[Federal Register Volume 65, Number 172 (Tuesday, September 5, 2000)]
[Rules and Regulations]
[Pages 53624-53638]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-22630]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 24

[WT Docket No. 97-82; FCC 00-313]


Installment Payment Financing for Personal Communications 
Services (PCS) Licensees

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document adopts modifications to the Commission's rules 
that will apply to Auction No. 35, the next broadband Personal 
Communications Services (PCS) C and F block auction, as well as any 
subsequent auctions of C and F licenses, including any spectrum made 
available or reclaimed from bankruptcy proceedings in the future. We 
conclude that it is in the public interest to modify our auction and 
service rules for C and F block broadband PCS to achieve various goals.

DATES: Effective November 6, 2000.

FOR FURTHER INFORMATION CONTACT: Audrey Bashkin, Attorney, Auctions and 
Industry Analysis Division, Wireless Telecommunications Bureau, at 
(202) 418-0660.

SUPPLEMENTARY INFORMATION: This is a summary of a Sixth Report and 
Order and Order on Reconsideration (``C/F Block Sixth Report and 
Order'') in the Amendment of the Commission's Rules Regarding 
Installment Payment Financing for Personal Communications Services 
(PCS) Licensees. The complete text of the C/F Block Sixth Report and 
Order is available for inspection and copying during normal business 
hours in the FCC Reference Center (Room CY-A257), 445 12th Street, SW, 
Washington, DC. It may also be purchased from the Commission's copy

[[Page 53625]]

contractor, International Transcription Services, Inc. (ITS, Inc.), 
1231 20th Street, NW, Washington, DC 20036, (202) 857-3800. It is also 
available on the Commission's web site at http://www.fcc.gov/wtb/auctions.

Synopsis of the C/F Block Sixth Report and Order

I. Introduction And Executive Summary

    1. In the C/F Block Sixth Report and Order we address the tentative 
conclusions and proposals in our recent Further Notice of Proposed 
Rulemaking in this docket (``FNPRM'') and resolve the petitions that 
precipitated the FNPRM. See Amendment of the Commission's Rules 
Regarding Installment Payment Financing for Personal Communications 
Services (PCS) licenses, Further Notice of Proposed Rulemaking, 65 FR 
37092 (June 13, 2000). The modifications to the Commission's rules that 
we adopt in the order will apply to Auction No. 35, the next C and F 
block auction. The modifications also will apply to any subsequent 
auctions of C or F block licenses, including any spectrum made 
available or reclaimed from bankruptcy proceedings in the future.
    2. We conclude that it is in the public interest to modify our 
auction and service rules for C and F block broadband Personal 
Communications Services (PCS) licenses to achieve the various goals of 
section 309(j) of the Communications Act. Specifically, in the C/F 
Block Sixth Report and Order we retain, clarify, and revise our rules, 
as follows:
     Reconfiguration. We will reconfigure each 30 MHz C block 
license available in Auction No. 35 and other future broadband PCS 
auctions into three 10 MHz C block licenses.
     Tiers. We divide Basic Trading Areas (BTAs) into two tiers 
according to the population size of the BTA. ``Tier 1'' will comprise 
BTAs with populations equal to or greater than 2.5 million; ``Tier 2'' 
will comprise the remaining BTAs.
     Eligibility restrictions. We remove the entrepreneur 
auction eligibility restrictions--thereby establishing ``open'' 
bidding--for the following licenses:
     two of the three reconfigured 10 MHz C block licenses in 
Tier 1;
     one of the three reconfigured 10 MHz C block licenses in 
Tier 2;
     all 15 MHz C block licenses in Tier 1;
     all F block licenses;
     all C block licenses available but unsold in Auction No. 
22.
     License grouping. We reject Nextel Communications, Inc. 
(``Nextel'') proposal to license by bulk bidding.
     ``Grandfather'' exception. We clarify an applicant's 
eligibility for the Sec. 24.709(b)(9)(i) C block ``grandfather'' 
exception after it has been involved in a merger, acquisition, or other 
business combination, as follows:
     When each of the combining entities is individually 
eligible for the ``grandfather'' exception, the exception will extend 
to the resulting entity.
     When one or more of the combining entities is not 
individually eligible for the grandfather exception, the resulting 
entity will be eligible for the exception only so long as an originally 
eligible entity retains de facto and de jure control of the resulting 
entity.
     Bidding credits.
     Licenses won in open bidding: We retain the existing 
bidding credits for small and very small businesses of 15 percent and 
25 percent, respectively.
     Licenses won in closed bidding: We eliminate bidding 
credits.
     Transfer requirements.
     Licenses won in open bidding: We will not apply the 
entrepreneur eligibility restrictions to the assignment or transfer of 
control of C and F block licenses won in open bidding.
     Licenses won in closed bidding: Upon satisfaction of the 
first construction benchmark for a license won in closed bidding, 
entrepreneur eligibility restrictions on assignment or transfer of 
control of C and F block licenses will not apply to that license. We 
will continue to evaluate satisfaction of construction requirements on 
a license-by-license, rather than on a system-wide, basis.
     Unjust enrichment: 
     A licensee that won a license in Auction No. 5 or 10, will 
not be subject to a bidding credit unjust enrichment payment upon 
assignment or transfer of that license, pursuant to the Commission's 
transfer requirements, to an entity not qualifying as a small business.
     License cap. We eliminate the Sec. 24.710 cap on the 
number of C and F block licenses that a single entity may win at 
auction.
     Spectrum cap. We will continue to apply the spectrum cap 
to C and F block licenses, including those won in Auction No. 35.

II. Background

    3. In the Omnibus Budget Reconciliation Act of 1993, Congress 
authorized the Commission to employ systems of competitive bidding to 
award spectrum licenses. This authorization, as amended, is codified as 
section 309(j) of the Communications Act. Section 309(j)(3) directs the 
Commission to ``seek to promote'' a number of objectives, including:
     the development and rapid deployment of new services for 
the benefit of the public, including those residing in rural areas;
     promoting economic opportunity and competition and 
ensuring that new and innovative technologies are readily accessible to 
the public 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, i.e., ``designated entities;''
     recovery for the public of a portion of the value of the 
public spectrum resource made available for commercial use.
    4. Section 309(j)(4) directs the Commission, in prescribing 
regulations to implement the objectives of section 309(j)(3), to, inter 
alia, (i) establish performance requirements to ensure prompt delivery 
of service to rural areas and prevent warehousing of spectrum by 
licensees; (ii) prescribe area designations and bandwidth assignments 
that promote an equitable geographic distribution of licenses and 
services, economic opportunity for a wide variety of applicants, 
including designated entities, and rapid deployment of services; and 
(iii) ensure that designated entities are given the opportunity to 
participate in the provision of spectrum-based services, and, for such 
purposes, consider using bidding preferences and other procedures.
    5. The Commission outlined the original framework for C and F block 
auctions in the 1994 Competitive Bidding Fifth Report and Order, 
establishing the C and F blocks as ``set-aside'' licenses for 
``entrepreneurs'' in which eligibility would be restricted to entities 
below a specified financial threshold. See Implementation of Section 
309(j) of the Communications Act--Competitive Bidding, Fifth Report and 
Order, 59 FR 37566 (July 22, 1994). The initial C block licenses were 
awarded through two auctions, Auction No. 5, which ended on May 6, 
1996, and Auction No. 10, which concluded on July 16, 1996. Auction No. 
11, the initial F block auction, ended on January 14, 1997, and also 
included D and E block licenses. Auction No. 22, which concluded on 
April 15, 1999, made available C and F block licenses that had been 
returned to, or reclaimed by, the Commission.

[[Page 53626]]

    6. Since adoption of the 1994 Competitive Bidding Fifth Report and 
Order, the rules for auctions of C and F block licenses have steadily 
evolved in response to legislative changes, judicial decisions, the 
needs of licensees striving to succeed in a rapidly developing wireless 
market, and the demand of the public for greater access to wireless 
services. For example, in the 1997 C Block Second Report and Order, 62 
FR 55348 (October 24, 1997), as modified by the 1998 C Block 
Reconsideration Order, 63 FR 17111 (April 8, 1998), the Commission 
created a package of financial restructuring options to be offered to C 
block licensees experiencing financial difficulties in the wake of 
Auctions No. 5 and No. 10. The Commission also decided in the C Block 
Second Report and Order, as modified by the 1998 C Block Fourth Report 
and Order, 63 FR 50791 (September 23, 1998), to allow, for a period of 
two years from the beginning of the first post-restructuring C block 
auction (Auction No. 22), participation in bidding for C block licenses 
by entities that had participated in Auctions No. 5 and 10, even if 
such entities had since become too large to qualify as entrepreneurs 
under the Commission's rules.
    7. Prior to the start of Auction No. 22, three C block licensees, 
NextWave Personal Communications, Inc. (``NextWave''), GWI PCS Inc. 
(``GWI''), and DCR PCS, Inc. (``DCR''), filed for bankruptcy 
protection. Bankruptcy filings and payment defaults by C and F block 
licensees occurred, both before and after the auction; and, to date, a 
total of 232 C and F block licenses, covering a population (``pops'') 
of approximately 191 million, have been involved in bankruptcy 
proceedings and/or license payment defaults.
    8. In January 2000, the Wireless Telecommunications Bureau 
(``Bureau''), pursuant to its delegated authority, announced the next C 
and F block auction, Auction No. 35. Auction No. 35 is slated to 
include both 30 MHz and 15 MHz C block licenses, as well as F block 
licenses (all 10 MHz each) for operation on frequencies for which 
previous licenses had automatically cancelled or had been returned to 
the Commission. The announcement of Auction No. 35 prompted petitions 
from SBC Communications Inc. (``SBC''), Nextel, and other parties 
asking that we waive, modify, or eliminate our entrepreneur eligibility 
requirements for participation in the auction. In response to those 
filings, several parties also proposed that we make other modifications 
to our C and F block rules. Additionally, US WEST Wireless, LLC (``US 
West'') and Sprint Spectrum L.P. dba Sprint PCS (``Sprint'') filed a 
joint petition for reconsideration of our C Block Fourth Report and 
Order Reconsideration, 65 FR 14213 (March 16, 2000). The C Block Fourth 
Report and Order Reconsideration addressed certain of the rules 
governing auctions of C block licenses. Sprint and US West requested 
that the Commission eliminate its eligibility restrictions for 
participation in the upcoming auction as well as modify other C block 
rules. In addition, Verizon Wireless (``Verizon'') petitioned the 
Commission for clarification or reconsideration of our two-year C block 
auction eligibility ``grandfather'' rule, Sec. 24.709(b)(9)(i). In 
response to these petitions, a number of parties argued that all, or at 
least some portion, of the C and F block spectrum should be open to all 
participants in order to satisfy the Commission's obligations section 
under 309(j)(4); other parties opposed these arguments.
    9. We also received petitions from Bell Atlantic Mobile, Inc. 
(``Bell Atlantic''), BellSouth Corporation (``BellSouth''), AT&T 
Wireless Services, Inc. (``AT&T''), and GTE Service Corporation 
(``GTE'') requesting that the Commission waive, forbear from applying, 
or declare inapplicable the Commercial Mobile Radio Services (``CMRS'') 
spectrum cap with respect to the spectrum available in Auction No. 35.
    10. We addressed the issues raised and points made in the various 
petitions, comments, and other documents filed in this proceeding in 
the FNPRM, released on June 7, 2000, in which we set forth tentative 
conclusions and proposals concerning our C and F block rules. Also on 
June 7, 2000, the Bureau announced that Auction No. 35 would begin on 
November 29, 2000, in order to allow resolution of the issues in the 
FNPRM and implementation of any rule changes prior to the auction. In 
the C/F Block Sixth Report and Order, we resolve the issues raised in 
the FNPRM and in the petitions and other filings in this proceeding by 
retaining, clarifying, and modifying our rules governing C and F block 
auctions and licenses.

III. Discussion

A. Reconfiguration of C Block Spectrum License Size
    11. Background. In the FNPRM, we tentatively concluded that each 30 
MHz C block license available in Auction No. 35 should be reconfigured 
into three 10 MHz C block licenses. We asserted that the increased 
number of licenses available as a result of this reconfiguration, along 
with elimination of certain of the Commission's C and F block 
eligibility requirements, would promote wider auction participation and 
license distribution in accordance with the goals of section 309(j) of 
the Communications Act. We tentatively concluded that a 10 MHz C block 
license is a viable minimum size for voice and some data services, 
including Internet access, and that it provides an appropriate building 
block for bidders that wish to acquire a larger amount of spectrum in 
particular markets. We sought comment on these tentative conclusions, 
as well as on whether a different configuration, such as creation of 20 
MHz C block licenses where possible, would be more appropriate to 
provide meaningful opportunities for potential bidders, including new 
entrants into particular markets. Additionally, in the FNPRM, we 
proposed to permit bidders to aggregate the 10 MHz C block licenses, 
subject only to the CMRS spectrum cap and the relevant remaining 
eligibility restrictions for these licenses.
    12. Discussion. We adopt our tentative conclusions in the FNPRM to 
reconfigure each available 30 MHz C block license into three 10 MHz C 
block licenses and to permit bidders to aggregate the 10 MHz C block 
licenses, subject to the CMRS spectrum cap and the relevant remaining 
eligibility restrictions for these licenses. Each 30 MHz C block 
license that is available for inclusion in the Commission's license 
inventory for Auction No. 35 or any subsequent auction, will be 
reconfigured into three 10 MHz C block licenses. Each of the newly 
reconfigured 10 MHz C block licenses will consist of two paired 5 MHz 
blocks: 1895-1900 MHz paired with 1975-1980 MHz; 1900-1905 MHz paired 
with 1980-1985 MHz; and 1905 MHz-1910 MHz paired with 1985-1990 MHz. 
Accordingly, we deny the Nextel Petition insofar as it requests a 
different reconfiguration of available 30 MHz C block licenses; and we 
grant the US West/Sprint Petition to the extent that it requests the 
reconfiguration we adopt today.
    13. The majority of the commenters support our proposal to divide 
each available 30 MHz C block license into three 10 MHz C block 
licenses. They contend that dividing the spectrum into three 10 MHz C 
block licenses will promote a wider dissemination of licenses; provide 
bidders with more flexibility to adapt their bidding strategies to meet 
their business plans; and make licenses more affordable, especially for 
entrepreneurs. Some parties offer contingent support for reconfiguring 
the 30 MHz C block licenses, e.g., provided that entrepreneur 
eligibility restrictions are

[[Page 53627]]

maintained in their current form, are modified as proposed in the 
FNPRM, or are eliminated for at most only a single 10 MHz C block 
license in each market. Other parties oppose the Commission's proposal, 
arguing that such a proposal is contrary to statutory requirements, 
because it will reduce small business opportunity in the marketplace. 
Additionally, some parties contend that 10 MHz of C block spectrum is 
insufficient to provide a full range of third generation (``3G'') 
services.
    14. We believe that 10 MHz is a viable broadband PCS license size. 
Ten MHz has always been one of the principal license sizes used in 
broadband PCS. In fact, half of the original licenses representing one-
fourth of the total broadband PCS spectrum were 10 MHz licenses. In 
Auction No. 11, we made available to bidders almost 1,500 D, E, and F 
block licenses, all of which were for 10 MHz of spectrum. Virtually all 
of those licenses were sold; and, with the exception of licenses won by 
entrepreneurs with substantial C block holdings, almost none of the 
them have been returned to, or reclaimed by, the Commission. Moreover, 
we believe that 10 MHz broadband PCS block licenses provide 
opportunities to applicants, such as smaller companies and new 
entrants, that might not be able to acquire 20 or 30 MHz PCS licenses. 
In our recent 700 MHz First Report and Order, 65 FR 3139 (January 20, 
2000), where we established both 20 MHz and 10 MHz block licenses for 
wireless use, we noted that 10 MHz block wireless licenses ``should 
prove of interest to parties in the record who desire spectrum to 
deploy innovative wireless technologies, including high-speed Internet 
access, that do not require as much spectrum.'' Those entities that 
want to obtain more than 10 MHz of C block spectrum where it is 
available in a BTA, retain the option of bidding on, or otherwise 
acquiring, as many of the available C block licenses as they are 
eligible for and aggregating them, or aggregating one or more newly 
acquired licenses with existing licenses.
    15. Accordingly, we conclude that, by dividing each available 30 
MHz C block license into three 10 MHz licenses, we can best address the 
diverse needs of the potential participants in the next C and F block 
auction. Entrepreneurs that continue to favor smaller blocks will still 
be able to fulfill their business needs. Parties that desire more 
spectrum for services will be allowed to aggregate the 10 MHz C block 
licenses, subject to the CMRS spectrum cap. We will continue to provide 
set-asides for some C block licenses to ensure that entrepreneurs are 
provided opportunities to acquire spectrum for their needs. We believe 
that this reconfiguration, along with the other rule modifications we 
make today, will ensure the best use of spectrum through the 
competitive bidding process while at the same time promoting wider 
auction participation and license distribution in accordance with the 
goals of section 309(j) of the Communications Act.
B. Eligibility Restrictions Under a Tiered Approach
    16. Background. In the FNPRM, we proposed to remove the 
entrepreneur eligibility restrictions for some, but not all, licenses 
available in Auction No. 35 and in future C and F block auctions. We 
tentatively concluded that we should divide BTAs into two tiers 
according to population size of the BTA. ``Tier 1'' would comprise BTAs 
at and above a 2.5 million population threshold; ``Tier 2'' would 
comprise BTAs below that population threshold. We also sought comment 
on other population thresholds and on establishing a third tier. We 
tentatively concluded that we would allow ``open'' bidding (i.e., 
bidding without eligibility restrictions) for two of the three newly 
reconfigured 10 MHz C block licenses in Tier 1 and one of the three 
newly reconfigured 10 MHz C block licenses in Tier 2. We also sought 
comment on whether there should be ``open'' bidding for all three of 
the 10 MHz licenses in Tier 1 and two of the three in Tier 2. With 
respect to available F block licenses, we sought comment on eliminating 
the eligibility requirements, or, alternatively, applying a tiered 
approach or retaining the existing eligibility rules. We tentatively 
concluded that we would allow ``open'' bidding for all available 15 MHz 
C block licenses, because they had not been sold in Auction No. 22. 
Finally, we sought comment on whether to establish a rule that lifts 
eligibility restrictions on any C or F block licenses that remain 
unsold after Auction No. 35 or after other future auctions.
    17. Discussion. As described, we adopt our tentative conclusions 
and other proposals to remove the entrepreneur eligibility restrictions 
for some, but not all, licenses available in Auction No. 35 and in 
future C and F block auctions, utilizing the tiered approach outlined 
in the FNPRM. In the FNPRM, we discussed at some length the rationale 
behind those tentative conclusions and other proposals. We find in 
general that those reasons continue to apply and that they support the 
actions we take today. We elaborate further on our reasoning in light 
of the record we received in response to the FNPRM.
    18. Tiers. Consistent with our tentative conclusion, we will divide 
all BTAs into two categories, ``Tier 1'' BTAs and ``Tier 2'' BTAs. Tier 
1 will comprise BTAs with populations that, according to the 1990 
census, are equal to or greater than 2.5 million; and Tier 2 will 
comprise the remaining BTAs. Commenters that support or oppose a tiered 
approach per se do so in the context of removing entrepreneur 
eligibility restrictions. Certain commenters take issue with our 
tentative conclusion to demarcate the two tiers at a population of 2.5 
million, arguing, for example, that the upper tier should be enlarged 
to include BTAs with populations of one million or greater, i.e., 
approximately the top ten percent of the BTAs in the United States, or 
that we should constrict Tier 1 to include only BTAs with populations 
over five million.
    19. We believe that our decision to establish two tiers with a 2.5 
million population demarcation represents the most reasonable balancing 
of the various competing public interest factors that bear on this 
issue. Both sides in this debate make credible arguments about their 
needs for additional spectrum. Because we have only a limited amount of 
spectrum to offer, we must respond with an approach to eligibility that 
necessarily will not fully satisfy all competing demands. Under these 
circumstances, we believe that the mid-course approach proposed in the 
FNPRM, which removes eligibility restrictions for some, but not all, of 
the available spectrum is the best course. The approach, in conjunction 
with the changes in entrepreneur eligibility restrictions described, 
will make relatively more spectrum available for ``open'' bidding in 
the most populous markets where the demand for spectrum by existing 
CMRS carriers is the greatest and the prospects of a spectrum shortage 
for these carriers is the most acute. At the same time, the 
modifications we make today will keep most of this spectrum (i.e., 20 
MHz) closed in all but the very largest markets, while also retaining 
restricted eligibility for some spectrum (i.e., 10 MHz) even in those 
latter cases. Thus, entrepreneurs will have an opportunity to acquire 
additional spectrum on a set-aside basis in all available C block 
markets. We note that the tiering approach will split the C block 
spectrum available in Auction No. 35 almost equally, when weighted by 
population, between open and closed licenses. For these reasons, 
implementing our tentative conclusion

[[Page 53628]]

provides an effective method of accommodating the conflicting goals of 
entrepreneurs and non-entrepreneurs and satisfies our objectives under 
section 309(j).
    20. 30 MHz and 15 MHz C block licenses. For markets with available 
30 MHz licenses, other than licenses that were available but unsold in 
Auction No. 22, we adopt our tentative conclusion and establish open 
bidding (i.e., bidding without entrepreneur eligibility restrictions) 
for two of the three newly reconfigured 10 MHz C block licenses in Tier 
1 and for one of the three newly reconfigured 10 MHz C block licenses 
in Tier 2. In Tier 1, the following two 10 MHz blocks will be open: 
1900-1905 MHz paired with 1980-1985 MHz and 1905 MHz-1910 MHz paired 
with 1985-1990 MHz. In Tier 2, the following 10 MHz block will be open: 
1905 MHz-1910 MHz paired with 1985-1990 MHz. For available 15 MHz C 
block licenses, other than for licenses that were available but unsold 
in Auction No. 22, we eliminate entrepreneur eligibility restrictions 
for licenses in Tier 1 but retain the restrictions for licenses in Tier 
2.
    21. A number of commenters oppose any relaxation of the 
Commission's entrepreneur eligibility restrictions. Some commenters 
argue that section 309(j) compels the Commission to maintain the C and 
F block set-aside as is. On the other hand, one commenter responds that 
nothing in section 309(j) or its legislative history necessitates a C 
and F block set-aside for entrepreneurs. Some parties that favor 
elimination of entrepreneur eligibility requirements believe that our 
tentative conclusion is too limited. These parties, which include most 
of the major, national carriers, would prefer that we remove 
entrepreneur eligibility restrictions from more--or all--of the 
available C and F block licenses. Other commenters ask that the 
reduction be smaller.
    22. Section 309(j)(3) directs the Commission to seek to promote a 
variety of sometimes competing objectives, including economic 
opportunity, competition, and the rapid deployment of new technologies 
and services by, inter alia, disseminating licenses among a wide 
variety of applicants, including small businesses. Section 309(j)(4) 
requires the Commission to ensure that small businesses and others 
``are given the opportunity to participate in the provision of spectrum 
based services'' and directs the Commission to consider the use of 
mechanisms that will further that end. The statute accords the 
Commission wide latitude in determining how to achieve the stated 
objectives. For example, section 309(j) does not mandate the use of 
set-asides, or any other particular method, to promote the 
participation of small businesses in spectrum auctions; and the 
Commission has conducted numerous auctions in recent years in which it 
has not provided an entrepreneurs' block set-aside. Similarly, section 
309(j)(3) does not require the Commission to promote the participation 
of small businesses in PCS auctions at the expense of other, 
potentially conflicting, objectives enumerated in the section, such as 
the promotion of competition and the rapid deployment of new 
technologies and services. Finally, section 309(j)(4)(D) does not 
require the Commission to ensure that licenses actually are granted to 
small businesses but, rather, requires only that these small businesses 
be given the opportunity to participate in the provision of spectrum-
based services.
    23. We believe that by implementing our tentative conclusion we 
give effect to, and reasonably balance, as many of the various and 
partially conflicting section 309(j) objectives as possible. As 
discussed in the FNPRM, circumstances in the PCS industry have changed 
dramatically, and continue to change, since the implementation of our 
rules in 1994. The introduction of wireless Internet, advanced data, 
and 3G services, and global competition within these services, has 
created a shortage of suitable available spectrum. Many carriers claim 
that obtaining additional spectrum to provide such services or satisfy 
capacity needs is crucial to their business plans. Still other carriers 
require additional spectrum to ``fill out'' regional or national 
service areas. Taking all of our statutory objectives into account, we 
believe that it is fair and appropriate to apportion the spectrum to 
accommodate these interests. Apportioning the 30 MHz C block licenses 
in the manner described will enable larger carriers to obtain 
additional spectrum, which, we find, will promote the further 
development of CMRS competition and innovation, especially in larger 
markets. At the same time, maintaining a significant set aside of C 
block spectrum for entrepreneurs will help smaller businesses in this 
band continue to achieve their business goals as well as providing 
meaningful opportunities for new entrepreneurial firms to enter the 
market. Entrepreneurs will retain exclusive eligibility to bid on 10MHz 
of available C block spectrum in Tier 1 markets and on most of the 
first-time reauctioned C block spectrum in Tier 2 markets. 
Entrepreneurs also will be eligible to participate, along with non-
entrepreneurs, in all open bidding.
    24. F block licenses. We adopt open bidding--bidding without 
entrepreneur eligibility restrictions--for F block licenses available 
in Auction No. 35 and in all future auctions. No commenter advocates a 
middle ground for the F block, such as disaggregating the F block 
spectrum into smaller spectrum blocks or applying a tier structure to 
the F block and removing eligibility restrictions for some of the 
available licenses. Commenters argue, instead, either for maintaining 
the entrepreneur restrictions for all F block licenses or for lifting 
these restrictions entirely. Some parties that favor maintaining the 
set-aside contend that entrepreneurs have made business plans in 
reliance on their ability to vie for additional F block licenses in 
future closed auctions. Some argue that the Commission is constrained 
by section 309(j) from eliminating the eligibility restrictions. Others 
point out that the Commission's proposals for modifying eligibility 
restrictions for C block licenses represent a substantial reduction in 
the set-aside and contend that the Commission should go no further. 
Finally, parties believe that, because the F block does not share the C 
block's history of financial difficulty, there is less, if any, 
justification for eliminating the F block set-aside.
    25. Conversely, commenters supporting the lifting of F block 
entrepreneur eligibility restrictions argue that the lack of financial 
difficulties in the F block indicates no further need for continued 
protection in the form of a set-aside. Other commenters assert that 
eliminating the F block set-aside would further the goals of section 
309(j) by alleviating spectrum congestion, promoting new services, and 
advancing competition.
    26. We believe that it is in the public interest, and consistent 
with section 309(j), to remove the set-aside for all available F block 
licenses. As we stated in the FNPRM, and as some commenters underscore, 
the F block has evolved in a fashion largely distinct from that of the 
C block. The two blocks have been subject to increasingly different 
regulatory requirements, reflecting in large part the different bidding 
and marketplace histories of the two blocks and the correspondingly 
different equity and reliance concerns applicable to bidders and 
licensees in each of the blocks. Accordingly, as we have recognized 
previously, there is no longer a rationale for attempting to treat the 
two blocks in an identical fashion. Moreover, the need for additional 
open spectrum that exists in the C block

[[Page 53629]]

markets also applies in the F block markets; and allowing open 
eligibility for all available F block licenses might lead to more 
expeditious provision of service to consumers. Moreover, as discussed 
in the FNPRM, almost every market with an available F block license 
already has a significant 30 MHz C block entrepreneur presence. Thus, 
we can modify the F block eligibility rules while preserving the 
diversity of opportunity and service that are goals of section 309(j).
    27. Unsold set-aside licenses. For Auction No. 35, we eliminate 
entrepreneur eligibility requirements for all C block licenses that 
were available but not sold in Auction No. 22. For all auctions after 
Auction No. 35, we eliminate the entrepreneur eligibility requirements 
for any C or F block license that was available, but not sold, in 
Auction No. 22 or any subsequent auction. In the FNPRM, we proposed 
removing eligibility restrictions for available 15 MHz C block 
licenses, reasoning that they remained unsold after having been offered 
in closed bidding in Auction No. 22. We similarly proposed to remove 
eligibility restrictions on all C and F block licenses that are 
available, but not sold, in Auction No. 35 as well as on all broadband 
PCS licenses that remain unsold after having been available for closed 
bidding in any auction after Auction No. 35.
    28. The failure of certain 15 MHz C block licenses to sell in 
Auction No. 22 indicates that closed bidding for these licenses will 
not necessarily result in their acquisition and construction and in 
service to the public. By lifting the eligibility restrictions for 
these unsold licenses now, we hope to prevent additional delays in 
their utilization. We find persuasive Nextel's argument that the same 
rationale that applies to 15 MHz C block licenses should apply to 30 
MHz C block licenses, and we believe that the rationale is equally 
applicable to all C and F block licenses that have failed to sell in 
Auction No. 22 or any subsequent auction. We note that no commenter 
opposed Nextel's suggestion to extend our proposal. Accordingly, we 
will implement the rule change for all C or F block licenses that were 
available, but not sold, in Auction No. 22 or that remain unsold after 
having been available for closed bidding in Auction No. 35 or in any 
auction thereafter.
C. Determination of Entrepreneur Eligibility
    29. Background. To qualify as an entrepreneur under current rules, 
a C or F block applicant (together with its affiliates and persons or 
entities that hold interests in the applicant and their affiliates) 
must have had gross revenues of less than $125 million in each of the 
last two years and must have total assets of less than $500 million at 
the short-form deadline. Total assets are generally determined by the 
applicant's most recent audited financial statements. As discussed, the 
grandfather exception provides that, in addition to entities qualifying 
as entrepreneurs at the time of the short form filing deadline, any 
entity that was eligible for and participated in either of the first 
two C block auctions will be eligible to bid in any auction of C block 
spectrum that begins within two years of the March 23, 1999 start date 
of Auction No. 22. Each C or F block licensee, whether its license was 
acquired at auction or by transfer or assignment, must maintain its 
entrepreneur eligibility during the five-year holding period, which 
begins on the date of the initial license grant, except that a 
licensee's increased gross revenues or increased total assets due to 
nonattributable equity investments, debt financing, revenue from 
operations or other investments, business development, or expanded 
service will not be considered. With respect to applications for 
assignment or transfer of control of C or F block licenses during the 
five-year holding period, the proposed transferee or assignee must meet 
the entrepreneur eligibility criteria at the time the assignment or 
transfer application is filed or the proposed transferee or assignee 
must already hold other C or F block licenses and, at the time of 
receipt of such licenses, have met the entrepreneur eligibility 
criteria.
    30. Discussion. In its comments, Nextel asks that the Commission 
review its rules on reporting ``total assets'' for entrepreneur 
eligibility and require applicants to report total assets as of the 
short form filing deadline. Nextel asserts that Leap Wireless 
International, Inc. (``Leap'') may try to qualify for Auction No. 35 
based on the unavailability, at the short-form filing deadline, of 
Leap's audited financial statement for its fiscal year ending August 
31, 2000. In reply, Leap states that departing from a clear, bright-
line test that uses credible audited numbers could facilitate 
manipulation of the eligibility calculations. Leap states that there is 
no need for it to ``slip in'' under the asset cap since the current 
rules allow it to remain eligible to participate in future C and F 
block auctions, even if its assets exceed $500 million due to growth 
allowable under Sec. 24.709(a)(3). In short, Leap claims that the 
natural growth exception which allows C or F block licensees to retain 
their entrepreneur eligibility during the holding period establishes 
its eligibility for the upcoming C block auction, Auction No. 35.
    31. Leap confuses the concept of maintaining entrepreneur 
eligibility for the purpose of meeting the five-year holding period 
with the concept of eligibility to participate as an entrepreneur in a 
C or F block auction. By allowing licensees to maintain their 
eligibility despite growth beyond the financial caps, the Commission 
intended to encourage entrepreneurs to grow and succeed during the 
five-year holding period. Contrary to Leap's assertions, although the 
Commission intended to ignore natural growth for purposes of 
entrepreneur eligibility during the five-year holding period, it did 
not intend to ignore such growth in determining eligibility to 
participate in future C and F block auctions. In other words, Leap, 
which is not eligible for the grandfather exception, would have us read 
the natural growth rule, that allows a licensee to maintain eligibility 
for the holding period despite growth beyond the financial caps, as an 
alternative grandfathering exception. If the Commission had intended 
the natural growth rule to be read as Leap contends, then the two-year 
grandfather exception for Auction No. 5 participants would have been 
more narrowly drafted. Instead, the Commission applied the grandfather 
exception to all entities that had qualified for, and participated in, 
either of the first two C block auctions.
    32. Nextel's comments raise the issue of whether eligibility for C 
block auctions is determined by an applicant's most recently available 
audited financial statements, even if those statements are then a year 
or more out of date, or whether eligibility should be based on the 
relevant financial data as of the most recently completed calendar/
fiscal year, even if audited financial statements for the most recent 
year are not available as of the short-form filing deadline. Under 
Sec. 24.720, an entrepreneurs' block applicant must evidence its gross 
revenues and total assets with its most recent audited financial 
statements, or, if the applicant does not otherwise use audited 
financial statements, a certification by the applicant's chief 
financial officer or its equivalent. We see no need to modify these 
rules. We note, however, that we expect an applicant to obtain 
financial statements within a reasonable period of time after the close 
of the applicable calendar or fiscal year and to base its claim to 
eligibility on those financial statements. If an applicant delays, or

[[Page 53630]]

takes action that results in delay in, the generation and/or submission 
of current audited financial statements in order to capture 
entrepreneur eligibility to which the applicant would otherwise not be 
entitled, it will risk being declared ineligible for auction 
participation or license grant or jeopardize its continuing eligibility 
to hold its licenses.
D. License Grouping for Bids and Competitive Bidding Design
    33. Background. In the FNPRM, we tentatively concluded that we 
would take bids separately on each license in Auction No. 35 on a 
simultaneous multiple round basis as we have done in the past. We 
agreed with commenters that Nextel's bulk bid proposal, under which the 
Commission would reconfigure the available 30 MHz C block licenses into 
separate 20 MHz and 10 MHz licenses and offer the newly created 20 MHz 
C block licenses and the available 15 MHz C block licenses together on 
a ``bulk bid'' (i.e., winner-take-all) basis, would exclude all but a 
very few competitors. We stated that small entities would be hard 
pressed to obtain the financing necessary to win and pay for the 
licenses and construct the systems included in the bulk bid proposal, 
while many other carriers would be constrained from participating by 
the CMRS spectrum cap. We noted that our past auctions demonstrate that 
significant aggregations of licenses through the auction process are 
feasible and that bidding for each license separately is unlikely to 
preclude carriers from aggregating licenses on a nationwide or regional 
basis.
    34. At the same time, we explained that we were considering 
implementation of a combinatorial, or package, bidding design for the 
auction of licenses in the 700 MHz bands in order to facilitate 
aggregations of complementary licenses into larger blocks. We invited 
parties to suggest ways in which bidders could efficiently aggregate 
licenses in Auction No. 35; although, we noted that it might be 
impractical to implement a package bidding design for that auction.
    35. Discussion. We reject Nextel's bulk bid proposal. Instead, we 
leave to the Wireless Telecommunications Bureau (``Bureau''), under its 
existing delegated authority, the final selection of a competitive 
bidding design and methodology for Auction No. 35, including the 
decision whether or not to implement a combinatorial bidding design for 
the auction. There is no support in the record for the Nextel bulk bid 
proposal. We continue to be concerned that, as argued by the bulk bid 
opponents, Nextel's suggested approach would unduly favor Nextel to the 
possible exclusion of most other potential applicants.
    36. Some of the parties that commented on ways to aggregate 
licenses in the auction process, argue against the use of package 
bidding for Auction No. 35, on the ground that such a design would be 
complex and impractical. Other commenters support implementation of 
package bidding as a way to enhance the ability of auction participants 
to acquire their targeted groups of licenses while reducing their 
exposure. In preparing for Auction No. 35, the Bureau, under its 
existing delegated authority and pursuant to public notice and comment, 
will determine the competitive bidding design most appropriate for the 
auction. Following the Bureau's determination of the auction design, we 
will, if necessary, revisit the need for any rule modifications.
E. Grandfather Exception
    37. Background. In the FNPRM, the Commission tentatively concluded 
that upon the merger of two entities, the grandfather exception 
contained in Sec. 24.709(b)(9)(i) should extend to the resulting entity 
when each of the two original entities is eligible for the exception, 
but not when only one of them is eligible for the exception. The 
Commission sought comment on how to determine C and F block eligibility 
when faced with more complex transactions. The Commission also sought 
comment on issues raised by Verizon in its petition for reconsideration 
or clarification of the C Block Fourth Report and Order 
Reconsideration. Verizon asks us to reexamine the grandfather exception 
and limit resulting eligibility to those Auction No. 5 and 10 
participants that won licenses in the auctions and then returned 
spectrum pursuant to the Commission's C block restructuring options. 
Verizon also proposes that the entity claiming the grandfather 
exception must be the same company--having substantially the same 
ownership and control--as the one that acquired the entrepreneur 
status.
    38. Discussion. We clarify an applicant's eligibility for the 
grandfather exception after it has been involved in a merger, 
acquisition, or other business combination, as follows. When each of 
the combining entities is individually eligible for the ``grandfather'' 
exception, the exception will extend to the resulting entity. When one 
or more of the entities are not individually eligible for the 
grandfather exception, the resulting entity will be eligible for the 
exception only so long as an originally eligible entity retains de 
facto and de jure control of the resulting entity.
    39. We deny the Verizon petition to the extent that it asks that 
the exception be available only to Auction No. 5 and 10 participants 
that won licenses in those auctions and then returned spectrum. Despite 
its narrowly worded caption, the rule codifying the grandfather 
exception is clear on its face. It applies not just to Auction No. 5 
and 10 participants that returned spectrum to the Commission but also 
to participants in either of those auctions that either won no licenses 
or won licenses but did not disaggregate or return spectrum. We deny 
the remainder of the Verizon petition as moot in light of our 
clarification of the application of the grandfather exception to an 
auction applicant that has been involved in a business combination.
    40. We do not believe that, when entities eligible for the 
grandfather exception combine, the resulting entity should be 
penalized. Accordingly, we clarify that, under such circumstances, the 
grandfather exception will extend to the resulting entity. For 
situations where at least one of the entities is not individually 
eligible for the grandfather exception, we find persuasive the 
suggestion that we adopt a simple control analysis to determine whether 
an entity is ``substantially the same'' as the prior auction 
participant in Auction No. 5 or 10. Pursuant to this reasoning, the 
grandfather exception should be available to the resulting entity, so 
long as at least one entity that was originally eligible for the 
grandfather exception retains de facto and de jure control over the 
resulting entity. Other than to make these clarifications, we see no 
need to modify the grandfather exception, which will apply to auctions 
of C block licenses that begin on or before March 23, 2001.
F. Bidding Credits
    41. Background. In the FNPRM, we sought comment on whether we 
should make adjustments to the current C and F block bidding credits 
for future auctions based on whether such auctions are open to all 
bidders or subject to eligibility restrictions. More specifically, we 
sought comment on whether we should retain existing small and very 
small business bidding credits (15 percent and 25 percent, 
respectively) for licenses subject to open bidding or increase them to 
25 percent and 40 percent, respectively. For licenses subject to closed 
bidding, we sought comment on whether we should increase the bidding 
credits, retain them

[[Page 53631]]

at the current level, or eliminate them entirely.
    42. Discussion. For licenses subject to open bidding, we will 
maintain the current level of bidding credits for small and very small 
businesses and consortia thereof, of 15 percent and 25 percent, 
respectively. For licenses subject to closed bidding, we will eliminate 
all bidding credits. While a number of commenters, primarily small and 
very small businesses, support an increase in bidding credits for 
licenses won in open bidding, other parties contend that the existing 
bidding credits would enable small and very small businesses to compete 
successfully in open auctions. We agree with the latter contingent that 
bidding credits of 15 and 25 percent will allow effective competition 
by small businesses in open C and F block bidding. We note that in our 
Specialized Mobile Radio (SMR) 900 MHz auction--using bidding credits 
of 10 percent and 15 percent--75 percent of the winning bidders were 
small businesses, winning 26 percent of the licenses. Moreover, in 
Auction No. 11, the auction of D, E, and F block licenses, small and 
very small business were the high bidders for 141 of the 986 D and E 
block licenses won in that auction, even though bidding credits are not 
available for D and E block licenses.
    43. With respect to closed bidding, we believe that the continued 
use of bidding credits in restricted auctions would not necessarily 
serve its intended purpose. As we explained in the FNPRM, among those 
eligible to participate in entrepreneurs' block auctions, some well 
capitalized new entities with small gross revenues qualify for bidding 
credits, while some older companies with small total assets and net 
revenues but high gross revenues do not. One commenter asserts that 
bidding credits in set-aside auctions ``simply skew these auctions in 
favor of well-capitalized applicants that are carefully structured to 
shield deep-pocketed investors from attribution.'' Furthermore, the 
results of Auction No. 11 suggest that if small and very small 
businesses can compete effectively in open bidding without bidding 
credits, they can certainly compete effectively in closed bidding 
without bidding credits.
G. Transfer Requirements

i. Open bidding

    44. Background. In the FNPRM, we proposed to modify the transfer 
restrictions for C and F block licenses to correspond to our proposed 
changes in entrepreneur eligibility requirements and to encourage rapid 
construction of C and F block systems. We tentatively concluded that C 
and F block licenses won pursuant to open bidding at Auction No. 35, or 
in any future open auction for such spectrum, would not be subject to 
the restrictions against transfers to non-entrepreneurs.
    45. Discussion. Pursuant to our tentative conclusion, we will not 
subject C and F block spectrum licenses won pursuant to open bidding at 
Auction No. 35, or any future open auction for such spectrum, to a 
five-year holding and limited transfer rule. Thus, such licenses may be 
transferred or assigned at any time after grant to any qualified 
entity, entrepreneur or not. Several commenters support removing the 
transfer restrictions for C and F block licenses won pursuant to open 
bidding at Auction No. 35, or any future open auction for such 
spectrum. None of the commenters urge maintaining transfer restrictions 
on licenses won in open bidding. The only purpose for restricting the 
transfer of C and F block licenses to non-entrepreneurs is to ensure 
the integrity of the set-aside auction process. Because these licenses 
will now be subject to competitive bidding in open auctions, there is 
no longer a need to restrict their transfer and assignment solely to 
entrepreneurs.

ii. Closed bidding

    46. Background. With respect to licenses won in closed bidding in 
any C or F block auction, past or future, we sought comment on tying 
the holding period to completion of build-out requirements. Under our 
proposal, a licensee would be able to assign or transfer its license to 
any qualified entity, entrepreneur or not, upon the licensee's 
completion of its first construction benchmark, whether or not it takes 
the full five years allowed by our rules. In this way, we sought to 
minimize the trafficking of C and F block licenses won pursuant to 
closed bidding, while enhancing the likelihood of early build-out.
    47. Discussion. We will allow a licensee to assign or transfer a 
license won in closed bidding to any qualified entity, entrepreneur or 
not, as soon as the licensee has satisfied its first construction 
benchmark. The decision to transfer a restricted license to a non-
entrepreneur before the end of the five-year holding period in this 
manner must be made affirmatively by those in control of the 
entrepreneur. As discussed, even under our modified rule, an early 
transfer or assignment may be subject to unjust enrichment payment 
requirements.
    48. Most commenters that addressed this issue support the 
elimination of transfer restrictions upon completion of the first 
construction benchmark for licenses won in closed bidding in any C or F 
block auction, past or future. Other commenters advocate retention of 
the transfer restrictions in ``closed'' auctions. In our estimation, 
permitting such assignments and transfers will encourage rapid build-
out and service to the public, two objectives of section 309(j), while 
at the same time providing C and F block licensees with the ability to 
access capital. The result should be increased competition and more 
efficient spectrum use.
    49. Normally, if a C or F block licensee that used a bidding credit 
assigns or transfers its license within the first five years after the 
initial license grant date to an entity not qualifying for a bidding 
credit, or as favorable a bidding credit, the licensee is subject to an 
unjust enrichment payment requirement. In the case of early transfers 
or assignments of C block licenses won in Auctions No. 5 and 10, where 
virtually all bidders, and all license winners, qualified for a single 
25 percent bidding credit, we see no purpose in requiring the payment. 
When all bidders are given the same bidding credit, the competitive 
effect is the same as if no bidder has a credit. Thus, bidding credits 
likely did not affect the outcome of those auctions in terms of who won 
or how much money was paid to the government. Accordingly, allowing the 
early sale of a C block license by an Auction No. 5 or 10 licensee 
would not constitute unjust enrichment. When there is an early transfer 
or assignment of a license won in Auctions No. 11 or 22, or of any 
other license won in closed bidding, we will continue to require any 
applicable unjust enrichment payment. In Auctions No 11 and 22, where 
two levels of bidding credits were used and a significant number of 
bidders and winners did not receive a bidding credit, the use of such 
credit by some bidders may well have influenced the results of the 
auction.

iii. System-wide satisfaction of construction benchmark

    50. Background. In the FNPRM, we sought comment on whether we 
should, under certain circumstances, evaluate an incumbent licensee's 
compliance with construction requirements on a system-wide basis. 
Noting that at least one carrier had argued that it needs the 
flexibility to sell and exchange licenses in order to restructure its 
business plans, we sought comment on whether we should allow a carrier 
to exchange and transfer licenses if the carrier can demonstrate 
``substantial service'' throughout its system, rather than in a

[[Page 53632]]

particular market. We also sought comment on any other modifications to 
our transfer restrictions that would provide incumbent licensees with 
the flexibility to restructure their business plans without decreasing 
their incentive to rapidly construct systems and place them into 
operation.
    51. Discussion. Although several commenters urge us to do so, we do 
not believe that we should allow a carrier to exchange and transfer 
licenses where the carrier can demonstrate ``substantial service'' 
throughout its system, but not in the particular market that would be 
affected by the transfer. Although permitting such transfers might 
provide incumbent licensees with the flexibility to restructure their 
business plans, we believe that it would also remove an important 
incentive for carriers to construct systems rapidly and place them into 
operation in all markets where they are licensed. If we adopt a system-
wide ``substantial service'' standard, carriers may choose to build out 
selectively in more populous markets at the expense of less populated 
areas in anticipation of transferring or exchanging licenses. Also, an 
entrepreneur could acquire a license in a closed auction and 
immediately sell the newly acquired--and wholly unconstructed--license 
on the open market so long as the entrepreneur satisfied the system-
wide standard, even with the newly acquired license included in its 
``system.'' We do not think that such a result is consistent with 
making licenses available for closed bidding by entrepreneurs.
H. License Cap
    52. Background. In the FNPRM, we tentatively concluded that we 
would remove from the Commission's rules Sec. 24.710, which prohibits 
an auction applicant from winning (but not from acquiring in the 
secondary market) more than 98 C and F block licenses.
    53. Discussion. We adopt our proposal to remove Sec. 24.710 from 
the Commission's rules. When established in 1994, this license cap was 
intended to facilitate a fair distribution of licenses within the C and 
F blocks by preventing an entity from winning more than approximately 
10 percent of the then-total of 986 D and F block licenses. In the 
FNPRM, we explained that the Commission has already achieved its 
objective of disseminating the C and F block licenses among a variety 
of entrepreneurs. While most commenters agree that the license cap has 
outlived its purpose, a few believe that the cap is still necessary to 
prevent big applicants from acquiring large numbers of licenses. We 
believe that the license cap is no longer necessary. Not only is there 
already substantial diversity among C and F block licensees, but our 
decision today to reconfigure each available 30 MHz C block license 
into three 10 MHz licenses--tripling the number of available C block 
licenses--and to eliminate the eligibility restrictions for many of the 
available C block licenses, and all of the available F block licenses, 
should enhance that diversity.
I. Spectrum Cap
    54. Background. In the FNPRM, we tentatively concluded that we 
would continue to apply the CMRS spectrum cap, as set forth in 
Sec. 20.6 of the Commission's rules, to the spectrum awarded in the 
upcoming C and F block auction. Almost a year ago, we determined in our 
Biennial CMRS Spectrum Cap Order, 64 FR 54564 (October 7, 1999), that 
the CMRS spectrum cap, with some modification, continued to be an 
efficient means to promote competition and protect the public interest. 
In addition, we established and clarified a process by which any 
carrier with a demonstrable need for additional spectrum to provide 3G 
or other advanced services in a particular geographic area could seek a 
waiver of the spectrum cap rule. Finally, we stated that we would be 
reexamining whether to retain, modify, or eliminate the CMRS spectrum 
cap as part of our year 2000 biennial review.
    55. Discussion. We conclude that we will continue to apply the CMRS 
spectrum cap to the C and F block licenses to be auctioned. Those 
parties requesting that the cap be eliminated with respect to this 
spectrum have not provided sufficient bases in the record to revise a 
rule or eliminate the cap in the context of this particular auction of 
initial licenses.
    56. In the comments on this FNPRM, almost all of the commenters 
supported our tentative conclusion not to eliminate the CMRS spectrum 
cap with respect to these C and F block licenses. They agreed with our 
general conclusion that the parties requesting elimination of the cap 
have not provided the Commission sufficient bases for revising the CMRS 
spectrum. Only four commenters, including three of the parties that 
petitioned the Commission earlier this year, opposed our tentative 
conclusion; they did not, however, supply any additional substantive 
arguments to those raised in the petitions filed earlier this year.
    57. As we indicated in the FNPRM, we did not find that those 
petitions requesting waiver, or limited forbearance from application, 
of the CMRS spectrum cap were persuasive. In requesting waiver or 
forbearance, AT&T, Bell Atlantic, BellSouth, and GTE only supplied very 
general assertions that, absent lifting of the cap, they would face 
considerable difficulty rolling out 3G and other advanced broadband 
services. We agree with most of the commenters to the petitions that 
the petitioners failed to satisfy the waiver standard set forth either 
in the Biennial CMRS Spectrum Cap Order or in Sec. 1.3 of the 
Commission's rules. We also agree that Bell Atlantic failed to 
establish the basis for reversing our determination that the spectrum 
cap promoted the public interest, as would be necessary for granting a 
forbearance request. Finally, we find unpersuasive GTE's argument that 
the CMRS spectrum cap does not apply to the C and F block spectrum in 
the upcoming auction, and therefore deny its request for a declaratory 
ruling.
    58. As a practical matter, we believe that our decision to 
reconfigure the 30 MHz blocks of C block spectrum into 10 MHz blocks 
will better enable all carriers to obtain additional spectrum in the 
vast majority of markets without the need to exceed the CMRS spectrum 
cap. In only a few locations have carriers accumulated spectrum up to 
the CMRS spectrum cap limits, either the general 45 MHz cap or the 55 
MHz cap that applies to rural areas. More particularly, in the upcoming 
C and F block auction, almost all carriers in every market could obtain 
additional spectrum in blocks of 10 MHz (or 15 MHz where applicable) 
and still comply with the spectrum cap without any need for 
disaggregation. Finally, as we noted, we will shortly issue a Notice of 
Proposed Rulemaking as part of our biennial review of the spectrum cap 
rule. That proceeding will provide the Commission a better opportunity 
to revisit, in a more comprehensive manner than in this context, issues 
pertaining to the CMRS spectrum cap, taking into consideration existing 
competitive conditions and technological developments that could affect 
the continued need for the cap.

IV. Procedural Matters And Ordering Clauses

A. Final Regulatory Flexibility Analysis
    59. Pursuant to the Regulatory Flexibility Act, the Final 
Regulatory Flexibility Analysis incorporated herein. See 5 U.S.C. 604.
B. Paperwork Reduction Act Analysis
    60. The C/F Block Sixth Report and Order contains neither a new nor 
a modified information collection.

[[Page 53633]]

C. Ordering Clauses
    61. Authority for issuance of the C/F Block Sixth Report and Order 
is contained in sections 4(i), 5(b), 5(c)(1), 309(r), and 309(j) of the 
Communications Act of 1934, as amended, 47 U.S.C. sections 154(i), 
155(b), 156(c)(1), 303(r), and 309(j). Accordingly, it is ordered that 
part 24 of the Commission's rules is amended as specified and become 
effective November 6, 2000.
    62. It is further ordered that the Commission's Consumer 
Information Bureau, Reference Operations Division, shall send a copy of 
the C/F Block Sixth Report and Order, including the Final Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.

Final Regulatory Flexibility Analysis

    63. As required by the Regulatory Flexibility Act (``RFA''), an 
Initial Regulatory Flexibility Analysis (``IRFA'') was incorporated 
into the FNPRM. The Commission sought written public comment on the 
tentative conclusions, proposals, and alternatives in the FNPRM, 
including comment on the IRFA. This Final Regulatory Flexibility 
Analysis (``FRFA'') conforms to the RFA.

A. Need for, and Objectives of, the C/F Block Sixth Report and Order in 
WT Docket No. 97-82

    64. This C/F Block Sixth Report and Order addresses the tentative 
conclusions and proposals in our recent FNPRM and also resolves the 
petitions that precipitated the FNPRM. The modifications to the 
Commission's rules that we adopt in this order will apply to Auction 
No. 35, a C and F block auction currently scheduled to begin on 
November 29, 2000. The modifications will also apply to any subsequent 
auctions of C or F block licenses, including any spectrum made 
available or reclaimed from bankruptcy proceedings in the future.
    65. We conclude that it is in the public interest to modify our 
auction and service rules for C and F block broadband Personal 
Communications Services (``PCS'') licenses to achieve the various goals 
of section 309(j) of the Communications Act. In reaching this 
conclusion, we recognize that many carriers, including small and very 
small businesses, need additional spectrum to ``fill out'' their 
service areas or to satisfy capacity needs. Although our modifications 
to the rules include the elimination of entrepreneur eligibility 
requirements (allowing open bidding) for some C and F block licenses, 
our revised rules provide entrepreneurs with a significant set-aside of 
C block spectrum (for closed bidding) in order to assist them in 
achieving their business goals. Section 309(j) does not mandate the use 
of set-asides to promote the participation of small businesses in 
spectrum auctions. In fact, we note that there have been numerous 
auctions in recent years in which we have not included an 
entrepreneurs' block set-aside. By maintaining a significant set aside 
for entrepreneurs, small and very small businesses will be given the 
opportunity to participate in the provision of spectrum-based services. 
Additionally, in open auctions, small and very small businesses will 
continue to be provided with bidding credits in order to ensure 
meaningful participation. The C/F Block Sixth Report and Order reflects 
the Commission's continuing commitment to encouraging participation by 
small businesses while at the same time helping to ensure the best use 
of spectrum through the competitive bidding process.

B. Summary of Significant Issues Raised by Public Comments in Response 
to the IRFA

    66. There were no comments filed directly in response to the IRFA. 
However, a number of parties did submit general comments on the 
Commission's tentative conclusions and proposals set forth in the 
FNPRM. The significant issues raised by small and very small businesses 
primarily concerned the removal of the entrepreneur eligibility 
restrictions for some licenses available in future C and F block 
auctions and the use of bidding credits. For example, some commenters 
opposed the Commission's proposal to reconfigure the available 30 MHz C 
block license into three 10 MHz C block licenses, arguing that such a 
proposal is contrary to statutory requirements, because it will reduce 
small business opportunity in the marketplace. Many of the commenters 
that opposed the reconfiguration, contended that 10 MHz of C block 
spectrum is insufficient to provide a full range of third generation 
(``3G'') services. In addition, a number of commenters opposed any 
relaxation of the Commission's entrepreneur eligibility restrictions. 
Some commenters argued that section 309(j) compels the Commission to 
maintain the C and F block set-aside as is. In addition, small and very 
small businesses supported an increase in bidding credits in open 
bidding.
    67. On the other hand, a number of larger entities, including most 
of the major national carriers, favored the elimination of eligibility 
restrictions from more, or all, of the available C and F block 
licenses. Many carriers claimed that obtaining additional spectrum to 
provide advanced telecommunications services and global competition 
within these services, or to satisfy capacity needs, was crucial to 
their business plans. In addition, these carriers stated that they 
require additional spectrum to complete regional or national service 
areas. As required by the RFA, and in light of the numerous comments 
received, the Commission considered the economic impact on small 
businesses of the rules adopted herein. See section E, infra. 

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

    68. 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. Generally, the RFA defines 
the term ``small entity'' as having the same meaning as the terms 
``small business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' 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. Under the Small Business Act, a ``small 
business concern'' is one which: (i) is independently owned and 
operated; (ii) is not dominant in its field of operation; and (iii) 
meets any additional criteria established by the Small Business 
Administration (``SBA''). A small organization is generally ``any not-
for-profit enterprise which is independently owned and operated and is 
not dominant in its field.'' 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.'' As of 1992, there were 
approximately 85,006 local governments 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 Census Bureau 
estimates that this ratio is approximately accurate for all 
governmental entities. Thus, of the 85,006 governmental entities, we 
estimate that 81,600 (91 percent) are small entities. According to SBA 
reporting data, there were 4.44 million small business firms nationwide 
in 1992.

[[Page 53634]]

    69. The rule changes effected by the C/F Block Sixth Report and 
Order affect all small entities that choose to participate in the 
upcoming auction of C and F block spectrum and other future auctions of 
C and F block spectrum, including small businesses currently holding C 
and F block licenses, and other small businesses that may participate 
in and/or acquire licenses through the auction. 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 were originally designated by the Commission as 
``entrepreneurs' blocks,'' and participation in past auctions of C and 
F block licenses was limited to entities qualifying under the 
Commission's rules as entrepreneurs. The Commission's rules define an 
entrepreneur as an entity (together with its affiliates and persons or 
entities that hold interests in the applicant and their affiliates) 
that had gross revenues of less than $125 million in each of the last 
two years and total assets of less than $500 million at the time the 
FCC Form 175 application was filed. For blocks C and F, the Commission 
has defined ``small business'' as a firm, together with its affiliates, 
that had average gross revenues of not more 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. These definitions have been approved by the SBA.
    70. On May 6, 1996, the Commission concluded the first broadband 
PCS C block auction. On July 16, 1996, the second C block auction 
closed. On January 14, 1997, the broadband PCS D, E, and F block 
auction closed. Ninety (90) bidders (prior to any defaults by winning 
bidders) won 493 C block licenses and 88 bidders won 491 F block 
licenses. Small businesses placing high bids in these C and F block 
auctions were eligible for bidding credits and installment payment 
plans. On April 15, 1999, Auction No. 22, which included 347 C and F 
block licenses, closed.
    71. On January 12, 2000, the Wireless Telecommunications Bureau 
(``Bureau'') announced an auction of broadband PCS C and F block 
licenses scheduled for July 26, 2000 (Auction No. 35). At that time, 
under the Commission's eligibility rules, in order to participate in an 
entrepreneur auction, a C or F block applicant (together with its 
affiliates and persons or entities that hold interests in the applicant 
and their affiliates) must have had gross revenues of less than $125 
million in each of the last two years and must have total assets of 
less than $500 million. Following the announcement of Auction No. 35, 
the Commission received several formal requests to waive, modify, or 
eliminate the C and F block auction and service rules in order to allow 
companies other than entrepreneurs to participate in the upcoming PCS 
auction. The Commission addressed the issues raised in the various 
petitions, comments, and other documents filed in this proceeding in 
FNPRM, in which we set forth tentative conclusions and proposals to 
retain, clarify, and modify our rules related to the C and F block 
auctions and service. In addition, on June 7, 2000, the Bureau 
announced that Auction No. 35 would begin on November 29, 2000, in 
order to allow resolution of the issues in the FNPRM and implementation 
of any rule changes prior to the auction. In the C/F Block Sixth Report 
and Order, we resolve the issues raised in the FNPRM and in the 
petitions and other filings in this proceeding by retaining, 
clarifying, and modifying our rules governing C and F block auctions 
and licenses.
    72. Auction No. 35 is slated to include C block licenses as well as 
F block licenses for operation on frequencies for which previous 
licenses had automatically cancelled or had been returned to the 
Commission. For purposes of our evaluations and conclusions in this 
IRFA, we assume that all of the original 90 C block broadband PCS 
licensees and 88 F block broadband PCS licensees, a total of 178 
licensees potentially affected by the C/F Block Sixth Report and Order 
are small entities. In addition to the 178 original small business 
licensees that may participate in the auction of the C block licenses, 
a number of additional small business entities may seek to acquire 
licenses through auction; thus, these business entities would be 
affected by these rules.

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

    73. The C/F Block Sixth Report and Order does not impose new 
reporting, recordkeeping, or other compliance requirements upon auction 
participants. As customary, auction participants will need to follow 
the standard procedural rules used for broadband PCS spectrum auctions, 
including application and payment rules.

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

    74. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (i) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (ii) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(iii) the use of performance, rather than design, standards; and (iv) 
an exemption from coverage of the rule, or any part thereof, for small 
entities. 5 U.S.C. 603.
    75. The Commission concludes that it is in the public interest to 
modify our auction and service rules for C and F block broadband 
Personal Communications Services (PCS) licenses to achieve the various 
goals of section 309(j) of the Communications Act. Specifically, in 
this C/F Block Sixth Report and Order we retain, clarify, and revise 
our rules, as follows:
    Reconfiguration of C Block License Size: The Commission will 
reconfigure each 30 MHz C block license available in future broadband 
PCS auctions into three 10 MHz C block licenses. By increasing the 
number of available licenses through this reconfiguration, rather than 
retaining the larger spectrum blocks (with fewer licenses), taken 
together with lifting certain of our eligibility requirements, 
providing set-asides, and providing small and very small business 
bidding credits to small entities for licenses offered in open bidding, 
the Commission will promote wider auction participation and license 
distribution in accordance with the goals of section 309(j) of the 
Communications Act. Under this alternative, small bidders should be 
able to fulfill their business needs, while large bidders should enjoy 
greater flexibility in tailoring their bidding to their business plans 
without running afoul of the spectrum cap.
    Utilization of a Tiered Approach: The Commission will remove the 
entrepreneur eligibility restrictions for some, but not all, licenses 
available in future C and F block auctions. Based on the demand for 
spectrum to satisfy congestion, new technology and competitive needs, 
the Commission has considered the alternatives and determined that it 
would serve the public interest to make some additional spectrum 
available to all interested bidders, not just entrepreneurs. The

[[Page 53635]]

Commission will divide Basic Trading Areas (``BTAs'') into two tiers 
according to population size of the BTA. ``Tier 1'' would comprise BTAs 
at and above a 2.5 million population threshold; ``Tier 2'' would 
comprise BTAs below that population threshold. The Commission believes 
that by dividing BTAs into two tiers, according to population, the 
Commission has greater flexibility to eliminate the entrepreneur 
eligibility restrictions in some of the largest markets while retaining 
the restrictions in many mid-sized and smaller markets, where smaller 
entities have proven more successful.
    Eligibility Restrictions Under a Tiered Approach: For markets with 
available 30 MHz licenses, other than licenses that were available but 
unsold in Auction No. 22, the Commission will allow open bidding for 
two of the three newly reconfigured 10 MHz C block licenses in Tier 1 
and for one of the three newly reconfigured 10 MHz C block licenses in 
Tier 2. Specifically, in Tier 1, the Commission will allow open bidding 
for two 10 MHz blocks, 1900-1905 MHz paired with 1980-1985 MHz and 1905 
MHz-1910 MHz paired with 1985-1990 MHz. In Tier 2, the Commission will 
allow open bidding for one 10 MHz block, 1905 MHz-1910 MHz paired with 
1985-1990 MHz. The Commission believes this approach will split the C 
block spectrum available in Auction No. 35 almost equally, when 
weighted by population, between open and closed licenses. Moreover, in 
light of the alternatives, this approach, in conjunction with the other 
revisions to the entrepreneur eligibility restrictions, will make 
relatively more spectrum available for open bidding in the most 
populous markets where the demand for spectrum by the large Commercial 
Mobile Radio Service (``CMRS'') carriers is the greatest and the 
prospects of a spectrum shortage for these carriers is the most acute. 
For available 15 MHz C block licenses, other than licenses that were 
available but unsold in Auction No. 22, the Commission will eliminate 
entrepreneur eligibility restrictions in Tier 1 but retain the 
restrictions in Tier 2. The Commission believes that in this way we 
give effect to as many of the section 309(j) objectives as possible. 
Balancing all of our statutory objectives and considering alternative 
possibilities, we believe that it is fair and appropriate to apportion 
the spectrum to accommodate the interests of many carriers that need 
additional spectrum to ``fill out'' their service areas or to satisfy 
capacity needs. Apportioning the 30 MHz C block licenses in the manner 
described will enable larger carriers to obtain spectrum crucial to 
their business plans. At the same time, maintaining a significant set 
aside of C block spectrum for entrepreneurs will help smaller 
businesses in this band continue to achieve their business goals as 
well as providing meaningful opportunities for new entrepreneurial 
firms to enter the market.
    In addition, the Commission will allow open bidding for all F block 
licenses available in Auction No. 35 and in all future auctions. The 
Commission believes that it is in the public interest and consistent 
with section 309(j), to remove the set-aside for all available F block 
licenses. The F block has evolved in a fashion largely distinct from 
that of the C block; thus, the two blocks have been subject to 
increasingly different regulatory requirements, reflecting the separate 
equity and reliance concerns applicable to each of the blocks. 
Therefore, there is no longer a rationale for attempting to treat the 
two blocks in an identical or a substantially similar fashion.
    Lastly, the Commission will establish open bidding for all 
broadband PCS C and F block licenses available but unsold in Auction 
No. 35 or in any other future auction and for all C block licenses, 15 
MHz or 30 MHz (reconfigured into 10 MHz), that were available but not 
sold in Auction No. 22. Bidding to date has failed to result in 
construction of these licenses and service to the public. By lifting 
the eligibility restrictions for these unsold licenses now, the 
Commission hopes to prevent additional delays in their utilization.
    Entrepreneur Eligibility: The Commission will not apply the natural 
growth exception, which allows C and F block licensees to retain their 
entrepreneur eligibility during the five-year holding period, to 
determinations of entrepreneur eligibility for Auction No. 35. Although 
the Commission intended to ignore natural growth for purposes of 
entrepreneur eligibility during the five-year holding period, it did 
not intend to ignore such growth in determining eligibility to 
participate in future C and F block auctions. In addition, the 
Commission does not see a need to modify Sec. 24.720 which states that 
an entrepreneurs' block applicant must substantiate its gross revenues 
and total assets with its most recent audited financial statements, or, 
if the applicant does not otherwise use audited financial statements, a 
certification by the applicant's chief financial officer or its 
equivalent. However, the Commission expects applicants to obtain 
audited financial statements within a reasonable period of time after 
the close of the applicable calendar or fiscal year and to base its 
claim to eligibility on those financial statements.
    License Grouping for Bids and Competitive Design: The Commission 
will not license by bulk bidding. As stated in the FNPRM, the 
Commission is concerned that small entities may be hard pressed to 
obtain the financing necessary to win and pay for licenses and 
construct systems included in the bulk bid proposal, while many other 
carriers may be constrained from participating by the CMRS spectrum 
cap. Some of the parties that commented on ways to aggregate licenses 
in the auction process, argued against the use of package bidding for 
Auction No. 35, on the ground that such a design would be complex and 
impractical. Other commenters support implementation of package bidding 
as a way to enhance the ability of auction participants to acquire 
their targeted groups of licenses while reducing their exposure. The 
Bureau has discretion, under its existing delegated authority and 
pursuant to public notice and comment, to determine the competitive 
bidding design most appropriate for the auction.
    ``Grandfather'' Exception: The Commission will not eliminate the 
``grandfather'' exception contained in Sec. 24.709(b)(9)(i). Instead, 
the Commission will clarify an applicant's eligibility for the 
``grandfather'' exception after it has been involved in a merger, 
acquisition, or other business combination, as follows. When each of 
the merging entities is individually eligible for the ``grandfather'' 
exception, the exception will extend to the resulting entity. When one 
or more of the entities is not individually eligible for the 
``grandfather'' exception, the resulting entity will be eligible for 
the exception only so long as an originally eligible entity retains de 
facto and de jure control of the resulting entity. The Commission does 
not believe that, when entities eligible for the ``grandfather'' 
exception combine, the resulting entity should be penalized. This 
revision to the Commission's rules will provide spectrum opportunities 
for entrepreneurs while at the same time maintaining a fair 
implementation of the auctions program.
    Bidding Credits: The Commission will maintain the current level of 
bidding credits for small and very small businesses, and consortia 
thereof, of 15 percent and 25 percent, respectively, for licenses 
subject to ``open'' biding. After considering the alternatives, the 
Commission believes that bidding credits of 15 and 25 percent will 
allow effective competition by small

[[Page 53636]]

businesses in open C and F block bidding. In our Specialized Mobile 
Radio (SMR) 900 MHz auction--using bidding credits of 10 percent and 15 
percent--75 percent of the winning bidders were small businesses, 
winning 26 percent of the licenses. Moreover, in Auction No. 11, the 
auction of D, E, and F block licenses, small and very small business 
were the high bidders for 141 of the 986 D and E block licenses won in 
that auction, even though bidding credits are not available for D and E 
block licenses. The current level of bidding credits for broadband PCS 
C and F blocks seems to allow significant participation of small and 
very small entities; therefore, we do not see a need to increase the 
current level of bidding credits.
    For licenses subject to ``closed'' bidding, the Commission will 
eliminate all bidding credits. After considering the alternatives, the 
Commission believes that the continued use of bidding credits in 
restricted auctions would not necessarily serve its intended purpose. 
As explained in the Further Notice, some well-capitalized new entities 
with small gross revenues qualify for bidding credits, while some older 
companies with small total assets and net revenues but high gross 
revenues do not. Eliminating bidding credits in a closed auction will 
remove this anomaly while at the same time continuing to provide small 
and very small businesses with a meaningful opportunity to compete in 
Auction No. 35.
    Transfer Requirements for Certain Licenses: The Commission will 
modify its transfer requirements to correspond to the Commission's 
changes in the eligibility requirements, and to encourage rapid 
construction of C and F block systems. Specifically, C and F block 
licenses won pursuant to ``open'' bidding at Auction No. 35, or any 
future open auction for such spectrum, will not be subject to a holding 
rule. For C and F block licenses won pursuant to ``closed'' bidding, 
the Commission will permit a licensee to assign or transfer its 
licenses to any qualified entity, entrepreneur or not, upon the 
licensee's completion of its first construction benchmark, whether or 
not it takes the full five years allowed by our rules. This will 
encourage rapid build-out and service to the public while at the same 
time providing C and F block licensees with the ability to access 
capital; thus, resulting in a more efficient use of spectrum. The 
Commission will continue to evaluate satisfaction of construction 
requirements on a license-by-license, rather than on a system-wide, 
basis.
    Additionally, a licensee that won a license in Auction No. 5 or 10 
will not be subject to a bidding credit unjust enrichment payment upon 
transfer and assignment of the license to an entity not qualifying as a 
small business, subject to the Commission's transfer requirements. 
Because all license winners in those auctions qualified for the 
available 25 percent bidding credit, there is no purpose in requiring 
the payment. However, licenses won in other auctions using a bidding 
credit will be subject to a bidding credit unjust enrichment payment 
upon transfer or assignment in accordance with the Commission's 
transfer requirements.
    License Cap: The Commission will remove Sec. 24.710, which 
prohibits an auction applicant from winning more than 98 C and F block 
licenses, from the Commission's rules. When this rule was established, 
the license cap was intended to facilitate a fair distribution of 
licenses within the C and F blocks. The Commission has achieved this 
objective; moreover, the reconfiguration of the available 30 MHz C 
block licenses will create additional C block licenses, while the 
elimination of the eligibility restrictions will increase the chances 
of C and F block licenses being won by a variety of entities.
    Spectrum Cap: The Commission will continue to apply the CMRS 
spectrum cap to PCS C and F block licenses to be auctioned. In 
September 1999, the Commission decided that the spectrum cap, with some 
modification, continued to promote competition, efficient spectrum use, 
innovation, and a wide dissemination of licenses. The Commission 
believes that implementation of the C and F block auction and service 
rule changes will ease the impact of the spectrum cap for Auction No. 
35, making the alternative of spectrum cap relief unnecessary with 
respect to licenses in this auction. Moreover, the Commission will soon 
begin its year 2000 biennial review of the spectrum cap rules, 
providing another opportunity for a comprehensive review of related 
issues.
    76. 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 ensures 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. The 
Commission believes that these revisions to the C and F block auction 
and service rules as set forth in the C/F Block Sixth Report and Order 
promote these goals while maintaining the fair and efficient execution 
of the auctions program.
    77. Report to Congress: The Commission will send a copy of the C/F 
Block Sixth Report and Order, including this FRFA, in report to be sent 
to Congress pursuant to the SBREFA, see 5 U.S.C. 801(a)(1)(A). In 
addition, the Commission will send a copy of the C/F Block Sixth Report 
and Order, including the FRFA, to the Chief Counsel for Advocacy of the 
Small Business Administration.

List of Subjects in 47 CFR Part 24

    Personal communications services.

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

Rule Changes

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR part 24 as follows:

PART 24--PERSONAL COMMUNICATIONS SERVICES

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

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

    2. Amend Sec. 24.202 by revising the introductory text to read as 
follows:


Sec. 24.202  Service areas.

    Broadband PCS service areas are Major Trading Areas (MTAs) and 
Basic Trading Areas (BTAs) as defined in this section. MTAs and BTAs 
are based on the Rand McNally 1992 Commercial Atlas & Marketing Guide, 
123rd Edition, at pages 38-39 (``BTA/MTA Map''). Rand McNally organizes 
the 50 states and the District of Columbia into 47 MTAs and 487 BTAs. 
The BTA/MTA Map is available for public inspection at the Office of 
Engineering and Technology's Technical Information Center, 445 12th 
Street, SW, Washington, DC 20554.
* * * * *

    3. Amend Sec. 24.203 by revising paragraph (b) to read as follows:


Sec. 24.203  Construction requirements.

* * * * *
    (b) Licensees of 10 MHz blocks, including 10 MHz C block licenses 
reconfigured pursuant to Amendment of the Commission's Rules Regarding 
Installment Payment Financing for Personal Communications Services 
(PCS) Licensees, WT Docket No. 97-82,

[[Page 53637]]

Sixth Report and Order, FCC 00-313, and 15 MHz blocks resulting from 
the disaggregation option as provided in the Commission's Rules 
Regarding Installment payment Financing for Personal Communications 
Services (PCS) Licensees, Second Report and Order and Further Notice of 
Proposed Rule Making, WT Docket 97-82, 12 FCC Rcd 16436 (1997), as 
modified by Order on Reconsideration of the Second Report and Order, WT 
Docket 97-82, 13 FCC Rcd 8345 (1998), must serve with a signal level 
sufficient to provide adequate service to at least one-quarter of the 
population in their licensed area within five years of being licensed, 
or make a showing of substantial service in their licensed area within 
five years of being licensed. Population is defined as the 1990 
population census. Licensees may elect to use the 2000 population 
census to determine the five-year construction requirement. Failure by 
any licensee to meet these requirements will result in forfeiture of 
the license and the licensee will be ineligible to regain it.
* * * * *

    4. Amend Sec. 24.229 by revising paragraph (b) to read as follows:


Sec. 24.229  Frequencies.

* * * * *
    (b) The following frequency blocks are available for assignment on 
a BTA basis:
    Block C: 1895-1910 MHz paired with 1975-1990 MHz;
    Pursuant to Amendment of the Commission's Rules Regarding 
Installment Payment Financing for Personal Communications Services 
(PCS) Licensees, WT Docket No. 97-82, Sixth Report and Order, FCC 00-
313, all 30 MHz Block C licenses available for auction in Auction No. 
35 or any subsequent auction will be reconfigured into three 10 MHz C 
block licenses as follows: 1895-1900 MHz paired with 1975-1980 MHz, 
1900-1905 MHz paired with 1980-1985 MHz, 1905-1910 MHz paired with 
1985-1990 MHz;
    Block D: 1865-1870 MHz paired with 1945-1950 MHz;
    Block E: 1885-1890 MHz paired with 1965-1970 MHz;
    Block F: 1890-1895 MHz paired with 1970-1975 MHz;

    5. Amend Sec. 24.709 by revising paragraphs (a), (a)(1), (a)(3), 
(b)(9)(i), redesignating paragraph (b)(9)(ii) as paragraph (b)(9)(iv), 
adding new paragraphs (b)(9)(ii), (b)(9)(iii), revising paragraph 
(d)(1), redesignating paragraph (e) as paragraph (g), and adding new 
paragraphs (e) and (f) to read as follows:


Sec. 24.709  Eligibility for licenses for frequency Blocks C and F.

    (a) General Rule for licenses offered for closed bidding. (1) No 
application is acceptable for filing and no license shall be granted to 
a winning bidder in closed bidding for frequency block C or frequency 
block F, unless the applicant, together with its affiliates and persons 
or entities that hold interests in the applicant and their affiliates, 
have had gross revenues of less than $125 million in each of the last 
two years and total assets of less than $500 million at the time the 
applicant's short-form application (Form 175) is filed.
* * * * *
    (3) Any licensee awarded a license won in closed bidding pursuant 
to the eligibility requirements of this section (or pursuant to 
Sec. 24.839(a)(2)) shall maintain its eligibility until at least five 
years from the date of initial license grant, except that a licensee's 
(or other attributable entity's) increased gross revenues or increased 
total assets due to nonattributable equity investments (i.e., from 
sources whose gross revenues and total assets are not considered under 
paragraph (b) of this section), debt financing, revenue from operations 
or other investments, business development, or expanded service shall 
not be considered.
    (b) * * *
    (9) * * *
    (i) In addition to entities qualifying for closed bidding under 
paragraph (a)(1) of this section, any entity that was eligible for and 
participated in the auction for frequency block C, which began on 
December 18, 1995, or the reauction for frequency block C, which began 
on July 3, 1996, will be eligible to bid for C block licenses offered 
in closed bidding in any reauction of frequency block C spectrum that 
begins within two years of March 23, 1999.
    (ii) In cases of merger, acquisition, or other business combination 
of entities, where each of the entities is eligible to bid for C block 
licenses offered in closed bidding in any reauction of C block spectrum 
on the basis of the eligibility exception set forth in paragraph 
(b)(9)(i) of this section, the resulting entity will also be eligible 
for the exception specified in paragraph (b)(9)(i).
    (iii) In cases of merger, acquisition, or other business 
combination of entities, where one or more of the entities are 
ineligible for the exception set forth in paragraph (b)(9)(i) of this 
section, the resulting entity will not be eligible pursuant to 
paragraph (b)(9)(i) unless an eligible entity possesses de jure and de 
facto control over the resulting entity.
* * * * *
    (d) * * * (1) Applicants and licensees claiming eligibility for 
closed bidding under this section or for other provisions under 
Secs. 24.711 through 24.720 shall be subject to audits by the 
Commission, using in-house and contract resources. Selection for audit 
may be random, on information, or on the basis of other factors.
* * * * *
    (e) Tiers. (1) For purposes of determining spectrum to which the 
eligibility requirements of this section are applicable, the BTA 
service areas (see Sec. 24.202(b)) are divided into two tiers according 
to their population as follows:
    (i) Tier 1: BTA service areas with population equal to or greater 
than 2.5 million;
    (ii) Tier 2: BTA service areas with population less than 2.5 
million.
    (2) For Auction No. 35, the population of individual BTA service 
areas will be based on the 1990 census. For auctions beginning after 
the start of Auction No. 35, the population of individual BTA service 
areas will be based on the most recent available decennial census.
    (f) Application of eligibility requirements. (1) The following 
categories of licenses will be subject to closed bidding pursuant to 
the eligibility requirements of this section in auctions that begin 
after the effective date of this paragraph.
    (i) For Tier 1 BTAs, one of the 10 MHz C block licenses (1895-1900 
MHz paired with 1975-1980 MHz);
    (ii) For Tier 2 BTAs, two of the 10 MHz C block licenses (1895-1900 
MHz paired with 1975-1980 MHz; 1900-1905 MHz paired with 1980-1985 MHz) 
and all 15 MHz C block licenses.
    (2) Notwithstanding the provisions of paragraph (f)(1) of this 
section, any C block license for operation on spectrum that has been 
offered, but not won by a bidder, in closed bidding in any auction 
beginning on or after March 23, 1999, will not be subject in a 
subsequent auction to closed bidding pursuant to the eligibility 
requirements of this section.
* * * * *


Sec. 24.710  [Removed and Reserved]

    6. Remove and reserve Sec. 24.710.

    7. Revise Sec. 24.712 to read as follows:


Sec. 24.712  Bidding credits for licenses for frequency Block C.

    (a) Except with respect to licenses won in closed bidding in 
auctions that begin after March 23, 1999, a winning bidder that 
qualifies as a small business or a consortium of small businesses as 
defined in Sec. 24.720(b)(1) or

[[Page 53638]]

Sec. 24.720(b)(4) may use a bidding credit of fifteen percent, as 
specified in Sec. 1.2110(e)(2)(iii) of this chapter, to lower the cost 
of its winning bid.
    (b) Except with respect to licenses won in closed bidding in 
auctions that begin after March 23, 1999, a winning bidder that 
qualifies as a very small business or a consortium of very small 
businesses as defined in Sec. 24.720(b)(2) or Sec. 24.720(b)(5) may use 
a bidding credit of twenty-five percent as specified in 
Sec. 1.2110(e)(2)(ii) of this chapter, to lower the cost of its winning 
bid.
    (c) Unjust enrichment. See Sec. 1.2111 of this chapter. The unjust 
enrichment provisions of Sec. 1.2111(d) and (e)(2) shall not apply with 
respect to licenses acquired in either the auction for frequency block 
C that began on December 18, 1995, or the reauction of block C spectrum 
that began on July 3, 1996.

    8. Amend Sec. 24.714 by revising paragraphs (a)(2) and (a)(3) to 
read as follows:


Sec. 24.714  Partitioned licenses and disaggregated spectrum.

    (a) * * *
    (2) Broadband PCS licensees in spectrum blocks A, B, D, and E and 
broadband PCS C and F block licenses not subject to the eligibility 
requirements of Sec. 24.709 may apply to partition their licensed 
geographic service area or disaggregate their licensed spectrum at any 
time following the grant of their licenses.
    (3) Broadband PCS licensees that acquired C or F block licenses in 
closed bidding subject to the eligibility requirements of Sec. 24.709 
may partition their licensed geographic service area or disaggregate 
their licensed spectrum at any time to an entity that meets the 
eligibility criteria set forth in Sec. 24.709 at the time the request 
for partial assignment of license is filed or to an entity that holds 
license(s) for frequency blocks C and F that met the eligibility 
criteria set forth in Sec. 24.709 at the time of receipt of such 
license(s). Partial assignment applications seeking partitioning or 
disaggregation of broadband PCS licenses in spectrum blocks C and F 
must include an attachment demonstrating compliance with this section.
* * * * *

    9. Amend Sec. 24.717 by revising paragraphs (a) and (b) to read as 
follows:


Sec. 24.717  Bidding credits for licenses for frequency Block F.

    (a) Except with respect to licenses won in closed bidding in 
auctions that begin after March 23, 1999, a winning bidder that 
qualifies as a small business or a consortium of small businesses as 
defined in Sec. 24.720(b)(1) or Sec. 24.720(b)(4) may use a bidding 
credit of fifteen percent, as specified in Sec. 1.2110(e)(2)(iii) of 
this chapter, to lower the cost of its winning bid.
    (b) Except with respect to licenses won in closed bidding in 
auctions that begin after March 23, 1999, a winning bidder that 
qualifies as a very small business or a consortium of very small 
businesses as defined in Sec. 24.720(b)(2) or Sec. 24.720(b)(5) may use 
a bidding credit of twenty-five percent as specified in 
Sec. 1.2110(e)(2)(ii) of this chapter, to lower the cost of its winning 
bid.
* * * * *

    10. Amend Sec. 24.720 by revising paragraph (i) to read as follows.


Sec. 24.720  Definitions.

* * * * *
    (i) Members of Minority Groups. Members of minority groups include 
individuals of African American, Hispanic-surnamed, American Eskimo, 
Aleut, American Indian, and Asian American extraction.
* * * * *

    11. Amend Sec. 24.839 by revising paragraphs (a) introductory text, 
(a)(2), (a)(3) and (a)(5) and by adding paragraph (a)(6) to read as 
follows:


Sec. 24.839  Transfer of control or assignment of license.

    (a) Restrictions on Assignments and Transfers of Licenses for 
Frequency Blocks C and F won in closed bidding. No assignment or 
transfer of control of a license for frequency Block C or frequency 
Block F won in closed bidding pursuant to the eligibility requirements 
of Sec. 24.709 will be granted unless:
* * * * *
    (2) The proposed assignee or transferee meets the eligibility 
criteria set forth in Sec. 24.709 of this part at the time the 
application for assignment or transfer of control is filed, or the 
proposed assignee or transferee holds other license(s) for frequency 
blocks C and F and, at the time of receipt of such license(s), met the 
eligibility criteria set forth in Sec. 24.709 of this part; or
    (3) The application is for partial assignment of a partitioned 
service area to a rural telephone company pursuant to Sec. 24.714 of 
this part and the proposed assignee meets the eligibility criteria set 
forth in Sec. 24.709 of this part; or
* * * * *
    (5) The assignment or transfer of control is pro forma; or
    (6) The application for assignment or transfer of control is filed 
on or after the date the licensee has notified the Commission pursuant 
to Sec. 24.203(c) that its five-year construction requirement has been 
satisfied.
* * * * *
[FR Doc. 00-22630 Filed 9-1-00; 8:45 am]
BILLING CODE 6712-01-U