[Federal Register Volume 66, Number 47 (Friday, March 9, 2001)]
[Proposed Rules]
[Pages 14104-14107]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-5830]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1 and 22

[WT Docket No. 01-32; FCC 01-36]


Implementation of Competitive Bidding Rules To License Certain 
Rural Service Areas

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, we propose rules for awarding licenses for 
four cellular rural service areas (RSAs) that remain unlicensed because 
the initial lottery winner was disqualified or otherwise withdrew its 
application. Specifically, we propose competitive bidding rules for 
these licenses and seek comment on our proposals.

DATES: Comments are due on or before March 19, 2001 and reply comments 
are due on or before April 3, 2001.

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

FOR FURTHER INFORMATION CONTACT: Katherine M. Harris, Wireless 
Telecommunications Bureau, Commercial Wireless Division at (202) 418-
0609.

SUPPLEMENTARY INFORMATION: This is a summary of the Federal 
Communications Commission's Notice of Proposed Rule Making (NPRM), FCC 
01-36, in WT Docket No. 01-32, adopted on January 31, 2001, and 
released on February 12, 2001. The full text of this NPRM is available 
for inspection and copying during normal 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 Rule Making

I. Introduction

    1. In this Notice of Proposed Rule Making (NPRM), we propose rules 
for awarding licenses for four cellular Rural Service Areas (RSAs) that 
remain unlicensed because the initial lottery winner was disqualified 
or has otherwise withdrawn its application. Under the Balanced Budget 
Act of 1997 (1997 Budget Act), we are now required, with certain 
exceptions not applicable here, to resolve mutually exclusive 
applications for initial licenses by competitive bidding. Balanced 
Budget Act of 1997, Public Law 105-33, section 3002(a), 111 Stat. 251, 
at 258-60 (1997). We propose to: (1) Allow all eligible parties to 
apply for these initial licenses; and (2) license these markets on an 
RSA basis under our Part 22 rules. As discussed below, we also propose 
to use our Part 1 competitive bidding rules to auction these licenses.

II. Background

    2. The Commission has been awarding cellular licenses since 1982. 
Although we awarded the first thirty Metropolitan Statistical Area 
(MSA) licenses pursuant to comparative hearing rules, we adopted rules 
in 1984 to award the remaining cellular MSA and RSA licenses through 
lotteries. By 1991, lotteries had been held for every MSA and RSA, and 
licenses were awarded to the lottery winners in most instances. In some 
RSA markets, however, the initial RSA license was never awarded.
    3. On August 5, 1997, President Clinton signed the 1997 Budget Act 
into law, which modified the Commission's auction authority by amending 
Section 309(j) of the Communications Act to require that all mutually 
exclusive applications for initial licenses or construction permits be 
auctioned, with certain exceptions not applicable here. 1997 Budget 
Act, Public Law 105-33, section 3002(a), 111 Stat. 251, 258-60 (1997) 
(amending 47 U.S.C. 309(j)). The 1997 Budget Act expressly repealed 
Section 6002(e) of the 1993 Budget Act, id. at Section 3002(a)(4), and 
terminated the Commission's authority to award licenses through random 
selection, even in the case of applications filed prior to July 26, 
1993, except for licenses for noncommercial educational and public 
broadcast stations. Id. at Section 3002(a)(2)(B). Because the 1997 
Budget Act terminated the Commission's remaining lottery authority, the 
Commission's Wireless Telecommunications Bureau dismissed all pending 
RSA lottery applications by separate orders released April 2, 1999, and 
April 29, 1999. See Certain Cellular Rural Service Area Applications, 
Order, 14 FCC Rcd 4619 (1999); Certain Cellular Rural Service Area 
Applications in Market Nos. 599A and 672A, Order, DA 99-814 (rel. Apr. 
29, 1999).

III. Discussion

    4. We propose to allow all eligible applicants to apply for 
licenses for the four remaining unlicensed cellular RSAs. Further, we 
propose to license these markets on an RSA basis, subject to the same 
construction and operational rules as previously licensed RSAs. 
Finally, if there are mutually exclusive applications for these 
markets, we propose to use the general competitive bidding rules set 
forth in Part 1, Subpart Q, of the Commission's rules to conduct the 
auction. We seek comment on these issues, which we address in greater 
detail below.

A. Eligibility for Licenses

    5. We propose to allow all eligible entities and persons to apply 
for the licenses at issue in this proceeding. Our competitive bidding 
program seeks to award each license to the applicant who values it most 
highly, as determined by the marketplace, and who is therefore most 
likely to offer valued service to the public. To the extent that former 
lottery applicants continue to have an interest in applying for these 
markets, open eligibility allows them to do so. We therefore 
tentatively conclude that it would be in the public interest to permit 
all eligible entities to participate in an RSA auction. We seek comment 
on this proposal.
    6. In all of the four unlicensed RSAs, the Commission has granted 
interim operating authority (IOA) to one or more cellular operators to 
provide cellular service on the Channel A block pending the ultimate 
permanent licensing of these RSAs. We propose to permit current IOA 
holders to participate in the auction of licenses for the unlicensed 
RSAs on an equal basis with other applicants. We also note that under 
the terms of each of the existing IOAs, the IOA operator must cease 
operations immediately upon initiation of service by the new licensee, 
provided that the new licensee gives at least 30 days written notice of 
its intent to provide service. In order to prevent unnecessary 
interruption of service to existing cellular customers, we propose 
that, in the event that any of the current IOA holders do not obtain 
the RSA license

[[Page 14105]]

for their markets, they should be allowed to continue providing service 
on a temporary basis subject to these conditions, i.e., until the 
auction winner provides the required notice and is prepared to commence 
service. We seek comment on these proposals.

B. Market Areas To Be Auctioned

    7. We also seek comment on whether the unlicensed markets for which 
licenses are to be awarded through competitive bidding should be 
licensed on an RSA basis, or whether alternative licensing models 
should be considered. For the reasons discussed below, we tentatively 
conclude that the unlicensed cellular markets should be licensed on an 
RSA basis under our Part 22 rules.
    8. We also propose that licenses awarded for these markets would be 
subject to the same construction and operational rules as licenses 
granted to prior RSA lottery winners, including the exclusive right of 
the licensee of the first cellular system on each channel block to 
expand its system within that market for a period of five years. See 47 
CFR 22.947. After the expiration of the five-year expansion period, any 
areas within the RSA market that remained unserved would be available 
for licensing pursuant to our Part 22 unserved areas Phase I and Phase 
II filing procedures. See 47 CFR 22.949.

C. Competitive Bidding Procedures

    9. We propose to conduct the auction of cellular RSA licenses in 
conformity with the general competitive bidding rules set forth in Part 
1, Subpart Q, of the Commission's rules, and consistent with the 
bidding procedures that have been employed in previous auctions. 
Specifically, we propose to employ the Part 1 rules governing 
competitive bidding design, designated entities, application and 
payment procedures, reporting requirements, collusion issues, and 
unjust enrichment. Under this proposal, such rules would be subject to 
any modifications that the Commission may adopt in the Part 1 
proceeding. We also note that under the Part 1 rules, winning bidders 
would be eligible to obtain a bidding credit for serving qualifying 
tribal lands pursuant to Section 1.2110(f)(3). See 47 CFR 1.2110(f)(3). 
In this regard, we note that only one RSA subject to these proposals--
RSA 582A-Barnes, ND--contains any federally recognized tribal lands. In 
addition, consistent with current practice, matters such as the 
appropriate competitive bidding design, as well as minimum opening bids 
and reserve prices, would be determined by WTB pursuant to its 
delegated authority. Amendment of Part 1 of the Commission's Rules--
Competitive Bidding Procedures, Allocation of Spectrum Below 5 GHz 
Transferred from Federal Government Use, Third Report and Order and 
Second Further Notice of Proposed Rule Making, 13 FCC Rcd 374, 448-49, 
454-55, paragraphs 125, 139 (1997), modified by Erratum, DA 98-419 
(rel. Mar. 2, 1998). We seek comment on this approach.
    10. We also seek comment on whether to adopt special provisions for 
small businesses that participate in the auction of cellular RSA 
licenses. We propose to provide small businesses with bidding credits 
in order to meet our Congressional mandate to promote competition and 
to disseminate licenses among a wide variety of applicants. See 47 
U.S.C. 309(j)(3)(B). Specifically, we propose to establish three small 
business definitions. We would define an entrepreneur as an entity with 
average annual gross revenues for the preceding three years not 
exceeding $40 million, a small business as an entity with average 
annual gross revenues for the preceding three years not exceeding $15 
million, and a very small business as an entity with average annual 
gross revenues for the preceding three years not exceeding $3 million. 
As provided in 47 CFR 1.2110(f)(2) of our rules, we propose to offer 
entrepreneurs a bidding credit of 15 percent, small businesses a 
bidding credit of 25 percent, and very small businesses a bidding 
credit of 35 percent. We seek comment on whether this approach is 
appropriate here, or whether there is anything about the 
characteristics and capital requirements of cellular service that would 
require a different approach.
    11. We also seek comment on whether the small business provisions 
we propose today are sufficient to promote participation by businesses 
owned by minorities and women, as well as rural telephone companies. To 
the extent that commenters propose additional provisions to ensure 
participation by minority-owned or women-owned businesses, they should 
address how such provisions should be crafted to meet the relevant 
standards of judicial review. See Adarand Constructors v. Pena, 515 
U.S. 200 (1995) (requiring a strict scrutiny standard of review for 
Congressionally mandated race-conscious measures); United States v. 
Virginia, 518 U.S. 515 (1996) (applying an intermediate standard of 
review to a state program based on gender classification).

IV. Procedural Matters

A. Ex Parte Rules

    12. Pursuant to 47 CFR 1.1206 of the Commission's ex parte rules, 
this rulemaking proceeding proposing rules for awarding licenses for 
cellular RSAs for which the tentative selectee has been disqualified is 
a permit-but-disclose proceeding. Provided they are disclosed in 
accordance with the Commission's rules, ex parte presentations are 
permitted, except during the Sunshine Agenda period.

B. Filing Procedures

    13. Pursuant to 47 CFR 1.415 and 1.419 of the Commission's Rules, 
interested parties may file comments on this NPRM on or before March 
19, 2001, and reply comments on or before April 3, 2001. Comments and 
reply comments should be filed in WT Docket No. 01-32. 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 
comment or reply comment. Commenters who wish each Commissioner to 
receive personal copies of their submissions must file an original and 
nine copies of each comment and reply comment. Comments and reply 
comments must be directed to the Office of the Secretary, Federal 
Communications Commission, 445 12th St., SW., Room TW-A325, Washington, 
DC 20554. Copies of all comments also should be provided to (1) the 
Commission's copy contractor, and (2) Policy and Rules Branch, 
Commercial Wireless Division, Wireless Telecommunications Bureau, 
Federal Communications Commission, 445 12th Street, SW., Washington, DC 
20554.
    14. 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>.
    15. Comments and reply comments will be available for public 
inspection during regular business hours at the

[[Page 14106]]

FCC Reference Information Center, Room 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

    16. As required by Section 603 of the Regulatory Flexibility Act 
(RFA), 5 U.S.C. 603, the Commission has prepared this Initial 
Regulatory Flexibility Analysis (IRFA) of the possible significant 
economic impact on small entities of the policies and rules proposed in 
this NPRM. Written public comments are requested on the IRFA. These 
comments must be filed in accordance with the same filing deadlines as 
the comments on the rest of the NPRM, but they must have a separate and 
distinct heading designating them as responses to the Initial 
Regulatory Flexibility Analysis. The Commission will send a copy of the 
NPRM, including this IRFA, to the Chief Counsel for Advocacy of the 
Small Business Administration. See 5 U.S.C. 603(a). In addition, the 
NPRM and IRFA (or summaries thereof) will be published in the Federal 
Register. See id.

A. Need for and Objectives of the Proposed Rules

    17. We originally initiated this rulemaking proceeding in response 
to a petition filed by Cellular Communications of Puerto Rico, Inc. 
(CCPR) on September 9, 1996, which requested that the Commission award 
certain RSA licenses through competitive bidding, rather than random 
selection. Cellular Communications of Puerto Rico, Inc. Petition for 
Declaratory Ruling, Or, in the Alternative, for Rulemaking, RM-8897 
(filed Sept. 9, 1996). However, we dismissed CCPR's petition as moot in 
response to the enactment of the Balanced Budget Act of 1997, which 
requires the Commission to resolve mutually exclusive applications for 
initial licenses through competitive bidding instead of random 
selection, with certain exceptions not applicable here. See Certain 
Cellular Rural Service Area Applications, Order, 14 FCC Rcd 4619 
(1999); Certain Cellular Rural Service Area Applications in Market Nos. 
599A and 672A, Order, DA 99-814 (rel. April 29, 1999). Our objective in 
this rulemaking proceeding is to determine, for cellular RSA markets 
for which a tentative selectee has been disqualified, whether to allow 
all eligible applicants to participate in the auction of licenses, 
which competitive bidding rules to use, and the type of market area to 
be used for licensing.

B. Legal Basis

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

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

    19. The RFA directs agencies to provide a description of, and where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. 5 U.S.C. 603(b)(3). The 
Regulatory Flexibility Act defines the term ``small entity'' as having 
the same meaning as the terms ``small business,'' ``small 
organization,'' and ``small business concern'' under section 3 of the 
Small Business Act. Id. at 601(3). 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. Id. at 632.
    20. The Commission is required to estimate in its Final Regulatory 
Flexibility Analysis the number of small entities to which any new 
rules would apply, provide a description of such entities, and assess 
the impact of the rule on such entities. To assist in this analysis, 
commenters are requested to provide information regarding how many 
total entities, existing and potential, will be considered small 
businesses.
    21. According to the most recent Telecommunications Industry 
Revenue data, 808 carriers reported that they were engaged in the 
provision of either cellular service or Personal Communications 
Services (PCS), which are placed together in that data. Trends in 
Telephone Service, Table 19.3 (March 2000). The rules proposed in the 
NPRM would affect all small entities that seek to acquire any of the 
four cellular RSA licenses discussed therein. In the NPRM, we propose 
to define three tiers of small businesses for the purpose of providing 
bidding credits to small entities. We propose to define these three 
tiers of small businesses as follows: an ``entrepreneur'' would be an 
entity with average annual gross revenues not exceeding $40 million for 
the preceding three years; a ``small business'' would be an entity with 
average annual gross revenues not exceeding $15 million for the 
preceding three years; and a ``very small business'' would be an entity 
with average annual gross revenues not exceeding $3 million for the 
preceding three years. The Small Business Administration approved these 
proposed small business definitions on January 30, 2001. See Letter 
from Fred P. Hochberg, Acting Administrator, Small Business 
Administration, to Margaret W. Wiener, Chief, Auctions and Industry 
Analysis Division, Wireless Telecommunications Bureau, Federal 
Communications Commission, dated Jan. 30, 2001. We will not know how 
many entities meeting these proposed definitions will apply for or win 
cellular RSA licenses until an auction is held. In view of our lack of 
knowledge about the entities that will seek to acquire the cellular RSA 
licenses in question, we assume that, for purposes of our evaluations 
and conclusions in this IRFA, all prospective licensees are 
entrepreneurs, small businesses, or very small businesses under our 
proposed definitions. We invite comment on this analysis.

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

    22. In making the transition to award the cellular RSA licenses at 
issue in this proceeding by competitive bidding, the NPRM proposes (1) 
to accept new license applications, and (2) to use our general Part 1 
competitive bidding rules to conduct the auction. If adopted, these 
proposals would require all applicants to electronically submit FCC 
Form 175 in order to participate in the auction and, at the conclusion 
of the auction, all high bidders to electronically submit FCC Form 601 
to apply for a license. The purposes of these forms are to ensure that 
applicants are eligible to participate in the auction and that high 
bidders are eligible to hold the cellular RSA licenses at issue. The 
Office of Management and Budget has already approved both of these 
forms. Under our Part 1 rules, any entity wishing to receive a bidding 
credit for serving qualifying lands must comply with 47 CFR 
1.2110(f)(3).

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

    23. 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

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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.
    24. To provide opportunities for small entities to participate in 
the auction of cellular RSA licenses discussed in the NPRM, we propose 
to provide bidding credits for entrepreneurs, small businesses, and 
very small businesses as defined in Section C of this IRFA. The bidding 
credits proposed are 15 percent for entrepreneurs, 25 percent for small 
businesses, and 35 percent for very small businesses. We believe these 
bidding credits will benefit a range of small entities. In the NPRM, we 
seek comment on these proposed small business definitions and bidding 
credits, thus providing interested parties with an opportunity to 
suggest alternatives.

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

    25. None.

VI. Ordering Clauses

    26. Authority for the issuance of this NPRM is contained in 
Sections 4(i), 303(r) and 309(j) of the Communications Act of 1934, as 
amended, 47 U.S.C. 154(i), 303(r) and 309(j).
    27. The Commission's Consumer Information Bureau, Reference 
Information Center, SHALL SEND a copy of this NPRM, 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. 01-5830 Filed 3-8-01; 8:45 am]
BILLING CODE 6712-01-U