[Federal Register Volume 69, Number 240 (Wednesday, December 15, 2004)]
[Rules and Regulations]
[Pages 75144-75173]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-27049]



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Part II





Federal Communications Commission





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47 CFR Parts 1, 22, 24, 27, and 90



Facilitating the Provision of Spectrum-Based Services to Rural Areas 
and Promoting Opportunities for Rural Telephone Companies To Provide 
Spectrum-Based Services; Final Rule and Proposed Rule

  Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / 
Rules and Regulations  

[[Page 75144]]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1, 22, 24, 27, and 90

[WT Docket Nos. 02-381, 01-14, and 03-202; FCC 04-166]


Facilitating the Provision of Spectrum-Based Services to Rural 
Areas and Promoting Opportunities for Rural Telephone Companies To 
Provide Spectrum-Based Services

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
(``Commission'') modifies certain regulations and policies to 
facilitate the deployment of wireless services in rural areas. The 
Commission establishes the definition for ``rural areas'' in the 
context of specific policies or regulations governing wireless 
communications services. The Commission also evaluates its policies 
governing the licensing of spectrum, both with respect to initial 
geographic area licensing as well as subsequent re-licensing. The 
Commission also takes steps to facilitate increased access to capital 
for rural licensees, such as the elimination of the remaining 
components of the cellular cross-interest rule, as well as the revision 
of Commission policies governing security interests in wireless 
licenses. Further, the Commission takes several actions designed to 
increase licensee flexibility and permit more cost-effective coverage 
of rural areas; for example, the Commission increases the permissible 
power levels for certain wireless services that are located in rural 
areas, permits certain geographic-area licensees to provide substantial 
service as a means of complying with their construction requirements, 
and clarifies its policies governing infrastructure sharing 
arrangements.

DATES: Effective February 14, 2005, except for Sec.  1.919(c) which 
contains an information collection requirement under the Paperwork 
Reduction Act that has not been approved by the Office of Management 
and Budget (OMB). The Commission will publish a document in the Federal 
Register announcing the effective date of Sec.  1.919(c).

FOR FURTHER INFORMATION CONTACT: Allen A. Barna, Wireless 
Telecommunications Bureau, at (202) 418-0620.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order portion (Report and Order) of the Commission's Report and 
Order and Further Notice of Proposed Rulemaking, FCC 04-166, in WT 
Docket Nos. 02-381, 01-14, and 03-202, adopted July 8, 2004, and 
released September 27, 2004. Contemporaneous with this document, the 
Commission publishes a Further Notice of Proposed Rulemaking (FNPRM) 
(summarized elsewhere in this publication). The full text of this 
document is available for public inspection during regular business 
hours at the FCC Reference Information Center, 445 12th St., SW., Room 
CY-A257, Washington, DC 20554. The complete text may be purchased from 
the Commission's duplicating contractor: Best Copy & Printing, Inc., 
445 12th Street, SW, Room CY-B402, Washington, DC 20554, telephone 800-
378-3160, facsimile 202-488-5563, or via e-mail at [email protected].

Paperwork Reduction Act

    The Report and Order contains modified information collection 
requirements subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. They will be submitted to the Office of Management 
and Budget (OMB) for review under Section 3507(d) of the PRA. OMB, the 
general public, and other Federal agencies are invited to comment on 
the modified information collection requirements contained in this 
proceeding. Public and agency comments are due on or before February 
14, 2005. Comments should address: (a) Whether these modified 
collections of information are 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. Below, the Commission continues to assess the additional 
information collection burden that changes to its regulations and 
policies might have on small entities including businesses with fewer 
than 25 employees.

Synopsis of the Report and Order

I. Introduction

    1. In this Report and Order, the Commission adopts several measures 
intended to increase the ability of wireless service providers to use 
licensed spectrum resources flexibly and efficiently to offer a variety 
of services in a cost-effective manner. By our actions today, we take 
steps to promote access to spectrum and facilitate capital formation 
for entities seeking to serve rural areas or improve service in rural 
areas. This Report and Order takes action affecting the provision of 
commercial and private terrestrial wireless services. While the 
policies and regulations discussed herein are targeted to promote 
wireless services in rural areas, we note that certain of our actions 
will likely have broader application to non-rural areas as well. 
Accordingly, we expect these decisions will facilitate the deployment 
of new and advanced wireless services, including broadband services, 
and thereby foster much-needed economic development. The actions we 
adopt in our Report and Order are derived from those proposed in both 
the Notice of Inquiry (Rural NOI), 68 FR 723 (January 7, 2003), and the 
Rural NPRM, 68 FR 64050 (November 12, 2003).
    2. In this Report and Order, we modify certain regulations and 
policies in order to facilitate the deployment of wireless services in 
rural areas. Specifically, we take the following actions. As an initial 
matter, we examine the various definitions that are used to describe 
``rural areas'' and establish the presumption that, on a going-forward 
basis, and unless otherwise specified in the context of specific 
policies or regulations governing wireless communications services, 
counties with a population density of 100 persons per square mile or 
less constitute ``rural areas'' for purposes of our wireless spectrum 
policies.
    3. Second, we take a close look at some of our policies affecting 
access to spectrum and the provision of service in rural areas. In 
particular, we consider our policies governing the licensing of 
spectrum, both with respect to initial licensing through the 
competitive bidding process as well as subsequent re-licensing after an 
authorization is returned to the Commission. We affirm that we will 
continue to establish licensing areas on a service-by-service (or band-
by-band) basis as appropriate, based upon the flexibility that such an 
approach provides and our past experience in determining the initial 
size of service areas. We also reaffirm that when developing rules for 
licensing individual services, we will consider using smaller service 
areas in some spectrum blocks in order to encourage deployment in rural 
areas for the service in question.
    4. Third, we take steps to facilitate increased access to capital 
for rural licensees. We eliminate the remaining components of the 
cellular cross-interest

[[Page 75145]]

rule that currently apply only in rural service areas and transition to 
case-by-case review for cellular transactions, while closely examining 
those that present a significant likelihood of substantial competitive 
harm in a market. We also revise our policies governing security 
interests in wireless licenses and permit licensees, at their option, 
to grant such interests to the Department of Agriculture's Rural 
Utilities Service (RUS), subject to the Commission's prior approval of 
any transfer of control.
    5. Fourth, we take several actions to increase licensee flexibility 
and permit more cost-effective coverage of rural areas. We amend our 
regulations to increase permissible power levels for base stations in 
certain wireless services that are located in rural areas or that 
provide coverage to otherwise unserved areas. By this action, we 
anticipate that coverage of such areas will be more economical, as 
licensees may provide increased coverage of rural areas using fewer 
base stations and less associated infrastructure. We also amend our 
regulations to permit certain geographic-area licensees to provide 
substantial service as a means of complying with their construction 
requirements, thus countering existing disincentives to build out less 
densely populated areas. Finally, we clarify our policies governing 
infrastructure sharing and discuss the various types of infrastructure 
arrangements that parties generally may enter into without the need for 
Commission review.

II. Background

    6. One of the Commission's primary statutory obligations, as well 
as one of its principal public policy objectives, is to facilitate the 
widespread deployment of facilities-based communications services to 
all Americans, including those doing business in, residing in, or 
visiting rural areas. In December 2002, the Commission released a Rural 
NOI that sought comment on the effectiveness of its existing regulatory 
tools in promoting service to rural areas and asked how we could modify 
our policies to further encourage the provision of wireless services in 
rural areas. In a follow-up Rural NPRM, released in October 2003, the 
Commission sought to build upon the record developed in response to the 
Rural NOI and sought comment regarding a variety of proposals to 
eliminate unnecessary regulatory barriers and encourage the deployment 
of spectrum-based services in rural areas. The Rural NPRM focused on 
measures that would increase flexibility, reduce regulatory costs of 
providing service to rural areas, and promote access to both spectrum 
and capital resources for entities seeking to provide wireless services 
in rural areas. Among other issues, the Rural NPRM sought comment on 
the following policies and proposals: (1) Determining an appropriate 
definition for ``rural area'' for purposes of implementing Commission 
policies; (2) promoting access to ``unused'' spectrum; (3) extending a 
``substantial service'' construction option to all geographic-area 
licensees; (4) determining whether geographic-area licensees should 
satisfy additional construction requirements after their initial 
license term; (5) increasing power limits in rural areas for licensed 
services; (6) evaluating the appropriate initial size of licensing 
areas for geographic-area licenses; (7) fostering our partnership with 
RUS and determining whether additional measures should be taken to 
complement the RUS loan programs; (8) considering whether to modify 
long-held restrictive policies on security interests in licenses by 
permitting licensees to offer RUS security interests in their licenses; 
(9) considering modification or elimination of the cellular cross-
interest rule in Rural Service Areas (RSAs); (10) clarifying our 
policies with respect to infrastructure sharing; and (11) updating and 
amending our rules governing the Rural Radiotelephone Service (RRS) and 
Basic Exchange Telephone Radio Systems (BETRS).
    7. As discussed below, the Commission's market-oriented policies 
largely have been successful in promoting facilities-based competition 
in the rural marketplace, especially with respect to CMRS. These 
market-oriented policies, acting in concert with more historical 
licensing policies, such as the cellular unserved area process, have 
resulted in the widespread provision of wireless services, including in 
rural areas. As the Commission noted in a recent report, 95 percent of 
the total U.S. population live in counties with access to three or more 
different mobile telephony providers. See Implementation of Section 
6002(b) of the Omnibus Budget Reconciliation Act of 1993, Annual Report 
and Analysis of Competitive Market Conditions with Respect to 
Commercial Mobile Services, Eighth Report, 18 FCC Rcd 14783, 14793-94 
paragraph 18 (2003) (Eighth Competition Report). Moreover, we are 
optimistic that recent Commission initiatives will encourage the 
further deployment of new and advanced wireless services in rural 
areas, including broadband services. These initiatives complement 
existing programs and regulations that, in our estimation, already are 
working to promote wireless service in rural areas. These existing 
measures include small business bidding credits and partitioning and 
disaggregation. As the Commission noted in the Rural NPRM, available 
data indicates that wireless service providers have taken advantage of 
these existing regulatory mechanisms. We also note that there are 
explicit funding programs available to support the provision of 
wireless services in rural areas, including Universal Service Fund 
support for service in high cost areas and RUS funds for the deployment 
of broadband services.
    8. In light of the record developed in response to the Rural NPRM, 
we conclude that our market-oriented policies, in tandem with 
substantial capital investment by licensees, generally have led to the 
growth of valuable, productivity-enhancing wireless services to a vast 
majority of Americans, including many who reside, work, or travel in 
rural areas. Nevertheless, we also conclude that there are additional 
steps that we can take in order to promote greater deployment of 
wireless services in rural areas, such as eliminating disincentives to 
serve or invest in rural areas, and helping to reduce the costs of 
market entry, network deployment and continuing operations.

III. Report and Order

A. Definition of ``Rural''

    9. Background. In the Rural NPRM, the Commission requested comment 
on an appropriate definition of a ``rural area'' for use in conjunction 
with each of the policies addressed in this proceeding. The Commission 
sought comment on whether a uniform definition of a ``rural area'' 
would be appropriate, or whether the definition of a ``rural area'' 
should differ depending upon the particular regulatory initiative at 
issue. The Commission discussed various definitions that are currently 
used by the Commission or by other federal agencies as proxies for 
``rural,'' and sought comment on whether one or more of these 
definitions would be appropriate. Specifically, the Commission sought 
comment on the following potential definitions: (1) Counties with a 
population density of 100 persons or fewer per square mile; (2) RSAs; 
(3) non-nodal counties within an Economic Area (EA) as defined by the 
Department of Commerce's Bureau of Economic Analysis ; (4) the 
definition for ``rural'' used by RUS for its broadband loan program; 
(5) the

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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 10 miles of any incorporated or census-designated place 
containing more than 2,500 people, and is not within a county or county 
equivalent that has an overall population density of more than 500 
persons per square mile of land. To the extent that commenters believed 
that none of the eight definitions provided in the Rural NPRM are 
appropriate, the Commission asked commenters to identify specific, 
quantifiable factors that the Commission should consider when 
determining whether an area is a ``rural area.''
    10. Discussion. We conclude that it is appropriate to establish a 
baseline definition of ``rural area'' for purposes of our regulatory 
policies. Rather than discussing ``rural areas'' in abstract terms, we 
believe that a baseline definition will provide clarity in situations 
where the Commission does not otherwise specifically designate an 
alternative definition. As noted in the Rural NPRM, we believe that 
some clarification of the term is necessary in order to ensure that our 
policies are appropriately tailored to promote service to consumers in 
rural areas and ensure uniform understanding of how our regulatory 
proposals will be implemented and evaluated. In addition, by adopting a 
baseline definition of ``rural area,'' we can facilitate the evaluation 
of our rural-oriented policies. By providing continuity with respect to 
the meaning of a ``rural area,'' we can form a basis for comparison of 
the effects of our ``rural area'' policies over time.
    11. We establish a baseline definition of ``rural area'' as those 
counties (or equivalent) with a population density of 100 persons per 
square mile or less, based upon the most recently available Census 
data. The Commission first used this definition as a proxy definition 
in its annual CMRS Competition Report for purposes of analyzing the 
average number of mobile telephony competitors in rural versus non-
rural counties. Our decision to adopt this specific definition over 
other possible definitions is based on several factors. In order to 
apply a specific definition to Commission policies, it is important 
that we not make the definition difficult to administer, or so narrowly 
tailored to only include what many refer to as the most rural areas. We 
believe this definition achieves an appropriate balance. As noted in 
the Rural NPRM, definitions based on county boundaries are easy to 
administer and understand, population data based on county boundaries 
are widely available to the public, and county boundaries rarely 
change. Moreover, the total population of the counties that fall within 
this definition of ``rural area'' closely tracks the Census Bureau's 
overall population for non-urban areas; accordingly, although we do not 
adopt the same definition for ``rural area'' as the Census Bureau, we 
believe that we are targeting the same general population. This 
definition encompasses 2,331 U.S. counties with a total population of 
approximately 60 million people. These figures, based on the 2000 
Census, correspond to approximately 72 percent of all U.S. counties and 
21 percent of the total U.S. population.
    12. We recognize, however, that the application of a single, 
comprehensive definition for ``rural area'' may not be appropriate for 
all purposes. Indeed, the Commission stated in the Rural NPRM that 
there may be potential drawbacks of adopting a definition based solely 
on county boundaries, and others expressed concern that a single 
definition will not suit all situations. As noted in the Rural NPRM, 
there are several well-established definitions for ``rural'' utilized 
by federal agencies, and the Commission itself has employed different 
proxy definitions of ``rural'' in various proceedings. We realize that 
definitions of a ``rural area'' previously adopted were tailored to 
specific policies, and that the 100 persons per square mile or less 
definition may not be a suitable alternative in all cases. We believe, 
therefore, that applying a comprehensive definition of ``rural'' to all 
policies is not warranted and may instead have unintended results. 
Rather than establish the 100 persons per square mile or less 
designation as a uniform definition to be applied in all cases, we 
instead believe that it is more appropriate to treat this definition as 
a presumption that will apply for current or future Commission wireless 
radio service rules, policies and analyses for which the term ``rural 
area'' has not been expressly defined. By doing so, we maintain 
continuity with respect to existing definitions of ``rural'' that have 
been tailored to apply to specific policies, while also providing a 
practical guideline.

B. Facilitating Access to Spectrum

    13. Entities seeking to serve rural areas can be prevented from 
doing so by lack of access to spectrum that has not yet been made 
available by the Commission or that is held by others in such areas. We 
do not believe spectrum is overly congested in rural areas, as demand 
for spectrum in rural areas will in many cases be less than demand in 
suburban or urban areas. However, we regularly hear from rural carriers 
that they are unable to gain access to spectrum in rural markets, 
notwithstanding their interest and the presence of unused spectrum in 
the market. We therefore review our policies that affect access to 
spectrum--including initial licensing determinations, subsequent 
regulatory oversight of the secondary market, and our re-licensing 
policies--to ensure that our policies facilitate access to spectrum in 
rural areas.
    14. In the following paragraphs, we focus on facilitating 
opportunities for entities seeking to serve rural areas to acquire 
spectrum both through initial licensing and through secondary market 
transactions. We believe that the approach we take in this proceeding 
will promote service in rural areas, consistent with market-based 
policies that have encouraged wireless carriers to increase capital 
spending on equipment and other infrastructure. One of our key 
objectives is to ensure that carriers that seek to serve rural areas 
are not prevented from doing so either because they lack of access to 
adequate spectrum or because those that already have such spectrum lack 
adequate economic or regulatory incentives to share it. Moreover, we 
want to do what we can to ensure that spectrum rights flow to those who 
are willing and able to put the spectrum to use in rural markets. We 
recognize that this approach is not a panacea. Even where spectrum 
access is not a barrier to entry, there will be certain rural areas 
that are very difficult to serve because of high equipment costs, low 
population density, or other economic factors. Instead of attempting at 
this time to dramatically manipulate market-based spectrum policies 
that have yielded tremendous benefits in prices and services for the 
overwhelming majority of American consumers, we believe the better 
approach is to gain more experience with secondary markets and to seek 
additional comment in our FNPRM on measures to promote the provision of 
service in these high-cost and underserved areas by either existing 
carriers or new entrants.
    15. In the sections that follow, we explain how our initial 
definitions of spectrum licenses, along with our commitment to make 
substantial amounts of spectrum and licenses available, should 
facilitate access to

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spectrum in rural areas. To facilitate such access, we will determine 
the size of geographic service areas on a service-by-service basis and 
create opportunities for small service areas as appropriate. In 
addition, we will continue our commitment to flexible secondary market 
policies that facilitate post-auction access to spectrum. We also seek 
comment in our FNPRM on additional steps that we might take to promote 
spectrum access. Our goal is to ensure that the highest valued use of 
spectrum is not affected significantly by regulatory methodologies that 
may artificially constrain the choice of the technology used and 
services provided.
1. Size of Geographic Service Areas
    16. Background. For many wireless services, the Commission has 
adopted geographic-area licensing. In contrast to site-based licensing, 
geographic-area licensing provides licensees with flexibility to 
respond to demand within a geographic market without the need for 
additional licensing or authorization by the Commission. When 
determining the size of geographic service areas, the Commission, after 
seeking comment, considers a number of factors including the nature of 
the service or services to be provided and the likely users. The 
Commission has designated various sizes of geographic service areas in 
order to encourage participation in spectrum auctions and to facilitate 
deployment of wireless services.
    17. The Act directs the Commission to design competitive bidding 
systems to promote ``economic opportunity and competition and ensuring 
that new and innovative technologies are readily accessible to the 
American people by avoiding excessive concentration of licenses and by 
disseminating licenses among a wide variety of applicants, including 
small businesses, rural telephone companies, and businesses owned by 
minority groups and women.'' Thus, the determination of geographic area 
sizes becomes an integral part of a system designed to disseminate 
licenses for a broad array of uses.
    18. In the Rural NPRM, the Commission requested comments on the 
appropriate size of geographic markets in rural areas. The Commission 
recognized that the initial size of geographic service areas plays an 
important role in providing the requisite access to spectrum that would 
stimulate competition and result in greater wireless services in rural 
areas. The Commission stated that it intends to continue establishing 
geographic areas on a service-by-service basis, and sought comments on 
this approach. The Commission also emphasized the importance of 
selecting appropriate sized geographic service areas for reducing 
transaction costs that providers may incur if it becomes necessary to 
aggregate or disaggregate spectrum, or negotiate in secondary markets, 
in order to meet spectrum needs.
    19. Discussion. Based on our experience in past proceedings and the 
record established in this one, we conclude that maintaining the 
flexibility to establish geographic areas on a service-by-service basis 
and promoting the use of a variety of service areas, including small 
areas such as MSAs/RSAs, are in the public interest. By adopting this 
framework, we seek to promote service in rural areas, encourage the 
efficient utilization of spectrum, and to make spectrum and licenses 
available to a wide array of licensees, including rural providers. 
Furthermore, we believe that this approach provides flexibility, while 
providing an opportunity for spectrum to be made available over small 
areas such as MSAs/RSAs depending on the record and other 
considerations relevant to the specific spectrum, thereby increasing 
the likelihood of service to rural markets.
    20. The approach we adopt today will afford us with the flexibility 
necessary to tailor the size of licensed areas to balance the needs of 
the different prospective users of the spectrum together with other 
factors, including the unique characteristics of that spectrum. We 
believe that this approach will provide incentives for the provision of 
advanced applications and service offerings in rural areas.
    21. Service-by-Service Determination in Future Proceedings. 
Consistent with our tentative finding in the Rural NPRM, we intend to 
continue a service-by-service approach in defining the initial scope of 
licenses in the future. We find that this approach is the best method 
to provide carriers adequate access to spectrum, including spectrum in 
rural areas, and is consistent with the methodologies used in prior 
proceedings.
    22. A service-by-service approach is consistent with our statutory 
mandate as well. For services subject to auction, 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.'' The flexibility afforded by a service-by-
service approach permits us to balance our various obligations. For 
example, promoting efficient and intensive use of the spectrum may 
require the use of large spectrum blocks or service areas to achieve 
economies of scale, which in turn may conflict with promoting 
opportunities for small businesses and rural service providers that may 
require smaller spectrum blocks. Moreover, parties within the same 
geographic areas may have competing interests. In this regard, the 
flexibility afforded by a service-by-service approach allows the 
Commission to consider the extent to which multiple licenses and 
different sizes of geographic areas should be made available to promote 
competition within the market. This approach also permits the 
Commission to consider the use of large service areas if necessary to 
provide for quicker build-out of facilities and deployment of new and 
innovative wireless services. In some instances, the adoption of larger 
areas may be more effective than the use of smaller areas where 
spectrum use is to be transitioned to new services. In these 
circumstances, the availability of licenses based on larger service 
areas may result in a quicker and more successful transition throughout 
the nation and thus enable the development and deployment of such new 
services.
    23. Another important element of a service-specific methodology is 
that it takes into account any technical considerations associated with 
particular spectrum. For example, questions of whether and when new 
technologies would use the spectrum, and how much spectrum would be 
required for any such new technologies may be considered in determining 
the appropriate geographic areas for a particular service. In addition, 
a service-by-service approach would allow the Commission to determine 
whether propagation characteristics in a particular band would make it 
more or less conducive to business models that are built on serving 
customers over a particular size of service area. This approach would 
help us to promote investment in and the rapid development of new 
technologies and services.
    24. We also find that a service-specific approach allows us to 
consider the appropriate size of each future service area in the 
context of geographic partitioning and spectrum disaggregation rules. 
Geographic partitioning and spectrum disaggregation are available to 
promote efficient spectrum use and economic opportunity by a wide range 
of applicants, including rural telephone companies. A service-by-
service approach permits the Commission to

[[Page 75148]]

structure service areas in light of potential costs relating to 
aggregation, partitioning and disaggregation for the particular 
spectrum. The Commission can consider whether potentially high 
transaction costs can be avoided by allowing the initial service areas 
to be sized in order to meet the needs of the service providers that 
want to use that spectrum.
    25. The continued use of service-specific determinations of 
appropriate geographic area sizes corresponds with the opportunity for 
parties to take advantage of our secondary markets leasing rules. Even 
if the market size or sizes that we adopt in a particular proceeding 
are not necessarily the optimal size to meet the objectives of all 
potential users, small carriers are still afforded the opportunity to 
access appropriately sized market areas through spectrum leasing. In 
the Secondary Markets Report and Order, the Commission stated that 
facilitating the development of secondary markets enhances and 
complements several of the Commission's major policy initiatives and 
public interest objectives, including enabling the development of 
additional and innovative services in rural areas. See Promoting 
Efficient Use of Spectrum Through Elimination of Barriers to the 
Development of Secondary Markets, WT Docket No. 00-230, Report and 
Order and Further Notice of Proposed Rulemaking, 68 FR 66252 (November 
25, 2003) (Secondary Markets Report and Order).
    26. Based on the record, we find that the continuing development of 
the benefits associated with the secondary markets policies and rules 
complements a service-specific approach to determining the appropriate 
size or sizes of geographic service areas. We also note that a service-
specific approach permits the Wireless Telecommunications Bureau 
(Bureau) to consider whether any particular auction methodology should 
be employed in light of the decisions that are made regarding the scope 
of licenses for that spectrum. For example, certain comments address 
the potential for use of package bidding. In order to maintain maximum 
flexibility with respect to removing barriers to spectrum, however, no 
particular form of auction design will be endorsed at this time, 
including the use of package bidding. Rather, consistent with our 
statutory obligations and with our actions in the past, the Bureau will 
seek comment on auction-related procedural issues, including auction 
design, prior to the start of the auctions for the individual spectrum. 
This will provide an opportunity to weigh the benefits and 
disadvantages of any particular bidding design prior to the start of 
the auction, and will permit the auction procedures to be structured, 
if necessary, to center on matters that may be of particular concern to 
the likely participants in the auction and to the spectrum use, 
including the number of licenses to be auctioned, the number of 
spectrum blocks, and the size of the geographic service areas.
    27. In conclusion, we decline to adopt any particular size of 
geographic service area for future licensing at this time. Rather, as 
we state above, we believe that the existence of such a wide range of 
comments and views make it all the more appropriate for us to consider 
issues relating to spectrum access and the scope of licenses for 
particular spectrum in the context of proceedings to establish rules 
for the use of that spectrum. We believe that this methodology offers 
the opportunity for parties that would actually want to be involved 
with the use of that spectrum to target specific issues relating to 
adoption of the band plan that will help to remove barriers to entry 
and increase access to the spectrum.
    28. Multiple Licensing; Opportunities for Providers in Small and 
Rural Areas. In our service-by-service evaluations, in certain 
circumstances we have determined that it is appropriate to license 
different market sizes. For example, for AWS in the 1.7 GHz and 2.1 GHz 
bands, the Commission licensed the bands using a range of geographic 
licensing areas in order to maintain maximum flexibility. That band 
plan spreads licenses over various blocks of spectrum and uses EAs, 
REAGs, and a block with 734 licenses based on RSAs/MSAs. The Commission 
noted the competing needs of parties that sought large and small areas, 
as well as a combination of large and small geographic licensing areas, 
and found that there was sufficient spectrum to meet the competing need 
for both large and small areas. The Commission determined that using a 
varied selection of areas will foster service to rural areas and 
promote the policy goal of disseminating licenses among a wide variety 
of applicants. The Commission stated further that these smaller service 
areas ``provide entry opportunities for smaller carriers, new entrants, 
and rural telephone companies.'' Assignment of a variety of licenses 
will also provide flexibility in service offerings, for example, where 
the use of MSAs and RSAs in conjunction with other sized license areas 
may allow licensees to focus on consumers that require localized use 
without the need for roaming service. In future proceedings, where we 
determine the size of service areas on a service-by-service basis, we 
will consider licensing the spectrum over a range of various sized 
geographic areas, including smaller service areas such as MSAs/RSAs, 
where consistent with the record in that proceeding and with other 
factors that may be relevant to the spectrum.
2. Re-Licensing vs. Market-Based Mechanisms
    29. Background. In an effort to increase access to assigned 
spectrum, the Commission sought comment on when, and under what 
circumstances, it should apply re-licensing provisions to prospective 
spectrum designations. The Commission did not propose to change the 
licensing provisions for current wireless services, but rather chose to 
evaluate whether it should use re-licensing as a means to increase 
access to spectrum, and thus service, especially in rural areas and 
whether, in the event of such re-licensing, there are particular 
construction standards, such as ``complete forfeiture'' or ``keep what 
you use'' that are most effective in promoting access and service in 
rural areas.
    30. The Commission explained that one reason it adopted its 
Secondary Markets Report and Order was to enhance economic 
opportunities and access for the provision of communications services 
in rural areas. In that proceeding, the Commission took important first 
steps to facilitate significantly broader access to valuable spectrum 
resources. These flexible policies extended the Commission's reliance 
on the marketplace to expand the scope of available wireless services 
and devices, with the intent of promoting efficient and dynamic use of 
spectrum resource for the benefit of consumers throughout the country, 
including those in rural areas. The Commission also sought further 
comment on various ways in which it could enhance opportunities for 
spectrum access, efficiency, and innovation by removing unnecessary 
regulatory barriers and implementing more market-oriented policies that 
would facilitate moving spectrum to its highest valued uses.
    31. Following the policies adopted in the secondary markets 
proceeding, the Commission sought comment in the Rural NPRM on 
different mechanisms that could potentially be used to reclaim spectrum 
and increase access by others, including the cellular ``keep what you 
use'' approach and the PCS ``complete forfeiture'' approach. Currently, 
the process for reclaiming unused licensed spectrum differs across 
services. Under the cellular ``keep what you use''

[[Page 75149]]

approach, initial licensees must construct facilities five years from 
license grant and begin providing service within a predefined 
geographic service area, after which licensees relinquish their 
spectrum usage rights to all ``unserved areas.'' For the majority of 
other geographically licensed services, including PCS, licensees are 
afforded exclusive rights and a renewal expectancy for the entire 
authorized area once performance requirements are met, regardless of 
whether service is provided over the entire authorized area. Failure to 
meet applicable benchmarks results in forfeiture of the entire license, 
including the rights to operate any facilities already constructed 
under the authorization.
    32. The Commission explained that once spectrum has been reclaimed 
there are different approaches to re-licensing that spectrum for use by 
others. Under the cellular ``keep what you use'' approach, the 
unconstructed portions of a market become available for site-based 
licensing to other parties via the cellular ``unserved area'' licensing 
process. In the alternative, the Commission explained that it could 
create expanded ``overlay'' rights to unused spectrum, whereby usage 
rights are auctioned to new licensees. Comment was also sought on 
alternative mechanisms such as government defined easements to promote 
access to spectrum in rural areas.
    33. To assess how these potential re-licensing mechanisms would 
work in the context of the Commission's market-oriented policies based 
on flexible use of spectrum and substantial service performance 
requirements, the Commission inquired generally as to what constitutes 
use of spectrum by a licensee. In this context, it sought comment on 
whether and how to provide a clear definition of ``use'' for all 
parties to support policies for access to ``unused'' spectrum. If a 
definition of ``use'' was to be adopted, the Commission explained that 
licensees that construct facilities or lease their spectrum must 
understand how use is construed in terms of construction requirements, 
re-licensing, and other policies that may affect them so that they will 
know what rights they will retain in the event they do not use their 
spectrum.
    34. Discussion. We decline to adopt specific re-licensing rules for 
future spectrum allocations at this time. We believe our recently-
adopted secondary market-based mechanisms should be afforded a greater 
opportunity to provide access to spectrum in a more efficient manner. 
After considering the record established in this proceeding, we agree 
generally with those who support additional time for the development of 
secondary market mechanisms to move ``unused'' spectrum from licensees 
to other entities that place a higher value on use of the spectrum. 
Because our secondary markets policies are relatively new and the 
benefits from their implementation have yet to be fully realized, we 
decline to adopt re-licensing rules for future spectrum allocations at 
this time.
    35. This approach will allow us to examine alternative approaches 
while we assess the efficacy of our secondary markets initiatives and 
underlying policies in rural areas. We believe that the flexibility 
that results from a simplified set of licensing rules gives licensees 
freedom to determine the choice of technologies and services the market 
demands and ultimately leads to more efficient spectrum use. Over the 
last decade, a large percentage of spectrum has been allocated under 
policies that emphasize flexible use. As in the past, numerous 
commenters in this proceeding cite the benefits of applying such 
policies to spectrum allocations where licensing rules rely on market-
based mechanisms. These flexible allocation policies underlie our goal 
of creating an efficient secondary market that can move spectrum to its 
highest valued end use. Our steps to facilitate spectrum leasing in the 
secondary market, along with many other measures to encourage more 
efficient use of spectrum, should facilitate greater access to spectrum 
by better ensuring that licensees face significant opportunity costs 
when deciding either to use spectrum for themselves or to lease it to 
others.
    36. In addition, we will continue to examine various alternatives 
for creating incentives to increase the number and/or level of wireless 
providers and services in rural areas. In particular, we recognize 
that, after the initial license term, it may be appropriate in some 
instances to revert to re-licensing along the lines of some of the 
proposals received so that another carrier has an opportunity to 
provide wireless services to such areas. In addition, we are exploring 
approaches that may be more transparent and better aligned with market-
based mechanisms than proposals whose implementation might constrain 
the flexible use policies underlying our secondary market-based 
initiatives. We will continue to consider the potential use of re-
licensing standards (e.g., ``keep what you use'') in our FNPRM, as well 
as in the context of future service-specific rulemakings.
    37. In the Rural NPRM, as part of the Commission's consideration of 
re-licensing versus market-based mechanisms for increasing licensed 
access to ``exclusive use'' spectrum, the Commission also sought 
comment on whether it should consider at this time a more general 
application of alternative mechanisms for new licensed services, such 
as government-defined spectrum easements. Given our current efforts to 
facilitate the development of secondary markets in spectrum usage 
rights in such spectrum, we believe that we should continue to take 
steps to facilitate spectrum leasing in secondary markets, and that we 
should evaluate other access mechanisms in the context of specific 
service rulemakings. Less than a year has elapsed since our spectrum 
leasing rules went into effect--a short period of time for an efficient 
secondary market to develop and for its impact to be seen. As such, any 
broad evaluation and comparison of secondary markets with the other 
access mechanisms described in the Rural NPRM for new licenses is 
premature. We note that commenting parties opposed the general 
imposition of mandatory spectrum easements, many contending that 
secondary markets have not yet had time to develop. We will, however, 
continue to evaluate the possible future use of easements in the FNPRM.
    38. Because we are not adopting any re-licensing policies at this 
time, we need not define ``use'' of spectrum. As a result, it follows 
that we also are not establishing any specific usage baselines for 
individual services above which licensees must reach in order to 
minimally comply with our substantial service policies. As we explain 
below, however, we are amending our rules to permit certain geographic-
area licensees to provide substantial service as a means of complying 
with their existing construction requirements, along with appropriate 
rural ``safe harbors'' to increase certainty and alleviate concerns 
that the substantial service requirement is overly vague. Accordingly, 
we disagree with those who support strict reporting guidelines and we 
will continue to rely on current rules that in many cases permit 
licensees to determine the showings necessary to report their 
construction. To the extent that our rules defining protected service 
areas vary by service, we intend to consider harmonizing these 
regulations across services in a future rulemaking.
    39. As explained above, we generally believe that by maintaining 
our flexible, relatively undefined use policy for geographic-area 
licensees as applicable, we can increase efficient access to and use of 
spectrum under our secondary markets initiatives that will permit

[[Page 75150]]

spectrum (and access) to flow to those particular uses that consumers 
most demand. We note, however, that the definition of ``use'' will be 
revisited, should we conclude that re-licensing policies should be 
adopted as a result of our FNPRM. We make clear, however, 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, 
will be construed as ``used'' for the purposes of performance criteria 
and construction requirements.
    40. This is consistent with the Commission's decision in its 
Secondary Markets Report and Order. We note that merely leasing 
spectrum, where the lessee does not fully meet the licensee's 
performance requirements, would not be considered ``use'' under this 
decision. We find the record to be insufficient to declare a policy of 
regulatory flexibility for system construction extension requests 
arising from the failure of an unrelated lessee to live up to its 
contractual obligation. Further, as we note in our discussion regarding 
infrastructure sharing arrangements that, to the extent that licensees 
are sharing spectrum usage rights with third parties under spectrum 
leasing arrangements, such arrangements will be subject to the 
policies, rules, and procedures set forth in the Secondary Markets 
proceeding. Thus, to the extent that parties enter into spectrum 
leasing arrangements pursuant to the Secondary Markets Report and 
Order, the applicable policies, rules, and procedures relating to 
performance, build-out, and discontinuance of service will apply. 
Finally, we also find it premature to establish a data base of 
available ``white space'' in rural areas or increase the use of 
spectrum ``audits.''

C. Facilitating Access to Capital

    41. In order to construct facilities and provide Americans living 
or traveling in rural areas with important, innovative and advanced 
services--including such services as broadband, E911, and medical 
telemetry--wireless licensees must have adequate access to capital 
resources. We recognize that capital formation issues may be 
particularly relevant for would-be rural service providers, who may 
have fewer consumers among whom to spread the costs of providing 
service. Although we have existing measures to provide funding for 
deployment in rural areas, such as the Universal Service Fund, we 
recognize that there are additional steps that we can take to 
facilitate access to capital. In the following sections, we discuss 
funding resources available through RUS and outline the ways in which 
we are working together with RUS to promote rural deployment. We also 
examine and modify our policies governing security interests in FCC 
licenses. As discussed below, we believe that relaxing our policies to 
permit licensees to grant RUS a security interest in FCC licenses, 
conditioned upon the prior approval of any assignment or transfer of 
control of the license, will permit licensees to take full advantage of 
the collateral value of their spectrum rights and reduce the risks of 
lending. We also examine our cellular cross-interest rule and 
transition to case-by-case review of cellular cross-interests in RSAs. 
We believe that these actions will facilitate investment and financing 
opportunities for licensees seeking to provide service in rural areas.
1. Rural Utilities Service (RUS) Loan Programs
    42. RUS, through its 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. For fiscal year 2004, no less than $2.211 
billion in loans is available for the Rural Broadband Access Loan and 
Loan Guarantee Program, with $2.051 billion for direct cost-of-money 
loans, $80 million for direct 4 percent loans, and $80 million for loan 
guarantees.
    43. In order to encourage greater access and deployment of wireless 
services throughout rural America, the Commission's WTB has partnered 
with RUS to sponsor the ``Federal Rural Wireless Outreach Initiative'' 
(FCC/RUS Outreach Partnership). The FCC/RUS Outreach Partnership was 
announced on July 2, 2003. 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.
    44. The Rural NPRM sought comment on what, if any, further 
regulatory or policy changes should be made to complement RUS's 
Telecommunications Program, and any other method of securing financing 
for rural build out and operations. The Commission requested comment on 
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. The Commission noted that an important part of 
accomplishing this goal is through the promotion of federal government 
financing programs. The Rural NPRM requested comment on how the 
Commission can assist in making the RUS loan programs more effective. 
The Commission sought 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.
    45. Discussion. We believe that the FCC/RUS Outreach Partnership 
continues to be a useful means of encouraging greater access and 
deployment of wireless services throughout rural America. With respect 
to RUS loan program rules, we note that certain RUS policies are 
statutorily mandated. To the extent that we can adopt rules or policies 
that will facilitate the use of RUS loan programs, however, we will do 
so. For example, as we set out below, we are modifying our policy with 
respect to the grant of security interests in FCC licenses, which we 
believe will enable more prospective borrowers to qualify for RUS 
loans. We will continue to work with RUS and other federal agencies to 
research and identify rural community wireless telecommunications needs 
and strive to create program efficiencies that might assist with 
exploring options to meet those needs. Further, we will continue to 
work with RUS to develop rural outreach programs, materials and 
workshops, which provide technical and economic information on 
telecommunication technologies and funding options.
2. Conditional Security Interests to RUS
    46. Background. As we noted in the Rural NPRM, the Commission's 
policies with respect to commercial transactions involving FCC licenses 
have evolved over time. As the Commission has gained experience in 
regulating wireless licensees and as the wireless marketplace has 
developed, the Commission's policies with respect to control and 
capital formation issues have matured. Particularly in the last decade, 
the Commission has modified its policies to address evolving licensee

[[Page 75151]]

and consumer needs, while concurrently taking appropriate measures to 
safeguard its regulatory authority vis-[agrave]-vis private licensees 
and to ensure compliance with its statutory responsibilities. Central 
to the evolution of these market-oriented policies is the Commission's 
understanding that, in order for wireless licensees to construct 
facilities and deploy innovative services to all Americans, wireless 
licensees must have sufficient access to capital.
    47. Although the Commission has increasingly embraced market-based 
transactions, recognizing the marketplace enables licensees to put 
spectrum to its highest and best uses, this has not always been the 
case. As a historical matter, the Commission initially was restrictive 
in its policies towards market-oriented transactions. For example, the 
Commission prohibited the sale of bare licenses, basing its position on 
its interpretation of Sections 301 and 304 of the Communications Act. 
The Commission stated that ``Section 301 and 304 provide, inter alia, 
that licenses issued by the Commission convey no property interest,'' 
and that ``[t]o allow a permit to be transferred in a situation in 
which the station seller obtains a profit, prior to the time that 
programs tests have commenced, would appear to violate this 
prohibition.'' The Commission subsequently changed its interpretation 
of these statutory provisions, however, and has approved the for-profit 
sale of unbuilt licenses and construction permits for terrestrial 
wireless, broadcasting and satellite services. In the context of the 
sale of an authorization of an unbuilt cellular telephone facility, the 
Commission held that ``the plain language of sections 301 and 304 of 
the Act does not address the sale of authorizations for stations, 
whether built or unbuilt, for-profit or not for-profit,'' but 
``[r]ather * * * congressional concerns that the Federal Government 
retain ultimate control over radio frequencies, as against any rights, 
especially property rights, that might be asserted by licensees who are 
permitted to use the frequencies.'' The Commission went on to conclude 
that the for-profit sale of ``whatever rights a permittee has in its 
license'' to a private party, subject to prior Commission approval, 
would be permissible under these statutory provisions. In 1991, the 
Commission received a Petition for Declaratory Ruling regarding the 
grant of security interests in the broadcasting context, and in 1992, 
the Commission initiated a proceeding in the broadcast context, seeking 
comment on whether we could improve access to capital by allowing 
licensees to grant security interests to creditors. In 1994, the 
Commission found that a ``security interest in the proceeds of the sale 
of a license does not violate Commission policy.''
    48. Over time, the Commission's policies for all spectrum-based 
services have evolved to expressly permit 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. Notably, the 
Commission itself has taken an exclusive security interest in licenses 
subject to the auction installment payment program and a senior 
security interest in the proceeds of a sale of an auctioned license. In 
such circumstances, and subject to the requirements and protections of 
the security agreements that bind the participants in the installment 
payment program, the Commission has allowed licensees to provide their 
lenders a subordinated security interest in the proceeds of a license 
sale. Furthermore, the Commission continues to develop and evaluate its 
policies regarding security interests and control of spectrum, in order 
to ensure that these policies afford licensees sufficient flexibility 
consistent with the Communications Act to develop and deploy innovative 
technology and keep pace with ever-changing consumer needs. In a 2000 
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,'' and indicated its intent to examine Commission policies 
prohibiting security and reversionary interests in licenses.
    49. The Commission noted that it had not yet taken a position on 
whether its policy towards prohibiting a licensee to give a security 
interest in the license itself ``is statutorily mandated or solely 
dictated by regulatory policy.'' In the Secondary Markets Report and 
Order, the Commission found that licensees could enter into certain 
types of leasing transactions that are not deemed transfers of de facto 
control under section 310(d) of the Act without prior Commission 
approval, provided licensees continued to exercise effective working 
control over the spectrum they lease. The Commission indicated that it 
was updating its policy for interpreting de facto control in the 
context of spectrum leasing, in order ``to reflect more recent 
evolutionary developments in the Commission's spectrum policies, 
technological advances, and marketplace trends.''
    50. In the Rural NPRM, the Commission continued its examination of 
its security interest policies as a means of facilitating access to 
capital, consistent with its authority under the Communications Act. 
Specifically, the Commission sought comment on whether permitting 
licensees to grant security interests in their licenses to RUS would 
result in lower costs of and greater access to capital. The Commission 
noted that it would review and require prior Commission approval of an 
assignment to RUS, in accordance with the Commission's transfer and 
assignment policies, before RUS could assume control of a license. The 
Commission also sought comment on whether modifying our policy to 
permit RUS to take a security interest in FCC licenses is a natural 
outgrowth of Commission and judicial developments, 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. The Commission asked whether a 
licensee could grant RUS a security interest in an FCC license without 
compromising the Commission's obligation to maintain control of 
spectrum in the public interest and completely fulfill its applicable 
mandates under the Communications Act of 1934, as amended. The 
Commission sought comment on what the consequences of such a policy 
shift might be, including what, if any, difference from the perspective 
of RUS, a third-party lender, or the licensee, there would be on a 
relaxation of the current security interest policies in the 
circumstances described above. Finally, the Commission sought comment 
on a concern that had been raised in the broadcasting context, 
regarding the independence of broadcast stations and about the ability 
of creditors to have substantial influence over a borrower station. The 
Commission asked 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.
    51. Discussion. After careful review of the record, as well as the 
judicial and regulatory developments of the past decade, we believe 
that it is appropriate to adjust our policy with respect to the grant 
of security interests in FCC licenses. We agree with RUS that allowing 
it to obtain a security interest in an FCC license will greatly improve

[[Page 75152]]

loan security and will facilitate our roles in fulfilling the 
President's goal for the universal deployment of broadband service. We 
therefore modify our policy and permit commercial and private wireless, 
terrestrial-based licensees to grant security interests in their FCC 
licenses to RUS, conditioned upon the Commission's prior approval of 
any assignment or transfer of de jure or de facto control. A licensee 
therefore may grant RUS a security interest in its FCC license, 
provided that the Commission approves the transaction, pursuant to its 
authority under section 310(d) of the Communications Act, before the 
secured party can exercise its right to foreclose on the license. We 
limit this policy change to wireless, terrestrial-based licensees that 
are within the scope of this proceeding. Further, any security interest 
granted to RUS must 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 license to the secured party or other person or entity. 
We also note that, in the case of a licensee operating under the 
installment payment program, the Commission will retain its exclusive, 
senior secured position with respect to the license. The Commission 
also will retain its senior secured position with respect to the 
proceeds of the sale of such license. Accordingly, we clarify that RUS 
may not obtain a security interest in an FCC license in instances where 
the FCC itself is a secured creditor, but may obtain a subordinated 
interest in the proceeds subject to the requirements of the licensee's 
installment payment obligations (e.g., those set forth in the security 
agreement between the licensee and the FCC).
    52. We believe that relaxing our security interest policy to permit 
licensees to grant RUS a conditional security interest in their FCC 
licenses will greatly enhance the value of a licensee's available 
collateral by facilitating RUS's ability (as a secured party) to keep 
the licensees' assets together as a package. While we acknowledge that 
it may be possible for a licensee--primarily through careful corporate 
structuring--to cobble together a set of interests that it can offer to 
a lender as security that approximates a security package containing 
the license, we believe that rural licensees will be much better served 
if they can approach RUS for financing without having to incur the 
potentially substantial transactional and other administrative costs 
that might be necessary to create such a package.
    53. Our decision to relax the current restrictions on security 
interests reflects the Commission's increased reliance on market-
oriented policies to facilitate and encourage competition. At the same 
time, limiting this initiative to RUS, as was proposed in the Rural 
NPRM, avoids any suggestion that the Commission's recognition of a 
third party property interest in an FCC license itself conveys any type 
of ownership interest prohibited by the Communications Act. Although 
this relaxation of our security interest policy marks the first time 
that the Commission has recognized such an interest, the third party 
involved (RUS) is a federal governmental agency. Thus, we do not 
believe that anyone--licensees, their lenders, or the courts--would 
mistakenly construe our action as a retreat from the principle of the 
Communications Act that the spectrum itself is a public resource and 
cannot be ``owned'' or deemed private property. This principle is 
stated most explicitly in sections 301 and 304 of the Act. Section 301 
provides for the control of the United States over ``all the channels 
of radio transmission'' and for ``the use of such channels, but not the 
ownership thereof, by persons for limited periods of time, under 
licenses granted by Federal authority.'' Section 301 also states that 
``no such license shall be construed to create any right, beyond the 
terms, conditions, and periods of the license.'' Section 304 provides 
that the Commission cannot grant any station license until ``the 
applicant thereof shall have waived any claim to the use of * * * the 
electromagnetic spectrum as against the regulatory power of the United 
States.'' Furthermore, pursuant to section 310(d), the Commission must 
review and approve license assignments and transfers of control, assess 
and confirm the basic qualifications of assignees and transferees, and, 
more generally, determine whether the transaction in question will 
serve the public interest, convenience and necessity.
    54. In view of the limitations of such provisions as sections 301, 
304 and 310(d), it is clear that the Communications Act prohibits a 
licensee from ``owning'' the spectrum it uses, and that the Commission 
cannot grant, with a license, any such ownership interests. At the same 
time, however, we recognize that a licensee holds certain ``spectrum 
usage rights,'' as defined within the terms, conditions, and period of 
the FCC license at the time of issuance. The Commission has used the 
security interest prohibition as one bright line to mark off the point 
at which a licensee's spectrum usage rights end and the government's 
control of spectrum begins. By permitting RUS--but only RUS--to take a 
conditional security interest in an FCC license, we maintain the heart 
of this bright line: i.e., a prohibition on anyone other than the 
federal government holding a property interest in something as closely 
associated with spectrum as an FCC license. RUS (like the FCC) is an 
agency of the United States with a particular mandate from Congress. We 
believe that permitting it to obtain a security interest in an FCC 
license will further its mandate and is fully consistent with the view 
of spectrum as a public resource. Moreover, by conditioning any 
assignment or transfer of de facto or de jure control of the license on 
prior Commission approval pursuant to section 310(d), we ensure that 
the Commission retains ultimate control over the spectrum. Thus, the 
FCC's approval must be obtained before RUS can foreclose on a security 
interest it may hold in an FCC license or before RUS or any other 
entity may otherwise obtain control of the license or licensee. This 
prior approval will satisfy our Congressional mandate, while at the 
same time encouraging capital formation in rural areas.
    55. We recognize that one could argue that a grant of a security 
interest in an FCC license does not convey any ownership of spectrum, 
but rather ownership of the licensee's private spectrum usage rights 
associated with the FCC license. However, after carefully considering 
whether this argument would support extending the relaxation of our 
security interest policy to non-United States lenders, we have decided 
to limit our action to RUS, as stated in the Rural NPRM. Thus, we will 
maintain a bright line prohibition against private (non-government) 
lenders taking a security interest in an FCC license.
    56. As an additional matter, we believe that relaxing our policy to 
permit the grant of conditional security interests in FCC licenses to 
RUS is unlikely to result in RUS exercising inappropriate influence 
over the licensee. As noted earlier, licensees may grant security 
interests in the proceeds of the sale of their licenses, as well as in 
their assets and stock. We have received no evidence, and we have no 
reason to suspect, that RUS has used any of these types of 
transactions, already permitted under our rules and policies, to 
exercise inappropriate influence over any FCC licensee. In light of 
these circumstances, we do not believe that permitting a licensee to 
grant RUS a conditional security interest

[[Page 75153]]

in the license itself will increase the likelihood of such 
inappropriate influence.
    57. We note the concerns of some that modifying our policy to 
permit RUS to obtain a security interest could impede the ability of a 
wireless provider to obtain financing from other lenders. However, we 
note that providing licensees with the ability to offer their license 
as collateral would create an opportunity, not a requirement, and that 
the wireless provider, as in all loan decisions, will initially 
determine whether the business risks outweigh the benefits of using its 
license for collateral. Licensees have the option of obtaining 
financing through RUS; in the event they find RUS's terms unsuitable, 
they may elect to work with private lenders. Licensees are not required 
to provide RUS with a conditional security interest, although this 
modification of our policy permits them to do so, at their option.
3. Cellular Cross-Interest Rule
    58. Background. To facilitate additional access to capital by 
cellular carriers in rural areas, the Commission sought comment 
regarding whether the prohibition against cellular cross-interests in 
all RSAs remains in the public interest. As set forth in Sec.  22.942 
of the Commission's rules, the prohibition 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, Sec.  22.942 prohibits any entity from having a direct or 
indirect ownership interest of more than five 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.
    59. The Commission consolidated into the instant proceeding two 
petitions that seek reconsideration of the decision in the December 
2001 Spectrum Cap Sunset Order, which, on the basis of the state of 
competition in CMRS markets, sunset the CMRS spectrum cap rule in all 
markets and eliminated the cellular cross-interest rule in MSAs because 
cellular carriers in urban areas no longer enjoyed first-mover, 
competitive advantages. See 2000 Biennial Regulatory Review Spectrum 
Aggregation Limits for Commercial Mobile Radio Services, WT Docket No. 
01-14, Report and Order, 67 FR 1626 (January 14, 2002) and Final rule; 
correction, 67 FR 4675 (January 31, 2002) (Spectrum Cap Sunset Order). 
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 portion of the Spectrum 
Cap Sunset Order that retained the cellular cross-interest rule in 
RSAs. See Petitions for Reconsideration of Action in Rulemaking 
Proceeding, 67 FR 13183 (March 21, 2002). While the Commission left the 
cross-interest rule in place in RSAs, it indicated in the Spectrum Cap 
Sunset Order that it would consider waiver requests and reassess the 
need for the rule at a future date.
    60. In the Rural NPRM, the Commission made clear that it sought to 
balance its efforts to remove unnecessary regulatory barriers to 
financing and investment of cellular service in rural areas with the 
need to safeguard competition in RSAs. As an initial matter, it sought 
comment on a tentative conclusion to retain the current cellular cross-
interest rule in RSAs with three or fewer CMRS competitors. Assuming 
the Commission were to decide to retain a number-based rule, the Rural 
NPRM also sought comment on how to define a ``competitor'' under such a 
proposal, whether a ``competitor'' might be any CMRS provider with 
significant geographic overlap with the cellular licensee, and whether 
a transition period was necessary to sunset the rule for those RSAs 
with four or more competitors.
    61. In the alternative, the Commission sought comment on a range of 
other options for modifying or eliminating the current rule in a way 
that promotes investment in rural areas while retaining adequate 
competitive safeguards. For example, the Commission sought comment on 
whether to eliminate the prohibition for all RSAs where the ownership 
interest being obtained 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). It sought comment on 
the extent to which the waiver option has deterred or prevented 
acquisition of capital in rural markets. Although a specific waiver 
process has existed to address this barrier to investment in rural 
areas, the Commission noted that the transactions costs and regulatory 
uncertainty surrounding any waiver procedure may deter some beneficial 
investment in these areas. Finally, the Commission sought comment on 
the option of extending case-by-case review, as established in the 
Spectrum Cap Sunset Order, to promote investment and reduce the 
possibility of impeding transactions that are actually in the public 
interest. The Commission recognized the important 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, but it inquired whether the public interest 
may be better served by the benefits of pure case-by-case review.
    62. Discussion. Based on our review of certain arguments raised on 
reconsideration and in the comments regarding the advantages of case-
by-case review, as well as developments since the release of the 
Spectrum Cap Sunset Order in 2001, we find that reliance on a uniform 
case-by-case review process for aggregations of spectrum and cellular 
cross interests in RSAs is currently the better approach as compared to 
prophylactic limits. We believe that continued application of the 
cellular cross-interest rule in RSAs may impede market forces that 
could drive financing and development of new services in rural and 
underserved areas. Accordingly, we find that it is in public interest 
to apply a more flexible approach in reviewing cellular competition in 
rural areas and, as a result, we will extend our section 310(d) case-
by-case review to all cellular markets.
    63. We therefore eliminate the cellular cross-interest rule in RSAs 
and will utilize our case-by-case approach to review transactions where 
a level of cellular cross interests arises to a substantial transfer or 
assignment under section 310(d) of the Act. In addition, if a party 
with a controlling or otherwise attributable interest in one cellular 
licensee within an RSA obtains a non-controlling interest of more than 
10 percent in the other cellular licensee in an overlapping CGSA, we 
will require the licensee to notify the Commission within 30 days of 
the date of consummation of the transaction by filing updated ownership 
information (using an FCC Form 602) reflecting the specific level of 
investment. This notification requirement will sunset at the earlier 
of: (1) Five years after the release of this item, or (2) at the 
cellular licensee's specific renewal deadline. By

[[Page 75154]]

employing this approach to maintain scrutiny over those cross interests 
that pose a particular risk to competition in the near term, we 
conclude that we have struck the proper balance between promoting 
investment and protecting consumers against potential competitive harms 
in rural areas.
    64. Although the Commission last determined that the level of CMRS 
economic competition was not meaningful enough to warrant complete 
elimination of the cellular cross-interest rule pursuant to section 11 
of the Act, it did not fully consider in its Spectrum Cap Sunset Order 
whether a move to case-by-case review for cross interests in RSAs would 
be in the public interest under the broader scope of its 2000 biennial 
review of spectrum aggregations limits. To perform meaningful and 
timely review of spectrum aggregation transactions without the CMRS 
spectrum cap rule, the Commission explained that it needed time to 
develop effective guidelines for this process, as well as to ensure 
that sufficient resources were devoted to the task. In contrast, 
because the concerns underlying the original purpose of the cross-
interest rule had been achieved in MSAs, the Commission was able to 
immediately eliminate the rule in that context without having to 
consider to any great extent the rule's necessity as compared to other, 
less burdensome tools. When the Commission subsequently determined that 
market conditions in rural areas had not changed sufficiently such that 
it should eliminate the cellular cross-interest rule in RSAs pursuant 
to section 11 of the Act, it concluded its reexamination of the rule 
and did not evaluate whether it would nevertheless be in the public 
interest to extend the advantages of flexible case-by-case review to 
aggregation and cross interests of cellular spectrum in rural areas.
    65. Notwithstanding section 11 of the Communications Act and the 
Commission's past findings regarding the level of economic competition 
in rural markets, we decide on reconsideration of our Spectrum Cap 
Sunset Order and based on the comments filed in response to the Rural 
NPRM that it is in the public interest to eliminate the cellular cross-
interest rule. Instead, parties will be permitted to file under our 
case-by-case review process for substantial cross interests in all 
cellular spectrum and report to the Commission a certain level of 
cellular cross interests in rural areas that do not arise to an 
assignment or transfer of control. Such a change in approach, supported 
by adequate resources and procedures and facilitated by collection of 
sufficient industry information along with appropriate enforcement 
mechanisms, is currently the better approach for evaluating whether 
proposed cross interests reflect opportunities for increased financing 
and new services or indicate potential risks of anticompetitive market 
conditions. The Commission indicated that its 2000 biennial review 
would consider whether other factors beyond the impact of competition 
made the cross interest rule appropriate for modification, and in this 
context, we find they do.
    66. Although we recognize the safeguard that the cellular cross-
interest rule has provided against the possibility of significant 
additional consolidation of control over cellular spectrum in rural 
areas and the attendant serious anticompetitive effects, we find that 
the public interest is better served by the benefits of case-by-case 
review with its greater degree of flexibility to reach the appropriate 
decision in each case, reduced likelihood of prohibiting beneficial 
transactions or levels of investment both in urban and rural areas, and 
ability to account for the particular attributes of a transaction or 
market. The greater regulatory flexibility offered by this change in 
tools for review outweighs any ``guarantees'' to the competitive nature 
of cellular competition in rural areas ensured by the current cross-
interest rule, as that rule may inadvertently discourage transactions 
and cross interests that could be found to be in the public interest. 
We believe that no cross interest or transaction should be 
presumptively prohibited in RSAs and that we should consider such 
proposals under an approach that is consistent with the same case-by-
case analysis that is employed in all other CMRS contexts.
    67. In the Spectrum Cap Sunset Order, the Commission gave much 
consideration to the availability of less burdensome case-by-case 
review before it decided that the CMRS spectrum cap rule was no longer 
necessary in the public interest. Given the level of competitive market 
forces and the benefits of flexible case-by-case review, it determined 
that it had the means to sunset the CMRS spectrum cap rule in all 
markets, RSAs as well as MSAs. The Commission decided to retain the 
cellular cross-interest rule in RSAs based on reasoning that the 
likelihood of approving a cellular consolidation between two providers 
in a given market was small and that it would be more efficient and 
less costly for the Commission to maintain a prophylactic rule and to 
entertain waiver requests for the small subset of transactions in RSAs 
where competition was more robust. In review, given advancements in our 
case-by-case processing procedures and resources since December 2001, 
we believe that we can repeal the rule to better encourage transactions 
and levels of financing that are in the public interest while 
maintaining much of the protection afforded by the cellular cross-
interest rule. We recognize that the current waiver approach may 
interfere with investment in rural areas by discouraging certain 
financing in the RSA portions of a regional market but not in the MSA 
portions. Our approach in essence relaxes the permitted threshold to 
49.9 percent. However, for the reasons explained here, we disagree with 
the argument that there is no conceivable situation where the public 
interest could be served by considering such transactions in RSAs. Our 
decision here is to change tools for review to a more precise standard, 
and we make no determination that such proposed transactions are any 
more likely to be found to be in the public interest.
    68. Case-specific review, along with information resources and 
enforcement mechanisms, is a more targeted process to examine the 
actual competitive positions involved in a particular transaction or 
level of cross interests and ensure that acquisitions of and cross 
interests in spectrum do not have anticompetitive effects that render 
them contrary to the public interest. As the Commission indicated in 
the Spectrum Cap Sunset Order in the context of the CMRS spectrum cap 
rule, we can rely on case-by-case review of CMRS spectrum aggregation 
(including cross interests of cellular spectrum in rural areas) to 
fulfill our statutory mandates to promote competition, ensure diversity 
of license holdings, and manage the spectrum resource in the public 
interest. We have been increasing the resources available to review 
spectrum aggregation transactions and developing internal procedures 
for review of concentration of CMRS spectrum in general, and cross 
interests of cellular spectrum in rural areas in particular. While it 
at first places greater resource demands on parties and the Commission, 
over time, these actions will provide parties, including small 
businesses, with legal precedent and a reasonable degree of certainty 
and transparency regarding cross interests of cellular spectrum in 
rural areas and should minimize the administrative costs of case-by-
case review for all applicants and licensees, as well as Commission 
staff. In addition, we believe there may be an inequity that

[[Page 75155]]

distorts the market in any area in which more than just the two 
cellular licensees hold spectrum and find that the better approach to 
safeguarding competition is to take account of the particular 
circumstances of each market through case-specific review.
    69. To review aggregations or cross interests of cellular spectrum 
in rural areas, we eliminate Sec.  22.942 of the Commission's rules, 47 
CFR 22.942, such that applicants and parties will only be required to 
obtain prior Commission approval for transactions subject to section 
310(d) of the Act. Although we are imposing a reporting requirement to 
collect ownership information on certain levels of interests that do 
not trigger section 310(d) review, we have adopted reporting thresholds 
that reflect a comparatively higher 10 percent level of permitted cross 
interest by a party with a controlling interest in a given cellular 
licensee. Under Sec.  22.942, a party with a controlling interest in 
one of the cellular licensees may only have a 5 percent direct or 
indirect ownership interest in the other licensee in that CGSA. Under 
the new reporting standard, we will allow a party with a controlling or 
otherwise attributable interest in one of the cellular licensees to 
have a non-controlling or otherwise non-attributable direct or indirect 
ownership of up to and including 10 percent in the other cellular 
licensee in overlapping CGSAs without notification. We have not been 
able to determine conclusively that such cross interests pose a 
significant threat to competition, and this new 10 percent threshold 
will afford petitioners and commenters some relief from restrictions on 
financing in the RSA portions of a regional market. Moreover, it 
harmonizes the reporting threshold with our FCC Form 602 ownership 
reporting requirements imposed currently on all licensees.
    70. We do not make any determination here on the extent to which 
cellular carriers may continue to hold a dominant market share in rural 
areas or whether a consolidation of cellular licenses in RSAs would 
likely result in a significant reduction in competition. We note, 
however, that a concentration of interests between the two cellular 
licensees in rural areas would more likely result in a significant 
reduction in competition than an aggregation of additional CMRS 
spectrum by such licensees. In addition, we note that different risks 
to competition are present depending on whether a proposed cross 
interest would be held by a telecommunications carrier or by a third-
party bank or other source of financing. By reviewing substantial 
aggregations of cellular cross-interests on a case-by-case basis, as 
discussed above, we retain the flexibility to evaluate individual 
transactions on their own merits and account for these different 
factors in determining whether approval of the transaction will serve 
the public interest under section 310(d).

D. Increasing Licensee Flexibility

1. Performance Requirements
    71. Background. Over the past decade, the Commission has shifted 
away from site-based licensing for wireless licensees and has adopted 
more flexible, geographic-area based allocations that provide licensees 
with greater freedom to provide different types of services. In making 
this shift, the Commission also has adopted performance benchmarks that 
increase licensees' flexibility to offer a variety of services, 
including service that may not require ubiquitous geographic coverage. 
As a general matter, geographic-area licensees are not required to 
construct their entire geographic area in order to retain their 
authorizations. Instead, depending upon the specific service, the 
Commission's rules may require coverage of a certain percentage of the 
licensed area's population or a certain percentage of the licensed 
area's geographic area. For many, but not all 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 without satisfying a prescribed 
population-or geographic-based construction requirement. The 
substantial service standard was intended to provide flexibility for 
services with a variety of uses for the spectrum (i.e., fixed or 
mobile, voice or data) or with a high level of incumbency that would 
prevent a new geographic-based licensee from meeting the coverage 
requirements. While the definition of ``substantial service'' is 
generally consistent among wireless services, the factors that the 
Commission will consider when determining if a licensee has met the 
standard vary among services. Once a licensee satisfies its 
construction requirement during its initial license term, the 
Commission's rules currently do not require that the licensee satisfy 
additional construction requirements during subsequent renewal terms 
other than the standards necessary to achieve a renewal expectancy.
    72. In the Rural NPRM, the Commission proposed modifications to our 
construction requirements to promote licensee flexibility and the 
build-out of rural areas. First, the Commission proposed to adopt a 
``substantial service'' construction benchmark for all wireless 
geographic area licensees that are subject to build-out requirements 
but that did not have the option of meeting those requirements by 
providing substantial service. Specifically, the Commission proposed to 
amend its regulations to extend the substantial service construction 
benchmark to the following licensees: 30 MHz broadband PCS licensees; 
800 MHz SMR licensees (blocks A, B, and C); certain 220 MHz licensees; 
LMS licensees; Multipoint Distribution Service and Instructional 
Television Fixed Service (MDS/ITFS) licensees; and 700 MHz public 
safety licensees. The Commission observed that construction benchmarks 
that mandated population-or geographic-specific coverage might hinder 
licensees from serving niche or less populated areas, and might 
unintentionally discourage construction in rural areas. Second, the 
Commission asked whether we should adopt geographic-based construction 
requirements for private and commercial terrestrial wireless services 
that are licensed on a geographic area basis and that do not have a 
geographic-based requirement. The Commission noted that a geographic 
benchmark would provide licensees who did not intend to focus 
construction efforts on population centers with an alternative. Third, 
the Commission asked whether we should adopt substantial service ``safe 
harbors'' that are tailored to providing coverage in rural areas, and 
proposed safe harbors for mobile as well as fixed services. Finally, 
the Commission also asked whether requiring compliance with additional 
construction requirements in license terms following initial renewal of 
the license might be likely to increase build-out in rural areas.
    73. Discussion. In large part, we adopt the proposal, as set forth 
in the Rural NPRM, to extend the substantial service construction 
benchmark to all wireless services that are licensed on a geographic 
area basis. Specifically, we amend our regulations to provide a 
substantial service construction benchmark for the following licensees: 
30 MHz broadband PCS licensees; 800 MHz SMR licensees (blocks A, B, and 
C); certain 220 MHz licensees; LMS licensees; and 700 MHz public safety 
licensees. These licensees now have the option of satisfying their 
construction requirements by providing substantial service or by 
complying with other service-specific construction benchmarks already 
available to them

[[Page 75156]]

under the Commission's rules. We decline to take any action with 
respect to the MDS/ITFS and the 71-76 GHz, 81-86 GHz and 92-95 GHz (70/
80/90 GHz) bands, because construction rules for these bands recently 
have been or will be addressed in service-specific proceedings.
    74. Based on the record before us, we believe that modifying our 
rules to permit these additional licensees to satisfy their 
construction requirements by providing substantial service will 
increase their flexibility to develop rural-focused business plans and 
deploy spectrum-based services in more sparsely populated areas without 
being bound to concrete population or geographic coverage requirements. 
As the Commission noted in the Rural NPRM, particularly in cases where 
a licensee has a population-based construction requirement, licensees 
have both an economic and practical incentive to achieve compliance 
with the Commission's build-out obligation by providing service to 
urban areas. Further, current population-specific benchmarks may have 
the unintended consequence of encouraging several licensees within a 
particular market to provide coverage to the same populous areas. In 
order to satisfy its construction obligations and safeguard its 
license, even a late entrant who is the fourth or fifth competitor in a 
particular area initially may choose to duplicate existing carriers' 
footprints while other, more sparsely populated areas may be without 
such competition or even service at all. With the additional 
flexibility afforded by a substantial service option, however, 
licensees will be free to develop construction plans that tailor the 
deployment of services to needs that are otherwise unmet, such as the 
provision of service to rural or niche markets. While a substantial 
service alternative, by itself, does not guarantee that all licensees 
will serve rural areas, the additional flexibility of this alternative 
undoubtedly improves the likelihood of rural deployment and provides 
licensees with the opportunity to target unserved rural areas. 
Moreover, providing these licensees with the option of satisfying their 
construction requirements by providing substantial service in their 
licensed areas will increase parity among geographic area licensees. 
This action promotes more equal regulatory footing with respect to 
construction obligations.
    75. We disagree with those who urge the adoption of a substantial 
service standard only for those licensees with ``small geographic 
territories.'' Our intent in providing licensees with a substantial 
service option is not to mandate, but to encourage and facilitate 
construction in less populated areas by providing licensees with 
sufficient flexibility to develop unique business plans that do not 
require ubiquitous coverage or coverage of densely populated areas. In 
keeping with our market-oriented policies, we do not propose to require 
licensees to deploy services where their market studies or other 
analyses indicate that service would be economically unsustainable. As 
we stated earlier, the adoption of the substantial service standard 
provides licensees with the flexibility to provide coverage to other, 
less populated areas and still satisfy its coverage requirement without 
necessarily focusing on more urban population centers.
    76. We also decline at this time to abandon our substantial service 
performance benchmark in favor of stricter, more specific build-out 
obligations, and a `keep what you use' approach similar to the 
`unserved area' licensing regime established for cellular service. As 
demonstrated by our trend towards licensing services on a geographic-
area basis, we believe that licensees can provide a meaningful and 
socially beneficial service without providing ubiquitous service and 
that providing licensees with sufficient flexibility to respond to 
market fluctuations will promote the public interest. However, we 
recognize that, for example because they can be used sequentially, 
market-based mechanisms and re-licensing approaches (such as ``keep 
what you use'') are not necessarily mutually exclusive. Accordingly, 
our FNPRM will continue this discussion of the appropriate re-
licensing, and construction obligations for current and future 
licensees who hold licenses beyond their first term.
    77. As an additional matter, we adopt safe harbors for providing 
substantial service to rural areas. As we state earlier, we adopt a 
default definition of ``rural area'' as a county with a population 
density of 100 persons per square mile or less, based upon the most 
recent Census data. We apply this definition for purposes of these 
rural-focused substantial service safe harbors. In light of the fact 
that the geographic area licenses are comprised of counties, we believe 
it is sensible and administratively efficient to adopt safe harbors for 
geographic area licenses that also are based upon counties. With 
respect to mobile wireless services, a licensee will be deemed to have 
met the substantial service requirement if it provides coverage to at 
least 75 percent of the geographic area of at least 20 percent of the 
``rural areas'' within its licensed area. With respect to fixed 
wireless services, the substantial service requirement is met if a 
licensee constructs at least one end of a permanent link in at least 20 
percent of the number of ``rural areas'' within its licensed area. 
Licensees may satisfy these construction requirements through lease 
agreements, provided these arrangements satisfy the conditions set 
forth in the Secondary Markets Report and Order. As we stated in the 
Rural NPRM, the use of a population density of 100 persons or fewer per 
square mile 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 believe that this population density-based 
definition provides a workable and reasonable point of differentiation 
between rural and non-rural areas, as we noted earlier.
    78. We believe it is beneficial to adopt these safe harbors because 
they provide licensees with concrete examples of how they can provide 
substantial service through specific types of deployment in rural 
areas, thereby increasing certainty and alleviating concerns that the 
substantial service requirement is overly vague. We emphasize, however, 
that these safe harbors do not constitute the only means by which a 
licensee may provide substantial service. A licensee is therefore free 
to meet the substantial service test by satisfying one of the safe 
harbors or providing some alternative coverage to its licensed area, 
depending upon the individual needs of their consumers or their own 
unique business plans. We also note that the Rural NPRM provided 
licensees with additional guidance by setting forth a list of factors 
that we will consider in the context of determining whether a licensee 
is providing substantial service to rural areas. We affirm that we will 
consider these factors in evaluating substantial service showings. 
Specifically, we will look at 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. While this list is not 
intended to be exhaustive or exclusive, we believe it illustrates the 
sorts of material factors we will consider in any rural substantial 
service analysis.

[[Page 75157]]

By adopting substantial service ``safe harbors,'' as well as by 
providing examples of the sorts of factors we will consider in 
evaluating substantial service showings, we believe we satisfactorily 
balance the competing interests of maximizing licensee flexibility 
while providing some measure of certainty.
    79. We decline at this time to introduce a ``very rural area'' safe 
harbor or modify our safe harbors to include a population component. As 
we stated above, the safe harbors are not intended to be the only means 
of providing substantial service. We will take into consideration if a 
licensee is serving a ``very rural area'' or a very large geographic 
area.
    80. We also decline to adopt a geographic-based benchmark for all 
wireless geographic area services that are subject to construction 
requirements but that otherwise do not have a geographic-specific 
construction requirement. We believe that licensees who wish to provide 
coverage to a particular geographic portion of their licensed area have 
the flexibility to do so pursuant to the ``substantial service'' 
standard. We conclude, based upon the record in this proceeding, that 
there is no demonstrated need to modify our regulations in this regard.
    81. We also decline to adopt performance requirements for renewed 
licenses at this time. While we recognize the concerns of existing 
licensees regarding future construction requirements, we believe that 
re-licensing approaches such as ``keep what you use'' and market-based 
mechanisms are not necessarily mutually exclusive. While we do not make 
any such changes at this time, we initiate a FNPRM to continue our 
discussion of various re-licensing approaches and the merits, if any, 
of construction requirements for current and future licensees holding 
licensees beyond their first term.
    82. We note that although we refrain from adopting renewal term 
performance requirements at this time, we will continue to examine the 
state of competition in rural areas and will revisit this decision in 
the event we observe that licensees cease deploying new services in 
rural areas and/or that secondary markets are not facilitating 
sufficient access to spectrum for would-be service rural service 
providers. We emphasize that, contrary to the assertions of some, the 
Commission retains the right to modify the terms and conditions of FCC 
licenses. The Commission's licensing system has never provided any 
vested right to specific license terms. Rather, it is well established 
that the Commission always retains the power to alter the terms of 
existing licenses by rule making. Further, at the time Congress 
introduced auctions into the licensing process, it made clear that this 
mechanism for assigning licenses was not intended to change the 
Commission's basic regulatory role or otherwise provide additional 
rights to auction-winning licensees. Thus, no auction bidder could have 
assumed that it was buying a license containing terms that the 
Commission could not modify.

2. Increasing Power Limits for Certain Services

    83. Background. In the Rural NPRM, the Commission observed that 
``[i]ncreasing 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,'' and that ``[o]ne way to 
increase the range of radio systems is by increasing power levels.'' 
The Commission accordingly sought comment regarding whether we should 
modify our regulations governing power limits for operations in rural 
areas, as a means of encouraging service to these areas. Specifically, 
the Commission asked whether current power limits should be increased 
for stations located in rural areas and licensed under parts 22, 24, 
27, 80, 87, 90, and 101 of our rules. The Commission also sought 
comment regarding the implementation of higher power limits, such as 
how to define ``rural area'' for purposes of increased power limits and 
whether, in the case of base/mobile systems, both the base and mobile 
stations must be located within a rural area. The Commission further 
acknowledged that there may be certain challenges in implementing 
increased power levels in rural areas and sought comment on how 
increased power might increase the potential for harmful interference 
to neighboring systems or otherwise limit the number of paths in a 
given area.
    84. Discussion. Based on the record in this proceeding, we believe 
that, in principle, increasing power limits in rural areas can benefit 
consumers in rural areas by reducing the costs of infrastructure and 
otherwise making the provision of spectrum-based services to rural 
areas more economic. When we balance this potential benefit, however, 
against the potential costs of harmful interference, we recognize that 
we must act carefully to ensure that increased power limits do not 
cause harmful interference for other licensees. After reviewing the 
record and evaluating the technical and operational rules for the 
various services at issue in this proceeding, we conclude that 
increasing cellular, PCS, and AWS power limits may provide measurable 
benefits without creating harmful interference for co-channel or 
adjacent licensees. As we discuss in the following paragraphs, we find 
that the current cellular, PCS, and AWS technical and coordination 
rules (with some modifications) will be sufficient to ensure that 
licensees are able to utilize increased power levels at certain base 
stations without causing harmful interference.
    85. Cellular. We amend our regulations governing the Cellular 
Radiotelephone Service and authorize increased power limits for 
cellular base stations that either: (1) Are located in counties with 
population densities of 100 persons or fewer per square mile, based 
upon the most recently available population statistics from the Bureau 
of the Census; or (2) extend coverage into cellular unserved areas, as 
those areas are defined in Sec.  22.949 of the Commission's rules. 
Specifically, we amend Sec.  22.913(a) of our rules to provide that the 
Effective Radiated Power (ERP) of such base transmitters must not 
exceed 1000 Watts. This power increase doubles permissible ERP for 
selected cellular base stations; prior to this amendment, Sec.  
22.913(a) provided that the ERP of base transmitters and cellular 
repeaters must not exceed 500 Watts. We recognize that a ``one size 
fits all'' approach to spectrum management is unlikely to yield optimal 
spectral efficiency and that, particularly in areas where there is less 
congestion or where other unique factors are present, it is appropriate 
to amend our operating parameters to afford licensees greater 
flexibility. As the Spectrum Policy Task Force noted, ``spectrum policy 
must evolve towards more flexible and market-oriented regulatory 
models,'' in order ``[t]o increase opportunities for technologically 
innovative and economically efficient spectrum use.'' Our action today 
is consistent with the recommendations of the Spectrum Policy Task 
Force, which advised that the Commission explore ways of promoting 
spectrum access and flexibility in rural areas, and stated that the 
Commission's interference and other technical rules should ``afford 
spectrum users the flexibility to operate at higher power in less 
congested areas, which are typically rural, so long as such higher 
power operations do not cause interference and do not receive 
additional interference protection.''
    86. We believe that this amendment of our regulations governing 
cellular power limits will promote coverage to rural areas by making it 
more

[[Page 75158]]

economical to provide service to these areas. As a result of this power 
increase, cellular licensees may be able to extend their coverage area 
and use fewer base stations, thereby lowering their infrastructure 
costs. Relaxed limits for licensed operations will provide much-needed 
relief to rural operators by substantially reducing the costs 
associated with construction of such systems.'' We estimate that 
increasing authorized base station power limits to 1,000 Watts ERP may 
increase the distance to the licensee's Service Area Boundary (SAB) by 
as much as 12.5 percent and may increase overall coverage area by as 
much as 26.6 percent. Consequently, we estimate that, as a result of 
this power increase, licensees may require up to 21 percent fewer cell 
sites to provide the same coverage with 1,000 Watts ERP as previously 
provided with 500 Watts ERP.
    87. We limit this power increase to cellular base stations that are 
located in rural areas or that are providing coverage to unserved 
areas. We define ``rural areas'' for purposes of increased power limits 
as counties with a population density of 100 persons per square mile or 
less. Specifically, permitting power increases in areas where the 
population density is 100 persons or less captures much of the 
geographic area where service is not provided by both the A- and B-
block cellular carriers (or, in some instances, by either cellular 
carrier). After conducting an analysis of current cellular licenses in 
the United States, we have determined that there are 625 counties that 
have some area that is not covered by the license of an A-block and/or 
B-block cellular provider. Of these 625 counties, 577 of these counties 
have a population density of 100 persons per square mile or less. As an 
additional matter, in order to promote cellular coverage to areas that 
lack cellular service but otherwise are not captured by this definition 
of ``rural area,'' we amend our rules to permit carriers to use higher 
power at base stations located in counties with a greater population 
density, provided those base stations are providing coverage to 
unserved areas, as defined by our rules. We also limit this power 
increase to cellular base stations more than 72 kilometers (45 miles) 
from the Mexican and Canadian borders, consistent with our current 
agreements with those countries.
    88. We note that some expressed concern that higher power limits 
might result in harmful interference to other licensees. We have 
carefully considered the concerns raised by commenters and believe that 
this limited amendment of our cellular rules will increase licensee 
flexibility without increasing the likelihood of harmful interference. 
Our regulations governing the provision of cellular service already 
contain specific safeguards that are designed to minimize the 
likelihood of harmful interference by clearly defining protected 
service areas for each cell site, and requiring licensee coordination 
near system boundaries. We find that applying these same requirements 
to higher power base stations will minimize the potential for harmful 
interference. Specifically, the Service Area Boundary (SAB) of each 
cellular base station is defined by a formula based on antenna height 
and transmitter power, and the formula's underlying assumptions are 
still valid for power levels up to 1000 Watts. Using the existing 
formula, the SAB distance for a particular base station will increase 
as the power level increases. However, because the rules prevent a base 
station SAB from overlapping other licensees' CGSAs, such power 
increases will only be permitted so long as they do not infringe upon 
other licensees' systems.
    89. As an additional safeguard, the Commission's rules currently 
provide that licensees must coordinate channel usage at each 
transmitter location within 75 miles of any transmitter locations 
authorized to other licensees or proposed by tentative selectees or 
other applicants. This requirement recognizes that the SAB/CGSA overlap 
restriction described above permits licensees to provide service 
quality signal levels up to the edge of another licensee's system 
boundary. While this approach facilitates seamless coverage for 
consumers, it requires careful coordination among neighboring licensees 
in order to avoid interference. For years licensees have been 
coordinating system frequency plans with one another in order to ensure 
high levels of service quality and seamless roaming along system 
boundaries. Going forward, we believe this coordination requirement 
will perform equally well in coordinating high power operations.
    90. Our decision here to authorize higher power levels for cellular 
licensees, subject to certain safeguards to protect other cellular 
services does not diminish in any way the obligations we impose today 
on cellular licensees in the 800 MHz Order to protect public safety and 
other non-cellular operations in the adjacent 800 MHz band from 
interference. See Improving Public Safety Communications in the 800 MHz 
Band Consolidating the 900 MHz Industrial/Land Transportation and 
Business Pool Channels, WT Docket No. 02-55, Report and Order, Fifth 
Report and Order, Fourth Memorandum Opinion and Order, and Order, FCC 
04-168 (rel. August 6, 2004) (800 MHz Order) published at 69 FR 67823 
(November 22, 2004). As explained in detail in the 800 MHz Order, we 
adopt a specific standard defining ``unacceptable interference'' to 
such operations in that band and require other licensees, including 
cellular licensees, to immediately take all steps necessary, including 
the implementation of Enhanced Best Practices, to abate such 
interference. Cellular licensees wishing to utilize the increased power 
levels authorized in this Order can do so only to the extent that they 
also remain in compliance with their 800 MHz Order obligations.
    91. Some have stated that increased power limits would not 
necessarily facilitate increased coverage due to handset limitations or 
other technical constraints. Although increasing the power of the 
handset might address this issue by increasing the mobile unit's 
ability to ``talk'' to the base station, we note that increasing such 
power could be problematic, in light of the fact that a handset is 
likely to be used in urban as well as rural areas and might introduce 
interference concerns if used in an urban setting. Accordingly, we find 
that there is no need to increase handset power limits at this time. We 
do not believe that increasing handset power is necessary, however, in 
order for cellular licensees to benefit from increased power limits. 
First, nearly all cellular phones on the market today operate at power 
levels well under the maximum permitted under our rules, which suggests 
that our regulations already permit sufficient handset power. Today's 
handsets generally utilize low power in order to comply with our RF 
safety rules and to extend battery life. Second, cellular licensees may 
overcome handset constraints by employing an external means of boosting 
the handset's signal, or by adding amplifiers at the base station to 
boost the received signal. For example, a cellular carrier may use an 
external amplifier or otherwise use a tower top amplifier at the base 
station. In any case, cellular technology continues to develop and we 
expect that technical limitations may diminish over time as technology 
evolves. Further, our action affords licensees with additional 
flexibility to take advantage of new technological advancements without 
being unduly constrained by Commission requirements.
    92. In addition, we note that some wireless carriers are 
considering the use of directional antennas to improve

[[Page 75159]]

network performance, and that such antennas have the potential to help 
improve communications in rural areas by achieving higher gain, 
mitigating the effects of multipath, improving frequency bandwidth 
performance, and providing better directional control over emissions. 
As such, directional handset antennas would provide improved reception 
quality at the cellular tower receiver, significant improvement of 
voice quality near the edge of a cell, potentially larger cell sites 
with fewer base stations, and lower power consumption in handsets, 
improving battery life. Although handsets that employ directional 
antennas may need to be slightly reoriented when used in certain 
locations, techniques such as antenna diversity are being considered to 
combat large-scale fading effects caused by shadowing from large 
obstacles (e.g., buildings or other terrain features). Because 
directional handset antennas have the potential to significantly 
increase the strength of signals transmitted from handsets, as well as 
provide efficiency benefits both to the wireless network and to battery 
life, there are several benefits that could be gained from their 
increased use in handsets. Importantly, directional handset antennas, 
coupled with an increase in base stations' transmitted power, have the 
potential to significantly improve wireless communications in many 
rural areas.
    93. Broadband PCS. Similar to our treatment of cellular above, we 
will provide for increased power limits for broadband PCS. 
Specifically, we increase power levels by 100 percent for broadband PCS 
base stations located in rural areas, in parity with the cellular power 
levels adopted in this proceeding. We note that broadband PCS power 
levels are tied to antenna heights, so that the authorized power for a 
given broadband PCS base station would vary, depending upon the 
accompanying antenna height. For example, a base station with an 
antenna with a height above average terrain (HAAT) of 300 meters or 
less may operate at a maximum of 1640 watts peak equivalent 
isotropically radiated power (EIRP). Thus, for base stations of 300 
meters or less in rural areas, we will allow an increase from 1640 to 
3280 watts EIRP.
    94. As with the modification of our cellular regulations, we 
believe that this modification of our PCS regulations will allow 
licensees to increase their coverage while using fewer base stations, 
thereby reducing the costs of providing service to rural areas. We 
estimate that permitting broadband PCS licensees to increase their 
power by 100 percent will increase the distance from the base station 
to the edge of their coverage area by 17 percent and will increase the 
overall coverage area by 36 percent. As a result, we estimate that a 
broadband PCS licensee using increased power will require 27 percent 
fewer sites in order to provide the same coverage provided using 
current power limits.
    95. We find that the current market-boundary signal strength limit, 
in conjunction with a coordination requirement, will minimize the 
potential for harmful interference among licensees. Currently, 
broadband PCS licensees cannot exceed a signal strength of 47 dB[mu]V/m 
at their geographic market-boundary unless neighboring licensees agree 
to a higher level. This means that, regardless of the location, height, 
or power level of broadband PCS base stations, the signal level at the 
market-boundary may not exceed this maximum level without mutual 
agreement. Therefore, we find that permitting a 100 percent increase in 
power levels at broadband PCS base stations will not increase the 
potential for harmful interference beyond what exists today. At the 
same time, we note that the 47 dB[mu]V/m limit is a ``service quality'' 
signal level that promotes coverage up to the edge of the market 
boundary, and seamless roaming across market boundaries in certain 
instances. In other words, although there is no formal coordination 
requirement, neighboring licensees must as a practical matter 
coordinate frequency plans and site locations along market boundaries 
in order to avoid interference. As a cautionary measure, we will 
require that licensees using higher power levels coordinate operations 
with all licensees within 75 miles of the relevant base station. This 
requirement will supplement the existing signal strength limit and 
underscore our intention that licensees must coordinate spectrum usage 
along common boundaries. We note that this power increase applies only 
to broadband PCS base stations, and not to mobile units. For the 
reasons stated above for the 800 MHz cellular service, we find that 
there is not reason to increase mobile power levels at this time.
    96. We also note that the Commission is taking steps to address 
interference concerns more generally and that these additional measures 
might protect other licensees from harmful interference. We are 
optimistic that these initiatives might effectively address 
interference concerns in a flexible manner and alleviate the need to 
impose detailed, service-specific coordination requirements.
    97. Finally, as we did with 800 MHz cellular, we limit this power 
increase to broadband PCS base stations located in counties with 
population densities of less than 100 persons per square mile and those 
located more than 75 miles from the Mexican and Canadian borders. As 
stated above, we find that a majority of areas likely to be unserved or 
underserved are located in such counties. Further, because our existing 
agreements with Mexico and Canada are based on the prior maximum power 
limits, we retain those limits for border areas.
    98. AWS. In 2003, the Commission adopted the PCS power limit of 
1640 watt EIRP for AWS base stations. See Service Rules for Advanced 
Wireless Services in the 1.7 GHz and 2.1 GHz Bands, WT Docket No. 02-
353, Report and Order, 69 FR 5711 (February 6, 2004) (AWS Report and 
Order). The Commission noted, however, that the Rural NPRM had proposed 
an increase in the power limit for PCS operations in rural areas and 
indicated that, in the event we adopted higher power limits for PCS 
services, we would ``explore the possibility of similar power increases 
for AWS.'' Thus, similar to our treatment of cellular and broadband PCS 
above, we will provide for increased power limits for AWS. 
Specifically, we increase power levels for AWS base stations located in 
rural areas by 100 percent, or up to 3280 watts EIRP in parity with the 
cellular and broadband PCS power levels adopted in this proceeding.
    99. As with the modification of our cellular and broadband PCS 
regulations, we believe that this modification of our AWS regulations 
will allow licensees to increase their coverage while using fewer base 
stations, thereby reducing the costs of providing service to rural 
areas. We estimate that increasing authorized base station power limits 
to 3280 Watts EIRP may increase the distance to the licensee's edge of 
coverage by as much as 17 percent and may increase overall coverage 
area by as much as 36 percent. Consequently, we estimate that, as a 
result of this power increase, licensees may require up to 27 percent 
fewer cell sites to provide the same coverage with 3,280 Watts EIRP as 
previously provided with 1640 Watts EIRP. We estimate that permitting 
AWS licensees to increase their power by 100 percent will increase the 
distance from the base station to the edge of their coverage area in an 
amount similar to broadband PCS, thereby requiring fewer sites in order 
to provide the same

[[Page 75160]]

coverage provided using current power limits.
    100. As with broadband PCS, we find that the current market-
boundary signal strength limit, in conjunction with a coordination 
requirement, will minimize the potential for harmful interference among 
AWS licensees, and licensees in neighboring bands. Therefore, as a 
cautionary measure, we will require that licensees using higher power 
levels coordinate operations with all affected licensees within 75 
miles of the relevant base station and with certain satellite entities. 
As with broadband PCS, this requirement will supplement the existing 
signal strength limit and underscore our intention that licensees must 
coordinate spectrum usage along common boundaries. At present, AWS 
licensees already must coordinate with nearby, incumbent co-channel and 
adjacent channel Part 101 and MDS licensees. Due to concern about the 
possibility of both out-of-band emission (OOBE) and receiver overload 
interference from AWS base stations to BAS and CARS operations, the 
Commission also has decided that AWS licensees must coordinate their 
operations with affected BAS and CARS licensees. In addition to these 
existing coordination requirements, higher power AWS operations must 
also be coordinated with adjacent channel AWS licensees, Part 21 MDS 
licensees operating above 2155 MHz, as well as all Government and non-
Government satellite entities operating in the 2025-2110 MHz band.
    101. We note that this power increase applies only to AWS base 
stations, and not to mobile units. For the reasons stated above for the 
800 MHz cellular service, we find that there is not reason to increase 
mobile power levels at this time. Finally, as we did with broadband 
PCS, we limit this power increase to AWS base stations located in 
counties with population densities of less than 100 persons per square 
mile. As stated above, we find that a majority of areas likely to be 
unserved or underserved are located in such counties.
    102. Other Radio Services. At this time we will not adopt increased 
power levels in other radio services. We also decline to modify power 
levels for: (1) 2.3 GHz WCS facilities; or (2) licensed terrestrial 
services that operate in frequency bands that are shared by satellite 
services.
    103. We also decline the request of one commenter that the 
Commission adopt higher power limits and increased operating parameters 
for the Multichannel Video Distribution and Data Service (MVDDS). 
First, the Commission expressly excluded MVDDS stations licensed under 
Part 101 from the scope of its power limits inquiry, noting that the 
Commission recently increased power levels for all MVDDS stations in a 
separate proceeding. Second, that commenter's request constitutes a 
late-filed petition for reconsideration of this prior Commission 
action. Furthermore, we decline to take any action with respect to 
unlicensed services in this proceeding. We will incorporate comments 
addressing power limits for unlicensed services into the record of the 
Cognitive Radio NPRM and will respond to these comments in the context 
of that proceeding.
    104. In conclusion, we decline to adopt increased power limits for 
any of the other radio services for which we sought comment in the 
Rural NPRM, due to lack of support in the record. We note, however, 
that licensees in these services may file a request for waiver of these 
power limits. We will entertain waiver requests on a case-by-case 
basis. Any such waiver request should demonstrate how a waiver of our 
power limits will promote the public interest. In addition, licensees 
seeking to obtain a waiver of our power limits must adequately address 
any potential interference concerns that may arise as a result of such 
increased power.
3. Infrastructure Sharing
    105. Background. The Rural NPRM sought comment on whether 
clarifying the Commission's policy on infrastructure sharing may 
promote service in rural markets. The Commission also stated that 
certain carriers in the United States have entered into sharing 
arrangements, and sought comment on the extent to which infrastructure 
sharing would promote service in rural areas and on the costs and 
benefits associated with such arrangements in the context of 
competition. Infrastructure sharing offers the potential for wireless 
service providers to share facilities and other infrastructure in order 
to provide spectrum-based services on a more cost-effective basis, 
including service to rural areas. A key objective underlying such 
arrangements is the possible reduction in costs of capital construction 
in rural areas, and the creation of opportunities for enhanced and 
expanded coverage. A number of infrastructure sharing arrangements have 
been entered into in the United States, and some of the parties to such 
transactions have claimed that these lead to lower costs associated 
with expanded geographic coverage. Generally, because there are fewer 
providers in rural areas than in more populated areas, infrastructure 
sharing may permit more providers to operate in rural areas and thus 
encourage more competitors to enter those markets.
    106. As noted in the Rural NPRM, infrastructure sharing includes 
sharing of infrastructure-related equipment, including antennas, 
towers, and network elements such as switches and nodes. Commission 
rules and policies, including our environmental rules, have enabled the 
sharing of towers and other antenna support structures for the 
provision of spectrum based services by multiple service providers. 
Moreover, the Commission has both facilitated and encouraged the 
collocation of antennas on existing towers. Existing operators have 
taken advantage of these policies to enter into tower sharing 
arrangements. Indeed, some companies have made a business of 
constructing and maintaining towers on which multiple licensees can 
locate their transmitters and receivers.
    107. In addition to these infrastructure sharing arrangements, 
parties may also be able to expand or improve service to rural areas 
through spectrum leasing arrangements--whereby licensees in effect 
share the use of their licensed spectrum with spectrum lessees--under 
the policies, rules, and procedures established in the Secondary 
Markets proceeding. In the Secondary Markets Report and Order, the 
Commission established policies and rules to enable spectrum users in 
most wireless radio services to gain access to licensed spectrum by 
entering into different types of spectrum leasing arrangements with 
licensees, and streamlined its approval procedures for license 
assignments and transfers of control. Also, in the Secondary Markets 
Second Report and Order, we clarified that spectrum leasing parties may 
enter into a variety of dynamic leasing arrangements in which licensees 
and spectrum lessees share the use of the same licensed spectrum.
    108. Depending on their structure, infrastructure sharing 
arrangements may raise transfer of control considerations under section 
310(d) of the Communications Act, as amended. Under that statute, prior 
Commission approval is required to transfer control of or assign 
licenses (or parts of licenses, where permitted) to third parties. For 
many licensees in the wireless radio services, the Commission has 
interpreted section 310(d) de facto control requirements pursuant to 
its Intermountain Microwave decision, which focuses on whether the 
licensee, as opposed to an unlicensed third party, exercises close 
working control over different aspects of the operation of the

[[Page 75161]]

station facilities that use the spectrum. See Nonbroadcast and General 
Action Report No. 1142, (Intermountain Microwave Public Notice), 12 FCC 
2d 559 (February 6, 1963). Specifically, the Commission applied six 
factors for determining who has de facto control by examining whether a 
licensee: (1) Has unfettered use of all station facilities and 
equipment; (2) controls daily operations; (3) determines and carries 
out the policy decisions (including preparation and filing of 
applications with the Commission); (4) is in charge of employment, 
supervision and dismissal of personnel operating the facilities; (5) is 
in charge of the payment of financial obligations, including expenses 
arising out of operations; and (6) receives the monies and profits from 
the operation of the facilities. Under Intermountain Microwave, the 
Commission has interpreted section 310(d) de facto control to require 
that the licensees exercise close working control of both the actual 
facilities/equipment operating the radiofrequency (RF) energy and the 
policy decisions, e.g., business decisions, regarding use of the 
spectrum.
    109. In its Secondary Markets Report and Order, the Commission 
determined that, in the context of spectrum leasing, it would replace 
the Intermountain Microwave standard with a more flexible standard for 
determining whether there has been a transfer of de facto control under 
section 310(d). Under the new de facto control standard adopted in that 
proceeding, we no longer require that, when leasing spectrum, licensees 
exercise close working control over station facilities, determine the 
services that are provided, or set the policies affecting the 
station(s) operating with the spectrum licensed to them under their 
authorizations. Instead, the Commission determined that licensees in 
applicable wireless services may lease spectrum usage rights to 
spectrum lessees, without the need for prior Commission approval, so 
long as the licensee continues to exercise effective working control 
over the use of the spectrum it leases.
    110. The Rural NPRM stated that, where infrastructure sharing 
arrangements do not involve a transfer of control of licensed spectrum 
usage rights under section 310(d), Commission review is not required, 
but that infrastructure sharing arrangements that involve a transfer of 
control under section 310(d) require Commission review. The Commission 
noted that in the Secondary Markets proceeding it has streamlined the 
transfer of control and assignment process, and sought comment in the 
Rural NPRM on whether other steps may be taken that could further 
streamline this process. Comment was sought on the factors to consider 
in evaluating infrastructure sharing arrangements that require section 
310(d) approval in order to effectively balance competition among 
providers and expanded coverage in rural areas.
    111. Discussion. We believe that infrastructure sharing offers the 
potential for benefits to both providers and consumers. Infrastructure 
sharing should be encouraged because of the potential for savings in 
capital costs for construction of facilities necessary to deploy 
wireless services, and for the improved or enhanced coverage in rural 
and other areas that otherwise may not be economical for providers to 
offer without some form of sharing. As we observed in the Rural NPRM, 
infrastructure sharing arrangements have been considered in both the 
United States and in Europe, with apparently favorable results. The 
actions we take today seek to further encourage beneficial 
infrastructure sharing arrangements.
    112. We determine in this Report and Order that a revised de facto 
control standard, different from the de facto control standard under 
Intermountain Microwave, should be extended to infrastructure sharing 
arrangements that only involve the sharing of facilities such as 
physical structures and equipment. Specifically, the revised de facto 
control standard for spectrum leasing in Secondary Markets shall apply 
for interpreting whether a licensee retains de facto control for 
purposes of section 310(d) when it is engaged in an infrastructure 
sharing arrangement. We believe that this policy will encourage the 
development of arrangements that potentially reduce costs for providers 
and improve coverage in rural areas. We note, however, that to the 
extent that licensees are sharing spectrum usage rights with third 
parties under spectrum leasing arrangements, such arrangements will be 
subject to the policies, rules, and procedures set forth in the 
Commission's Secondary Markets proceeding in WT Docket No. 00-230.
    113. The Commission stated in the Secondary Markets Report and 
Order that revision of the de facto transfer of control test ``may be 
warranted as the public's interests and needs change and the nature of 
a service evolves.'' The Commission further stated that ``continuing to 
focus on one type of control (e.g., control over facilities) may no 
longer constitute the best way to further the complex and sometimes 
competing public interest goals of today.'' The ``sea change'' that has 
taken place in the regulatory and technological environment for 
wireless services was addressed by the Commission, which identified 
some of the actions it has taken to promote innovative policies that 
seek to increase communications capacity and efficiency of spectrum 
use, and to make spectrum available for new uses and users.
    114. There have been significant changes in the communications 
industry since the Intermountain Microwave de facto standard was 
established over 40 years ago, including the rise of new technologies 
for the industry and the Commission's increasing efforts to afford 
quick and effective means for parties to adapt to markets and to the 
needs of consumers. Under these circumstances, we no longer believe 
that it is necessary to continue to require that a licensee exercise 
immediate direct control over every facility that may be operating in 
connection with the provision of services using its spectrum. 
Accordingly, we will apply the more flexible de facto control standard 
set forth in the Secondary Markets Report and Order when interpreting 
whether a licensee (or spectrum lessee) retains de facto control for 
purposes of section 310(d) when it is engaged in an infrastructure 
sharing arrangement involving facilities only. Under this standard, the 
licensee (or spectrum lessee) remains responsible for ensuring 
compliance with the Communications Act and all applicable policies and 
rules. This responsibility includes maintaining reasonable operational 
oversight with respect to any activities relating to the infrastructure 
sharing arrangement so as to ensure that the operator of the facilities 
complies with all applicable technical and service rules, including 
safety guidelines relating to radiofrequency radiation. In addition, 
the licensee must retain responsibility for meeting all applicable 
frequency coordination obligations and resolving interference-related 
matters, and must retain the right to inspect the facility operations 
and to terminate the infrastructure sharing arrangement to ensure 
compliance.
    115. The Commission retains the ability to investigate and 
terminate any infrastructure sharing arrangement to the extent it 
determines that the arrangement constitutes an unauthorized transfer of 
de facto control under our new standard.
    116. Our elimination of the Intermountain Microwave de facto 
control standard with respect to infrastructure sharing arrangements

[[Page 75162]]

generally, however, in no way affects the application of our rules to 
determine eligibility for designated entity and entrepreneur licensee 
status. A designated entity or entrepreneur licensee will be permitted 
to enter into an infrastructure sharing arrangement, without 
application of our unjust enrichment rules and transfer restrictions, 
only so long as the arrangement does not result in another entity's 
becoming a controlling interest or affiliate of the licensee, such that 
the licensee would no longer meet our eligibility requirements for 
designated entity or entrepreneur benefits. For these determinations, 
our existing attribution rules, including our definitions of 
controlling interest and affiliation (which incorporate the 
Intermountain Microwave principles of de facto control), will continue 
to control. However, in determinations involving infrastructure sharing 
arrangements, our attribution rules will be applied in the same manner 
in which, as we clarified in the Secondary Markets Report and Order, 
they are to be applied in determinations involving spectrum manager 
leasing arrangements. We expect each designated entity or entrepreneur 
licensee contemplating entering into an infrastructure sharing 
arrangement to analyze in advance whether such an arrangement would 
adversely affect the licensee's ongoing eligibility for size-based 
benefits.
    117. The assessment of potential competitive effects of 
transactions, whether they are transfers of control, license 
assignments, or infrastructure sharing arrangements, remains an 
important element of our policies to promote facilities-based 
competition and guard against the harmful effects of anticompetitive 
conduct. We believe that our encouragement of infrastructure sharing 
arrangements as potentially effective means to promote the provision of 
spectrum based services to rural areas is consistent with our 
consideration of competitive effects and potential competitive harm. 
Providers and consumers may be in a position to benefit from the 
potential for lower capital costs for facilities and improved coverage.
    118. One commenter expressed concern that interference issues 
similar to those that have been raised in other proceedings may result 
from infrastructure sharing arrangements, particularly with respect to 
the potential for interference that may result from the collocation of 
antennas. Licensees that are parties to infrastructure sharing 
arrangements will be responsible for resolving all interference-related 
matters that may result from such arrangements in a manner consistent 
with the Commission's interference-based service rules. Our 
notification requirement that we adopt here also helps us to ensure 
that licensees and non-licensee parties to an arrangement are complying 
with our interference and non-interference related policies and rules.
    119. Potential Barriers to Infrastructure Sharing. A number of 
comments request that the Commission act to remove impediments to 
infrastructure sharing at the state and local level, particularly as 
they relate to tower siting. The Commission is asked to form a national 
policy that would seek to remove these barriers and establish direction 
for state and local authorities to establish clear and consistent 
siting policies. Some comments ask generally that the Commission 
preempt state and local regulations that block the deployment of 
services in rural areas.
    120. Section 332(c)(7) of the Act preserves state and local 
authority over zoning and land use decisions for personal wireless 
service facilities, but also limits that authority. The limitations 
include that state or local governments may not unreasonably 
discriminate among providers of functionally equivalent services, and 
may not regulate in a manner that prohibits or has the effect of 
prohibiting the provision of personal wireless services. A state or 
local government also must act on applications within a reasonable 
period of time, and must make any denial of an application in writing 
supported by substantial evidence in a written record. The statute also 
preempts state and local decisions to regulate the placement, 
construction, and modification of personal wireless service facilities 
on the basis of the environmental effects of radio frequency (RF) 
emissions to the extent the facilities comply with the Commission's RF 
rules.
    121. We encourage state and local authorities, when considering 
requests to deploy wireless facilities and when establishing facilities 
siting policies, to consider the impacts of their decisions on the 
availability of competitive wireless service. We note some localities 
have imposed tower siting requirements that make both initial 
construction and subsequent sharing of facilities difficult. We believe 
that state and local governments should consider measures that would 
reduce regulatory burdens for those projects that are least likely to 
implicate local land use concerns, while retaining reasonable review 
processes for proposals that are more likely to have significant 
effects. In this regard, the Commission and its former Local and State 
Government Advisory Committee (LSGAC) have provided guidance to state 
and local authorities to assist them in devising efficient procedures 
for verifying that antenna facilities comply with the Commission's RF 
exposure guidelines. We will consider offering similar guidance in the 
future in response to specific needs.
    122. With respect to preemption, as discussed above, section 
332(c)(7) of the Communications Act of 1934 as amended, generally 
preserves local authority over land use decisions, and limits the 
Commission's authority in this area. In appropriate cases, the 
Commission or its Bureaus have considered petitions alleging that 
particular regulations impinge on areas within the Commission's 
exclusive jurisdiction. We will continue to address such issues in the 
future where supported by law.
    123. Finally, we note that we have taken action to improve our own 
rules and procedures respecting other tower siting issues, including 
those relating to our environmental review, in order to facilitate the 
timely deployment of wireless services. We will continue to consider 
further improvements in the future where necessary.
4. Rural Radiotelephone Service/Basic Exchange Telecommunications Radio 
Service
    124. Background. In the Rural NPRM, the Commission sought comment 
on several issues related to the current use and demand for service in 
the Rural Radiotelephone Service (RRS) and the Basic Exchange 
Telecommunications Radio Service (BETRS). Additionally, the Commission 
sought comment on whether its current rules and policies for RRS and 
BETRS are limiting factors towards a more expansive use of these 
services. As indicated in the Rural NPRM, RRS was established to 
provide, in most instances, basic telephone service to subscribers in 
locations deemed so remote that traditional wireline service or service 
by other means is not feasible. BETRS is a digital counterpart to the 
traditional, analog RRS, and can be characterized as more spectrally 
efficient than RRS, provides private calling, and has a much lower call 
blocking rate than RRS. All RRS and BETRS authorizations are issued on 
a secondary, non-interfering basis.
    125. Specifically, in the Rural NPRM, the Commission sought comment 
on the current level of demand for RRS and BETRS and noted that 
according to its licensing records, a relatively low number of licenses 
have been issued for the spectrum. In addition, the

[[Page 75163]]

Commission sought comment on the demand for basic communications 
services, other than wireline, and inquired about how the demand is 
being met if it is not through the use of RRS and BETRS spectrum. 
Furthermore, the Commission sought comment on whether access to RRS and 
BETRS spectrum is an impediment to the provision of these services, if 
a demand exists.
    126. With respect to current policies and rules, the Commission 
sought comment on the proposal to remove the eligibility restriction 
for BETRS that restricts the issuance of a license to only those 
entities that receive state approval to provide a basic exchange 
telephone service. The Commission also sought comment on whether 
expanding the secondary status of RRS and BETRS to other spectrum bands 
would facilitate and encourage construction in rural areas. Finally, 
the Commission sought comment on whether additional spectrum, issued on 
a primary basis, is needed at this time for RRS and BETRS.
    127. Discussion. We conclude that it is appropriate to remove the 
eligibility restrictions contained within Sec.  22.702 of our rules 
regarding state approval prior to the issuance of a BETRS license. 
Although no comments were received regarding this specific proposal, we 
believe the removal of this restriction is in the public interest. As 
it stands now, a potential BETRS licensee must demonstrate that it has 
received state approval to provide basic exchange telephone service 
prior to applying for a BETRS license. We believe by eliminating this 
restriction, a potential regulatory barrier is removed and the process 
for gaining access to BETRS spectrum is simplified and expedited. 
Nonetheless, we retain the current requirement that a BETRS station 
must be constructed within 12 months of the issuance of a license, 
therefore minimizing the potential for warehousing spectrum in those 
instances where a BETRS licensee does not receive state approval, where 
required, to provide basic exchange telephone service.
    128. The Commission consolidated into the instant proceeding two 
petitions that seek reconsideration of its decision in the Spectrum Cap 
Sunset Order. 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 portion 
of the Spectrum Cap Sunset Order that retained the cellular cross-
interest rule in RSAs. See Petitions for Reconsideration of Action in 
Rulemaking Proceeding, 67 FR 13183 (March 21, 2002). For the 
Commission's discussion and disposition of those two petitions see 
paragraphs 58 through 70 above and paragraph 182 below.

IV. Procedural Matters

    129. As required by the Regulatory Flexibility Act (RFA), an 
Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the 
Notice of Proposed Rulemaking in WT Docket Nos. 02-381, 01-14, and 03-
202, released October 6, 2003. The Commission sought written public 
comment on the proposals in the Rural NPRM, including comment on the 
IRFA. This Final Regulatory Flexibility Analysis (FRFA) conforms to the 
RFA.

A. Need for, and Objectives of, the Report and Order

    130. We adopt several measures, as indicated below, intended to 
increase the ability of wireless service providers to use licensed 
spectrum resources flexibly and efficiently to offer a variety of 
services in a cost-effective manner. The Commission takes steps to 
promote access to spectrum and facilitate capital formation for 
entities seeking to serve rural areas or improve service in rural 
areas. We expect that these decisions will facilitate the deployment of 
new and advanced wireless services, including broadband services, and 
thereby foster much-needed economic development.
    131. Definition of ``rural area''. We establish the presumption 
that, unless otherwise specified in the context of specific policies or 
regulations governing wireless communications services, counties with a 
population density of 100 persons or less per square mile constitute 
``rural areas'' for purposes of the Commission's wireless spectrum 
policies.
    132. Size of geographic service areas and re-licensing issues. We 
examine Commission policies affecting access to spectrum and the 
provision of service in rural areas. In particular, the Commission 
considers its policies governing the licensing of spectrum, both with 
respect to initial licensing through the competitive bidding process, 
as well as subsequent re-licensing after an authorization is returned 
to the Commission. Specifically, the Report and Order affirms that the 
Commission will continue to establish licensing areas on a service-by-
service (or band-by-band) basis as appropriate, based upon the 
flexibility that such an approach provides and our past experience in 
determining the initial size of service areas. The Commission also 
reaffirms that when developing rules for licensing individual services 
in the future, it will consider using smaller service areas in some 
spectrum blocks to encourage deployment in rural areas for the service 
in question.
    133. Cellular cross-interest rule and conditional security 
interests to RUS. We also take the following steps to facilitate 
increased access to capital for rural licensees, and eliminate the 
remaining components of the cellular cross-interest rule that currently 
apply only in Rural Service Area (RSA) markets and transitions to case-
by-case review for cellular transactions, while closely examining those 
that present a significant likelihood of substantial competitive harm 
in a market. The Commission also revises the policies governing 
security interests in wireless licenses by permitting licensees, at 
their discretion, to grant such interests to the Department of 
Agriculture's Rural Utilities Service (RUS).
    134. Increase of power limits for certain services. We amend the 
Commission's regulations to increase permissible power levels for base 
stations in certain wireless services that are located in rural areas 
or that provide coverage to otherwise unserved areas. In doing so, the 
Commission anticipates that coverage of such areas will be more 
economical, as licensees may provide increased coverage of rural areas 
using fewer base stations and less associated infrastructure. The 
Commission believes these actions will increase licensee flexibility 
and permit more cost-effective coverage of rural areas.
    135. Substantial service construction requirement. We also amend 
regulations to permit certain geographic-area licensees to provide 
substantial service as a means of complying with their construction 
requirements, thus countering existing disincentives to build out less 
densely populated areas.
    136. Infrastructure sharing. Finally, we conclude that the revised 
de facto control standard for spectrum leasing adopted in the 
Commission's Secondary Markets proceeding generally shall apply for 
interpreting whether a licensee retains de facto control for purposes 
of section 310(d) of the Communications Act when it is engaged in an 
infrastructure sharing arrangement.

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

    137. We received no comments in response to the IRFA. However, as 
described below, we have nonetheless considered potential significant

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economic impacts of our actions on small entities.

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

    138. The RFA directs agencies to provide a description of, and 
where feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. 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).
    139. 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 12 of these firms were 
cellular telephone companies, nearly all cellular carriers are small 
businesses under the SBA's definition.
    140. 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 12 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.
    141. 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. For this service in 1997, 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.
    142. 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 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.
    143. Upper 700 MHz Band Licenses. In 2001, the Commission 
authorized service in the upper 700 MHz band. The related auction, 
previously scheduled for January 13, 2003, has been postponed.
    144. Paging. In 1997, 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 EA licenses commenced on October 30, 2001, and 
closed on December 5, 2001. Of the 15,514 licenses auctioned, 5,323 
were sold. One-hundred thirty-two 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

[[Page 75165]]

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.
    145. 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.
    146. 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 41 licenses, 11 of which were 
obtained by four small businesses. To ensure meaningful participation 
by small business entities in future auctions, the Commission in 2000 
for this service adopted a two-tiered small business size standard. 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. A fourth auction commenced on September 24, 2003 
and closed on September 29, 2003. Here, four bidders won 48 licenses. 
Four of these claimed status as a very small entity and won 48 
licenses. Finally, a fifth auction commenced on September 24, 2003 and 
closed on September 25, 2003. Here, one bidder won five licenses. That 
bidder claimed status as a very small entity.
    147. Specialized Mobile Radio (SMR). The Commission awards ``small 
entity'' bidding credits in auctions for 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.
    148. 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.
    149. 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 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.
    150. 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 PLMR 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.
    151. 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

[[Page 75166]]

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.
    152. 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 FRFA, 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.
    153. 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.
    154. 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.
    155. 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.
    156. 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. For 
this service in 1999, 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 assume 
for purposes of this FRFA that in future auctions, many, and perhaps 
all, of the licenses may be awarded to small businesses.
    157. 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.
    158. 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.
    159. 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 10 licensees in the Air-Ground Radiotelephone Service, 
and the Commission estimates that almost all of them qualify as small 
entities under the SBA definition.

[[Page 75167]]

    160. 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 
FRFA, that all of the 55 licensees are small entities, as that term is 
defined by the SBA.
    161. 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.
    162. 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.
    163. 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.
    164. 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.
    165. 700 MHz Guard Band Licenses. For this service in 2000, 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 
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.
    166. 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 Rural NPRM.

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

    167. With respect to the cellular cross-interest rule, in the event 
that a party with a controlling or otherwise attributable interest in 
one cellular licensee within an RSA obtains a non-controlling interest 
of more than 10 percent in the other cellular carrier, the Commission 
will require that the cellular licensee file a notification with the 
Commission that will include updated ownership information (FCC Form 
602) to reflect this investment. This notification requirement will 
sunset at the earlier of: (1) Five years after the effective date of 
this item, or (2) at the cellular licensee's specific renewal deadline.

[[Page 75168]]

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

    168. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities.
    169. We adopt several measures intended to increase the ability of 
wireless service providers to use licensed spectrum resources flexibly 
and efficiently to offer a variety of services in a cost-effective 
manner. The Commission also takes steps to promote access to spectrum 
and facilitate capital formation for entities, including small 
entities, seeking to serve rural areas or improve service in rural 
areas. As explained infra, the actions set forth in this Report and 
Order are consistent with the RFA. Given that many carriers serving or 
seeking to serve rural areas may be considered small entities for FRFA 
purposes, the steps taken in this Report and Order will aid such 
entities.
    170. Definition of ``rural area''. We establish a baseline 
definition of ``rural area'' that includes those counties (or the 
equivalent) with a population density of 100 persons or less per square 
mile. While some supported alternative plans such as defining ``rural 
areas'' as any area within an RSA or refraining from adopting new 
definitions at all, we rejected these alternatives because it believes 
its county- and population-based definition provides an appropriate 
practical guideline for carriers, including carriers qualifying as 
small entities, which serve or seek to serve rural areas. We believe 
the ``100 persons or less'' definition best serves the Commission's 
goals both in ease of the definition's administration and its 
foundation in widely available population data. Further, by treating 
the designation not as a uniform definition but rather as a presumption 
that will apply only to Commission proceedings for which the term 
``rural area'' has not been expressly defined, the Commission can 
maintain continuity and avoid confusion with respect to definitions of 
``rural'' already in existence for specific policies.
    171. Size of geographic service areas. We conclude that maintaining 
the flexibility to establish geographic areas on a service-by-service 
basis and promoting the use of a variety of service areas, including 
small areas such as MSAs/RSAs, are in the public interest. Some 
commenters made an alternative proposal that the Commission should 
mandate that small markets such as RSAs are available in every future 
auction in order to ensure that small carriers are able to acquire 
licenses at auction. We also received a variety of suggestions on the 
appropriate size of geographic areas, ranging from a belief that all 
licenses should be based on MSAs/RSAs to the recommendation of even 
smaller areas based on counties. We rejects those alternatives, 
concluding that service area size should not be determined by a bright-
line rule as some suggest but rather on service-by-service basis so 
that the Commission can evaluate all factors relevant to the types of 
spectrum being licensed.
    172. When determining the scope of geographic licenses, we 
generally consider a number of factors, including the size for each 
area or areas that will be licensed; the amount of spectrum to be 
available under each license and whether there should be paired 
spectrum blocks available for auction. We have designated various sizes 
of geographic service areas, including smaller market sizes, in order 
to encourage participation in spectrum auctions and to facilitate 
deployment of wireless services. Our service-specific approach ensures 
flexibility while providing an opportunity for spectrum to be made 
available over small areas such as MSAs or RSAs depending on the record 
and other considerations relevant to the specific spectrum. This in 
turn increases the likelihood of service to rural markets by all 
carriers, including small entities.
    173. Re-licensing issues. In this document, we conclude that 
because secondary markets rules and policies are aimed at improving 
access to spectrum in an efficient manner for all carriers, including 
small entities, and we therefore would not revise any of its specific 
re-licensing policies at this time. Before reaching this conclusion, we 
sought comment on when, and under what circumstances, we should apply 
re-licensing provisions to prospective spectrum designations in order 
to evaluate mechanisms that it could employ in the future that would 
potentially increase service by making spectrum available to those 
seeking to serve a given area, particularly if the area is rural in 
nature. We sought comment on a number of different re-licensing 
mechanisms that could result in increased access to spectrum, including 
a ``keep what you use'' approach, a ``complete forfeiture'' approach, 
and geographic overlays. In reaching our decision, we fully considered 
but rejected, at this time, the ``keep what you use'' re-licensing 
approach in the context of future band designations. We indicated that, 
after being given time to mature and take effect, if the secondary 
markets rules and policies do not provide sufficient incentives to 
increase spectrum access in rural areas, we would support future 
consideration of ``keep what you use'' approaches in the context of 
specific service rulemakings for new licensed services.
    174. Cellular cross-interest rule. We eliminate the remaining 
components of the cellular cross-interest rule that currently apply 
only in RSAs and transitions to case-by-case review for cellular 
transactions. To facilitate additional access to capital by cellular 
carriers in rural areas, the Commission, before adopting this new rule, 
sought comment regarding whether the prohibition against cellular 
cross-interests in all RSAs remains in the public interest and whether 
the current cross-interest rule should be retained in RSAs with three 
or fewer CMRS competitors. Alternatively, we sought comment on whether 
to eliminate the prohibition for all RSAs where the ownership interest 
being obtained 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, however, rejected these 
alternatives and found that elimination of the cellular cross-interest 
rule and reliance on a uniform case-by-case review process for all 
aggregations of spectrum and potentially anticompetitive cellular 
cross-interests in RSAs is currently the better approach as compared to 
the old, prophylactic limits. We believe that modification of the rule 
is necessary to better encourage more transactions and levels of 
financing that are in the public interest while still maintaining much 
of the protection afforded by the cellular cross-interest rule. We 
recognize that the approach limiting cross-interests in RSAs, as well 
as the proposal to eliminate the rule only in counties with more than 
three competitors, may interfere with investment in rural areas by 
discouraging certain financing in the RSA portions of a regional market 
but not in the MSA portions. We believe that elimination of the 
cellular cross-interest rule will provide greater

[[Page 75169]]

flexibility to all carriers, including small entities.
    175. Conditional security interests to RUS. We relax our security 
interest policy to permit commercial and private wireless, terrestrial-
based licensees to grant RUS a conditional security interest in their 
FCC licenses. We believe this action will significantly increase the 
financing opportunities for all licensees, including those classified 
as small entities, by increasing the value of their available 
collateral. Although one commenter suggested in the alternative that 
permitting RUS to obtain a security interest in an FCC license would 
make the RUS lending process more onerous, the Commission rejected this 
idea and believes that its new policy will enhance RUS loan 
opportunities. We believe that allowing FCC licenses to be used as 
collateral will serve the public interest by facilitating licensees' 
access to capital. In doing so, the policy will provide increased 
flexibility for all licensees, including small entities, seeking to 
expand into rural areas.
    176. Increase of power limits for certain services. We amend our 
regulations to increase cellular, PCS, and AWS power limits in rural 
areas as a means of encouraging service to these areas. In doing so, 
the Commission evaluated the technical and operations rules for the 
various services at issue and found that increasing power limits may 
provide measurable benefits without creating harmful interference. 
Although it considered and alternative proposal to adopt such 
flexibility for other services in addition to cellular, PCS, and AWS, 
we rejected this alternative due to lack of support in the record. 
However, licensees in other services may file a request for waiver of 
service-specific power limits.
    177. Substantial service construction requirement. We amend our 
regulations to provide a substantial service construction benchmark for 
the following licensees: 30 MHz broadband PCS licensees; 800 MHz SMR 
licensees (blocks A, B, and C); certain 220 MHz licensees; LMS 
licensees; and 700 MHz public safety licensees. These licensees now 
have the option of satisfying their construction requirements by 
providing substantial service or by complying with other service-
specific construction benchmarks already available to them under the 
Commission's rules. As part of the amendments and in order to provide 
licensees with guidance, we adopt safe harbors for providing 
substantial service to rural areas: A licensee will be deemed to have 
met the substantial service requirement if it provides coverage to at 
least 75 percent of the geographic area of at least 20 percent of the 
``rural areas'' within its licensed area. With respect to fixed 
wireless services, the substantial service requirement is met if a 
licensee constructs at least one end of a permanent link in at least 20 
percent of the number of ``rural areas'' within its licensed area.
    178. We implement this rule change in order to increase licensees' 
flexibility to develop rural-focused business plans and to allow all 
licensees, including small entities, to deploy spectrum-based services 
in more sparsely populated areas without being bound to concrete 
population or geographic coverage requirements. Certain commenters 
urged the adoption of a substantial service standard only for those 
licensees with ``small geographic territories.'' We rejected this 
alternative, stating that it would only result in focused coverage of 
populated areas instead of more rural areas. We also rejected proposals 
for a ``very rural area'' safe harbor or to modify safe harbors to 
include a population component. We noted that several commenters 
proposed as an alternative that a population component be included to 
make the safe harbor more meaningful for licensees whose licensed areas 
include counties with large land areas. These commenters argued that in 
such circumstances, it may be easier for a licensee to satisfy 
population requirements instead of the substantial service safe harbor. 
In rejecting these alternatives, we've stated that the safe harbors are 
not intended to be the only means of providing substantial service, and 
that we will take into consideration a situation in which a licensee is 
serving a ``very rural area'' or a very large geographic area.
    179. Infrastructure sharing. We adopt a more flexible de facto 
control standard when interpreting whether a licensee (or spectrum 
lessee) retains de facto control for purposes of section 310(d) when 
engaging in an infrastructure sharing arrangement involving facilities 
only. Although the Secondary Markets Report and Order initially set out 
this policy for the purposes of spectrum sharing only, the Commission 
believes that extending this policy to infrastructure sharing 
arrangements will provide the potential for savings in both capital 
costs for the construction of facilities and for improved coverage in 
rural areas. The Commission noted that most commenters supported the 
adoption of this more flexible standard, which they believe will help 
to alleviate the significant financial barriers small regional entities 
face when constructing wireless networks. Some commenters, on the other 
hand, stated their concern with the potential for interference that may 
result from the collocation of antennas. In rejecting this concern as 
needless, the Commission pointed out that all parties to infrastructure 
sharing arrangements, including small entities, must continue to comply 
with the Commission's interference and non-interference related rules 
and policies.

F. Reports to Congress and SBA

    180. The Commission will send a copy of this Report and Order, 
including the FRFA, in a report to be sent to Congress pursuant to the 
Congressional Review Act. In addition, the Commission will send a copy 
of the Report and Order, including this FRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration. In addition, the 
Commission's Consumer and Governmental Affairs Bureau, Reference 
Information Center, will send a copy of this Report and Order, 
including the Final Regulatory Flexibility Analysis, to the Chief 
Counsel for Advocacy of the Small Business Administration.

V. Ordering Clauses

    181. 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 Report and Order is 
adopted.
    182. The Petition for Reconsideration filed by Cingular Wireless 
LLC, in WT Docket No. 01-14 on February 13, 2002, and the Petition for 
Reconsideration filed by Dobson Communications Corp./ Western Wireless 
Corp./Rural Cellular Corp. in WT Docket No. 01-14 on February 13, 2002 
are granted, to the extent described above.
    183. Pursuant to sections 4(i), 7, 303(c), 303(f), 303(g), 303(r), 
and 332 of the Communications Act of 1934, as amended, 47 U.S.C. 
154(i), 157, 303(c), 303(f), 303(g), 303(r), and 332, the rule changes 
specified below are adopted. The rules will become effective February 
14, 2005, except for Sec.  1.919(c), which contains an information 
collection requirement that is not effective until approved by the 
Office of Management and Budget (OMB). The agency will publish a 
document in the Federal Register announcing the effective date of Sec.  
1.919(c).
    184. The Commission's Consumer and Governmental Affairs Bureau, 
Reference Information Center, shall send a copy of the Report and 
Order, including the Final Regulatory Flexibility Analysis, to the 
Chief Counsel for Advocacy of the Small Business Administration.

[[Page 75170]]

List of Subjects

47 CFR Part 1

    Administrative practice and procedure, Communications common 
carriers, Radio, Reporting and Recordkeeping requirements, 
Telecommunications.

47 CFR Part 22

    Communications common carriers, Radio.

47 CFR Part 24

    Personal communications services, Radio.

47 CFR Part 27

    Wireless Communications Service.

47 CFR Part 90

    Business and industry, Common carriers, Radio, Reporting and 
recordkeeping requirements.

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

Rule Changes

0
For the reasons discussed in the preamble, the Federal Communications 
Commission amends 47 CFR parts 1, 22, 24, 27, and 90 as follows:

PART 1--PRACTICE AND PROCEDURE

0
1. The authority citation for part 1 continues to read as follows:

    Authority: 47 U.S.C. 151, 154(i), 154(j), 155, 225, 303(r), 309 
and 325(e).


0
2. Section 1.919 is amended by redesignating paragraphs (c), (d), and 
(e) as paragraphs (d), (e), and (f), and by adding a new paragraph (c) 
to read as follows:


Sec.  1.919  Ownership information.

* * * * *
    (c) Reporting of Cellular Cross-Ownership Interests. (1) A cellular 
licensee of one channel block in a cellular geographic service area 
(CGSA) must report current ownership information if the licensee, a 
party that owns a controlling or otherwise attributable interest in the 
licensee, or a party that actually controls the licensee, obtains a 
direct or indirect ownership interest of more than 10 percent in a 
cellular licensee, a party that owns a controlling or otherwise 
attributable interest in a cellular licensee, or a party that actually 
controls a cellular licensee, for the other channel block in an 
overlapping CGSA, if the overlap is located in whole or in part in a 
Rural Service Area (RSA), as defined in Sec.  22.909 of this chapter. 
The ownership information must be filed on a FCC Form 602 within 30 
days of the date of consummation of the transaction and reflect the 
specific levels of investment.
    (2) For the purposes of paragraph (c) of this section, the 
following definitions and other provisions shall apply:
    (i) Non-controlling interests. A direct or indirect non-
attributable interest in both systems is excluded from the reporting 
requirement set out in paragraph (c)(1) of this section.
    (ii) Ownership attribution. For purposes of paragraph (c) of this 
section, ownership and other interests in cellular licensees will be 
attributed to their holders pursuant to the following criteria:
    (A) Controlling interest shall be attributable. Controlling 
interest means majority voting equity ownership, any general 
partnership interest, or any means of actual working control (including 
negative control) over the operation of the licensee, in whatever 
manner exercised.
    (B) Partnership and other ownership interests and any stock 
interest amounting to 20 percent or more of the equity, or outstanding 
stock, or outstanding voting stock of a cellular licensee shall be 
attributed.
    (C) Non-voting stock shall be attributed as an interest in the 
issuing entity if in excess of the amounts set forth in paragraph 
(c)(2)(ii)(B) of this section.
    (D) Debt and instruments such as warrants, convertible debentures, 
options, or other interests (except non-voting stock) with rights of 
conversion to voting interests shall not be attributed unless and until 
converted.
    (E) Limited partnership interests shall be attributed to limited 
partners and shall be calculated according to both the percentage of 
equity paid in and the percentage of distribution of profits and 
losses.
    (F) Officers and directors of a cellular licensee shall be 
considered to have an attributable interest in the entity with which 
they are so associated. The officers and directors of an entity that 
controls a cellular licensee shall be considered to have an 
attributable interest in the cellular licensee.
    (G) Ownership interests that are held indirectly by any party 
through one or more intervening corporations will be determined by 
successive multiplication of the ownership percentages for each link in 
the vertical ownership chain and application of the relevant 
attribution benchmark to the resulting product, except that if the 
ownership percentage for an interest in any link in the chain exceeds 
50 percent or represents actual control, it shall be treated as if it 
were a 100 percent interest. (For example, if A owns 20 percent of B, 
and B owns 40 percent of licensee C, then A's interest in licensee C 
would be 8 percent. If A owns 20 percent of B, and B owns 51 percent of 
licensee C, then A's interest in licensee C would be 20 percent because 
B's ownership of C exceeds 50 percent.)
    (H) Any person who manages the operations of a cellular licensee 
pursuant to a management agreement shall be considered to have an 
attributable interest in such licensee if such person, or its 
affiliate, has authority to make decisions or otherwise engage in 
practices or activities that determine, or significantly influence:
    (1) The nature or types of services offered by such licensee;
    (2) The terms upon which such services are offered; or
    (3) The prices charged for such services.
    (I) Any licensee, or its affiliate, who enters into a joint 
marketing arrangements with a cellular licensee, or its affiliate, 
shall be considered to have an attributable interest, if such licensee 
or affiliate has authority to make decisions or otherwise engage in 
practices or activities that determine, or significantly influence:
    (1) The nature or types of services offered by such licensee;
    (2) The terms upon which such services are offered; or
    (3) The prices charged for such services.
    (3) Sunset Provisions. This notification requirement will sunset at 
the earlier of:
    (i) Five years after February 14, 2005, or
    (ii) At the cellular licensee's specific deadline for renewal.
* * * * *

PART 22--PUBLIC MOBILE SERVICES

0
3. The authority citation for part 22 continues to read as follows:

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


0
4. 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.

[[Page 75171]]


0
5. Section 22.913 is amended by revising paragraph (a) to read as 
follows:


Sec.  22.913  Effective radiated power limits.

* * * * *
    (a) Maximum ERP. In general, the effective radiated power (ERP) of 
base transmitters and cellular repeaters must not exceed 500 Watts. 
However, for those systems operating in areas more than 72 km (45 
miles) from international borders that:
    (1) Are located in counties with population densities of 100 
persons or fewer per square mile, based upon the most recently 
available population statistics from the Bureau of the Census; or,
    (2) Extend coverage on a secondary basis into cellular unserved 
areas, as those areas are defined in Sec.  22.949, the ERP of base 
transmitters and cellular repeaters of such systems must not exceed 
1000 Watts. The ERP of mobile transmitters and auxiliary test 
transmitters must not exceed 7 Watts.
* * * * *


Sec.  22.942  [Removed]

0
6. Remove Sec.  22.942.

PART 24--PERSONAL COMMUNICATIONS SERVICES

0
7. The authority citation for part 24 continues to read as follows:

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


0
8. Section 24.203 is amended by revising paragraph (a) 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. Licensees may, in the alternative, provide 
substantial service to their licensed area within the appropriate five- 
and ten-year benchmarks. 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.
* * * * *

0
9. Section 24.232 is revised to read as follows:


Sec.  24.232  Power and antenna height limits.

    (a) Base stations are limited to 1640 watts peak equivalent 
isotropically radiated power (EIRP) with an antenna height up to 300 
meters HAAT, except as described in paragraph (b) of this section. See 
Sec.  24.53 for HAAT calculation method. Base station antenna heights 
may exceed 300 meters with a corresponding reduction in power; see 
Table 1 of this section. In no case may the peak output power of a base 
station transmitter exceed 100 watts. The service area boundary limit 
and microwave protection criteria specified in Sec.  24.236 and Sec.  
24.237 apply.

Table 1.--Reduced Power for Base Station Antenna Heights Over 300 Meters
------------------------------------------------------------------------
                                                           Maximum  EIRP
                     HAAT in meters                            watts
------------------------------------------------------------------------
<=300...................................................            1640
<=500...................................................            1070
<=1000..................................................             490
<=1500..................................................             270
<=2000..................................................             160
------------------------------------------------------------------------

    (b) Base stations that are located in counties with population 
densities of 100 persons or fewer per square mile, based upon the most 
recently available population statistics from the Bureau of the Census, 
are limited to 3280 watts peak equivalent isotropically radiated power 
(EIRP) with an antenna height up to 300 meters HAAT; See Sec.  24.53 
for HAAT calculation method. Base station antenna heights may exceed 
300 meters with a corresponding reduction in power; see Table 2 of this 
section. In no case may the peak output power of a base station 
transmitter exceed 200 watts. The service area boundary limit and 
microwave protection criteria specified in Sec.  24.236 and Sec.  
24.237 apply. Operation under this paragraph must be coordinated in 
advance with all PCS licensees within 120 kilometers (75 miles) of the 
base station and is limited to base stations located more than 120 
kilometers (75 miles) from the Canadian border and more than 75 
kilometers (45 miles) from the Mexican border.

Table 2.--Reduced Power for Base Station Antenna Heights Over 300 Meters
------------------------------------------------------------------------
                                                           Maximum  EIRP
                     HAAT in meters                            watts
------------------------------------------------------------------------
<=300...................................................            3280
<=500...................................................            2140
<=1000..................................................             980
<=1500..................................................             540
<=2000..................................................             320
------------------------------------------------------------------------

    (c) Mobile/portable stations are limited to 2 watts EIRP peak power 
and the equipment must employ means to limit the power to the minimum 
necessary for successful communications.
    (d) Peak transmit power must be measured over any interval of 
continuous transmission using instrumentation calibrated in terms of an 
rms-equivalent voltage. The measurement results shall be properly 
adjusted for any instrument limitations, such as detector response 
times, limited resolution bandwidth capability when compared to the 
emission bandwidth, sensitivity, etc., so as to obtain a true peak 
measurement for the emission in question over the full bandwidth of the 
channel.

0
10. Section 24.237 is amended by revising paragraph (d) to read as 
follows:


Sec.  24.237  Interference protection.

* * * * *
    (d) The licensee must perform an engineering analysis to assure 
that the proposed facilities will not cause interference to existing 
OFS stations within the coordination distance specified in Table 3 of a 
magnitude greater than that specified in the criteria set forth in 
paragraphs (e) and (f) of this section, unless there is prior agreement 
with the affected OFS licensee. Interference calculations shall be 
based on the sum of the power received at the terminals of each 
microwave receiver from all of the applicant's current and proposed PCS 
operations.

                                                     Table 3.--Coordination Distances in Kilometers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                         PCS Base Station Antenna HAAT in Meters
---------------------------------------------------------------------------------------------------------------------------------------------------------
                     EIRP(W)                         5      10      20      50      100     150     200     250     300     500    1000    1500    2000
--------------------------------------------------------------------------------------------------------------------------------------------------------
0.1.............................................      90      93      99     110     122     131     139     146     152     173     210     239     263
0.5.............................................      96     100     105     116     128     137     145     152     158     179     216     245     269
1...............................................      99     103     108     119     131     140     148     155     161     182     219     248     272
2...............................................     120     122     126     133     142     148     154     159     164     184     222     250     274
5...............................................     154     157     161     168     177     183     189     194     198     213     241     263     282

[[Page 75172]]

 
10..............................................     180     183     187     194     203     210     215     220     225     240     268     291     310
20..............................................     206     209     213     221     229     236     242     247     251     267     296     318     337
50..............................................     241     244     248     255     264     271     277     282     287     302     331     354     374
100.............................................     267     270     274     282     291     297     303     308     313     329     358     382     401
200.............................................     293     296     300     308     317     324     330     335     340     356     386     409     436
500.............................................     328     331     335     343     352     359     365     370     375     391     421     440
1000............................................     354     357     361     369     378     385     391     397     402     418
1200............................................     361     364     368     376     385     392     398     404     409     425
1640............................................     372     375     379     388     397     404     410     416     421     437
2400............................................     384     387     391     399     408     415     423     427     431
3280............................................     396     399     403     412     419     427     435     439     446
--------------------------------------------------------------------------------------------------------------------------------------------------------

* * * * *

PART 27--MISCELLANEOUS WIRELESS COMMUNICATIONS SERVICES

0
11. The authority citation for part 27 continues to read as follows:

    Authority: 47 U.S.C. 154, 301, 302, 303, 307, 309, 332, 336, and 
337 unless otherwise noted.


0
12. Section 27.50 is amended by revising paragraph (d) to read as 
follows:


Sec.  27.50  Power and antenna height limits.

* * * * *
    (d) The following power and antenna height requirements apply to 
stations transmitting in the 1710-1755 MHz and 2110-2155 MHz bands:
    (1) The power of each fixed or base station transmitting in the 
2110-2155 MHz band and located in any county with population density of 
100 or fewer persons per square mile, based upon the most recently 
available population statistics from the Bureau of the Census, is 
limited to a peak equivalent isotropically radiated power (EIRP) of 
3280 watts and a peak transmitter output power of 200 watts. The power 
of each fixed or base station transmitting in the 2110-2155 MHz band 
from any other location is limited to a peak EIRP of 1640 watts and a 
peak transmitter output power of 100 watts. A licensee operating a base 
or fixed station utilizing a power of more than 1640 watts EIRP must 
coordinate such operations in advance with all Government and non-
Government satellite entities in the 2025-2110 MHz band. Operations 
above 1640 watts EIRP must also be coordinated in advance with the 
following licensees within 120 kilometers (75 miles) of the base or 
fixed station: all Multipoint Distribution Service (MDS) licensees 
authorized under Part 21 in the 2155-2160 MHz band and all AWS 
licensees in the 2110-2155 MHz band.
    (2) Fixed, mobile, and portable (hand-held) stations operating in 
the 1710-1755 MHz band are limited to a peak EIRP of 1 watt. Fixed 
stations operating in this band are limited to a maximum antenna height 
of 10 meters above ground, and mobile and portable stations must employ 
a means for limiting power to the minimum necessary for successful 
communications.
* * * * *

PART 90--PRIVATE LAND MOBILE RADIO SERVICES

0
13. The authority citation for part 90 continues to read as follows:

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


0
14. Section 90.155 is amended by revising paragraph (d) 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. Licensees 
may, in the alternative, provide substantial service to their licensed 
area within the appropriate five- and ten-year benchmarks. 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).
* * * * *

0
15. Section 90.685 is amended by revising paragraph (b) 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. EA-based licensees may, in the 
alternative, 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.''
* * * * *

0
16. 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. Licensees may, 
in the alternative, provide substantial service to their licensed areas 
at the appropriate five- and ten-year benchmarks.
    (b) Licensees must notify the Commission in accordance with Sec.  
1.946

[[Page 75173]]

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) 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.

0
17. 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. Licensees may, in the alternative, provide substantial 
service to their licensed areas at the appropriate 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 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. 04-27049 Filed 12-14-04; 8:45 am]
BILLING CODE 6712-01-P