[Federal Register Volume 68, Number 218 (Wednesday, November 12, 2003)]
[Proposed Rules]
[Pages 64050-64072]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-28047]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 22, 24, and 90

[WT Docket Nos. 02-381, 01-14, 03-202; FCC 03-222]


Facilitating the Provision of Spectrum-Based Services to Rural 
Areas and Promoting Opportunities for Rural Telephone Companies To 
Provide Spectrum-Based Services; 2000 Biennial Regulatory Review 
Spectrum Aggregation Limits for Commercial Mobile Radio Services; and 
Increasing Flexibility To Promote Access to and the Efficient and 
Intensive Use of Spectrum and the Widespread Deployment of Wireless 
Services, and To Facilitate Capital Formation

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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

SUMMARY: In this document, the Federal Communications Commission 
examines ways of amending spectrum regulations and policies in order to 
promote the rapid and efficient deployment of quality spectrum-based 
services in rural areas.

DATES: Submit comments on or before December 29, 2003. Submit reply 
comments on or before January 26, 2004.

FOR FURTHER INFORMATION CONTACT: Nicole McGinnis, Wireless 
Telecommunications Bureau, at (202) 418-0317, or via the Internet at 
[email protected]. For additional information concerning the 
information collections contained in this document, contact Judith-B. 
Herman at (202) 418-0214, or via the Internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Federal 
Communications Commission's Notice of Proposed Rulemaking (NPRM), FCC 
03-222, adopted September 10, 2003, and released October 6, 2003. The 
full text of this document is available for inspection and copying 
during normal business hours in the FCC Reference Information Center, 
445 12th Street, SW., Washington, DC 20554. The complete text may be 
purchased from the FCC's copy contractor, Qualex International, 445 
12th Street, SW., Room CY-B402, Washington, DC 20554. The full text may 
also be downloaded at: www.fcc.gov. Alternative formats are available 
to persons with disabilities by contacting Brian Millin at (202) 418-
7426 or TTY (202) 418-7365 or at [email protected].

Synopsis of the NPRM

I. Introduction and Overview

    1. In this Notice of Proposed Rulemaking (NPRM), we continue to 
examine ways to promote the rapid and efficient deployment of quality 
spectrum-based services in rural areas. We build upon the record 
developed in response to our Notice of Inquiry, in which we sought 
comment on how we could modify our policies to further encourage the 
provision of wireless services in rural areas. See Facilitating the 
Provision of Spectrum-Based Service to Rural Areas and Promoting 
Opportunities for Rural Telephone Companies to Provide Spectrum-Based 
Services, WT Docket No. 02-381, Notice of Inquiry, 68 FR 723 (January 
7, 2003) (Rural NOI). We also draw upon the findings and 
recommendations of the Spectrum Policy Task Force.
    2. The Commission's primary mission is the promotion of 
``communication by wire and radio so as to make available, so far as 
possible, to all the people of the United States, without 
discrimination on the basis of race, color, religion, national origin, 
or sex, a rapid, efficient, Nation-wide, and world-wide wire and radio 
communication service.'' Furthermore, for auctionable services, the 
Commission is required to promote various objectives in designing a 
system of competitive bidding, including the development and rapid 
deployment of new technologies, products, and services for the benefit 
of the public, ``including those residing in rural areas,'' and ``the 
efficient and intensive use of spectrum.'' Under section 706 of the 
Communications Act, the Commission is also directed to ``encourage the 
provision of new technologies and services to the public.'' Consistent 
with these statutory mandates, the Commission's spectrum policy goals 
generally have been to facilitate efficient use, competition, and 
rapid, widespread service consistent with the goals of the 
Communications Act.
    3. On a national scale, the deployment of wireless mobile services 
has been a huge success, resulting in increased competition and 
services overall. We believe that a number of measures that the 
Commission has already adopted have contributed to this successful 
deployment of wireless service. Recently, the Commission took steps to 
facilitate spectrum leasing in secondary markets, building upon 
existing, flexible, market-based policy efforts to encourage more 
efficient use of spectrum. The Commission did so with the belief that 
secondary markets would also facilitate investment in rural areas.
    4. We recognize the inherent economic challenges of providing 
telecommunications services in sparsely populated, expansive rural 
areas. We note that the Federal-State Joint Board has solicited comment 
on issues relating to the eligibility of wireless carriers to receive 
universal service support. Further, the Wireless Telecommunications 
Bureau and the U.S. Department of Agriculture's Rural Utilities Service 
(RUS) have recently initiated a ``Federal Rural Wireless Outreach 
Initiative'' that seeks to harmonize the agencies' policies regarding 
rural wireless deployment and highlight the RUS loan programs available 
to wireless companies that serve rural communities. At present, 
programs are available to support the provision of spectrum-based 
services in rural areas.
    5. We believe that rural as well as urban consumers and businesses 
have benefited from our market-oriented policies that promote 
facilities-based competition for telecommunications services. The 
Commission recently found that there is effective competition in the 
CMRS marketplace as a whole, including in rural areas. The Commission's 
policy to let market forces determine the number of firms operating in 
a given geographic area, subject to limits on spectrum availability and 
aggregation, recognizes this fact, and allows firms to operate at a 
competitive and efficient scale of operation. The Commission recognizes 
that, as a result of varying technical and demographic characteristics, 
the economics of providing service can be significantly different in 
rural areas as compared to urban areas. Our proposals attempt to 
acknowledge that market characteristics, especially demographics, will 
affect the optimal market structure.
    6. Furthermore, there may well be a public interest in policies 
that encourage potential users to become mobile subscribers due to the 
network externalities that would result. In short, network 
externalities occur when adding a user to a communications network 
increases the value of the network for existing users who wish to 
communicate with that new user. For this reason, it is an especially 
important Commission goal to facilitate access to service broadly, not 
just in urban

[[Page 64051]]

markets but also in rural areas, to enable Americans who travel, reside 
or conduct business throughout the country to communicate effectively 
for the benefit of the general public interest.
    7. The NPRM focuses upon the following issues: (1) Determining an 
appropriate definition of what constitutes a ``rural'' area for 
purposes of our policies and requirements; (2) creating mechanisms for 
access to ``unused'' spectrum; (3) relaxing performance requirements to 
remove disincentives to serve rural areas and to allow all geographic 
area licensees to satisfy construction requirements by providing 
``substantial service'' in their initial license term; (4) determining 
whether geographic area licensees should be required to provide 
coverage to increased portions of their licensed areas after their 
initial license term; (5) amending our regulations to permit increased 
power limits in rural areas for both licensed services and unlicensed 
services; (6) evaluating the appropriate size of licensing areas for 
geographic area licenses; (7) determining what, if any, regulatory or 
policy changes should be made to complement the RUS program for low 
interest loans for deployment of broadband services; (8) considering 
whether we could enhance access to capital by permitting the grant of 
conditional security interests in spectrum licenses to RUS; (9) 
considering whether we should modify application of the cellular cross-
interest rule in Rural Service Areas (RSAs) with greater than three 
competitors; (10) establishing a clear, predictable policy on 
infrastructure sharing; and (11) updating and refining our rules 
governing the Rural Radiotelephone Service (RRS) and Basic Exchange 
Telephone Radio Systems (BETRS).

II. Notice of Proposed Rulemaking on Increasing Flexibility and the 
Deployment of Spectrum-Based Services in Rural Areas

A. Definition of ``Rural''

    8. As an initial matter, we seek comment on an appropriate 
definition of a ``rural area'' for use in conjunction with each of the 
policies addressed in this proceeding. Furthermore, given the various 
definitions of ``rural'' that already have been utilized, we believe 
that some clarification of the term is necessary. Although sections 
309(j)(3) and 309(j)(4) of the Communications Act direct the Commission 
to promote the development and deployment of spectrum-based services to 
``rural areas,'' the Communications Act does not define ``rural 
areas,'' nor has the Commission adopted a specific definition of 
``rural areas'' for purposes of implementing section 309(j). In the 
Seventh and Eighth Competition Reports, 17 FCC Rcd 12985 (2002) and 18 
FCC Rcd 14783 (2003), the Commission used three different proxy 
definitions of ``rural'' for purposes of analyzing the average number 
of mobile telephony competitors in rural versus non-rural counties. The 
Commission compared the number of competitors in: (1) RSA counties 
versus MSA counties; (2) non-nodal Economic Area (EA) counties versus 
nodal EA counties; and (3) counties with population densities below 100 
persons per square mile versus those with population densities above 
100 persons per square mile. In connection with administering universal 
service support programs for schools, libraries, and rural health care 
providers, the Commission defines ``rural area'' as any county outside 
of an MSA (with some exceptions). Moreover, the federal government has 
multiple ways of defining ``rural,'' reflecting the multiple purposes 
for which the definitions are used. The Commission has used RSAs as a 
proxy for ``rural'' in certain instances. In administering its 
financial assistance program for broadband access to rural areas, RUS 
defines ``rural'' as any place that is not located within an MSA and 
that has no more than 20,000 inhabitants (based upon the most recently 
available Census data). The Economic Research Service of the USDA, in 
conjunction with others, developed a definition of ``rural'' based on a 
set of metrics that delineates each census tract as being either rural 
or urban. By contrast, the Census Bureau established a different metric 
for defining ``rural'' areas during its 2000 census. Although there are 
many definitions of ``rural'' used by the federal government, we have 
developed a record in response to our Rural NOI proceeding that 
provides some guidance with respect to an appropriate definition of 
``rural area.''
    9. Based upon the record developed in the Rural NOI proceeding, as 
well as certain definitions used by the Commission and by other federal 
agencies as proxies for ``rural,'' we have identified and seek comment 
on the following potential definitions of ``rural area,'' or some 
combination of elements combined in these potential definitions: (1) 
Counties with a population density of 100 persons or fewer per square 
mile; (2) RSAs; (3) non-nodal counties within an EA; (4) the definition 
for ``rural'' used by the RUS for its broadband program; (5) the 
definition for ``rural area'' used by the Commission in connection with 
universal service support for schools, libraries, and rural health care 
providers; (6) the definition of ``rural'' based on census tracts as 
outlined by the Economic Research Service of the USDA; (7) the Census 
Bureau definition of ``rural'' counties; and (8) any census tract that 
is not within ten miles of any incorporated or census-designated place 
containing more than 2,500 people, and is not within a county or county 
equivalent which has an overall population density of more than 500 
persons per square mile of land. In the event that commenters disagree 
with these potential definitions, we ask commenters to provide 
alternative definitions of ``rural.'' Commenters that believe that none 
of these potential definitions are workable or feasible should identify 
specific factors that the Commission should consider when determining 
whether an area is a ``rural area,'' such as population density, Census 
rankings, or other criteria. Finally, we seek comment on whether we 
should adopt different definitions of what constitutes a ``rural area'' 
depending upon the policy initiative for which the definition is used, 
as set out in this proceeding.

B. Improved Access to Unused Spectrum

1. Background
    10. The Commission has promoted access to and efficient use of 
spectrum through a variety of means that may foster the rapid and 
efficient deployment of wireless services in rural areas. Applied to 
licensed spectrum, these approaches may be viewed as existing along a 
continuum, with voluntary, market-based mechanisms at one end, 
regulatory incentives and other approaches in the middle, and 
regulatory mandates and enforcement mechanisms at the other end. More 
specifically, the means by which the Commission may promote access to 
and use of spectrum range from allowing voluntary arrangements that 
move spectrum and licenses between users to establishing regulatory 
mechanisms by which the Commission reclaims and re-licenses unused 
spectrum.
    11. In many spectrum-based services, the Commission has established 
rules by which it reclaims unused spectrum and makes it available to 
other parties. This process for reclaiming unused licensed spectrum 
differs across services. For example, with site-based private land 
mobile radio services, licensees generally are given one year to 
construct particular sites. A licensee with an unconstructed site after 
one year loses its authorization to operate at that site,

[[Page 64052]]

and other parties subsequently may request a license to operate in that 
unused spectrum. In the geographically-based cellular service, initial 
licensees are given five years to construct facilities and begin 
providing service within a geographic service area. At the end of the 
initial five-year period, the licensee is allowed to keep those 
portions of its licensed area in which it has constructed, while the 
unconstructed portions of the market become available for licensing to 
other parties via the cellular ``unserved area'' licensing process. We 
refer to this standard as a ``keep what you use'' approach.
    12. Other geographically licensed services, in contrast, face 
notably different construction benchmarks and means by which unused 
spectrum may be reclaimed and re-licensed by the Commission. For 
example, PCS licensees must meet five- and ten-year benchmarks that 
mandate coverage of a certain percentage of the population of their 
licensed areas, or where applicable, make a showing of substantial 
service. Failure to meet these benchmarks results in automatic 
cancellation or non-renewal of the entire license, including the rights 
to operate from any facilities already constructed under the 
authorization. Moreover, for many services, if the licensee loses its 
authorization for failing to meet the coverage requirements, it is 
often ineligible to reapply for that authorization. However, once these 
benchmarks are achieved, licensees are generally afforded exclusive 
rights and a renewal expectancy for the entire area and band under the 
license regardless of whether service is being provided in all parts of 
the area or over all of the spectrum. Because licensees that fail to 
comply with this coverage requirement lose their entire license, we 
refer to this standard of termination or forfeiture as the ``complete 
forfeiture'' approach. Among the advantages of this model, since 
licensees do not have to cover their entire geographic license areas or 
use all of their licensed spectrum capacity, there is a greater 
incentive for licensees to build out those areas that will ensure their 
economic viability as providers. Among the disadvantages is the 
potentially lower likelihood that rural and less-populous areas will be 
served by the licensee, because there may be an incentive for 
construction to focus first on populous areas and little corresponding 
incentive for licensees to construct in rural areas.
    13. In addition, there are other approaches the Commission may use 
to transition spectrum to higher-valued uses. For example, as the 
Spectrum Policy Task Force observed, the Commission could create 
expanded ``overlay'' rights to licensed spectrum, whereby usage rights 
are given to new licensees. To address issues related to the incumbent 
licensees in these bands, the Commission could adopt various policies, 
including mandatory relocation of incumbents to other bands, 
grandfathering incumbents in the existing band, or providing incentives 
for band-clearing. Overlays with relocation of incumbents were used in 
broadband PCS, while grandfathering of incumbents was used in services 
such as paging and SMR. Among the advantages of this approach, overlays 
may be more flexible and, in some cases, less burdensome on incumbents. 
Among the disadvantages of this approach are potential incumbent hold-
out problems, lengthy periods for incumbent relocation, and the expense 
of additional auctions. Because the ``keep what you use,'' ``complete 
forfeiture,'' and other approaches such as overlays may not be 
effective tools to ensure prompt delivery of service to rural and 
underserved areas, we explore below alternative methods to facilitate 
access to and use of spectrum in these markets.
2. Discussion
a. What Constitutes ``Use'' of Spectrum
    14. As the Commission attempts to increase efficient access to and 
use of spectrum, and as it subsequently establishes policies for access 
to unused spectrum, we must provide a clear definition of ``use'' for 
all parties affected by these rules. That is, licensees that construct 
or lease their spectrum must understand how this use is construed in 
terms of construction requirements, re-licensing, and other policies 
that may affect them so that they will know what rights licensees will 
retain in the event they do not ``use'' their spectrum, however we 
define it. We seek comment on how to define ``use'' in order to 
effectively promote access to and use of spectrum in rural areas. We 
also inquire how to define this term in a flexible manner so as to 
recognize the many ways in which licensees provide service, or allow 
other parties to provide service, with their licensed spectrum. Under 
our current rules for many service bands, ``use'' is defined to reflect 
construction and operation of specified facilities by the licensee. We 
seek comment on whether this is the appropriate baseline standard for 
determining use and, if not, what this standard or other 
``performance'' criteria should be.
    15. We recognize that leasing via secondary markets may require 
viewing the concept of use from a different perspective. That is, under 
a negotiated spectrum leasing arrangement, a licensee assigns a usage 
right to a third party. We propose that spectrum in rural areas that is 
leased by a licensee, and for which the lessee meets the performance 
requirements that are applicable to the licensee, should be construed 
as ``used'' for the purposes of this proceeding and any other 
performance criteria we adopt. We note that merely leasing spectrum, 
where the lessee does not fully meet the lessors' performance 
requirements, would not be considered ``use'' under this proposal. We 
seek comment on this approach and other ways we could better tailor or 
expand the concept of ``use'' to encourage service by licensees or 
lessees in rural and underserved areas. Finally, should our definition 
of ``use'' be in any way limited as it applies to leasing?
    16. Under one approach to defining construction, the Commission 
would rely on the filings of wireless providers, perhaps with certain 
reporting criteria. This approach is based on the presumption that 
wireless providers are in the best position to determine the meaning of 
``built'' for their particular technology and application. Moreover, 
such an approach is consistent with recent Commission precedent and 
trends. With broadband PCS licensees, for example, the Commission did 
not attempt to specify a particular signal level, but instead required 
licensees to provide a signal level ``sufficient to provide adequate 
service'' to one-third of the population in the market within five 
years, and to two-thirds within ten years. In applying this approach to 
measuring construction, the Commission could provide guidance regarding 
what type of range would be acceptable and how this might vary from 
service to service. Alternatively, we could decline to provide 
direction and simply monitor the various means by which licensees 
report their construction.
    17. We recognize that the approach described above, however, may 
present certain risks, particularly in the event that a licensee claims 
that it is satisfying the more flexible ``substantial service'' 
standard, instead of satisfying a concrete coverage benchmark. The 
Commission may not have sufficient resources to verify that the many 
different uses of rural spectrum likely to emerge will actually serve 
the goals of our build out requirements. Additionally, we note that 
this approach might present some risk for the licensee. For example, 
were

[[Page 64053]]

it able to do so, the Commission could determine, upon receiving an 
assertion of compliance by a licensee, that the indicated build out is 
insufficient and that the licensee must do more in order to satisfy its 
construction requirements. This would require additional construction 
and investments not planned for by the licensee, which ultimately could 
prove more expensive to comply with than if they had been planned for 
and completed with the original build out. We therefore seek comment 
regarding whether the Commission should establish a baseline above 
which a licensee must reach in order to minimally comply with our 
substantial service requirements. We seek comment on whether this 
baseline should be determined in terms of signal strength or using some 
other metric.
    18. We also seek comment on two other approaches for determining 
whether spectrum is being used in accordance with construction 
requirements or for purposes of finding available spectrum in rural 
areas. First, the Commission has developed rules defining protected 
service areas for site-based incumbents, such as 220 MHz, 800 MHz SMR, 
and paging licensees. We seek comment on how we should address these 
and other differences in estimating coverage in rural areas. In light 
of the fact that our rules defining protected service areas vary by 
service, we ask commenters whether we should harmonize these 
regulations across services and establish a data base of available 
``white space'' in rural areas. Second, we seek comment on expanding 
the use of spectrum ``audits'' and on exploring the means and 
methodologies for making in situ measurements of signal strength in 
selected rural areas to maintain an ``inventory'' of available spectrum 
resources. We inquire as to whether expanded use of such audits would 
help identify unused spectrum in rural areas so as to ultimately make 
more spectrum, and thus more service, available in these markets. We 
also inquire as to what may be an appropriate way to test whether a 
spectrum inventory is feasible. Should we limit such an inventory to 
the most rural or underserved areas? We believe markets in Alaska, 
Appalachia, and the Mississippi Delta may be particularly appropriate, 
and we inquire as to whether commenters recommend these or other areas.
b. Re-licensing vs. Market-Based Mechanisms
    19. As described above, the Commission practices re-licensing in 
several different forms, both in terms of the conditions under which 
licensed spectrum is returned to the Commission, and in terms of how 
that spectrum subsequently is made available to other users. Generally, 
licensed spectrum may return to the Commission due to non-use under a 
``complete forfeiture'' standard, as applied to PCS licensees, or under 
a ``keep what you use'' standard, as applied to cellular licensees. 
Once this spectrum is reclaimed, the Commission may then re-license via 
competitive bidding, as with PCS licenses, or it may use a non-auction 
mechanism such as the cellular unserved area re-licensing rule.
    20. We seek comment on when, and under what circumstances, the 
Commission should use re-licensing as a means to increase access to 
spectrum, and thus service, especially in rural areas. We do not 
propose to change the current re-licensing rules for any current 
wireless service. Rather, we inquire as to whether we should apply one 
of the current rules, or some other rule, to future spectrum 
allocations. We also inquire as to whether we should apply a new 
standard to spectrum that has been returned, under the current rules, 
to the Commission for re-licensing at the end of a licensee's second 
term.
    21. In the event of spectrum re-licensing, we seek comment on 
whether there are particular construction standards, such as ``complete 
forfeiture'' or ``keep what you use,'' that are most effective in 
promoting access and service, especially in rural areas. In particular, 
we seek comment on whether a ``keep what you use'' standard based on 
the cellular unserved area model is most appropriate to advance our 
goal of promoting rural service, should we decide to extend this 
approach to additional services. Further, how might the ``keep what you 
use'' approach work in tandem with the substantial service safe harbor 
that we propose below?
    22. As described above, in the cellular service, after the initial 
five-year period, there is an unserved area licensing process whereby 
unconstructed portions of a market become available to other parties. 
In a Petition for Reconsideration filed in WT Docket 01-108, Dobson 
proposed that licensees should be permitted to extend into unserved 
areas of less than 50 square miles operating on a secondary non-
interference basis to any licensee that might be authorized to cover 
the area in the future. While we intend to address Dobson's petition in 
the context of that proceeding, we seek comment on whether there are 
other changes to the cellular unserved area rules that could promote 
service in rural areas. We also seek comment on whether, for purposes 
of defining use, the most appropriate approach would be based on the 
PCS model (i.e., allowing providers to define construction based on 
their particular technology and application). We note that the approach 
with the PCS model is technology neutral, yet it requires a 
sufficiently strong signal to produce a reasonable level of service.
    23. In addition, we seek comment on the relative merits of re-
licensing as compared to secondary markets. Are there particular 
circumstances or factors that we should consider in deciding to use one 
approach or the other? We recognize that re-licensing is a more 
regulatory approach, and we therefore inquire as to whether we should 
limit its application. What market conditions or other measures should 
we consider in determining whether to apply re-licensing to a 
particular service or in a particular market? Is this approach more 
appropriate for rural markets, and if so, why?
    24. Finally, we note that while the Spectrum Policy Task Force 
recommended that the Commission focus on secondary markets as the 
primary means to increase access to spectrum, it also recommended that, 
after there has been sufficient time to consider the effectiveness of 
this approach, the Commission also consider alternative mechanisms such 
as government-defined easements. We seek comment on whether now is an 
appropriate time to consider the use of spectrum easements for new 
licenses.

C. Performance Requirements

    25. Subsequent to the enactment of section 309(j), the Commission 
initiated the Competitive Bidding proceeding, which, among other 
things, addressed how the Commission intended to implement the 
statutory mandate for ``performance requirements'' for licenses awarded 
through competitive bidding. See Implementation of Section 309(j) of 
the Communications Act--Competitive Bidding, PP Docket No. 93-253, 
Notice of Proposed Rulemaking, 58 FR 53489 (October 15, 1993). 
Depending upon the service, the Commission's construction benchmarks 
may require coverage of a certain percentage of the licensed area's 
population or coverage of a certain percentage of the licensed area's 
geographic area. For many services, the Commission has adopted a 
flexible ``substantial service'' construction standard that allows 
licensees that are providing a beneficial use of the spectrum to retain 
their authorizations. While the definition of ``substantial service'' 
is generally consistent among wireless services, the

[[Page 64054]]

factors that the Commission will consider when determining if a 
licensee has met the standard vary among services. Substantial service 
generally means service that is sound, favorable, and substantially 
above a level of mediocre service that would barely warrant renewal.
1. Substantial Service Construction Benchmarks
a. Background
    26. As we have explained, the Commission has taken a market-
oriented approach to spectrum policy that, where possible, has allowed 
economic forces to determine build-out of wireless facilities and the 
provision of wireless services. The Commission has shifted towards 
providing licensees increased flexibility to tailor use of their 
spectrum to unique business plans and needs. This increased flexibility 
is evident in our adoption of the ``substantial service'' benchmark for 
many of our services. In more recently adopted rules for wireless 
services, the Commission established the substantial service standard 
as the only construction requirement. In addition, for licensees 
subject only to the substantial service requirement, the Commission 
often has included ``safe harbors,'' i.e., examples of how a licensee 
would meet the substantial service standard.
b. Discussion
    27. As a general matter, we believe that our current performance 
requirements, in combination with economic incentives and the licensing 
of multiple competitors, have served to promote significant build out. 
Nevertheless, we believe that current geographic area licensees without 
a ``substantial service'' option or a rural-specific construction 
requirement may be unduly constrained and may lack sufficiently 
flexibility to provide service to rural areas or to offer niche 
services. Moreover, given the unique characteristics and considerations 
inherent in constructing within rural areas, we believe that a 
construction standard that is based upon coverage of a requisite 
percentage of an area's population may be an inappropriate measure of 
levels of rural construction. Accordingly, while we intend to keep our 
current construction requirements, as they are set forth in our 
service-specific rule sections, we propose to adopt a ``substantial 
service'' alternative for all wireless services that are licensed on a 
geographic area basis and that are subject to construction 
requirements. This proposal therefore would affect the following 
licensees: 30 MHz broadband PCS licensees; 800 MHz SMR licensees 
(blocks A, B, and C only); certain 220 MHz licensees; LMS licensees; 
MDS/ITFS licensees; and 700 MHz public safety licensees. If we adopt 
our proposed modification of our build-out rules, these licensees would 
have the flexibility to comply with existing service-specific 
benchmarks or to satisfy the substantial service benchmark, at their 
option.
    28. We are concerned that current population-or geographic area-
specific benchmarks may impinge upon licensees' abilities to serve 
niche or less populated areas, and may unintentionally discourage 
construction in rural areas. Particularly in the case of a population-
based construction requirement, a licensee has both an economic and 
practical incentive to achieve compliance with the requirement by 
providing service only to the urban areas of its licensed area. In 
addition, because each licensee must satisfy the same population-based 
benchmark, we are concerned that, as multiple licensees enter a market, 
they likely will construct systems in the same populous areas, thereby 
duplicating coverage. Consequently, within any given market, urban 
areas are likely to have multiple wireless competitors providing 
service, whereas rural areas may have fewer options.
    29. We believe that providing all geographic area wireless 
licensees with a substantial service option will address concerns that 
construction requirements based on population or geographic coverage 
may discourage the build-out of rural areas. As we have explained in 
past proceedings, the substantial service option provides licensees 
with greater flexibility and therefore may result in the more efficient 
use of spectrum and the provision of service to rural, remote, and 
insular areas. Furthermore, in light of the fact that we have been 
moving towards a more flexible approach to coverage requirements, 
offering all geographic area wireless licensees a substantial service 
option will increase regulatory parity. We also note that, by providing 
terrestrial wireless licensees with greater flexibility in satisfying 
their construction requirements and by alleviating the pressure of 
satisfying minimum population-based benchmarks, licenses that are 
comprised largely of rural areas might be more likely to appeal to a 
wider range of potential bidders at auction.
    30. We intend to retain our current construction benchmarks and 
propose adopting the substantial service benchmark as an additional 
means of satisfying our construction requirements. Our proposal 
effectively would harmonize construction benchmarks across all wireless 
services licensed on a geographic-basis (and that are subject to 
construction requirements) so that all geographic area licensees have 
the increased flexibility of a substantial service option. Licensees 
may elect to satisfy either the construction benchmark options already 
available to them today or the substantial service benchmark, according 
to their preference. In the past, in evaluating substantial service 
showings, we have considered factors such as whether the licensee is 
offering a specialized or technologically sophisticated service that 
does not require a high level of coverage to be of benefit to 
customers, and whether the licensee's operations serve niche markets. 
In the context of providing substantial service to rural areas, we are 
particularly interested in the following factors: (1) Coverage of 
counties or geographic areas where population density is less than or 
equal to 100 persons per square mile; (2) significant geographic 
coverage; (3) coverage of unique or isolated communities or business 
parks; and (4) expanding the provision of E911 services into areas that 
have limited or no access to such services. We intend to limit this 
proposal to wireless services that are currently licensed on a 
geographic area basis. In the event we adopt geographic areas for new 
wireless services at a future date, we will examine the appropriateness 
of adopting a substantial service or alternative construction 
requirement for the new service at that time.
    31. We seek comment on our proposal to adopt a ``substantial 
service'' benchmark for all wireless services that are licensed by 
geographic area and are subject to build-out requirements, but 
currently do not have a substantial service option. We also seek 
comment on whether any services should be excluded from our proposal. 
In the event that commenters believe that a substantial service 
standard is inappropriate for certain services, we ask commenters to 
suggest alternative benchmarks that might promote the deployment of 
service within rural areas. We ask commenters whether the adoption of a 
substantial service requirement is likely to increase deployment of 
wireless services in rural areas. Finally, because this proposed 
modification of our rules will apply generally to all geographic area 
licensees, and not just those licensees serving rural areas, we ask how 
the adoption of a substantial service

[[Page 64055]]

requirement might affect the deployment of wireless services in non-
rural areas.
    32. We also seek comment on whether we should adopt geographic-
based construction requirements for those private and commercial 
terrestrial wireless services that are licensed on a geographic area 
basis and that currently do not have a geographic area coverage option. 
A geographic benchmark would provide an alternative for licensees who 
do not intend to focus construction efforts on population centers. 
Further, like population-based benchmarks, geographic benchmarks would 
provide increased certainty for licensees, in comparison to the more 
flexible substantial service standard. Commenters supporting 
geographic-based construction requirements should identify the 
applicable radio service(s) and recommend benchmark levels, or 
percentages, for the relevant market sizes. We seek comment on whether 
the benchmark levels may be reduced where the geographic areas in 
question are rural areas.
    33. In addition to proposing the adoption of a substantial service 
benchmark for all wireless services that are licensed by geographic 
area, we propose the adoption of a substantial service ``safe harbor'' 
based on provision of rural service. We propose two different rural 
safe harbors, depending on whether a licensee is providing mobile or 
fixed wireless service. With respect to mobile wireless services, we 
propose that a licensee will be deemed to have met the substantial 
service requirement if it provides coverage, through construction or 
lease, to at least 75 percent of the geographic area of at least 20 
percent of the ``rural'' counties within its licensed area. We propose 
that ``rural'' counties be defined as those counties with a population 
density less than or equal to 100 persons per square mile. For example, 
if a licensee's market contains five counties (all having a population 
density of 100 persons per square mile or fewer), the licensee could 
meet the safe harbor by providing coverage to 75 percent of the 
geography in one of those five counties. With respect to fixed wireless 
services, we propose to define the substantial service requirement as 
met if a licensee, through construction or lease, constructs at least 
one end of a permanent link in at least 20 percent of the ``rural'' 
counties within its licensed area (using the same ``rural'' county 
definition). For example, if a licensee's market contains five counties 
(all having a population density of 100 persons per square mile or 
fewer), the licensee could meet the safe harbor by constructing one end 
of a permanent link in one of those five counties. Our proposal to base 
the safe harbor on a population density of 100 persons per square mile 
or fewer is derived from our finding in the Eighth Competition Report, 
which indicates that counties with population densities of 100 persons 
per square mile or less ``have an average of 3.3 mobile competitors, 
while the more densely populated counties have an average of 5.6 
competitors.'' We note that these proposed ``safe harbors'' are 
intended to provide licensees with a measure of certainty in 
determining whether they are providing substantial service, but are not 
intended to be the only means of demonstrating substantial service.
    34. We seek comment on whether we should adopt rural safe harbors 
and, if so, whether it is advisable to adopt the specific safe harbors 
described above. We note that although the analyses of competition in 
counties with population densities of 100 persons per square mile or 
fewer were based upon data pertaining to the mobile telephony industry 
(dominated by cellular, broadband PCS, and digital SMR providers), we 
believe that 100 persons per square mile nevertheless provides a usable 
and reasonable proxy for ``rural'' for the purpose of establishing a 
rural substantial service safe harbor. We seek comment on this proposed 
population-density based standard. In particular, we seek comment on 
whether this safe harbor is suitably flexible to accommodate variances 
in service areas and how we might modify our safe harbors to 
accommodate various geographic service areas and uneven population 
distributions. In the event commenters disagree with our proposed safe 
harbors, we ask that commenters suggest examples of alternative rural 
safe harbors, in light of their practical experience and based upon 
their own service-specific demands and requirements. Should we adopt a 
rural safe harbor that applies to all services, or are services 
sufficiently specialized that we should adopt service-specific safe 
harbors?
2. Renewal License Terms
a. Background
    35. At present, we require compliance with our construction 
requirements during the initial license term. Depending upon the 
particular service, we require licensees to satisfy minimum coverage 
benchmarks at an interim period prior to the end of the initial license 
term, and/or at the conclusion of the initial license term. Licensees 
obtain authorizations to use designated spectrum for a specific period 
of time (typically a term of ten years), and may request renewal of 
their authorizations prior to the expiration of their license terms. 
Once a licensee renews its license, however, no additional performance 
requirements are imposed in subsequent license terms.
b. Discussion
    36. We seek comment on whether we should require geographic area 
licensees to satisfy performance requirements during their renewal 
license terms (we refer to license terms subsequent to the initial 
license term as ``renewal terms''). This question of whether licensees 
should satisfy additional performance requirements during renewal terms 
is particularly relevant as licensees approach the end of their initial 
license terms or enter into their renewal terms. We ask whether 
additional performance requirements are likely to increase the 
provision of wireless services to rural areas.
    37. With respect to commercial mobile wireless services, we have 
seen the prompt use of at least a portion of the spectrum and provision 
of at least a minimum level of service. While this data appears to 
suggest that our construction requirements have facilitated competition 
and have promoted the deployment of wireless services, it is 
nevertheless difficult to identify whether wireless deployment is the 
result of our minimum coverage requirements or the operation of market 
forces. We ask commenters whether market forces, and not build out 
requirements, should govern any additional construction during renewal 
terms. Will the imposition of additional performance requirements 
during renewal terms likely result in uneconomic construction?
    38. In the event that commenters believe additional construction 
requirements are appropriate and necessary to promote the continued 
deployment of wireless services to consumers in rural areas, we ask 
what form these construction requirements should take. For example, 
should we adopt a population- or geography-based benchmark? Should we 
adopt a modified version of substantial service and require the 
provision of additional coverage beyond what is sufficient to satisfy 
``substantial service'' during the initial license term (in effect, a 
``substantial service plus'' requirement)? Should we require compliance 
with these benchmarks at the expiration of the renewal term, or at some 
interim period prior to the end of the renewal term? Furthermore, given 
our objective of promoting service to rural consumers, we ask whether 
renewal term

[[Page 64056]]

construction requirements should be specifically targeted towards 
construction in rural areas or otherwise include a rural component.

D. Relaxed Power Limits

1. Background
    39. In the following sections, we propose modifications to our 
regulations governing power limits and technical specifications for 
operations in rural areas. In its report, the Spectrum Policy Task 
Force recommended that in less congested areas (i.e., rural areas) 
spectrum users should be permitted to operate at higher power levels so 
long as they do not cause interference and do not receive additional 
interference protection. Similarly, in the Rural NOI we observed that 
technical and operational rules throughout the spectrum-based services 
are necessary to facilitate efficient use of the radio spectrum while 
minimizing the potential for interference among licensees. We sought 
comment on the degree of flexibility that these regulations afford to 
providers of spectrum-based services in rural areas.
2. Discussion
a. Part 15 Unlicensed Devices and Systems
    40. Unlicensed devices are permitted to operate under Part 15 of 
our rules at very low power levels. One of the more significant 
developments in the use of unlicensed devices is the emergence of 
wireless Internet service providers or ``WISPs.'' Using unlicensed 
devices, WISPs around the country are beginning to provide an 
alternative high-speed connection to cable or DSL services. In addition 
to providing competition to cable and DSL, the record reflects that 
WISPs have taken root in many rural areas where these services have 
been slow to arrive.
    41. We remain committed to exploring more flexible spectrum 
policies for rural areas to help foster, where possible, a viable last 
mile solution for delivering Internet services, other data 
applications, or even video and voice services to underserved or 
isolated communities. The record in the Rural NOI identifies legitimate 
issues under our Part 15 policies, such as interference with other Part 
15 devices and how to design a framework that reasonably ensures that 
Part 15 devices operate using different parameters in different 
locations or under differing RF conditions. Cognitive radio 
technologies, which permit radio systems to modify their performance in 
response to such external information, would appear to hold great 
promise in resolving such issues. In this connection, we plan to 
initiate a proceeding shortly to consider how to leverage these 
technologies to permit more intensive use of spectrum in a number of 
situations, including possible rule changes that would permit greater 
use of spectrum in rural areas. In this proceeding, we plan to invite 
comment on any specific factors that may need to be considered to allow 
cognitive radios to operate with higher power in rural America. This 
impending proceeding also will address power limits for the operation 
of ``dumb'' or ``non-cognitive radio'' unlicensed devices in rural 
areas.
b. Licensed Services
    42. Two commenters responding to the Rural NOI address the issue of 
whether we should modify our regulations to permit increased power 
levels in the context of mobile voice systems. South Dakota 
Telecommunications Association (SDTA) points out that higher power 
levels could reduce the number of transmitters required to connect 
stretches of roadways between small rural towns and to serve ranches 
and farms beyond the highways, but cautions that while it may be 
feasible to increase power and still safeguard urban and suburban 
operations, such safeguards must include ``clear-cut interference 
definitions and protections.'' CTIA, however, argues that an increase 
in base station power levels would not improve matters unless mobile 
station (i.e., handset) power levels are increased as well. CTIA 
contends that it is unlikely that handset manufacturers would make 
special ``high power'' handsets for rural areas.
    43. Increasing the range of radio systems is one means of making it 
more economical to provide spectrum-based radio services in rural areas 
by potentially lowering infrastructure costs. One way to increase the 
range of radio systems is by increasing power levels. While there may 
be challenges in implementing increased power levels for cellular-like 
mobile systems, we would like to further investigate whether power 
increases may be beneficial for other mobile or fixed services. In 
doing so, we must consider increasing power levels in rural areas in 
the context of base/mobile systems, point-to-point systems, and point-
to-multipoint systems. Base/mobile systems (e.g., cellular, PCS, SMR, 
private land mobile) consist of a base station antenna intended to 
provide coverage over a specific area, and the mobile units that 
communicate with the base station. The base station operates at a 
sufficient power level to cover the desired area, while the battery-
powered mobile units operate at relatively low power. The ability of 
the base station to reach a mobile unit is limited by, among other 
things, transmitter power, the propagation characteristics of the 
frequency band, antenna directionality (gain), antenna height, terrain, 
clutter, man-made obstructions, and the sensitivity of the mobile unit 
receiver. As stated above, there are challenges related to increasing 
power levels. First, increasing the base station power may cause 
unacceptable levels of interference to nearby systems. Second, simply 
guaranteeing that a mobile unit can ``hear'' the base station, however, 
is not sufficient for two-way communications. The low power mobile 
unit, which is likely located close to ground level, must also be able 
to return a signal to the base station antenna, i.e., the base station 
must be able to ``hear'' the mobile unit. One can observe that, at the 
fringe of the base station coverage area, the most significant limiting 
factors to two-way transmissions are the power level and the location 
of the mobile unit. Thus, merely increasing the base station power 
level may not improve the communications range unless the mobile unit 
is capable of returning a signal to the base station antenna.
    44. It is instructive to provide examples of the likely results of 
increasing base station power for specific types of base/mobile 
systems. Because received signal levels decrease exponentially as the 
receiver moves farther from the transmitter, we would expect that 
relatively large increases in power would yield only small increases in 
communications range. In the case of a rural 800 MHz cellular system, 
we found that increasing the base station power by 10 percent (500 W 
ERP to 550 W ERP) and 20 percent (500 W ERP to 600 W ERP) increased the 
base station range by 1.5 km (0.93 mi) and 3 km (1.86 mi) respectively. 
We note, however, that our calculations show that a typical 0.5 W ERP 
mobile unit would not have sufficient range to reach the base station 
from the edge of the base station coverage area regardless of whether 
the base station power is 500 (maximum under the rules today), 550, or 
600 W ERP. Similarly, in the case of a rural 1,900 MHz PCS system, we 
found that increasing the base station power by 10 percent (1,640 W 
EIRP to 1,804 W EIRP) and 20 percent (1,640 W EIRP to 1,968 W EIRP) 
increased the base station range by 1 km (0.62 mi) and 2 km (1.24 mi) 
respectively. We note, however, that our calculations show that a 
typical 0.8 W EIRP mobile unit

[[Page 64057]]

would not have sufficient range to reach the base station from the edge 
of the base station coverage area regardless of whether the base 
station power is 1,640 (maximum under the rules today), 1,806, or 1,968 
W EIRP.
    45. Microwave point-to-point systems generally consist of a highly 
directional, high gain transmitting antenna and a highly directional, 
high gain receive antenna separated by some distance along a path. 
System performance is impacted by, among other things, transmitter 
power, propagation characteristics of the frequency band, antenna 
directionality (gain), height of transmit and receive antennas, terrain 
between the antennas, interference, clutter, man-made obstructions, 
weather, type of modulation, and sensitivity of the receiver. Unlike a 
base/mobile system, however, the system designer can increase the 
distance of the path by increasing transmitter power or using a higher 
gain antenna as well as elevating the receive antenna. Point-to-
multipoint microwave systems share many of the characteristics of 
point-to-point microwave systems, except that there are multiple 
receive antennas situated in an area of desired service and the 
transmitting antenna may not be as highly directional. In either case, 
as with base/mobile systems, increasing the transmitter power may cause 
unacceptable levels of interference to neighboring paths, or limit the 
number of paths in a particular area.
    46. For example, in the theoretical case of a typical rural 
microwave path in the 6.8 GHz band, a 45 percent increase in 
transmitter output power yields only a one km (0.62 mi) increase in 
path length. We seek comment on whether the benefits of such a modest 
increase in path length outweigh the potential for unacceptable levels 
of interference to neighboring paths, or siting limitations on new 
paths in the same area.
    47. We seek comment on whether it is beneficial, feasible, and 
advisable to increase the current power limits for stations located in 
rural areas licensed under parts 22, 24, 27, 80, 87, 90, and 101. A 
licensee can increase power by increasing transmitter output power and/
or by using a directional antenna that focuses energy on the specific 
area to be covered and reduces energy in other directions, serving to 
limit interference potential, and potentially improving reception of 
signals from mobile units. Commenters should indicate which radio 
service(s) and power level(s) should be increased, specify a particular 
amount of additional power (either transmitter output power, EIRP, or 
both), specify directional antenna parameters if applicable (e.g., 
front to back ratio or beamwidth), and quantify the benefits that one 
could expect from the power increase. In particular, we are interested 
in how such increases may increase the potential for unacceptable 
levels of interference to other stations, increase exposure to 
electromagnetic radiation for workers and consumers, or limit future 
use of the spectrum in such areas.
    48. We also seek comment on how best to define the term ``rural'' 
for purposes of permitting increased power levels. In the case of base/
mobile systems, would both the base stations and mobile stations need 
to be located in a rural area? For point-to-point and point-to-
multipoint systems, would both ends of the transmission path need to be 
in a rural area? Rather than defining certain geographic areas as rural 
for these purposes, would some other measure (e.g., taking into account 
a combination of terrain and nearby spectrum usage) be more 
appropriate?
    49. We also seek comment on other measures that licensees may be 
using to minimize the costs associated with serving rural areas, and 
whether our rules and policies are sufficiently flexible to facilitate 
and encourage such innovations. For example, cellular and PCS licensees 
in rural areas may be using tower top amplifiers to boost incoming 
mobile signals. Similarly, licensees may deploy ``smart antenna'' 
systems capable of increasing base station range and suppressing 
interference from unwanted sources.

E. Appropriate Size of Geographic Service Areas

1. Background
    50. Over the past decade, the Commission has moved from the use of 
site-based licenses to the use of geographic areas for licensing 
commercial wireless services. In selecting the initial size of 
geographic service areas for licenses with mutually exclusive 
applications (and thus competitive bidding), section 309(j)(4)(C) 
directs the Commission to promote certain goals. Specifically, section 
309(j)(4)(C) requires the Commission to, consistent with other 
objectives, prescribe service areas ``that promote (i) an equitable 
distribution of licenses and services among geographic areas, (ii) 
economic opportunity for a wide variety of applications, including 
small businesses, rural telephone companies, and businesses owned by 
members of minority groups and women, and (iii) investment in and rapid 
deployment of new technologies and services.''
2. Discussion
    51. We believe that the Commission's choice for the initial size of 
geographic service areas plays an important role in promoting a number 
of policy goals, including efficiency of spectrum use, competition 
among providers, and advancing service to rural areas. If geographic 
service area licenses are assigned with an initial size that does not 
represent the needs of service providers, then transaction costs are 
incurred, as carriers seek to acquire rights to spectrum in areas they 
wish to serve and divest their interest in areas they do not wish to 
serve. While we hope that the Commission's recent efforts to facilitate 
the development of secondary markets will make these transaction costs 
less burdensome, we recognize that some costs to moving spectrum to its 
highest valued use will remain.
    52. Since it is costly to aggregate or disaggregate spectrum, it is 
important that the Commission select initial license sizes and 
boundaries that are appropriate for the likely users and services to be 
provided. We recognize that there are tradeoffs between the use of 
large service areas and small service areas. Large service areas 
provide economies of scale and reduce coordination costs. On the other 
hand, smaller service areas allow local, independent operators to 
better tailor their services to local conditions and provide greater 
financial incentives to local licensees than if they were managers in 
very large enterprises. Adopting small license areas also may allow 
smaller enterprises with limited financing to acquire spectrum 
licenses. In addition, license boundaries are also a concern of the 
Commission, which has attempted to choose boundaries that combine 
people and firms who are part of the same community and who are likely 
to communicate with each other. The Commission also has attempted to 
avoid setting boundaries that would preclude incumbents from bidding on 
licenses because of cross-ownership rules.
    53. We recognize that carriers are divided on the issue of the 
appropriate size of geographic service areas. In various Commission 
proceedings, representatives of small, regional, and rural providers 
have argued that CMAs are the most appropriate size. In contrast, 
representatives of large regional and nationwide CMRS providers and 
other parties have argued that service areas that are too small may be 
inefficient. Still other parties have

[[Page 64058]]

argued that the size of service areas should be tailored to the 
wireless service in question.
    54. We seek comment on the costs of partitioning post-auction as 
compared to the costs of aggregating spectrum during or after the 
auction process. We observe that spectrum aggregation within auctions 
is fairly common. While we recognize the concerns of small carriers 
regarding their access to spectrum in rural markets, especially when 
large geographic areas are used, we note that partitioning also is 
relatively common. Partitioning appears to be occurring across all 
regions of the country and includes many counties that fall within the 
various definitions of ``rural'' that are proposed above.
    55. We seek comment on the lessons we should draw from the 
Commission's experience in choosing initial service area sizes. Is 
there evidence of net aggregation towards nationwide service areas for 
certain services such as cellular and PCS? Is there evidence of net 
partitioning for other services? To the extent partitioning is more 
common in some services and less so in others, is this trend indicative 
of some miscalculation by the Commission in choosing the initial size 
of service areas? Alternatively, could this activity reflect changes in 
the demand for services that could be provided in this band, or changes 
in technologies or other factors that affect what services could be 
supplied in this band? We also seek comment as to whether the 
difference in the level of partitioning across services could reflect 
the application of different Commission rules, such as build-out 
requirements. Finally, we note that there are certain transaction costs 
associated with any partitioning. Should we expect that licenses for 
highly valued spectrum, in highly valued services, will be more likely 
to be partitioned, given the greater likelihood that the value created 
by this trade will exceed the transaction costs? Similarly, as 
secondary markets develop and transaction costs decline, should we 
expect that partitioning through leasing arrangements will become more 
feasible in more services? To what extent might such partitioning be 
limited by a hold-out problem? That is, might licensees with large 
geographic areas refuse to make spectrum available to small providers 
that want to serve small or niche markets, which tend to be in rural 
areas?
    56. We tentatively conclude that it is in the public interest for 
the Commission to balance the needs of different providers, including 
the larger carriers' need for economies of scale and the smaller 
carriers' need for license areas that more closely resemble their 
service areas. We recognize that, since users of spectrum have a 
variety of needs, one size of service area does not fit all. We intend 
to continue establishing geographic areas on a service-by-service 
basis, and we seek comment on steps we can take to effectively balance 
the competing needs of different users as we make these service area 
decisions. Would such an approach produce economically efficient 
results? Is such an approach necessary, given our expectation that 
secondary markets will become more prevalent in the future? We 
especially encourage commenters to use empirical evidence to support 
their assessment of partitioning costs, aggregation costs, and the 
efficiency of any approach they recommend.
    57. In addition, while the largest geographic service area the 
Commission may adopt would be a nationwide area, there is some question 
as to what would be the smallest size that would still be functional. 
That is, at what point is it more appropriate for the Commission to use 
site-based licenses instead of very small geographic area licenses? 
Also, to the extent we believe small license areas are appropriate for 
specific bands, what size is most appropriate? Are there particular 
frequencies that are better suited for allocations to small license 
areas? We also inquire as to whether it is possible that use of 
relatively small geographic areas would introduce an unreasonable risk 
of another type of hold-out problem. In particular, might such an 
approach result in many small incumbent licensees who could then 
frustrate post-auction attempts to aggregate licenses efficiently by 
refusing to sell except at excessive prices?
    58. We also seek ways to make it easier for providers in need of 
larger areas to acquire them with minimal transaction costs. One way to 
achieve this objective may be to adopt bidding design mechanisms that 
permit the aggregation of geographic areas or spectrum blocks during an 
auction. Typically, the Bureau uses a simultaneous multiple-round 
auction design, which facilitates aggregation by making all licenses in 
the auction available at the same time. Recently, the Bureau selected a 
package bidding design for two auctions. This relatively new approach 
to auctions allows bidders to submit all-or-nothing bids on 
combinations of geographic areas or spectrum blocks in addition to bids 
on individual licenses or authorizations. We believe that, in instances 
in which the Commission has determined that smaller size license areas 
are appropriate, a package bidding format may be helpful to bidders 
seeking to acquire larger geographic areas or spectrum blocks. We 
recognize, however, that in such circumstances, the use of package 
bidding may introduce significant computational complexities.
    59. We also observe that choosing a geographic service area that 
represents a ``middle solution'' may be an inefficient approach. We 
note that, as an alternative to such a ``middle solution'' in which 
service area size represents a compromise that may not be ideal for 
either small or large service providers, there may be situations in 
which it is possible to create geographic service areas of mixed sizes. 
In particular, if there is sufficient bandwidth available, both large 
regional (or even national) and small local license areas can be 
created. We inquire as to whether such a mixed plan may reduce the 
aggregation/disaggregation transaction costs inherent in a single size 
geographic licensing scheme, and we seek comment on what other costs, 
as well as benefits, may be associated with such an approach. We 
recognize that, while a mixed approach may be useful in some bands with 
spectrum users that have very different needs, it may not be 
appropriate in other bands, and we conclude that our approach must be 
tailored to the needs of each band or service in question.

F. Facilitating Access to Capital

1. Rural Utilities Service
a. Rural Loan Programs
(i) Background
    60. The U.S. Department of Agriculture's RUS Telecommunications 
Program assists the private sector in developing, planning, and 
financing the construction of telecommunications infrastructure in 
rural America. Programs administered by RUS include: (1) Infrastructure 
loans; (2) broadband loans and grants; (3) distance learning and 
telemedicine loans and grants; (4) weather radio grants; (5) local TV 
loan guarantees; and (6) digital translator grants. The largest of 
these programs are the infrastructure loan program and the broadband 
loan program.
    61. The infrastructure loan program is technology neutral, requires 
broadband-capable facilities, and provides financing for infrastructure 
(e.g., building and equipment), but not financing for the costs of 
operating the business. Within the infrastructure loan program, there 
are four types of financing: (1) Hardship loans; (2) cost-of-money 
loans; (3) rural telephone bank loans; and (4) federal financing bank

[[Page 64059]]

loans. For fiscal year 2003, the total authorized loan level for these 
four programs is $670 million.
    62. The broadband loan program is technology neutral; requires 
provision of high-quality data transmission service and may provide 
voice, graphics, and video; and must enable a subscriber to transmit 
and receive at a rate of no less than 200 kilobits per second. Similar 
to the infrastructure loan program, the broadband loan program finances 
the construction or acquisition of new facilities and facility 
improvements. RUS makes broadband loans available to any legally 
organized entity that has sufficient authority to enter into a contract 
with RUS and carry out the purposes of the loan, so long as the entity 
is providing or proposes to provide service to an area that meets the 
following criteria: (1) There are no more than 20,000 inhabitants, and 
(2) the service area does not fall within a standard metropolitan 
statistical area. For fiscal year 2003, RUS has $80 million for 4 
Percent loans, $80 million for Guaranteed loans, and $1.3 billion for 
Treasury Rate loans. In fiscal year 2004, the total loan level is 
anticipated to be $418 million.
    63. The Commission's Wireless Telecommunications Bureau (WTB) has 
partnered with RUS to sponsor the ``Federal Rural Wireless Outreach 
Initiative'' (FCC/RUS Outreach Partnership). The FCC/RUS Outreach 
Partnership is designed to exchange program and regulatory information 
about rural development and wireless telecommunications access in rural 
areas. The four key goals of the FCC/RUS Outreach Partnership are to: 
(1) Exchange information about products and services each agency offers 
to promote the expansion of wireless telecommunications services in 
rural America; (2) harmonize rules, regulations and processes whenever 
possible to maximize the benefits for rural America; (3) educate 
partners and other agencies about Commission, WTB and USDA/RUS 
offerings; and (4) expand the FCC/WTB and USDA/RUS partnership, to the 
extent that it is mutually beneficial, to other agencies and partners.
(ii) Discussion
    64. We seek methods to help facilitate access to capital in rural 
areas in order to increase the ability of wireless telecommunications 
providers to offer service in rural areas. An important part of 
accomplishing this goal is through the promotion of federal government 
financing programs. We seek comment on how the Commission can assist in 
making the RUS loan programs more effective. We seek comment on whether 
there are any Commission regulations or policies that should be 
reexamined or modified to facilitate participation in the RUS programs 
by wireless licensees and service providers. In addition, we ask for 
comment on whether the FCC/RUS Outreach Partnership could be expanded 
to include other federal, state, or local government programs and, if 
so, which programs. We further seek comment on whether there is a role 
for non-governmental entities in the FCC/RUS Outreach Partnership and 
how such entities might be able to participate. We also ask for 
suggestions regarding effective outreach programs and the groups that 
should be targeted. In addition, we ask for submission of lists of 
associations, government agencies, or other interested parties that 
would want to join in this FCC/RUS Outreach Partnership or receive 
future information regarding this program.
b. Security Interests
(i) Background
    65. As a historical matter, the Commission has not permitted third 
parties to take a security interest in spectrum licenses. At the same 
time, the Commission's legal and policy bases for various restrictions 
on transactions involving licenses have evolved over the years. For 
instance, at one time, the policy of prohibiting the sale of bare 
licenses, as well as the policies against security and reversionary 
interests in licenses, were based on the Commission's interpretation of 
the Communications Act. In various decisions, the Commission modified 
its views on the statutory basis for these policies in the context of 
cellular and other wireless licenses. For all spectrum-based services, 
the Commission has expressly permitted licensees to grant security 
interests in the stock of the licensee, in the physical assets used in 
connection with its licensed spectrum, and in the proceeds from 
operations associated with the licensed spectrum. The Commission and 
the courts have likewise determined that security interests in the 
proceeds of the sale of a license do not violate Commission policy. In 
connection with the auction installment payment program, the Commission 
itself has taken an exclusive security interest in licenses subject to 
installment payments and a senior security interest in the proceeds of 
a sale of an auctioned license. In its Secondary Markets Policy 
Statement, the Commission considered ways in which licensees may be 
able to maximize their efficient use of spectrum by leveraging ``the 
value of their retained spectrum usage rights to increase access to 
capital.'' See Principles for Promoting the Efficient Use of Spectrum 
by Encouraging the Development of Secondary Markets, WT Docket No. 00-
230, Policy Statement, 65 FR 81475 (December 26, 2000) (Secondary 
Markets Policy Statement). Specifically, the Commission said ``we plan 
to evaluate our policies prohibiting security and reversionary 
interests in licenses.''
(ii) Discussion
    66. Pursuant to our stated intent in the Secondary Markets Policy 
Statement, we initiate a discussion regarding whether we should permit 
RUS to obtain security interests in the spectrum licenses of their 
borrowers. We seek comment on whether, and to what extent, licensees in 
rural areas would benefit from the opportunity to pledge their licenses 
to RUS as collateral as a means of overcoming their difficulties in 
raising capital.
    67. As an initial matter, we limit the scope of our inquiry to 
commercial and private terrestrial wireless services. We further limit 
our inquiry concerning security interests to licenses and licensees in 
rural and underserved areas that are seeking federal financial 
assistance through RUS loan programs. We believe that such licensees 
will benefit most in light of their apparently greater need for lower-
cost capital and the new opportunities presented by RUS loans discussed 
below. Also with regard to the scope of our inquiry, we note that we do 
not intend to implement any policy change that would, in the case of a 
licensee operating under the installment payment program, compromise 
the Commission's exclusive or senior secured position with respect to 
the license and the proceeds of the sale of such license. Nevertheless, 
we seek comment on whether permitting RUS to obtain security interests 
in the spectrum licenses of their borrowers, as described below, could 
have unintended effects on installment licensees and the Commission's 
rights under these arrangements.
    68. Our primary goal is to determine whether further relaxation of 
the security interest restrictions--by allowing at least a modified 
form of collateralization of FCC licenses by licensees obtaining RUS 
funds--could increase opportunities to raise capital or avoid financial 
collapse. We therefore seek comment on the extent to which a licensee's 
ability to grant RUS a security interest directly in an FCC license 
would, in fact, create new financing opportunities and facilitate the

[[Page 64060]]

construction, deployment and continuity of new and existing wireless 
services in rural and underserved areas. We also ask how this change in 
our policy would affect the ability of small businesses to obtain much 
needed startup capital.
    69. On the other hand, despite these potential benefits, we 
recognize that a licensee's current ability to grant security interests 
in its stock and in the proceeds of a license sale may already provide 
it with financing opportunities that are similar to those we seek to 
foster by our proposal below. If so, it would appear that we may not 
significantly enhance financing opportunities. We ask all interested 
parties, including licensees, vendors, RUS, lenders and others to 
comment on these potential benefits and to identify any other specific 
benefits that could accrue from such a policy change.
    70. We further note that any security interest granted to RUS would 
be expressly conditioned, in writing as part of all applicable 
financing documents, on the Commission's prior approval of any 
assignment of the license or any transfer of de jure or de facto 
control of the licensee to RUS. We discuss below the reasons for this 
limitation and seek comment on some specific concerns.
    71. First, in addition to the benefits from lower costs of and 
greater access to capital, we seek comment on whether modifying our 
policy to permit RUS to take a security interest in FCC licenses is a 
natural outgrowth of the Commission and judicial developments discussed 
above, which recognize the value and ability of a lender obtaining a 
security interest in the licensee's stock, proceeds and other assets 
without infringing upon the Commission's statutory obligations. For 
instance, in MLQ Investors , L.P. v. Pacific Quadracasting, Inc., 146 
F.3d 746 (9th Cir. 1998), the U.S. Court of Appeals for the Ninth 
Circuit determined that a security interest in the proceeds of the sale 
of a broadcast license can be perfected prior to the sale of the 
license, and that ``[g]overnment licenses, as a general rule, are 
considered to be 'general intangibles' under the Uniform Commercial 
Code, ``i.e., personal property interests in which security interests 
may be perfected.''' The Ninth Circuit identified the Commission's 
primary policy concern by stating that ``[t]he FCC may prohibit 
security interests in licenses themselves because the creation of such 
an interest could result in foreclosure and transfer of the license 
without FCC approval.'' The Ninth Circuit went on to explain that the 
Commission's interest in regulating spectrum to promote the public 
interest is not implicated ``by a security interest in the proceeds of 
licenses, which does not grant the creditor any power or control over 
the license.'' We also note that application of state laws under 
Article 9 of the Uniform Commercial Code is generally limited in 
connection with the treatment of security interests of non-assignable 
``personal property'' governed by federal law. We seek comment on how 
cases like MLQ Investors and the application of the UCC provisions have 
affected lending practices for FCC licensees and what, if any, impact 
the grant of security interests in spectrum licenses to RUS might have 
on established law in this area, including the appropriate method of 
how RUS would perfect a security interest in FCC licenses.
    72. Next, we address the concerns that have led us to propose that 
any security interest granted to RUS be expressly conditioned on the 
Commission's prior approval of any assignment of the license or any 
transfer of de jure or de facto control. We ask whether it may be 
feasible for a licensee to grant RUS a security interest in an FCC 
license without compromising our obligation to maintain control of 
spectrum in the public interest, so long as we are completely able to 
fulfill our applicable mandates under the Communications Act of 1934, 
as amended. For example, we must and will preserve our authority under 
section 310(d) to review and approve license assignments and transfers 
of control, to assess and confirm the basic qualifications of assignees 
and transferees, and, more generally, to exercise our statutory 
responsibility to determine whether the section 310(d) transaction in 
question will serve the public interest, convenience and necessity. The 
Commission has historically disallowed granting security interests in 
FCC licenses, based upon its concern that such financing arrangements 
may interfere with its ability to regulate the assignment of licenses, 
the transfer of control over licenses, and, more generally, the use of 
spectrum. If, however, we can ensure that appropriate prior approval of 
assignments and transfers is obtained, and if we further limit any 
grant of a security interest to RUS, a federal loan agency, do 
commenters believe that our policy and statutory concerns would be 
satisfactorily addressed, thus enabling us to promote flexibility and 
financing opportunities for licensees serving rural and underserved 
areas? In this regard, we note that we have seen no detectable erosion 
of our regulatory authority from our current policy of permitting 
licensees to engage in a very similar type of financing arrangement--
that is, a licensee grant of a third party security interest in its 
stock and the proceeds of the sale of the license, along with third 
party perfection of that interest, prior to the sale of the subject 
license. We seek comment on the relative impact that such developments 
may have on our ability to implement and enforce our statutory 
obligations.
    73. We recognize that permitting RUS to obtain security interests 
in FCC licenses would provide RUS with greater rights vis-[agrave]-vis 
the license and licensee than it currently can obtain. We therefore ask 
whether our proposed condition requiring prior FCC approval before RUS 
can foreclose on the license would satisfactorily and adequately 
preserve existing regulatory relationships. The type of security 
interest that we are seeking comment on would be a right between the 
licensee and RUS, exercisable only upon Commission approval. Would such 
a right be fully consistent with our responsibilities under the 
Communications Act? We ask whether it would not be different than 
granting RUS an option to purchase a license, for example. We note that 
we would review and require our approval of an assignment to RUS in 
accordance with our transfer and assignment policies before RUS could 
assume control of a license. Such a process is designed to ensure that 
the federal government retains appropriate control over use of the 
spectrum consistent with sections 301 and 304 of the Act, and that the 
perfection of a security interest in a license does not interfere with 
these or other statutory obligations and policy prerogatives. For 
example, would a security interest in a license give RUS any rights 
that might conflict with the Commission's regulatory oversight (other 
than an unapproved foreclosure or assertion of control) that it could 
exercise against the licensee? Furthermore, in light of the fact that 
RUS is a federal government agency, we ask whether we may have greater 
statutory latitude to grant it a security interest while still ensuring 
that the federal government retains control over spectrum.
    74. Our next concern relates to any unintended consequences that 
may result from this potential policy change, especially as it relates 
to existing and future financial and regulatory relationships and any 
new claims or conflicts that may arise. It appears that one of the main 
conceptual differences between the current limits on the scope of 
permissible security interests and our proposal is that a security 
interest in a

[[Page 64061]]

license itself would link the secured party more directly to the 
Commission. It is our understanding that under current financing 
practices involving FCC licensees, the secured party's rights stem from 
its relationship as a lender (and possibly an equipment vendor, 
bondholder or stockholder) to the licensee, not directly to the 
Commission, even after default and foreclosure on the secured assets. 
We seek comment on whether the grant by a licensee of a contingent 
interest in a Commission authorization to RUS--without the Commission's 
permission or review--would undermine our regulatory authority embodied 
in sections 301 and 304. We also ask how the existence of RUS, as a 
secured creditor, may affect the ability of the licensee to seek 
financing from other sources in this situation? In sum, we seek comment 
on what, if any, difference from the perspective of RUS, a third-party 
lender, or the licensee, would there be on a relaxation of the current 
security interest policies in the circumstances described above.
    75. Finally, we seek comment on one other concern that had been 
raised in the past by the Commission in connection with prior similar 
proposals. In particular, in the context of broadcast licenses, the 
Commission expressed concern about the independence of broadcast 
stations and about the ability of creditors to have substantial 
influence over a borrower station. We seek comment on whether such 
dangers exist in the connection with RUS's attainment of security 
interests in non-broadcasting wireless licenses, especially as it 
relates to preserving and protecting facilities-based competition and 
innovation by and among wireless service providers.
2. Cellular Cross-Interests in Rural Service Areas
a. Background
    76. Section 22.942 of the Commission's rules substantially limits 
the ability of parties to have interests in cellular carriers on 
different channel blocks in the same rural geographic area. To the 
extent licensees on different channel blocks have any degree of overlap 
between their respective cellular geographic service areas (CGSAs) in 
an RSA, section 22.942 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 or any controlling interest. An entity 
may have a non-controlling and otherwise non-attributable direct or 
indirect ownership interest of less than 20 percent in licensees for 
different channel blocks in overlapping CGSAs within an RSA.
    77. The Commission initiated a comprehensive review of the cellular 
cross-interest rule in January 2001 as part of its 2000 biennial 
regulatory review of spectrum aggregation limits. In December 2001, 
pursuant to section 11 of the Communications Act, the Commission 
released its Spectrum Cap Sunset Order and, on the basis of the state 
of competition in CMRS markets, sunset the CMRS spectrum cap rule in 
all markets effective January 1, 2003. See 2000 Biennial Regulatory 
Review Spectrum Aggregation Limits for Commercial Mobile Radio 
Services, WT Docket No. 01-14, Report and Order, 67 FR 1626 (Jan. 14, 
2002) (Spectrum Cap Sunset Order). In that order, the Commission also 
determined that cellular carriers in urban areas no longer enjoyed 
first-mover, competitive advantages, and it therefore eliminated the 
cellular cross-interest rule in MSAs on that basis, also pursuant to 
section 11 of the Act. While the Commission left the cross-interest 
rule in place in RSAs, it indicated that it would consider waiver 
requests and reassess the need for the rule at a future date.
    78. In March 2002, the Commission sought comment on petitions filed 
by Dobson Communications Corporation, Western Wireless Corporation, and 
Rural Cellular Corporation (Dobson/Western/RCC) and Cingular Wireless 
LLC (Cingular) seeking reconsideration of the decision in the Spectrum 
Cap Sunset Order to retain the cellular cross-interest rule in RSAs. 
Petitioners and commenting parties focused on the sufficiency of the 
competitive market analysis underlying the decision to retain the 
cellular cross-interest rule in RSAs, as well as the consequences of 
relying on case-by-case review to examine cellular competition in rural 
areas. Parties also asserted that the waiver process established in the 
Spectrum Cap Sunset Order creates regulatory uncertainty and 
discourages potential transactions and financing that could benefit 
rural consumers. These petitions remain pending and are being 
consolidated into the instant rulemaking.
    79. In its December 2002 Rural NOI, the Commission sought comment 
on the cellular cross-interest rule as it reviewed its policies to 
encourage the provision of wireless services in rural areas. The 
Commission received comments supporting either modification or 
elimination of the rule so as to facilitate investment and financing 
arrangements for rural cellular providers.
b. Discussion
    80. We seek comment on whether the continued application of the 
cellular cross-interest rule in all RSAs may impede market forces that 
drive investment and economic development in rural areas. The recent 
downturn in telecommunications markets, worsening financial condition 
of many carriers, and the ongoing need for capital investment to keep 
up with technological and regulatory changes, has made it more 
difficult for wireless carriers, especially those serving rural areas, 
to obtain financing. In light of the foregoing, we seek comment 
regarding whether we should modify the cellular cross-interest rule to 
promote investment while protecting against potential competitive 
harms. Specifically, we tentatively conclude to retain the cellular 
cross-interest rule as it applies only in RSAs with three or fewer CMRS 
competitors and we seek comment on removing the rule as it applies to 
other RSAs and to non-controlling investments in all RSA licensees.
    81. In the Spectrum Cap Sunset Order, the Commission concluded that 
it would be more efficient and less costly to the Commission to 
maintain a prophylactic cross-interest rule applicable to all RSAs and 
to entertain waiver requests for the small subset of transactions in 
RSAs where competition was more robust. As a consequence of that 
decision, cellular licensees in MSAs are free to procure financing that 
involves ownership interests that fall below the threshold that 
triggers the cross-interest rule, while cellular licensees in all RSAs 
are not. While the Commission attempted to address this barrier to 
investment in rural areas by providing a specific waiver process, the 
transactions costs and regulatory uncertainty surrounding any waiver 
procedure may deter some beneficial investment in these areas.
    82. We seek comment on whether changing the cellular cross-interest 
rule for RSAs that enjoy a greater degree of competition will spur 
needed investment in these rural areas and foster even more competition 
in others. As an initial matter, we seek comment regarding what 
constitutes a ``competitor'' for purposes of this rule. We also seek 
comment regarding whether, in the event we do eliminate the cellular 
cross-interest rule for RSAs with greater than three competitors, we 
should adopt a transition period after which time the rule would sunset 
for these RSAs. In the event that

[[Page 64062]]

commenters support such a sunset period, we seek comment regarding the 
appropriate length of the sunset period.
    83. We also ask commenters for additional suggestions regarding how 
we may modify our cellular cross-interest rule to promote investment in 
rural areas while retaining adequate competitive safeguards. For 
example, should we eliminate the cellular cross-interest restriction 
for all RSAs where the ownership interest being transferred, assigned 
or acquired is not a controlling interest (i.e., where the interest is 
a non-controlling interest and where the transaction otherwise would 
not require prior FCC approval)? We ask parties to focus their comments 
on the effect of the cross-interest rule on licensees' acquisition of 
adequate capital in these areas. Commenters supporting our proposal 
should identify and discuss specific past instances in which they have 
had difficulty obtaining financing in rural areas due to the cellular 
cross-interest rule. We also request parties to provide examples of the 
extent to which the waiver process has deterred or prevented 
acquisition of capital in a rural market(s). We seek specific market 
data and historical examples to assist our public interest 
determination of the extent to which application of the cellular cross-
interest rule in RSAs impedes market forces that drive development in 
these rural and underserved areas.
    84. We also seek comment on whether extension of the case-by-case 
review, as established in the Spectrum Cap Sunset Order, will promote 
investment and is sufficient to safeguard competition in RSAs with more 
than three competitors. Although we recognize the role that the 
cellular cross-interest rule has provided in the past against the 
possibility of significant additional consolidation of cellular 
providers in rural areas, we ask whether the public interest may be 
better served by the benefits of pure case-by-case review. In the 
Spectrum Cap Sunset Order, the Commission concluded that case-by-case 
review under section 310(d) of the Act, properly performed and with 
appropriate enforcement mechanisms, allows greater regulatory 
flexibility and greater attention to the actual circumstances of a 
particular transaction, thus promoting economic efficiency by reducing 
the possibility both of approving secondary market transactions that 
are not in the public interest and of impeding transactions that are 
actually in the public interest. In the markets still covered by the 
cellular cross-interest rule, for example, the rule prevents the two 
cellular licensees from merging regardless of the competitive 
circumstances in a given market, but does not prevent one cellular 
licensee from merging with a PCS licensee, even though the competitive 
effect of both transactions might be very similar. We seek comment on 
whether this inequity may distort the market in any area in which more 
than just the two cellular licensees are operating and whether the 
better approach to safeguarding competition is to take account of the 
particular circumstances of each market through case-by-case 
competitive review.

G. Infrastructure Sharing

1. Background
    85. Both in the United States (U.S.) and the European Union (EU), 
commercial wireless providers have sought to minimize their capital 
expenditures and maximize their coverage by engaging in joint ventures 
with other providers to share infrastructure costs. Such arrangements 
are generally known as ``infrastructure sharing,'' and they can take 
place at various levels. At the most basic level is sharing of passive 
elements such as antennas and towers, followed by sharing of active or 
``intelligent'' elements of the networks such as switches and nodes, 
followed by sharing of spectrum.
    86. In the United States, several infrastructure sharing 
arrangements have been announced in the past two years. The providers 
claim that such infrastructure sharing will allow them to cover a 
larger geographic area at lower cost. In addition, because two or more 
providers share the infrastructure, these arrangements may allow for 
more providers to serve a market than otherwise would be possible. 
Finally, to the extent that these arrangements make it possible for 
providers to cover a larger geographic area, and thus serve a greater 
number of consumers, they may provide an important public interest 
benefit.
    87. Infrastructure sharing arrangements that do not involve a 
transfer of control, as defined under section 310(d), do not require 
Commission review. Infrastructure sharing arrangements that do involve 
a transfer of control, like other arrangements, require Commission 
review. Also, while previous infrastructure sharing arrangements have 
not required Commission review, the Commission has taken no regulatory 
action to either promote or create incentives for parties to enter into 
such arrangements.
    88. As compared to the U.S. market, infrastructure sharing has 
received more attention from regulators in the EU and its Member 
States. Within the past year, the European Commission announced a 
preliminary conclusion to favorably view two agreements for the 
provision of 3G services, one in the United Kingdom and one in Germany. 
The European Commission noted that these arrangements should allow for 
faster rollout of service and greater coverage, especially in remote 
and rural areas.
2. Discussion
    89. As noted earlier, because of the lower population density and 
smaller customer base found in rural areas, the economically efficient 
number of providers for these markets will be fewer than that for urban 
markets. Because infrastructure sharing helps lower capital costs and 
thus extend the coverage of providers, this practice may be 
particularly important in rural areas, for which geographic coverage is 
especially important. In addition, because infrastructure sharing may 
make it possible for more providers to operate in a given area, this 
practice again is important for rural markets that tend to have fewer 
competitors.
    90. We continue to believe that, under certain circumstances, 
licensees should be able to engage in infrastructure sharing in order 
to further promote service in these markets. Thus, for infrastructure 
sharing in rural areas that involve no transfer of control, as defined 
by section 310(d), there are no requirements for Commission pre-
clearance. For infrastructure sharing arrangements in rural areas that 
involve a transfer of control, we will maintain section 310(d) review. 
We note that in the Secondary Markets proceeding we have significantly 
streamlined the transfer of control and assignment process, and we 
inquire as to whether there are other steps we should consider to 
further streamline this process.
    91. We seek comment on the extent to which infrastructure sharing 
may promote service in rural markets. Are there particular types of 
infrastructure sharing arrangements that may be most effective in 
promoting this goal? Are there specific policy steps we should take as 
a regulatory matter to promote infrastructure sharing arrangements 
that, in turn, promote service in rural areas? We encourage comments 
from providers involved in infrastructure sharing in the U.S. and EU as 
well as those familiar with such arrangements.
    92. We also seek comment on the potential costs and benefits of 
this proposed policy. With regard to the potential benefits, we note 
that comments by European Commission regulators in support of such 
arrangements in the E.U. generally focus

[[Page 64063]]

on the ability of carriers to lower costs and increase their coverage 
area, especially to rural markets. Can we assume similar benefits for 
rural areas in the U.S.? We recognize that the Commission has stressed 
the value of facilities-based competition, and that infrastructure 
sharing by definition limits competition between two potential 
competitors. We seek comment on the factors we should consider in 
evaluating infrastructure sharing arrangements that require section 310 
approval so as to effectively balance promoting competition among 
providers and promoting expanded coverage in rural areas.
    93. In addition, we recognize that, as in the case of secondary 
market spectrum leasing, infrastructure sharing may require 
reconsideration of our regulatory definitions of spectrum use. As 
described above, we propose that licensees that make their spectrum in 
rural areas available to other parties via secondary markets are, in a 
sense, using that spectrum. Should we similarly consider spectrum 
involved in infrastructure sharing arrangements to be ``used'' and thus 
not subject to re-licensing or any other mechanism to make the spectrum 
available to third parties?

H. Rural Radiotelephone Service and Basic Exchange Telecommunications 
Radio Service

1. Background
    94. The Rural Radiotelephone Service (RRS) was established to 
permit the use of certain VHF and UHF spectrum to provide radio 
telecommunications services, in particular, basic telephone service, to 
subscribers in locations generally deemed so remote that traditional 
wireline service or service by other means is not feasible. The RRS 
operates in the paired 152/158 MHz and 454/459 MHz bands, which are 
also used by paging services. In 1987, the Commission adopted rules 
that authorized the establishment of the Basic Exchange 
Telecommunications Radio Service (BETRS) within the RRS. BETRS is 
authorized in the same paired spectrum bands as RRS and in addition, on 
fifty channel pairs in the 816-820/861-865 MHz band. BETRS, which is 
essentially a type of technology used to provide RRS, utilizes a 
digital system that is more spectrally efficient than traditional 
analog RRS, provides private calling, and has a much lower call 
blocking rate than RRS. Only local exchange carriers that have been 
state certified to provide basic exchange telephone service (or others 
having state approval to provide such service) in the pertinent area 
are eligible to hold authorizations for BETRS.
    95. The BETRS R&O provided that traditional RRS and BETRS would be 
co-primary with other services that were authorized to use the same 
spectrum. See Basic Exchange Telecommunications Radio Service, CC 
Docket No. 86-495, Report and Order, 53 FR 3210 (February 4, 1988) 
(BETRS R&O). Prior to the establishment of BETRS, RRS was licensed on a 
secondary, non-interfering basis. In 1997, the Commission established 
rules to auction the 152/158 MHz and 454/459 MHz bands and issue paging 
licenses on a geographic basis. As a result, existing RRS and BETRS 
licensees authorized for these spectrum bands were afforded protection 
as incumbent licensees and could continue operating on a primary basis. 
However, we indicated that subsequent RRS and BETRS licenses in these 
bands would be issued on a secondary basis to the geographic area 
licensee. Similarly, in 1997, the Commission established rules to 
auction the 816-820/861-865 MHz bands and issue SMR licenses on a 
geographic basis. As a result, existing BETRS licensees authorized in 
the 800 MHz band were afforded protection as incumbent licensees and 
could continue operating on a primary basis. Again, we indicated 
subsequent BETRS licenses in these bands would be issued on a secondary 
basis to the geographic area licensee. Today new RRS and BETRS licenses 
are issued on a secondary, non-interfering basis.
2. Discussion
    96. We seek to establish a more complete record regarding these 
services in order to allow us to determine if certain rules and policy 
changes are needed to facilitate the use of RRS and BETRS. As discussed 
below, we seek comment on whether: (1) There is a current demand for 
RRS and BETRS; (2) other wireless services have supplanted RRS and 
BETRS as alternatives to wireline service; (3) access to spectrum is a 
limiting factor for RRS and BETRS and (4) current Commission rules and 
polices are prohibiting/limiting the effectiveness of RRS and BETRS to 
provide service in rural areas.
    97. As an initial matter, we would like to determine the level of 
demand for RRS and BETRS. We reviewed licensing data, locations where 
basic exchange service does not appear to be available, and the 
availability of equipment for RRS and BETRS. It appears, on the 
surface, certain areas that do not have basic telephone service might 
benefit from RRS or BETRS. For example, we note that no RUS or BETRS 
facilities are licensed in Mississippi, which according to 2000 Census 
data, has the lowest household telephone penetration rate in the U.S. 
In addition, we cannot find evidence that 800 MHz BETRS equipment has 
ever been manufactured and made available in the U.S. Furthermore, we 
only found one company that claimed it provided new RRS and BETRS 
equipment. We seek comment on whether there is still a demand for RRS 
and BETRS, beyond what is currently offered, and whether RRS and BETRS 
are viable options in the provision of basic telecommunications 
services. If there is a demand for these services, are there ways that 
RRS and BETRS could be used more efficiently and/or effectively?
    98. If there is a demand for basic communications services, other 
than wireline, and it is not being met using traditional RRS and BETRS 
spectrum, we are interested in exploring how the demand is being met. 
The Commission has embraced policies that provide many wireless 
licensees with added flexibility in providing various types of services 
(i.e., fixed or mobile/voice or data). It is now possible that services 
(i.e., basic exchange service) previously offered only by RRS and BETRS 
licensees could be offered by licensees in other wireless services, 
using other spectrum bands. Furthermore, it is possible with the 
proliferation of mobile telephony throughout the country, individuals 
that in the past would have been a prime candidate to receive RRS or 
BETRS may now have access to a mobile telephone that is the sole 
telephone used within a household. We are not able to determine how 
many licensees are providing basic exchange service to rural areas 
using alternative spectrum or how many licensees are providing services 
(i.e., mobile telephony) and therefore could negate the need for RRS or 
BETRS in particular areas. We therefore seek comment on the 
effectiveness of non-RRS and BETRS licensees in providing the same 
services or alternative services in lieu of RRS and BETRS. Furthermore, 
we seek comment on whether additional flexibility is necessary in order 
to fully exploit capabilities of licensees in this context? In 
addition, we seek comment regarding to what, if any, extent unlicensed 
spectrum is being used to provide services that have traditionally been 
provided by RRS and BETRS licensees.
    99. In some instances, there may be a demand for a service; 
however, access to the spectrum needed to provide such services may not 
be readily available. We noted in the Secondary Markets proceeding that 
facilitating spectrum

[[Page 64064]]

leasing arrangements permits additional spectrum users to gain access 
to spectrum. Furthermore, several commenters in the Secondary Markets 
proceeding specifically indicated that facilitating leasing 
arrangements would increase service offerings to rural customers by 
enabling rural telephone companies and others to access underutilized 
spectrum. We seek comment on whether there is a problem for potential 
providers of RRS or BETRS in accessing spectrum and if so, whether 
parties feel secondary markets will provide the appropriate means for 
access to the desired spectrum.
    100. We are also interested in determining if the Commission's 
current rules and policies for RRS and BETRS are limiting factors 
towards a more expansive use of these services. We note that currently 
there is an eligibility restriction for BETRS that restricts the 
issuance of a license to only those entities that receive state 
approval to provide basic exchange telephone service. We believe that 
this rule may be unnecessary and may serve as a potential regulatory 
hurdle towards a more rapid and efficient use of the BETRS spectrum. We 
therefore propose to remove the eligibility restrictions contained 
within section 22.702 of our rules regarding state approval prior to 
the issuance of a BETRS license. Furthermore, the current service rules 
for RRS and BETRS provides that new licenses are issued on a secondary, 
non-interfering basis. In a Petition for Rulemaking filed by several 
parties, which eventually lead to the establishment of BETRS, a request 
was made to provide 2 MHz of dedicated spectrum for the use of BETRS. 
At the time, we determined that the demand for BETRS was not clear and 
therefore made the decision not to provide discrete spectrum for the 
use of BETRS. However, we indicated that if the spectrum that was made 
available for BETRS proved to be insufficient at a future date, we 
would revisit the problem at that time. We note that in the Rural NOI 
we sought comment on how we might revise existing RRS and BETRS rules 
to further facilitate the provision of wireless services to rural 
areas. We did not receive any comments that specifically addressed the 
need to revise RRS or BETRS rules. We seek comment on our proposal to 
remove the eligibility restrictions in section 22.702 of the 
Commission's rules for BETRS licensees. Based on the current RRS and 
BETRS licensing scheme, we seek comment on whether there is a need for 
us to expand the secondary status for RRS and BETRS to other spectrum 
bands in order to facilitate and encourage construction in rural areas. 
If so, what spectrum bands could RRS and BETRS be expanded to include? 
If additional spectrum should be designated on a primary basis for 
BETRS, what band(s) would be viable? How much spectrum would be needed? 
Is there existing equipment or equipment that can be manufactured and 
made readily available for use in the band(s)?
    101. As a final matter, and in light of the Commission's policies 
towards a more flexible-use, market-based approach to spectrum 
management, we believe it is appropriate at this time to determine if 
the current designation of RRS and BETRS as fixed services creates 
disincentives towards a more expansive use of the spectrum. We seek 
comment on whether providing additional flexibility to allow other 
types of service offerings using RRS and BETRS spectrum on a secondary 
basis would provide the proper incentives for these spectrum bands to 
be more fully utilized in providing telecommunications services to 
rural areas. If a more flexible use policy were created for RRS and 
BETRS, what considerations must the Commission consider in adopting 
rules and policies to facilitate such flexible use?

III. Procedural Matters

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

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

B. Initial Regulatory Flexibility Analysis

    103. As required by the Regulatory Flexibility Act, the Commission 
has prepared an Initial Regulatory Flexibility Analysis (IRFA) of the 
possible impact on small entities of the proposals in the NPRM. The 
IRFA is set forth below. 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 Initial 
Regulatory Flexibility Analysis. The Commission's Consumer Information 
Bureau, Reference Information Center, will send a copy of this Notice 
of Proposed Rulemaking, including the Initial Regulatory Flexibility 
Analysis, to the Chief Counsel for Advocacy of the Small Business 
Administration, in accordance with the Regulatory Flexibility Act. See 
5 U.S.C. 603(a).
Need for, and Objectives of, the NPRM
    104. In this NPRM, we continue to examine ways of amending our 
regulations and policies governing the electromagnetic spectrum and the 
facilities-based commercial and private wireless services that rely on 
spectrum, in order to promote the rapid and efficient deployment of 
these services in rural areas. This NPRM builds upon the work of our 
Notice of Inquiry, in which we sought comment on how we could modify 
our policies to encourage the provision of wireless services in rural 
areas. This NPRM also draws upon the efforts and recommendations of the 
Spectrum Policy Task Force, which identified and evaluated potential 
changes in our spectrum policy that would increase public benefits from 
spectrum-based services. This NPRM proposes several ways in which the 
Commission can modify and improve its regulations and policies in order 
to promote such wireless service within rural areas while 
simultaneously removing any disincentives or other barriers to 
construction and operation in rural areas.
    105. As a complement to the measures the Commission has already 
taken, we seek to minimize regulatory costs and eliminate unnecessary 
regulatory barriers to the deployment of spectrum-based services in 
rural areas. As reflected in the proposals set forth in this NPRM, we 
believe there are additional spectrum policy initiatives the Commission 
can adopt to reduce the overall cost of regulation and increase 
flexibility in a manner that will facilitate access, capital formation, 
build-out and coverage in rural areas. Specifically, in this NPRM, we 
seek comment on the appropriate definition of what constitutes a 
``rural area'' for the purposes of this proceeding. We also seek 
comment on how to define ``built'' spectrum and we inquire as to 
whether the most efficient approach may be to rely on providers' 
filings of their construction notifications, an approach used with 
broadband PCS. Notably, we propose that spectrum in rural areas that is 
leased by a licensee, and for which the lessee meets the performance 
requirements that are applicable to the licensee, should be construed 
as ``used'' for the purposes of this proceeding and any performance 
requirements we adopt. Furthermore, we seek comment on ways the 
Commission could modify its regulations pertaining to unused spectrum.

[[Page 64065]]

    106. In this NPRM, we propose the adoption of a ``substantial 
service'' construction benchmark during the initial license term for 
all wireless services that are licensed on a geographic area basis and 
that are subject to performance requirements. We also propose a 
substantial service safe harbor for rural areas. We also seek comment 
on whether we should adopt a geography-based benchmark for wireless 
services that are licensed on a geographic area basis and that 
currently do not have a geographic area coverage option. In addition, 
we seek comment on whether we should impose performance requirements in 
subsequent license terms after initial renewal. We also seek comment on 
measures that may be taken to increase power flexibility for licensed 
services. We also seek comment as to the relative effect on service in 
rural areas of the Commission's use of small versus large geographic 
service areas.
    107. In this NPRM, we seek comment on what, if any, regulatory or 
policy changes should be made to complement the Rural Utilities 
Service's (RUS) financing programs. We also ask whether we should allow 
RUS to take security interests in spectrum licenses, provided that any 
security interest is expressly conditioned on the Commission's prior 
approval of any assignment of the license from the licensee to the 
secured party. We also seek comment on whether we should eliminate the 
cellular cross-interest rule in Rural Service Areas with greater than 
three competitors, and we seek comment on what should constitute a 
``competitor.'' In addition, we seek comment on whether clarifying the 
Commission's policy on infrastructure sharing may promote service in 
rural areas. Finally, we propose ways of modifying our rules governing 
Rural Radiotelephone Service (RRS) and Basic Exchange Telephone Radio 
Systems (BETRS) to expand the use of these services, including removing 
eligibility restrictions on the use of BETRS spectrum.
Legal Basis
    108. We tentatively conclude that we have authority under sections 
4(i), 11, 303(r), 309(j) and 706 of the Communications Act of 1934, as 
amended, 47 U.S.C. 154(i), 157, 161, 303(r), and 309(j), to adopt the 
proposals set forth in the NPRM.
Description and Estimate of the Number of Small Entities to Which the 
Rules Will Apply
    109. 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 rules adopted herein. 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 Small Business 
Administration (SBA).
    110. Cellular Licensees. The SBA has developed a small business 
size standard for small businesses in the category ``Cellular and Other 
Wireless Telecommunications.'' Under that SBA category, a business is 
small if it has 1,500 or fewer employees. According to the Bureau of 
the Census, only twelve firms out of a total of 1,238 cellular and 
other wireless telecommunications firms operating during 1997 had 1,000 
or more employees. Therefore, even if all twelve of these firms were 
cellular telephone companies, nearly all cellular carriers are small 
businesses under the SBA's definition.
    111. 220 MHz Radio Service--Phase I Licensees. The 220 MHz service 
has both Phase I and Phase II licenses. Phase I licensing was conducted 
by lotteries in 1992 and 1993. There are approximately 1,515 such non-
nationwide licensees and four nationwide licensees currently authorized 
to operate in the 220 MHz band. The Commission has not developed a 
definition of small entities specifically applicable to such incumbent 
220 MHz Phase I licensees. To estimate the number of such licensees 
that are small businesses, we apply the small business size standard 
under the SBA rules applicable to ``Cellular and Other Wireless 
Telecommunications'' companies. This category provides that a small 
business is a wireless company employing no more than 1,500 persons. 
According to the Census Bureau data for 1997, only twelve firms out of 
a total of 1,238 such firms that operated for the entire year, had 
1,000 or more employees. If this general ratio continues in the context 
of Phase I 220 MHz licensees, the Commission estimates that nearly all 
such licensees are small businesses under the SBA's small business 
standard.
    112. 220 MHz Radio Service--Phase II Licensees. The 220 MHz service 
has both Phase I and Phase II licenses. The Phase II 220 MHz service is 
subject to spectrum auctions. In an order relating to this service, we 
adopted a small business size standard for defining ``small'' and 
``very small'' businesses for purposes of determining their eligibility 
for special provisions such as bidding credits and installment 
payments. This small business standard indicates that a ``small 
business'' is an entity that, together with its affiliates and 
controlling principals, has average gross revenues not exceeding $15 
million for the preceding three years. A ``very small business'' is 
defined as an entity that, together with its affiliates and controlling 
principals, has average gross revenues that do not exceed $3 million 
for the preceding three years. The SBA has approved these small size 
standards. Auctions of Phase II licenses commenced on September 15, 
1998, and closed on October 22, 1998. In the first auction, 908 
licenses were auctioned in three different-sized geographic areas: 
Three nationwide licenses, 30 Regional Economic Area Group (EAG) 
Licenses, and 875 Economic Area (EA) Licenses. Of the 908 licenses 
auctioned, 693 were sold. Thirty-nine small businesses won 373 licenses 
in the first 220 MHz auction. A second auction included 225 licenses: 
216 EA licenses and 9 EAG licenses. Fourteen companies claiming small 
business status won 158 licenses. A third auction included four 
licenses: 2 BEA licenses and 2 EAG licenses in the 220 MHz Service. No 
small or very small business won any of these licenses.
    113. Lower 700 MHz Band Licenses. We adopted criteria for defining 
three groups of small businesses for purposes of determining their 
eligibility for special provisions such as bidding credits. We have 
defined a small business as an entity that, together with its 
affiliates and controlling principals, has average gross revenues not 
exceeding $40 million for the preceding three years. A very small 
business is defined as an entity that, together with its affiliates and 
controlling principals, has average gross revenues that are not more 
than $15 million for the preceding three years. Additionally, the lower 
700 MHz Service has a third category of small business status that may 
be claimed for Metropolitan/Rural Service Area (MSA/RSA) licenses. The 
third category is entrepreneur, which is defined as an entity that, 
together with its affiliates and controlling principals, has average 
gross revenues that are not more than $3 million for the preceding 
three years. The SBA has approved these small size standards. An 
auction of 740 licenses (one license in each of the 734 MSAs/RSAs and 
one license in each of the six Economic Area

[[Page 64066]]

Groupings (EAGs)) commenced on August 27, 2002, and closed on September 
18, 2002. Of the 740 licenses available for auction, 484 licenses were 
sold to 102 winning bidders. Seventy-two of the winning bidders claimed 
small business, very small business or entrepreneur status and won a 
total of 329 licenses. A second auction commenced on May 28, 2003, and 
closed on June 13, 2003, and included 256 licenses: 5 EAG licenses and 
476 CMA licenses. Seventeen winning bidders claimed small or very small 
business status and won sixty licenses, and nine winning bidders 
claimed entrepreneur status and won 154 licenses.
    114. Upper 700 MHz Band Licenses. The Commission released an order 
authorizing service in the upper 700 MHz band. This auction, previously 
scheduled for January 13, 2003, has been postponed.
    115. Paging. In a recent order relating to paging, we adopted a 
size standard for ``small businesses'' for purposes of determining 
their eligibility for special provisions such as bidding credits and 
installment payments. A small business is an entity that, together with 
its affiliates and controlling principals, has average gross revenues 
not exceeding $15 million for the preceding three years. The SBA has 
approved this definition. An auction of Metropolitan Economic Area 
(MEA) licenses commenced on February 24, 2000, and closed on March 2, 
2000. Of the 2,499 licenses auctioned, 985 were sold. Fifty-seven 
companies claiming small business status won 440 licenses. An auction 
of Metropolitan Economic Area (MEA) and Economic Area (EA) licenses 
commenced on October 30, 2001, and closed on December 5, 2001. Of the 
15,514 licenses auctioned, 5,323 were sold. 132 companies claiming 
small business status purchased 3,724 licenses. A third auction, 
consisting of 8,874 licenses in each of 175 EAs and 1,328 licenses in 
all but three of the 51 MEAs commenced on May 13, 2003, and closed on 
May 28, 2003. Seventy-seven bidders claiming small or very small 
business status won 2,093 licenses. Currently, there are approximately 
24,000 Private Paging site-specific licenses and 74,000 Common Carrier 
Paging licenses. According to the most recent Trends in Telephone 
Service, 608 private and common carriers reported that they were 
engaged in the provision of either paging or ``other mobile'' services. 
Of these, we estimate that 589 are small, under the SBA-approved small 
business size standard. We estimate that the majority of private and 
common carrier paging providers would qualify as small entities under 
the SBA definition.
    116. 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 
has created a small business size standard 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 small 
business size standard 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 small business size standards, in the context of 
broadband PCS auctions, have been approved by the SBA. No small 
businesses within the SBA-approved small business size standards 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 won 
approximately 40 percent of the 1,479 licenses for Blocks D, E, and F. 
On March 23, 1999, the Commission reauctioned 155 C, D, E, and F Block 
licenses; there were 113 small business winning bidders.
    117. Narrowband PCS. The Commission held an auction for Narrowband 
PCS licenses that commenced on July 25, 1994, and closed on July 29, 
1994. A second commenced on October 26, 1994 and closed on November 8, 
1994. For purposes of the first two Narrowband PCS auctions, ``small 
businesses'' were entities with average gross revenues for the prior 
three calendar years of $40 million or less. Through these auctions, 
the Commission awarded a total of forty-one licenses, 11 of which were 
obtained by four small businesses. To ensure meaningful participation 
by small business entities in future auctions, the Commission adopted a 
two-tiered small business size standard in an order relating to 
narrowband PCS. A ``small business'' is an entity that, together with 
affiliates and controlling interests, has average gross revenues for 
the three preceding years of not more than $40 million. A ``very small 
business'' is an entity that, together with affiliates and controlling 
interests, has average gross revenues for the three preceding years of 
not more than $15 million. The SBA has approved these small business 
size standards. A third auction commenced on October 3, 2001 and closed 
on October 16, 2001. Here, five bidders won 317 (MTA and nationwide) 
licenses. Three of these claimed status as a small or very small entity 
and won 311 licenses.
    118. Specialized Mobile Radio (SMR). The Commission awards ``small 
entity'' bidding credits in auctions for Specialized Mobile Radio (SMR) 
geographic area licenses in the 800 MHz and 900 MHz bands to firms that 
had revenues of no more than $15 million in each of the three previous 
calendar years. The Commission awards ``very small entity'' bidding 
credits to firms that had revenues of no more than $3 million in each 
of the three previous calendar years. The SBA has approved these small 
business size standards for the 900 MHz Service. The Commission has 
held auctions for geographic area licenses in the 800 MHz and 900 MHz 
bands. The 900 MHz SMR auction began on December 5, 1995, and closed on 
April 15, 1996. Sixty bidders claiming that they qualified as small 
businesses under the $15 million size standard won 263 geographic area 
licenses in the 900 MHz SMR band. The 800 MHz SMR auction for the upper 
200 channels began on October 28, 1997, and was completed on December 
8, 1997. Ten bidders claiming that they qualified as small businesses 
under the $15 million size standard won 38 geographic area licenses for 
the upper 200 channels in the 800 MHz SMR band. A second auction for 
the 800 MHz band was held on January 10, 2002 and closed on January 17, 
2002 and included 23 BEA licenses. One bidder claiming small business 
status won five licenses.
    119. The auction of the 1,050 800 MHz SMR geographic area licenses 
for the General Category channels began on August 16, 2000, and was 
completed on September 1, 2000. Eleven bidders won 108 geographic area 
licenses for the General Category channels in the 800 MHz SMR band 
qualified as small businesses under the $15 million size standard. In 
an auction completed on December 5, 2000, a total of 2,800 Economic 
Area licenses in the lower 80 channels of the 800 MHz SMR service were 
sold. Of the 22 winning bidders, 19 claimed ``small business'' status 
and won 129 licenses. Thus, combining all three auctions, 40 winning 
bidders for geographic licenses in the 800 MHz SMR band claimed status 
as small business.
    120. In addition, there are numerous incumbent site-by-site SMR 
licensees and licensees with extended implementation authorizations in 
the 800 and 900 MHz bands. We do not know how many firms provide 800 
MHz or 900 MHz geographic area SMR pursuant to extended implementation 
authorizations, nor how many of these

[[Page 64067]]

providers have annual revenues of no more than $15 million. One firm 
has over $15 million in revenues. We assume, for purposes of this 
analysis, that all of the remaining existing extended implementation 
authorizations are held by small entities, as that small business size 
standard is established by the SBA.
    121. Private Land Mobile Radio (PLMR). PLMR systems serve an 
essential role in a range of industrial, business, land transportation, 
and public safety activities. These radios are used by companies of all 
sizes operating in all U.S. business categories, and are often used in 
support of the licensee's primary (non-telecommunications) business 
operations. For the purpose of determining whether a licensee of a PLMR 
system is a small business as defined by the SBA, we could use the 
definition for ``Cellular and Other Wireless Telecommunications.'' This 
definition provides that a small entity is any such entity employing no 
more than 1,500 persons. The Commission does not require PLMR licensees 
to disclose information about number of employees, so the Commission 
does not have information that could be used to determine how many PLMR 
licensees constitute small entities under this definition. Moreover, 
because PMLR licensees generally are not in the business of providing 
cellular or other wireless telecommunications services but instead use 
the licensed facilities in support of other business activities, we are 
not certain that the Cellular and Other Wireless Telecommunications 
category is appropriate for determining how many PLMR licensees are 
small entities for this analysis. Rather, it may be more appropriate to 
assess PLMR licensees under the standards applied to the particular 
industry subsector to which the licensee belongs.
    122. The Commission's 1994 Annual Report on PLMRs indicates that at 
the end of fiscal year 1994, there were 1,087,267 licensees operating 
12,481,989 transmitters in the PLMR bands below 512 MHz. Because any 
entity engaged in a commercial activity is eligible to hold a PLMR 
license, the revised rules in this context could potentially impact 
every small business in the United States.
    123. Fixed Microwave Services. Fixed microwave services include 
common carrier, private-operational fixed, and broadcast auxiliary 
radio services. Currently, there are approximately 22,015 common 
carrier fixed licensees and 61,670 private operational-fixed licensees 
and broadcast auxiliary radio licensees in the microwave services. The 
Commission has not yet defined a small business with respect to 
microwave services. For purposes of this IRFA, we will use the SBA's 
definition applicable to ``Cellular and Other Wireless 
Telecommunications'' companies--that is, an entity with no more than 
1,500 persons. The Commission does not have data specifying the number 
of these licensees that have more than 1,500 employees, and thus is 
unable at this time to estimate with greater precision the number of 
fixed microwave service licensees that would qualify as small business 
concerns under the SBA's small business size standard. Consequently, 
the Commission estimates that there are 22,015 or fewer small common 
carrier fixed licensees and 61,670 or fewer small private operational-
fixed licensees and small broadcast auxiliary radio licensees in the 
microwave services that may be affected by the rules and policies 
adopted herein. The Commission notes, however, that the common carrier 
microwave fixed licensee category includes some large entities.
    124. Wireless Communications Services. This service can be used for 
fixed, mobile, radiolocation, and digital audio broadcasting satellite 
uses. The Commission defined ``small business'' for the wireless 
communications services (WCS) auction as an entity with average gross 
revenues of $40 million for each of the three preceding years, and a 
``very small business'' as an entity with average gross revenues of $15 
million for each of the three preceding years. The SBA has approved 
these definitions. The FCC auctioned geographic area licenses in the 
WCS service. In the auction, which commenced on April 15, 1997 and 
closed on April 25, 1997, there were seven bidders that won 31 licenses 
that qualified as very small business entities, and one bidder that won 
one license that qualified as a small business entity. An auction for 
one license in the 1670-1674 MHz band commenced on April 30, 2003 and 
closed the same day. One license was awarded. The winning bidder was 
not a small entity.
    125. 39 GHz Service. The Commission defines ``small entity'' for 39 
GHz licenses as an entity that has average gross revenues of less than 
$40 million in the three previous calendar years. ``Very small 
business'' 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. The SBA has approved these definitions. 
The auction of the 2,173 39 GHz licenses began on April 12, 2000, and 
closed on May 8, 2000. The 18 bidders who claimed small business status 
won 849 licenses.
    126. Local Multipoint Distribution Service. An auction of the 986 
Local Multipoint Distribution Service (LMDS) licenses began on February 
18, 1998, and closed on March 25, 1998. The Commission defined ``small 
entity'' for LMDS licenses as an entity that has average gross revenues 
of less than $40 million in the three previous calendar years. 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 LMDS auctions have been approved by the SBA. There were 93 
winning bidders that qualified as small entities in the LMDS auctions. 
A total of 93 small and very small business bidders won approximately 
277 A Block licenses and 387 B Block licenses. On March 27, 1999, the 
Commission re-auctioned 161 licenses; there were 32 small and very 
small business winning bidders that won 119 licenses.
    127. 218-219 MHz Service. The first auction of 218-219 MHz 
(previously referred to as the Interactive and Video Data Service or 
IVDS) spectrum resulted in 178 entities winning licenses for 594 
Metropolitan Statistical Areas (MSAs). Of the 594 licenses, 567 were 
won by 167 entities qualifying as a small business. For that auction, 
we defined a small business as an entity that, together with its 
affiliates, has no more than a $6 million net worth and, after federal 
income taxes (excluding any carry over losses), has no more than $2 
million in annual profits each year for the previous two years. In an 
order relating to the 218-219 MHz service, we defined a small business 
as an entity that, together with its affiliates and persons or entities 
that hold interests in such an entity and their affiliates, has average 
annual gross revenues not exceeding $15 million for the preceding three 
years. A very small business is defined as an entity that, together 
with its affiliates and persons or entities that hold interests in such 
an entity and its affiliates, has average annual gross revenues not 
exceeding $3 million for the preceding three years. The SBA has 
approved of these definitions. At this time, we cannot estimate the 
number of licenses that will be won by entities qualifying as small or 
very small businesses under our rules in future auctions of 218-219 MHz 
spectrum. Given the success of small businesses in the previous 
auction, and the prevalence of small businesses in the subscription 
television services and message communications industries, we

[[Page 64068]]

assume for purposes of this IRFA that in future auctions, many, and 
perhaps all, of the licenses may be awarded to small businesses.
    128. Location and Monitoring Service (LMS). Multilateration LMS 
systems use non-voice radio techniques to determine the location and 
status of mobile radio units. For purposes of auctioning LMS licenses, 
the Commission has defined ``small business'' as an entity that, 
together with controlling interests and affiliates, has average annual 
gross revenues for the preceding three years not exceeding $15 million. 
A ``very small business'' is defined as an entity that, together with 
controlling interests and affiliates, has average annual gross revenues 
for the preceding three years not exceeding $3 million. These 
definitions have been approved by the SBA. An auction for LMS licenses 
commenced on February 23, 1999, and closed on March 5, 1999. Of the 528 
licenses auctioned, 289 licenses were sold to four small businesses. We 
cannot accurately predict the number of remaining licenses that could 
be awarded to small entities in future LMS auctions.
    129. Rural Radiotelephone Service. We use the SBA definition 
applicable to cellular and other wireless telecommunication companies, 
i.e., an entity employing no more than 1,500 persons. There are 
approximately 1,000 licensees in the Rural Radiotelephone Service, and 
the Commission estimates that there are 1,000 or fewer small entity 
licensees in the Rural Radiotelephone Service that may be affected by 
the rules and policies adopted herein.
    130. Air-Ground Radiotelephone Service. We use the SBA definition 
applicable to cellular and other wireless telecommunication companies, 
i.e., an entity employing no more than 1,500 persons. There are 
approximately 100 licensees in the Air-Ground Radiotelephone Service, 
and the Commission estimates that almost all of them qualify as small 
entities under the SBA definition.
    131. Offshore Radiotelephone Service. This service operates on 
several ultra high frequency (UHF) TV broadcast channels that are not 
used for TV broadcasting in the coastal area of the states bordering 
the Gulf of Mexico. At present, there are approximately 55 licensees in 
this service. We use the SBA definition applicable to cellular and 
other wireless telecommunication companies, i.e., an entity employing 
no more than 1,500 persons. The Commission is unable at this time to 
estimate the number of licensees that would qualify as small entities 
under the SBA definition. The Commission assumes, for purposes of this 
IRFA, that all of the 55 licensees are small entities, as that term is 
defined by the SBA.
    132. Multiple Address Systems (MAS). Entities using MAS spectrum, 
in general, fall into two categories: (1) Those using the spectrum for 
profit-based uses, and (2) those using the spectrum for private 
internal uses. With respect to the first category, the Commission 
defines ``small entity'' for MAS licenses as an entity that has average 
gross revenues of less than $15 million in the three previous calendar 
years. ``Very small business'' is defined as an entity that, together 
with its affiliates, has average gross revenues of not more than $3 
million for the preceding three calendar years. The SBA has approved of 
these definitions. The majority of these entities will most likely be 
licensed in bands where the Commission has implemented a geographic 
area licensing approach that would require the use of competitive 
bidding procedures to resolve mutually exclusive applications. The 
Commission's licensing database indicates that, as of January 20, 1999, 
there were a total of 8,670 MAS station authorizations. Of these, 260 
authorizations were associated with common carrier service. In 
addition, an auction for 5,104 MAS licenses in 176 EAs began November 
14, 2001, and closed on November 27, 2001. Seven winning bidders 
claimed status as small or very small businesses and won 611 licenses.
    133. With respect to the second category, which consists of 
entities that use, or seek to use, MAS spectrum to accommodate their 
own internal communications needs, we note that MAS serves an essential 
role in a range of industrial, safety, business, and land 
transportation activities. MAS radios are used by companies of all 
sizes, operating in virtually all U.S. business categories, and by all 
types of public safety entities. For the majority of private internal 
users, the definitions developed by the SBA would be more appropriate. 
The applicable definition of small entity in this instance appears to 
be the ``Cellular and Other Wireless Telecommunications'' definition 
under the SBA rules. This definition provides that a small entity is 
any entity employing no more than 1,500 persons. The Commission's 
licensing database indicates that, as of January 20, 1999, of the 8,670 
total MAS station authorizations, 8,410 authorizations were for private 
radio service, and of these, 1,433 were for private land mobile radio 
service.
    134. Incumbent 24 GHz Licensees. The rules that we adopt could 
affect incumbent licensees who were relocated to the 24 GHz band from 
the 18 GHz band, and applicants who wish to provide services in the 24 
GHz band. The Commission did not develop a definition of small entities 
applicable to existing licensees in the 24 GHz band. Therefore, the 
applicable definition of small entity is the definition under the SBA 
rules for ``Cellular and Other Wireless Telecommunications.'' This 
definition provides that a small entity is any entity employing no more 
than 1,500 persons. The 1992 Census of Transportation, Communications 
and Utilities, conducted by the Bureau of the Census, which is the most 
recent information available, shows that only 12 radiotelephone (now 
Wireless) firms out of a total of 1,178 such firms that operated during 
1992 had 1,000 or more employees. This information notwithstanding, we 
believe that there are only two licensees in the 24 GHz band that were 
relocated from the 18 GHz band, Teligent and TRW, Inc. It is our 
understanding that Teligent and its related companies have less than 
1,500 employees, though this may change in the future. TRW is not a 
small entity. Thus, only one incumbent licensee in the 24 GHz band is a 
small business entity.
    135. Future 24 GHz Licensees. With respect to new applicants in the 
24 GHz band, we have defined ``small business'' as an entity that, 
together with controlling interests and affiliates, has average annual 
gross revenues for the three preceding years not exceeding $15 million. 
``Very small business'' in the 24 GHz band is defined as an entity 
that, together with controlling interests and affiliates, has average 
gross revenues not exceeding $3 million for the preceding three years. 
The SBA has approved these definitions. The Commission will not know 
how many licensees will be small or very small businesses until the 
auction, if required, is held.
    136. 700 MHz Guard Band Licenses. In an order relating to the 700 
MHz Guard Band, we adopted a small business size standard for ``small 
businesses'' and ``very small businesses'' for purposes of determining 
their eligibility for special provisions such as bidding credits and 
installment payments. A ``small business'' is an entity that, together 
with its affiliates and controlling principals, has average gross 
revenues not exceeding $15 million for the preceding three years. 
Additionally, a ``very small business'' is an entity that, together 
with its affiliates and controlling principals, has average gross 
revenues that are not more than $3 million for the preceding three 
years. An auction of 52 Major Economic Area

[[Page 64069]]

(MEA) licenses commenced on September 6, 2000, and closed on September 
21, 2000. Of the 104 licenses auctioned, 96 licenses were sold to nine 
bidders. Five of these bidders were small businesses that won a total 
of 26 licenses. A second auction of 700 MHz Guard Band licenses 
commenced on February 13, 2001 and closed on February 21, 2001. All 
eight of the licenses auctioned were sold to three bidders. One of 
these bidders was a small business that won a total of two licenses.
    137. Multipoint Distribution Service, Multichannel Multipoint 
Distribution Service, and Instructional Television Fixed Service. 
Multichannel Multipoint Distribution Service (MMDS) systems, often 
referred to as ``wireless cable,'' transmit video programming to 
subscribers using the microwave frequencies of the Multipoint 
Distribution Service (MDS) and Instructional Television Fixed Service 
(ITFS). In connection with the 1996 MDS auction, the Commission defined 
``small business'' as an entity that, together with its affiliates, has 
average gross annual revenues that are not more than $40 million for 
the preceding three calendar years. The SBA has approved of this 
standard. The MDS auction resulted in 67 successful bidders obtaining 
licensing opportunities for 493 Basic Trading Areas (BTAs). Of the 67 
auction winners, 61 claimed status as a small business. At this time, 
we estimate that of the 61 small business MDS auction winners, 48 
remain small business licensees. In addition to the 48 small businesses 
that hold BTA authorizations, there are approximately 392 incumbent MDS 
licensees that have gross revenues that are not more than $40 million 
and are thus considered small entities. After adding the number of 
small business auction licensees to the number of incumbent licensees 
not already counted, we find that there are currently approximately 440 
MDS licensees that are defined as small businesses under either the 
SBA's or the Commission's rules. Some of those 440 small business 
licensees may be affected by the proposals in the Further Notice.
    138. In addition, the SBA has developed a small business size 
standard for Cable and Other Program Distribution, which includes all 
such companies generating $12.5 million or less in annual receipts. 
According to Census Bureau data for 1997, there were a total of 1,311 
firms in this category, total, that had operated for the entire year. 
Of this total, 1,180 firms had annual receipts of under $10 million, 
and an additional 52 firms had receipts of $10 million or more but less 
than $25 million. Consequently, we estimate that the majority of 
providers in this service category are small businesses that may be 
affected by the rules and policies proposed in the Further Notice.
    139. Finally, while SBA approval for a Commission-defined small 
business size standard applicable to ITFS is pending, educational 
institutions are included in this analysis as small entities. There are 
currently 2,032 ITFS licensees, and all but 100 of these licenses are 
held by educational institutions. Thus, we tentatively conclude that at 
least 1,932 ITFS licensees are small businesses.
Description of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements
    140. The NPRM does not propose any specific reporting, 
recordkeeping or compliance requirements. However, we seek comment on 
what, if any, requirements we should impose if we adopt the proposals 
set forth in the NPRM.
Steps Taken To Minimize Significant Economic Impact on Small Entities, 
and Significant Alternatives Considered
    141. The RFA requires an agency to describe any significant, 
specifically small business, alternatives that it has considered in 
developing its 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.
    142. As stated earlier, we seek to minimize regulatory costs and 
eliminate unnecessary regulatory burdens to the deployment of spectrum-
based services in rural areas. Therefore, we believe that modifying or 
eliminating certain rules should decrease the costs associated with 
regulatory compliance for licensees and increase flexibility in a 
manner that will facilitate access, capital formation, build-out and 
coverage in rural areas. We therefore anticipate that, although it 
seems likely that there will be a significant economic impact on a 
substantial number of small entities, there will be no adverse economic 
impact on small entities. In fact, certain of the proposed rules may 
particularly benefit small entities.
    143. For example, the NPRM proposes that spectrum in rural areas 
that is leased by a licensee, and for which the lessee meets the 
performance requirements that are applicable to the licensee, should be 
construed as ``used'' for the purposes of this proceeding and any 
performance requirements we adopt. Although adoption of this proposal 
would benefit both small and large entities in the radio services where 
leasing is allowed, the majority of businesses in these radio services 
are small entities.
    144. The NPRM further proposes a ``substantial service'' 
construction benchmark for all wireless services licensed on a 
geographic basis. We believe this proposal, if adopted, will affect 
small and large entities alike by providing increased flexibility, 
particularly in rural areas, for licensees to meet their performance 
requirements.
    145. In addition, the NPRM proposes to modify the eligibility 
restrictions on the use of spectrum within the Basic Exchange Telephone 
Radio Systems (BETRS) to allow more flexible use of the spectrum. We 
believe this proposal, if adopted, will provide a particular benefit to 
small entities by providing current BETRS licensees, of which a 
majority are small entities, with increased flexibility to use BETRS 
spectrum.
    146. In the NPRM, then, the Commission has set forth various 
options it is considering for each rule, from modifying them to 
eliminating them all together. We seek comment on any additional 
appropriate alternatives and especially alternatives that may further 
reduce economic impacts on small entities.

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

    147. None.

C. Initial Paperwork Reduction Act of 1995 Analysis

    148. This NPRM seeks comment on a proposed information collection. 
As part of the Commission's continuing effort to reduce paperwork 
burdens, we invite the general public and the Office of Management and 
Budget (OMB) to take this opportunity to comment on the information 
collections contained in this NPRM, as required by the Paperwork 
Reduction Act of 1995, Public Law 104-13. Public and agency comments 
are due at the same time as other comments on this NPRM and must have a 
separate heading designating them as responses to the Initial Paperwork 
Reduction Analysis (IPRA). OMB comments are due 60 days from

[[Page 64070]]

date of publication of this NPRM in the Federal Register. Comments 
should address: (a) Whether the proposed collection of information is 
necessary for the proper performance of the functions of the 
Commission, including whether the information shall have practical 
utility; (b) the accuracy of the Commission's burden estimates; (c) 
ways to enhance the quality, utility, and clarity of the information 
collected; and (d) ways to minimize the burden of the collection of 
information on the respondents, including the use of automated 
collection techniques or other forms of information technology. In 
addition to filing comments with the Secretary, a copy of any comments 
on the information collection(s) contained herein should be submitted 
to Judith B. Herman, Federal Communications Commission, room 1-C804, 
445 12th Street, SW., Washington, DC 20554, or via the Internet to 
<[email protected] and to Kim A. Johnson, OMB Desk 
Officer, room 10236 NEOB, 725 17th Street, NW., Washington, DC 20503 
via the Internet to [email protected] or by fax to 202-395-
5167.

D. Comment Dates

    149. Pursuant to applicable procedures set forth in sections 1.415 
and 1.419 of the Commission's Rules, interested parties may file 
comments on or before December 29, 2003 and reply comments on or before 
January 26, 2004. Comments and reply comments should be filed in WT 
Docket No. 03-202. All relevant and timely comments 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 all comments, reply comments, and 
supporting comments. If interested parties want each Commissioner to 
receive a personal copy of their comments, they must file an original 
plus nine copies.
    150. Comments also may 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/cgb/ecfs. Generally, only one copy of an electronic submission 
must be filed. Commenters should transmit one electronic copy of the 
comments to WT Docket No. 03-202. In completing the transmittal screen, 
commenters should include their full name, Postal Service mailing 
address, and the applicable docket or rulemaking number. Parties may 
also submit electronic comments by Internet e-mail. To receive filing 
instructions for e-mail comments, commenters should send an e-mail to 
[email protected], and should include the following words in the body of the 
message, ``get form .'' A sample form 
and directions will be sent in reply.
    151. Parties who choose to file by paper must file an original and 
four copies of each filing. Filings can be sent by hand or messenger 
delivery, by commercial overnight courier, or by first-class or 
overnight U.S. Postal Service mail (although we continue to experience 
delays in receiving U.S. Postal Service mail). The Commission's 
contractor, Natek, Inc., will receive hand-delivered or messenger-
delivered paper filings for the Commission's Secretary at 236 
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The filing 
hours at this location will be 8 a.m. to 7 p.m. All hand deliveries 
must be held together with rubber bands or fasteners. Any envelopes 
must be disposed of before entering the building. In addition, parties 
who choose to file by paper should provide a courtesy copy of each 
filing to Nicole McGinnis, Attorney Advisor, Commercial Wireless 
Division, Wireless Telecommunications Bureau, 445 12th Street, SW., 
Room 6223, Washington, DC 20554 or by e-mail to Nicole McGinnis at 
[email protected].
    152. Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743. U.S. Postal Service first-class mail, 
Express Mail, and Priority Mail should be addressed to 445 12th Street, 
SW., Washington, DC 20554. All filings must be addressed to the 
Commission's Secretary, Office of the Secretary, Federal Communications 
Commission.

------------------------------------------------------------------------
 If you are sending this type of document    It should be addressed for
    or using this delivery method . . .           delivery to . . .
------------------------------------------------------------------------
Hand-delivered or messenger-delivered       236 Massachusetts Avenue,
 paper filings for the Commission's          NE., Suite 110, Washington,
 Secretary.                                  DC 20002 (8 to 7 p.m.)
Other messenger-delivered documents,        9300 East Hampton Drive,
 including documents sent by overnight       Capitol Heights, MD 20743
 mail (other than United States Postal       (8 a.m. to 5:30 p.m.)
 Service Express Mail and Priority Mail).
United States Postal Service first-class    445 12th Street, SW.,
 mail, Express Mail, and Priority Mail.      Washington, DC 20554
------------------------------------------------------------------------

    153. Regardless of whether parties choose to file electronically or 
by paper, parties should also file one copy of any documents filed in 
this docket with the Commission's copy contractor, Qualex 
International, Portals II, 445 12th Street, SW., CY-B402, Washington, 
DC 20554 (see alternative addresses above for delivery by hand or 
messenger) (telephone 202-863-2893; facsimile 202-863-2898) or via e-
mail at [email protected].
    154. The full text of this document is available for public 
inspection and copying during regular business hours at the FCC 
Reference Information Center, Portals II, 445 12th Street, SW., Room 
CY-A257, Washington, DC, 20554. This document may also be purchased 
from the Commission's duplicating contractor, Qualex International, 
Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC, 20554, 
telephone 202-863-2893, facsimile 202-863-2898, or via e-mail 
[email protected]. Alternative formats (computer diskette, large print, 
audio cassette and Braille) are available to persons with disabilities 
by contacting Brian Millin at (202) 418-7426, TTY (202) 418-7365, or at 
[email protected].

IV. Ordering Clauses

    155. Pursuant to the authority contained in sections 4(i), 11, 
303(r), 309(j) and 706 of the Communications Act of 1934, as amended, 
47 U.S.C. 154(i), 157, 161, 303(r), and 309(j), the NPRM is adopted.
    156. The Commission's Consumer and Governmental Affairs Bureau, 
Reference Information Center, shall send a copy of the NPRM, including 
the Initial Regulatory Flexibility Analysis, to the Chief Counsel for 
Advocacy of the Small Business Administration.

List of Subjects

47 CFR Part 22

    Communications common carriers, rural areas.

47 CFR Part 24

    Communications equipment, telecommunications.

47 CFR Part 90

    Communications equipment, reporting and recordkeeping equipment.


[[Page 64071]]


Federal Communications Commission.
Marlene H. Dortch,
Secretary.

Proposed Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission proposes to amend 47 CFR Parts 22, 24, and 90 
as follows:

PART 22--PUBLIC MOBILE SERVICES

    1. The authority citation for Part 22 continues to read as follows:

    Authority: 47 U.S.C. 154, 222, 303, 309 and 332.

    2. Section 22.702 is revised to read as follows:


Sec.  22.702  Eligibility.

    Existing and proposed communications common carriers are eligible 
to hold authorizations to operate conventional central office, 
interoffice and rural stations in the Rural Radiotelephone Service. 
Subscribers are also eligible to hold authorizations to operate rural 
subscriber stations in the Rural Radiotelephone Service.

PART 24--PERSONAL COMMUNICATIONS SERVICES

    3. The authority citation for Part 24 continues to read as follows:

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

    4. Section 24.203(a) is revised to read as follows:


Sec.  24.203  Construction requirements.

    (a) Licensees of 30 MHz blocks must serve with a signal level 
sufficient to provide adequate service to at least one-third of the 
population in their licensed area within five years of being licensed 
and two-thirds of the population in their licensed area within ten 
years of being licensed. Alternatively, licensees may provide 
``substantial service'' to their licensed area within ten years. 
Licensees may choose to define population using the 1990 census or the 
2000 census. Failure by any licensee to meet these requirements will 
result in forfeiture or non-renewal of the license and the licensee 
will be ineligible to regain it.
* * * * *

PART 90--PRIVATE LAND MOBILE RADIO SERVICES

    5. The authority citation for Part 90 continues to read as follows:

    Authority: Sections 4(i), 11, 303(g), 303(r), and 332(c)(7) of 
the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 161, 
303(g), 303(r), 332(c)(7).

    6. Section 90.155(d) is revised to read as follows:


Sec.  90.155  Time in which station must be placed in operation.

* * * * *
    (d) Multilateration LMS EA-licensees, authorized in accordance with 
Sec.  90.353, must construct and place in operation a sufficient number 
of base stations that utilize multilateration technology (see paragraph 
(e) of this section) to provide multilateration location service to 
one-third of the EA's population within five years of initial license 
grant, and two-thirds of the population within ten years. 
Alternatively, licensees may provide ``substantial service'' to their 
licensed area within ten years. In demonstrating compliance with the 
construction and coverage requirements, the Commission will allow 
licensees to individually determine an appropriate field strength for 
reliable service, taking into account the technologies employed in 
their system design and other relevant technical factors. At the five 
and ten year benchmarks, licensees will be required to file a map and 
FCC Form 601 showing compliance with the coverage requirements (see 
Sec.  1.946 of this chapter).
* * * * *
    7. Section 90.685(b) is revised to read as follows:


Sec.  90.685  Authorization, construction and implementation of EA 
licenses.

* * * * *
    (b) EA licensees in the 806-821/851-866 MHz band must, within three 
years of the grant of their initial license, construct and place into 
operation a sufficient number of base stations to provide coverage to 
at least one-third of the population of its EA-based service area. 
Further, each EA licensee must provide coverage to at least two-thirds 
of the population of the EA-based service area within five years of the 
grant of their initial license. Alternatively, EA-based licensees may 
provide substantial service to their markets within five years of the 
grant of their initial license. Substantial service shall be defined 
as: ``Service which is sound, favorable, and substantially above a 
level of mediocre service.''
* * * * *
    8. Section 90.767 is revised to read as follows:


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

    (a) An EA or Regional licensee must construct a sufficient number 
of base stations (i.e., base stations for land mobile and/or paging 
operations) to provide coverage to at least one-third of the population 
of its EA or REAG within five years of the issuance of its initial 
license and at least two-thirds of the population of its EA or REAG 
within ten years of the issuance of its initial license. Alternatively, 
licensees may provide ``substantial service'' to their licensed area at 
their five- and ten-year benchmarks.
    (b) Licensees must notify the Commission in accordance with Sec.  
1.946 of this chapter of compliance with the Construction requirements 
of paragraph (a) of this section.
    (c) Failure by an EA or Regional licensee to meet the construction 
requirements of paragraph (a) of this section, as applicable, will 
result in automatic cancellation of its entire EA or Regional license. 
In such instances, EA or Regional licenses will not be converted to 
individual, site-by-site authorizations for already constructed 
stations.
    (d) EA and Regional licensees will not be permitted to count the 
resale of the services of other providers in their EA or REAG, e.g., 
incumbent, Phase I licensees, to meet the construction requirement of 
paragraph (a) or (b) of this section, as applicable.
    (e) EA and Regional licensees will not be required to construct and 
place in operation, or commence service on, all of their authorized 
channels at all of their base stations or fixed stations.
    9. Section 90.769 is revised to read as follows:


Sec.  90.769  Construction and implementation of Phase II nationwide 
licenses.

    (a) A nationwide licensee must construct a sufficient number of 
base stations (i.e., base stations for land mobile and/or paging 
operations) to provide coverage to a composite area of at least 750,000 
square kilometers or 37.5 percent of the United States population 
within five years of the issuance of its initial license and a 
composite area of at least 1,500,000 square kilometers or 75 percent of 
the United States population within ten years of the issuance of its 
initial license. Alternatively, licensees may provide ``substantial 
service'' to their licensed area at their five- and ten-year 
benchmarks.
    (b) Licensees must notify the Commission in accordance with Sec.  
1.946 of this chapter of compliance with the Construction requirements 
of paragraph (a) of this section.
    (c) Failure by a nationwide licensee to meet the construction 
requirements of paragraph (a) of this section, as applicable, will 
result in automatic cancellation of its entire nationwide license. In 
such instances, nationwide

[[Page 64072]]

licenses will not be converted to individual, site-by-site 
authorizations for already constructed stations.
    (d) Nationwide licensees will not be required to construct and 
place in operation, or commence service on, all of their authorized 
channels at all of their base stations or fixed stations.

[FR Doc. 03-28047 Filed 11-10-03; 8:45 am]
BILLING CODE 6712-01-U