[Federal Register Volume 69, Number 240 (Wednesday, December 15, 2004)]
[Proposed Rules]
[Pages 75174-75185]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-27050]



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

[[Page 75174]]


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FEDERAL COMMUNICATIONS COMMISSION

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

[WT Docket Nos. 02-381, 01-14, 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: Proposed rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) examines ways of amending its spectrum regulations and 
policies to promote the more rapid and efficient deployment of quality 
spectrum-based services in rural areas. In particular, the Commission 
seeks to expand upon the record in this proceeding by identifying 
additional measures that it can take to promote access to spectrum in 
rural areas. The Commission seeks additional comment on adopting an 
unserved-area or ``keep what you use'' re-licensing process for current 
and future wireless services and asks whether such measures are likely 
to spur the delivery of wireless services to rural areas. This document 
also inquires whether additional performance requirements might be 
appropriate for license terms subsequent to initial renewal to 
encourage the deployment of quality spectrum-based service in rural 
areas.

DATES: Comments due: January 14, 2005. Reply Comments Due: February 14, 
2005.

FOR FURTHER INFORMATION CONTACT: Allen A. Barna, Wireless 
Telecommunications Bureau, at (202) 418-0620, or via the Internet at 
[email protected].
    For additional information concerning the Paperwork Reduction Act 
information collection requirements contained in this document, contact 
Judith B. Herman at 202-418-0214, or via the Internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Further Notice of 
Proposed Rulemaking portion (Rural Further Notice) 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 the Report and Order and order on reconsideration 
portion (Report and Order) (summarized elsewhere in this publication). 
The full text of this document is available for public inspection and 
copying 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]. The full text may also be 
downloaded at: http://www.fcc.gov. Alternative formats are available to 
persons with disabilities by contacting Brian Millin at (202) 418-7426 
or TTY (202) 418-7365 or at [email protected].

Synopsis of the Further Notice of Proposed Rulemaking

I. Introduction

    1. In this Further NPRM, the widespread provision of communications 
services is not only one of the Commission's primary public policy 
objectives, but also one of its statutory mandates. Our primary mission 
is to promote ``communication by wire and radio so as to make 
available, so far as possible, to all the people of the United States, 
without discrimination on the basis of race, color, religion, national 
origin, or sex, a rapid, efficient, Nation-wide, and world-wide wire 
and radio communication service.'' In addition, the Omnibus Budget 
Reconciliation Act of 1993 added section 309(j) to the Communications 
Act, which requires the Commission to promote various objectives in 
designing a system of competitive bidding. A number of these objectives 
focus on the provision of spectrum-based services to rural areas, such 
as encouraging the development and rapid deployment of new 
technologies, products, and services for the benefit of the public, 
``including those residing in rural areas.'' In addition to the rural 
service objectives mandated by section 309(j), Congress directed the 
Commission to pursue other broader public interest goals. Specifically, 
section 309(j)(3) requires the Commission to promote efficient and 
intensive use of the spectrum, encourage economic opportunity and 
competition, and recover for the public a portion of the value of the 
public spectrum. Given these statutory obligations, the Commission's 
spectrum policy goals include facilitating the efficient use of 
spectrum, as well as fostering competition, and rapid, widespread 
service consistent with the goals of the Communications Act. In this 
proceeding, we released a Notice of Inquiry (Rural NOI) in December of 
2002, 68 FR 723 (January 7, 2003), and, in October 2003, we released 
our initial Notice of Proposed Rulemaking (Rural NPRM), 68 FR 64050 
(November 12, 2003).
    2. As noted in the Report and Order, our current policies and rules 
generally facilitate rural development of wireless services where it is 
economic to do so. The competitive bidding process and related 
performance and other requirements for successful bidders, including 
existing substantial service and flexible use policies, encourage 
licensees to make productive and innovative use of spectrum. In 
addition, our secondary market mechanisms provide on-going 
opportunities for new entrants to gain access to spectrum from those 
licensees as market conditions change, thereby ensuring that spectrum 
moves to its highest valued uses over time. We believe that, insofar as 
they have economic incentives to do so, new wireless service providers 
will choose to enter rural markets and existing rural service providers 
will extend their presence further into the rural areas where they 
operate.
    3. As we acknowledge in the Report and Order, however, there may be 
circumstances in which our market-oriented policies are insufficient to 
foster access to spectrum and deployment of service in rural areas. In 
such cases, we will continue to consider the adoption of appropriate 
performance requirements, along with other means, for both existing and 
future licenses to further encourage the provision of wireless service 
to rural areas. Accordingly, in this Further Notice, we build on the 
record accumulated in response to the Rural NPRM and we seek comment on 
the appropriate mechanisms to further ensure that spectrum ultimately 
continues to be put to its highest valued use. In particular, we seek 
additional comment on the effectiveness of our partitioning, 
disaggregation, spectrum leasing and other market-based policies and 
rules in making wireless services available to more rural areas. We 
also seek comment on our potential use of ``keep-what-you-use'' re-
licensing mechanisms, renewal term substantial service requirements, as 
well as other alternatives to move unused or underused spectrum to 
those who may be able to use it more intensively. We also seek comment 
on the economic impacts of employing such approaches and whether 
different services may benefit from different

[[Page 75175]]

approaches to expanded spectrum access.
    4. As noted above, service to rural areas may be delayed because 
entities that are otherwise willing and able to deploy service lack 
access to spectrum. The increasing use of unlicensed wireless 
technologies and applications in rural areas suggests that operators 
will deploy service if there is availability of or access to spectrum 
with which to do so. Accordingly, we undertake this further inquiry to 
assess alternative methods that will ensure that spectrum rights flow 
to those who are willing and able to put spectrum to use in rural 
areas.
    5. In this Rural Further Notice, we seek to explore whether 
changing our method for enforcing performance requirements or adding 
renewal term performance requirements could have a beneficial impact on 
the deployment of wireless service to rural areas. In this regard, this 
section examines how the licensing of wireless services has evolved 
from a ``keep what you use'' standard to a ``complete forfeiture'' 
approach. The following paragraphs provide an overview of the 
development of licensing models and performance standards, while also 
providing the Commission's rationale behind these policy shifts.

II. Background

    6. Site-by-site Construction. Initially, the Commission licensed 
mobile and fixed wireless services on a site-by-site and frequency-by-
frequency basis. Licensees were authorized to operate a station only at 
a specific location, using a specific frequency or frequencies. Some 
examples of this type of licensing approach include one or more base 
stations with mobile units in the vicinity, or a fixed communications 
path between two points. With this type of site-specific licensing, the 
Commission adopted a ``keep what you use'' performance requirement, 
meaning that at the end of a licensee's construction period, any 
unconstructed areas or frequencies came back under Commission control 
for re-licensing on a first-come, first served (often pre-coordinated) 
site-by-site basis. In this regard, the Commission sought to ensure 
timely use of spectrum and ``to ensure that the channels which we make 
available to eligibles are put in `use' and not put in `storage.' ''
    7. For example, the Commission's original rules governing 800 MHz 
SMR were designed to license dispatch radio systems on a transmitter-
by-transmitter basis in local markets. The Commission typically gave an 
800 MHz SMR licensee up to 12 months after the grant of a license to 
construct and begin operation of its facilities, meaning that each 
licensed site and frequency had to be up and running within one year. 
At the end of that time period, licensed areas and frequencies that 
were unconstructed reverted back to the Commission for re-licensing.
    8. Hybrid Licensing. As technology evolved, mobile wireless 
providers sought to expand their reach and to provide service over a 
wide area. Two different approaches of ``wide-area'' licensing 
developed in response to increasing demand for new services: the SMR 
model and the cellular model. While these approaches permitted SMR and 
cellular carriers to operate within a wide-area footprint, the 
Commission's site-specific licensing rules and ``keep what you use'' 
policy still applied.
    9. For example, responding to growing demand for mobile telephony 
and limited capacity, SMR licensees sought to operate technically 
innovative, wide-area systems. Because of the complexity and expense of 
building these systems, however, licensees were frequently unable to 
provision service within the 8 to 12 month time frame required by 
Commission rules. Beginning in 1991, the Commission granted waivers and 
extended implementation authority to many SMR licensees, giving them 
authority to expand the geographic scope of their services and combine 
large numbers of channels in order to provide service intended to 
compete with cellular. Applicants who were granted waivers or extended 
implementation authority received additional time to construct the 
licensed spectrum. However, applicants still had to apply for each site 
individually and in the event the licensee did not construct and 
operate the frequencies within the extended time period, the unused 
spectrum came back under Commission control for re-licensing.
    10. In contrast, wide-area licensing for the cellular 
radiotelephone service followed a different path. In establishing 
commercial licensing of cellular in 1981, the Commission recognized the 
need to define cellular service areas while also providing authorized 
cellular operators with the freedom they needed to adapt their systems 
in the face of growing and changing demand. The Commission established 
a regulatory structure centered on cellular geographic service areas 
(CGSAs) that would be defined by license applicants themselves as the 
areas within a market that they intended to serve. An applicant was 
required to serve at least 75 percent of its CGSA. The Commission soon 
after added an additional rule, requiring applicants to define their 
CGSAs to cover at least 75 percent of the population or area of the 
corresponding MSA or RSA. Carriers operating in MSAs were required to 
place their cellular stations into operation within 36 months of the 
initial license grant, while operators in RSAs had 18 months to 
construct. In addition, the Commission afforded licensees a five-year 
``fill-in'' period in which a licensee could apply to expand the 
boundaries of its CGSA within the MSA/RSA without the worry of 
competing interests from another applicant.
    11. As the popularity of cellular service began to grow, the 
Commission determined that it was not in the public interest to allow a 
cellular licensee to protect unserved territory for an unlimited period 
of time simply because the territory was part of its CGSA. The 
Commission, therefore, imposed a ``keep-what-you-use'' regime on all 
cellular licenses, and established rules and procedures for accepting 
applications to operate new cellular systems in areas still unserved at 
the expiration of the incumbent's five-year ``fill-in'' period. In 
addition, the Commission adopted rules determining the size of CGSAs by 
a mathematical formula and redefined the boundaries authorized for 
existing cellular systems to more closely mirror the areas of actual 
construction and coverage so that potential licensees for the cellular 
unserved areas would have a clearer picture of which areas were 
available. At the end of the five year ``fill-in'' period, any unused 
spectrum reverted back to the Commission for re-licensing. New licenses 
authorized as a result of the unserved area licensing rules are 
licensed on a site-specific basis, and licensees are required to 
complete construction and provide service to the public within one year 
of the initial authorization grant.
    12. Geographic Area-based Approach. While the hybrid licensing 
models did help to expand wireless service, problems remained. For 
example, even with waivers and grants of extended implementation 
authority developed in the hybrid licensing model, the SMR licensing 
process remained cumbersome because of the requirement that SMR sites 
and frequencies be licensed individually. The Commission noted 
specifically that site-by-site licensing deprives licensees of 
flexibility to move transmitter sites throughout a defined service area 
without seeking the Commission's prior approval.'' In order to provide 
wireless licensees with needed flexibility, therefore, the Commission 
adopted a system of

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geographic-area licensing with minimum coverage requirements based on 
population or geography. At the same time, the Commission transitioned 
from the ``keep what you use'' licensing policy to a ``complete 
forfeiture'' approach, which made licenses subject to automatic 
cancellation for failure to meet interim coverage requirements at 
specified benchmarks. Failure to meet applicable performance benchmarks 
would result in complete loss of the license, even in areas where 
construction had already been completed.
    13. The Commission first applied geographic area licensing and a 
``complete forfeiture'' performance standard when it established the 
narrowband and broadband PCS services. In order to permit the widest 
possible range of mobile communications, the Commission put in place 
technical standards that would permit significant flexibility in both 
the design and implementation of PCS systems as well as geographic- and 
population-based construction benchmarks that would ensure that 
licensees built out their systems or face forfeiture of their licenses. 
The Commission concluded that these and other changes to its licensing 
approach would encourage diversity of technologies and speed deployment 
of service. In addition, in 2000, the Commission adopted ``substantial 
service'' as an alternative construction requirement for PCS licensees. 
As noted, under the ``complete forfeiture'' approach, failure to meet 
these benchmarks results in automatic cancellation or non-renewal of 
the entire PCS license, including the rights to operate from any 
facilities already constructed under the authorization.
    14. The Commission also applied geographic area licensing to 
existing services, such as SMR. The Commission sought to institute 
policies that would afford wide-area SMR system licensees opportunities 
to bid on new licenses that offered the same flexibility as cellular 
and PCS licenses in terms of facility location, design, construction, 
and modification. Therefore, the Commission designated the upper 200 
channels of 800 MHz SMR spectrum for geographic-area licensing based on 
EAs, and overlayed geographic markets over existing site-based systems. 
The Commission granted licensees the authority to construct base 
stations at any available site and on any available channel within 
their spectrum blocks so long as previously existing site-based 
facilities are provided appropriate interference protection. Using the 
``complete forfeiture'' approach, the Commission also instituted 
minimum coverage and channel use requirements at three- and five-year 
benchmarks. Two years later, in 1997, the Commission adopted 
geographic-area licensing with EA service areas for the lower 230 800 
MHz channels as well, stating that geographic area licensing remains 
the most efficient and logical licensing approach for the majority of 
licensees in the band. The Commission adopted construction requirements 
similar to the upper channels, but eliminated the channel usage 
requirement and also adopted an alternative plan whereby licensees in 
the lower 230 channels can satisfy coverage obligations by providing 
substantial service within five years of license.
    15. In recent years, the Commission has continued to embrace 
geographic area licensing and moved towards the adoption of more 
flexible construction requirements, such as substantial service. This 
shift has occurred in order to provide flexibility for licensees 
seeking to provide a variety of services with their spectrum, not all 
of which require pervasive geographic coverage, as well as to 
accommodate licenses encompassing very large service areas as opposed 
to smaller site-based licenses. In keeping with its goal of flexibility 
for licensees, the Commission has also adopted substantial service as 
the sole standard, or as an alternate standard, for many services. For 
example, LMDS, 39 GHz and 24 GHz microwave services all have the sole 
construction requirement of providing substantial service by the end of 
the initial license term. As discussed earlier, the Commission's 
increasing movement towards substantial service as an alternative means 
of meeting construction requirements has been met with mixed reactions. 
Based on this difference of opinion between commenters, we seek further 
comment in the paragraphs below as to the appropriate performance 
standards to apply.
    16. We note that regardless of the type of requirement, our current 
performance requirements apply only during the initial term. As noted, 
once a licensee renews its license, no additional performance 
requirements are imposed in subsequent terms other than the standard 
necessary in order to achieve a renewal expectancy. In the case of 
renewals, if an incumbent files an appropriate and timely application 
and neither the public nor the Commission objects, the license will 
typically be renewed for another term. However, if another party 
objects or files a competing application, a licensee must demonstrate 
that it is entitled to a renewal expectancy. A renewal applicant 
involved in a comparative renewal proceeding will acquire a renewal 
expectancy if the applicant provides sufficient evidence that the 
applicant has provided substantial service during its license term, and 
that the applicant has substantially complied with the Communications 
Act, as well as with all applicable Commission rules and policies. As a 
general matter, if a renewal applicant satisfies these requirements, 
the applicant will be granted a renewal expectancy and other competing 
applications will be dismissed.

III. Further Notice of Proposed Rulemaking

A. Existing Market-Based Models

    17. The Commission's rules and policies provide interested parties 
with several market-based vehicles for obtaining access to licensed 
spectrum through the secondary market. First, an interested party may 
obtain a license through the assignment and transfer of control 
process, pursuant to Commission review and approval under section 
310(d) of the Communications Act. Furthermore, by utilizing the 
partitioning and disaggregation process, parties need not buy a license 
``as is--instead, parties may obtain licenses for a particular subset 
of frequencies and carve out certain geographic areas that satisfy 
their unique needs, while the original licensee retains the remaining 
frequencies and geographic areas. Second, parties may utilize the 
spectrum leasing process--further enabled under the Commission's 
secondary markets proceeding--to engage in short- and long-term leases. 
Based upon the record developed in response to the Rural NPRM, we are 
hopeful that these measures will provide effective means of providing 
access to spectrum through the secondary market. As discussed below, 
however, it appears that there are ways in which these mechanisms 
nevertheless may not satisfy the needs of some parties; in the 
following paragraph, we identify some of the key concerns with these 
mechanisms, as reflected in the record, and seek additional comment on 
the efficacy of these procedures in providing access to spectrum in 
rural areas.
    18. As an initial matter, we observe that the record reflects some 
disagreement with respect to the effectiveness of our partitioning and 
disaggregation policies in providing access to spectrum in rural areas. 
On the one hand, the record provides information on partitioning and 
disaggregation transactions that suggest

[[Page 75177]]

these policies are working. On the other hand, the record also shows 
that some rural carriers may not be receiving the benefits of 
partitioning and disaggregation. According to commenter, the problems 
with partitioning and disaggregation are multi-fold: (1) The 
Commission's rules do not provide licensees with an incentive to `carve 
out' portions of their license areas for rural carriers; (2) the 
administrative costs of entering into and managing the partitioning/
disaggregation process outweigh the realized financial gains; (3) and 
licensees wish to retain the entire geographic area when they go to 
sell the system as a whole in the future, because licensees perceive 
that unpartitioned licenses will have a higher resale value. Another 
commenter echoes these concerns, stating that large national and 
regional carriers that control licenses for most of the spectrum are 
not willing or able to devote the time and resources necessary to 
negotiate and implement arrangements on the scale desired by rural 
telephone companies.
    19. In order to identify the specific nature and extent to which 
our partitioning and disaggregation rules are working, we seek 
additional comment on specific partitioning and disaggregation 
transactions, as well as the negotiations process. We seek to develop a 
more comprehensive understanding of the ways in which this process may 
be insufficient to promote access to spectrum. Given the conflicting 
record regarding the ability of carriers to engage in smaller-scale 
partitioning and disaggregation transactions, we believe that 
additional information, particularly specific transaction data, will 
facilitate our greater understanding of the benefits and shortfalls of 
our partitioning and disaggregation policies in fostering access to 
spectrum in rural areas. We also seek comment on how these policies may 
work in coordination with potential re-licensing mechanisms such as 
``keep what you use,'' as discussed in greater detail below. We note 
that certain commenters proposed various incentives for licensees to 
engage in partitioning and disaggregation, including the provision of 
bidding credits for auction winners that commit to partitioning 
portions of their licenses to rural carriers, monetary credits towards 
a future spectrum auction in exchange for the return of unused 
spectrum, and credits towards licensees' construction obligations. We 
ask for comment on these proposals and also seek comment on additional 
incentives that are likely to encourage partitioning and disaggregation 
in rural areas.
    20. In addition to the partitioning and disaggregation process, the 
Commission's rules also facilitate access to spectrum on the secondary 
market through spectrum leasing. Because our rules further enabling 
spectrum leasing went into effect on January 24, 2004, we are not yet 
in a position to evaluate the effectiveness of spectrum leasing in 
providing access to spectrum in rural areas. Nevertheless, we are 
encouraged by the record that interested parties will take advantage of 
our spectrum leasing rules to obtain access to previously ``unused'' 
spectrum and provide innovative and new service offerings to the 
public. Indeed, based upon preliminary information regarding proposed 
spectrum leasing transactions, we are optimistic that our spectrum 
leasing rules are affording many new opportunities for access to 
spectrum, including spectrum in rural areas.
    21. While the record in response to the Rural NPRM indicates that 
many commenters are optimistic that our spectrum leasing will promote 
the deployment of wireless services to rural areas and therefore urge 
the Commission to ``wait and see'' how secondary markets develop prior 
to taking any regulatory action to encourage spectrum access, others 
indicate concern that this market-based mechanism will be an 
insufficient means of providing spectrum access. Accordingly, we seek 
additional comment on how spectrum leasing is addressing concerns about 
access to spectrum, particularly from those who have entered into, or 
are contemplating, such transactions. In particular, we seek comment 
regarding situations where parties' need for spectrum have been 
accommodated by spectrum leasing as well as situations where those 
needs may not have been satisfied by the availability of such leasing.

B. ``Keep What You Use'' Re-licensing Measures

    22. Based upon the record developed in this proceeding, as well as 
available data on partitioning and disaggregation transactions and 
preliminary information on spectrum leasing agreements, we believe that 
our current policies and regulations are working to promote access to 
``unused'' spectrum. Nevertheless, the record also suggests that, for a 
variety of reasons, there may be instances where these market-based 
policies may not be adequate to promote access to spectrum in rural 
areas. As we have already indicated, the rapid provision of broadband 
and other wireless services to rural areas is of critical importance in 
accomplishing our statutory and public policy objectives. Accordingly, 
if we determine that our current policies are insufficient to increase 
access to spectrum, we may take additional measures to ensure that 
unused spectrum moves into the hands of those who stand ready and 
willing to deploy wireless voice and data services to rural Americans.
    23. Based upon the record received in response to the Rural NPRM, 
commenters indicate that extending the ``keep what you use'' to 
additional wireless services may provide a variety of benefits. For 
those services that otherwise would be subject to a ``complete 
forfeiture'' approach, a ``keep what you use'' approach might also have 
the benefit of allowing future licensees in those services to keep 
certain portions of their licenses rather than forfeiting the entire 
license for failure to satisfy certain benchmarks.
    24. We also recognize, however, that adopting a ``keep what you 
use'' approach may yield certain unintended and potentially detrimental 
consequences, as asserted by a number of commenters. As an initial 
matter, commenters suggest that adopting a ``keep what you use'' 
approach may not actually result in additional rural deployment, 
because, if it is economically beneficial for a carrier to deploy 
services in a particular area, they have sufficient incentive to do so 
without regulatory intervention. Second, commenters caution that 
adopting a ``keep what you use'' approach may upset the valuation of 
spectrum licenses and chill investment in wireless services. Third, 
such an approach might result in uneconomic construction, in an attempt 
to ``save'' licensed area. Fourth, adopting the ``keep what you use'' 
approach may result in numerous administrative and legal costs, 
including the costs of initially assessing whether the spectrum is 
being ``used,'' reclaiming the subject spectrum and resolving ``any 
controversy or litigation that may arise as a result,'' engaging in the 
re-licensing process, and ``waiting to see whether the new licensees 
actually provide the desired wireless service to the indicated rural 
territory.'' Finally, carriers express concern that adopting a ``keep 
what you use'' approach may strip a licensee of legitimate business 
opportunities, such as the ability to lease excess spectrum in the 
secondary market.
    25. Given the potential benefits and drawbacks of the ``keep what 
you use'' approach, we intend to continue to examine carefully the 
potential use of this mechanism to increase access to spectrum in this 
proceeding as well as

[[Page 75178]]

in future service-specific proceedings. In the Rural NPRM, the 
Commission limited its inquiry regarding spectrum re-licensing and 
adoption of the ``keep what you use'' approach to future spectrum 
allocations only. In this Rural Further Notice, however, we extend our 
inquiry to include all licensed terrestrial wireless services that are 
within the scope of this proceeding, as well as future spectrum 
allocations. Accordingly, we see comment on the benefits, if any, of 
extending the ``keep what you use'' approach. We ask whether the 
potential benefits of the ``keep what you use'' approach, in terms of 
increasing access to spectrum in rural areas, are likely to outweigh 
the potential costs. In this regard, commenters are asked to discuss 
the likelihood that such an approach will in fact cause uneconomic 
construction. We note that, to the extent that any construction 
requirement will cause a licensee to deploy facilities in a manner in 
which it may not otherwise have in the absence of such a rule, any 
build-out obligation could to some extent be said to cause uneconomic 
investment or construction. Accordingly, we seek comment on whether a 
``keep what you use'' approach will cause undue disruption or whether 
it should more appropriately be viewed as one of many factors to be 
considered by a licensee in determining whether or not to deploy 
facilities in a given area.
    26. We also seek comment on the impact of such a re-licensing 
approach on secondary markets. Because licensees may wish to recoup 
some financial benefit from their unused spectrum, rather than simply 
allowing it to revert to the Commission, a ``keep what you use'' 
approach would seem to encourage licensees to engage in more 
partitioning, disaggregation, and spectrum licensing arrangements. For 
these reasons, adoption of a ``keep what you use'' approach might well 
complement our existing market-based policies. On the other hand, we 
note that certain commenters caution that a ``keep what you use'' 
approach to spectrum re-licensing could eliminate long range benefits 
from the Commission's positive steps taken to foster development of a 
secondary market in spectrum. We seek clarification on the potential 
impact of a ``keep what you use'' approach on our secondary market 
policies.
    27. We acknowledge that any ``keep what you use'' approach would 
necessitate certain important administrative determinations, such as 
identifying what constitutes ``use'' for particular services and 
requiring licensees to demonstrate sufficient ``use.'' However, we do 
not intend to set out a comprehensive definition of spectrum ``use'' in 
this proceeding. Should we adopt a ``keep what you use'' approach, we 
will examine the definition of ``use'' and other administrative issues 
in future service-specific proceedings.

C. Renewal Term Substantial Service Requirements

    28. We also seek comment on whether we should strengthen the 
application of substantial service performance requirements after 
initial license terms as a means of encouraging access to spectrum and 
provision of service in rural areas. The Report and Order provided most 
geographic area licensees with the option of satisfying a substantial 
service standard if they did not already have such an option. As 
discussed in the Report and Order, the unique characteristics and 
considerations inherent in constructing within rural areas may make it 
impractical for licensees with population-based build-out requirements 
to construct in such areas. We believe that enabling licensees to 
fulfill their construction obligations by providing substantial service 
affords them the flexibility to deploy facilities in sparsely populated 
areas that otherwise may not be served. Indeed, the record in this 
proceeding supports our belief that the substantial service requirement 
enhances licensee ability to bring service to rural areas.
    29. We therefore seek comment on the viability of more rigorous 
substantial service construction requirements for licenses beyond their 
initial license terms. Given our interest in ensuring that spectrum is 
available to those who actively seek to deploy facilities, we ask if 
such a measure would promote access to spectrum and expanded service in 
sparsely populated areas. We also ask how best to structure any new 
substantial service requirements for use in renewal license terms that 
will expand coverage in rural areas. For example, should we require the 
provision of additional coverage beyond that which is sufficient to 
satisfy the existing substantial service standard during the initial 
license term? In other words, is it reasonable to expect a carrier to 
expand its coverage over time and therefore impose an increasing 
substantial service requirement? If so, we ask commenters to explain 
how best to formulate such standards to provide both existing and 
prospective licensees with flexibility to develop or revise their long-
term business plans and build-out strategies but also with sufficient 
clarity for them to understand what needs to be accomplished and by 
what date. In addition, we ask commenters to describe any safe harbor 
provisions that would facilitate compliance or explain why the adoption 
of a safe harbor for that particular standard would not be appropriate. 
In addition, given our desire to encourage the deployment of service in 
rural areas, should we require licensees to demonstrate that some 
percentage of the rural population of its licensed areas is being 
covered in order to satisfy its substantial service showing whether or 
not a competing application is filed against a renewal application? 
Recognizing the reservations of some to the imposition of performance 
requirements during renewal license terms, we also seek comment on any 
disadvantages that might accrue if we were to strengthen substantial 
service performance after initial terms.

D. Other Alternatives

    30. We ask commenters to identify any other methods we might adopt 
to make unused spectrum available to those better positioned to deploy 
service in the event our market-based policies fail to do so. For 
example, as stated earlier, although we believe it is premature at this 
time to adopt the use of easements, we will continue to consider the 
potential impact of easements on the incentives of all parties to 
ensure the highest and best use of the band. Comments in this 
proceeding provided mixed views on such use. One commenter generally 
supports such easements provided they permit, but do not require, 
licensees to allow the operation of unlicensed devices on their 
networks. However, others submit that such easements or underlays for 
the provision of unlicensed services should not be permitted because 
they believe that unlicensed overlays will interfere with the 
Commission's secondary market policies, would create uncertainty 
regarding a licensee's spectrum rights, as well as raise interference 
concerns. We, nevertheless, remain interested in the role that 
easements or other authorized secondary uses could play in providing 
incentives for the development by third parties of new devices and 
services that will increase access to spectrum, such as software-
defined radios and other frequency-agile devices in frequency bands 
that are otherwise currently restricted to exclusive license holders. 
Such ability to take advantage of unused portions of licensed spectrum 
could lead to the development of more equipment at lower costs, a key 
barrier to entry in rural areas. Nonetheless, we also seek to afford 
license holders as much

[[Page 75179]]

reliability in their spectrum usage rights as practicable. In light of 
the objections of some to the possible use of easements, we ask 
commenters to clarify their objections and, where possible, provide 
examples of potential adverse consequences. Should we choose to use 
such easements, we ask, first, how they could be structured to increase 
spectrum access and service coverage while also addressing the concerns 
raised in the comments. Second, after what time period should we allow 
entities to employ such easements, e.g., immediately after renewal if a 
certain standard was not met during the initial term, or at some other 
point?
    31. Finally, because we recognize that different wireless services 
may benefit from different approaches to spectrum access, we ask 
commenters to identify the specific services to which their proposed 
approaches should apply and whether there are any services that should 
be excluded. For example, how should the re-licensing methodologies 
available for mobile wireless services be different than those for 
fixed services? Should different approaches be applied to different 
geographic markets, i.e. is it appropriate to apply the same re-
licensing method for a nationwide license as well as a MTA-based 
license?

IV. Procedural Matters

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

    32. This is a permit-but-disclose notice and comment rule making 
proceeding. Ex parte presentations are permitted, except during the 
Sunshine Agenda period, provided they are disclosed as provided in 
Commission rules.

B. Initial Regulatory Flexibility Analysis

1. Introduction
    33. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission has prepared this present Initial 
Regulatory Flexibility Analysis (IRFA) of the possible significant 
economic impact on a substantial number of small entities by the 
policies and rules proposed in this Further Notice of Proposed 
Rulemaking (Further Notice). Written public comments are requested on 
this IRFA. Comments must be identified as responses to the IRFA and 
must be filed by the deadlines for comments on the Further Notice 
provided in paragraph 183 of the item. The Commission will send a copy 
of the Further Notice, including this IRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration (SBA). In addition, the 
Further Notice and IRFA (or summaries thereof) will be published in the 
Federal Register.
2. Need for, and Objectives of, the Proposed Rules
    34. In this Rural Further Notice, the Commission seeks to expand 
upon the record received in response to the Rural NPRM, with respect to 
additional measures that the Commission can take in order to promote 
the further expansion of spectrum-based services into rural areas. As 
the Commission observed in the Report and Order, there may be 
circumstances in which our market-oriented policies lack the ability to 
foster access to spectrum and deployment of wireless service in rural 
areas. In situations such as these, therefore, it may be appropriate to 
impose renewal-term performance requirements for both existing and 
future licenses in order to continue to encourage the provisioning of 
wireless service to rural areas. Based on these observations, the 
Further Notice seeks comment in the following areas.
    35. First, the Commission seeks comment on the appropriate 
mechanism to further ensure that spectrum continues to be put to its 
highest valued use. Specifically, the Rural Further Notice seeks 
additional comment concerning the effectiveness of the Commission's 
partitioning, disaggregation, and secondary markets rules as well as 
other market-based policies and rules in making wireless services 
available in more rural areas.
    36. Second, the Commission also seeks comment on the potential use 
of ``keep what you use'' relicensing mechanisms, renewal term 
substantial service requirements, and other alternatives such as 
easements to move unused or underused spectrum to those carriers who 
may be able to use it more intensively. At the same time, the 
Commission seeks comment on the economic impact of employing the above 
approaches and whether there are different services that may benefit 
from a different approach to expanded spectrum access.
3. Legal Basis
    37. The Commission tentatively concludes that it has authority to 
issue the Rural Further Notice under sections 4(i), 11, 303(r), 309(j) 
and 706 of the Communications Act of 1934, as amended, 47 U.S.C. 
154(i), 157, 161, 303(r), and 309(j).
4. Description and Estimate of the Number of Small Entities to Which 
the Rules Will Apply
    38. The RFA directs agencies to provide a description of, and where 
feasible, an estimate of the number of small entities that may be 
affected by the rules adopted herein. The RFA generally defines the 
term ``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small business concern'' under the Small Business 
Act. A ``small business concern'' is one which: (1) Is independently 
owned and operated; (2) is not dominant in its field of operation; and 
(3) satisfies any additional criteria established by the Small Business 
Administration (SBA).
    39. 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.
    40. 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.
    41. 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

[[Page 75180]]

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.
    42. 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.
    43. Upper 700 MHz Band Licenses. The Commission authorized service 
in the upper 700 MHz band in 2000. The related auction, previously 
scheduled for January 13, 2003, has been postponed.
    44. Paging. For the Paging Service 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 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.
    45. 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.
    46. 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 adopted a 
two-tiered small business size standard in 2000. 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

[[Page 75181]]

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.
    47. 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.
    48. 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.
    49. 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.
    50. 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.
    51. The Commission's 1994 Annual Report on PLMRs indicates that at 
the end of fiscal year 1994, there were 1,087,267 licensees operating 
12,481,989 transmitters in the PLMR bands below 512 MHz. Because any 
entity engaged in a commercial activity is eligible to hold a PLMR 
license, the revised rules in this context could potentially impact 
every small business in the United States.
    52. 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.
    53. 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.
    54. 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

[[Page 75182]]

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.
    55. 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.
    56. 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.
    57. 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.
    58. 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.
    59. 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.
    60. 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.
    61. 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.
    62. 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.

[[Page 75183]]

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.
    63. 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.
    64. 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.
    65. 700 MHz Guard Band Licenses. In the 700 MHz Guard Band Order, 
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.
    66. 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 Further 
Notice.
5. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements
    67. The Rural Further Notice does not propose any specific 
reporting, recordkeeping or compliance requirements. However, we seek 
comment on what, if any, requirements may arise as a result of our 
discussion in the Rural Further Notice.
6. Steps Taken to Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    68. The RFA requires an agency to describe any significant, 
specifically small business, alternatives that it has considered in 
developing its approach, which may include the following four 
alternatives (among others): (1) The establishment of differing 
compliance or reporting requirements or timetables that take into 
account the resources available to small entities; (2) the 
clarification, consolidation, or simplification of compliance or 
reporting requirements under the rule for small entities; (3) the use 
of performance, rather than design, standards; and (4) an exemption 
from coverage of the rule, or any part thereof, for small entities.
    69. As stated, the Rural Further Notice, the Commission seeks 
detailed comment on additional measures that the Commission can take in 
order to promote the further deployment of wireless services to rural 
and underserved areas. As a general matter, it is reasonable to 
conclude that targeted programs designed to encourage deployment of 
services in high cost or hard-to-serve rural areas could impose 
additional regulatory requirements on a substantial number of carriers, 
including small entities. Overall, however, the Commission believes 
that by creating further opportunities for carriers to serve rural 
areas, small entities could see a significant positive economic impact 
as a result of a new ability to deploy their services in smaller, rural 
areas to which their business plans may be better suited. A more 
specific discussion of the impact to small entities is detailed below.
    70. In this Rural Further Notice, the Commission seeks additional 
comment on the effectiveness of its current partitioning, 
disaggregation, and secondary markets spectrum leasing rules in the 
deployment of wireless service to rural areas. Specifically, the 
Commission seeks to develop a better understanding of the ways in which 
these rules may be insufficient to promote access to spectrum for all 
carriers, including small entities. For example, the Commission seeks 
comment on an alternative proposal initially suggested by a previous 
commenter, which would modify the current rules to provide bidding 
credits for auction winners that commit to partitioning portions of 
their licenses to rural carriers. This plan could impact all rural 
carriers, including small entities, by giving them greater access to 
spectrum. In addition, the Commission also requests comment on an 
alternative approach to the current spectrum leasing rules that would 
require carriers to take affirmative steps to enter into spectrum 
leasing arrangements, such as requiring them to report leasing requests 
made to them and the reasons the requests did not result in a lease. An 
alternative such as this could impact small entities by enabling them 
to enter smaller spectrum leasing arrangements for which they may be 
better suited.
    71. The Rural Further Notice also seeks comment on the potential 
use of ``keep what you use'' relicensing mechanisms as well as renewal 
term substantial service requirements in order to further encourage the 
provisioning of wireless service to rural

[[Page 75184]]

areas. However, the Commission also seeks comment on the alternative 
raised by commenters that a ``keep what you use'' approach could 
potentially impede the efforts taken by the Commission with the 
secondary markets rules. In addition, the Rural Further Notice requests 
comment on an alternative approach that would adopt a substantial 
service construction requirement for licenses that are beyond their 
initial terms. In this respect, the Commission asks whether such 
measures would promote access to spectrum in sparsely populated areas 
and thereby ease the way for carriers, including small entities, to 
serve rural and underserved areas.
7. Federal Rules that May Duplicate, Overlap or Conflict with the 
Proposed Rules.
    72. None.

C. Initial Paperwork Reduction Act of 1995 Analysis

    73. This Rural Further Notice does not contain either a proposed or 
a modified information collection. Accordingly, we need not seek 
comment on the impact of this Rural Further Notice on information 
collections, pursuant to the Paperwork Reduction Act of 1995.

D. Comment Dates

    74. Pursuant to Sec. Sec.  1.415 and 1.419 of the Commission's 
rules, interested parties may file comments on or before January 14, 
2005, and reply comments on or before February 14, 2005. Comments and 
reply comments should be filed in WT Docket Nos. 02-381, 01-14, 03-202. 
Comments may be filed using the Commission's Electronic Comment Filing 
System (ECFS) or by filing paper copies.
    75. Comments filed through the ECFS can be sent as an electronic 
file via the Internet to http://www.fcc.gov/cgb/ecfs/. Generally, only 
one copy of an electronic submission must be filed. If multiple docket 
or rulemaking numbers appear in the caption of this proceeding, 
however, commenters must transmit one electronic copy of the comments 
to each docket or rulemaking number referenced in the caption. In 
completing the transmittal screen, commenters should include their full 
name, U.S. Postal Service mailing address, and the applicable docket or 
rulemaking number. Parties may also submit an electronic comment by 
Internet e-mail. To get filing instructions for e-mail comments, 
commenters should send an e-mail to [email protected], and should include 
the following words in the body of the message, ``get form.'' A sample 
form and directions will be sent in reply. Parties who choose to file 
by paper must file an original and four copies of each filing. If more 
than one docket or rulemaking number appears in the caption of this 
proceeding, commenters must submit two additional copies for each 
additional docket or rulemaking number.
    76. Parties that choose to file by paper must file an original and 
four copies of each filing. Filings can be sent by hand or messenger 
delivery, by commercial overnight courier, or by first-class or 
overnight U.S. Postal Service mail (although we continue to experience 
delays in receiving U.S. Postal Service mail). The Commission's 
contractor, Best Copy and Printing, Inc., will receive hand-delivered 
or messenger-delivered paper filings for the Commission's Secretary at 
236 Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. The 
filing hours at this location will be 8 a.m. to 7 p.m. All hand 
deliveries must be held together with rubber bands or fasteners. Any 
envelopes must be disposed of before entering the building. One copy of 
all comments should also be sent to the Commission's contractor, Natek, 
Inc., 445 12th Street, SW., Suite CY-B402, Washington, DC 20554. In 
addition, parties who choose to file by paper should provide a courtesy 
copy of each filing to Allen A. Barna, Mobility Division, Wireless 
Telecommunications Bureau, 445 12th Street, SW., Portals I, Room 6324, 
Washington, DC 20554 or by e-mail to [email protected].
    77. Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743. U.S. Postal Service first-class mail, 
Express Mail, and Priority Mail should be addressed to Natek, Inc., 445 
12th Street, SW., Washington, DC 20554. All filings must be addressed 
to the Commission's Secretary, Office of the Secretary, Federal 
Communications Commission.
    78. Copies of all filings will be available for public inspection 
and copying during regular business hours at the FCC Reference 
Information Center, Room CY-A257, at Portals II, 445 12th St., SW., 
Washington, DC 20554, and will be placed on the Commission's Internet 
site. Copies of comments and reply comments will be available through 
the Commission's contractor, Natek, Inc., 445 12th St., SW., Room CY-
B402, Washington, DC 20554, www.bcpiweb.com, 1-800-378-3160.

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

    79. Parties who choose to file by paper should also submit their 
comments on diskette. These diskettes, plus one paper copy, should be 
submitted to: Milton Price, Mobility Division, Wireless 
Telecommunications Bureau, Federal Communications Commission, at 236 
Massachusetts Avenue, NE., Suite 110, Washington, DC 20002. Such a 
submission should be on a 3.5-inch diskette formatted in an IBM 
compatible format using Word or compatible software. The diskette 
should be accompanied by a cover letter and should be submitted in 
``read only'' mode. The diskette should be clearly labeled with the 
commenter's name, proceeding (including the docket numbers, WT Docket 
Nos. 02-381, 01-14, 03-202, type of pleading (comment or reply 
comment), date of submission, and the name of the electronic file on 
the diskette. The label should also include the following phrase ``Disk 
Copy--Not an Original.'' Each diskette should contain only one party's 
pleadings, preferably in a single electronic file. In addition, 
commenters must send diskette copies to the Commission's copy 
contractor, 445 12th Street, SW., Room CY-B402, Washington, DC 20554 
(see alternative

[[Page 75185]]

addresses above for delivery by hand or messenger).
    80. Regardless of whether parties choose to file electronically or 
by paper, parties should also file one copy of any documents filed in 
this docket with the Commission's copy contractor, 445 12th Street SW., 
CY-B402, Washington, DC 20554 (see alternative addresses above for 
delivery by hand or messenger).
    81. Alternative formats (computer diskette, large print, audio 
cassette and Braille) are available to persons with disabilities by 
contacting Brian Millin at (202) 418-7426, TTY (202) 418-2555, or via 
e-mail to [email protected]. This Report and Order and Further 
Notice of Proposed Rulemaking can also be downloaded in Microsoft Word 
and ASCII formats at http://www.fcc.gov/wtb.

IV. Ordering Clauses

    82. 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), this further notice of 
proposed rulemaking is adopted.
    83. The Commission's Consumer and Governmental Affairs Bureau, 
Reference Information Center, shall send a copy of the Report and Order 
and Further Notice of Proposed Rulemaking, including the Initial 
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of 
the Small Business Administration.

Federal Communications Commission.
William F. Caton,
Deputy Secretary.
[FR Doc. 04-27050 Filed 12-14-04; 8:45 am]
BILLING CODE 6712-01-P