[Federal Register Volume 62, Number 64 (Thursday, April 3, 1997)]
[Rules and Regulations]
[Pages 15978-16003]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-8014]



[[Page 15977]]

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Part II





Federal Communications Commission





_______________________________________________________________________



47 CFR Parts 2 and 90



Provision for the Use of the 220-222 MHz Band by the Private Land 
Mobile Radio Service; Final Rule and Proposed Rule

  Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules 
and Regulations  

[[Page 15978]]



FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 2 and 90

[PR Docket No. 89-552, GN Docket No. 93-252, PP Docket No. 93-253; FCC 
97-57]


Provision for the Use of the 220-222 MHz Band by the Private Land 
Mobile Radio Service

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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

SUMMARY: The Commission adopts a Third Report and Order and Fifth 
Notice of Proposed Rulemaking in this proceeding. The Fifth Notice of 
Proposed Rulemaking portion of this decision is summarized elsewhere in 
this issue of the Federal Register. The Third Report and Order adopts 
rules to govern the future operation and licensing of the 220-222 MHz 
band. This action is taken as part of the Commission's continuing 
implementation of the regulatory framework for mobile radio services 
enacted by Congress in the Omnibus Budget Reconciliation Act of 1993. 
This Third Report and Order also contains proposed and/or modified 
information collections subject to the Paperwork Reduction Act of 1995 
(PRA). These will be submitted to the Office of Management and Budget 
(OMB) for review under the PRA. The general public and other Federal 
agencies are invited to comment on the proposed or modified information 
collections contained in this proceeding.

DATES: Effective: August 21, 1997. Written comments by the public on 
the proposed and/or modified information collections are due June 2, 
1997.

ADDRESSES: 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, NW., Washington, DC 
20554, or via the Internet to [email protected].

FOR FURTHER INFORMATION CONTACT: Marty Liebman or Mary Woytek, 202-418-
1310, or Frank Stilwell, 202-418-0660. For additional information 
concerning the information collections contained in this Third Report 
and Order, contact Dorothy Conway at 202-418-0217, or via the Internet 
at [email protected].

SUPPLEMENTARY INFORMATION: This is a synopsis of the Third Report and 
Order portion of the Third Report and Order and Fifth Notice of 
Proposed Rulemaking in PR Docket No. 89-552, GN Docket No. 93-252, and 
PP Docket No. 93-253, FCC 97-57, adopted February 19, 1997, and 
released March 12, 1997. The Fifth Notice of Proposed Rulemaking is 
summarized elsewhere in this edition of the Federal Register. The 
complete text of the Third Report and Order is available for inspection 
and copying during normal business hours in the FCC Reference Center 
(Room 239), 1919 M Street, NW., Washington, DC., and also may be 
purchased from the Commission's copy contractor, International 
Transcription Service, at (202) 857-3800, 2100 M Street, NW., Suite 
140, Washington, DC. 20037.

Paperwork Reduction Act

    1. This Third Report and Order contains either a proposed or 
modified information collection. The Commission, as part of its 
continuing effort to reduce paperwork burdens, invites the general 
public to comment on the information collections contained in this 
Third Report and Order, as required by the Paperwork Reduction Act of 
1995, Public Law 104-13. Public and agency comments are due June 2, 
1997. 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.
    OMB Approval Number: New Collection.
    Title: Private Land Mobile Radio Services Part 90.
    Form No.: N/A.
    Type of Review: New collection.
    Respondents: Licensees in the 220-222 MHz band; applicants for 
licenses in the 220-222 MHz band; and governmental entities.
    Number of Respondents: Approximately 34,200.
    Estimated Time Per Response: Approximately 5 hours.
    Total Annual Burden: Approximately 176,400 hours.
    Needs and Uses: The information collected will be used by the 
Commission to verify licensee compliance with Commission rules and 
regulations, to ensure the integrity of the 220 MHz service, and to 
ensure that licensees continue to fulfill their statutory 
responsibilities in accordance with the Communications Act of 1934.

Synopsis of the Third Report and Order

    2. This Third Report and Order adopts rules to govern the future 
operation and licensing of the 220-222 MHz band (220 MHz service). This 
action is taken as part of the Commission's continuing implementation 
of the regulatory framework for mobile radio services enacted by 
Congress in section 6002(b) of the Omnibus Budget Reconciliation Act of 
1993, which amended sections 3(n) and 332 of the Communications Act of 
1934.1 As part of the implementation of the Budget Act, the 
Commission initiated a series of rulemaking proceedings to provide 
guidelines for the regulation of commercial and private mobile radio 
services, including the 220 MHz service, consistent with the policy of 
regulatory symmetry as reflected in the revisions to section 332 of the 
Act.
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    \1\ Omnibus Budget Reconciliation Act of 1993, Pub. L. 103-66, 
Title VI, sections 6002(b)(2)(A), 6002(b)(2)(B), 107 Stat. 312, 392 
(1993) (Budget Act). Section 3(n) of the Communications Act has been 
redesignated as section 3(14). See section 3(c)(4) of the 
Telecommunications Act of 1996. The reference to former section 3(n) 
in section 332 has been changed to a reference to section 3. See 
section 3(d)(2) of the Telecommunications Act of 1996.
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    3. One of the Commission's actions resulting from these 
proceedings, the CMRS Third Report and Order in GN Docket No. 93-252, 
59 FR 59945 (November 21, 1994), addressed a variety of issues relating 
to the licensing of the 220 MHz service, but deferred a detailed 
examination of that service to a separate rulemaking proceeding. That 
proceeding was initiated by the adoption of the Second Memorandum 
Opinion and Order and Third Notice of Proposed Rulemaking in PR Docket 
No. 89-552, 60 FR 46564 (September 7, 1995), where the Commission 
proposed a new licensing plan for 220 MHz service. The Third Report and 
Order adopted today generally establishes that proposal for the Phase 
II 2 licensing of the 220-222 MHz band, with some modifications. 
The Commission's decisions in the Third Report and Order are summarized 
as follows:
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    \2\ We refer herein to licenses granted pursuant to this new 
framework as Phase II licenses. Licenses granted under the rules 
that existed prior to the adoption of this Order are referred to 
herein as Phase I licenses.
---------------------------------------------------------------------------

    4. The Commission will return the pending, mutually exclusive 
applications for the four non-commercial, Phase I nationwide licenses 
and adopt a new licensing procedure for the 30 channels associated with 
these licenses. The 30 channels will be licensed on a nationwide basis 
to all applicants--i.e., applicants that intend to use the channels to 
offer commercial

[[Page 15979]]

services as well as applicants that intend to use the channels for 
their private, internal use. The channels will be assigned, in the form 
of three 10-channel authorizations, through competitive bidding, based 
upon the Commission's conclusion that the principal use of the spectrum 
will be for the provision of for-profit, subscriber-based services. The 
license term will be ten (10) years, and licensees will be required to 
meet five- and ten-year construction benchmarks.
    5. The Commission will assign Phase II, non-nationwide 220 MHz 
channels as follows: Fifty channels will be assigned in 175 geographic 
areas defined as Economic Areas by the Bureau of Economic Analysis, 
Department of Commerce (``EA licenses'') and 75 channels in the 
geographic areas defined by six ``Regional Economic Area Groupings'' 
(``Regional licenses''). Codes and names for the Economic Areas are 
listed in Appendix D of the full text of this decision. The Regional 
Economic Area Groupings are described in Appendix E of the full text of 
this decision. The Commission will make these channels available to all 
eligible applicants, and resolve mutually exclusive applications for 
these channels through competitive bidding. EA and Regional licensees 
will be permitted to operate stations anywhere within their geographic 
borders, provided that their transmissions do not exceed a predicted 
field strength of 38 dBuV/m at their border, and they protect the base 
stations of Phase I licensees in accordance with the existing co-
channel separation criteria for 220 MHz stations. The Commission adopts 
a 10-year license term for EA and Regional licensees, and will require 
EA and Regional licensees to meet five- and ten-year construction 
benchmarks.
    6. The Commission adopts the following Phase II band plan for non-
nationwide channels:

             Non-Nationwide 220 MHz Channel Allocation Plan             
------------------------------------------------------------------------
                                                                Channels
------------------------------------------------------------------------
                           EA Block                                     
                                                                        
A: Channel Groups \3\ 2, 13..................................         10
B: Channel Groups 3, 16......................................         10
C: Channel Groups 5, 18......................................         10
D: Channel Groups 8, 19......................................         10
E: Channels 171-180..........................................         10
                                                              ----------
    Total....................................................         50
                                                                        
                        Regional Block                                  
                                                                        
F: Channel Groups 1, 6, 11...................................         15
G: Channel Groups 4, 9, 14...................................         15
H: Channel Groups 7, 12, 17..................................         15
I: Channel Groups 10, 15, 20.................................         15
J: Channels 186-200..........................................         15
                                                              ----------
    Total....................................................         75
------------------------------------------------------------------------
\3\ The Channel Groups indicated in the allocation plan are the 5-      
  channel, non-contiguous assignments identified as ``Group Nos. 1, 2,  
  3,'' etc., in Sec.  90.721 of the Commission's rules, 47 CFR 90.721.  

    7. The Commission will continue to assign, on a single-station 
basis, 10 channels to applicants eligible in the Public Safety Radio 
Service (PSRS) and five channels to applicants eligible in the 
Emergency Medical Radio Service (EMRS) to meet internal communications 
needs. The Commission will assign five of the 10 PSRS channel pairs on 
a shared basis to all public safety eligibles. This will enable public 
safety licensees within a particular geographic area to share these 
channels and coordinate the location and operation of base stations on 
these channels, which will enable them to communicate more effectively 
with each other during emergencies. The Commission will assign channels 
in the PSRS and EMRS pools on a first-come, first-served basis and 
resolve mutually exclusive applications by random selection procedures.
    8. The Commission will allow Phase I and Phase II, nationwide and 
non-nationwide 220 MHz licensees to operate paging systems without the 
requirement that such use be on an ancillary basis to land mobile 
operations. Phase I and Phase II, nationwide and non-nationwide 220 MHz 
licensees, will also be allowed to aggregate any and all of their 
authorized, contiguous channels to operate on channels wider than 5 
kHz, so long as they comply with a prescribed spectrum efficiency 
standard.
    9. The Commission also modifies existing 220 MHz rules with regard 
to certain technical and operational matters. Specifically, Phase I and 
Phase II, nationwide and non-nationwide non-CMRS 220 MHz licensees will 
be permitted to operate fixed stations without the requirement that 
such use be on an ancillary basis to land mobile operations; and 
licensees using the 220-222 MHz band for geophysical telemetry 
operations will be permitted to operate fixed stations on a temporary 
basis, without the requirement that such use be ancillary to land 
mobile operations, and on a secondary basis to Phase I and Phase II 
licensees authorized to operate on 220 MHz channels on a primary basis.
    10. The Commission adopts procedures and definitions for initial 
applications, amended applications, applications to modify 
authorizations, and renewal of authorizations. First, the Commission 
defines initial applications for 220 MHz licenses as applications for 
the nationwide, EA, and Regional licenses to be assigned in Phase II. 
Second, the Commission adopts the same procedures for amending 
applications and modifying authorizations for Phase II 220 MHz licenses 
that are established for other Part 90 Commercial Mobile Radio Services 
(CMRS). Third, the Commission adopts the same procedures for obtaining 
grants of Special Temporary Authority for Phase II 220 MHz licenses 
that are established for other Part 90 CMRS services. Fourth, the 
Commission adopts for all 220 MHz licensees the renewal standards 
adopted in the CMRS Third Report and Order for Part 90 CMRS services.

Auction Rules

Competitive Bidding Design

    11. A total of 908 licenses (3 nationwide, 30 Regional, and 875 
Economic Area (``EA'') licenses) will be awarded in the Phase II 220 
MHz service. The Commission will use a simultaneous multiple round 
auction to award these licenses. These licenses will be significantly 
interdependent, because of the desirability of aggregation across 
spectrum blocks and geographic areas. Simultaneous multiple round 
bidding will generate more information about license values during the 
course of the auction and provide bidders with more flexibility to 
pursue back-up strategies than if the licenses were auctioned 
separately or through sealed bidding.

License Grouping

    12. Grouping interdependent licenses and putting them up for bid at 
the same time facilitates awarding licenses to bidders who value them 
most highly by providing bidders with information about the prices of 
complementary and substitutable licenses during the course of an 
auction. As a result, the Commission plans to hold a single 
simultaneous multiple round auction for all nationwide, Regional, and 
EA 220 MHz licenses. The Commission reserves the discretion, however, 
to auction each of these license groupings (i.e., nationwide, Regional, 
EA) separately or in different combinations (e.g., nationwide and 
Regional) if there are administrative reasons for doing so.

[[Page 15980]]

Bid Increments and Tie Bids

    13. The general guidelines for bid increments will be announced by 
Public Notice prior to the auction. In the case of a tie bid, the high 
bidder will be determined by the order in which the bids were received 
by the Commission.

Stopping Rules

    14. The Commission adopts a simultaneous stopping rule for the 220 
MHz service auction, and elects not to employ a hybrid rule or a 
market-by-market closing rule. Under a simultaneous stopping rule, 
bidding will remain open on all licenses in an auction until bidding 
stops on every license. The Commission concludes that the 
substitutability between and among licenses in different geographic 
areas and the importance of preserving bidders' ability to pursue back-
up strategies support the use of a simultaneous stopping rule. The 
Phase II 220 MHz service auction will close after one round passes in 
which no new valid bids or proactive activity rule waivers (as 
discussed below) are submitted. The Commission retains the discretion, 
however, to keep the auction open even if no new acceptable bids and no 
proactive waivers are submitted in a single round. In the event that 
this discretion is exercised, the effect will be the same as if a 
bidder has submitted a proactive waiver. The Commission also retains 
the discretion to announce market-by-market closing.
    15. The Commission further retains the discretion to declare, at 
any point, that the auction will end after some specified number of 
additional rounds. If this option is exercised, bids will be accepted 
only on licenses where the high bid has increased in the last three 
rounds. This will deter bidders from continuing to bid on a few low 
value licenses solely to delay the closing of the auction. It also will 
enable the Commission to end the auction when it determines that the 
benefits of terminating the auction and issuing licenses exceed the 
likely benefits of continuing to allow bidding.

Activity Rules

    16. The Commission will employ the Milgrom-Wilson activity rule in 
conjunction with the simultaneous stopping rule in a manner similar to 
that employed in prior FCC auctions. In each round of Stage I, a bidder 
that wishes to maintain its current eligibility must be active on 
licenses encompassing at least sixty percent of the activity units for 
which it currently is eligible. In each round of Stage II, a bidder 
that wishes to maintain its current eligibility in the next round is 
required to be active on at least eighty percent of the activity units 
for which it is eligible in the current round. In each round of Stage 
III, a bidder that wishes to maintain its current eligibility must be 
active on licenses encompassing at least ninety-eight percent of the 
activity units for which it is eligible in the current round.
    17. The Commission believes that initially establishing required 
activity at these levels will achieve a proper balance between allowing 
for bidder flexibility and completing the auction within a reasonable 
time. Requiring a 100 percent level of activity in Stage III, as 
originally proposed, might inhibit bidder flexibility and be unduly 
restrictive. In addition, activity levels of sixty, eighty and ninety-
eight percent are far easier to administer, both for bidders and for 
the Commission, than the fractional one-third, two-thirds and 100 
percent activity levels initially proposed. In addition to easing 
administrative burdens, the increased activity requirement will require 
bidders to focus their bidding and will contribute to increasing the 
pace of the auction.
    18. As in prior auctions, the transition from one stage to the next 
in the Phase II 220 MHz auction will be determined based on a variety 
of measures of bidder activity, including, but not limited to, the 
auction activity level (i.e., the sum of bidding units of those 
licenses whose high bid increased in the current round, as a percentage 
of the total bidding units of all licenses in the auction), the 
percentage of licenses (measured in terms of bidding units) on which 
there are new bids, the number of new bids, and the percentage increase 
in revenue. In no case can the auction revert to an earlier stage. The 
Wireless Telecommunications Bureau will announce when the auction will 
move from one stage to the next. To avoid the consequences of clerical 
errors and to compensate for unusual circumstances that might delay a 
bidder's bid preparation or submission on a particular day, bidders 
will be provided with five activity rule waivers that may be used in 
any round during the course of the auction. Bidders will have the 
option to proactively enter an activity rule waiver during the bid 
submission period. A proactive waiver, as distinguished from an 
automatic waiver, is one requested by the bidder. If a bidder submits a 
proactive waiver in a round in which no other bidding activity occurs, 
the auction will remain open.

Duration of Bidding Rounds

    19. The Wireless Telecommunications Bureau will announce the 
duration of and intervals between bidding rounds, either by Public 
Notice prior to the auction or by announcement during the auction.

Pre-Auction Application Procedures

    20. Bidders will be able to submit bids from remote locations using 
special bidding software or by telephone. The Commission has adopted a 
fee schedule for obtaining access to the Commission's database and 
remote bidding software packages. The remote access bidding software 
package is available for $175.00. The charge for on-line remote access 
via a 900 number is $2.30 per minute. Bidders also may bid via 
telephone for no charge. There is no charge for the first Bidder 
Information Package, and a $16.00 fee for each additional package that 
is subsequently requested by the same party. Bidders will be permitted 
to bid electronically only if they have filed a short-form application 
electronically. Bidders who file their short-form applications manually 
may bid only telephonically. When submitting bids telephonically, 
bidders may utilize the Internet to learn the round-by-round results of 
the auction. Bidders also may, at negligible cost, use a computerized 
bulletin board service, accessible by telephone lines, from which 
auction results can be downloaded to a personal computer. The 
Commission intends to hold a seminar for prospective bidders to 
acquaint them with these bidding procedures.

Short-Form Applications

    21. Applicants for 220 MHz service licenses will be required to 
file a short-form application, FCC Form 175 and 175-S, prior to the 
auction. If only one application that is acceptable for filing is 
received for a particular license, and thus there is no mutual 
exclusivity, a Public Notice will be issued cancelling the auction for 
that license and establishing a date for the filing of a long-form 
application. Filing deadlines will be announced by Public Notice.

Short-Form Application Amendments and Modifications

    22. Upon reviewing the short-form applications, the Commission will 
issue a Public Notice listing all defective applications. Applicants 
with minor defects in their applications will be given an opportunity 
to cure them and resubmit a corrected version.

[[Page 15981]]

Upfront Payments

    23. The Commission proposed to require 220 MHz auction participants 
to tender in advance to the Commission an upfront payment of $2,500 or 
$0.02 per MHz-pop, whichever is greater, for the largest combination of 
MHz-pops (bidding units) on which they anticipate bidding in any round. 
In the Competitive Bidding Second Report and Order, 59 FR 22980, (May 
4, 1994), the Commission indicated that upfront payments should equal 
approximately five percent of the expected amounts of winning bids. In 
general, the license values in previous auctions have exceeded 
expectations. Based upon defaults occurring in the broadband PCS, IVDS 
and MDS auctions, and to guard against future defaults, the Commission 
believes that there is a need to obtain a higher payment upfront than 
the one proposed. Authority is delegated to the Wireless 
Telecommunications Bureau to determine an appropriate upfront payment 
for each license being auctioned, taking into account such factors as 
the population in each geographic license area and the value of similar 
spectrum. In no event will the upfront payment for any license be less 
than $2,500, and the Wireless Telecommunications Bureau will retain the 
flexibility to modify this minimum if it finds that a higher amount 
would better deter speculative filings. Prior to the 220 MHz auction, 
the Wireless Telecommunications Bureau will publish a Public Notice 
listing the upfront payment amounts required for the licenses to be 
auctioned. The number of bidding units determines the amount of upfront 
payment for the license. Although a bidder may file applications for 
every license being auctioned, the total upfront payment submitted by 
each applicant will determine the combinations on which the applicant 
will actually be permitted to be active in any single round of bidding. 
Upfront payments will be due by a date specified by Public Notice, but 
generally no later than 14 days before the scheduled auction.

Down Payments and Full Payments

    24. All winning bidders, including small businesses and very small 
businesses will be required to supplement their upfront payments with a 
down payment sufficient to bring their total deposits up to 20 percent 
of their winning bid(s). If the upfront payment already tendered by a 
winning bidder, after deducting any bid withdrawal and default payments 
due, amounts to 20 percent or more of its winning bids, no additional 
deposit will be required. If the upfront payment amount on deposit is 
greater than 20 percent of the winning bid amount after deducting any 
bid withdrawal and default payments due, the additional monies will be 
refunded.
    25. Winning bidders, except small businesses and very small 
businesses, must submit the required down payment by cashier's check or 
wire transfer to the Commission's lock-box bank within ten business 
days following release of a Public Notice announcing the close of 
bidding. All auction winners, except those eligible for an installment 
payment plan, will be required to make full payment of the balance of 
their winning bids within ten business days following release of a 
Public Notice mailed to the successful applicant that the Commission is 
prepared to award the license. The Commission generally will grant 
uncontested licenses within ten business days after receiving full 
payment.

Bid Withdrawal, Default, and Disqualification

    26. The Commission will apply the bid withdrawal rules set forth in 
Part 1 of its rules in the 220 MHz auction. Any bidder that withdraws a 
high bid before the Commission declares bidding closed will be required 
to reimburse the Commission in the amount of the difference between its 
high bid and the amount of the ``winning bid'' the next time the 
license is offered, if this subsequent ``winning bid'' is lower than 
the withdrawn bid.
    27. If a license is re-offered by auction, the ``winning bid'' 
refers to the high bid in the auction in which the license is re-
offered. If a license is re-offered in the same auction, the winning 
bid refers to the high bid amount made subsequent to the withdrawal in 
that auction. If a license which is the subject of withdrawal or 
default is offered to the highest losing bidders in the initial 
auction, as opposed to being re-auctioned, the ``winning bid'' refers 
to the bid of the highest bidder who accepts the offer.
    28. After bidding closes, the Commission will assess a defaulting 
auction winner an additional payment of three percent of the subsequent 
winning bid or three percent of the amount of the defaulting bid, 
whichever is less. This additional payment is designed to encourage 
bidders who wish to withdraw their bids to do so before bidding ceases. 
In the unlikely event that there is more than one bid withdrawal on the 
same license, each withdrawing bidder will be held responsible for the 
difference between its withdrawn bid and the amount of the winning bid 
the next time the license is offered for auction.
    29. If a bidder has withdrawn a bid or defaulted, but the amount of 
the default payment cannot yet be determined, the bidder will be 
required to make a deposit of up to 20 percent of the amount bid on the 
license. When it becomes possible to calculate and assess the default 
payment, any excess deposit will be refunded. Upfront payments will be 
applied to such deposits, and to bid withdrawal and default assessments 
due, before being applied toward the bidder's down payment on licenses 
the bidder has won and seeks to acquire.
    30. The Commission recently addressed the issue of how its bid 
withdrawal provisions apply to bids that are mistakenly placed and 
withdrawn in a decision involving the 900 MHz Specialized Mobile Radio 
(SMR) and broadband Personal Communication Service (PCS) C block 
auctions. See Atlanta Trunking Associates, Inc. and MAP Wireless L.L.C. 
Request to Waive Bid Withdrawal Payment Provisions, FCC 96-203, Order 
(released May 3, 1996) (summarized in 61 FR 25807 (May 23, 1996)), 
recon. pending. If a default or disqualification involves gross 
misconduct, misrepresentation or bad faith by an applicant, the 
Commission may declare the applicant and its principals ineligible to 
bid in future auctions, and may take any other action that it deems 
necessary, including institution of proceedings to revoke any existing 
licenses held by the applicant.

Long-Form Applications

    31. The Commission will apply its Part 1 long-form procedures to 
the 220 MHz auction. A long-form application filed on FCC Form 600 must 
be filed by a date specified by Public Notice, generally within ten 
business days after the close of bidding. After the winning bidder's 
down payment and long-form application are received, the Commission 
will review the application to determine if it is acceptable for 
filing. Upon acceptance for filing, the Commission will issue a Public 
Notice announcing this fact, triggering the filing window for petitions 
to deny. If all petitions to deny are dismissed or denied, the 
license(s) will be granted to the auction winner.

Petitions To Deny and Limitations on Settlements

    32. In the Third Notice, the Commission proposed to adopt petition 
to deny procedures based on former Sec. 22.30 of its rules, which 
provided for

[[Page 15982]]

procedures regarding opposition to applications. In addition, the 
Commission proposed to adopt rules similar to former Sec. 22.943 of its 
rules, which provided for procedures regarding the withdrawal of 
applications, to prevent the filing of speculative applications and 
pleadings designed to extract money from sincere 220 MHz license 
applicants. The Commission adopted these proposals. The restrictions in 
Sec. 90.162, 47 CFR 90.162 (which replaced Sec. 22.943 for purposes of 
CMRS), were established to prevent the filing of speculative 
applications and pleadings (or threats of the same) designed to extract 
money from license applicants. Thus, the Commission will limit the 
consideration that an individual or entity is permitted to receive for 
agreeing to withdraw an application or a petition to deny to the 
legitimate and prudent expenses of the applicant or petitioner.

Anti-Collusion Rules

    33. The Commission will require 220 MHz licensees to comply with 
the reporting requirements and rules prohibiting collusion embodied in 
Secs. 1.2105 and 1.2107 of the Commission's rules, 47 CFR 1.2105 and 
1.2107. Even where the applicant discloses parties with whom it has 
reached an agreement on the short-form application, thereby permitting 
discussions with those parties, the applicant nevertheless is subject 
to existing antitrust laws. Moreover, where specific instances of 
collusion in the competitive bidding process are alleged during the 
petition to deny process, the Commission may conduct an investigation 
or refer such complaints to the United States Department of Justice for 
investigation. Bidders who are found to have violated the antitrust 
laws, in addition to any penalties they incur under the antitrust laws, 
or who are found to have violated the Commission's rules in connection 
with their participation in the auction process, may be subject to a 
variety of sanctions, including forfeiture of their down payment or 
their full bid amount, revocation of their license(s), and possible 
prohibition from participating in future auctions.

Transfer Disclosure Requirements

    34. The Commission will apply Sec. 1.2111(a) of its rules, 47 CFR 
1.2111(a), to all Phase II 220 MHz licenses obtained through the 
competitive bidding process. The Commission has also adopted specific 
rules that will apply solely to small business licensees, as discussed 
in subsequent sections. The Commission will give particular scrutiny to 
auction winners who have not yet begun commercial service and who seek 
approval for a transfer of control or assignment of their licenses 
within three years after the initial license grant, so that it may 
determine if any unforeseen problems relating to unjust enrichment have 
occurred.

Treatment of Designated Entities

Minority- and Women-Owned Businesses
    35. In the Phase II 220 MHz service, as in other auctionable 
services, the Commission is committed to meeting the objectives of 47 
U.S.C. 309(j) of promoting economic opportunity and competition, of 
avoiding excessive concentrations of licenses, and of ensuring access 
to new and innovative technologies by disseminating licenses among a 
wide variety of applicants, including businesses owned by members of 
minority groups and women. Commenters did not cite any evidence of 
specific discrimination for purposes of creating a record sufficient to 
support special provisions for minorities under the strict scrutiny 
standard of judicial review, which applies to federal race-based 
provisions. Adarand Constructors, Inc. v. Pena, 115 S.Ct. 2097 (1995). 
The Commission is also concerned that the record would not support 
gender-based provisions under intermediate scrutiny, the standard of 
judicial review applicable to such provisions. United States v. 
Virginia, 116 S.Ct. 2263 (1996). Balancing the Commission's statutory 
obligation to provide opportunities for women- and minority-owned 
businesses to participate in spectrum-based services against the 
statutory duties to facilitate the rapid delivery of new services to 
the American consumer and promote efficient use of the spectrum, the 
Commission concludes that it should not delay the Phase II 220 MHz 
service auction for the amount of time it would take to adduce 
sufficient evidence to support race- and gender-based provisions. 
Moreover, the Commission believes that most minority- and women-owned 
businesses will be able to take advantage of the specific provisions 
that the Commission is adopting for small businesses, as discussed 
infra.
    36. The Commission also notes that it has initiated a separate 
inquiry to gather information regarding barriers to entry faced by 
minority- and women-owned firms as well as small businesses. Section 
257 Proceeding to Identify and Eliminate Market Entry Barriers for 
Small Businesses, Notice of Inquiry, GN Docket No. 96-113, 61 FR 33066 
(June 26, 1996). The Commission will continue to track the rate of 
participation in its auctions by minority- and women-owned firms. It 
will evaluate this information, together with other data gathered, with 
the goal of developing a record to support race-and gender-based 
provisions that will satisfy judicial scrutiny. If a sufficient record 
can be adduced, the Commission will consider race- and gender-based 
provisions for future auctions. Finally, the Commission will continue 
to look for other ways to reduce barriers to entry for women- and 
minority-owned businesses, such as extending partitioning and 
disaggregation of licenses to entities that do not currently qualify, 
an adjustment to its rules that may be helpful to small businesses 
generally.
Small Businesses
    37. Congress specifically cited the needs of small businesses in 
enacting Section 309(j), directing the Commission to promote economic 
opportunities for small businesses. The Commission believes that small 
businesses applying for 220 MHz licenses should be entitled to some 
type of bidding credit and should be allowed to pay their bids in 
installments. In order to ensure the meaningful participation of small 
business entities in the 220 MHz auction the Commission adopts a two-
tiered definition of small business with thresholds applicable across 
all three categories of license. This approach will give qualifying 
small businesses flexibility to bid for a Regional license or, on the 
other hand, elect to bid for several EAs, without having to choose 
which type of license to bid for prior to the start of the auction. For 
purposes of bidding on the nationwide, Regional, and EA licenses, 
therefore, the Commission will define (1) a very small business as an 
entity that, together with its affiliates and controlling principals, 
has average gross revenues that are not more than $3 million for the 
three preceding years; and (2) a small business as an entity that, 
together with affiliates and controlling principals, has average gross 
revenues that are not more than $15 million for the three preceding 
years. Bidding credits will be determined, as discussed infra, based 
upon this two-tiered approach.
    38. The Commission believes the cost of building out a 220 MHz 
system most closely resembles the cost of a 900 MHz SMR system, and 
that it is therefore appropriate to establish definitions of ``small 
business'' and ``very small business'' for the 220 MHz service that

[[Page 15983]]

are consistent with the definitions adopted for the 900 MHz SMR 
service. The Commission's experience in conducting the 900 MHz SMR 
auction indicates that its definitions of eligible small businesses in 
that service were appropriate, and that it would substantially dilute 
the value of the small business preferences to increase the size of 
small businesses eligible for special bidding provisions in the 220 MHz 
service.
    39. For purposes of the Phase II 220 MHz small business definition, 
the Commission will consider the gross revenues of the small business 
applicant, its controlling principals, and its affiliates. The 
Commission will not impose specific equity requirements on the 
controlling principals of entities that meet the small business 
definition. The Commission will still require, however, that in order 
for an applicant to qualify as a small business or very small business, 
qualifying small business principals must maintain control of the 
applicant, including both de facto and de jure control. For this 
purpose, the Commission will borrow from certain Small Business 
Administration rules that are used to determine when a firm should be 
deemed an affiliate of a small business. Typically, de jure control is 
evidenced by ownership of 50.1 percent of an entity's voting stock. De 
facto control is determined on a case-by-case basis. An entity must 
demonstrate at least the following indicia of control to establish that 
it retains de facto control of the applicant: (1) The entity 
constitutes or appoints more than 50 percent of the board of directors 
or partnership management committee; (2) the entity has authority to 
appoint, promote, demote and fire senior executives that control the 
day-to-day activities of the licensees; and (3) the entity plays an 
integral role in all major management decisions. The Commission 
cautions that, while it is not imposing specific equity requirements on 
small business principals, the absence of significant equity could 
raise questions about whether the applicant qualifies as a bona fide 
small business or very small business.
    40. Exceptions will apply for small business consortia and publicly 
traded corporations with widely dispersed voting power. Specifically, 
eligible small businesses or very small businesses will be permitted to 
form consortia and not aggregate their gross revenues. Additionally, a 
small corporation that has dispersed voting stock ownership and no 
controlling affiliates will not be required to aggregate with its own 
revenues the revenues of each shareholder for purposes of small 
business or very small business status. Thus, an applicant may qualify, 
even in the absence of identifiable control being held by particular 
investors.
    41. Applicants and licensees claiming eligibility as a small 
business, a very small business, a consortium of small businesses, or a 
consortium of very small businesses, are subject to audits by the 
Commission. Selection for audit may be random, on information, or on 
the basis of other factors. Consent to such audit is part of the 
certification included in the short-form application (FCC Form 175). 
Such consent includes consent to the audit of the applicant's or 
licensee's books, documents, and other material, including accounting 
procedures and practices, regardless of form or type, sufficient to 
confirm that such applicant's or licensee's representations are and 
remain accurate. Such consent also includes inspection at all 
reasonable times of the facilities, or parts thereof, engaged in 
providing and transacting business or keeping records regarding 
licensed Phase II 220 MHz service, and will also include consent to the 
interview of principals, employees, customers, and suppliers of the 
applicant or licensee.

Bidding Credits

    42. The Commission adopts bidding credits consistent with its two-
tiered definition of small business that will apply to all three 
license groups. Very small businesses that, together with affiliates 
and controlling principals, have average gross revenues that are not 
more than $3 million for the three preceding years, will receive a 25 
percent bidding credit, available for all three categories of Phase II 
220 MHz licenses. Likewise, small businesses that, together with 
affiliates and controlling principals, have average gross revenues that 
are not more than $15 million for the three preceding years, will 
receive a bidding credit of ten percent, available for all three 
categories of Phase II 220 MHz licenses. While the 25 percent bidding 
credit is less than the 40 percent bidding credit proposed for one of 
the nationwide licenses and the Regional geographic area licenses, the 
Commission concludes that this bidding credit is appropriate since the 
Commission is now going to offer bidding credits generally for all 
channel blocks. The Commission also had favorable results in previous 
auctions with bidding credits at this level or lower.

Installment Payments, Upfront Payments, and Down Payments

    43. The Commission will make installment payment plans available to 
small businesses that are winners in the 220 MHz auction(s). Licensees 
who qualify as small businesses or very small businesses in the 220 MHz 
auction(s) will be entitled to pay their winning bid amount in 
quarterly installments over the term of the license with interest 
charges to be fixed at the time of licensing at a rate equal to the 
rate for ten-year U.S. Treasury obligations plus 2.5 percent. The rate 
for ten-year U.S. Treasury obligations will be determined by taking the 
coupon rate of interest on the ten-year U.S. Treasury notes most 
recently auctioned by the Treasury Department before licenses are 
conditionally granted. These licensees will be able to make interest-
only payments for the first two years of the license term. Timely 
payment of all installments will be a condition of the license grant, 
and failure to make such timely payments will be grounds for revocation 
of the license.
    44. The Commission will not adopt a second installment payment plan 
with a longer interest-only period for very small businesses with 
average gross revenues of not more than $3 million. The Commission 
believes that the two-year interest-only period in the single plan it 
adopts will provide all small businesses with the appropriate level of 
financing to overcome difficulties in attracting capital.
    45. The Commission also concludes that there should be a late 
payment fee in connection with the installment payment plan for Phase 
II 220 MHz licensees. The Commission stated in the Third Notice that 
timely payment of all installments would be a condition of the award of 
a license. Therefore, when licensees are more than fifteen days late in 
their scheduled installment payments, the Commission will charge a late 
payment fee equal to five percent of the amount of the past due 
payment. For example, if a $50,000 payment is due on June 1, then on 
June 16, $2,500 is due in addition to the payment. Without such a fee 
licensees may not have adequate financial incentives to make 
installment payments on time and may attempt to maximize their cash 
flow at the government's expense by paying late. The five percent 
payment is an approximation of late payment fees applied in typical 
commercial lending transactions. Payments will be applied in the 
following order: late charges, interest charges, and principal 
payments.

[[Page 15984]]

    46. Substantial upfront payments are necessary for both large and 
small businesses to deter speculation and ensure participation by 
sincere bidders only. The Commission therefore declines to adopt a 
reduced upfront payment provision for small businesses or very small 
businesses.
    47. The Commission likewise concludes that small businesses should 
be required to pay a down payment of 20 percent of their winning 
bid(s). Such a requirement is consistent with ensuring that winning 
bidders have the financial capability of building out their systems, 
will provide the Commission with stronger assurance against defaults 
than a ten percent down payment, and should cover the required payments 
in the unlikely event of default. Thus, small businesses will be 
required to bring their deposit up to ten percent of their winning bid 
within ten business days of the close of the auction. Prior to 
licensing, they will be required to pay an additional ten percent. 
Specific procedures for payment will be provided in a Public Notice.

Partitioning

    48. The Commission will permit any holder of an EA, Regional, or 
nationwide Phase II 220 MHz license to partition portions of its 
authorization and enter into contracts with eligible parties, and will 
allow such parties to file long-form applications for the usable 
channels within the partitioned area. The Commission concludes that 
allowing holders of EA, Regional and nationwide Phase II 220 MHz 
licenses to partition their geographic service areas will facilitate 
the provision of services in small markets and rural areas. 
Partitioning will also furnish providers of Phase II 220 MHz service 
with operational flexibility that will serve to promote the most 
efficient use of the spectrum and encourage participation by a wide 
variety of service providers.
    49. The Commission will not, at this time, authorize spectrum 
disaggregation for the Phase II 220 MHz service. Instead, the 
Commission will seek comment on the feasibility of spectrum 
disaggregation for the 220 MHz service in a notice of proposed 
rulemaking adopted concurrently with this Third Report and Order.
    50. Providers of 220 MHz service will be permitted to acquire 
partitioned licenses in either of two ways: (1) By forming bidding 
consortia to participate in auctions, and then partitioning the 
licenses won among consortium members; and (2) by acquiring partitioned 
licenses from other licensees through private negotiation and agreement 
either before or after the auction. Each member of a consortium will be 
required to file a long-form application, following the auction, for 
its respective mutually agreed-upon geographic area. In the event the 
Commission receives applications requesting FCC consent to partitioning 
transfers prior to the adoption of rules governing such issues as 
whether to permit partitioning based on any license area defined by the 
parties--upon which the Commission seeks comment in a notice of 
proposed rulemaking--action on such applications will be deferred.

Transfer Restrictions and Unjust Enrichment Provisions

    51. To ensure that large businesses do not become the unintended 
beneficiaries of measures meant for smaller firms, the Commission 
adopts unjust enrichment provisions similar to those adopted for 
narrowband PCS and the 900 MHz SMR service. Licensees seeking to 
transfer their licenses to entities which do not qualify as small 
businesses (or very small businesses seeking to transfer their licenses 
to small businesses or large companies), as a condition of approval of 
the transfer, must remit to the government a payment equal to a portion 
of the total value of the benefit conferred by the government. Thus, 
for example, a small business that received a bidding credit seeking to 
transfer or assign a license to an entity that does not qualify as a 
small business will be required to reimburse the government for the 
amount of the bidding credit, plus interest at the rate imposed for 
installment financing at the time the license was awarded, before the 
transfer will be permitted. Similarly, a very small business that 
received a bidding credit seeking to transfer or assign a license to a 
small business that qualified for a lesser bidding credit will be 
required to reimburse the government for the difference between the 
amount of its bidding credit and the lesser credit, plus interest at 
the rate imposed for installment financing at the time the license was 
awarded, before the transfer will be permitted. The amount of this 
payment will be reduced over time as follows: (1) A transfer in the 
first two years of the license term will result in a forfeiture of 100 
percent of the value of the bidding credit (or, in the case of very 
small businesses transferring to small businesses, 100 percent of the 
difference between the bidding credit received by the former and the 
bidding credit for which the latter is eligible); (2) in year three of 
the license term the payment will be 75 percent; (3) in year four the 
payment will be 50 percent, and (4) in year five the payment will be 25 
percent, after which there will be no required payment. These 
assessments will have to be paid to the U.S. Treasury as a condition of 
approval of the assignment or transfer.
    52. In addition, if a licensee that qualifies for installment 
payments seeks to assign or transfer control of its license during its 
term to an entity that does not meet the small business or very small 
business definition, the Commission will require payment of the 
remaining principal and any interest accrued through the date of 
assignment as a condition of the license assignment or transfer. Also, 
if an investor subsequently purchases an interest in the business and, 
as a result, the gross revenues of the business exceed the applicable 
financial caps, this unjust enrichment provision will apply. The 
Commission will apply these payment requirements for the entire license 
term to ensure that small businesses will look first to other small 
businesses when deciding to transfer their licenses. However, the 
Commission will not impose a holding period or other transfer 
restrictions on these licensees.

Spectrum Set Asides

    53. Because there will be both a large number and a large variety 
of licenses available in the Phase II 220 MHz auction, the Commission 
will not adopt an entrepreneurs' block for the service. Small 
businesses will have a significant opportunity to compete for Phase II 
220 MHz licenses, particularly given the special provisions that have 
been adopted for small businesses.

Procedural Matters; Ordering Clauses

Final Regulatory Flexibility Analysis

    54. As required by the Regulatory Flexibility Act of 1980, Pub. L. 
96-354, 94 Stat. 1164, as amended by the Contract with America 
Advancement Act of 1996, Pub. L. 104-121, 110 Stat. 847, 5 U.S.C. 601 
et seq., the Commission has prepared a Final Regulatory Flexibility 
Analysis of the expected impact of the rule changes adopted in this 
proceeding on small entities. The Secretary shall send a copy of this 
Third Report and Order and Fifth Notice of Proposed Rulemaking, 
including the Final Regulatory Flexibility Analysis, to the Chief 
Counsel for Advocacy of the Small Business Administration in accordance 
with paragraph 603(a) of the Regulatory Flexibility Act.4
---------------------------------------------------------------------------

    \4\ Pub. L. 96-354, 94 Stat. 1164, 5 U.S.C. section 601 et seq. 
(1980).

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[[Page 15985]]

Final Regulatory Flexibility Analysis

    55. As required by section 603 of the Regulatory Flexibility Act, 5 
U.S.C. 603 (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated in the Third Notice of Proposed Rulemaking in this 
proceeding (Third Notice).5 The Commission sought written public 
comments on the proposals in the Third Notice, including on the IRFA. 
The Commission's Final Regulatory Flexibility Analysis (FRFA) in this 
220 MHz Third Report and Order conforms to the RFA, as amended by the 
Contract With America Advancement Act of 1996, Pub. L. 104-121, 110 
Stat. 847 (1996) (CWAAA).6
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    \5\ Third Notice, 11 FCC Rcd at 287.
    \6\ Title II of the CWAAA is the Small Business Regulatory 
Enforcement Fairness Act of 1996 (SBREFA), codified at 5 U.S.C. 601 
et seq.
---------------------------------------------------------------------------

I. Need for and Objective of the Rules

    56. The rules adopted in this decision will establish a flexible 
regulatory scheme that will allow for efficient licensing and use of 
the 220 MHz service, eliminate unnecessary regulatory burdens on 
existing and future 220 MHz licensees, provide a wide variety of radio 
services to the public, enhance the competitive potential of 220 MHz 
services in the mobile marketplace, and continue to provide a home for 
the development of spectrally efficient technologies. By establishing 
competitive bidding procedures pursuant to section 309(j) of the 
Communications Act, this decision will promote economic opportunity and 
ensure that new and innovative technologies are readily accessible to 
the American people by avoiding excessive concentration of licenses and 
by disseminating licenses among a wide variety of applicants, including 
small businesses. The adoption of competitive bidding rules will also 
permit the recovery for the public of a portion of the value of the 
public spectrum resource made available for commercial use and 
avoidance of unjust enrichment through the methods employed to award 
uses of that resource.

II. Summary of Issues Raised by the Public Comments in Response to the 
Initial Regulatory Flexibility Analysis

    57. No issues were raised specifically in response to the IRFA. 
However, we have considered the significant economic impact on a 
substantial number of small entities through consideration of comments 
that pertained to issues of concern to small businesses. For example, 
two equipment manufacturers, SEA and Securicor, argued against allowing 
Phase I and Phase II licensees to aggregate their contiguous channels 
to create wider bandwidth channels.7 (See para. 98 of the full 
text of this decision). These commenters, who have developed radio 
equipment in the 220 MHz band using spectrally efficient technologies, 
argue that allowing aggregation of channels would severely jeopardize 
their ability to continue to develop and market their technology. The 
Commission decided in favor of allowing licensees to aggregate their 
channels, agreeing with those commenters who support allowing such 
aggregation because this type of flexibility will allow 220 MHz 
licensees to offer a wider variety of communications services and more 
effectively compete in the wireless marketplace. While allowing channel 
aggregation, the Commission agreed with SEA and Securicor that it 
should also require licensees and equipment manufacturers to meet a 
spectrum efficiency standard. In adopting a spectrum efficiency 
standard, the Commission sought to ensure that the 220 MHz band would 
continue to be a home for the development of spectrally efficient 
technologies.
---------------------------------------------------------------------------

    \7\ The Commission received comments from five equipment 
manufacturers: Fairfield Industries (Fairfield), SEA Inc. (SEA), 
Securicor Radiocoms, Ltd. (Securicor), Ericsson Corporation, and E. 
F. Johnson Company. Of these commenters, Fairfield, SEA, and 
Securicor may be small businesses under the definition used in this 
analysis. Securicor is a corporation based in England. A sixth 
equipment manufacturer, Motorola, while not submitting formal 
comments, filed ex parte presentations in this proceeding.
---------------------------------------------------------------------------

    58. The Commission proposed two classifications of non-nationwide 
220 MHz licensing--i.e., Economic Area (EA) licenses and Regional 
licenses. Pagenet endorsed this proposal, noting that such assignments 
would be a ``complement to nationwide'' licensing, and would allow 
``participation by small, medium and large carriers in which local to 
nationwide service will be provided by a number of different licensees 
in each marketplace.'' (See para. 79 of the full text of this 
decision). The Commission adopted this proposal. (See para. 80 of the 
full text of this decision).
    59. American Mobile Telecommunications Association (AMTA) and 
Comtech asked that no limit be placed on the number of channels a 
licensee may obtain within an EA or Region through our auction 
procedures. Comtech also asked that EA and Regional licensees not be 
required to construct a minimum number of channels at all of their base 
stations. The Commission adopted both of these proposals.
    60. The Commission also adopted a proposal by Fairfield to allow 
for fixed operations on a secondary basis. In so doing, the Commission 
acknowledged the concerns of other commenters that such operations 
might cause interference to primary users of the band. We thus required 
secondary licensees to notify nearby primary users of their secondary 
facilities, limited secondary licensees' operating parameters beyond 
those initially proposed, and restricted secondary licensees from 
operating on public safety, Emergency Medical Radio Service (EMRS), or 
Federal Government 220-222 MHz channels.
    61. A number of commenters asked that we provide greater protection 
to Phase I base stations than initially proposed. We decided to adopt 
our proposed co-channel protection criteria because we concluded that, 
inter alia, this decision would provide protection to Phase I base 
stations consistent with other recent Commission decisions establishing 
protection criteria in other mobile services. Commenters were also 
opposed to our proposal for limiting field strength at EA and Regional 
borders. We adopted our proposal in order to afford Phase II licensees 
the maximum degree of flexibility in designing their systems and to 
enable them to provide a quality signal at the borders of their service 
areas.
    62. Association of Public-Safety Communications Officials--
International (APCO) asked that we refrain from assigning the 125 non-
nationwide channels not reserved for Public Safety or EMRS eligibles by 
competitive bidding in order to give public safety entities a realistic 
opportunity to obtain authorization for more than ten 220 MHz channels. 
We decided that such channels should be assigned through competitive 
bidding because we could not conclusively determine the demand by 
public safety entities for 220 MHz channels, and because we intend to 
fully explore the spectrum needs of the public safety community in a 
future rulemaking proceeding.
    63. A number of commenters urged the Commission to maintain a non-
commercial set-aside for the 220 MHz service, arguing that there is a 
continuing demand for such a set-aside and that it is necessary for 
licensees' internal communications. Other commenters disagreed. We 
found that it would not be in the public interest to establish a non-
commercial set-aside based in part on our continuing commitment to 
efficient use of the spectrum. As discussed in para. 42 of the full 
text of this Third Report and

[[Page 15986]]

Order, we agree with those commenters who believe that it is 
unnecessary to set aside spectrum for exclusively internal 
communications, given the apparent demand for nationwide spectrum for 
the provision of service to the public and the fact that we are not 
precluding a nationwide licensee from using all or part of its spectrum 
for internal communications.
    64. Commenters disagreed regarding how the Commission should treat 
pending applications for nationwide 220 MHz licenses. Many commenters 
urged the Commission to exercise its discretion to award the licenses 
through lotteries. Other commenters argued that the pending 
applications should be returned and the licenses should be awarded 
through auctions. We found that it would be in the public interest to 
return the pending applications for the 220 MHz service without 
prejudice and award the licenses through competitive bidding. We 
concluded that, because the nature of the 220 MHz service is undergoing 
a substantial change, it would be unfair to preclude new applicants 
from having the opportunity to apply for these licenses. We also noted 
that awarding licenses through auctions benefits the public by ensuring 
that licenses go to those who value them the most and to those who have 
an incentive to build their systems quickly, thereby speeding the 
provision of service to the public.

III. Description and Estimate of the Small Entities Involved

    65. The Commission anticipates receiving approximately 2,220 total 
applications for the Phase II 220 MHz service--i.e., 2,000 Public 
Safety applications (including 1,000 EMRS applications), 90 
applications for Economic Area channels, 20 applications for Regional 
channels, 100 applications for secondary service, and 10 applications 
for nationwide channels. These applicants, many of whom may be small 
businesses, as well as approximately 3,800 Phase I 220 MHz licensees, 
many of whom may be small entities, and at least six equipment 
manufacturers, three of which may be small businesses, will be subject 
to the rules adopted in the 220 MHz Third Report and Order.
    66. The Commission has not developed a definition of small entities 
applicable to 220 MHz Phase I licensees, or equipment manufacturers for 
purposes of this Final Regulatory Flexibility Analysis, and since the 
Regulatory Flexibility Act amendments were not in effect until the 
record in this proceeding was closed, the Commission was unable to 
request information regarding the number of small businesses that are 
associated with the 220 MHz service. However, we have adopted criteria 
for defining small businesses and very small businesses for purposes of 
determining eligibility for auction bidding credits and installment 
payments.8 We will therefore use this definition for estimating 
the number of potential Phase II entities applying for auctionable 
spectrum that are small businesses. To estimate the number of Phase I 
licensees and the number of 220 MHz equipment manufacturers that are 
small businesses, and the number of Phase II entities applying for non-
auctionable spectrum (i.e., public safety and EMRS channels) we shall 
turn to the relevant definitions as provided by the Small Business 
Administration (SBA).
---------------------------------------------------------------------------

    \8\ Approval from the Small Business Administration for this 
definition is pending.
---------------------------------------------------------------------------

Phase I Licensees
    There are approximately 3,800 non-nationwide Phase I licensees and 
4 nationwide licensees currently authorized to operate in the 220 MHz 
band. To estimate the number of such entities that are small 
businesses, we apply the definition of a small entity under SBA rules 
applicable to radiotelephone companies. This definition provides that a 
small entity is a radiotelephone company employing fewer than 1,500 
persons.9 However, the size data provided by the SBA do not allow 
us to make a meaningful estimate of the number of 220 MHz providers 
that are small entities because they combine all radiotelephone 
companies with 500 or more employees.10 We therefore use the 1992 
Census of Transportation, Communications, and Utilities, conducted by 
the Bureau of the Census, which is the most recent information 
available. Data from the Bureau of the Census' 1992 study indicate that 
only 12 out of a total 1,178 radiotelephone firms which operated during 
1992 had 1,000 or more employees--and these may or may not be small 
entities, depending on whether they employed more or less than 1,500 
employees.11 But 1,166 radiotelephone firms had fewer than 1,000 
employees and therefore, under the SBA definition, are small entities. 
However, we do not know how many of these 1,166 firms are likely to be 
involved in the 220 MHz service.
---------------------------------------------------------------------------

    \9\ 13 CFR 121.201, Standard Industrial Classification (SIC) 
Code 4812.
    \10\ U.S. Small Business Administration 1992 Economic Census 
Employment Report, Bureau of the Census, U.S. Department of 
Commerce, Table 3, SIC Code 4812 (radiotelephone communications 
industry data adopted by the SBA Office of Advocacy).
    \11\ U.S. Bureau of the Census, U.S. Department of Commerce, 
1992 Census of Transportation, Communications, and Utilities, UC92-
S-1, Subject Series, Establishment and Firm Size, Table 5, 
Employment Size of Firms; 1992, SIC Code 4812 (issued May 1995).
---------------------------------------------------------------------------

Phase II Entities Applying for Auctionable Spectrum
    The 220 MHz Third Report and Order adopts a two-tiered definition 
of small business for the purpose of competitive bidding. The 
Commission defines a ``very small business'' as an entity that, 
together with its affiliates and controlling principals, has average 
gross revenues for the three preceding years of not more than $3 
million; and a ``small business'' as an entity that, together with 
affiliates and controlling principals, has average gross revenues for 
the three preceding years of not more than $15 million. For purposes of 
determining small business status, the Commission will attribute the 
gross revenues of all controlling principals in the small business 
applicant as well as the gross revenues of affiliates of the applicant. 
The Commission is not imposing specific equity requirements on the 
controlling principals that meet this small business definition. In 
order for an applicant to qualify as a small business, qualifying small 
business principals must maintain both de facto and de jure control of 
the applicant.
    67. As noted above, the SBREFA was not in effect at the time the 
Third Notice was issued, so comment was not sought on the number of 
prospective Phase II applicants in the 220 MHz service which might 
qualify as small businesses. Therefore, the Commission cannot 
accurately predict the number of applicants in the 220 MHz service who 
will fit the description of a small business. However, using the 
definitions of small business and very small business we adopted for 
the purpose of determining eligibility for bidding credits and 
installment payments, the Commission can attempt to estimate the number 
of applicants for 220 MHz licenses that are small businesses by looking 
at the number of applicants in similar services that qualified as small 
businesses. For example, the 900 MHz SMR service utilized a definition 
of very small business based on gross revenues of not more than $3 
million and a definition of small business based on gross revenues of 
not more than $15 million. A total of 128 applications were received in 
the 900 MHz SMR auction, and, of these applications, 71 qualified as 
very small businesses and an additional 30 qualified as small 
businesses.
    68. Approximately 900 licenses will be made available for 
authorization in

[[Page 15987]]

the 220 MHz auction. In the 900 MHz SMR auction, 1050 licenses were 
made available. Given that 128 qualified applications were received in 
the 900 MHz auction, we anticipate receiving slightly fewer, or 120 
applications in the 220 MHz auction. Given that 71 applicants qualified 
as very small businesses and 30 applicants qualified as small 
businesses in the 900 MHz SMR auction, we estimate that proportionately 
fewer, or 65 applicants, will qualify as very small businesses, and 27 
applicants will qualify as small businesses in the 220 MHz auction.
Phase II Entities Applying for Non-Auctionable Spectrum
    We estimate that approximately 1,000 applications will be filed for 
authorization on the 220 MHz public safety channels, and we estimate 
that approximately 1,000 applications will be filed for authorization 
on the 220 MHz EMRS channels. To estimate the number of such applicants 
that are small entities, we apply the definition of a small entity 
under the SBA rules applicable to small governmental entities. The 
SBREFA requires that we estimate the number of governmental entities 
with populations of less than 50,000 for which our rules will 
apply.12 According to the Census Bureau, 96 percent of the 
nation's counties, cities, and towns have populations of fewer than 
50,000.13 The Census Bureau estimates that this ratio is 
approximately accurate for all governmental entities. We thus estimate 
that 96 percent of all governmental entities are small; and further 
estimate that, because the estimated 1,000 applications for the public 
safety channels will be from governmental entities, that 960 of these 
applications may be from small governmental entities. Some EMRS 
applicants will be governmental entities, while others will be non-
governmental (e.g., hospitals, ambulance services). Because we assume 
that all such non-governmental entities applying for EMRS licenses will 
be small entities, we estimate that a slightly higher percentage of 
applicants for EMRS licenses, or 98 percent of EMRS applicants, will be 
small entities. We therefore estimate that approximately 980 
applications for the EMRS channels will be from small entities.
---------------------------------------------------------------------------

    \12\ See 5 U.S.C. 601(5) (including cities, counties, towns, 
townships, villages, school districts, or special districts).
    \13\ See 1992 Census of Governments, U.S. Bureau of the Census, 
U.S. Department of Commerce.
---------------------------------------------------------------------------

Radio Equipment Manufacturers
    We anticipate that at least six radio equipment manufacturers will 
be affected by our decisions in this proceeding. According to the SBA's 
regulations, a radio and television broadcasting and communications 
equipment manufacturer must have 750 or fewer employees in order to 
qualify as a small business concern.14 Census Bureau data indicate 
that there are 858 U.S. firms that manufacture radio and television 
broadcasting and communications equipment, and that 778 of these firms 
have fewer than 750 employees and would therefore be classified as 
small entities.15 We do not have information that indicates how 
many of the six radio equipment manufacturers associated with this 
proceeding are among these 778 firms. However, because three of these 
manufacturers (Motorola, Ericsson and E.F. Johnson) are major, 
nationwide radio equipment manufacturers, we conclude that these 
manufacturers would not qualify as small businesses.
---------------------------------------------------------------------------

    \14\ 13 CFR 121.201, (SIC) Code 3663.
    \15\ U.S. Dept. of Commerce, 1992 Census of Transportation, 
Communications and Utilities (issued May 1995), SIC category 3663.
---------------------------------------------------------------------------

IV. Summary of the Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    69. The 220 MHz Third Report and Order adopts a number of rules 
that will entail reporting, recordkeeping, and/or third party 
consultation. However, the Commission believes that these requirements 
are the minimum needed to ensure the integrity of the 220 MHz service. 
The Commission considers the effects of these requirements first on 
Phase II applicants and licensees and then on Phase I licensees.
Phase II Applicants
    Applicants for the Phase II 220 MHz auction will be required to 
submit a completed FCC Form 175. Auction winners, as well as applicants 
for the 220 MHz public safety and EMRS channels, will be required to 
file a completed FCC Form 600. In addition, applicants for the 220 MHz 
EMRS channels, like all other EMRS applicants, must furnish a statement 
from the governmental body having jurisdiction over the state emergency 
plan indicating that the applicant is included in the emergency plan, 
or is otherwise supporting the application.
Phase II Licensees
    Phase II licensees authorized on Channels 161-200 and Channels 1-40 
will be required to coordinate among themselves to locate their base 
stations to avoid interference. Regional licensees operating on 
Channels 196-200 may operate stations at powers exceeding 2 watts ERP 
or at antenna heights greater than 20 feet provided that they obtain 
the written concurrence of all Phase I and Phase II licensees operating 
base stations on Channels 1-40 within 6 km of the base stations of the 
Regional licensees.
    70. Phase II licensees operating secondary, fixed stations will be 
required to notify any co-channel primary licensees authorized in the 
area of their operation of the location of their secondary facilities. 
Phase II licensees implementing nationwide land mobile or paging 
systems will be required to meet construction ``benchmarks'' and must 
submit maps and other supporting documentation to demonstrate 
compliance with these benchmarks five and ten years after grant of the 
initial license. Also, nationwide licensees implementing fixed systems, 
in lieu of meeting the construction benchmarks described above, may 
make a showing of ``substantial service'' within five and ten years of 
the initial license grant. To comply with these requirements, such 
licensees must also submit maps and other supporting documents five and 
ten years after grant of the initial license. Regional licensees and EA 
licensees implementing land mobile, paging, or fixed systems must also 
comply with 5- and 10-year construction or substantial service 
requirements and must also provide maps and other supporting documents 
to demonstrate compliance with such requirements. Preparation of maps 
and supporting documentation may involve engineering expertise. Failure 
by nationwide, EA, or Regional licensees to meet either the five- or 
ten-year construction requirement will result in automatic cancellation 
of the licensees' nationwide authorization. Phase II licensees will not 
be permitted to construct their stations less than 120 km from a 
constructed and operating Phase I, co-channel station unless they 
submit a technical analysis demonstrating that the predicted 28 dBuV/m 
interfering contour of their base station does not overlap the 
predicted 38 dBuV/m service contour of the Phase I licensee's station. 
This technical analysis will involve engineering expertise. Phase II 
licensees may also locate their stations less than 120 km from the 
station of an existing Phase I co-channel licensee or with less 10 dB 
protection to such co-channel's station's 38 dBuV/m contour if the 
Phase II licensee obtains the written consent of the affected Phase I

[[Page 15988]]

licensee. Finally, Phase II licensees operating in adjacent EAs or 
Regions may exceed the specified field strength limit at their border 
if all affected, co-channel EA and Regional licensees agree to the 
higher field strength.
    71. Section 309(j)(4)(E) of the Communications Act directs the 
Commission to ``require such transfer disclosures and anti-trafficking 
restrictions and payment schedules as may be necessary to prevent 
unjust enrichment as a result of the methods employed to issue licenses 
and permits.'' 16 The Commission adopted safeguards designed to 
ensure that the requirements of this section are satisfied, including a 
transfer disclosure requirement for licenses obtained through the 
competitive bidding process for the 220 MHz service. An applicant 
seeking approval for a transfer of control or assignment of a license 
within three years of receiving a new license through a competitive 
bidding procedure must, together with its application for transfer of 
control or assignment, file with the Commission a statement indicating 
that its license was obtained through competitive bidding. Such 
applicant must also file with the Commission the associated contracts 
for sale, option agreements, management agreements, or other documents 
disclosing the total consideration that the applicant would receive in 
return for the transfer or assignment of its license.
---------------------------------------------------------------------------

    \16\ 47 U.S.C. 309(j)(4)(E).
---------------------------------------------------------------------------

    72. With respect to small businesses, we have adopted unjust 
enrichment provisions to deter speculation and participation in the 
licensing process by those who do not intend to offer service to the 
public, or who intend to use the competitive bidding process to obtain 
a license at a lower cost than they would otherwise have to pay and to 
later sell it at a profit, and to ensure that large businesses do not 
become the unintended beneficiaries of measures meant to help small 
firms. Small business licensees seeking to transfer their licenses to 
entities which do not qualify as small businesses (or very small 
businesses seeking to transfer their licenses to small businesses or 
large companies), as a condition of approval of the transfer, must 
remit to the government a payment equal to a portion of the total value 
of the benefit conferred by the government.
    73. Finally, applicants and licensees claiming eligibility for 
competitive bidding as a small business, a very small business, or a 
consortium of small businesses (or very small businesses) are subject 
to audits by the Commission. Selection for audit may be random, on 
information, or on the basis of other factors. Consent to such audit is 
part of the certification included in the short-form application (FCC 
Form 175).
Phase I Licensees
    Phase I nationwide licensees intending to operate primary, fixed or 
paging operations instead of or in addition to their land mobile 
operations must revise their 10-year schedule for construction of their 
land mobile system to describe the fixed or paging system they intend 
to deploy. They must also certify that the financial showings and all 
other certifications they had previously provided in demonstrating 
their ability to construct and operate their nationwide land mobile 
system remain applicable to their planned, primary fixed or paging 
system, or they must revise their financial showings and provide all 
other relevant certifications to demonstrate their ability to construct 
and operate a nationwide, primary fixed or paging system. These 
certifications and showings may involve engineering and financial 
expertise. The Commission anticipates that two Phase I licensees will 
seek to deploy primary fixed or paging operations.
    74. Phase I nationwide licensees intending to operate primary fixed 
systems will be required to comply with existing construction, 
recordkeeping, and reporting requirements, but, rather than 
constructing base stations (for base and mobile operations) and placing 
them in operation to meet their 4-, 6- and 10-year construction 
benchmarks, must demonstrate how their fixed stations are providing 
``substantial service'' to the public. This demonstration of 
substantial service will be provided in the same form as documentation 
currently required for nationwide Phase I licensees providing evidence 
of the construction of their primary land mobile systems.
All 220 MHz Licensees
    All 220 MHz licensees seeking renewal of their authorizations will 
be required, inter alia, to demonstrate that they have provided 
substantial service during their past license term, and submit a 
showing explaining why they should receive a renewal expectancy.

V. Significant Alternatives and Steps Taken by Agency to Minimize the 
Significant Economic Impact on a Substantial Number of Small Entities 
Consistent With Stated Objectives

    75. The Commission's chief objectives in adopting the 220 MHz Third 
Report and Order are to establish a regulatory plan for the 220 MHz 
service that will allow for the efficient licensing and use of the 
service, to eliminate unnecessary regulatory burdens, to enhance the 
competitive potential of the 220 MHz service in the mobile services 
marketplace, to provide a wide variety of radio services to the public, 
and to continue to provide a home for the development of spectrally 
efficient technologies. A number of the Commission's original proposals 
were modified in order to minimize the significant economic impact on 
small entities consistent with these objectives, based on issues and 
suggestions raised in the public comment.
    76. For example, the Commission made significant changes to the 
proposed Phase II channel band plan based on an analysis of the 
comments. Most of the commenters favored the assignment of larger 
numbers of channels to individual EA and Regional licensees than the 
proposed 5-channel blocks. The Commission concurred with the 
commenters' argument that proposed 5-channel blocks would unjustly 
inhibit licensees' revenue-producing ability and therefore decided to 
authorize 10- and 15-channel EA and Regional assignments, respectively. 
We concluded that adoption of a licensing scheme that provides for 10-
channel and 15-channel assignments should enable Phase II licensees, 
many of which are likely to be small businesses, to establish more 
viable radio services. Commenters were also generally opposed to the 
Commission's use of contiguous channel assignments in our proposed 
Phase II band plan after having previously adopted predominantly non-
contiguous assignments in Phase I. The Commission found merit in the 
argument of those who emphasized the difficulties that are likely to be 
encountered by both Phase I licensees and Phase II licensees, many of 
which are likely to be small businesses, if we adopted completely 
inconsistent Phase II and Phase I band plans. We therefore adopted a 
Phase II band plan that mirrored the existing Phase I plan. We 
concluded that adopting a Phase II band plan patterned after the Phase 
I plan will benefit both Phase I and Phase II licensees because Phase I 
licensees will be able to more easily expand on their existing 
authorized channels, and Phase II licensees will be able to more easily 
provide protection to co-channel Phase I licensees. In addition, at the 
suggestion of a commenter, we decided not to require EA, Regional or 
nationwide licensees to construct a minimum number of channels at all 
of their base stations.
    77. In order to provide licensees with maximum flexibility to 
employ a variety

[[Page 15989]]

of technologies, the Commission decided to allow them to aggregate 
their contiguous channels. However, in so doing the Commission agreed 
with the views of commenters SEA and Securicor and adopted a spectrum 
efficiency standard. In adopting a spectrum efficiency standard, we 
rejected other commenters' arguments that a standard is not necessary 
because licensees acquiring spectrum assigned on contiguous channels 
through competitive bidding will have an incentive to use that spectrum 
as efficiently as possible, and that adoption of a particular spectrum 
efficiency standard could limit the types of services that licensees 
would be able to provide. The Commission concluded that a standard was 
needed to ensure that the 220 MHz band would continue to be a home for 
the development of spectrum efficient technologies.
    78. The Commission also attempted, wherever possible, to offer 
licensees the most flexibility with a minimum regulatory burden. For 
example, the Commission elected to allow Phase I and Phase II licensees 
the flexibility to conduct paging operations on a primary basis. The 
commenters were divided on this issue. Commenters opposed to allowing 
paging on a primary basis maintained that to do so would transform the 
220 MHz band into merely an additional band for the provision of paging 
services, and that this would be unfair to existing paging licensees in 
other bands. These commenters argued that there are a sufficient number 
of paging bands already in existence and that the 220 MHz band should 
continue to be used to advance the development of narrowband 
technology. The Commission, however, decided to allow paging on a 
primary basis in the 220 MHz band in order to provide additional 
spectrum for a rapidly growing communications service and to enable 220 
MHz licensees to compete more effectively in the wireless marketplace.
    79. The Commission also decided to allow 220 MHz licensees to 
conduct fixed operations on a primary basis to provide them with the 
flexibility to offer a wider array of communications services to the 
public. Similarly, the Commission decided that 220 MHz licensees 
conducting geophysical telemetry operations should be permitted to 
obtain secondary authorizations to operate their fixed facilities on a 
non-interference basis to licensees authorized to operate on a primary 
basis. In making this decision, the Commission acknowledged concerns 
raised by commenters about possible interference to primary operations, 
but concluded that the risk of interference from secondary, geophysical 
telemetry operations was minimal, and that such operations should 
therefore be allowed.
    80. In prescribing rules for the 220 MHz service auction, we 
initially proposed to begin by auctioning the nationwide licenses and 
the Regional licenses in one simultaneous multiple round auction. We 
proposed to then auction the economic area (EA) licenses in a 
subsequent auction. The SMR Advisory Group supported this approach. 
After further consideration, however, we concluded that all three 
categories of licenses are highly interdependent. Grouping such 
licenses and putting them up for bid at the same time facilitates 
awarding licenses to bidders who value them the most highly by 
providing bidders, including small businesses, with information about 
the prices of complementary and substitutable licenses during the 
course of an auction. We therefore announced our plan to hold a single, 
simultaneous multiple round auction for all classes of licenses. We 
did, however, reserve the discretion to auction each of these license 
groupings (nationwide, Regional, EA) separately or in different 
combinations (e.g., nationwide and Regional together) if there are 
administrative reasons for doing so.
    81. In establishing bidding procedures, the Commission proposed the 
use of the Milgrom-Wilson activity rule. We proposed a minimum activity 
level requiring bidders to be active on at least one-third of the MHz-
pops for which they are eligible in Stage I, two-thirds of the MHz-pops 
for which they are eligible in Stage II, and 100 percent of the MHz-
pops for which they are eligible in Stage III. The SMR Advisory Group 
and AMTA supported use of the Milgrom-Wilson activity rule. However, 
NTIA stated that requiring a 100 percent level of activity in Stage III 
may inhibit bidder flexibility and be unduly restrictive. We agree with 
NTIA and decided not to require a 100 percent level of activity in 
Stage III. Moreover, in order to enhance bidder flexibility at the end 
of the auction and to make the figures easier to administer, we 
eliminated the use of fractions. Thus, we adopted eligibility levels of 
60 percent, 80 percent, and 98 percent, for Stages I, II, and III, 
respectively. This change will benefit all bidders, including small 
businesses.
    82. In establishing auction rules for the 220 MHz service, the 
Commission adopted a number of provisions to support the participation 
of small businesses. For example, the Commission established bidding 
credits and an installment payment plan, designed to increase the 
opportunities for small businesses to become 220 MHz service providers. 
In addition, the Commission established rules for the partitioning of 
geographic area licenses, which will increase opportunities for small 
businesses to participate in the 220 MHz service. Through partitioning, 
small businesses may acquire licenses for portions of geographic areas, 
a less expensive alternative to acquiring a license for an entire area.
    83. The Commission initially proposed to define small business, for 
purposes of eligibility for such provisions as bidding credits and 
installment payments as follows: For companies wishing to bid on 
nationwide and Regional licenses, we proposed to define small 
businesses as those entities with $15 million or less in average annual 
gross revenues for the preceding three years. For EA licenses, we 
proposed to define small businesses as those entities with $6 million 
or less in average annual gross revenues for the preceding three years. 
AMTA and the SMR Advisory Group agreed with this definition. We 
concluded, however, that while the nationwide and Regional Phase II 220 
MHz licenses would have higher build-out and operational costs than 
would the EA licenses, it is likely that bidders will attempt to 
aggregate licenses across regions or EAs to establish their markets. 
Thus, for example, bidders may elect to aggregate EA licenses to create 
a Regional market, rather than bid for the Regional license itself. In 
order to ensure the meaningful participation of small business entities 
in the auction, we adopted a two-tiered definition of small business 
with gross revenues limits applicable across all three categories of 
license. This approach will give qualifying small businesses 
flexibility to bid for a Regional license or, on the other hand, elect 
to bid for several EAs, without having to choose which type of license 
to bid for prior to the start of the auction. For purposes of bidding 
for the nationwide, Regional and EA licenses, therefore, we defined (1) 
a very small business as an entity that, together with its affiliates 
and controlling principals, has average gross revenues for the three 
preceding years of no more than $3 million and (2) a small business as 
an entity that, together with affiliates and controlling principals, 
has average gross revenues for the preceding three years of no more 
than $15 million. Defining a ``very small business'' at the $3 million 
threshold, rather than at the $6 million threshold, is consistent with 
the

[[Page 15990]]

definitions successfully used in the 900 MHz SMR service, where build-
out costs are similar to those in the 220 MHz service. Bidding credits 
are based upon this two-tiered approach.
    84. We disagreed with the suggestion of Metricom that we should 
increase the gross revenues threshold of our small business definition 
to $25 million, because, based upon our experience in the 900 MHz SMR 
auction, such an increase would be far too inclusive. In the 900 MHz 
SMR auction, we established small business definitions of $15 million 
and $3 million. Of the 128 applicants that qualified to participate in 
the auction, 101 qualified for the small business or very small 
business bidding credits. Because we believe the cost of building out a 
220 MHz system most closely resembles the cost of a 900 MHz SMR system, 
and because it would substantially dilute the value of the small 
business preferences for virtually all applicants to qualify for them, 
we declined to adopt the Metricom proposal.
    85. For purposes of determining small business status, we will 
attribute the gross revenues of the applicant, all controlling 
principals of the applicant, and their affiliates. This is a much 
simpler approach than we utilized in broadband PCS, because it does not 
require a control group. We will still require, however, that in order 
for an applicant to qualify as a small business, qualifying small 
business principals must maintain ``control'' of the applicant, 
including both de facto and de jure control. Thus, small businesses 
will have less difficulty determining their eligibility. We declined to 
adopt Comtech's suggestion that, for determining whether an entity 
qualifies as a small business, revenues and assets of investors holding 
more than 25 percent of an applicant's voting stock and revenues and 
assets of all affiliates should be attributable to the applicant. Our 
approach is a more accurate indicator of the control of an applicant.
    86. With respect to bidding credits, in order to ensure that small 
businesses have a realistic opportunity to acquire Phase II 220 MHz 
nationwide and Regional licenses, we proposed a 40 percent bidding 
credit for all qualified designated entities. For Phase II 220 MHz 
nationwide licenses, we proposed, inter alia, to offer this bidding 
credit on only one of the available channel blocks. For Phase II 220 
MHz Regional licenses, we proposed to offer the bidding credit on all 
available channel blocks. Because we believed that the Phase II 220 MHz 
EA licenses are similar in their number and in the level of incumbency 
to the licenses offered in the 900 MHz SMR service, we proposed 
offering the same 10 percent bidding credit to qualified small 
businesses bidding on Phase II 220 MHz EA licenses as we did in the 900 
MHz SMR auction. SMR Advisory Group supported these proposals. AMTA, 
U.S. MobilComm, Roamer, and Incom also supported these proposals, 
although they supported bidding credits solely for regional and EA 
licenses. Comtech agreed with a 40 percent bidding credit for Regional 
licenses, but suggested this credit should be extended to all 
nationwide licenses as well.
    87. We concluded, however, that small businesses are in the best 
position to decide which blocks of licenses to bid on. As we have 
stated, based upon our experience in prior auctions, it is very likely 
that bidders will attempt to aggregate Regional and EA licenses in the 
development of their bidding strategies, particularly if these licenses 
are auctioned together. Thus, in order to enhance bidder flexibility, 
we elected to establish bidding credits consistent with our two-tiered 
definition of small business that will apply to all three license 
groups. For very small businesses that, together with affiliates and 
controlling principals, have average gross revenues for the three 
preceding years of not more than $3 million, we will give a 25 percent 
bidding credit, applicable for all three categories of licenses. 
Likewise, we will give small businesses that, together with affiliates 
and controlling principals, have average gross revenues for the three 
preceding years of not more than $15 million, a bidding credit of 10 
percent, available for all three categories of licenses. While the 25 
percent bidding credit is less than originally proposed for the 
nationwide and Regional licenses, we believe it is appropriate since we 
are now going to offer bidding credits generally for all channel 
blocks. Moreover, we had favorable results--i.e., a significant number 
of small business applicants were winning bidders--in previous auctions 
with bidding credits at this level or lower.
    88. We initially proposed the use of installment payments and 
reduced down payments for all small businesses bidding for any of the 
Phase II 220 MHz nationwide, Regional and EA licenses. The SMR Advisory 
Group supported these positions. We also tentatively concluded that 
reduced upfront payments for small businesses would be unnecessary.
    89. We adopted an installment payment plan for small businesses and 
very small businesses participating in the 220 MHz auction. We declined 
to provide very small businesses with a longer interest-only period 
than the two-year period provided for small businesses. We determined 
that a two-year interest-only period in the single plan we adopted 
provides all small businesses with the appropriate level of financing 
to overcome difficulties in attracting capital. Given that we are 
making additional financial assistance available to very small 
businesses in the form of a 25 percent bidding credit, we concluded 
that a longer interest-only period is not needed. We also concluded 
that small businesses should not be permitted to pay a reduced down 
payment. As we stated in the case of the broadband PCS D, E and F Block 
auction, we believe that a substantial down payment is necessary to 
ensure that winning bidders have the financial capability of building 
out their systems, and will provide us with stronger assurance against 
defaults than a reduced down payment. Increasing the amount of the 
bidder's funds at risk in the event of default discourages insincere 
bidding and therefore increases the likelihood that licenses are 
awarded to parties who are best able to serve the public. We also 
believe that a 20 percent down payment should cover the required 
payments in the unlikely event of default.
    90. Finally, we elected not to adopt a spectrum set-aside for 
designated entities, including small businesses. Because there will be 
both a large number and a large variety of licenses available in the 
Phase II 220 MHz auction, we decided not to adopt an entrepreneur's 
block for this service. Small businesses, we concluded, will have a 
significant opportunity to compete for Phase II 220 MHz licenses, 
particularly given the special provisions adopted for small businesses.
    91. In making its various decisions in this proceeding, the 
Commission considered all available alternatives. It believes that the 
rules it has adopted in this decision represent the best balance of 
providing licensees, many of whom are small businesses, with the most 
flexibility and the smallest regulatory burden, and enables them to 
offer a variety of radio services to the public and compete effectively 
in the mobile communications marketplace.

VI. Report to Congress

    92. The Commission shall send a copy of this Final Regulatory 
Flexibility Analysis (FRFA) along with this 220 MHz Third Report and 
Order, in a report to Congress pursuant to 5 U.S.C. 801(a)(1)(A). A 
copy of this FRFA will also be published in the Federal Register.

[[Page 15991]]

Ordering Clauses

    93. Authority for issuance of this Third Report and Order is 
contained in sections 4(i), 303(r), 309(j), and 332 of the 
Communications Act of 1934, 47 U.S.C. 154(i), 303(r), 309(j), 332.
    94. Accordingly, it is ordered that part 90 of the Commission's 
rules, 47 CFR part 90, is amended as set forth below, effective August 
21, 1997.
    95. It is further ordered that the Petitions for Reconsideration 
filed by Columbia Cellular Corporation, PLMRS Narrowband Corp. and 360 
Mobile Data Joint Venture on August 6, 1993, are dismissed as moot.
    96. It is further ordered that, pursuant to 47 U.S.C. 155(c), the 
Chief, Wireless Telecommunications Bureau, is granted delegated 
authority to implement and modify auction procedures in the Phase II 
220 MHz service, including the general design and timing of an auction; 
the number and grouping of authorizations to be offered in any 
particular auction; the manner of submitting bids; the amount of 
minimum opening bids and bid increments; activity and stopping rules; 
and application and payment requirements, including the amount of 
upfront payments; and to announce such procedures by Public Notice.
    97. It is further ordered that all pending nationwide and non-
nationwide 220 MHz applications, together with the appropriate filing 
fees, will be returned to applicants, without prejudice.
    98. It is further ordered that a Public Notice will be issued 
announcing the acceptance of applications for authorizations on 
Channels 161-170 and Channels 181-185 after August 21, 1997.
    99. It is further ordered that applications for temporary, 
secondary authorizations for geophysical telemetry operations will be 
accepted beginning August 21, 1997.

List of Subjects

47 CFR Part 2

    Radio.

47 CFR Part 90

    Radio.

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

Rule Changes

    Parts 2 and 90 of Title 47 of the Code of Federal Regulations are 
amended as follows:

PART 2--FREQUENCY ALLOCATIONS AND RADIO TREATY MATTERS; GENERAL 
RULES AND REGULATIONS

    1. The authority citation for part 2 continues to read as follows:

    Authority: Secs. 4, 302, 303, and 307 of the Communications Act 
of 1934, as amended, 47 U.S.C. 154, 302, 303, and 307, unless 
otherwise noted.

    2. Section 2.106, the Table of Frequency Allocations, is amended as 
follows:
    a. Revise entries for 220-222 MHz;
    b. Remove international footnote 625; and
    c. Add United States footnote US335.


Sec. 2.106  Table of Frequency Allocations.

* * * * *

                                                                                                                
                 International table                       United States table           FCC use designators    
----------------------------------------------------------------------------------------------------------------
                                                        Government        Non-                                  
   Region 1--        Region 2--        Region 3--    ---------------   Government                               
 allocation MHz    allocation MHz    allocation MHz                 ---------------  Rule part(s)   Special-use 
                                                        Allocation     Allocation                   frequencies 
                                                           MHz            MHz                                   
(1)               (2)               (3)               (4)            (5)            (6)            (7)          
----------------------------------------------------------------------------------------------------------------
         *                *                 *               *              *              *              *      
----------------------------------------------------------------------------------------------------------------
220-222           220-222 AMATEUR   220-222 FIXED     220-222 FIXED  220-222 FIXED  PRIVATE LAND                
 BROADCASTING      FIXED MOBILE      MOBILE            LAND MOBILE    LAND MOBILE    MOBILE (90)                
                   Radiolocation     BROADCASTING      Radiolocatio                                             
                   627                                 n 627                                                    
621  623  628  6  ................  626               G2 US335       627 US335                                  
 29                                                                                                             
         *                *                 *               *              *              *              *      
----------------------------------------------------------------------------------------------------------------

United States (US) Footnotes

* * * * *
    US335 The primary Government and non-Government allocations for 
the various segments of the 220-222 MHz band are divided as follows: 
(1) the 220.0-220.55/221.0-221.55, 220.6-220.8/221.6-221.8, 220.85-
220.90/221.85-221.90 and 220.925-221.0/221.925-222.0 MHz bands 
(Channels 1-110, 121-160, 171-180 and 186-200, respectively) are 
available for exclusive non-Government use; (2) the 220.55-220.60/
221.55-221.60 MHz bands (Channels 111-120) are available for 
exclusive Government use; and (3) the 220.80-220.85/221.80-221.85 
and 220.900-220.925/221.900-221.925 MHz bands (Channels 161-170 and 
181-185, respectively) are available for shared Government and non-
Government use. The exclusive non-Government band segments are also 
available for temporary fixed geophysical telemetry operations on a 
secondary basis to the fixed and mobile services.
* * * * *

PART 90--PRIVATE LAND MOBILE RADIO SERVICES

    1. The authority citation for part 90 continues to read as follows:

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

    2. Section 90.7 is amended by revising the definitions for ``EA-
based or EA license'' and ``Economic Areas (EAs),'' and by adding 
definitions for ``Geophysical Telemetry,'' ``Regional Economic Area 
Groupings (REAGs),''

[[Page 15992]]

``Regional License,'' and ``220 MHz Service'' in alphabetical order to 
read as follows:


Sec. 90.7  Definitions.

* * * * *
    EA-based or EA license. A license authorizing the right to use a 
specified block of SMR and 220-222 MHz spectrum within one of 175 
Economic Areas (EAs) as defined by the Department of Commerce Bureau of 
Economic Analysis. The EA Listings and the EA Map are available for 
public inspection at the Wireless Telecommunications Bureau's public 
reference room, Room 5608, 2025 M St. NW, Washington, DC 20554 and 
Office of Operations--Gettysburg, 1270 Fairfield Road, Gettysburg, PA 
17325.
    Economic Areas (EAs). A total of 175 licensing regions based on the 
United States Department of Commerce Bureau of Economic Analysis 
Economic Areas defined as of February 1995, with the following 
exceptions:
    (1) Guam and Northern Mariana Islands are licensed as a single EA-
like area (identified as EA 173 in the 220 MHz Service);
    (2) Puerto Rico and the U.S. Virgin Islands are licensed as a 
single EA-like area (identified as EA 174 in the 220 MHz Service); and
    (3) American Samoa is licensed as a single EA-like area (identified 
as EA 175 in the 220 MHz Service).
* * * * *
    Geophysical Telemetry. Telemetry involving the simultaneous 
transmission of seismic data from numerous locations to a central 
receiver and digital recording unit.
* * * * *
    Regional Economic Area Groupings (REAGs). The six geographic areas 
for Regional licensing in the 220-222 MHz band, based on the United 
States Department of Commerce Bureau of Economic Analysis Economic 
Areas (see 60 FR 13114 (March 10, 1995)) defined as of February 1995, 
and specified as follows:
    REAG 1 (Northeast): REAG 1 consists of the following EAs: EA 001 
(Bangor, ME) through EA 011 (Harrisburg-Lebanon-Carlisle, PA); and EA 
054 (Erie, PA).
    REAG 2 (Mid-Atlantic): REAG 2 consists of the following EAs: EA 012 
(Philadelphia-Wilmington-Atlantic City, PA-NJ-DE-MD) through EA 026 
(Charleston-North Charleston, SC); EA 041 (Greenville-Spartanburg-
Anderson, SC-NC); EA 042 (Asheville, NC); EA 044 (Knoxville, TN) 
through EA 053 (Pittsburgh, PA-WV); and EA 070 (Louisville, KY-IN).
    REAG 3 (Southeast): REAG 3 consists of the following EAs: EA 027 
(Augusta-Aiken, GA-SC) through EA 040 (Atlanta, GA-AL-NC); EA 043 
(Chattanooga, TN-GA); EA 069 (Evansville-Henderson, IN-KY-IL); EA 071 
(Nashville, TN-KY) through EA 086 (Lake Charles, LA); EA 088 
(Shreveport-Bossier City, LA-AR) through EA 090 (Little Rock-North 
Little Rock, AR); EA 095 (Jonesboro, AR-MO); EA 096 (St. Louis, MO-IL); 
and EA 174 (Puerto Rico and the U.S. Virgin Islands).
    REAG 4 (Great Lakes): REAG 4 consists of the following EAs: EA 055 
Cleveland-Akron, OH-PA) through EA 068 (Champaign-Urbana, IL); EA 097 
(Springfield, IL-MO); and EA 100 (Des Moines, IA-IL-MO) through EA 109 
(Duluth-Superior, MN-WI).
    REAG 5 (Central/Mountain): REAG 5 consists of the following EAs: EA 
087 (Beaumont-Port Arthur, TX); EA 091 (Forth Smith, AR-OK) through EA 
094 (Springfield, MO); EA 098 (Columbia, MO); EA 099 (Kansas City, MO-
KS); EA 110 (Grand Forks, ND-MN) through EA 146 (Missoula, MT); EA 148 
(Idaho Falls, ID-WY); EA 149 (Twin Falls, ID); EA 152 (Salt Lake City-
Ogden, UT-ID); and EA 154 (Flagstaff, AZ-UT) through EA 159 (Tucson, 
AZ).
    REAG 6 (Pacific): REAG 6 consists of the following EAs: EA 147 
(Spokane, WA-ID); EA 150 (Boise City, ID-OR); EA 151 (Reno, NV-CA); EA 
153 (Las Vegas, NV-AZ-UT); EA 160 (Los Angeles-Riverside-Orange County, 
CA-AZ) through EA 173 (Guam and the Northern Mariana Islands); and EA 
175 (American Samoa).
    Regional License. A license authorizing the right to use a 
specified block of 220-222 MHz spectrum within one of six Regional 
Economic Area Groupings (REAGs).
* * * * *
    220 MHz Service. The radio service for the licensing of frequencies 
in the 220-222 MHz band.
* * * * *
    3. Section 90.41(a) is revised to read as follows:


Sec. 90.41  Disaster relief organizations.

    (a) Eligibility. Organizations established for disaster relief 
purposes having an emergency radio communications plan are eligible to 
hold authorizations to operate radio stations for the transmission of 
communications relating to the safety of life or property, the 
establishment and maintenance of temporary relief facilities, and the 
alleviation of emergency situations during periods of actual or 
impending emergency, or disaster, and until substantially normal 
conditions are restored. In addition, the stations may be used for 
training exercises, incidental to the emergency communications plan, 
and for operational communications of the disaster relief organization 
or its chapter affiliates.
* * * * *
    4. Section 90.137 is amended by revising paragraph (a)(3) to read 
as follows:


Sec. 90.137  Applications for operation at temporary locations.

    (a) * * *
    (3) Applications for operation at temporary locations exceeding 180 
days must be accompanied by evidence of frequency coordination, except 
that applications for operation at temporary locations exceeding 180 
days by applicants using 220-222 MHz spectrum for geophysical telemetry 
operations need not be accompanied by evidence of frequency 
coordination.
* * * * *
    5. Section 90.203 is amended by adding paragraph (k) to read as 
follows:


Sec. 90.203  Type acceptance required.

* * * * *
    (k)(1) For transmitters operating on frequencies in the 220-222 MHz 
band, type acceptance will only be granted for equipment with channel 
bandwidths up to 5 kHz, except that type acceptance will be granted for 
equipment operating on 220-222 MHz band Channels 1 through 160 
(220.0025 through 220.7975/221.0025 through 221.7975), 171 through 180 
(220.8525 through 220.8975/221.8525 through 221.8975), and 186 through 
200 (220.9275 through 220.9975/221.9275 through 221.9975) with channel 
bandwidths greater than 5 kHz if the equipment meets the following 
spectrum efficiency standard: Applications for Part 90 type acceptance 
of transmitters designed to operate on frequencies in the 220-222 MHz 
band must include a statement that the equipment meets a spectrum 
efficiency standard of at least one voice channel per 5 kHz of channel 
bandwidth (for voice communications), and a data rate of at least 4,800 
bits per second per 5 kHz of channel bandwidth (for data 
communications). Type acceptance for transmitters operating on 220-222 
MHz band Channels 1 through 160 (220.0025 through 220.7975/221.0025 
through 221.7975), 171 through 180 (220.8525 through 220.8975/221.8525 
through 221.8975), and 186 through 200 (220.9275 through 220.9975/
221.9275 through 221.9975) with channel bandwidths greater than 5 kHz 
will be granted without the requirement that a statement be included 
that the

[[Page 15993]]

equipment meets the spectrum efficiency standard if the requests for 
type acceptance of such transmitters are filed after December 31, 2001.
    (2) Type acceptance may be granted on a case-by-case basis by the 
Commission's Equipment Authorization Division for equipment operating 
on 220-222 MHz band Channels 1 through 160 (220.0025 through 220.7975/
221.0025 through 221.7975), 171 through 180 (220.8525 through 220.8975/
221.8525 through 221.8975), and 186 through 200 (220.9275 through 
220.9975/221.9275 through 221.9975) with channel bandwidths greater 
than 5 kHz and not satisfying the spectrum efficiency standard 
identified in paragraph (k)(1) of this section, if requests for Part 90 
type acceptance of such transmitters are accompanied by a technical 
analysis that satisfactorily demonstrates that the transmitters will 
provide more spectral efficiency than that which would be provided by 
use of the spectrum efficiency standard.
    6. Section 90.701 is revised to read as follows:


Sec. 90.701  Scope.

    (a) Frequencies in the 220-222 MHz band are available for land 
mobile and fixed use for both Government and non-Government operations. 
This subpart sets out the regulations governing the licensing and 
operation of non-Government systems operating in the 220-222 MHz band. 
It includes eligibility requirements, application procedures, and 
operational and technical standards for stations licensed in these 
bands. The rules in this subpart are to be read in conjunction with the 
applicable requirements contained elsewhere in this part; however, in 
case of conflicts, the provisions of this subpart shall govern with 
respect to licensing and operation in this frequency band.
    (b)(1) Licensees granted initial authorizations for operations in 
the 220-222 MHz band from among applications filed on or before May 24, 
1991 are referred to in this subpart as ``Phase I'' licensees;
    (2) Applicants that filed initial applications for operations in 
the 220-222 MHz band on or before May 24, 1991 are referred to in this 
subpart as ``Phase I'' applicants; and
    (3) All assignments, operations, stations, and systems of licensees 
granted authorizations from among applications filed for operations in 
the 220-222 MHz band on or before May 24, 1991 are referred to in this 
subpart as ``Phase I'' assignments, operations, stations, and systems, 
respectively.
    (c)(1) Licensees granted initial authorizations for operations in 
the 220-222 MHz band from among applications filed after May 24, 1991 
are referred to in this subpart as ``Phase II'' licensees;
    (2) Applicants that filed initial applications for operations in 
the 220-222 MHz band after May 24, 1991 are referred to in this subpart 
as ``Phase II'' applicants; and
    (3) All assignments, operations, stations, and systems of licensees 
granted authorizations from among applications filed for operations in 
the 220-222 MHz band after May 24, 1991 are referred to in this subpart 
as ``Phase II'' assignments, operations, stations, and systems, 
respectively.
    (d) The rules in this subpart apply to both Phase I and Phase II 
licensees, applicants, assignments, operations, stations, and systems, 
unless otherwise specified.
    7. Section 90.705 is revised to read as follows:


Sec. 90.705  Forms to be used.

    Phase II applications for EA, Regional, or Nationwide radio 
facilities under this subpart must be prepared in accordance with 
Secs. 90.1009 and 90.1013. Phase II applications for radio facilities 
operating on public safety/mutual aid channels (Channels 161 through 
170) or Emergency Medical Radio Service channels (Channels 181 through 
185) under this subpart must be prepared on FCC Form 600 and submitted 
or filed in accordance with Sec. 90.127.
    8. Paragraphs (a) and (c) of Sec. 90.709 are revised and paragraph 
(e) is added to read as follows:


Sec. 90.709  Special limitations on amendment of applications and on 
assignment or transfer of authorizations licensed under this subpart.

    (a) Except as indicated in paragraph (b) of this section, the 
Commission will not consent to the following:
    (1) Any request to amend an application so as to substitute a new 
entity as the applicant;
    (2) Any application to assign or transfer a license for a Phase I, 
non-nationwide system prior to the completion of construction of 
facilities; or
    (3) Any application to transfer or assign a license for a Phase I 
nationwide system before the licensee has constructed at least 40 
percent of the proposed system pursuant to the provisions of 
Sec. 90.725(a) or Sec. 90.725(h), as applicable.
* * * * *
    (c) The assignee or transferee of a Phase I nationwide system is 
subject to the construction benchmarks and reporting requirements of 
Sec. 90.725. The assignee or transferee of a Phase I nationwide system 
is not subject to the entry criteria described in Sec. 90.713.
* * * * *
    (e) The assignee or transferee of a Phase II system is subject to 
the provisions of Sec. 90.1017 and Sec. 1.2111(a) of this chapter.
    9. Section 90.711 is revised to read as follows:


Sec. 90.711  Processing of Phase II applications.

    (a) Phase II applications for authorizations on Channels 166 
through 170 and Channels 181 through 185 will be processed on a first-
come, first-served basis. When multiple applications are filed on the 
same day for these frequencies in the same geographic area, and 
insufficient frequencies are available to grant all applications (i.e., 
if all applications were granted, violation of the station separation 
provisions of Sec. 90.723(i) would result), these applications will be 
considered mutually exclusive and will be subject to random selection 
procedures pursuant to Sec. 1.972 of this chapter.
    (1) All applications will first be considered to determine whether 
they are substantially complete and acceptable for filing. If so, they 
will be assigned a file number and put in pending status. If not, they 
will be dismissed.
    (2) Except as otherwise provided in this section, all applications 
in pending status will be processed in the order in which they are 
received, determined by the date on which the application was received 
by the Commission in its Gettysburg, Pennsylvania office (or the 
address set forth at Sec. 1.1102 of this chapter for applications 
requiring the fees established by part 1, subpart G of this chapter).
    (3) Each application that is accepted for filing will then be 
reviewed to determine whether it can be granted. Frequencies will be 
assigned by the Commission pursuant to the provisions of Sec. 90.723.
    (4) An application which is dismissed will lose its place in the 
processing line.
    (5) If an application is returned for correction and resubmitted 
and received by the Commission within 60 days from the date on which it 
was returned to the applicant, it will retain its place in the 
processing line. If it is not received within 60 days, it will lose its 
place in the processing line.
    (b) All applications for Channels 161 through 165 that comply with 
the applicable rules of this part shall be

[[Page 15994]]

granted. Licensees operating on such channels shall cooperate in the 
selection and use of frequencies and resolve any instances of 
interference in accordance with the provisions of Sec. 90.173.
    (c) Phase II applications for authorization on all non-Government 
channels other than Channels 161 through 170 and 181 through 185 shall 
be processed in accordance with the provisions of subpart W of this 
part.
    10. Section 90.713 is revised to read as follows:


Sec. 90.713  Entry criteria.

    (a) As set forth in Sec. 90.717, four 5-channel blocks are 
available for nationwide, commercial use to non-Government, Phase I 
applicants. Applicants for these nationwide channel blocks must comply 
with paragraphs (b), (c), and (d) of this section.
    (b)(1) An applicant must include certification that, within ten 
years of receiving a license, it will construct a minimum of one base 
station in at least 70 different geographic areas designated in the 
application; that base stations will be located in a minimum of 28 of 
the 100 urban areas listed in Sec. 90.741; and that each base station 
will have all five assigned nationwide channels constructed and placed 
in operation (regularly interacting with mobile and/or portable units).
    (2) An applicant must include certification that it will meet the 
construction requirements set forth in Sec. 90.725.
    (3) An applicant must include a ten-year schedule detailing plans 
for construction of the proposed system.
    (4) An applicant must include an itemized estimate of the cost of 
constructing 40 percent of the system and operating the system during 
the first four years of the license term.
    (5) An applicant must include proof that the applicant has 
sufficient financial resources to construct 40 percent of the system 
and operate the proposed land mobile system for the first four years of 
the license term; i.e., that the applicant has net current assets 
sufficient to cover estimated costs or a firm financial commitment 
sufficient to cover estimated costs.
    (c) An applicant relying on personal or internal resources for the 
showing required in paragraph (b) of this section must submit 
independently audited financial statements certified within one year of 
the date of the application showing net current assets sufficient to 
meet estimated construction and operating costs. An applicant must also 
submit an unaudited balance sheet, current within 60 days of the date 
of submission, that clearly shows the continued availability of 
sufficient net current assets to construct and operate the proposed 
system, and a certification by the applicant or an officer of the 
applicant organization attesting to the validity of the balance sheet.
    (d) An applicant submitting evidence of a firm financial commitment 
for the showing required in paragraph (b) of this section must obtain 
the commitment from a bona fide commercially acceptable source, e.g., a 
state or federally chartered bank or savings and loan institution, 
other recognized financial institution, the financial arm of a capital 
equipment supplier, or an investment banking house. If the lender is 
not a state or federally chartered bank or savings and loan 
institution, other recognized financial institution, the financial arm 
of a capital equipment supplier, or an investment banking house, the 
lender must also demonstrate that it has funds available to cover the 
total commitments it has made. The lender's commitment shall contain a 
statement that the lender:
    (1) Has examined the financial condition of the applicant including 
an audited financial statement, and has determined that the applicant 
is creditworthy;
    (2) Has examined the financial viability of the proposed system for 
which the applicant intends to use the commitment; and
    (3) Is willing, if the applicant is seeking a Phase I, commercial 
nationwide license, to provide a sum to the applicant sufficient to 
cover the realistic and prudent estimated costs of construction of 40 
percent of the system and operation of the system for the first four 
years of the license term.
    (e) A Phase II applicant for authorization in a geographic area for 
Channels 166 through 170 in the public safety/mutual aid category may 
not have any interest in another pending application in the same 
geographic area for Channels 166 through 170 in the public safety/
mutual aid category, and a Phase II applicant for authorization in a 
geographic area for channels in the Emergency Medical Radio Service 
(EMRS) category may not have any interest in another pending 
application in the same geographic area for channels in the EMRS 
category.
    11. Section 90.717 is revised to read as follows:


Sec. 90.717  Channels available for nationwide systems in the 220-222 
MHz band.

    (a) Channels 51-60, 81-90, and 141-150 are 10-channel blocks 
available to non-Government applicants only for nationwide Phase II 
systems.
    (b) Channels 21-25, 26-30, 151-155, and 156-160 are 5-channel 
blocks available to non-Government applicants only for nationwide, 
commercial Phase I systems.
    (c) Channels 111-115 and 116-120 are 5-channel blocks available for 
Government nationwide use only.
    12. Section 90.719 is revised to read as follows:


Sec. 90.719  Individual channels available for assignment in the 220-
222 MHz band.

    (a) Channels 171 through 200 are available to both Government and 
non-Government Phase I applicants, and may be assigned singly or in 
contiguous channel groups.
    (b) Channels 171 through 180 are available for any use by Phase I 
applicants consistent with this subpart.
    (c) Channels 181 through 185 are set aside for Phase II Emergency 
Medical Radio Service (EMRS) use under subpart B of this part.
    (d) Channels 161 through 170 and 181 through 185 are the only 220-
222 MHz channels available to Phase II non-nationwide, Government 
users.
    13. Section 90.720 is revised to read as follows:


Sec. 90.720  Channels available for public safety/mutual aid.

    (a) Part 90 licensees whose licenses reflect a two-letter radio 
service code beginning with the letter ``P'' (except for licensees 
whose licenses reflect a two-letter radio service code beginning with 
the letters ``PS'' and are not eligible under Secs. 90.35, 90.37, 
90.41, and 90.45) are authorized by this rule to use mobile and/or 
portable units on Channels 161-170 throughout the United States, its 
territories, and possessions to transmit:
    (1) Communications relating to the immediate safety of life;
    (2) Communications to facilitate interoperability among public 
safety entities and Special Emergency Radio Service (SERS) entities 
eligible under Secs. 90.35, 90.37, 90.41 and 90.45; or
    (3) Communications on behalf of and by members of organizations 
established for disaster relief purposes having an emergency radio 
communications plan (i.e., licensees eligible under Sec. 90.41) for the 
transmission of communications relating to the safety of life or 
property, the establishment and maintenance of temporary relief 
facilities, and the alleviation of emergency conditions during periods 
of actual or impending emergency, or disaster, until substantially 
normal conditions are restored; for limited training exercises 
incidental to an emergency radio

[[Page 15995]]

communications plan, and for necessary operational communications of 
the disaster relief organization or its chapter affiliates.
    (b) Any Government entity and any non-Government entity eligible to 
obtain a license under subpart B of this part or eligible to obtain a 
license under Secs. 90.35, 90.37, 90.41 and 90.45 is also eligible to 
obtain a license for base/mobile operations on Channels 161 through 
170. Base/mobile or base/portable communications on these channels that 
do not relate to the immediate safety of life or to communications 
interoperability among public safety entities and the above-specified 
SERS entities, may only be conducted on a secondary non-interference 
basis to such communications.
    14. Section 90.721 is revised to read as follows:


Sec. 90.721   Other channels available for non-nationwide systems in 
the 220-222 MHz band.

    (a) The channel groups listed in the following Table are available 
to both Government and non-Government Phase I applicants for trunked 
operations or operations of equivalent or greater efficiency for non-
commercial or commercial operations.

                Table 1.--Phase I Trunked Channel Groups                
------------------------------------------------------------------------
                     Group No.                           Channel Nos.   
------------------------------------------------------------------------
1..................................................       1-31-61-91-121
2..................................................       2-32-62-92-122
3..................................................       3-33-63-93-123
4..................................................       4-34-64-94-124
5..................................................       5-35-65-95-125
6..................................................       6-36-66-96-126
7..................................................       7-37-67-97-127
8..................................................       8-38-68-98-128
9..................................................       9-39-69-99-129
10.................................................     10-40-70-100-130
11.................................................     11-41-71-101-131
12.................................................     12-42-72-102-132
13.................................................     13-43-73-103-133
14.................................................     14-44-74-104-134
15.................................................     15-45-75-105-135
16.................................................     16-46-76-106-136
17.................................................     17-47-77-107-137
18.................................................     18-48-78-108-138
19.................................................     19-49-79-109-139
20.................................................     20-50-80-110-140
------------------------------------------------------------------------

    (b) The channels listed in the following Table are available to 
non-Government applicants for Phase II assignments in Economic Areas 
(EAs) and Regional Economic Area Groupings (REAGs) (see Secs. 90.761 
and 90.763).

                             Table 2.--Phase II EA and Regional Channel Assignments                             
----------------------------------------------------------------------------------------------------------------
                                                                                                        Channel 
                Assignment                     Assignment area          Group Nos. (from table 1)         Nos.  
----------------------------------------------------------------------------------------------------------------
A........................................  EA                       2 and 13.........................           
B........................................  EA                       3 and 16.........................           
C........................................  EA                       5 and 18.........................           
D........................................  EA                       8 and 19.........................           
E........................................  EA                       .................................    171-180
F........................................  REAG                     1, 6, and 11.....................           
G........................................  REAG                     4, 9, and 14.....................           
H........................................  REAG                     7, 12, and 17....................           
I........................................  REAG                     10, 15, and 20...................           
J........................................  REAG                     .................................    186-200
----------------------------------------------------------------------------------------------------------------

    15. Section 90.723 is revised to read as follows:


Sec. 90.723   Selection and assignment of frequencies.

    (a) Phase II applications for frequencies in the 220-222 MHz band 
shall specify whether their intended use is for 10-channel nationwide 
systems, 10-channel EA systems, 15-channel Regional systems, public 
safety/mutual aid use, or EMRS use. Phase II applicants for frequencies 
for public safety/mutual aid use or EMRS use shall specify the number 
of frequencies requested. All frequencies in this band will be assigned 
by the Commission.
    (b) Phase II channels will be assigned pursuant to Secs. 90.717, 
90.719, 90.720, 90.721, 90.761 and 90.763.
    (c) Phase II applicants for public safety/mutual aid and EMRS 
channels will be assigned only the number of channels justified to meet 
their requirements.
    (d) Phase I base or fixed station receivers utilizing 221-222 MHz 
frequencies assigned from Sub-band A as designated in Sec. 90.715(b) 
will be geographically separated from those Phase I base or fixed 
station transmitters utilizing 220-221 MHz frequencies removed 200 kHz 
or less and assigned from Sub-band B as follows:

Geographic Separation of Sub-Band A; Base or Fixed Station Receivers and
        Sub-Band B; Base or Fixed Station Transmitters Effective        
------------------------------------------------------------------------
                                                               Radiated 
              Separation distance (kilometers)                   power  
                                                                (watts) 
------------------------------------------------------------------\1\---
0.0-0.3.....................................................       (\2\)
0.3-0.5.....................................................           5
0.5-0.6.....................................................          10
0.6-0.8.....................................................          20
0.8-2.0.....................................................          25
2.0-4.0.....................................................          50
4.0-5.0.....................................................         100
5.0-6.0.....................................................         200
Over 6.0....................................................         500
------------------------------------------------------------------------
\1\ Transmitter peak envelope power shall be used to determine effective
  radiated power.                                                       
\2\ Stations separated by 0.3 km or less shall not be authorized. This  
  table does not apply to the low-power channels 196-200. See Sec.      
  90.729(c).                                                            

    (e) Phase II licensees authorized on 220-221 MHz frequencies 
assigned from Sub-band B will be required to geographically separate 
their base station or fixed station transmitters from the base station 
or fixed station receivers of Phase I licensees authorized on 221-222 
MHz frequencies 200 kHz removed or less in Sub-band A in accordance 
with the Table in paragraph (d) of this section.
    (f) Phase II licensees with base or fixed stations transmitting on 
220-221 MHz frequencies assigned from Sub-band B and Phase II licensees 
with base or fixed station stations receiving on Sub-band A 221-222 MHz 
frequencies, if such transmitting and receiving frequencies are 200 kHz 
or less removed from one another, will be required to coordinate the 
location of their base stations or fixed stations to avoid interference 
and to cooperate to resolve any instances of interference in accordance 
with the provisions of Sec. 90.173(b).
    (g) A mobile station is authorized to transmit on any frequency 
assigned to its associated base station. Mobile units not associated 
with base stations (see Sec. 90.720(a)) must operate on ``mobile'' 
channels.
    (h) A licensee's fixed station is authorized to transmit on any of 
the licensee's assigned base station frequencies or mobile station 
frequencies.
    (i) Except for nationwide assignments, the separation of co-channel 
Phase I base stations, or fixed stations transmitting on base station 
frequencies, shall be 120 kilometers. Except for Phase I licensees 
seeking license modification in accordance with the provisions of 
Secs. 90.751 and 90.753, shorter separations between such stations will 
be considered by the Commission on a case-by-case basis upon submission 
of a technical analysis indicating that at least 10 dB protection will 
be provided to an existing Phase I station's predicted 38 dBu signal 
level

[[Page 15996]]

contour. The existing Phase I station's predicted 38 dBu signal level 
contour shall be calculated using the F(50,50) field strength chart for 
Channels 7-13 in Sec. 73.699 (Fig. 10) of this chapter, with a 9 dB 
correction factor for antenna height differential. The 10 dB protection 
to the existing Phase I station's predicted 38 dBu signal level contour 
shall be calculated using the F(50,10) field strength chart for 
Channels 7-13 in Sec. 73.699 (Fig. 10a) of this chapter, with a 9 dB 
correction factor for antenna height differential.
    16. Section 90.725 is amended by revising the section heading and 
paragraphs (f) and (h) to read as follows:


Sec. 90.725   Construction requirements for Phase I licensees.

* * * * *
    (f) Licensees authorized Phase I non-nationwide systems, or 
authorized on Channels 161 through 170 or Channels 181 through 185, 
must construct their systems (i.e., have all specified base stations 
constructed with all channels) and place their systems in operation, or 
commence service in accordance with the provisions of Sec. 90.167, 
within twelve months of the initial license grant date. Authorizations 
for systems not constructed and placed in operation, or having 
commenced service, within twelve months from the date of initial 
license grant cancel automatically.
* * * * *
    (h) The requirements and conditions of paragraphs (a) through (e) 
and paragraph (g) of this section apply to nationwide licensees that 
construct and operate stations for fixed or paging operations on a 
primary basis instead of, or in addition to, stations for land mobile 
operations on a primary basis except that, in satisfying the base 
station construction and placed in operation requirements of paragraph 
(a) of this section and the system progress report requirements of 
paragraphs (d) and (e) of this section, licensees operating stations 
for fixed operation on a primary basis instead of, or in addition to, 
stations for land mobile or paging operations on a primary basis in a 
given geographic area may demonstrate how such fixed stations are 
providing substantial service to the public in those geographic areas.
    17. The section heading of Sec. 90.727 is revised to read as 
follows:


Sec. 90.727   Extended implementation schedules for Phase I licensees.

* * * * *
    18. Section 90.729 is revised to read as follows:


Sec. 90.729  Limitations on power and antenna height.

    (a) The permissible effective radiated power (ERP) with respect to 
antenna heights for land mobile, paging, or fixed stations transmitting 
on frequencies in the 220-221 MHz band shall be determined from the 
following Table. These are maximum values and applicants are required 
to justify power levels requested.

                    ERP vs. Antenna Height Table \2\                    
------------------------------------------------------------------------
                                                               Effective
                                                                radiated
     Antenna height above average terrain (HAAT), meters         power, 
                                                               watts \1\
------------------------------------------------------------------------
Up to 150....................................................        500
150 to 225...................................................        250
225 to 300...................................................        125
300 to 450...................................................         60
450 to 600...................................................         30
600 to 750...................................................         20
750 to 900...................................................         15
900 to 1050..................................................         10
Above 1050...................................................         5 
------------------------------------------------------------------------
\1\ Transmitter PEP shall be used to determine ERP.                     
\2\ These power levels apply to stations used for land mobile, paging,  
  and fixed operations.                                                 

    (b) The maximum permissible ERP for mobile units is 50 watts. 
Portable units are considered as mobile units. Licensees operating 
fixed stations or paging base stations transmitting on frequencies in 
the 221-222 MHz band may not operate such fixed stations or paging base 
stations at power levels greater than 50 watts ERP, and may not 
transmit from antennas that are higher than 7 meters above ground, 
except that transmissions from antennas that are higher than 7 meters 
above ground will be permitted if the effective radiated power of such 
transmissions is reduced below 50 watts ERP by 20 log10(h/7) dB, 
where h is the height of the antenna above ground, in meters.
    (c) Base station and fixed station transmissions on base station 
transmit Channels 196-200 are limited to 2 watts ERP and a maximum 
antenna height of 6.1 meters (20 ft) above ground. Licensees authorized 
on these channels may operate at power levels above 2 watts ERP or with 
a maximum antenna height greater than 6.1 meters (20 ft) above ground 
if:
    (1) They obtain the concurrence of all Phase I and Phase II 
licensees with base stations or fixed stations receiving on base 
station receive Channels 1-40 and located within 6 km of their base 
station or fixed station; and
    (2) Their base station or fixed station is not located in the 
United States/Mexico or United States/Canada border areas.


Sec. 90.731  [Removed]

    19. Section 90.731 is removed.
    20. Section 90.733 is amended by removing paragraph (d), revising 
paragraphs (a)(1), and (c) and adding new paragraphs (d), (e), (f), 
(g), (h), and (i) to read as follows:


Sec. 90.733  Permissible operations.

    (a) * * *
    (1)(i) For government and non-government land mobile operations, 
i.e., for base/mobile and mobile relay transmissions, on a primary 
basis; or
    (ii) For the following operations instead of or in addition to a 
licensee's land mobile operations: One-way or two-way paging operations 
on a primary basis by all non-Government Phase II licensees, fixed 
operations on a primary basis by all non-Government Phase II licensees 
and all Government licensees, one-way or two-way paging or fixed 
operations on a primary basis by all non-Government Phase I licensees, 
except that before a non-Government Phase I licensee may operate one-
way or two-way paging or fixed systems on a primary basis instead of or 
in addition to its land mobile operations, it must meet the following 
requirements:
    (A) A nationwide Phase I licensee must;
    (1) Meet its two-year benchmark for the construction of its land 
mobile system base stations as prescribed in Sec. 90.725(a); and
    (2) Provide a new 10-year schedule, as required in 
Sec. 90.713(b)(3), for the construction of the fixed and/or paging 
system it intends to construct instead of, or in addition to, its 
nationwide land mobile system; and
    (3) Certify that the financial showings and all other 
certifications provided in demonstrating its ability to construct and 
operate its nationwide land mobile system, as required in Secs. 90.713 
(b), (c) and (d), remain applicable to the nationwide system it intends 
to construct consisting of fixed and/or paging operations on a primary 
basis instead of, or in addition to, its land mobile operations; or
    (4) In lieu of providing the requirements of paragraph 
(a)(1)(ii)(A)(3) of this section, provide the financial showings and 
all other certifications required in Secs. 90.713 (b), (c) and (d) to 
demonstrate its ability to construct and operate a nationwide system 
consisting of fixed and/or paging operations on a primary basis instead 
of, or in addition to, its land mobile operations.
    (B) A non-nationwide Phase I licensee must first meet the 
requirement to construct its land mobile base station and place it in 
operation, or commence

[[Page 15997]]

service (in accordance with Sec. 90.167) as prescribed in 
Sec. 90.725(f) or Sec. 90.727, as applicable.
* * * * *
    (c) For operations requiring less than a 4 kHz bandwidth, more than 
a single emission may be utilized within the authorized bandwidth. In 
such cases, the frequency stability requirements of Sec. 90.213 do not 
apply, but the out-of-band emission limits of Sec. 90.210(f) must be 
met.
    (d) Licensees, except for licensees authorized on Channels 161 
through 170 and 181 through 185, may combine any number of their 
authorized, contiguous channels to form channels wider than 5 kHz. In 
so doing, licensees must comply with the following spectrum efficiency 
standard, which will remain in effect through December 31, 2001:
    (1) For voice communications, licensees must employ equipment that 
provides at least one voice channel per 5 kHz of channel bandwidth; and
    (2) For data communications, licensees must employ equipment that 
operates at a data rate of at least 4,800 bits per second per 5 kHz of 
channel bandwidth.
    (3) Licensees authorized on channels other than Channels 161 
through 170 and 181 through 185 may combine any number of their 
authorized, contiguous channels to form channels wider than 5 kHz 
without complying with the spectrum efficiency standard identified in 
paragraphs (d)(1) and (d)(2) of this section if they operate with 
equipment that has been granted type acceptance in accordance with the 
provisions of Sec. 90.203(k)(2).
    (e) In combining authorized contiguous channels to form channels 
wider than 5 kHz, the emission limits in Sec. 90.210(f) must be met 
only at the outermost edges of the contiguous channels. Transmitters 
shall be tested to confirm compliance with this requirement with the 
transmission located as close to the band edges as permitted by the 
design of the transmitter. The frequency stability requirements in 
Sec. 90.213 shall apply only to the outermost of the contiguous 
channels authorized to the licensee. However, the frequency stability 
employed for transmissions operating inside the outermost contiguous 
channels must be such that the emission limits in Sec. 90.210(f) are 
met over the temperature and voltage variations prescribed in 
Sec. 2.995 of this chapter.
    (f) A Phase I non-nationwide licensee operating a paging base 
station, or a fixed station transmitting on frequencies in the 220-221 
MHz band, may only operate such stations at the coordinates of the 
licensee's authorized land mobile base station.
    (g) The transmissions of a Phase I non-nationwide licensee's paging 
base station, or fixed station transmitting on frequencies in the 220-
221 MHz band, must meet the requirements of Secs. 90.723 (d) and (i), 
and 90.729, and such a station must operate at the effective radiated 
power and antenna height-above-average-terrain prescribed in the 
licensee's land mobile base station authorization.
    (h) Licensees using 220-222 MHz spectrum for geophysical telemetry 
operations are authorized to operate fixed stations on a secondary, 
non-interference basis to licensees operating in the 220-222 MHz band 
on a primary basis under the conditions that such licensees:
    (1) Provide notification of their operations to co-channel non-
nationwide Phase I licensees with an authorized base station, or fixed 
station transmitting on frequencies in the 220-221 MHz band, located 
within 45 km of the secondary licensee's station, to co-channel, Phase 
II EA or Regional licensee authorized to operate in the EA or REAG in 
which the secondary licensee's station is located, and to co-channel 
Phase I or Phase II nationwide licensees;
    (2) Operate only at temporary locations in accordance with the 
provisions of Section 90.137;
    (3) Not transmit at a power level greater than one watt ERP;
    (4) Not transmit from an antenna higher than 2 meters (6.6 feet) 
above ground; and
    (5) Not operate on Channels 111 through 120, 161 through 170, or 
181 through 185.
    (i) All licensees constructing and operating base stations or fixed 
stations on frequencies in the 220-222 MHz band must:
    (1) Comply with any rules and international agreements that 
restrict use of their authorized frequencies, including the provisions 
of Sec. 90.715 relating to U.S./Mexican border areas;
    (2) Comply with the provisions of Sec. 17.6 of this chapter with 
regard to antenna structures; and
    (3) Comply with the provisions of Secs. 1.1301 through 1.1319 of 
this chapter with regard to actions that may or will have a significant 
impact on the quality of the human environment.
    21. Paragraph (d) of Sec. 90.735 is revised to read as follows:


Sec. 90.735  Station identification.

* * * * *
    (d) Digital transmissions may also be identified by digital 
transmission of the station call sign. A licensee that identifies its 
station in this manner must provide the Commission, upon its request, 
information (such as digital codes and algorithms) sufficient to 
decipher the data transmission to ascertain the call sign transmitted.
    22. The section heading of Sec. 90.737 is revised to read as 
follows:


Sec. 90.737  Supplemental reports required of Phase I licensees.

* * * * *
    23. Section 90.739 is revised to read as follows:


Sec. 90.739 Number of systems authorized in a geographical area.

    (a) No licensee will be authorized more than one Phase I system in 
the 220-222 MHz band in a single category (i.e., one nationwide system, 
one 5-channel trunked system, one data-only local system of 1 to 5 
channels, one unrestricted non-trunked local system of 1 to 5 channels, 
or one public safety/mutual aid local system of 1 to 5 channels) within 
64 kilometers (40 miles) of an existing system authorized to that 
licensee in the same category, unless the licensee can demonstrate that 
the additional system is justified on the basis of its communications 
requirements.
    (b) There is no limit on the number of Phase II nationwide, EA or 
Regional licenses that may be authorized to a single licensee.
    24. The section heading and introductory text of Sec. 90.741 are 
revised to read as follows:


Sec. 90.741  Urban areas for Phase I nationwide systems.

    Licensees of Phase I nationwide systems must construct base 
stations, or fixed stations transmitting on frequencies in the 220-221 
MHz band, in a minimum of 28 of the urban areas listed in the following 
Table within ten years of initial license grant. A base station, or 
fixed station, is considered to be within one of the listed urban areas 
if it is within 60 kilometers (37.3 miles) of the specified 
coordinates.
* * * * *
    25. A new Sec. 90.743 is added to read as follows:


Sec. 90.743  Renewal expectancy.

    (a) All licensees seeking renewal of their authorizations at the 
end of their license term must file a renewal application in accordance 
with the provisions of Sec. 90.149. Licensees must demonstrate, in 
their application, that:
    (1) They have provided ``substantial'' service during their past 
license term. ``Substantial'' service is defined in this rule as 
service that is sound, favorable,

[[Page 15998]]

and substantially above a level of mediocre service that just might 
minimally warrant renewal; and
    (2) They have substantially complied with applicable FCC rules, 
policies, and the Communications Act of 1934, as amended.
    (b) In order to establish its right to a renewal expectancy, a 
renewal applicant must submit a showing explaining why it should 
receive a renewal expectancy. At a minimum, this showing must include:
    (1) A description of its current service in terms of geographic 
coverage and population served;
    (2) For an EA, Regional, or nationwide licensee, an explanation of 
its record of expansion, including a timetable of the construction of 
new stations to meet changes in demand for service;
    (3) A description of its investments in its system;
    (4) Copies of all FCC orders finding the licensee to have violated 
the Communications Act or any FCC rule or policy; and
    (5) A list of any pending proceedings that relate to any matter 
described in this paragraph.
    (c) Phase I non-nationwide licensees have license terms of 5 years, 
and therefore must meet these requirements 5 years from the date of 
initial authorization in order to receive a renewal expectancy. Phase I 
nationwide licensees and all Phase II licensees have license terms of 
10 years, and therefore must meet these requirements 10 years from the 
date of initial authorization in order to receive a renewal expectancy.
    26. Section 90.751 is revised to read as follows:


Sec. 90.751  Minor modifications of Phase I, non-nationwide licenses.

    Phase I non-nationwide licensees will be given an opportunity to 
seek modification of their license to relocate their initially 
authorized base station, i.e., locate their base station at a site 
other than its initially authorized location. The conditions under 
which modifications will be granted and the procedures for applying for 
license modifications are described in Secs. 90.753, 90.755, and 
90.757. For CMRS licensees, these modifications will be treated as 
minor modifications in accordance with Sec. 90.164.
    27. A new centered heading is added following Sec. 90.757 to read 
as follows:

Policies Governing the Licensing and Use of Phase II EA, Regional and 
Nationwide Systems

    28. A new Sec. 90.761 is added to read as follows:


Sec. 90.761  EA and Regional licenses.

    (a) EA licenses for spectrum blocks listed in Table 2 of 
Sec. 90.721(b) are available in 175 Economic Areas (EAs) as defined in 
Sec. 90.7.
    (b) Regional licenses for spectrum blocks listed in Table 2 of 
Sec. 90.721(b) are available in six Regional Economic Area Groupings 
(REAGs) as defined in Sec. 90.7.
    29. A new Sec. 90.763 is added to read as follows:


Sec. 90.763  EA, Regional and Nationwide system operations.

    (a) A nationwide licensee authorized pursuant to Sec. 90.717(a) may 
construct and operate any number of land mobile or paging base 
stations, or fixed stations, anywhere in the Nation, and transmit on 
any of its authorized channels, provided that the licensee complies 
with the requirements of Sec. 90.733(i).
    (b) An EA or Regional licensee authorized pursuant to Sec. 90.761 
may construct and operate any number of land mobile or paging base 
stations, or fixed stations, anywhere within its authorized EA or REAG, 
and transmit on any of its authorized channels, provided that:
    (1) The licensee affords protection to all authorized co-channel 
Phase I non-nationwide base stations as follows:
    (i) The EA or Regional licensee must locate its land mobile or 
paging base stations, or fixed stations transmitting on base station 
transmit frequencies, at least 120 km from the land mobile or paging 
base stations, or fixed stations transmitting on base station transmit 
frequencies, of co-channel Phase I licensees, except that separations 
of less than 120 km shall be considered on a case-by-case basis upon 
submission by the EA or Regional licensee of:
    (A) A technical analysis demonstrating at least 10 dB protection to 
the predicted 38 dBu service contour of the co-channel Phase I 
licensee, i.e., demonstrating that the predicted 28 dBu interfering 
contour of the EA or Regional licensee's base station or fixed station 
does not overlap the predicted 38 dBu service contour of the co-channel 
Phase I licensee's base station or fixed station; or
    (B) A written letter from the co-channel Phase I licensee 
consenting to a separation of less than 120 km, or to less than 10 dB 
protection to the predicted 38 dBu service contour of the licensee's 
base station or fixed station.
    (ii) The Phase I licensee's predicted 38 dBu service contour 
referred to in paragraph (a)(1)(i) of this section is calculated using 
the F(50,50) field strength chart for Channels 7-13 in Sec. 73.699 
(Fig. 10) of this chapter, with a 9 dB correction factor for antenna 
height differential, and is based on the licensee's authorized 
effective radiated power and antenna height-above-average-terrain. The 
EA or Regional licensee's predicted 28 dBu interfering contour referred 
to in paragraph (a)(1)(i) of this section is calculated using the 
F(50,10) field strength chart for Channels 7-13 in Sec. 73.699 (Fig. 
10a) of this chapter, with a 9 dB correction factor for antenna height 
differential.
    (2) The licensee complies with the requirements of Sec. 90.733(i).
    (3) The licensee limits the field strength of its base stations, or 
fixed stations operating on base station transmit frequencies, in 
accordance with the provisions of Sec. 90.771.
    (4) The licensee notifies the Commission within 30 days of the 
completion of the addition, removal, relocation or modification of any 
of its facilities within its authorized area of operation. Such 
notification must be made by submitting an FCC Form 600, and must 
include the appropriate filing fee, if any.
    (c) In the event that the authorization for a co-channel Phase I 
base station, or fixed station transmitting on base station transmit 
frequencies, within an EA or Regional licensee's border is terminated 
or revoked, the EA or Regional licensee's channel obligations to such 
stations will cease upon deletion of the facility from the Commission's 
official licensing records, and the EA or Regional licensee then will 
be able to construct and operate without regard to the previous 
authorization.
    30. A new Sec. 90.765 is added to read as follows:


Sec. 90.765  Licenses term for Phase II licenses.

    Nationwide licenses authorized pursuant to Sec. 90.717(a), EA and 
Regional licenses authorized pursuant to Sec. 90.761, and non-
nationwide licenses authorized pursuant to Secs. 90.720 and 90.719(c) 
will be issued for a term not to exceed ten years.
    31. A new Sec. 90.767 is added to read as follows:


Sec. 90.767  Construction and implementation of EA and Regional 
licenses.

    (a) An EA or Regional licensee must construct a sufficient number 
of base stations (i.e., base stations for land mobile and/or paging 
operations) to provide coverage to:
    (1) At least one-third of the population of its EA or REAG within 
five years of the issuance of its initial license; and
    (2) At least two-thirds of the population of its EA or REAG within 
ten

[[Page 15999]]

years of the issuance of its initial license.
    (b) EA and Regional licensees offering fixed services as part of 
their system, and EA and Regional licensees that have one or more 
incumbent, co-channel Phase I licensees authorized within their EA or 
REAG may meet the construction requirements of paragraph (a) of this 
section by demonstrating an appropriate level of substantial service at 
their five- and ten-year benchmarks.
    (c) Licensees must submit maps or other supporting documents to 
demonstrate compliance with the construction requirements of paragraphs 
(a) and (b) of this section.
    (d) Failure by an EA or Regional licensee to meet the construction 
requirements of paragraph (a) or (b) of this section, as applicable, 
will result in automatic cancellation of its entire EA or Regional 
license. In such instances, EA or Regional licenses will not be 
converted to individual, site-by-site authorizations for already 
constructed stations.
    (e) EA and Regional licensees will not be permitted to count the 
resale of the services of other providers in their EA or REAG, e.g., 
incumbent, Phase I licensees, to meet the construction requirement of 
paragraph (a) or (b) of this section, as applicable.
    (f) EA and Regional licensees will not be required to construct and 
place in operation, or commence service on, all of their authorized 
channels at all of their base stations or fixed stations.
    32. A new Sec. 90.769 is added to read as follows:


Sec. 90.769  Construction and implementation of Nationwide licenses.

    (a) A nationwide licensee must construct a sufficient number of 
base stations (i.e., base stations for land mobile and/or paging 
operations) to provide coverage to:
    (1) A composite area of at least 750,000 square kilometers or 37.5 
percent of the United States population within five years of the 
issuance of its initial license; and
    (2) A composite area of at least 1,500,000 square kilometers or 75 
percent of the United States population within ten years of the 
issuance of its initial license.
    (b) Nationwide licensees offering fixed services as part of their 
system may meet the construction requirements of paragraph (a) of this 
section by demonstrating an appropriate level of substantial service at 
their five- and ten-year benchmarks.
    (c) Licensees must submit maps or other supporting documents to 
demonstrate compliance with the construction requirements of paragraphs 
(a) and (b) of this section.
    (d) Failure by a nationwide licensee to meet the construction 
requirements of paragraphs (a) or (b) of this section, as applicable, 
will result in automatic cancellation of its entire nationwide license. 
In such instances, nationwide licenses will not be converted to 
individual, site-by-site authorizations for already constructed 
stations.
    (e) Nationwide licensees will not be required to construct and 
place in operation, or commence service on, all of their authorized 
channels at all of their base stations or fixed stations.
    33. A new Sec. 90.771 is added to read as follows:


Sec. 90.771  Field strength limits.

    (a) The transmissions from base stations, or fixed stations 
transmitting on base station transmit frequencies, of EA and Regional 
licensees may not exceed a predicted 38 dBu field strength at their EA 
or REAG border. The predicted 38 dBu field strength is calculated using 
the F(50,50) field strength chart for Channels 7-13 in Sec. 73.699 
(Fig. 10) of this chapter, with a 9 dB correction factor for antenna 
height differential.
    (b) Licensees will be permitted to exceed the predicted 38 dBu 
field strength required in paragraph (a) of this section if all 
affected, co-channel EA and Regional licensees agree to the higher 
field strength.
    (c) EA and Regional licensees must coordinate to minimize 
interference at or near their EA and REAG borders, and must cooperate 
to resolve any instances of interference in accordance with the 
provisions of Sec. 90.173(b).
    34. A new subpart W consisting of Secs. 90.1001 through 90.1025 is 
added to part 90 to read as follows:

Subpart W--Competitive Bidding Procedures for the 220 MHz Service

Sec.
90.1001  220 MHz service subject to competitive bidding.
90.1003  Competitive bidding design for the 220 MHz service.
90.1005  Competitive bidding mechanisms.
90.1007  Withdrawal, default and disqualification payments.
90.1009  Bidding application (FCC Form 175 and 175-S Short-form).
90.1011  Submission of upfront payments and down payments.
90.1013  Long-form application (FCC Form 600).
90.1015  License grant, denial, default, and disqualification.
90.1017  Bidding credits, down payments, and installment payments 
for small businesses and very small businesses.
90.1019  Eligibility for partitioned licenses.
90.1021  Definitions concerning competitive bidding process.
90.1023  Certifications, disclosures, records maintenance and 
audits.
90.1025  Petitions to deny and limitations on settlements.

Subpart W--Competitive Bidding Procedures for the 220 MHz Service


Sec. 90.1001  220 MHz service subject to competitive bidding.

    Mutually exclusive initial applications for 220 MHz geographic area 
licenses are subject to competitive bidding procedures. The procedures 
set forth in part 1, subpart Q, of this chapter will apply unless 
otherwise provided in this part.


Sec. 90.1003  Competitive bidding design for the 220 MHz service.

    A simultaneous multiple round auction will be used to choose from 
among mutually exclusive initial applications for 220 MHz geographic 
area licenses, unless the Commission specifies otherwise by Public 
Notice prior to the competitive bidding procedure.


Sec. 90.1005  Competitive bidding mechanisms.

    (a) Sequencing. The Commission will establish and may vary the 
sequence in which 220 MHz geographic area licenses are auctioned.
    (b) Grouping. The Commission will determine which licenses will be 
auctioned simultaneously or in combination.
    (c) Minimum bid increments. The Commission may, by public 
announcement before or during an auction, require minimum bid 
increments in dollar or percentage terms.
    (d) Stopping rules. The Commission may establish stopping rules 
before or during an auction in order to terminate the auction within a 
reasonable time.
    (e) Activity rules. The Commission may establish activity rules 
which require a minimum amount of bidding activity. In the event that 
the Commission establishes an activity rule in connection with a 
simultaneous multiple round auction, each bidder may request waivers of 
such rule during the auction. The Commission may, by public 
announcement either before or during the auction, specify or vary the 
number of waivers available to each bidder.


Sec. 90.1007  Withdrawal, default and disqualification payments.

    The Commission will impose payments on bidders who withdraw high 
bids during the course of an auction, who default on payments due after 
an auction terminates, or who are

[[Page 16000]]

disqualified. When the Commission conducts a simultaneous multiple 
round auction, payments will be calculated as set forth in 
Secs. 1.2104(g) and 1.2109 of this chapter. When the amount of such a 
payment cannot be determined, a deposit of up to 20 percent of the 
amount bid on the license will be required.


Sec. 90.1009  Bidding application (FCC Form 175 and 175-S Short-form).

    Each applicant to participate in competitive bidding for 220 MHz 
geographic area licenses must submit an application (FCC Forms 175 and 
175-S) pursuant to the provisions of Sec. 1.2105 of this chapter.


Sec. 90.1011  Submission of upfront payments and down payments.

    (a) The Commission will require applicants to submit an upfront 
payment prior to the start of a 220 MHz service auction. The amount of 
the upfront payment for each geographic area license auctioned and the 
procedures for submitting it will be set forth by the Wireless 
Telecommunications Bureau in a Public Notice in accordance with 
Sec. 1.2106 of this chapter.
    (b) Each winning bidder in a 220 MHz service auction, except those 
that qualify as small businesses or very small businesses pursuant to 
Sec. 90.1021(b)(1) or Sec. 90.1021(b)(2), must submit a down payment to 
the Commission in an amount sufficient to bring its total deposits up 
to 20 percent of its winning bid within ten (10) business days 
following the release of a Public Notice announcing the close of 
bidding. Small businesses and very small businesses must submit a down 
payment to the Commission in accordance with Sec. 90.1017(c).


Sec. 90.1013  Long-form application (FCC Form 600).

    Each successful bidder for a 220 MHz geographic area license must 
submit a long-form application (FCC Form 600) within ten (10) business 
days after being notified by Public Notice that it is the winning 
bidder. Applications for 220 MHz geographic area licenses on FCC Form 
600 must be submitted in accordance with Sec. 1.2107 of this chapter, 
all applicable procedures set forth in the rules in this part, and any 
applicable Public Notices that the Commission may issue in connection 
with an auction. After an auction, the Commission will not accept long-
form applications for 220 MHz geographic area licenses from anyone 
other than the auction winners and parties seeking partitioned licenses 
pursuant to agreements with auction winners under Sec. 90.1019.


Sec. 90.1015  License grant, denial, default, and disqualification.

    (a) Each winning bidder, except those eligible for installment 
payments, will be required to pay the full balance of its winning bid 
within ten (10) business days following Public Notice that the 
Commission is prepared to award the license.
    (b) A bidder that withdraws its bid subsequent to the close of 
bidding, defaults on a payment due, or is disqualified, is subject to 
the payments specified in Sec. 1.2104(g), Sec. 1.2109 of this chapter 
and Sec. 90.1007, as applicable.


Sec. 90.1017  Bidding credits, down payments, and installment payments 
for small businesses and very small businesses.

    (a) Bidding credits. A winning bidder that qualifies as a small 
business or a consortium of small businesses as defined in 
Sec. 90.1021(b)(1) or Sec. 90.1021(b)(4) may use a bidding credit of 10 
percent to lower the cost of its winning bid. A winning bidder that 
qualifies as a very small business or a consortium of very small 
businesses as defined in Sec. 90.1021(b)(2) or Sec. 90.1021(b)(4) may 
use a bidding credit of 25 percent to lower the cost of its winning 
bid.
    (b) Unjust enrichment--bidding credits. (1) If a small business or 
very small business (as defined in Secs. 90.1021(b)(1) and 
90.1021(b)(2), respectively) that utilizes a bidding credit under this 
section seeks to transfer control or assign an authorization to an 
entity that is not a small business or a very small business, or seeks 
to make any other change in ownership that would result in the licensee 
losing eligibility as a small business or very small business, the 
small business or very small business must seek Commission approval and 
reimburse the U.S. government for the amount of the bidding credit, 
plus interest at the rate imposed for installment financing at the time 
the license was awarded, as a condition of approval of the assignment, 
transfer, or other ownership change.
    (2) If a very small business (as defined in Sec. 90.1021(b)(2)) 
that utilizes a bidding credit under this section seeks to transfer 
control or assign an authorization to a small business meeting the 
eligibility standards for a lower bidding credit, or seeks to make any 
other change in ownership that would result in the licensee qualifying 
for a lower bidding credit under this section, the licensee must seek 
Commission approval and reimburse the U.S. government for the 
difference between the amount of the bidding credit obtained by the 
licensee and the bidding credit for which the assignee, transferee, or 
licensee is eligible under this section, plus interest at the rate 
imposed for installment financing at the time the license was awarded, 
as a condition of the approval of such assignment, transfer, or other 
ownership change.
    (3) The amount of payments made pursuant to paragraphs (b)(1) and 
(b)(2) of this section will be reduced over time as follows: A transfer 
in the first two years of the license term will result in a forfeiture 
of 100 percent of the value of the bidding credit (or the difference 
between the bidding credit obtained by the original licensee and the 
bidding credit for which the post-transfer licensee is eligible); in 
year 3 of the license term the payment will be 75 percent; in year 4 
the payment will be 50 percent; and in year 5 the payment will be 25 
percent, after which there will be no assessment.
    (c) Down payments. Winning bidders in a 220 MHz service auction 
that qualify as small businesses under Sec. 90.1021(b)(1) or very small 
businesses under Sec. 90.1021(b)(2) must submit a down payment to the 
Commission in an amount sufficient to bring their total deposits up to 
20 percent of their winning bids. Small businesses and very small 
businesses must bring their deposit up to 10 percent of their winning 
bids within ten (10) business days following a Public Notice announcing 
the close of bidding. Prior to licensing, by a date and time to be 
specified by Public Notice, they must pay an additional 10 percent.
    (d) Installment payments. (1) Each licensee that qualifies as a 
small business under Sec. 90.1021(b)(1) or as a very small business 
under Sec. 90.1021(b)(2) may pay the remaining 80 percent of the net 
auction price for the license in installment payments over the term of 
the geographic area license. Interest charges shall be fixed at the 
time of licensing at a rate equal to the rate for ten-year U.S. 
Treasury obligations plus 2.5 percent. An eligible licensee may make 
interest-only payments for two years. Payments of interest and 
principal shall be amortized over the remaining eight years of the 
license term.
    (2) Late installment payment. Any licensee that submits a scheduled 
installment payment more than fifteen days late will be charged a late 
payment fee equal to five percent of the amount of the past due 
payment.

[[Page 16001]]

    (3) Payments will be applied in the following order: Late charges, 
interest charges, principal payments.
    (e) Unjust enrichment--installment payments. (1) If a licensee that 
utilizes installment financing under this section seeks to assign or 
transfer control of its license to an entity not meeting the 
eligibility standards for installment financing, the licensee must seek 
Commission approval and make full payment of the remaining unpaid 
principal and unpaid interest accrued through the date of assignment or 
transfer as a condition of Commission approval.
    (2) If a licensee that utilizes installment financing under this 
section seeks to make any change in ownership structure that would 
result in the licensee losing eligibility for installment payments, the 
licensee shall first seek Commission approval before making such a 
change in ownership structure and must make full payment of the 
remaining unpaid principal and unpaid interest accrued through the date 
of such change in ownership structure as a condition of Commission 
approval.


Sec. 90.1019  Eligibility for partitioned licenses.

    If partitioned licenses are being applied for in conjunction with a 
license(s) to be awarded through competitive bidding procedures--
    (a) The applicable procedures for filing short-form applications 
and for submitting upfront payments and down payments contained in this 
chapter shall be followed by the applicant, who must disclose as part 
of its short-form application all parties to agreement(s) with or among 
other entities to partition the license pursuant to this section, if 
won at auction (see 47 CFR 1.2105(a)(2)(viii));
    (b) Each party to an agreement to partition the license must file a 
long-form application (FCC Form 600) for its respective, mutually 
agreed-upon geographic license area together with the application for 
the remainder of the geographic license area filed by the auction 
winner.
    (c) If the partitioned license is being applied for as a partial 
assignment of the geographic area license following grant of the 
initial license, request for authorization for partial assignment of a 
license shall be made pursuant to Sec. 90.153.


Sec. 90.1021  Definitions concerning competitive bidding process.

    (a) Scope. The definitions in this section apply to Secs. 90.1001 
through 90.1025, unless otherwise specified in those sections.
    (b) Small business; very small business; consortium of small 
businesses or very small businesses. (1) A small business is an entity 
that, together with its affiliates and controlling principals, has 
average gross revenues that are not more than $15 million for the 
preceding three years.
    (2) A very small business is an entity that, together with its 
affiliates and controlling principals, has average gross revenues that 
are not more than $3 million for the preceding three years.
    (3) For purposes of determining whether an entity meets either of 
the definitions set forth in paragraph (b)(1) or (b)(2) of this 
section, the gross revenues of the entity, its affiliates, and 
controlling principals shall be considered on a cumulative basis and 
aggregated.
    (4) A consortium of small businesses (or a consortium of very small 
businesses) is a conglomerate organization formed as a joint venture 
between or among mutually independent business firms, each of which 
individually satisfies the definition in paragraph (b)(1) of this 
section or each of which individually satisfies the definition in 
paragraph (b)(2) of this section. Where an applicant (or licensee) is a 
consortium of small businesses (or very small businesses), the gross 
revenues of each small business (or very small business) shall not be 
aggregated.
    (c) Gross revenues. Gross revenues shall mean all income received 
by an entity, whether earned or passive, before any deductions are made 
for costs of doing business (e.g., cost of goods sold). Gross revenues 
are evidenced by audited financial statements for the relevant number 
of calendar or fiscal years preceding the filing of the applicant's 
short-form application (FCC Form 175). If an entity was not in 
existence for all or part of the relevant period, gross revenues shall 
be evidenced by the audited financial statements of the entity's 
predecessor-in-interest or, if there is no identifiable predecessor-in-
interest, unaudited financial statements certified by the applicant as 
accurate. When an applicant does not otherwise use audited financial 
statements, its gross revenues may be certified by its chief financial 
officer or its equivalent.
    (d) Affiliate.--(1) Basis for affiliation. An individual or entity 
is an affiliate of an applicant if such individual or entity:
    (i) Directly or indirectly controls or has the power to control the 
applicant, or
    (ii) Is directly or indirectly controlled by the applicant, or
    (iii) Is directly or indirectly controlled by a third party or 
parties who also control or have the power to control the applicant, or
    (iv) Has an ``identity of interest'' with the applicant.
    (2) Nature of control in determining affiliation. (i) Every 
business concern is considered to have one or more parties who directly 
or indirectly control or have the power to control it. Control may be 
affirmative or negative and it is immaterial whether it is exercised so 
long as the power to control exists.

    Example for paragraph (d)(2)(i). An applicant owning 50 percent 
of the voting stock of another concern would have negative power to 
control such concern since such party can block any action of the 
other stockholders. Also, the bylaws of a corporation may permit a 
stockholder with less than 50 percent of the voting stock to block 
any actions taken by the other stockholders in the other entity. 
Affiliation exists when the applicant has the power to control a 
concern while at the same time another person, or persons, are in 
control of the concern at the will of the party or parties with the 
power of control.

    (ii) Control can arise through stock ownership; occupancy of 
director, officer, or key employee positions; contractual or other 
business relations; or combinations of these and other factors. A key 
employee is an employee who, because of his/her position in the 
concern, has a critical influence in or substantive control over the 
operations or management of the concern.
    (iii) Control can arise through management positions if the voting 
stock is so widely distributed that no effective control can be 
established.

    Example for paragraph (d)(2)(iii). In a corporation where the 
officers and directors own various size blocks of stock totaling 40 
percent of the corporation's voting stock, but no officer or 
director has a block sufficient to give him/her control or the power 
to control and the remaining 60 percent is widely distributed with 
no individual stockholder having a stock interest greater than 10 
percent, management has the power to control. If persons with such 
management control of the other entity are controlling principals of 
the applicant, the other entity will be deemed an affiliate of the 
applicant.

    (3) Identity of interest between and among persons. Affiliation can 
arise between or among two or more persons with an identity of 
interest, such as members of the same family or persons with common 
investments. In determining if the applicant controls or is controlled 
by a concern, persons with an identity of interest will be treated as 
though they were one person.
    (i) Spousal affiliation. Both spouses are deemed to own or control 
or have the power to control interests owned or

[[Page 16002]]

controlled by either of them, unless they are subject to a legal 
separation recognized by a court of competent jurisdiction in the 
United States.
    (ii) Kinship affiliation. Immediate family members will be presumed 
to own or control or have the power to control interests owned or 
controlled by other immediate family members. In this context 
``immediate family member'' means father, mother, husband, wife, son, 
daughter, brother, sister, father- or mother-in-law, son- or daughter-
in-law, brother- or sister-in-law, step-father or -mother, step-brother 
or -sister, step-son or -daughter, half-brother or -sister. This 
presumption may be rebutted by showing that:
    (A) The family members are estranged,
    (B) The family ties are remote, or
    (C) The family members are not closely involved with each other in 
business matters.

    Example for paragraph (d)(3)(ii). A owns a controlling interest 
in Corporation X. A's sister-in-law, B, has a controlling interest 
in a 220 MHz service geographic area license application. Because A 
and B have a presumptive kinship affiliation, A's interest in 
Corporation X is attributable to B, and thus to the applicant, 
unless B rebuts the presumption with the necessary showing.

    (4) Affiliation through stock ownership. (i) An applicant is 
presumed to control or have the power to control a concern if he/she 
owns or controls or has the power to control 50 percent or more of its 
voting stock.
    (ii) An applicant is presumed to control or have the power to 
control a concern even though he/she owns, controls, or has the power 
to control less than 50 percent of the concern's voting stock, if the 
block of stock he/she owns, controls, or has the power to control is 
large as compared with any other outstanding block of stock.
    (iii) If two or more persons each owns, controls or has the power 
to control less than 50 percent of the voting stock of a concern, such 
minority holdings are equal or approximately equal in size, and the 
aggregate of these minority holdings is large as compared with any 
other stock holding, the presumption arises that each one of these 
persons individually controls or has the power to control the concern; 
however, such presumption may be rebutted by a showing that such 
control or power to control, in fact, does not exist.
    (5) Affiliation arising under stock options, convertible 
debentures, and agreements to merge. Stock options, convertible 
debentures, and agreements to merge (including agreements in principle) 
are generally considered to have a present effect on the power to 
control the concern. Therefore, in making a size determination, such 
options, debentures, and agreements will generally be treated as though 
the rights held thereunder had been exercised. However, neither an 
affiliate nor an applicant can use such options and debentures to 
appear to terminate its control over another concern before it actually 
does so.

    Example 1 for paragraph (d)(5). If company B holds an option to 
purchase a controlling interest in company A, who holds a 
controlling interest in a 220 MHz service geographic area license 
application, the situation is treated as though company B had 
exercised its rights and had become owner of a controlling interest 
in company A. The gross revenues of company B must be taken into 
account in determining the size of the applicant.
    Example 2 for paragraph (d)(5). If a large company, BigCo, holds 
70% (70 of 100 outstanding shares) of the voting stock of company A, 
who holds a controlling interest in a 220 MHz service geographic 
area license application, and gives a third party, SmallCo, an 
option to purchase 50 of the 70 shares owned by BigCo, BigCo will be 
deemed to be an affiliate of company A, and thus the applicant, 
until SmallCo actually exercises its options to purchase such 
shares. In order to prevent BigCo from circumventing the intent of 
the rule, which requires such options to be considered on a fully 
diluted basis, the option is not considered to have present effect 
in this case.
    Example 3 for paragraph (d)(5). If company A has entered into an 
agreement to merge with company B in the future, the situation is 
treated as though the merger has taken place.

    (6) Affiliation under voting trusts. (i) Stock interests held in 
trust shall be deemed controlled by any person who holds or shares the 
power to vote such stock, to any person who has the sole power to sell 
such stock, and to any person who has the right to revoke the trust at 
will or to replace the trustee at will.
    (ii) If a trustee has a familial, personal or extra-trust business 
relationship to the grantor or the beneficiary, the stock interests 
held in trust will be deemed controlled by the grantor or beneficiary, 
as appropriate.
    (iii) If the primary purpose of a voting trust, or similar 
agreement, is to separate voting power from beneficial ownership of 
voting stock for the purpose of shifting control of or the power to 
control a concern in order that such concern or another concern may 
meet the Commission's size standards, such voting trust shall not be 
considered valid for this purpose regardless of whether it is or is not 
recognized within the appropriate jurisdiction.
    (7) Affiliation through common management. Affiliation generally 
arises where officers, directors, or key employees serve as the 
majority or otherwise as the controlling element of the board of 
directors and/or the management of another entity.
    (8) Affiliation through common facilities. Affiliation generally 
arises where one concern shares office space and/or employees and/or 
other facilities with another concern, particularly where such concerns 
are in the same or related industry or field of operations, or where 
such concerns were formerly affiliated, and through these sharing 
arrangements one concern has control, or potential control, of the 
other concern.
    (9) Affiliation through contractual relationships. Affiliation 
generally arises where one concern is dependent upon another concern 
for contracts and business to such a degree that one concern has 
control, or potential control, of the other concern.
    (10) Affiliation under joint venture arrangements. (i) A joint 
venture for size determination purposes is an association of concerns 
and/or individuals, with interests in any degree or proportion, formed 
by contract, express or implied, to engage in and carry out a single, 
specific business venture for joint profit for which purpose they 
combine their efforts, property, money, skill and knowledge, but not on 
a continuing or permanent basis for conducting business generally. The 
determination whether an entity is a joint venture is based upon the 
facts of the business operation, regardless of how the business 
operation may be designated by the parties involved. An agreement to 
share profits/losses proportionate to each party's contribution to the 
business operation is a significant factor in determining whether the 
business operation is a joint venture.
    (ii) The parties to a joint venture are considered to be affiliated 
with each other.


Sec. 90.1023  Certifications, disclosures, records maintenance and 
audits.

    (a) Short-Form Applications: Certifications and Disclosure. In 
addition to certifications and disclosures required in part 1, subpart 
Q, of this chapter, each applicant for a 220 MHz service geographic 
area license which qualifies as a small business, very small business, 
consortium of small businesses, or consortium of very small businesses, 
shall append the following information as an exhibit to its FCC Form 
175:
    (1) The identity of the applicant's affiliates and controlling 
principals, and, if a consortium of small businesses

[[Page 16003]]

(or consortium of very small businesses), the members of the joint 
venture; and
    (2) The applicant's gross revenues, computed in accordance with 
Sec. 90.1021.
    (b) Long-Form Applications: Certifications and Disclosure. In 
addition to the requirements in Sec. 90.1013, each applicant submitting 
a long-form application for a 220 MHz service geographic area license 
and qualifying as a small business or very small business shall, in an 
exhibit to its long-form application:
    (1) Disclose separately and in the aggregate the gross revenues, 
computed in accordance with Sec. 90.1021, for each of the following: 
The applicant, the applicant's affiliates, the applicant's controlling 
principals, and, if a consortium of small businesses (or consortium of 
very small businesses), the members of the joint venture;
    (2) List and summarize all agreements or other instruments (with 
appropriate references to specific provisions in the text of such 
agreements and instruments) that support the applicant's eligibility as 
a small business or very small business under Secs. 90.1017 through 
90.1023, including the establishment of de facto and de jure control; 
such agreements and instruments include, but are not limited to, 
articles of incorporation and bylaws, shareholder agreements, voting or 
other trust agreements, franchise agreements, and any other relevant 
agreements including letters of intent, oral or written; and
    (3) List and summarize any investor protection agreements, 
including rights of first refusal, supermajority clauses, options, veto 
rights, and rights to hire and fire employees and to appoint members to 
boards of directors or management committees.
    (c) Records maintenance. All winning bidders qualifying as small 
businesses or very small businesses shall maintain at their principal 
place of business an updated file of ownership, revenue, and asset 
information, including any documents necessary to establish eligibility 
as a small business or very small business and/or consortium of small 
businesses (or consortium of very small businesses) under Sec. 90.1021. 
Licensees (and their successors-in-interest) shall maintain such files 
for the term of the license. Applicants that do not obtain the 
license(s) for which they applied shall maintain such files until the 
grant of such license(s) is final, or one year from the date of the 
filing of their short-form application (FCC Form 175), whichever is 
earlier.
    (d) Audits. (1) Applicants and licensees claiming eligibility as a 
small business or very small business or consortium of small businesses 
(or consortium of very small businesses) under Secs. 90.1017 through 
90.1023 shall be subject to audits by the Commission. Selection for 
audit may be random, on information, or on the basis of other factors.
    (2) Consent to such audits is part of the certification included in 
the short-form application (FCC Form 175). Such consent shall include 
consent to the audit of the applicant's or licensee's books, documents 
and other material (including accounting procedures and practices) 
regardless of form or type, sufficient to confirm that such applicant's 
or licensee's representations are, and remain, accurate. Such consent 
shall include inspection at all reasonable times of the facilities, or 
parts thereof, engaged in providing and transacting business, or 
keeping records regarding licensed 220 MHz service, and shall also 
include consent to the interview of principals, employees, customers 
and suppliers of the applicant or licensee.
    (e) Definitions. The terms affiliate, small business, very small 
business, consortium of small businesses (or consortium of very small 
businesses), and gross revenues used in this section are defined in 
Sec. 90.1021.


Sec. 90.1025  Petitions to deny and limitations on settlements.

    (a) Procedures regarding petitions to deny long-form applications 
in the 220 MHz service will be governed by Secs. 1.2108(b) through 
1.2108(d) of this chapter and Sec. 90.163.
    (b) The consideration that an individual or an entity will be 
permitted to receive for agreeing to withdraw an application or a 
petition to deny will be limited by the provisions set forth in 
Sec. 90.162 and Sec. 1.2105(c) of this chapter.

[FR Doc. 97-8014 Filed 4-2-97; 8:45 am]
BILLING CODE 6712-01-P