[Federal Register Volume 66, Number 29 (Monday, February 12, 2001)]
[Proposed Rules]
[Pages 9798-9806]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-3521]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 20 and 22

[WT Docket No. 01-14; FCC 01-28]


2000 Biennial Regulatory Review--Spectrum Aggregation Limits for 
Commercial Mobile Radio Services

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, we open a proceeding to reexamine the need 
for Commercial Mobile Radio Services (CMRS) spectrum aggregation 
limits. Specifically, we seek comment on whether the CMRS spectrum cap 
and the cellular cross-interest rule should be eliminated, modified, or 
retained, based on the public interest standard set forth under section 
11 of the Communications Act.

DATES: Comments are due on or before April 13, 2001 and reply comments 
are due on or before March 14, 2001.

ADDRESSES: Federal Communications Commission, 445 12th Street, SW., 
Washington, DC 20554.

FOR FURTHER INFORMATION CONTACT: Michael Rowan, Wireless 
Telecommunications Bureau, at (202) 418-7240.

SUPPLEMENTARY INFORMATION: This is a summary of the Federal 
Communications Commission's Notice of Proposed Rulemaking (NPRM), FCC 
01-28, in WT Docket No. 01-14, adopted on January 19, 2001 and released 
on January 23, 2001. The full text of this NPRM is available for 
inspection and copying during normal

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business hours in the FCC Reference Center, Room CY-A257, 445 12th 
Street, SW., Washington, DC 20554. The complete text may be purchased 
from the Commission's copy contractor, International Transcription 
Service, Inc., 1231 20th Street, NW., Washington, DC 20037. The full 
text may also be downloaded at: http://www.fcc.gov. Alternative formats 
are available to persons with disabilities by contacting Martha Contee 
at (202) 418-0260 or TTY (202) 418-2555.

Synopsis of Notice of Proposed Rulemaking

I. Introduction

    1. In this Notice of Proposed Rulemaking (NPRM), we begin our 
reexamination of the need for Commercial Mobile Radio Services (CMRS) 
spectrum aggregation limits as part of our 2000 biennial regulatory 
review of the Commission's telecommunications regulations. 
Specifically, we are initiating our second comprehensive review of the 
two regulations that currently limit the aggregation of broadband CMRS 
spectrum: The CMRS spectrum cap and the cellular cross-interest rule. 
Pursuant to the mandate of section 11 of the Communications Act of 
1934, as amended (Communications Act), 47 U.S.C. 161, we seek comment 
on whether competitive or other developments in CMRS markets warrant 
elimination or modification of one or both of these regulations.

II. Background

A. CMRS Spectrum Cap

    2. The CMRS spectrum cap rule reads: ``No licensee in the broadband 
PCS, cellular, or SMR services (including all parties under common 
control) regulated as CMRS * * * shall have an attributable interest in 
a total of more than 45 MHz of licensed broadband PCS, cellular and SMR 
spectrum regulated as CMRS with significant overlap in any geographic 
area, except that in Rural Service Areas (RSAs), * * * no licensee 
shall have an attributable interest in a total of more than 55 MHz of 
licensed broadband PCS, cellular, and SMR spectrum regulated as CMRS 
with significant overlap in any RSA.'' 47 CFR 20.6(a). No more than 10 
MHz is attributed to an entity when calculating Specialized Mobile 
Radio (SMR) spectrum under the cap.
    3. Section 20.6(d) of the Commission's rules provides generally 
that ownership interests of 20 percent or more are deemed attributable. 
Once all the applicable CMRS spectrum attributable to a given entity is 
identified, one then determines whether the attributable CMRS spectrum 
serves markets having a ``significant overlap.'' 47 CFR 20.6(a), (c). 
When a situation involves both a PCS license and a cellular or SMR 
license, a significant overlap exists when 10 percent or more of the 
population of the designated PCS licensed service area is within the 
cellular geographic service area (CGSA) or SMR service area(s) in 
question. Where only PCS licenses are involved, however, this analysis 
does not apply, and any overlap between BTA-licensed and MTA-licensed 
spectrum is considered significant.
    4. In our First Biennial Review Order, issued in September 1999 as 
part of the 1998 biennial review, we decided substantially to retain 
the CMRS spectrum cap (and the cellular cross-interest rule), with 
targeted modifications to reflect circumstances in rural areas and to 
permit passive institutional investors to acquire greater non-
attributable interests in CMRS carriers. See 1998 Biennial Regulatory 
Review, Spectrum Aggregation Limits for Wireless Telecommunications 
Carriers, WT Docket No. 98-205, Report and Order, 15 FCC Rcd 9219, 9249 
paragraph 66 (1999) (First Biennial Review Order). We reaffirmed the 45 
MHz limit as striking the proper balance (in non-rural areas) in 
providing carriers with sufficient spectrum until we could allocate 
additional amounts suitable for the provision of CMRS, while helping 
assuage the competitive consequences of the spectrum-related barriers 
to entry in today's CMRS markets. We concluded that a 55 MHz spectrum 
ceiling in RSAs recognizes the reality that higher concentration 
through efficiency-enhancing partnering and other arrangements is 
likely or inevitable in rural areas.

B. Cellular Cross-Interest Rule

    5. To the extent licensees on different channel blocks have any 
degree of overlap between their respective CGSAs, Sec. 22.942 of the 
Commission's rules prohibits any entity from having a direct or 
indirect ownership interest of more than 5 percent in one such licensee 
when it has an attributable interest in the other licensee. An 
attributable interest is defined generally to include an ownership 
interest of 20 percent or more, as well as any controlling interest. 
Under the rule, however, an entity may have non-controlling and 
otherwise non-attributable direct or indirect ownership interests of 
less than 20 percent in licensees for different channel blocks in 
overlapping CGSAs.
    6. As part of our 1998 biennial review of the cellular cross-
interest rule, we determined that the restriction continued to be 
necessary to protect against substantial anticompetitive threats from 
common ownership between the two cellular carriers in any given 
geographic area. However, because competition from other services had 
increased on the whole since the rule's inception in 1991, we altered 
what had been a near absolute bar against cross-ownership by relaxing 
application of the rule's attribution standards to the current limits 
under Sec. 22.942.

III. Discussion

A. Section 11 Review of CMRS Spectrum Aggregation Limits

    7. In passing the Telecommunications Act of 1996 to significantly 
amend the Communications Act, Congress anticipated that, as competition 
developed, market forces would reduce the need for regulation. 
Specifically, in adopting section 11 of the Communications Act, 
Congress required the Commission, every two years, to review all 
regulations that apply to ``the operations or activities of any 
provider of telecommunications service'' and to ``determine whether any 
such regulation is no longer necessary in the public interest as the 
result of meaningful economic competition between providers of such 
service.'' 47 U.S.C. 161(a)(1), (2). If we determine that, as the 
result of competition in CMRS markets, certain regulations applicable 
to CMRS providers are no longer necessary in the public interest, then 
we ``shall repeal or modify'' those regulations per Congress'' mandate. 
47 U.S.C. 161(b).
    8. To determine whether the CMRS spectrum cap and the cellular 
cross-interest rule are no longer necessary in the public interest as 
the result of meaningful economic competition, we are here soliciting 
detailed comments from wireless telecommunications carriers, consumers 
of their services, and other interested parties on whether we should 
retain, repeal or modify these limits under the standards of section 11 
of the Communications Act. Under section 11, our fundamental inquiry is 
whether, as a result of meaningful economic competition among providers 
of telecommunications services, spectrum aggregation limits are no 
longer necessary in the public interest, e.g., to prevent harmful 
concentration of spectrum ownership or to ensure meaningful 
opportunities for broadband CMRS market entry. In order to make this 
determination, we seek comment

[[Page 9800]]

regarding what providers of ``telecommunications service'' fall within 
the purview of our section 11 analysis of our spectrum aggregation 
policies. What constitutes ``meaningful economic competition'' under 
section 11, and to what degree have the relevant competitive conditions 
changed since our 1998 biennial review of these rules? If meaningful 
competition between providers of telecommunications services now 
exists, have spectrum aggregation limits served their purpose and are 
they no longer in the public interest? Or, are there public interest 
reasons to retain spectrum aggregation limits notwithstanding the 
development of meaningful economic competition? We ask commenters to 
consider generally the relation between ``public interest'' and 
``meaningful economic competition'' under section 11's terms. We note 
that we are incorporating by reference all comments on the spectrum cap 
that we received in our 2000 Staff Report proceeding. See In the Matter 
of the 2000 Biennial Regulatory Review, CC Docket No. 00-175, Report, 
FCC 00-456 (rel. Jan. 17, 2001) (2000 Staff Report).

B. Reexamination and Public Interest Determination

    9. In this review under section 11, we seek public comment and 
input, including the submission of specific market data and studies, to 
assist our public interest determination of whether the CMRS spectrum 
aggregation rules are no longer necessary in the public interest and, 
if they are necessary, whether our existing spectrum limits should be 
modified.
1. Development of Meaningful Economic Competition
    10. Since we last reviewed spectrum aggregation limits in September 
1999, CMRS markets have continued to grow in size, range of service 
offerings, and the pace of technological advances. In our Fifth Annual 
CMRS Competition Report, released in August 2000, we described 
considerable evidence that the mobile telephony market has experienced 
strong growth and competitive development. See Implementation of 
Section 6002(b) of the Omnibus Budget Reconciliation Act of 1993; 
Annual Report and Analysis of Competitive Market Conditions With 
Respect to Commercial Mobile Services, Fifth Report, FCC 00-289 (rel. 
Aug. 18, 2000) (Fifth Annual CMRS Competition Report). For example, we 
reported that non-cellular carriers had for the first time attracted a 
majority of the industry's total new subscribers. As a result, cellular 
licensees' market share of mobile telephone subscribers nationwide had 
dropped from 86 percent at the end of 1998 to approximately 75 percent 
at the end of 1999. Concurrent with, and we believe largely as the 
result of, the continued growth of competition in the mobile telephony 
market, consumers have benefited from declining prices, rapidly 
expanding coverage areas, new service packages, and technological 
innovation.
    11. In light of these developments in competition, we now seek 
comment on whether these regulations continue to serve the public 
interest by promoting or protecting competition in CMRS services. Will 
our spectrum aggregation limits continue to contribute to the rise of 
competition and resulting benefits to consumers, as we have found in 
the past, or are they no longer necessary? We seek comment regarding 
the correlation between the number of competitors maintained by current 
spectrum aggregation limits and the growth and maintenance of 
competition that has produced the benefits to consumers that we have 
observed.
    12. We seek comment on whether competitive developments since 1999 
have obviated the need for limits such as the spectrum cap to prevent 
potentially harmful reconsolidation. How valuable a role do spectrum 
limits play in preventing potentially harmful concentration versus 
allowing consolidations that benefit the public interest? In this 
regard, we note that spectrum aggregation limits do not appear to have 
prevented the consolidation of carriers into nationwide networks with 
the resulting beneficial service options for consumers.
    13. We ask for comment on the various economic relationships on 
which our spectrum cap policy is based. How do recent developments 
affect our concern that limits were necessary in order to ensure a 
minimum number of competitors in any given geographic area? Should the 
relevant measures of market capacity (e.g., assigned spectrum, 
subscriber shares, etc.) be weighted differently than in the past? What 
role should we continue to afford HHI calculations or similar measures 
of concentration of ownership or control, and what inputs should we use 
in calculating HHI? Should we continue to apply the cap to all 
broadband PCS, cellular, and SMR spectrum regulated as CMRS, regardless 
of the use to which the spectrum currently is dedicated; or, should we 
limit application of the cap to CMRS spectrum used for mobile voice 
service? If we were to limit the cap to mobile voice services only, how 
would we further and clearly define the included and excluded product 
markets? Also in the increasingly converging marketplace, are these 
product markets truly segregable? Moreover, how would such a policy 
affect the spectrum cap's goal to guard against excessive accumulation 
of CMRS spectrum? Also, how should we define the relevant geographic 
market, especially in light of the trend toward nationwide footprints 
and affiliations? Commenters should specifically address whether 
today's CMRS markets will enable new entrants--both existing carriers 
seeking to expand their footprints and firms, including small 
businesses, seeking to enter the market ab initio--to have access to 
the limited spectrum that is practically available today for mobile 
telephone services.
    14. We also seek comment on the implications for our spectrum 
aggregation limits of our authority under section 310(d) of the 
Communications Act to determine that a particular consolidation is not 
in the public interest. If we were to eliminate or relax the spectrum 
cap, could we, or should we, adopt new standards or methodologies such 
as a processing threshold that if a proposed transaction would cause an 
applicant to exceed 45 MHz of covered spectrum (or some other threshold 
amount), it must provide an additional public interest showing meeting 
certain criteria (e.g., HHI and/or other economic data demonstrating 
concentration of market)? Alternatively, would it be preferable to 
establish a threshold based on the number of competitors providing CMRS 
(or CMRS mobile voice telephony) in a geographic market? Commenters 
should consider the impact of any standards that will increase time and 
expense for small businesses, which often may not have the requisite 
resources for case-by-case reviews. To the extent that we decide to 
eliminate the spectrum cap and rely on the section 310(d) review 
process, we note that attribution and ownership issues could also arise 
outside that process if licensees are permitted to lease spectrum usage 
rights without prior section 310(d) approval.
    15. We seek comment on the implications of other agencies' 
enforcement of antitrust laws for our spectrum aggregation limits and 
our public interest review required by section 310(d). Can we, and 
should we, defer to the Department of Justice (DOJ) in cases where it 
has entered into consent decrees with merging CMRS carriers to prevent 
competitive harm, and if so, what form should such deference take? For 
example, can we, and should we, adopt an approach such that all 
transfers resulting in

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consolidation of spectrum below a spectrum threshold should be exempt 
from section 310(d) competitive analysis? Can we, and should we, eschew 
an independent review of the competitive implications of license 
transfers that are part of mergers that are subject to some specified 
level of DOJ review, and, if so, how should we define that level? What 
would be the legal and policy implications of adopting these or any 
alternative approaches? Do spectrum aggregation limits continue to 
promote other public interest goals that stress policies such as the 
beneficial role of market entry?
    16. If we conclude that spectrum aggregation limits remain 
necessary at this time, we ask commenters to address whether subsequent 
competitive developments could obviate the need for such limits and 
thereby enable us to sunset these regulations. If commenters believe 
that a sunset provision is appropriate, we seek further comment on 
whether it should be tied to a specific date in the future, and how 
best to predict the timing of the competitive developments on which it 
would be based. Alternatively, we seek comment on whether a sunset 
should be based on the development of specified competitive conditions 
or other criteria, in some or all markets, regardless of when they 
occur.
    17. We ask for comment on the potential harms or benefits of 
adopting limits other than the current 45/55 MHz spectrum cap 
thresholds. For example, assuming consolidation between broadband PCS 
and cellular operators, a 55 MHz cap would still ensure at least four 
broadband competitors under the 180 MHz of covered spectrum. However, 
under such a limit, it is possible that one competitor could have 
significantly less spectrum than the other three under current 
allocations. Under increased thresholds, which combinations would harm 
or benefit consumers?
    18. We also seek comment on whether we should repeal the cellular 
cross-interest rule. The distinctions between cellular and PCS services 
appear to have decreased since our 1998 biennial review. On the other 
hand, most broadband PCS operators are still deploying their networks 
and do not yet provide facilities-based coverage comparable to the 
current combined nationwide cellular footprint. We therefore seek 
comment on whether the need for a separate cellular cross-interest rule 
has lessened, or whether the cellular sector may still have the 
potential to undermine the level of CMRS competition we have seen so 
far. Can we continue to make distinctions and compare competitive 
differences between ``cellular carriers'' and their competitors, e.g., 
``PCS carriers''? We ask commenters to provide empirical evidence and/
or studies on the relative competitive and buildout status of cellular, 
SMR, and broadband PCS carriers on a market-by-market as well as 
comprehensive basis.
    19. We also seek comment on whether the cellular cross-interest 
rule may still be necessary to prevent cellular carriers from merging 
in rural and/or certain other markets where there is limited or no 
competition from other CMRS providers. Could the purpose of the cross-
interest rule still be served by its application in these 
circumstances?
    20. Finally, we seek comment on whether and, if so, how our 
spectrum aggregation limits affect CMRS providers' ability to enter 
into and compete in local telecommunications markets. Since September 
1999, has the spectrum cap enhanced or impeded the provision of 
wireless services as a competitive alternative to wireline services? 
How significant are the opportunity costs of dedicating broadband CMRS 
spectrum to mobile services when other spectrum bands are available for 
fixed wireless services? To the extent that incumbent licensees build 
networks using CMRS spectrum that are targeted mainly to particular 
services, are opportunities for entry and development of competition in 
other services limited in the short to medium term?
2. Spectrum Management and Other Regulatory Considerations
    21. We must also review the CMRS spectrum aggregation rules in 
light of our spectrum management responsibilities, pursuant to which we 
issue the licenses for spectrum necessary to provide CMRS, as well as 
other regulatory considerations. We begin by acknowledging that, 
relative to demand, there is a limited amount of spectrum available 
that, as a practical matter, is suitable for the provision of broadband 
CMRS within the foreseeable future. For example, the propagation 
characteristics of spectrum above approximately 3 GHz make it generally 
unsuitable for mobile use using current technology. In addition, many 
bands below 3 GHz are allocated for multiple uses other than CMRS, 
including broadcast operations, private mobile and fixed services, and 
various types of satellite operations. Moreover, significant amounts of 
spectrum below 3 GHz are allocated for important federal government 
uses, such as defense, national security, law enforcement, and air 
traffic control. Because scarcity issues to some degree affect all 
users of spectrum (and, indeed, all users of any finite natural 
resource) and all spectrum bands, scarcity in and of itself is not 
sufficient to justify a limit on the aggregation of spectrum. However, 
significant shortages of spectrum relative to demand raise concerns, 
especially in service markets where there are few close non-spectrum 
substitutes. The scarcity of this spectrum relative to demand is 
evidenced by the increasing market value of broadband CMRS licenses. 
The Commission has found that the particular conditions that apply to 
broadband CMRS spectrum support the use of aggregation limits in the 
bands currently used for these services. In other bands, where 
different conditions prevail, we have taken a different approach. For 
instance, there are several substantial, technologically suitable bands 
allocated for fixed wireless services, and we do not impose any 
aggregation limits on such spectrum. Moreover, wireline services are 
for many customers close substitutes for such wireless services and so 
aggregation of such spectrum in a small number of licensees would not 
necessarily raise competitive concerns.
    22. There have been a number of regulatory actions since the last 
biennial review that may affect our decisions here regarding CMRS 
spectrum aggregation limits. For example, we recently reconfigured the 
licenses available in the broadband PCS C and F block auction--Auction 
No. 35--to better enable all carriers to acquire additional CMRS 
spectrum in most markets without triggering any CMRS spectrum cap 
concerns. In addition, we decided to exclude from spectrum aggregation 
limits the 700 MHz bands that will be auctioned early this year. We 
also eliminated the separate narrowband PCS spectrum aggregation limit 
earlier last year.
    23. Another significant regulatory consideration is spectrum 
efficiency. Increases in the number of competitors and the associated 
demand for CMRS spectrum are leading to increases in spectrum 
efficiency. As operators seek to increase mobile voice capacity and 
deploy spectrum-intensive, advanced wireless services such as high-
speed Internet access and mobile video conferencing, we see the 
marketplace responding with technological solutions that are increasing 
the technical capacity of wireless networks.
    24. In addition, we found in the First Biennial Review Order that 
bright-line rules like the spectrum cap and cellular cross-interest 
rules hold many benefits over alternative regulatory tools. In

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particular, we reconfirmed that the spectrum cap would allow review of 
CMRS acquisitions in an administratively simple manner and lend 
certainty to the marketplace. We determined that bright-line rules 
reduce burdens placed on both the Commission and industry, especially 
small businesses, as well as give industry advance notice of which 
types of cross-ownership situations the Commission would find 
anticompetitive. In recognition that any bright-line test may be over-
inclusive or under-inclusive in individual cases, we specifically 
provided that parties who believed that individualized analysis is 
appropriate could always request a waiver of the spectrum cap and/or 
cross-interest rule.
    25. Choices about CMRS spectrum aggregation limits appear to 
involve market structure and fundamental spectrum management issues 
regarding this limited amount of spectrum. For example, the Commission 
is exploring the possible use of several frequency bands below 3 GHz to 
support the introduction of new advanced wireless services, including 
third-generation (3G) wireless systems. Accordingly, we seek comment on 
our above analysis of CMRS spectrum scarcity issues and its 
implications for our decisions on CMRS spectrum aggregation limits.
    26. We seek comment on the potential efficiency benefits or costs 
of our spectrum aggregation limits. Have such limits provided 
incentives to the development and deployment of spectrum-efficient 
technologies that will better serve the public interest in the middle 
and long term? Or, would such innovation have occurred independent of 
our spectrum aggregation limits? In addition, do spectrum limits do 
more to impede the efficient development of new 3G technologies that 
may be spectrum-intensive in the short term?
    27. We seek comment on the extent, if any, to which our regulations 
impede beneficial economies of scale and the introduction of innovative 
new technologies and services. We seek specific comment on how the 
decision to limit carriers' access to CMRS spectrum affects the 
deployment of next-generation services and the migration of 2G service 
providers to those services. How do aggregation limits impact the 
emergence of mobile Internet access and other data services? We seek 
comment on how to promote advanced wireless services while 
simultaneously ensuring that meaningful economic competition continues 
to develop.
    28. We also seek comment on how our spectrum aggregation limits may 
impair potential efficiencies for all CMRS markets, including those 
within urban areas. We noted in 1999 that up to a point, horizontal 
concentration in CMRS markets may be in the public interest because it 
could allow efficiencies and economies that would otherwise not be 
achievable. In today's CMRS markets, would achieving such economies be 
in the public interest despite any potential increased risk of 
anticompetitive consolidation?
    29. In discussing the availability of spectrum for advanced 
wireless services, commenters should address the extent to which 
companies' ability to use alternative spectrum--i.e., spectrum outside 
of the broadband PCS, cellular and SMR bands subject to the cap--should 
affect our analysis here. To the extent that future spectrum bands like 
700 MHz are not subject to the cap, does this lessen the need to 
increase the spectrum cap by creating opportunities for CMRS incumbents 
to obtain spectrum in these bands? Or, will new spectrum eliminate the 
access-to-spectrum barrier to entry faced by potential competitors, and 
thus lessen the need to maintain a spectrum cap at all?
    30. Similarly, we seek comment on how to assess the treatment of 
newly allocated spectrum for spectrum cap purposes. As a general 
matter, we believe that newly available CMRS-suitable spectrum either 
should be excluded from the spectrum cap or, if it is included, that 
the cap should be adjusted accordingly. We seek comment on the factors 
to consider in deciding between these two options. While we will not be 
making specific decisions in this proceeding on what, if any, 
constraints ought to apply to concentration of ownership in newly 
available spectrum bands, we plan to consider an analytical framework 
to apply to such bands.
    31. We also seek comment on whether the impact of the spectrum cap 
on development of advanced services could be adequately addressed by 
continuation of the waiver policy that we adopted in the First Biennial 
Review Order. Does our specific waiver process enable carriers with a 
demonstrable need for additional spectrum, especially for advanced 
wireless services, to obtain such spectrum? We request parties to 
provide specific evidence and concrete examples of the extent to which 
carriers' holdings in markets approach or are at the 45/55 MHz cap.
    32. Commenters are also asked to address whether any developments 
in the last year should lead us to alter our determination that a 
bright-line approach remains preferable to exclusive reliance on case-
by-case review under section 310(d). We seek comment on the extent to 
which our approach has benefited licensees, including licensees that 
are small businesses. Commenters are encouraged to provide specific 
examples where our aggregation limits either did or did not provide the 
certainty or efficiency that a particular marketplace transaction 
required.
    33. Finally, we seek specific comment on whether we should make any 
fundamental changes in rural and high-cost markets, which appear not to 
have seen the development of competition in mobile wireless services to 
the degree that is evident in urban areas. We seek comment on whether 
increasing the existing spectrum cap last year in rural areas has had 
any impact on the delivery of service to rural customers in terms of 
prices, availability of digital services, or other factors. Should we, 
at a minimum, continue to retain the cellular cross-interest rule until 
increased PCS and other service deployments become more firmly 
established?
3. International Developments
    34. We also wish to examine the significance for our reexamination 
of spectrum aggregation limits of foreign mobile licensing policies, 
and particularly the 3G licensing process now taking place in Europe 
and Asia. A recent study issued by the Organization for Economic 
Cooperation and Development has documented a global trend in mobile 
licensing policy towards increasing numbers of operators in a given 
market, a trend that predates the 3G licensing process. Moreover, many 
Western European countries are using the 3G licensing process as an 
opportunity to promote the development of competitive market 
structures.
    35. European countries are able both to ensure a minimum number of 
competitors and to permit each provider access to more spectrum because 
substantially more suitable spectrum has been allocated for commercial 
mobile telecommunications services in Europe than in the United States. 
With the additional 140 to 145 MHz of spectrum that most Western 
European countries have allocated to licensed 3G use, the total amount 
of spectrum available for mobile telephony services in these countries 
now exceeds 180 MHz, in most cases by a wide margin. In particular, we 
estimate that the total amount of spectrum available for 
first-, second- and third-generation mobile communications services in 
most Western European countries is generally about 250-300 MHz, and 
ranges from a

[[Page 9803]]

high of almost 365 MHz in the United Kingdom to a low of about 187 MHz 
in Norway. Thus, because most European countries have allocated more 
total spectrum for mobile telecommunications services, they are able to 
allow individual carriers to acquire larger total spectrum holdings 
than would be permitted under our spectrum cap policy, while at the 
same time ensuring that there are at least four, and often more, 
competitors in their markets.
    36. We also note that other countries limit the amount of spectrum 
operators can acquire in the secondary market. In the vast majority of 
countries, including European Union (EU) Member States, strict limits 
on trading of wireless licenses and/or spectrum rights render a 
spectrum cap largely superfluous. Apart from the United States, only a 
relative few countries, including Canada, Australia and New Zealand, 
allow spectrum licenses to be traded both in whole and in part.
    37. We generally seek comment on the lessons to be learned from 
experience internationally. In addressing these issues, commenters 
should consider the significance of the differences summarized above, 
as well as the fact that unlike our ``flexible use'' approach in the 
United States, spectrum management policies abroad generally do not 
afford wireless operators the flexibility to deploy 3G technologies on 
spectrum currently licensed for 2G services.
    38. We also seek comment generally on how international 
developments relate to the question of whether to eliminate spectrum 
limits to direct the course of development in U.S. CMRS markets. We 
note that most EU Member States have already licensed 3G spectrum or 
are planning to do so by the first half of 2001 to give operators 
sufficient lead time to plan for 3G deployment. Spectrum aggregation 
limits may affect U.S. development of advanced wireless services over 
the short term. We ask parties to comment on the trade-offs that we 
will face in the United States during this time. We also seek comment 
on whether U.S. carriers may require smaller amounts of total spectrum 
for 2G and 3G services than their counterparts in Europe and Asia 
because our policies afford U.S. carriers more flexibility with respect 
to spectrum use and alternative means of acquiring access to spectrum. 
Finally, we seek comment on whether any of the mechanisms other 
countries use to ensure they have an adequate number of competitors in 
their markets might be adapted to the U.S. market, as an alternative to 
our spectrum cap approach.

C. Possible Modifications to the CMRS Spectrum Cap and Cellular Cross-
Interest Rule

    39. In the event that we do not eliminate our spectrum aggregation 
limits, we also request comment on whether specific attributes of the 
CMRS spectrum cap and cellular cross-interest rule should be modified 
to allow some of the benefits that may arise from additional cross-
ownership interests. Commenters should also address any possible 
interim modifications that would benefit the public interest in the 
event that we decide to sunset our spectrum aggregation limits in the 
future.
1. Possible Modifications to the CMRS Spectrum Cap
    40. We seek comment on aspects of the CMRS spectrum cap that could 
be modified to increase carriers' flexibility and promote our various 
public policy objectives. To begin, we seek comment on the effect of 
recent changes in CMRS markets, particularly the emergence of broadband 
PCS licensees as competitors to cellular licensees, on the rationale 
for a 10 percent population overlap threshold. What are the public 
interest benefits of increasing the threshold and do those benefits 
outweigh any potential for reduced consumer benefits from the 
concentration of ownership or control of CMRS licenses?
    41. We solicit comment on whether there is a mechanism for 
triggering the application of a spectrum cap in given geographic areas 
that might be superior to our current overlap standard. We ask for 
comment on the pros and cons of adopting a simplified overlap standard 
that turns on a certain allowable percentage of overlap between 
licensed service areas. For example, assuming a 10 percent threshold, 
one possible approach would be a standard where a PCS BTA-based 
license's overlap with a partitioned MTA-based license would not come 
under the cap if the population covered by the overlap were less than 
10 percent of the total population of the PCS BTA and less than 10 
percent of the total population of the partitioned PCS MTA. Similarly, 
if we were to eliminate the cellular cross-interest rule under such a 
standard, an A-Block cellular license's overlap in CGSA with the CGSA 
of a B-Block cellular license would not trigger the cap if the 
population covered by the overlap were less than 10 percent of the 
total population of the A-Block CGSA and less than 10 percent of the 
total population of the B-Block CGSA. A variation of this standard 
would be to exempt overlaps from the cap if the population in the 
overlap area were less than 10 percent of the total population of the 
more populous licensed service area. In addition, the threshold could 
be set at some level other than 10 percent. We seek comment on these 
and any other possible approaches.
    42. We seek comment here on whether recent developments in the SMR 
industry warrant any modification of the special provisions for SMR 
overlap analysis and calculation of attributable spectrum. The original 
justification for the maximum attribution of 10 MHz was based on the 
conclusion that SMR spectrum is not equivalent to cellular or broadband 
PCS. We seek comment on whether the rationale for this 10 MHz limit 
continues in today's marketplace for broadband CMRS. For example, how 
have our recent auctions of SMR spectrum affected the rationale to 
limit the amount of SMR spectrum attributed to a carrier? Do we need to 
clarify our spectrum cap analysis to account for application of the cap 
when these auctioned geographic-based SMR licenses overlap with PCS 
licensed service areas? In addition, should significant recent 
acquisition and merger activity lead us to question the assumption that 
SMR spectrum is difficult to reconfigure? If we were to revise our 
approach to station-defined SMR spectrum, should we increase the 
maximum attributable amount from 10 MHz to a higher figure (e.g., 15 or 
20 MHz), or should we simply attribute to each carrier the actual 
spectrum it has in each market? If we were to adopt the latter 
approach, how would we determine the amount of spectrum and define the 
geographic area for our overlap analysis?
    43. We also seek comment on whether we should modify our ownership 
attribution standards. Should the 20 percent general attribution 
standard be modified? We seek comment on the effect that a 40 percent 
attribution standard has had on the ability of CMRS providers to obtain 
capital. Have small businesses benefited from their general 40 percent 
attribution standard? We also seek comment on whether any of our other 
ownership attribution criteria should be modified. For example, are 
there situations proscribed by our attribution rules that do not pose a 
threat to competition? Should we attribute spectrum used pursuant to 
potential spectrum leasing arrangements, or to management and joint 
marketing agreements?

[[Page 9804]]

2. Possible Modifications to the Cellular Cross-Interest Rule
    44. If we decide not to repeal the cellular cross-interest rule, we 
seek comment on whether we should modify the rule so that it does not 
apply in certain circumstances where other regulations will provide 
adequate safeguards. We seek comment on whether there is a need to 
maintain any cellular-specific restrictions in more urban areas, where 
there is generally a larger number of competitive choices for 
consumers. Although cellular providers still maintain large market 
shares in MSAs, would cellular/cellular combinations be more 
anticompetitive than cellular/PCS or PCS/PCS combinations if the 
cellular cross-interest rule is repealed in MSAs? Commenters should 
focus on whether cellular combinations would be able to sustain prices 
above the competitive level without reduction in market shares and 
explain their conclusions with specific data such as customer churn 
percentages and whether these are price driven, quality/coverage 
driven, or both.
    45. Another possibility, given that cellular licensees can now 
disaggregate their spectrum, would be to replace the current rule with 
a separate cellular spectrum cap of 35 MHz (or some other amount). 
Under the current cross-interest rule, an entity with an attributable 
interest in a cellular license cannot hold a 5 percent interest in a 
disaggregated license for even 1 MHz of spectrum on the other channel 
block in an overlapping CGSA. Such a rule change would allow increased 
opportunities for partnering while maintaining protection against the 
complete consolidation of two 25 MHz cellular carriers. We ask parties 
to comment on any modifications necessary to permit parties to 
disaggregate spectrum.
    46. In addition, we seek comment on the public interest benefits 
and/or harms of increasing the 5 percent ownership interest limit in a 
cellular licensee when one has a controlling or otherwise attributable 
interest in the other licensee in an overlapping CGSA. Although the 
cross-interest rule prohibits interests greater than 5 percent, our 
ownership disclosure standards for wireless telecommunications services 
only require licensees to report interests greater than 10 percent. We 
therefore seek comment on whether conformity between these two 
provisions would permit the Commission more accurately to regulate 
compliance with the cellular cross-interest rule.
    47. We also seek comment on whether we should modify the 
divestiture provisions related to the cellular cross-interest rule. For 
example, should we revise the rule to operate similar to the spectrum 
cap? In contrast to the cross-interest rule, we consider parties to 
have come into compliance with the spectrum cap once they have 
submitted an application for assignment or transfer of control of 
sufficient spectrum to comply with the cap. Commenters are asked to 
address the competitive and public interest implications of harmonizing 
these and any other provisions of the two rules.

IV. Procedural Matters

A. Regulatory Flexibility Act

    48. As required by the Regulatory Flexibility Act, see 5 U.S.C. 
603, the Commission has prepared an Initial Regulatory Flexibility 
Analysis (IRFA) of the possible impact on small entities of the 
proposals in the Notice of Proposed Rulemaking. The IRFA is set forth. 
Written public comments are requested on the IRFA. These comments must 
be filed in accordance with the same filing deadlines for comments on 
the NPRM, and they must have a separate and distinct heading 
designating them as responses to the IRFA. The Commission's Consumer 
Information Bureau, Reference Information Center, will send a copy of 
this NPRM, including the IRFA, to the Chief Counsel for Advocacy of the 
Small Business Administration, in accordance with the Regulatory 
Flexibility Act.

B. Ex Parte Rules

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

C. Filing Procedures

    50. Pursuant to applicable procedures set forth in Secs. 1.415 and 
1.419 of the Commission's rules, interested parties may file comments 
on or before April 13, 2001 and reply comments on or before March 14, 
2001. Comments and reply comments should be filed in WT Docket No. 01-
14. All relevant and timely filings will be considered by the 
Commission before final action is taken in this proceeding. To file 
formally in this proceeding, interested parties must file an original 
and four copies of each filing. All filings must be sent to the 
Commission's Secretary, Magalie Roman Salas, Office of the Secretary, 
Federal Communications Commission, 445 12th St., SW., Rm. TW-A325, 
Washington, DC 20554, with a copy to Michael J. Rowan, Commercial 
Wireless Division, Wireless Telecommunications Bureau, Federal 
Communications Commission, 445 12th St., SW., Rm. 4A-131, Washington, 
DC 20554. One copy of all filings should also be sent to the 
Commission's copy contractor.
    51. Comments may also be filed using the Commission's Electronic 
Comment Filing System (ECFS). Comments filed through the ECFS can be 
sent as an electronic file via the Internet to http://www.fcc.gov/e-file/ecfs.html. Generally, only one copy of an electronic submission 
must be filed. Parties may also submit an electronic comment by 
Internet E-Mail. To obtain filing instructions for E-Mail comments, 
commenters should send an E-mail to [email protected], and should include 
the following words in the body of the message: ``get form (your E-Mail 
address).'' A sample form and directions will be sent in reply. Or you 
may obtain a copy of the ASCII Electronic Transmittal Form (FORM-ET) at 
http://www.fcc.gov/e-file/email.html.
    52. Comments and reply comments will be available for public 
inspection during regular business hours at the FCC Reference 
Information Center, Rm. CY-A257, at the Federal Communications 
Commission, 445 12th St., SW., Washington, DC 20554. Copies of comments 
and reply comments are available through the Commission's duplicating 
contractor: International Transcription Service, Inc. (ITS, Inc.), 1231 
20th Street, NW., Washington, DC 20037, (202) 857-3800.

V. Initial Regulatory Flexibility Analysis

    53. As required by the Regulatory Flexibility Act (RFA), 5 U.S.C. 
601 et. seq., the Commission has prepared this Initial Regulatory 
Flexibility Analysis (IRFA) of the possible significant economic impact 
on small entities of the policies and proposals in this Notice of 
Proposed Rulemaking (NPRM), WT Docket No. 01-14. Written public 
comments are requested on this IRFA. These comments must be filed in 
accordance with the same filing deadlines for comments on the rest of 
this NPRM, as set forth above, and they must have a separate and 
distinct heading designating them as responses to the IRFA.

A. Need for, and Objectives of, the Proposed Rules

    54. As part of our biennial regulatory review, pursuant to section 
11 of the Communications Act, we solicit

[[Page 9805]]

comment on whether we should retain, modify, or eliminate the 
commercial mobile radio services (CMRS) spectrum cap. We also seek 
comment on whether we should retain, modify, or repeal the cellular 
cross-interest rule. In asking these questions, the NPRM looks at 
recent competitive changes in CMRS markets, reexamines the public 
interest objectives that the spectrum limits are designed to achieve, 
and asks whether there are alternatives to the existing rules that 
avoid any potential public interest costs. It seeks comment on how 
international trends and developments in the marketplace since the 
completion of our last biennial review in September 1999 may affect our 
analysis. The NPRM discusses reliance on case-by-case analysis of the 
potential competitive effects of a proposed spectrum holding pursuant 
to section 310(d) of the Communications Act as one potential 
alternative to the current rules, and it discusses possible 
modifications to the spectrum cap and cross-interest rules. These 
include, among other things: (1) increasing the amount of spectrum that 
a single entity may hold in a given geographic area beyond 45/55 MHz; 
(2) modifying the spectrum cap's 10 percent population overlap 
threshold and/or attribution rules; (3) eliminating or modifying the 
rule that limits attributable Specialized Mobile Radio (SMR) spectrum 
to 10 MHz; (4) altering the cellular cross-interest rule's provisions 
as they relate to disaggregation of spectrum and/or post-licensing 
divestiture; and (5) modifying the ownership attribution standards 
under both rules. Through the process of seeking public comment and 
collecting data, we hope to assess the impact of recent competitive 
trends, international developments, and spectrum management and other 
regulatory considerations.

B. Legal Basis

    55. The potential actions on which comment is sought in this NPRM 
would be authorized under sections 1, 4(i), 11, 303(g), and 303(r) of 
the Communications Act of 1934, as amended, 47 U.S.C. 151, 154(i), 161, 
303(g), and 303(r).

C. Description and Estimate of the Small Entities Subject to the Rules

    56. The RFA requires that an initial regulatory flexibility 
analysis be prepared for notice-and-comment rulemaking proceedings, 
unless the Agency certifies that ``the rule will not, if promulgated, 
have a significant impact on a substantial number of small entities.'' 
See 5 U.S.C. 603(b)(3). The RFA generally defines the term ``small 
entity'' as having the same meaning as the terms ``small business,'' 
``small organization,'' and ``small governmental jurisdiction.'' In 
addition, the term ``small business'' has the same meaning as the term 
``small business concern'' under the Small Business Act. A small 
business concern is one which: (1) is independently owned and operated; 
(2) is not dominant in its field of operation; and (3) satisfies any 
additional criteria established by the SBA. This IRFA describes and 
estimates the number of small-entity licensees that may be affected if 
the proposals in this NPRM are adopted.
    57. This NPRM could result in rule changes that, if adopted, would 
affect small businesses that currently are or may become licensees in 
the cellular, broadband Personal Communications Services (PCS) and/or 
SMR services.
    58. Cellular Radiotelephone Service. Neither the Commission nor the 
SBA has developed a definition of small entities applicable to cellular 
licensees. Therefore, the applicable definition of small entity is the 
definition under the SBA rules applicable to radiotelephone (wireless) 
companies. This provides that a small entity is a radiotelephone 
company employing no more than 1,500 persons. According to the Bureau 
of the Census, only twelve radiotelephone firms from a total of 1,178 
such firms, which operated during 1992, had 1,000 or more employees. 
Therefore, even if all twelve of these firms were cellular telephone 
companies, nearly all cellular carriers were small businesses under the 
SBA's definition. In addition, we note that there are 1,758 cellular 
licenses; however, a cellular licensee may own several licenses. In 
addition, according to the most recent Telecommunications Industry 
Revenue data, 808 carriers reported that they were engaged in the 
provision of either cellular service or PCS, which are placed together 
in the data. We do not have data specifying the number of these 
carriers that are not independently owned and operated or have more 
than 1,500 employees, and thus are unable at this time to estimate with 
greater precision the number of cellular service carriers that would 
qualify as small business concerns under the SBA's definition. 
Consequently, we estimate that there are fewer than 808 small cellular 
service carriers that may be affected by these proposals, if adopted.
    59. Broadband Personal Communications Service (PCS). The broadband 
PCS spectrum is divided into six frequency blocks designated A through 
F, and the Commission has held auctions for each block. The Commission 
defined ``small entity'' for Blocks C and F as an entity that has 
average gross revenues of less than $40 million in the three previous 
calendar years. For Block F, an additional classification for ``very 
small business'' was added and is 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 regulations 
defining ``small entity'' in the context of broadband PCS auctions have 
been approved by the SBA. No small businesses within the SBA-approved 
definition bid successfully for licenses in Blocks A and B. There were 
90 winning bidders that qualified as small entities in the Block C 
auctions. A total of 93 small and very small business bidders initially 
won approximately 40 percent of the 1,479 licenses for Blocks D, E, and 
F. On March 23, 1999, the Commission reauctioned 347 C, D, E, and F 
Block licenses; there were 48 small business winning bidders. Based on 
this information, we conclude that the number of small broadband PCS 
licensees will include the 90 winning C Block bidders and the 93 
qualifying bidders in the D, E, and F blocks plus the 48 winning 
bidders in the re-auction, for a total of approximately 231 small 
entity PCS providers as defined by the SBA and the Commission's auction 
rules. In addition, the Commission anticipates that a total of 422 
licenses will be auctioned in the broadband PCS reauction of the C & F 
Blocks that began December 12, 2000. Therefore, we conclude that the 
number of additional C & F Block broadband PCS licensees that may 
ultimately be affected by these proposals could be as many as 422.
    60. Specialized Mobile Radio (SMR). Pursuant to 47 CFR 
90.814(b)(1), the Commission has defined ``small business'' for 
purposes of auctioning 900 MHz SMR licenses, 800 MHz SMR licenses for 
the upper 200 channels, and 800 MHz SMR licenses for the lower 230 
channels on the 800 MHz band as a firm that has had average annual 
gross revenues of $15 million or less in the three preceding calendar 
years. The SBA has approved this small business size standard for the 
800 MHz and 900 MHz auctions. The auction of the 1,020 900 MHz SMR 
geographic area licenses for the 900 MHz SMR band began on December 5, 
1995, and was completed on April 15, 1996. Sixty (60) winning bidders 
for geographic area licenses in the 900 MHz SMR band qualified as small 
businesses under the $15 million size standard. The auction of the 525 
800 MHz SMR geographic area licenses for the upper 200 channels began 
on October 28, 1997, and was completed on

[[Page 9806]]

December 8, 1997. Ten (10) winning bidders for geographic area licenses 
for the upper 200 channels in the 800 MHz SMR band qualified as small 
businesses under the $15 million size standard.
    61. The lower 230 channels in the 800 MHz SMR band are divided 
between General Category channels (the upper 150 channels) and the 
lower 80 channels. The auction of the 1,053 800 MHz SMR geographic area 
licenses (1,050--800 MHz licenses for the General Category channels, 
and 3--800 MHz licenses for the upper 200 channels from a previous 
auction) for the General Category channels began on August 16, 2000, 
and was completed on September 1, 2000. At the close of the auction, 
1,030 licenses were won by bidders. Eleven (11) winning bidders for 
geographic area licenses for the General Category channels in the 800 
MHz SMR band qualified as small businesses under the $15 million size 
standard. The auction of the 2,800 800 MHz SMR geographic area licenses 
for the lower 80 channels of the 800 MHz SMR service began on November 
1, 2000, and was completed on December 5, 2000. Nineteen (19) winning 
bidders for geographic area licenses for the lower 80 channels in the 
800 MHz SMR band qualified as small businesses under the $15 million 
size standard. In addition, there are numerous incumbent site-by-site 
SMR licensees on the 800 and 900 MHz bands. The Commission awards 
bidding credits in auctions for geographic area 800 MHz and 900 MHz SMR 
licenses to firms that had revenues of no more than $15 million in each 
of the three previous calendar years.

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

    62. This NPRM neither proposes nor anticipates any additional 
reporting, recordkeeping or other compliance measures.

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

    63. 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): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities.
    64. In our September 1999 First Biennial Review Order, we concluded 
that retention of the CMRS spectrum cap and cellular cross-interest 
rule serves the public interest. We found that the benefits of these 
bright-line rules in addressing concerns about increased spectrum 
aggregation continued to make these approaches preferable to exclusive 
reliance on case-by-case review under section 310(d). By setting bright 
lines for permissible ownership interests, we found that the rules 
continued to benefit both the telecommunications industry and 
subscribers, including small businesses, by providing regulatory 
certainty and facilitating more rapid processing of transactions. 
Specifically, we noted that case-by-case review is especially expensive 
and time-consuming for small businesses, which often do not have the 
requisite resources.
    65. In our 2000 biennial regulatory review pursuant to section 11, 
we here reexamine our findings and determinations in September 1999. 
Since that time, there have been international and economic 
developments that have significantly affected CMRS markets. For 
example, consolidation within the CMRS industry in an effort to create 
national service footprints has tended to reduce the number of smaller 
entities providing broadband CMRS on a purely local level. As part of 
this 2000 biennial review, we seek to develop a record regarding 
whether the CMRS spectrum cap and cellular cross-interest rule continue 
to make regulatory and economic sense in CMRS markets in the current-, 
mid-, and long-term. In doing so, we generally request comment on 
whether retention, modification, or elimination of the CMRS spectrum 
cap and/or cellular cross-interest rule is appropriate with respect to 
small businesses that are licensees in the cellular, broadband PCS and/
or SMR services. We seek comment on whether there continues to be a 
need for these rules to ensure that new entrants, including small 
businesses, have access to spectrum licenses both at auction and in the 
secondary market. We inquire whether these bright-line rules continue 
to create efficiencies and reduce transaction costs for small business. 
We consider the impact on small businesses if we were to adopt 
alternative approaches that rely more heavily on case-by-case review. 
We also seek specific comment on various aspects of these rules that 
particularly affect small business, such as the whether our September 
1999 decision to increase attribution standards to 40 percent has 
benefited small businesses.

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

    66. None.

VI. Ordering Clauses

    67. Accordingly, It Is Ordered, pursuant to the authority of 
sections 1, 4(i), 11, 303(g), and 303(r) of the Communications Act of 
1934, as amended, 47 U.S.C. 151, 154(i), 161, 303(g), and 303(r), that 
this Notice of Proposed Rulemaking is Adopted.
    68. It Is Further Ordered that the Commission's Consumer 
Information Bureau, Reference Information Center, Shall Send a copy of 
the Notice of Proposed Rulemaking, including the Initial Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 01-3521 Filed 2-9-01; 8:45 am]
BILLING CODE 6712-01-P