[Federal Register Volume 64, Number 84 (Monday, May 3, 1999)]
[Proposed Rules]
[Pages 23571-23590]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-10989]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1, 22, 24, 26, 27, 73, 74, 80, 87, 90, 95, 97, and 101

[WT Docket No. 99-87, RM-9332; FCC 99-52]


Revised Competitive Bidding Authority

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rule making.

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SUMMARY: By this Notice of Proposed Rule Making (``NPRM''), the 
Commission commences a proceeding to implement changes to its statutory 
auction authority made by the Balanced Budget Act of 1997 (``Balanced 
Budget Act''). The NPRM seeks comment on the scope of the Balanced 
Budget Act's exemption from competitive bidding for public safety radio 
services. The NPRM also seeks comment on how the Balanced Budget Act's 
revision of the Commission's auction authority affects its 
determinations of which wireless telecommunications services licenses 
are potentially auctionable and its determinations of the appropriate 
licensing scheme for new and existing services. The Commission also 
seeks comment on how to implement competitive bidding for services that 
it may determine are auctionable as a result of its revised authority. 
The Commission also solicits comment on some additional issues relating 
to the implementation of the Balanced Budget Act's amendments to its 
auction authority.

DATES: Comments must be filed on or before July 2, 1999. Reply comments 
must be filed on or before August 2, 1999.

ADDRESSES: Federal Communications Commission, 445 Twelfth Street, S.W., 
Room TW-A325, Washington, D.C. 20554. Alternatively, comments may be 
filed by using the Commission's Electronic Comment Filing System 
(ECFS). Comments filed through the ECFS can be sent as an electronic 
file via the Internet to http://www.fcc.gov/e-file/ecfs.html.

FOR FURTHER INFORMATION CONTACT: Gary D. Michaels, Auctions & Industry 
Analysis Division, Wireless Telecommunications Bureau, at (202) 418-
0660, or Scot Stone Public Safety & Private Wireless Division, Wireless 
Telecommunications Bureau, at (202) 418-0680.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rule Making, WT Docket No. 99-87, RM-9332, FCC 99-52, 
adopted March 19, 1999, and released March 25, 1999. The complete text 
of this NPRM is available for inspection and copying during normal 
business hours in the FCC Reference Information Center, Room CY-A257, 
445 Twelfth Street, S.W., Washington, D.C. 20554. The complete text may 
be purchased from the Commission's copy contractor, International 
Transcription Service, Inc., 1231 20th Street, N.W., Washington, D.C. 
20036, (202) 857-3800. The complete NPRM is also available on the 
Internet at the Commission's web site: http://www.fcc.gov/wtb/.

Synopsis of Notice of Proposed Rule Making

I. Introduction

    1. This Notice of Proposed Rule Making (``NPRM'') commences a 
proceeding to implement Sections 309(j) and 337 of the Communications 
Act of 1934 (``Communications Act''), as amended by the Balanced Budget 
Act of 1997, Public Law No. 105-33, Title III, 111 Stat. 251 (1997) 
(``Balanced Budget Act''). The Balanced Budget Act revised the 
Commission's auction authority for wireless telecommunications 
services. The purpose of this NPRM is to seek comment on changes to the 
Commission's rules and policies to implement the revised auction 
authority. This NPRM first reviews the Commission's auction authority 
as provided by the Omnibus Budget Reconciliation Act of 1993, Public 
Law 103-66, Title VI, Sec. 6002(a), 107 Stat. 312 (1993) (``1993 Budget 
Act''), and how the Commission implemented that authority. The NPRM 
next discusses the statutory changes to the Commission's auction 
authority made by the Balanced Budget Act. The NPRM then seeks comment 
on the following matters:
     The scope of the Balanced Budget Act's exemption from 
competitive bidding for public safety radio services and the regulatory 
provisions that could be established to ensure that frequencies 
assigned without auctions meet the statutory requirements for 
exemption.
     How the Balanced Budget Act's amendments to Section 
309(j)(1) affect the categories of services that previously were 
determined to be nonauctionable by the Commission.
     The extent to which Section 337(c) of the Communications 
Act, gives eligible providers of public safety services a means to 
obtain unassigned spectrum not otherwise allocated for public safety 
purposes.
     A Petition for Rule Making filed by parties proposing that 
the Commission establish a third radio service pool in the private land 
mobile bands below 800 MHz for use by electric, gas, and water 
utilities, petroleum and natural gas pipeline companies, and railroads, 
and whether the Commission should adopt separate public safety radio 
services eligibility standards for (1) public safety and (2) public 
service entities.
     Whether changes in the rules governing multiple-licensed 
systems would be appropriate to avoid artificial distinctions between 
such systems and commercial providers, which must obtain spectrum 
through competitive bidding.
     Whether the Balanced Budget Act requires the Commission to 
revise its licensing schemes and license assignment methods to provide 
for competitive bidding in services previously determined not to be 
auctionable, and how such schemes and methods for new services might be 
revised.
     How the Commission might implement competitive bidding to 
award licenses and permits for those services and frequency bands, if 
any, that will be auctionable for the first time, including what 
auction procedures would best promote the four public interest 
objectives listed in 47 U.S.C. 309(j)(3)(A)-(D).

[[Page 23572]]

II. Background

A. Commission Implementation of the 1993 Auction Standard

    2. The 1993 Budget Act added Section 309(j) to the Communications 
Act, authorizing the Commission to award licenses for use of the 
electromagnetic spectrum through competitive bidding where mutually 
exclusive applications are filed. The 1993 Budget Act expressly 
authorized, but did not require, the Commission to use competitive 
bidding to choose among mutually exclusive applications for initial 
licenses or construction permits. Following enactment of the 1993 
Budget Act, the Commission instituted a rule making proceeding to 
implement Section 309(j). See Implementation of Section 309(j) of the 
Communications Act--Competitive Bidding, PP Docket No. 93-253, Notice 
of Proposed Rule Making, 58 FR 53489, October 15, 1993 (``Competitive 
Bidding Notice''). Based on the record in that proceeding and the 
requirements of the statute, the Commission established rules governing 
the types of services and licenses that may be subject to auctions in 
the Competitive Bidding Second Report and Order, 59 FR 22980, May 4, 
1994. See also Implementation of Section 309(j) of the Communications 
Act--Competitive Bidding, PP Docket No. 93-253, Second Memorandum 
Opinion and Order, 59 FR 44272, August 26, 1994 (``Competitive Bidding 
Second M O & O''). The Commission also conducted several subsequent 
proceedings in which it established, for specific services, rules and 
procedures for the competitive bidding process that it believed would 
best achieve Congress's objectives. See, e.g., Implementation of 
Section 309(j) of the Communications Act--Competitive Bidding, PP 
Docket No. 93-253, Fifth Report and Order, 59 FR 37566, July 22, 1994 
(Broadband PCS); Amendment of Part 90 of the Commission's Rules to 
Facilitate Future Development of SMR Systems in the 800 MHz Frequency 
Band, PR Docket No. 93-144, First Report and Order and Eighth Report 
and Order, 61 FR 6138, February 16, 1996; Amendment of Part 90 of the 
Commission's Rules To Provide for the Use of the 220-222 MHz Band by 
the Private Land Mobile Radio Service, PR Docket No. 89-552, Third 
Report and Order, 62 FR 15978, April 3, 1997 (``220-222 MHz Third 
Report and Order'').
    3. Pursuant to the 1993 Budget Act, Section 309(j)(1), ``General 
Authority,'' only permitted the Commission to use competitive bidding 
if mutual exclusivity existed among applications that the Commission 
has accepted for filing. Indeed, Section 309(j)(6)(E) made clear that 
the Commission was not relieved of its obligation in the public 
interest to continue to use engineering solutions, negotiation, 
threshold qualifications, service regulations and other means to avoid 
mutual exclusivity. The legislative history of the 1993 Budget Act, 
which added Section 309(j)(6)(E), indicates that Congress intended the 
Commission to use tools that avoid mutual exclusivity ``when feasible 
and appropriate.'' See H.R. Rep. No. 103-111, 103d Cong., 1st. Sess., 
at 258-259 (1993). The Commission has determined that applications are 
``mutually exclusive'' if the grant of one application would 
effectively preclude the grant of one or more of the other 
applications. Where the Commission receives only one application that 
is acceptable for filing for a particular license that is otherwise 
auctionable, there is no mutual exclusivity, and thus no auction. 
Therefore, mutual exclusivity is established when competing 
applications for a license are filed. For example, a request to provide 
service on the same frequency in the same or overlapping service area 
would trigger mutual exclusivity where both applicants could not offer 
service without causing electromagnetic interference to one another.
    4. Section 309(j)(1) also restricted the use of competitive bidding 
to applications for ``initial'' licenses or permits. Renewal licenses 
and permits were excluded from the auction process. As a result, the 
Competitive Bidding Second Report and Order, made clear that 
applications to modify existing licenses were generally not subject to 
competitive bidding. The Commission recognized, however, that if a 
modification is ``major,'' i.e., one that substantially alters a 
licensee's currently authorized facilities, and if the modification 
application is mutually exclusive with other applications, the 
Commission would consider treating the ``major'' modification as an 
initial application that would be subject to competitive bidding.
    5. In addition, Section 309(j)(2), ``Uses to Which Bidding May 
Apply,'' set forth conditions beyond mutual exclusivity that had to be 
satisfied in order for spectrum to be auctionable. Specifically, it 
required the Commission to determine that:

    (A) the principal use of such spectrum will involve, or is 
reasonably likely to involve, the licensee receiving compensation 
from subscribers in return for which the licensee--
    (i) Enables those subscribers to receive communications signals 
that are transmitted utilizing frequencies on which the licensee is 
licensed to operate; or
    (ii) Enables those subscribers to transmit directly 
communications signals utilizing frequencies on which the licensee 
is licensed to operate.

In the Competitive Bidding Second Report and Order, the Commission 
explained that, in making this assessment, it would evaluate classes of 
licenses and permits, rather than make a principal use determination on 
a license-by-license basis. The Commission concluded that it would 
consider the principal use requirement to be met if, comparing the 
amount of non-subscription use made by the licensees with the amount of 
use rendered to subscribers for compensation, at least a majority of 
the use of a service or class of service was operated for the benefit 
of subscribers.
    6. Section 309(j)(2) further directed the Commission--in evaluating 
the ``uses to which bidding may apply''--to determine whether ``a 
system of competitive bidding will promote the [public interest] 
objectives described in [Section 309(j)(3)].'' Section 309(j)(3), 
entitled ``Design of Systems of Competitive Bidding,'' directs that 
these factors be addressed in both identifying classes of licenses to 
be issued by competitive bidding, and designing particular 
methodologies of competitive bidding. The objectives are listed as 
follows:

    (A) The development and rapid deployment of new technologies, 
products, and services for the benefit of the public, including 
those residing in rural areas, without administrative or judicial 
delays;
    (B) Promoting economic opportunity and competition and ensuring 
that new and innovative technologies are readily accessible to the 
American people by avoiding excessive concentration of licenses and 
by disseminating licenses among a wide variety of applicants, 
including small businesses, rural telephone companies, and 
businesses owned by members of minority groups and women;
    (C) 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; and
    (D) Efficient and intensive use of the electromagnetic spectrum.
1. Services Determined to Be Auctionable
    7. Employing the criteria outlined above, the Commission identified 
a number of services and classes of services that were auctionable 
under the 1993 Budget Act if mutually exclusive applications are 
accepted for filing. Among the services the Commission found 
auctionable under the 1993

[[Page 23573]]

Budget Act (all of which involve commercial use of the spectrum) were 
narrowband and broadband Personal Communications Services (PCS), Public 
Mobile Services, 218-219 MHz Service, Specialized Mobile Radio Services 
(SMR), Private Carrier Paging (PCP) Services, Multipoint Distribution 
Service (MDS), Multichannel Multipoint Distribution Service (MMDS), 
General Wireless Communications Service (GWCS), Local Multipoint 
Distribution Service (LMDS), Wireless Communications Service (WCS), 
Digital Audio Radio Service (DARS), Direct Broadcast Satellite (DBS) 
Service, 220-222 MHz radio service, Location and Monitoring Service 
(LMS), and VHF Public Coast Stations. The Commission also adopted 
competitive bidding for assignment of licenses in the 39 GHz band after 
enactment of the Balanced Budget Act.
2. Services Determined To Be Nonauctionable
    8. Based on the statutory criteria contained in the 1993 Budget 
Act, the Commission also determined that a number of services were not 
auctionable, including ``private services'' that were for ``internal 
use,'' and thus not subscriber-based. The legislative history of the 
1993 Budget Act refers to ``private services'' as services that do not 
involve the receipt of compensation from subscribers, ``i.e., that were 
for internal use.'' See H.R. Rep No. 103-111 at 253. Generally, private 
radio services are used by government or business entities to meet 
internal communications needs, or by individuals for personal 
communications. Private radio services that the Commission decided were 
not auctionable under the 1993 Budget Act include the Public Safety 
Radio Services (subsequently combined with the Special Emergency Radio 
Services to form the Public Safety Radio Pool), 220 MHz channels 
reserved for private service, the Instructional Television Fixed 
Service (ITFS), the Citizens Band Service, the Radio Control Service, 
the General Mobile Radio Service, the Amateur Radio Service, Non-SMR 
licensees above 800 MHz, Multiple Licensed Systems below 800 MHz, and 
the Private Land Mobile Radio Service (PLMRS) below 470 MHz. See 
Competitive Bidding Second Report and Order; Competitive Bidding 
Notice.
    9. The plain language of the 1993 Budget Act also excluded 
traditional broadcast services from competitive bidding, because 
broadcast licensees do not receive compensation from subscribers. 
Consistent with the clear legislative intent, the Commission excluded 
from the competitive bidding process broadcast television (VHF, UHF, 
and LPTV), broadcast radio (AM and FM), and the Instructional 
Television Fixed Service (ITFS).
    10. Licensing in the Private Radio Services. The services deemed 
nonauctionable under the 1993 statute were largely private and 
noncommercial offerings operating on a variety of frequency bands. In 
contrast to its extensive use of geographic area licensing for services 
determined to be auctionable under the 1993 Budget Act, to date, the 
Commission has employed a variety of alternative licensing approaches 
for these private radio services.
    11. PLMRS frequencies below 470 MHz represent the majority of the 
frequencies allocated to the private radio services. Formerly, these 
frequencies were divided into twenty separate and diverse radio 
services, such as the Local Government, Telephone Maintenance, and 
Motor Carrier Radio Services. In 1997, however, the Commission 
consolidated these twenty services into two pools--the Public Safety 
Radio Pool and the Industrial/Business Radio Pool--in order to increase 
licensee flexibility to manage spectrum more efficiently by giving 
users access to a larger set of frequencies. Eligibility in the 
Industrial/Business pool is open to persons primarily engaged in the 
operation of a commercial activity; the operation of educational, 
philanthropic, or ecclesiastical institutions; clergy activities; or 
the operation of hospitals, clinics, or medical associations. See 47 
CFR 90.35(a). The majority of communications systems utilizing these 
frequencies are used to support day-to-day business operations (such as 
dispatching and diverting personnel or work vehicles, coordinating the 
activities of workers and machines on location, or remotely monitoring 
and controlling equipment), but many also are used for responding to 
emergencies.
    12. The private radio services also include PLMRS frequencies above 
470 MHz, specifically, in the 806-821/851-866 MHz band (the 800 MHz 
band) and the 896-901/935-940 MHz band (the 900 MHz band). The 
Commission divided PLMRS frequencies above 800 MHz into three 
categories--Public Safety, Business, and Industrial/Land 
Transportation, each consisting of one or more of the radio services 
consolidated into the two pools below 470 MHz, and a General category 
open to entities eligible in the other three categories and the 
Specialized Mobile Radio category. See 47 CFR 90.615, 90.617. The 
Commission designated private radio spectrum in the 800 and 900 MHz 
bands as shared, see 47 CFR 90.173(a), but concluded that a licensee 
may obtain exclusive use of a frequency by showing that it will meet 
certain loading requirements, i.e., that it will have a minimum number 
of mobile units operating on the frequency. See 47 CFR 90.625(a), 
90.631, 90.633.
    13. In the Competitive Bidding Second Report and Order, the 
Commission excluded from competitive bidding those services in which 
mutual exclusivity between applications cannot exist because channels 
are shared by multiple licensees. In the Competitive Bidding Second 
Report and Order, the Commission also found that for services in which 
licenses are assigned on a ``first-come, first-served'' basis, mutual 
exclusivity among applications will not exist. Specifically, the 
Commission concluded that use of ``first-come-first-served'' procedures 
generally avoids mutual exclusivity because the Commission does not 
consider competing applications. Rather, the applications are processed 
in sequence based on filing date and the first acceptable application 
is granted.
    14. The traditional approach to the licensing of users of private 
spectrum generally does not result in the filing of mutually exclusive 
applications because the frequencies are intensively shared, assigned 
on a first-come, first-served basis, and/or subject to frequency 
coordination. For example, PLMRS spectrum is licensed on a site-by-site 
basis. Thus, a prospective licensee applies for authority to construct 
and operate transmission facilities at a specifically designated 
location or locations using a particular antenna height and signal 
strength. Historically, site-based licensing has met the needs of PLMRS 
users like railroads or petroleum pipelines, which need to cover long 
but narrow areas rather than the wider areas that ordinarily constitute 
geographic licensing regions. Many other PLMRS users, such as 
manufacturers seeking to link their raw material, processing, and 
finishing operations, also have unique configuration requirements.
    15. Within the PLMRS services, Industrial/Business frequencies are 
licensed on a shared, non-exclusive basis, which allows multiple users 
with different coverage and capacity requirements to use the same 
frequencies effectively. Shared use increases the amount of frequency 
reuse that is possible compared to exclusive use with set distance 
separations, but requires that private system users must be able to 
tolerate interference and manage potential blocked access to channels. 
Such problems are

[[Page 23574]]

minimized, however, by the frequency coordination process, which 
involves the use of certified coordinators who analyze applications 
before they are submitted to the Commission to select a frequency that 
will meet the applicant's needs while minimizing interference to 
licensees already using the frequency band. Specifically, the frequency 
coordinator makes a recommendation to the Commission regarding the best 
available frequency for the applicant's proposed operations in the 
relevant area, based on the nature, size, and purpose of the radio 
systems already authorized on that frequency.
    16. The Commission had certified one coordinator for each radio 
service in the bands below 800 MHz, but now that those frequencies have 
been consolidated, applicants for those PLMR frequencies generally may 
use the services of any frequency coordinator certified in the pool. 
This introduction of competition among coordinators was intended to 
foster lower coordination costs and better service to the public. 
However, applicants for those frequencies still sometimes contend that 
receiving a coordinator's recommendation takes too long and costs too 
much. Indeed, the Commission has acknowledged that the changes made to 
date may not be sufficient to maximize the efficiency of its PLMR 
licensing procedures.
    17. Some private radio frequencies are available for shared use 
without any frequency coordination. One example is private coast 
station spectrum. Private coast stations serve the business and 
operational needs of vessels and may not charge fees for the provision 
of communications services. For example, a private coast station may be 
used by a vessel towing company to communicate with potential 
customers, or by a fishing company to maintain radio contact with its 
fleet. Frequencies are available in the 2-27.5 MHz band for 
communicating with vessels hundreds or thousands of miles away, and in 
the 156-162 MHz band for communications in a port area. Users are 
required to limit their communications to the minimum practicable 
transmission time. General use of tools to maximize spectrum 
efficiency, other than sharing of spectrum, have not been deemed 
necessary for private coast spectrum because, except in certain areas, 
the available spectrum generally has been sufficient to meet demand.
    18. Another example of private radio frequencies available for 
shared use without any frequency coordination are those services that 
are ``licensed by rule,'' meaning that no licenses are issued, such as 
the CB Radio Service. See 47 CFR 95.404. The CB Radio Service is a 
private, two-way, short-distance voice communications service for 
personal or business activities of the general public. Users may 
transmit communications about their personal or business activities, 
emergencies, and traveler assistance, but users must limit their 
communications to the minimum practicable time. Licensing by rule must 
be authorized by Congress, and is appropriate only for low-power, 
short-distance services with multiple, shared channels, where users can 
avoid congestion fairly easily.

B. The Balanced Budget Act of 1997

    19. In the summer of 1997, Congress revised the Commission's 
auction authority. Specifically, the Balanced Budget Act of 1997 
amended Section 309(j)(1) to require the Commission to award mutually 
exclusive applications for initial licenses or permits using 
competitive bidding procedures, except as provided in Section 
309(j)(2). Sections 309(j)(1) and 309(j)(2) now state:

    (1) General Authority.--If, consistent with the obligations 
described in paragraph (6)(E), mutually exclusive applications are 
accepted for any initial license or construction permit, then, 
except as provided in paragraph (2), the Commission shall grant the 
license or permit to a qualified applicant through a system of 
competitive bidding that meets the requirements of this subsection.
    (2) Exemptions.--The competitive bidding authority granted by 
this subsection shall not apply to licenses or construction permits 
issued by the Commission--
    (A) For public safety radio services, including private internal 
radio services used by State and local governments and non-
government entities and including emergency road services provided 
by not-for-profit organizations, that--
    (i) Are used to protect the safety of life, health, or property; 
and
    (ii) Are not made commercially available to the public;
    (B) For initial licenses or construction permits for digital 
television service given to existing terrestrial broadcast licensees 
to replace their analog television service licenses; or
    (C) For stations described in section 397(6) of this title.

Section 397(6), defines the terms ``noncommercial educational broadcast 
station'' and ``public broadcast station.'' See 47 U.S.C. 397(6).
    20. Prior to the Balanced Budget Act of 1997, Sections 309(j)(1) 
and 309(j)(2) granted the Commission the authority to use competitive 
bidding to resolve mutually exclusive applications for initial licenses 
or permits if the principal use of the spectrum was for subscription-
based services and competitive bidding would promote the objectives 
described in Section 309(j)(3). As amended by the Balanced Budget Act 
of 1997, Section 309(j)(1) states that the Commission shall use 
competitive bidding to resolve mutually exclusive initial license or 
permit applications, unless one of the three exemptions provided in the 
statute applies.
    21. As noted, the Balanced Budget Act of 1997 left unchanged the 
restriction that competitive bidding may only be used to resolve 
mutually exclusive applications. Moreover, the general auction 
authority provision of Section 309(j)(1) now references the obligation 
under Section 309(j)(6)(E) to use engineering solutions, negotiation, 
threshold qualifications, service regulations, or other means to avoid 
mutual exclusivity where to do so is in the public interest. In 
addition, the portion of the Conference Report that accompanies this 
section of the legislation emphasizes that notwithstanding the 
Commission's expanded auction authority, its determinations regarding 
mutual exclusivity must still be consistent with and not minimize its 
obligations under Section 309(j)(6)(E). The conferees expressed concern 
that the Commission not interpret its expanded auction authority in a 
manner that overlooks engineering solutions or other tools that avoid 
mutual exclusivity. The conferees emphasized that, notwithstanding its 
expanded auction authority, the Commission must still ensure that its 
determinations regarding mutual exclusivity are consistent with the 
Commission's obligations under section 309(j)(6)(E). See H.R. Conf. 
Rep. No. 105-217, 105th Cong., 1st Sess., at 572 (1997) (``Conference 
Report'')
    22. Section 309(j)(2), as amended by the Balanced Budget Act of 
1997, exempts from auctions licenses and construction permits for 
public safety radio services, digital television service licenses and 
permits given to existing terrestial broadcast licensees to replace 
their analog television service licenses, and licenses and construction 
permits for noncommercial educational broadcast stations and public 
broadcast stations. The Commission recently observed that the list of 
exemptions from its general auction authority set forth in Section 
309(j)(2) is exhaustive, rather than merely illustrative, of the types 
of licenses or permits that may not be awarded through a system of 
competitive bidding. See Implementation of Section 309(j) of the 
Communications Act--Competitive Bidding for Commercial Broadcast and 
Instructional Television Fixed Service Licenses, MM Docket No. 97-234, 
First Report and Order, 63 FR 48615,

[[Page 23575]]

September 11, 1998 (``Commercial Broadcast Competitive Bidding First 
Report & Order''). Although the reference to Section 309(j)(3) is now 
deleted from Section 309(j)(2), it is worth noting that Section 
309(j)(3), ``Design of Systems of Competitive Bidding,'' was not 
amended by the Balanced Budget Act of 1997 and still directs the 
Commission to consider the public interest objectives in identifying 
classes of licenses and permits to be issued by competitive bidding.
    23. The Conference Report for Section 3002(a) of the Balanced 
Budget Act of 1997 states that the exemption for public safety radio 
services includes ``private internal radio services'' used by 
utilities, railroads, metropolitan transit systems, pipelines, private 
ambulances, volunteer fire departments, and not-for-profit 
organizations that offer emergency road services, such as the American 
Automobile Association (AAA). The Conference Report also notes that the 
exemption is ``much broader than the explicit definition for `public 
safety services' '' included in Section 337(f)(1) of the Communications 
Act, 47 U.S.C. 337(f)(1), for the purpose of determining eligibility 
for licensing in the 24 MHz of spectrum reallocated for public safety 
services.
    24. The 1997 amendments also eliminate the Commission's authority 
to issue licenses or permits by random selection after July 1, 1997, 
with the exception of licenses or permits for noncommercial educational 
radio and television stations. See 47 U.S.C. 309(i)(5).

III. Discussion

A. General Approach to Implementing Legislation

    25. In this NPRM, the Commission seeks comment on which radio 
services or classes of services Congress intended to exempt from 
competitive bidding. The Commission also seeks comment on how the 
Balanced Budget Act's modification of its statutory auction authority 
affects its analysis of whether spectrum licenses for non-exempt 
wireless services are auctionable. Specifically, the Commission 
inquires about the scope and content of its obligation to continue to 
avoid mutual exclusivity under Sections 309(j)(1) and 309(j)(6)(E). The 
Commission also inquires whether alternative licensing schemes and 
techniques would more readily give effect to the goals expressed in the 
relevant Balanced Budget Act changes. In addition, in view of the 
above-mentioned statutory changes, the Commission explores the criteria 
to be used in establishing licensing schemes both for existing wireless 
services and for wireless services as to which no licensing rules have 
yet been adopted.
    26. The Commission has concluded in other proceedings that the 
revised statute does not require it to re-examine its determinations 
that specific services or frequency bands were auctionable under the 
1993 Budget Act's more restrictive definition of our auction authority. 
See Amendment of the Commission's Rules Concerning Maritime 
Communications, PR Docket No. 92-257, Third Report and Order and 
Memorandum Opinion and Order, 63 FR 40059, July 27, 1998 (``Maritime 
Third Report and Order''); Amendment of the Commission's Rules to Adopt 
Regulations for Automatic Vehicle Monitoring Systems, PR Docket No. 93-
61, Second Report and Order, 63 FR 40659, July 30, 1998. Consistent 
with its conclusions in those previous proceedings, this proceeding 
will not re-examine the Commission's previous determinations that 
specific services or frequency bands were auctionable under the 1993 
Budget Act.

B. Principles for Determining Whether a License is Subject to Auction

    27. By requiring the Commission to use auctions to resolve mutually 
exclusive applications for all categories of spectrum licenses except 
those that are expressly exempt, Congress established a new approach to 
determining the auctionability of spectrum. Under the revised Section 
309(j)(1), whether a particular service or class of frequencies is used 
principally for subscriber-based services is no longer dispositive. 
With the elimination of this criterion for determining auctionability 
of mutually exclusive applications, unless a service is expressly 
exempt from competitive bidding, the only remaining requirement for 
auctionability is that, subject to the Commission's ``obligation in the 
public interest * * * to avoid mutual exclusivity in application and 
licensing proceedings,'' 47 U.S.C. 309(j)(6)(E), there be mutually 
exclusive applications accepted for licenses in that service. Thus, in 
enacting the Balanced Budget Act, Congress simplified the statute, 
apparently expanding its potential scope, by requiring spectrum 
auctions with certain limited exceptions. Accordingly, the Commission 
seeks comment on how the Balanced Budget Act's amendments to Section 
309(j)(1) affect its determinations of which services are potentially 
auctionable and which are not.

C. Public Safety Radio Services Exemption

    28. Of particular importance to determining the auctionability of 
wireless services is the express exemption from the Commission's 
auction authority for ``public safety radio services,'' added by the 
Balanced Budget Act's amendment to Section 309(j)(2). The exemption is 
provided for certain public safety radio services meeting the 
conditions contained in the statutory language, rather than for a 
certain class of public safety licensees (i.e., police, fire, etc.). 
Thus the Commission seeks comment on how to apply this exemption.
    29. This NPRM does not seek comment on the exemptions from 
competitive bidding for digital television or noncommercial educational 
broadcast stations and public broadcast stations. The Commission has 
addressed the competitive bidding exemption for noncommercial 
educational broadcasters and sought further comment in another rule 
making proceeding. See Reexamination of the Comparative Standards for 
New Noncommercial Educational Applicants, Further Notice of Proposed 
Rule Making, MM Docket No. 95-31, FCC 98-269, 63 FR 58358, October 30, 
1998. To the extent the Commission determines that it is necessary to 
clarify the exemption for digital television or adopt implementing 
regulations for that exemption, it intends to do so in a proceeding 
specifically addressing broadcast services.
    30. The Balanced Budget Act defines ``public safety radio 
services'' to include private internal radio services used by State and 
local governments and non-government entities, and including emergency 
road services provided by not-for-profit organizations, that (i) are 
used to protect the safety of life, health, or property, and (ii) are 
not made commercially available to the public. The relevant legislative 
history states that ``public safety radio services'' is much broader 
than the explicit definition of ``public safety services'' contained in 
Section 337 of the Communications Act, which determines eligibility for 
licensing in the 24 MHz of spectrum reallocated for public safety 
services. In view of the express statutory language and legislative 
history, the Commission tentatively concludes that ``public safety 
radio services'' should include, at a minimum, all of the Private Land 
Mobile Radio Services that are currently assigned to the Public Safety 
Radio Pool, which is comprised of those services formerly housed in the 
Public

[[Page 23576]]

Safety Radio Services and the Special Emergency Radio Service. See 47 
CFR 90.16. The Public Safety Radio Services included the Local 
Government, Police, Fire, Highway Maintenance, Forestry-Conservation, 
and Emergency Medical Radio Services. The Special Emergency Radio 
Service covered the licensing of radio communications of hospitals and 
clinics, ambulance and rescue services, veterinarians, persons with 
disabilities, disaster relief organizations, school buses, beach 
patrols, persons or organizations in isolated areas, and emergency 
standby and repair facilities for telephone and telegraph systems. 
Thus, the Commission proposes to include the spectrum allocated to the 
Public Safety Radio Pool in our definition of ``public safety radio 
services,'' because such spectrum is used for communications directly 
related to the safety of life, health, or property and is not made 
commercially available to the public.
    31. The Commission also tentatively concludes that its definition 
of ``public safety radio services'' should include the 24 MHz of newly 
allocated public safety spectrum at 764-776 MHz and 794-806 MHz (``the 
700 MHz band''). See 47 U.S.C. 337(a). Licensing in the 700 MHz band is 
restricted to a more narrow class than licensing in the public safety 
radio services, which does not appear to be limited to particular 
entities. Moreover, the 700 MHz band, like public safety radio services 
spectrum, must be used to protect the safety of life, health, or 
property, and may not be made commercially available to the public. See 
47 U.S.C. 337(f)(1)(A),(C). The Commission therefore seeks comment on 
its tentative conclusion that spectrum in the 700 MHz band should be 
included within the public safety radio services spectrum that is 
exempt from competitive bidding.
    32. Further, in the 220-222 MHz Third Report and Order, the 
Commission concluded that it would be in the public interest to 
allocate ten 220 MHz non-nationwide channel pairs for the exclusive use 
of public safety eligibles. Therefore, consistent with this decision, 
the Commission tentatively concludes that its definition of public 
safety radio services should include the ten 220 MHz channel pairs. 
Similarly, in the Maritime Third Report and Order, the Commission 
concluded that it would be in the public interest to set aside two 
contiguous channel pairs in each of the thirty-three inland VHF Public 
Coast areas (VPC) for public safety users. Although the Commission 
stated that the ultimate use for these reserved frequencies would be 
decided as part of its pending public safety proceeding, the Commission 
concluded that these inland VPC channel pairs were a part of the public 
safety radio services that the Balanced Budget Act expressly exempted 
from competitive bidding. The Commission tentatively concludes that it 
should continue to include the VPC spectrum that it has set aside for 
public safety uses in its definition of public safety radio services. 
The Commission seeks comment on these tentative conclusions.
    33. In light of the exemption's focus on public safety radio 
services rather than certain classes of public safety licensees, the 
Commission also seeks comment on whether it should interpret the 
exemption to apply only to spectrum that the Commission specifically 
allocates to public safety radio services. Should the Commission 
designate certain radio services or classes of frequencies within 
certain services as ``public safety radio services'' for which licenses 
will be assigned without competitive bidding? And, if such designations 
are warranted, upon what basis should the Commission make such 
designations? Should, for example, such designations be based on the 
``principal use of the spectrum'' as determined by the Commission, or 
would other bases be more appropriate? Additionally, the Commission 
seeks comment on whether there are any other private radio services or 
frequency bands that satisfy the criteria of the public safety radio 
services exemption, i.e., that are used to protect the safety of life, 
health or property and that are not made commercially available to the 
public. For example, it appears that frequencies used by medical 
telemetry equipment may fall within this exemption.
1. Private Internal Radio Services
    34. Private internal systems are traditionally operated by 
licensees that require highly customized mobile radio facilities for 
the conduct of the licensee's underlying business. In the Competitive 
Bidding Second Report and Order, the Commission concluded that the term 
``private services'' refers to services ``that were for internal use.'' 
However, private internal services are a subclassification of private 
services, because some private services, such as the Amateur Radio 
Service and the Aviation Services, are not used for internal 
communications. The Commission's Part 90 rules governing private land 
mobile radio services currently define an ``internal system'' as a 
system in which ``all messages are transmitted between the fixed 
operating positions located on the premises controlled by the licensee 
and the associated mobile stations or paging receivers of the 
licensee.'' 47 CFR 90.7.
    35. Because the Balanced Budget Act's exemption for public safety 
radio services includes ``private internal radio services used by State 
and local governments and non-government entities,'' the Commission 
seeks comment on the definition of ``private internal radio services.'' 
The Commission recognizes, for example, that for the purpose of 
implementing the public safety radio services exemption, its definition 
of ``private internal radio services'' will need to cover private fixed 
as well as private mobile radio services. The Commision therefore 
proposes to define private internal radio services by incorporating its 
definition of ``private services'' with its definition of internal 
systems in its Part 90 rules, and expanding the definition to include 
both fixed and mobile services. Accordingly, the Commission seeks 
comment on whether it should define a private internal radio service as 
a service in which the licensee does not receive compensation, and all 
messages are transmitted between fixed operating positions located on 
premises controlled by the licensee and the associated fixed or mobile 
stations or other transmitting or receiving devices of the licensee.
    36. Additionally, the Commission seeks comment on whether its 
definition of private internal radio services should include services 
in which private internal systems operate on a cooperative or multiple-
license basis. The term ``private mobile service'' as defined in 
Section 332(d)(3) of the Communications Act, includes mobile service 
that may be licensed on an ``individual, cooperative, or multiple 
basis.'' See 47 U.S.C. 153(27). In Implementation of Sections 3(n) and 
332 of the Communications Act--Regulatory Treatment of Mobile Services, 
GN Docket No. 93-252, Second Report and Order, 59 FR 18493 (1994) 
(``CMRS Second Report and Order''), the Commission observed that 
shared-use arrangements are beneficial because they allow radio users 
to combine resources to meet compatible needs for specialized internal 
communications facilities, and it decided that such arrangements would 
be deemed to be not-for-profit and presumptively classified as PMRS. 
Private internal radio systems operating on a cooperative basis or as 
multiple-licensed systems would fall outside a definition of private 
internal radio services that was strictly based on the absence of 
compensation to the licensee, because such arrangements may involve

[[Page 23577]]

cost reimbursements that could be considered compensation. 
Nevertheless, systems operated on a cooperative basis and multiple-
licensed systems possess one of the most common characteristics of 
private internal radio systems: the systems are not operated as a 
direct source of revenue, but rather as a means of internal 
communications to support the day-to-day needs of the licensees' 
business operations or to protect the safety of their employees, 
customers, or the general public. Accordingly, the Commission seeks 
comment on whether licensees operating systems on a not-for-profit 
basis and under a cost-sharing agreement, on a cooperative basis, or as 
a multiple licensed system for internal communications to support their 
own operations should be classified as private internal radio services, 
and considered exempt, even though the licensee receives compensation.
a. Emergency Road Services
    37. Section 309(j)(2)(A) stipulates that licenses issued for 
private internal radio services used by providers of emergency road 
services will be awarded without competitive bidding only if the 
service provider is a not-for-profit organization. The Conference 
Report that accompanied the legislation states that Congress did not 
intend this exemption to include internal radio services used by 
automobile manufacturers and oil companies to support emergency road 
services provided by those parties as part of the competitive marketing 
of their products. See Conference Report at 572. This distinction 
between for-profit and not-for-profit entities is not required for any 
other user of public safety radio services.
    38. The Commission invites comment on how it should carry out 
Congress's intent regarding treatment of providers of emergency road 
services. Should the Commission limit licensee eligibility in the 
public safety radio services by excluding emergency road service 
providers that are not organized as not-for-profit entities under the 
laws of the state in which they reside and/or provide such services? 
Alternatively, should the Commission use the categories that are found 
in its regulations governing eligibility to hold authorizations in the 
Automobile Emergency Radio Service? Although both categories are 
eligible licensees under those regulations, the Commission 
distinguishes between operation of a private emergency road service for 
disabled vehicles by associations of owners of private automobiles and 
the business of providing to the general public an emergency road 
service for disabled vehicles. See 47 CFR 90.95(a)(1), (2). The 
Commission seeks comment on whether it should use similar definitions 
to distinguish between emergency road service providers that are 
eligible and noneligible to obtain auction-exempt licenses or permits 
for public safety radio spectrum.
b. State and Local Governments
    39. In establishing eligibility for licensing in the newly-
allocated public safety spectrum in the 700 MHz band, the Commission 
concluded that all state and local government entities would be 
presumed eligible without further showing as to eligibility. See The 
Development of Operational, Technical and Spectrum Requirements For 
Meeting Federal, State and Local Public Safety Agency Communication 
Requirements through the Year 2010, WT Docket No. 96-86, First Report 
and Order, FCC 98-191, 63 FR 58645, November 2, 1998 (``Public Safety 
First Report and Order''). The Conference Report accompanying the 
Balanced Budget Act makes clear that Congress intended the public 
safety radio services exemption to be broader than the definition of 
``public safety services'' eligible for licensing in the 700 MHz band. 
The Commission therefore tentatively concludes that it would be 
consistent with legislative intent for the Commission to presume that 
all state and local government entities are eligible for licensing in 
the auction-exempt public safety radio services without further showing 
as to eligibility, subject to the statutory requirement that this 
spectrum be used to protect the safety of life, health or property and 
not made commercially available to the public. The Commission seeks 
comment on this tentative conclusion.
c. Non-government Entities
    40. In establishing the eligibility of non-governmental 
organizations (NGOs) for licensing in the 700 MHz band, the Commission 
concluded in the Public Safety First Report and Order that NGOs must 
obtain written governmental approval to be eligible for licensing. 
However, as observed above, Congress intended the public safety radio 
services exemption to be much broader than the definition of ``public 
safety services'' eligible for licensing in the 700 MHz band and 
eligible to invoke Section 337. Unlike the definition of ``public 
safety services,'' which requires NGOs to be authorized by a 
governmental entity whose primary mission is the provision of such 
services to be eligible for public safety spectrum in the 700 MHz band, 
the public safety radio services exemption in Section 309(j)(2) is not 
restricted to NGOs that are ``authorized by a governmental entity.'' In 
light of this distinction, the Commission seeks comment on whether it 
should establish any eligibility criteria for non government entities 
to ensure that public safety radio services spectrum licensed to non-
government entities is used to protect the safety of life, health, or 
property and not made commercially available to the public. Does the 
absence of this restriction on ``non-government entities'' in Section 
309(j)(2)(A) suggest that non-government entities should not be 
required to obtain written governmental approval of their public safety 
radio service licenses, as they are required to do for licenses in the 
700 MHz band?
    41. The Commision notes that Section 309(j)(2)(A) exempts public 
safety radio services from auctions, but does not appear to restrict 
the entities that may apply for public safety radio services spectrum. 
The Commission recognizes that in some cases public safety entities may 
wish to obtain communications services on a contract basis from a 
commercial service provider. Comments are invited on whether it may be 
appropriate to permit commercial providers or other non-government 
entities that intend to provide public safety radio services on a 
contract basis to apply directly for auction-exempt spectrum, subject 
to the statutory requirement that this spectrum be used to protect the 
safety of life, health or property and not made commercially available 
to the public. If this were permitted, how might the Commission ensure 
that this spectrum is used only to protect the safety of life, health, 
or property and not to provide non-qualifying services to the public?
2. Frequency Pools
    42. The Commission provides a pool of frequencies for public safety 
radio services (i.e., the Public Safety Pool). The Commission 
recognizes that the exemption for public safety radio services provided 
in Section 309(j)(2)(A) is broader than the criteria the Commission has 
applied in determining eligibility for frequencies in the Public Safety 
Pool. The Commission invites comment on the ramifications of the 
revised Section 309(j)(2)(A) on its assignment of frequencies for 
public safety radio services. The Commission believes that it would be 
imprudent and potentially disruptive to current public safety 
communications to overhaul the existing frequency assignment approach 
for public safety pool spectrum. Therefore, the Commission seeks 
alternatives, such as establishing categories or frequency pools for 
various

[[Page 23578]]

types of users of public safety radio services spectrum and allocating 
specific frequencies within the public safety radio services to each 
category or frequency pool.
    43. The Commission also seeks comment on how such spectrum 
categories or pools should be defined if it were to decide to establish 
such categories or pools. Should a separate pool be established for 
state and local government licensees or for nonprofit organizations 
providing emergency road services? Based on past experience, frequency 
pools can sometimes lead to inefficiencies where spectrum is exhausted 
in one pool but not another. If the Commission were to establish such a 
separate frequency pool, how should frequencies be apportioned with 
eligibles in the existing Public Safety Pool so that the Commission can 
minimize inefficiencies?
    44. UTC, The Telecommunications Association, the American Petroleum 
Institute, and the Association of American Railroads have submitted a 
rulemaking petition that includes a proposal to create a third radio 
pool, in addition to the Public Safety and Industrial/Business Radio 
Pools already used for private radio frequencies below 470 MHz, to be 
known as the Public Service Radio Pool and open to entities that do not 
qualify for Public Safety Radio Pool spectrum, but are eligible to use 
the public safety radio services that the Balanced Budget Act exempted 
from the Commission's auction authority. See UTC, The 
Telecommunications Association, American Petroleum Institute, and 
Association of American Railroads Petition for Rulemaking (filed Aug. 
14, 1998). The Commission notes that this approach may be feasible for 
other frequency bands, including PLMR frequencies above 470 MHz. The 
Commission seeks comment on this proposal.
    45. Alternative proposals on ways to categorize public safety radio 
service spectrum and other PLMR spectrum also are welcome. Commenters 
discussing the creation of a third pool or any other means of 
separating auctionable from non-auctionable spectrum should consider 
the use of frequency coordination, the resolution of mutually exclusive 
applications, eligibility requirements, and the appropriate treatment 
of public safety radio service eligibles operating on frequencies not 
reallocated to the new pool, and of non-eligibles operating on 
frequencies that are reallocated. In addition, commenters are 
encouraged to submit specific quantitative information regarding the 
spectrum needs of public safety and non-public safety PLMR users. 
Necessary amendments to the Commission's Rules should also be noted.
3. Restrictions On Use
    46. The Commission also seeks comment on what regulatory provisions 
should be established to ensure that the licensee's assigned 
frequencies continue to be utilized only for purposes that meet the 
requirements of the Balanced Budget Act's exemption from competitive 
bidding. For example, private wireless licensees using their systems 
noncommercially to protect the safety of their employees in the course 
of conducting routine business operations also would have the 
capability to use those systems for communications of a routine 
business nature. Section 309(j)(2)(A) requires that spectrum exempt 
from auctions under the public safety radio services exemption be used 
to protect the safety of life, health, or property and not be made 
commercially available to the public. In contrast, Section 337(f)(1)(A) 
requires spectrum in the 700 MHz band to be used for services ``the 
sole or principal purpose'' of which is to protect the safety of life, 
health, or property. 47 U.S.C. 337(f)(1)(A) (emphasis added).
    47. The Commission seeks comment on the scope of permissible uses 
for auction-exempt services. Does the absence of the words ``or 
principal purpose'' in Section 309(j)(2) signify that licensees in 
these services may use their frequencies only for safety-related 
purposes? Alternatively, should the Commission permit licensees of 
auction-exempt spectrum to use their frequencies for ineligible as well 
as eligible purposes? If the Commission were to allow public safety 
radio services to be used incidentally for purposes other than safety 
protection, what standard should it adopt to ensure that licensees that 
obtain these frequencies do not circumvent the statutory mandate that 
spectrum be licensed without competitive bidding only for the limited 
purposes expressed in Section 309(j)(2)?
4. Noncommercial Proviso
    48. In addition to being used to protect the safety of life, 
health, or property, the public safety radio services exemption to our 
general auction authority requires that the radio services not be 
``made commercially available to the public.'' 47 U.S.C. 
309(j)(2)(A)(ii). Thus, private internal radio services that are made 
``commercially available to the public'' would be required to be 
licensed through auctions. The Commission sought comment above on 
whether commercial providers should be eligible for licenses in the 
public safety radio services, provided that they do not make the radio 
services commercially available to the public. The Commission now 
addresses how the term ``not made commercially available to the 
public'' should be defined.
    49. In determining what Congress meant by radio services ``not made 
commercially available,'' the Commission is presented with some of the 
same considerations raised in its discussion of how to interpret 
``private internal radio services.'' One of the criteria Congress has 
used to distinguish commercial mobile radio services from private 
mobile radio services is whether service is provided for a profit. See 
47 U.S.C. 332(d). However, the Commission has found that the 
distinction between CMRS and PMRS is not relevant for purposes of 
determining the meaning of ``private services'' in the context of 
Section 309(j). Similarly, the Commission believes that the distinction 
between CMRS and PMRS need not be determinative of how it defines ``not 
made commercially available'' for purposes of the auction exemption in 
Section 309(j)(2). Accordingly, the Commission seeks comment on how it 
should interpret the prohibition against public safety radio services 
being made commercially available. Should ``not made commercially 
available'' be defiined to have the same meaning as ``private 
internal,'' i.e., that the radio services are not made available for 
compensation? If the Commission adopts such a definition, should it 
also adopt an exception that would consider services to be not 
commercially available even though the licensee receives compensation, 
if the compensation is received under a nonprofit cost-sharing or 
cooperative agreement, or as a multiple licensed system?
    50. In addition to seeking comment regarding shared use and 
multiple licensing with respect to the meaning of ``not made 
commercially available,'' the Commission also seeks more general 
comment regarding multiple licensing. A ``multiple-licensed'' system, 
also known as a ``community repeater,'' is a system for which the same 
transmitting equipment and spectrum is licensed to and used by more 
than one entity, each of whom is eligible in the same service. If the 
station is interconnected with the public switched network, the 
telephone service must be provided on a cost-shared, non-profit basis, 
and detailed records must be maintained. No consideration is paid, 
either directly or indirectly, by any participant to any

[[Page 23579]]

other participant for or in connection with the use of the multiple-
licensed facilities.
    51. In 1992, the Commission proposed eliminating multiple 
licensing, on the grounds that, from a user's standpoint, such 
facilities were indistinguishable from SMR facilities, and that users' 
needs could adequately be met by SMR and private carrier licensees. 
When the Commission implemented the 1993 Budget Act, however, it 
concluded that Congress recognized the benefits of allowing private 
radio users to enter into legitimate cost-sharing arrangements, and did 
not intend such arrangements to be classified as a ``for-profit'' CMRS 
service. See CMRS Second Report and Order. This conclusion was based 
upon the definition of ``mobile service'' adopted in the 1993 Budget 
Act, which defines ``private'' communications systems as systems that 
may be licensed on an ``individual, cooperative, or multiple basis.'' 
The Commission discerned that the legislative intent was to provide for 
shared-use and multiple-licensed ``private'' communications systems, 
exempt from the competitive bidding process.
    52. Thus, despite concern that these systems are often 
indistinguishable from commercial systems, the Commission deemed it 
appropriate to retain multiple licensing. To ensure that only 
legitimate cost-sharing arrangements were treated as not-for-profit, 
the Commission continued to impose on licensees disclosure requirements 
to prevent PMRS licensees from providing de facto for-profit service in 
competition with CMRS providers. Nevertheless, the current licensing 
rules have sometimes resulted in de facto commercial mobile service 
operations by the managers of multiple licensed stations, who were 
permitted, after the implementation of the 1993 Budget Act, to continue 
to assist in the operation of multiple-licensed systems.
    53. A not-for-profit system structured to give an unlicensed 
manager sufficient operational control to provide for-profit service to 
customers without Commission approval is a violation of Section 310(d) 
of the Communications Act and the Commission's rules, for which the 
system license can be revoked. In addition, the licensee could be 
subject to reclassification as CMRS. De facto for-profit operations, on 
frequencies on which for-profit activities are prohibited, offends 
concepts of regulatory symmetry and interferes with the establishment 
of a level economic playing field. Such sham not-for-profit operations 
compete with CMRS licensees who are required to obtain their licenses 
through competitive bidding. With the potential expansion of our 
auction authority to include private radio services, the Commission 
thinks it is appropriate to revisit this issue. Accordingly, the 
Commission seeks comment on whether eliminating or modifying the 
multiple licensing rules would be appropriate.
    54. In addition to seeking comment on the meaning of ``not made 
commercially available,'' the Commission also invites comment on how it 
should define radio services ``not made commercially available to the 
public.'' In the CMRS Second Report and Order, the Commission 
determined the meaning of ``available to the public'' in the context of 
defining commercial mobile radio service. The Commission found in the 
CMRS proceeding that a service is available ``to the public'' if it is 
offered to the public without restriction on who may receive it. 
However, because in that rule making the Commission was determining the 
meaning of commercial mobile service, as defined in Section 332(d) of 
the Communications Act, it was required to include in its definition 
those services that are ``effectively available to a substantial 
portion of the public.'' See 47 U.S.C. 332(d)(1)(B). The Commission 
found that if service is provided exclusively for internal use or is 
offered only to a significantly restricted class of eligible users, it 
is made available only on a limited basis to insubstantial portions of 
the public. Examples of services cited as being available only to 
insubstantial portions of the public were the Public Safety Radio 
Services, Special Emergency Radio Service, Radiolocation Services, most 
of the Industrial Radio Services, Maritime Service Stations, and 
Aviation Service Stations. The Commission seeks comment on whether it 
should interpret the requirement that public safety radio services not 
be made commercially available to the public to mean that such services 
may be made available only to an insubstantial portion of the public. 
Under such a definition, a public safety radio service could not be 
made available to the public without restriction or to any substantial 
portion of the public.
5. Resolution of Mutually Exclusive Applications for Services Exempt 
From Competitive Bidding
    55. If applications for auction-exempt public safety radio services 
were to continue to be frequency coordinated prior to their filing with 
the Commission, the Commission would expect that under either site-
based or geographic area licensing, incidents of mutual exclusivity in 
these services would be rare. However, because it is possible for 
mutual exclusivity to arise, the Commission seeks comment below on how 
it should avoid or resolve mutual exclusivity between applications for 
spectrum exempt from competitive bidding.
    56. The Commission seeks comment on whether engineering solutions, 
negotiation, threshold qualifications, service regulations, or other 
means should be used to resolve mutual exclusivity in cases where 
frequency coordination is unsuccessful in avoiding mutually exclusive 
applications. As noted previously, the Balanced Budget Act terminated 
the Commission's authority to use lotteries to choose among mutually 
exclusive applications. Therefore, the Commission is foreclosed from 
using random selection in the event it receives mutually exclusive 
applications for licenses to use channels in a public safety radio 
service. Two of the remaining methods by which such applications could 
be resolved are comparative hearings and licensing on a first-come-
first-served basis. The Commission seeks comment on these and other 
possible alternatives to resolving such applications in public safety 
radio services.
6. Application of Section 337
    57. In addition to the statutory exemption for public safety radio 
services, providers of public safety services may obtain spectrum 
without engaging in competitive bidding if they are granted the use of 
a frequency under Section 337. Section 337, among other things, gives 
eligible providers of public safety services a means to obtain 
unassigned spectrum not otherwise allocated for public safety purposes. 
See 47 U.S.C. 337(c)(1).
    58. In considering applications under Section 337, the Commission 
must make an initial determination as to whether the applicant is an 
``entity seeking to provide public safety services,'' which the statute 
defines as ``services--

    (A) The sole or principal purpose of which is to protect the 
safety of life, health, or property;
    (B) That are provided--
    (i) By State or local government entities; or
    (ii) By nongovernmental organizations that are authorized by a 
governmental entity whose primary mission is the provision of such 
services; and
    (C) That are not made commercially available to the public by 
the provider.''

47 U.S.C. 337(f)(1).
    59. The Commission must grant applications filed pursuant to 
Section 337 if an eligible applicant demonstrates that (a) no other 
spectrum allocated to public safety services is immediately

[[Page 23580]]

available to satisfy the requested use, (b) the requested use will not 
cause harmful interference to other spectrum users entitled to 
protection from such interference, (c) the use of the unassigned 
frequency for the provision of public safety services is consistent 
with other allocations for the provision of such services in that 
geographic area, (d) the unassigned frequency has been allocated for 
its present use for at least two years, and (e) granting the 
application is in the public interest. 47 U.S.C. 337(c)(1). If an 
applicant's showing fulfills these criteria, the Commission must then 
waive any requirement of its regulations or the Communications Act 
(other than regulations regarding harmful interference) to the extent 
necessary to permit the requested use. After analysis and consideration 
of these criteria, the Commission must either disapprove the request or 
assign the specifically requested spectrum to the applicant. The 
statutory criteria indicate that an eligible applicant must request 
specific unassigned frequencies. Thus, the Commission tentatively 
concludes that an eligible entity must specify the spectrum it seeks to 
use, and cannot simply apply for the assignment of any unassigned 
spectrum and require the Commission to locate and select an appropriate 
frequency. If any one of the five criteria is unfulfilled, the 
application will not be granted.
    60. The Commission seeks comment on its application of the 
statutory criteria. The Commission particularly seeks comment regarding 
the showing necessary to demonstrate that the grant of the application 
would be in the public interest, and the requirement that the frequency 
applied for be ``unassigned.'' Specifically, the Commission requests 
comment on whether it would be in the public interest for applicants 
seeking to provide public safety services to apply for frequencies 
that, while not yet licensed to another entity, have already been 
identified and designated by the Commission as frequencies to be 
licensed by auction.

D. Establishing the Appropriate Licensing Scheme

1. Obligation to Avoid Mutual Exclusivity
    61. The Commission inquires about how the revisions to Sections 
309(j)(1) and 309(j)(2) affect its licensing obligations and 
methodologies. As discussed above, the Balanced Budget Act makes the 
acceptance of mutually exclusive license applications the only 
criterion for auctionability, subject to the obligation to avoid mutual 
exclusivity. Because services previously determined to be 
nonauctionable are generally licensed by processes that do not result 
in the filing of mutually exclusive license applications, unless the 
Commission alters these licensing schemes, licenses in these services 
will not be auctionable under the Balanced Budget Act.
    62. The Balanced Budget Act of 1997 simplified the Commission's 
determinations of which services are auctionable under Section 309(j). 
Section 309(j)(2) no longer requires the Commission to base its 
determinations on whether the service is used principally for 
subscriber-based services. Unless a service is expressly exempted, 
subject to its obligation under Section 309(j)(6)(E) avoid mutual 
exclusivity in the public interest, the Commission is required to 
assign initial licenses by auctions when it has accepted mutually 
exclusive applications for such licenses. Thus, if not exempted by the 
statute, a service will be auctionable if the Commission implements a 
licensing process that permits the filing and acceptance of mutually 
exclusive applications.
    63. In revising the Commission's auction authority, Congress 
retained and highlighted its obligation under Section 309(j)(6)(E) to 
continue to use various means to avoid mutual exclusivity.'' The 
Commission seeks comment on whether the express reference to its 
obligation under Section 309(j)(6)(E) in the general auction authority 
provision changes the scope or content of that obligation. In addition, 
the Comission notes that the Balanced Budget Act has not altered the 
criteria in Section 309(j)(3) that it must use to determine that a 
particular licensing scheme is in the public interest. In establishing 
licensing schemes or methodologies under the Balanced Budget Act (for 
both new and existing, commercial and private services), how should the 
Commission apply the public interest factors in Section 309(j)(3)? With 
respect to services currently using licensing schemes in which mutually 
exclusive applications are not filed, did Congress, in emphasizing the 
Commission's obligation to avoid mutual exclusivity, intend that it 
give greater weight to that obligation and less to other public 
interest objectives?
    64. The Commission has previously interpreted Section 309(j)(6)(E) 
to impose an obligation to avoid mutual exclusivity in defining 
licensing schemes for commercial services only when it would further 
the public interest goals of Section 309(j)(3). For example, in the 800 
MHz Specialized Mobile Radio (``SMR'') service, after considering the 
appropriateness of other license assignment methods, the Commission 
concluded that those other methods were not in the public interest and 
that competitive bidding was the most appropriate method of assigning 
licenses because it would allow the most expeditious access to the 
spectrum. The Commission formerly used site-by-site licensing and a 
``first-come, first-served'' license assignment method in the 800 MHz 
SMR service for channels that were primarily used to provide dispatch 
radio service. In recent years, however, a number of SMR licensees have 
expanded the geographic scope of their services, aggregated channels, 
and developed digital networks to enable them to provide a type of 
service comparable to that provided by cellular and PCS operators. The 
Commission found site-by-site licensing procedures cumbersome for 
systems comprised of several hundred sites, and was concerned that 
site-by-site licensing impaired an SMR licensee's ability to respond to 
changing market conditions and consumer demand. The Commission 
therefore replaced site-specific licensing with geographic area 
licensing and adopted competitive bidding procedures for the upper 200 
channels in the 800 MHz SMR band. On reconsideration of its decision, 
the Commission rejected arguments by petitioners contending that 
Section 309(j)(6)(E) prohibits it from conducting an auction unless it 
first attempts alternative licensing mechanisms to avoid mutual 
exclusivity. See also Fresno Mobile Radio, Inc. v. FCC, No. 97-1459 
(D.C. Cir. Feb. 5, 1999) (Commission's decision to award geographic 
area licenses in the 800 MHz SMR band by auction was within its 
discretion).
    65. In licensing direct broadcast satellite (``DBS'') channels, the 
Commission similarly determined that it would best serve the public 
interest to reassign reclaimed DBS channels by auction. This decision 
was based on a conclusion that the pro rata distribution of reclaimed 
channels among existing permittees would result in too few channels to 
provide any single permittee sufficient capacity for a viable system. 
The Commission therefore decided that even if reassigning channels on a 
pro rata basis could avoid mutual exclusivity, it would be more 
consistent with the public interest to award the channels by auction, 
in a block large enough to provide competitive DBS service. The U.S. 
Court of Appeals upheld this decision, ruling that Section 309(j)(6)(E) 
does not require

[[Page 23581]]

that the Commission adhere to a particular licensing scheme or 
methodology that is not found to serve the public interest in order to 
avoid mutual exclusivity in licensing proceedings. See DIRECTV, Inc. v. 
FCC, 110 F.3d 816, 828 (D.C. Cir. 1997). The court of appeals held that 
the statutory obligation to avoid mutual exclusivity requires the 
Commission to do so within the framework of its existing policy of 
promoting competition and prompt provision of DBS service.
    66. The Commission notes that its decisions to establish geographic 
licensing have affected its balancing of its Section 309(j)(6)(E) 
obligation with the public interest objectives in Section 309(j)(3). 
Under the 1993 Budget Act, the Commission implemented its auction 
authority by establishing geographic licensing for particular 
auctionable services, finding in each case that such a licensing scheme 
furthered the public interest objectives of efficient spectrum use, 
expeditious licensing, and rapid delivery to the public of new 
technologies and services as expressed in Section 309(j)(3). In 
particular, the Commission found that pre-defined geographic service 
areas for many services have significant advantages over site-by-site 
licensing. The Commission has also found that licensing by geographic 
area facilitates aggregation by licensees of smaller service areas into 
seamless regional and national service areas and allows development of 
strategic regional and national business plans. In addition, the 
Commission has found that geographic area licensing provides licensees 
with greater buildout flexibility and is easier for the Commission to 
administer. For a number of services, these changes represent dramatic 
reductions in the regulatory burdens on both licensees and the 
Commission. The Commission made these findings even though geographic 
licensing could lead to the filing of mutually exclusive applications, 
which, under Section 309(j)(6)(E), the Commission has an obligation to 
attempt to avoid.
    67. Against this historical backdrop, the Commission seeks comment 
on whether its previous analysis of its obligation under Section 
309(j)(6)(E) is still appropriate in view of the revisions to Section 
309(j)(1) and 309(j)(2). When choosing a licensing scheme for new 
services and in deciding whether to change the licensing scheme for 
existing services, should the Commission continue to evaluate its 
obligation to avoid mutual exclusivity by weighing the public interest 
objectives of Section 309(j)(3)? Alternatively, does the specific 
incorporation in Section 309(j)(1) of the Commission's obligation under 
Section 309(j)(6)(E) suggest an independent obligation to pursue 
strategies that avoid mutual exclusivity?
2. Exclusion of Satellite Services
    68. The Commission specifically notes that the authorization of 
satellite services, due to international concerns, may justify the use 
of licensing procedures that provide a means to continue to avoid 
mutual exclusivity. In the Direct Broadcast Satellite Service and the 
Digital Audio Radio Satellite Service, the Commission has found that 
auctions of satellite licenses would serve the public interest. In both 
cases, the spectrum in question had been identified in international 
treaties as uniquely within the regulatory authority of the United 
States. Most other satellite systems, however, operate in frequency 
bands not similarly identified, which are allocated for mobile 
satellite services on a world-wide basis. As a consequence, how much 
money entities might bid and even their willingness to bid at all will 
be affected by the degree of their interest in providing global service 
and by their expectations concerning licensing requirements and costs 
in other countries. For example, a satellite system operator proposing 
to serve only the United States may be willing to bid higher for a U.S. 
license than a satellite system operator proposing to serve multiple 
regions, because the U.S.-only system would face considerably fewer 
contingencies. Thus, auctions might prevent entry by satellite systems 
interested in providing global service, even though these systems may 
provide services valued more highly by consumers. Coordinated 
multinational auctions might properly address the interdependency 
between national licensing decisions and international provision of 
service. However, international arrangements for transnational use of 
such frequency bands currently are premised on coordination--using 
engineering solutions and other methods to avoid harmful interference--
among systems. A coordinated multilateral auction is likely to demand 
substantial time and resources by multiple administrations, could raise 
national sovereignty and other spectrum access issues, and thus, could 
substantially delay service to the public. Thus, bearing in mind the 
goals of Sections 309(j)(3) (A), (B) and (D), the Commission has 
undertaken considerable efforts to develop solutions that would avoid 
mutual exclusivity among satellite systems. For these reasons, the 
Commission is not seeking comment in this proceeding on satellite 
services. Nor are any conclusions the Commission reaches in this 
proceeding intended to constrain its discretion under Section 
309(j)(6)(E) as it relates to satellite services, or to specify any 
particular process for resolution of potential mutual exclusivity among 
satellite service applications.
3. Considerations of License Scope
    69. The Commission also seeks comment on several issues that may 
influence its choice of a licensing scheme in some of the frequency 
bands currently being licensed in ways that do not allow the filing of 
mutually exclusive applications. The Commission asks whether the use of 
geographic area licensing in these bands would be feasible and whether 
geographic area licensing or another licensing scheme would better 
serve its public interest goals. In services or classes of frequencies 
for which the Commission may ultimately adopt geographic area 
licensing, it seeks comment on how to convert existing licensing to 
geographic licensing and on the size of the licensing area that would 
be desirable.
    70. In light of Congress's mandate to use competitive bidding to 
promote rapid provision of new services to the public without 
administrative delay, the Commission seeks comment on whether 
resolution of mutually exclusive applications on a ``per station'' 
basis is feasible. Would the use of geographic area licensing speed 
assignment of new channels and facilitate further build-out of wide-
area systems? Specifically, the Commission seeks comment on the costs 
and benefits of geographic licensing in the frequency bands discussed 
above. What are the likely effects on incumbent systems and potential 
new entrants for such services if geographic area licensing is 
utilized? The Commission also seeks comment on whether any of the 
shared bands are so heavily used that adopting a geographic area 
licensing scheme would serve no purpose, because so little ``white 
space'' would be available to geographic area licensees that there 
would be no interest in applying for the geographic area licenses.
    71. The Commission seeks comment in particular on the PLMRS 
frequencies below 470 MHz that are licensed on a shared basis and are 
heavily used by many smaller PLMRS licensees. The Commission recently 
completed a complex multi-year proceeding to maximize spectrum 
efficiency in these bands through engineering solutions. In light of 
the extensive modifications to its regulatory and technical framework 
adopted to further the efficient use of these bands, the Commission 
seeks comment on whether the public interest

[[Page 23582]]

would best be served by retaining the current licensing scheme rather 
than adopting geographic licensing and competitive bidding.
    72. The Commision notes that some of the spectrum currently 
allocated for private internal use is also used to provide subscriber-
based services, pursuant to intercategory sharing or rule waiver. 
Similarly, for some frequencies licensed on a shared basis, a licensee 
can nonetheless obtain exclusive use of a frequency by meeting certain 
loading requirements. Thus, the Commission seeks comment on whether, in 
deciding if geographic area licensing would be appropriate for a given 
radio service or class of frequencies, it should consider the actual 
purpose for which the spectrum is used or proposed to be used, as well 
as the purpose for which the spectrum is currently allocated.
    73. For services in which the Commission decides to adopt 
competitive bidding, is there a licensing scheme that it could use as 
an alternative to geographic area licensing? Are there any services in 
which the Commission presently uses site-specific licensing that it 
should continue to license on a site-by-site basis? The Commission 
notes, in particular, that some private users have argued that their 
unique geographic coverage requirements make it difficult for these 
needs to be met through geographic area licensing schemes. The 
Commission also seeks comment on how, assuming geographic area 
licensing is used, its implementation could affect the private land 
mobile radio frequency coordination process. In its 39 GHz Report and 
Order, ET Docket No. 95-183, FCC 97-391, 63 FR 6079, February 6, 1998, 
the Commission observed that frequency coordination techniques for 
emerging point-to-point technologies are no longer adequate. When 
geographic area licenses are to be awarded through competitive bidding, 
what role, if any, should the frequency coordinators serve? In which 
services and frequency bands, and on what conditions would frequency 
coordination continue to serve the public interest?
    74. The Commission also seeks comment on ways in which it might 
convert existing licensing to geographic licensing. A Petition for 
Rulemaking filed by the American Mobile Telecommunications Association, 
Inc., (AMTA) proposes to require most Part 90 licensees in the bands 
between 222 MHz and 896 MHz, excluding Public Safety licensees, to use 
technology that achieves the equivalent of one voice path per 12.5 kHz 
of spectrum, using a 25 kHz frequency, and to involuntarily modify to 
secondary status the licenses of licensees that fail to meet this 
requirement after a transition period. See AMTA Petition for 
Rulemaking, RM-9332, Public Notice, Report No. 2288 (rel. July 31, 
1998). Alternatively, the Commission could deal with licensees that 
fail to migrate to more efficient equipment by relocating them to 
shared frequency bands, which would be more compatible with the 
incumbents' present use because it would prevent inefficient users from 
benefiting from the capacity created by other, more spectrum-efficient, 
licensees. Relocating incumbents to shared spectrum might also be 
appropriate for site-based incumbents in bands that are converted to 
geographic area licensing, for similar reasons of compatibility. The 
Commission seeks comment on the use of relocation to facilitate the 
conversion of spectrum to geographic licensing.
    75. Because the Commission believes that the geographic definition 
used should correspond as much as possible to the geographic area that 
licensees seek to serve, it proposes to establish the size of 
geographic licensing areas in service-specific proceedings, as it has 
done in the past. However, the Commission seeks comment on whether 
smaller geographic areas would be desirable for private internal radio 
services, because they would best approximate the service area desired 
by the small businesses and other users that typically characterize the 
private radio services. The Commission also seeks comment on whether in 
any of the services that will be subject to competitive bidding for the 
first time, it would be beneficial to establish geographic licensing 
areas smaller than EAs. Are there any other geographic boundaries that 
could be used to establish smaller geographic licensing areas, such as 
the boundaries of existing counties or boundaries established by the 
U.S. Postal Service to assign zip codes?
    76. The Commission has found the short-form application process 
used in conjunction with its auctions to be the most efficient means of 
determining if mutual exclusivity exists. The Commission seeks comment 
on whether, in those services or classes of services, if any, for which 
it will be required to assign licenses by competitive bidding, it 
should continue to use a short-form application process to determine 
which license applications are mutually exclusive. The Commission seeks 
comment on whether there is a cost-effective alternative to use of the 
short-form application process as a means of determining when 
applications are mutually exclusive. The Commission also seeks comment 
on whether there are any other auction designs or procedures, or 
service regulations that could be used to limit the occurrence of 
mutual exclusivity in services that have become auctionable under its 
expanded authority.
    77. Finally, the Commission notes that it traditionally has 
established licensing on a service-specific basis, taking into account 
the particular characteristics of the service, including its purposes 
and the technology to be used. Similarly, although the Commission 
adopted a uniform set of competitive bidding rules in the Part 1 Third 
Report and Order, to provide for a more consistent and efficient 
licensing process for all auctionable services, it also indicated that 
it would continue to adopt service-specific auction procedures where it 
finds that its general competitive bidding procedures are 
inappropriate. Thus, although the Commission seeks comment in this NPRM 
on the licensing schemes and various aspects of auction design and 
methodology that should be applied to services newly auctionable under 
the revised statute, it recognizes that many issues are more 
appropriately addressed on a service-specific basis. The Commission may 
therefore use service-specific proceedings to tailor licensing, 
service, and auction rules of specific services or classes of services 
to implement decisions ultimately taken in this and any subsequent 
dockets.

IV. Auction Design

A. Competitive Bidding Methodology and Design

    78. As explained in paragraph 23, supra, even though a reference to 
the public interest objectives outlined in Section 309(j)(3) is no 
longer included in Section 309(j)(2), the objectives of the 
Commission's competitive bidding system remain unchanged. In designing 
competitive bidding methodologies, Section 309(j)(3) requires that the 
Commission promote development and rapid deployment of new technologies 
and services; promote economic opportunity and competition, and ensure 
that new and innovative technologies are readily accessible to 
Americans; recover for the public a portion of the value of the 
spectrum; and promote efficient and intensive use of the 
electromagnetic spectrum. For those services that the Commission 
determines are potentially auctionable as a result of the Balanced 
Budget Act redefining its auction authority, the Commision seeks 
comment below on how to implement competitive bidding

[[Page 23583]]

in a manner that will further those objectives.
    79. The Commission has previously observed that the use of 
competitive bidding to assign geographic overlay licenses in private 
radio services would promote spectrum efficiency. This approach would 
promote competition among licensees, which, in turn, would provide 
market-based incentives for efficient spectrum use. In particular, 
incumbents would be able to continue existing operations without 
harmful interference, and overlay licensees would be able to negotiate 
voluntary mergers, buyouts, frequency swaps, or similar arrangements 
with incumbents. Thus, the overlay licensee would incur an opportunity 
cost if spectrum is not used as efficiently as possible and would have 
incentives to promote spectrum efficiency. Another method for 
introducing market-based incentives and encouraging greater spectrum 
efficiency in the private radio service bands is to implement market-
based user fees as an alternative to, or in conjunction with, 
competitive bidding. The Commission has previously sought comment on 
the implementation of user fees and it continues to believe that 
market-based user fees are a desirable means for encouraging greater 
spectrum efficiency. However, the Commission does not currently have 
statutory authority to impose spectrum user fees.
    80. The Commission is cognizant of private wireless operators' 
concerns about their ability to compete for spectrum in the open market 
with commercial wireless service providers operating their systems as a 
direct source of revenue. The Commission realizes that some private 
wireless licensees may be concerned that auctioning licenses for 
private internal radio services will lead to a concentration of 
licenses in the hands of a few operators in each market to the 
detriment of small businesses. With these concerns in mind, the 
Commission seeks to develop a competitive bidding process that is 
tailored to the specific characteristics of the private radio services, 
the various purposes for which spectrum in those services is used, and 
the needs of the various types of entities holding licenses in those 
services.
    81. In many of its previous auctions, the Commission has used the 
simultaneous multiple-round competitive bidding design. In a 
simultaneous multiple-round auction, bidding is open on all licenses or 
permits at once, and may remain open on all licenses until no more bids 
are received on any license. By contrast, in a sequential auction, 
licenses or permits are auctioned one at a time, and bidding ends on 
one license before bids are accepted for another license. Simultaneous 
multiple-round bidding has the advantage of affording bidders more 
information during the auction concerning the value that competing 
bidders place on what is being auctioned than is the case with single-
round or sequential bidding. For this reason, simultaneous multiple-
round bidding is more likely to result in the party that values the 
spectrum the most acquiring the license. Section 1.2103(a) of the 
Commission's rules, 47 CFR 1.2103(a), sets out the various types of 
auction designs from which the Commission may choose to award licenses 
for services or classes of services subject to competitive bidding. 
However, under Section 309(j) the Commission also has authority to 
design and test other auction methodologies. For example, in Section 
3002(a) of the Balanced Budget Act, Congress directed that the 
Commission design and test competitive bidding using a contingent 
combinatorial bidding system. Combinatorial bidding, also known as 
package bidding, allows bidders to place single bids for groups of 
licenses.
    82. The Commission seeks comment on whether alternate competitive 
bidding designs and methodologies should be considered for any private 
radio services that may be determined to be auctionable as a result of 
the Balanced Budget Act. Would the same auction methodology be 
appropriate for all newly auctionable services or are different 
methodologies warranted? Should the type of auction vary depending on 
the type of private service involved, the number of licenses at stake, 
the number of bidders that are likely to participate, and the degree to 
which interdependence may be important to those likely to bid on a 
license in a particular service or band?
    83. The Commission also recognizes that private internal radio 
service licensees using spectrum to conduct their day-to-day business 
operations may not be able to wait a significant amount of time to 
obtain authorizations for the frequencies they need to conduct their 
businesses. The Commission therefore seeks comment on the frequency 
with which it should conduct auctions of private radio services 
spectrum that it determines is auctionable, and whether it should 
conduct such auctions at regularly scheduled intervals.

B. Eligibility Requirements

    84. Because private radio services are dedicated to use by a 
defined group of eligible users, the Commission's service regulations 
set forth specific limitations on who is eligible to use each service. 
For private services that may be subject to competitive bidding for the 
first time, the Commission seeks comment below on whether such 
eligibility restrictions should limit who is eligible to participate in 
the auctions of spectrum in those services. The Commission also seeks 
comment on other means by which it can tailor a competitive bidding 
system to ensure that private wireless users have a reasonable 
opportunity to obtain sufficient spectrum to meet the needs of their 
day-to-day business operations.
    85. With respect to private radio services that may be licensed 
using competitive bidding, the Commission seeks comment on whether it 
should conduct limited-eligibility auctions by establishing eligibility 
criteria that restrict the types of entities that may bid on such 
auctionable spectrum. If the Commission decides to conduct limited-
eligibility auctions, how should it define the class of eligible 
bidders? For services that may be auctionable for the first time, 
should the Commission define eligibility to bid in the same manner as 
it has previously defined eligibility to hold an authorization in that 
service? For each auctionable service, should the Commission establish 
multiple classes of eligible applicants and assign priority status to 
certain classes, so that applicants with higher priority 
classifications would be allowed to bid on licenses before applicants 
with lower priority classifications?
    86. Should the class or classes of entities eligible to bid in a 
spectrum auction for private radio services be based only on the 
purpose for which the spectrum will be used, or should the Commission 
also establish eligibility criteria based on the size of the applicant? 
What other standards could the Commission use to establish eligibility 
to bid on auctionable private radio services spectrum? If the 
Commission establishes size standards for eligibility, should it adopt 
the Small Business Administration's (SBA) size standards under the 
Standard Industrial Classifications (``SIC''), see 13 CFR 121.201, or 
should it establish size standards on a service-specific basis, taking 
into account the characteristics and capital requirements of particular 
private services?
    87. If the Commission decides to establish size standards on a 
service-specific basis, should it measure an applicant's size by gross 
revenues, total assets, or some other standard? In the Part 1 Third 
Report and Order, the Commission decided that its service-

[[Page 23584]]

specific small business definitions will be expressed in terms of 
average gross revenues over the preceding three years ``not to exceed'' 
particular amounts, because it believes that average gross revenues 
provide an accurate, equitable, and easily ascertainable measure of 
business size. Should the Commission similarly adopt average gross 
revenues as a measure of business size for the purpose of determining 
eligibility for auctionable private radio services spectrum? If the 
Commission decides to use average gross revenues as its measure of 
applicant size, should it use the uniform definition of gross revenues 
that it adopted for all auctionable services in its Part 1 rules? See 
47 C.F.R. 1.2110(m). If applicant eligibility is to be based on gross 
revenues or total assets, what dollar amounts should be set as the 
eligibility thresholds?
    88. The Commission seeks comment on whether entities eligible for 
licenses in the public safety radio services should also be eligible to 
bid competitively with other applicants for frequencies allocated for 
private internal or commercial use. Applicants seeking spectrum for 
public safety radio services without bidding competitively are able to 
apply for spectrum that the Commission has specifically allocated for 
that purpose or file a waiver request for unassigned spectrum pursuant 
to Section 337(c). However, the Commission could allow those same 
entities to participate in auctions of other spectrum that it has 
designated for private or commercial radio services. The Commission 
seeks comment on this proposal.
    89. The Commission also requests comment on whether providers of 
commercial wireless telecommunications services should be included in 
one or more of the classes of entities eligible to bid on auctionable 
private radio service spectrum. The Commission seeks comment on the 
criteria that should be used to distinguish between applicants seeking 
spectrum for use in conducting their underlying businesses and those 
seeking to use spectrum as providers of commercial wireless 
telecommunications services. Should commercial telecommunications 
service providers be allowed to bid on spectrum allocated for private 
radio services, only if they commit to using the spectrum to meet the 
private communications needs of other entities eligible to hold 
licenses in the private radio services?
    90. Another approach to auctioning spectrum for private radio 
services would be to permit any qualified entity to bid on such 
spectrum, but to establish rules that either set aside specific 
licenses or confer certain financial benefits, such as bidding credits, 
on applicants that meet certain criteria. The Commission seeks comment 
on what eligibility criteria it should employ if it decides to 
establish a special class of licensee for the private internal radio 
services. As an alternative to business size standards, should the 
Commission establish spectrum caps that, if exceeded, would preclude 
eligibility for such spectrum set-asides or favorable financial 
treatment?

C. Band Manager Licenses

    91. Today, applicants for PLMRS licenses must obtain a frequency 
recommendation from a certified coordinator in order to prosecute a 
license application before the Commission. The certified coordinators 
base their frequency recommendations on detailed operational and 
technical requirements set forth in Part 90 of our Rules. In 
considering how private radio services should be licensed to meet 
current and projected needs for internal communications capacity, the 
Commission seeks comment on whether the public interest would be served 
by establishing a new class of licensee called a ``Band Manager.''
    92. As considered here, a Band Manager would be eligible to apply 
for a private radio license, with mutually exclusive applications 
subject to resolution through competitive bidding. The Commission's 
principal role would be to allocate spectrum for private services, 
establish the size and scope of the Band Manager license, and conduct 
auctions if mutually exclusive applications are received. As a 
condition of the Band Manager license, the Band Manager would be 
required to restrict its operations to the offering of internal 
communications services and/or capacity to an identified class of 
private radio eligibles. A Band Manager would be authorized to 
sublicense portions of its license to specific eligible users for a 
length of time not to exceed the expiration of the initial license 
term. Under this approach, the Band Manager would remain a Commission 
licensee, and would be held solely responsible for its sublicensor's 
compliance with the Commission's rules. The Commission notes that the 
Band Manager may be akin to a commercial licensee that offers capacity 
on its system, via resale, for example, to an end user that is not 
directly licensed by the Commission. Band Manager sublicense 
arrangements would be accomplished through private contractual 
arrangements between the Band Manager and eligible users, in a manner 
similar to agreements reached between commercial licensees and 
resellers.
    93. At the outset, the Commission seeks comment on how the concept 
of a Band Manager fits within its overall spectrum management 
responsibilities. For example, would the creation of a Band Manager be 
consistent with the Commission's spectrum management obligations under 
various sections of the Communications Act? See, e.g., 47 U.S.C. 1, 
301, 303(c), (d). The Commission also seeks comment on whether this 
concept is consistent with its obligation to determine whether the 
public interest, convenience and necessity will be served by the grant 
of each application filed with the Commission for use of the radio 
spectrum. See 47 U.S.C. 309(a). In this regard, the Commission seeks 
comment on whether Band Managers, as described above, would effectively 
be allocating spectrum or assuming the Commission's spectrum management 
responsibilities, or simply acting as licensees with various types of 
end user customers.
    94. The Commission notes that private radio systems serve a wide 
variety of specialized communications needs that historically have not 
been fulfilled by commercial service providers. Because market forces 
have not, to date, played a role in the availability and licensing of 
private spectrum, the Commission lacks a reliable method for 
objectively gauging current and future demand for private spectrum. 
Making a Band Manager license available at auction for the sole purpose 
of making spectrum available for private radio service users may enable 
the Commission to use market forces to determine private spectrum 
requirements.
    95. Creation of the Band Manager license could further privatize 
the Commission's licensing of private radio spectrum. Competition among 
Band Managers would serve to regulate price, quality, and availability 
of services. Private radio users could generally benefit through 
assured availability of the types of quality, customized services that 
may not be readily available from cellular, paging, PCS or SMR service 
providers. Competition among Band Managers would ensure that the 
available spectrum is used in the most economically efficient manner to 
meet the varied and assorted needs of the private user community. The 
Commission seeks comment on the costs and benefits of Band Manager 
licenses relative to alternative methods of providing internal 
communications services. To what extent can licensees such as PCS 
providers currently meet

[[Page 23585]]

the requirements of private users with commercial services? Can such 
licensees already exercise some, or all, of the functions of a Band 
Manager licensee by sublicensing spectrum to private users? If so, to 
what extent are they doing so? Are they likely to expand such 
sublicensing arrangements in the future as the demand for private uses 
increases? Would restrictions on eligible users and uses attached to 
Band Manager licenses be an appropriate response to a market failure 
that discourages current licensees from acting as Band Managers? To 
what extent can partitioning and disaggregation of current licenses 
meet the demand for internal communications capacity? Compared to the 
current system of frequency coordination and direct licensing of 
private users, would Band Managers ensure that spectrum is used more 
efficiently? Would allowing Band Managers to charge private users for 
spectrum use tend to discourage spectrally wasteful and low value uses? 
Would Band Managers have a greater incentive than frequency 
coordinators to consider future spectrum requirements when making 
spectrum available for current uses because their profit is more 
closely tied to maximizing the value of the spectrum over the entire 
expected license term?
    96. In addition to comment on the general concept of the Band 
Manager license, the Commission asks for comment on the full range of 
implementation issues. If adopted, where might Band Manager licenses 
best be applied? Should they be limited to any newly available spectrum 
for private radio services or should they be created as overlay 
licenses on certain bands already allocated for private radio services? 
Should the Commission establish any additional eligibility or use 
restrictions in connection with the Band Manager license, and if so, 
what are the public interest benefits that would result from such 
additional restrictions? In this respect, the Commission seeks comment 
on how it can ensure fair and nondiscriminatory access by private radio 
users to spectrum licensed to a Band Manager in the user's geographic 
area. Additionally, should the Commission adopt rules that limit to 
private uses spectrum that is licensed to Band Managers and/or 
sublicensed to eligible users? The Commission asks for comment on 
whether the Band Manager should be authorized to partition and 
disaggregate its license, and if so, should there be any limitations on 
this authority, or should the Band Manager be required to retain some 
portion of its license? The Commission also seeks comment on whether it 
should impose buildout or use requirements on Band Managers to ensure 
that spectrum assigned to Band Managers is used efficiently. The 
Commission seeks comment on other requirements that it could adopt to 
ensure that spectrum licensed to Band Managers would be used to meet 
the varied needs of the private user community. Finally, the Commission 
seeks comment on the enforcement measures, including license 
cancellation, to which a Band Manager licensee should be subject if it 
administers its spectrum in a manner that is inconsistent with the 
requirements of the Commission's service rules.
    97. The Commission also seeks comment on whether an applicant for a 
Band Manager license should receive priority over other competing 
bidders through use of some level of bidding credit. Commenters should 
also address whether the Commission should conduct auctions that are 
limited to the grant of Band Manager licenses, or whether it should 
hold auctions for particular blocks of spectrum, with the Band Manager 
licenses being one of many potential uses.
    98. As noted, it would be essential that each geographic area have 
several competing Band Managers so that market forces would substitute 
for regulation of rates and services. The Commission therefore seeks 
comment on whether it should grant more than one Band Manager license 
in a geographic area to allow for competition among Band Managers. The 
Commission also asks for comment on what types of limitations on 
ownership and control of Band Manager licenses should be imposed to 
preserve competition and market-based incentives. Commenters should 
address both the amount of spectrum contained in each Band Manager 
license, as well as the geographic area that each such license might 
encompass. In addition, commenters should provide recommendations for 
attribution of ownership and control of Band Manager licenses.

D. Processing of New Applications

    99. In services where the Commission has transitioned to geographic 
area licensing and auction rules, it has suspended acceptance of new 
license applications until such time as it adopts final rules and 
begins accepting applications to participate in the auction for 
spectrum in those services. The Commission has stated that the purpose 
of such an application freeze is to deter speculative applications and 
ensure that the goals of the rule making are not compromised.
    100. For services in which licenses will be assigned by auction for 
the first time, the Commission seeks comment on the measures it should 
take to prevent applicants from using the current application and 
licensing processes to engage in speculative activity prior to its 
adoption of auction rules, thus limiting the effectiveness of the 
decisions made in this proceeding. One approach would be to temporarily 
suspend acceptance of applications for new licenses, amendments, or 
major modifications in frequency bands for which the Commission 
proposes to adopt competitive bidding in the future. Alternatively, the 
Commission could adopt interim rules imposing shorter time periods for 
construction or build-out. For example, the Commission could impose a 
construction deadline as short as five months from licensing, which 
might be an effective means of ensuring that applicants seek only those 
licenses for which they have an immediate need. The Commission seeks 
comment on this proposal and on whether there are any other measures 
that would deter speculative applications in services where it proposes 
to assign licenses by auction.

V. Procedural Matters

A. Ex Parte Rules--Permit-But-Disclose Proceeding

    101. This is a permit-but-disclose notice and comment rule making 
proceeding. Ex parte presentations are permitted, except during the 
Sunshine Agenda period, provided they are disclosed as provided in 
Commission rules. See generally 47 CFR 1.1202, 1.1203, and 1.1206.

B. Initial Regulatory Flexibility Analysis

    102. As required by the Regulatory Flexibility Act, see 5 U.S.C. 
603, the Commission has prepared an Initial Regulatory Flexibility 
Analysis (``IRFA'') of the possible impact on small entities of the 
proposals suggested in the Notice of Proposed Rule Making. The IRFA is 
set forth below and in Appendix A of the NPRM. Written public comments 
are requested on the IRFA. These comments must be filed in accordance 
with the same filing deadlines as comments on the NPRM, and they must 
have a separate and distinct heading designating them as responses to 
the Initial Regulatory Flexibility Analysis. The Commission's Office of 
Public Affairs, Reference Operations Division, will send a copy of this 
NPRM, including the IRFA, to the

[[Page 23586]]

Chief Counsel for Advocacy of the Small Business Administration, in 
accordance with the Regulatory Flexibility Act, see 5 U.S.C. 603(a).

C. Initial Paperwork Reduction Act of 1995 Analysis

    103. This NPRM contains neither a new nor a modified information 
collection.

D. Comment Dates

    104. Pursuant to Sections 1.415 and 1.419 of the Commission's 
Rules, 47 CFR 1.415, 1.419, interested parties may file comments on or 
before July 2, 1999, and reply comments on or before August 2, 1999. 
Comments may be filed using the Commission's Electronic Comment Filing 
System (ECFS) or by filing paper copies. See Electronic Filing of 
Documents in Rulemaking Proceedings, 63 Fed. Reg. 24121, May 1, 1998.
    105. Comments filed through the ECFS can be sent as an electronic 
file via the Internet to <http://www.fcc.gov/e-file/ecfs.html>. 
Generally, only one copy of an electronic submission must be filed. If 
multiple docket or rulemaking numbers appear in the caption of this 
proceeding, however, commenters must transmit one electronic copy of 
the comments to each docket or rulemaking number referenced in the 
caption. In completing the transmittal screen, commenters should 
include their full name, Postal Service mailing address, and the 
applicable docket or rulemaking number. Parties may also submit an 
electronic comment by Internet e-mail. To get filing instructions for 
e-mail comments, commenters should send an e-mail to [email protected], and 
should include the following words in the body of the message, ``get 
form .'' A sample form and directions will be sent 
in reply.
    106. Parties who choose to file by paper must file an original and 
four copies of each filing. If participants want each Commissioner to 
receive a personal copy of their comments, an original plus nine copies 
must be filed. If more than one docket or rulemaking number appear in 
the caption of this proceeding, commenters must submit two additional 
copies for each additional docket or rulemaking number. All filings 
must be sent to the Commission's Secretary, Magalie Roman Salas, Office 
of the Secretary, Federal Communications Commission, The Portals, 445 
Twelfth Street, SW, Room TW-A325, Washington, DC 20554. In addition, a 
courtesy copy should be delivered to Gary D. Michaels, Auctions and 
Industry Analysis Division, Wireless Telecommunications Bureau, Federal 
Communications Commission, The Portals, 445 Twelfth Street, SW, 
Washington, DC 20554.
    107. All relevant and timely comments will be considered by the 
Commission before final action is taken in this proceeding. Comments 
and reply comments will be available for public inspection during 
regular business hours in the FCC Reference Information Center, 445 
Twelfth Street, SW, Room CY-A257, Washington, DC 20554.

E. Further Information

    108. For further information concerning this Notice of Proposed 
Rule Making, contact Gary D. Michaels, Auctions and Industry Analysis 
Division, (202) 418-0660, or Scot Stone, Public Safety and Private 
Wireless Division, (202) 418-0680, Wireless Telecommunications Bureau, 
Federal Communications Commission, Washington, DC 20554.

F. Ordering Clauses

    109. Accordingly, it is ordered that, pursuant to Sections 4(i), 
303(r), and 309(j) of the Communications Act of 1934, as amended, 47 
U.S.C.154(i), 303(r), and 309(j), this Notice of Proposed Rule Making 
is hereby adopted.
    110. It is further ordered that the Office of Public Affairs, 
Reference Operations Division, shall send a copy of this Notice of 
Proposed Rule Making, including the Initial Regulatory Flexibility 
Analysis, to the Chief Counsel for Advocacy of the Small Business 
Administration.

Initial Regulatory Flexibility Analysis

    111. As required by the Regulatory Flexibility Act (RFA), see 5 
U.S.C. 603, the Commission has prepared this Initial Regulatory 
Flexibility Analysis (IRFA) of the possible significant economic impact 
on small entities by the policies and rules proposed in this Notice of 
Proposed Rule Making (NPRM). Written public comments are requested on 
this IRFA. Comments must be identified as responses to the IRFA and 
must be filed by the deadlines for comments on the NPRM provided above 
in paragraph 104. The Commission will send a copy of the NPRM, 
including this IRFA, to the Chief Counsel for Advocacy of the Small 
Business Administration. See 5 U.S.C. 603(a).

A. Need for and Objectives of the Proposed Rules

    112. This rule making proceeding is initiated to evaluate the 
impact of the Balanced Budget Act of 1997 on the Commission's auction 
authority for wireless telecommunications services. The Balanced Budget 
Act revised the original auction standard established under the Omnibus 
Budget Reconciliation Act of 1993. The NPRM seeks comment on how the 
Balanced Budget Act's amendments to Section 309(j) affect the 
Commission's determinations of what services are auctionable. The NPRM 
also seeks comment on the scope of the Balanced Budget Act's exemption 
from competitive bidding for licenses and permits issued for public 
safety radio services. The NPRM also seeks comment on a Petition for 
Rule Making that proposes the establishment of a new radio service pool 
for use by electric, gas, and water utilities, petroleum and natural 
gas pipeline companies, and railroads, and on implementation of Section 
337(c), which provides for the licensing of unassigned frequencies 
under certain circumstances to entities seeking to provide public 
safety services. In addition, the NPRM seeks comment on whether the 
Balanced Budget Act's amendments to Section 309(j) require the 
Commission to revise its licensing schemes and license assignment 
methods to provide for competitive bidding in services that it 
previously determined were not auctionable, and on how such schemes for 
new services might be established. Additionally, the NPRM seeks comment 
on how the Commission might implement competitive bidding to award 
licenses in services that will be auctionable for the first time.

B. Legal Basis

    113. This action is authorized under Sections 4(i), 303(r), and 
309(j) of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 
303(r), and 309(j).

C. Description and Estimate of the Number of Small Entities to Which 
the Proposed Rules Will Apply

    114. The RFA directs agencies to provide a description of and, 
where feasible, an estimate of the number of small entities that will 
be affected by the proposed rules, if adopted. The RFA generally 
defines the term ``small entity'' as having the same meaning as the 
terms ``small business,'' ``small organization,'' and ``small 
governmental jurisdiction.'' 5 U.S.C. 601(6). In addition, the term 
``small business'' has the same meaning as the term ``small business 
concern'' under the Small Business Act, unless the Commission has 
developed one or more definitions that are appropriate for its 
activities. See 5 U.S.C. 601(3). Under the Small Business Act, a 
``small business

[[Page 23587]]

concern'' is one which: (1) is independently owned and operated; (2) is 
not dominant in its field of operation; and (3) meets any additional 
criteria established by the Small Business Administration (SBA). 15 
U.S.C. 632. A small organization is generally ``any not-for-profit 
enterprise which is independently owned and operated and is not 
dominant in its field.'' 5 U.S.C. 601(4). Nationwide, as of 1992, there 
were approximately 275,801 small organizations. ``Small governmental 
jurisdiction'' generally means ``governments of cities, counties, 
towns, townships, villages, school districts, or special districts, 
with a population of less than 50,000.'' 5 U.S.C. 601(5). As of 1992, 
there were approximately 85,006 such jurisdictions in the United 
States. This number includes 38,978 counties, cities, and towns; of 
these, 37,566, or 96 percent, have populations of fewer than 50,000. 
The U.S. Bureau of the Census estimates that this ratio is 
approximately accurate for all governmental entities. Thus, of the 
85,006 governmental entities, the Commission estimates that 81,600 (91 
percent) are small entities. The policies and rules proposed in the 
NPRM would affect a number of small entities who are either licensees 
or who may choose to become applicants for licenses in wireless 
services. Below, the Commission further describes and estimates the 
number of small entity licensees and regulatees that may be affected by 
the proposed policies and rules, if adopted.
a. Cellular Radiotelephone Service
    115. The Commission has not developed a definition of small 
entities applicable to cellular licensees. Therefore, the applicable 
definition of small entity is the definition under the SBA rules 
applicable to radiotelephone (wireless) companies. This definition 
provides that a small entity is a radiotelephone company employing no 
more than 1,500 persons. See 13 CFR 121.201 (Standard Industrial 
Classification (SIC) Code 4812). The size data provided by the SBA does 
not enable us to make a meaningful estimate of the number of cellular 
providers which are small entities because it combines all 
radiotelephone companies with 1000 or more employees. The 1992 Census 
of Transportation, Communications, and Utilities, conducted by the 
Bureau of the Census, is the most recent information available. This 
document shows that only twelve radiotelephone firms out of a total of 
1,178 such firms which operated during 1992 had 1,000 or more 
employees. Therefore, even if all twelve of these firms were cellular 
telephone companies, nearly all cellular carriers were small businesses 
under the SBA's definition. The Commission assumes, for purposes of 
this IRFA that nearly all of the current cellular licensees are small 
entities, as that term is defined by the SBA.
    116. The most reliable source of information regarding the number 
of cellular service providers nationwide appears to be data the 
Commission publishes annually in its Telecommunications Industry 
Revenue report, regarding the Telecommunications Relay Service (TRS). 
The report places cellular licensees and Personal Communications 
Service (PCS) licensees in one group. According to the data released in 
November, 1997, there are 804 companies reporting that they engage in 
cellular or PCS service. It seems certain that some of these carriers 
are not independently owned and operated, or have more than 1,500 
employees; however, the Commission is unable at this time to estimate 
with greater precision the number of cellular service carriers 
qualifying as small business concerns under the SBA's definition. For 
purposes of this IRFA, the Commission estimates that there are fewer 
than 804 small cellular service carriers.
b. Broadband and Narrowband PCS
    117. Broadband PCS. The broadband PCS spectrum is divided into six 
frequency blocks designated A through F, and the Commission has 
auctioned licenses in each block. Frequency blocks C and F have been 
designated by the Commission as ``entrepreneurs' blocks,'' and 
participation in auctions of C and F block licenses is limited to 
entities qualifying under the Commission's rules as entrepreneurs. The 
Commission's rules define an entrepreneur for purposes of C and F block 
auctions as an entity, together with affiliates, having gross revenues 
of less than $125 million and total assets of less than $500 million at 
the time the FCC Form 175 application is filed. For blocks C and F, the 
Commission has defined ``small business'' as a firm that had average 
gross revenues of less than $40 million in the three previous calendar 
years, and ``very small business'' has been defined as an entity that, 
together with its affiliates, has average gross revenues of not more 
than $15 million for the preceding three calendar years. See 47 CFR 
24.720(b)(1), (2). These definitions of ``small business'' and ``very 
small business'' in the context of broadband PCS auctions have been 
approved by the SBA. No small businesses within the SBA-approved 
definitions bid successfully for licenses in blocks A and B. In the 
first two C block auctions, there were 90 bidders that qualified as 
small entities and won licenses in block C. In the first auction of D, 
E, and F block licenses, a total of 93 small and very small business 
bidders won approximately 40% of the 1,479 licenses. Based on this 
information, the Commission concludes that the number of small 
broadband PCS licensees will include the 90 winning C block bidders and 
the 93 winning bidders in the D, E, and F blocks, for a total of 183 
small entity PCS providers as defined by the SBA and the Commission's 
auction rules.
    118. Narrowband PCS. The Commission has auctioned nationwide and 
regional licenses for narrowband PCS. There are 11 nationwide and 30 
regional licensees for narrowband PCS. The Commission does not have 
sufficient information to determine whether any of these licensees are 
small businesses within the SBA-approved definition for radiotelephone 
companies. At present, there have been no auctions held for the major 
trading area (MTA) and basic trading area (BTA) narrowband PCS 
licenses. The Commission anticipates a total of 561 MTA licenses and 
2,958 BTA licenses will be awarded in the auctions. Given that nearly 
all radiotelephone companies have no more than 1,500 employees, and 
that no reliable estimate of the number of prospective MTA and BTA 
narrowband licensees can be made, the Commission assumes, for purposes 
of this IRFA, that all of the licenses will be awarded to small 
entities, as that term is defined by the SBA.
c. 220 MHz Radio Services
    119. The Commission recently auctioned licenses in the 220-222 MHz 
band. The license blocks include five licenses in each of the 172 
Economic Areas (EAs) and three EA-like areas; five licenses in six 
Economic Area groupings (EAGs); and three Nationwide licenses, 
comprising the same territory as all of the EAGs combined. For this 
auction, a small business was defined as an entity with average annual 
gross revenues of not more than $15 million for the preceding three 
years; and very small business was defined as a firm with average 
annual gross revenues of not more than $3 million for the preceding 
three years. See 47 CFR 90.1021. A total of 373 licenses were won by 39 
small business bidders and 320 licenses were won by five other bidders. 
Given that nearly all radiotelephone companies employ no more than 
1,500 employees, for purposes of this IRFA, the

[[Page 23588]]

Commission will consider the approximately 3,800 incumbent licensees as 
small businesses under the SBA definition.
d. Paging
    120. The Commission has adopted a two-tier definition of small 
businesses in the context of auctioning geographic area paging licenses 
in the Common Carrier Paging and exclusive Private Carrier Paging 
services. This definition has been approved by the SBA. Under the 
definition, a very small business is 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. A small business 
is defined as an entity that, together with affiliates and controlling 
principals, has average gross revenues for the three preceding calendar 
years of not more than $15 million. At present, there are approximately 
24,000 Private Paging licenses and 74,000 Common Carrier Paging 
licenses. According to Telecommunications Industry Revenue data, there 
were 172 ``paging and other mobile'' carriers reporting that they 
engage in these services. Consequently, the Commission estimates that 
there are fewer than 172 small paging carriers. The Commission 
estimates that the majority of private and common carrier paging 
providers would qualify as small entities under the SBA definition.
e. Air-Ground Radiotelephone Service
    121. The Commission has not adopted a definition of small business 
specific to the Air-Ground radiotelephone service. See 47 CFR 22.99. 
Accordingly, the Commission will use the SBA definition applicable to 
radiotelephone companies, i.e., an entity employing no more than 1,500 
persons. There are approximately 100 licensees in the Air-Ground 
radiotelephone service, and the Commission estimates that almost all of 
them qualify as small entities under the SBA definition.
f. Specialized Mobile Radio (SMR)
    122. The Commission has adopted a two-tier bidding credit in 
auctions for geographic area 800 MHz and 900 MHz SMR licenses. A very 
small business is defined 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. A small business 
is defined as an entity that, together with affiliates and controlling 
principals, has average gross revenues for the three preceding calendar 
years of not more than $15 million. The definitions of ``small 
business'' and ``very small business'' in the context of 800 MHz and 
900 MHz SMR have been approved by the SBA. The Commission does not know 
how many firms provide 800 MHz or 900 MHz geographic area SMR service 
pursuant to extended implementation authorizations, nor how many of 
these providers have annual revenues of no more than $15 million. One 
firm has over $15 million in revenues. The Commission assumes for 
purposes of this IRFA that all of the remaining existing extended 
implementation authorizations are held by small entities, as that term 
is defined by the SBA. The Commission has held auctions for geographic 
area licenses in the 900 MHz SMR band and 800 MHz SMR band. There were 
60 winning bidders who qualified as small entities in the 900 MHz 
auction. In the 800 MHz SMR auction there were 524 licenses won by 
winning bidders, of which 38 licenses were won by small or very small 
entities.
g. Private Land Mobile Radio Services (PLMR)
    123. PLMR systems serve an essential role in a range of industrial, 
business, land transportation, and public safety activities. The 
Commission has not developed a definition of small entities 
specifically applicable to PLMR licensees due to the vast array of PLMR 
users. Therefore, the applicable definition of small entity is the 
definition under the SBA rules applicable to radiotelephone companies. 
This definition provides that a small entity is a radiotelephone 
company employing no more than 1,500 persons. For the purpose of 
determining whether a licensee is a small business as defined by the 
SBA, each licensee would need to be evaluated within its own business 
area. The Commission is unable at this time to estimate the number of 
small businesses which could be impacted by the rules. The Commission's 
1994 Annual Report on PLMRs indicates that at the end of fiscal year 
1994 there were 1,087,267 licensees operating 12,481,989 transmitters 
in the PLMR bands below 512 MHz. Because any entity engaged in a 
commercial activity is eligible to hold a PLMR license, the proposed 
rules could potentially impact every small business in the United 
States.
h. Aviation and Marine Radio Service
    124. Small entities in the aviation and marine radio services use a 
marine very high frequency (VHF) radio, any type of emergency position 
indicating radio beacon (EPIRB) and/or radar, a VHF aircraft radio, 
and/or any type of emergency locator transmitter (ELT). The Commission 
has not developed a definition of small entities specifically 
applicable to these small businesses. Therefore, the applicable 
definition of small entity is the definition under the SBA rules. Most 
applicants for individual recreational licenses are individuals. 
Approximately 581,000 ship station licensees and 131,000 aircraft 
station licensees operate domestically and are not subject to the radio 
carriage requirements of any statute or treaty. Therefore, for purposes 
of the evaluations and conclusions in this IRFA, the Commission 
estimates that there may be at least 712,000 potential licensees that 
are individuals or are small entities, as that term is defined by the 
SBA.
i. Offshore Radiotelephone Service
    125. This service operates on several ultra high frequency (UHF) TV 
broadcast channels that are not used for TV broadcasting in the coastal 
area of the states bordering the Gulf of Mexico. See 47 CFR 22.1001-
22.1037. At present, there are approximately 55 licensees in this 
service. The Commission is unable at this time to estimate the number 
of licensees that would qualify as small entities under the SBA 
definition for radiotelephone communications. The Commission assumes, 
for purposes of this IRFA, that all of the 55 licensees are small 
entities, as that term is defined by the SBA.
j. General Wireless Communication Service (GWCS)
    126. This service was created by the Commission on July 31, 1995 by 
transferring 25 MHz of spectrum in the 4660-4685 MHz band from the 
federal government to private sector use. The Commission sought and 
obtained SBA approval of a refined definition of ``small business'' for 
GWCS. According to this definition, a small business is any entity, 
together with its affiliates and entities holding controlling interests 
in the entity, that has average annual gross revenues over the three 
preceding years that are not more than $40 million. See 47 CFR 26.4. 
The Commission will offer 875 geographic area licenses, based on 
Economic Areas, for GWCS. In estimating the number of small entities 
that may participate in the GWCS auction, the Commission anticipates 
that the makeup of current wireless services licensees is 
representative of future auction winning bidders.
k. Fixed Microwave Services
    127. Microwave services includes common carrier fixed, see 47 CFR 
101 et seq., private operational fixed, see 47

[[Page 23589]]

CFR 80.1 et seq., 90.1 et seq., and broadcast auxiliary radio services, 
see 47 CFR 74.1 et seq. At present, there are 22,015 common carrier 
fixed licensees and approximately 61,670 private operational fixed 
licensees and broadcast auxiliary radio licensees in the microwave 
services. The Commission has not yet defined a small business with 
respect to microwave services. For purposes of this IRFA, the 
Commission will utilize the SBA definition applicable to radiotelephone 
companies, i.e., an entity with less than 1,500 persons. The Commission 
estimates that for purposes of this IRFA all of the Fixed Microwave 
licensees (excluding Multiple Address Systems broadcast auxiliary radio 
licensees) would qualify as small entities under the SBA definition for 
radiotelephone communications.
l. Amateur Radio Service
    128. The Commission estimates that 10,000 applicants applied for 
vanity call signs in FY 1998. All are presumed to be individuals. 
Amateur Radio service licensees are coordinated by Volunteer Examiner 
Coordinators (VECs). The Commission has not developed a definition for 
a small business or small organization that is applicable for VECs. The 
RFA defines the term ``small organization'' as meaning ``any not-for-
profit enterprise which is independently owned and operated and is not 
dominant in its field . * * *'' 5 U.S.C. 601(4). The Commission's rules 
do not specify the nature of the entity that may act as a VEC. All of 
the sixteen VEC organizations would appear to meet the RFA definition 
for small organizations.
m. Personal Radio Services
    129. Personal radio services provide short-range, low power radio 
for personal communications, radio signaling, and business 
communications not provided for in other services. These services 
include citizen band (CB) radio service, general mobile radio service 
(GMRS), radio control radio service, and family radio service (FRS). 
See 47 CFR Part 95. Inasmuch as the CB, GMRS, and FRS licensees are 
individuals, no small business definition applies for these services. 
To the extent any of these licensees may be small entities under the 
SBA definition, the Commission is unable at this time to estimate the 
exact number.
n. Rural Radiotelephone Service
    130. The Commission has not adopted a definition of small entity 
specific to the Rural Radiotelephone Service. See 47 CFR 22.99. A 
significant subset of the Rural Radiotelephone Service is the Basic 
Exchange Telephone Radio Systems (BETRS). See 47 CFR 22.757, 22.729. 
The Commission will use the SBA definition applicable to radiotelephone 
companies; i.e., an entity employing no more than 1,500 persons. There 
are approximately 1,000 licensees in the Rural Radiotelephone Service, 
and the Commission estimates that almost all of them qualify as small 
entities under the SBA definition.
o. Marine Coast Service
    130. The Commission recently concluded its auction of Public Coast 
licenses in the 157.1875-157.4500 MHz (ship transmit) and 161.775-
162.0125 MHz (coast transmit) bands. For purposes of this auction, the 
Commission defined a ``small'' business as an entity that, together 
with controlling interests and affiliates, has average gross revenues 
for the preceding three years not to exceed $15 million. A ``very 
small'' business is one that, together with controlling interests and 
affiliates, has average gross revenues for the preceding three years 
not to exceed $3 million. There are approximately 10,672 licensees in 
the Marine Coast Service, and the Commission estimates that almost all 
of them qualify as small under the SBA definition.
p. Wireless Communications Services (WCS)
    132. This service can be used for fixed, mobile, radiolocation, and 
digital audio broadcasting satellite uses. The Commission defined 
``small business'' for the WCS auction as an entity with average gross 
revenues of $40 million for each of the three preceding years. The 
Commission auctioned geographic area licenses in the WCS service. In 
the auction, there were seven winning bidders that qualified as very 
small business entities, and one that qualified as a small business 
entity. Based on this information, the Commission concludes that the 
number of geographic area WCS licensees affected includes these eight 
entities.
q. Public Safety Radio Services and Governmental Entities
    133. Public Safety radio services include police, fire, local 
governments, forestry conservation, highway maintenance, and emergency 
medical services. See 47 CFR 90.15-90.27, 90.33-90.55. There are a 
total of approximately 127,540 licensees within these services. 
Governmental entities as well as private businesses comprise the 
licensees for these services. As noted, governmental entities with 
populations of less than 50,000 fall within the SBA definition of a 
small entity. There are 85,006 governmental entities in the nation, as 
of the last census. This number includes such entities as states, 
counties, cities, utility districts, and school districts. There are no 
figures available on what portion of this number has populations of 
fewer than 50,000; however, this number includes 38,978 counties, 
cities, and towns and of those, 37,566 or 96 percent, have populations 
of fewer than 50,000. The Census Bureau estimates that this ratio is 
approximately accurate for all governmental entities. Thus, of the 
85,006 governmental entities, the Commission estimates that 96 percent 
or 81,600 are small entities that may be affected by its rules.

D. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    134. At this time, the Commission does not anticipate the 
imposition of new reporting, recordkeeping, or other compliance 
requirements as a result of this NPRM. The Commission seeks comment on 
this tentative conclusion.

E. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered

    135. Section 309(j) of the Communications Act directs the 
Commission to disseminate licenses among a wide variety of applicants, 
including small businesses and other designated entities. Section 
309(j) also requires that the Commission ensure the development and 
rapid deployment of new technologies, products, and services for the 
benefit of the public, and recover for the public a portion of the 
value of the public spectrum resource made available for commercial 
use. In addition, Section 337 gives eligible providers of public safety 
services a means to obtain unassigned spectrum not otherwise allocated 
for public safety purposes. The Commission believes the policies and 
rules proposed in this NPRM help meet those goals and promote efficient 
competition while maintaining the fair and efficient execution of the 
auctions program. The Commission seeks comment, therefore, on all 
proposals and alternatives described in the NPRM, and the impact that 
such proposals and alternatives might have on small entities.

F. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules

    136. None.


[[Page 23590]]


Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 99-10989 Filed 4-30-99; 8:45 am]
BILLING CODE 6712-01-U