[Federal Register Volume 65, Number 114 (Tuesday, June 13, 2000)]
[Proposed Rules]
[Pages 37092-37102]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-14881]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 24
[WT Docket No. 97-82; FCC 00-197]
Installment Payment Financing for Personal Communications
Services (PCS) Licensees
AGENCY: Federal Communications Commission.
ACTION: Notice of proposed rule making.
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SUMMARY: In this document the Federal Communications Commission
(Commission) tentatively concludes that it is in the public interest to
modify certain aspects of its rules for the upcoming C and F block
auction. The Commission seeks public comment on various issues,
including proposals to reconfigure the size of C block spectrum
licenses; to modify the entrepreneur eligibility restrictions for
certain licenses in both large and small markets; and to retain the
spectrum cap.
DATES: Comments are due on or before June 22, 2000 and reply comments
are due on or before June 30, 2000. Final ex parte presentations are
due on July 12, 2000.
ADDRESSES: All comments and reply comments should be sent to the Office
of the Secretary, Federal Communications Commission, 445 12th Street,
SW, Washington, D.C. 20554.
FOR FURTHER INFORMATION CONTACT: Audrey Bashkin, Auctions and Industry
Analysis Division, Wireless Telecommunications Bureau, at (202) 418-
0660.
SUPPLEMENTARY INFORMATION: This is a summary of a Further Notice of
Proposed Rule Making (Further Notice) adopted on May 31, 2000, and
released on June 7, 2000. The complete text of this Further Notice,
including attachments, is available for inspection and copying during
normal business hours in the FCC Reference Center (Room CY-A257), 445
12th Street, SW, Washington, DC. It may also be purchased from the
Commission's copy contractor, International Transcription Services,
Inc. (ITS, Inc.), 1231 20th Street, NW, Washington, DC 20036, (202)
857-3800. It is also available on the Commission's web site at http://www.fcc.gov/wtb/auctions.
Synopsis of the Further Notice of Proposed Rule Making
I. Introduction and Overview
1. On January 12, 2000, the Wireless Telecommunications Bureau
(``Bureau'') announced that a broadband Personal Communications
Services (``PCS'') C and F block auction--Auction No. 35--would begin
on July 26, 2000. Under the Commission's current rules, applicants for
C and F block auctions must meet specified financial size requirements
to qualify as ``entrepreneurs'' and to be eligible to compete in the
auction. Following the announcement of Auction No. 35, the Commission
received several formal requests to waive, modify, or eliminate the C
and F block auction and service rules. These requests seek, among other
things, modification of the various C and F block eligibility
requirements for the upcoming auction, reconfiguration of available 30
MHz C block licenses, and adoption of an alternative bidding plan.
2. As justification for the proposed changes, the petitioners point
to the relatively small percentage of C and F block licensees that have
begun providing service in the years since the initial entrepreneurs'
block auctions were held. They also note the increasing trend in the
wireless marketplace toward nationwide service, their need for
additional spectrum in order to ease spectrum capacity constraints, and
their financial readiness to construct and
[[Page 37093]]
operate C and F block systems should they win licenses in the upcoming
auction. Numerous parties have filed opposing and supportive pleadings
in response to these petitions. Opponents argue that businesses that
qualify as ``entrepreneurs'' under our rules are more likely than
larger companies to provide innovative and niche services and to serve
rural areas; that the Commission's previous C and F block installment
payment program was largely responsible for the dearth of build-out
among C and F block licensees; and that changing the eligibility
criteria at this juncture would be detrimental to the existing business
plans of current C and F block ``entrepreneur'' licensees developed
based upon these rules, and to the ability of small businesses to
secure needed financing to provide valuable wireless services.
3. Several parties have also asked that we consider whether we
should revise, waive, or forbear from applying the Commercial Mobile
Radio Service (``CMRS'') spectrum cap for Auction 35. In support of
these requests, the petitioners assert that the demand for CMRS
services has significantly increased and created substantial spectrum
constraints over the last few years. Further, petitioners contend that
lifting the spectrum cap would better enable them to roll out Third
Generation (``3G'') and other advanced services, as well as otherwise
help ensure the rapid and efficient development of the C and F block
spectrum. Those opposing these requests claim that the current spectrum
cap allows sufficient spectrum in local geographic markets to roll out
3G services in the foreseeable future and that petitioners failed to
establish any basis for waiving the spectrum cap.
4. Upon consideration of the petitions and responsive pleadings
received to date, we have tentatively concluded that it is in the
public interest to revise certain aspects of the C and F block rules.
Accordingly, we seek comment in this Further Notice on the following
specific proposals to:
Reconfigure C Block Spectrum License Size
We tentatively conclude that we will reconfigure each 30 MHz C
block license available in future broadband PCS auctions into three 10
MHz C block licenses.
Apply a Tiered Approach to Basic Trading Areas (BTAs)
We tentatively conclude that we will divide BTAs into two tiers
according to the population size of the BTA. Under this proposal,
``Tier 1'' would comprise BTAs at and above a 2.5 million population
threshold; and ``Tier 2'' would comprise BTAs below that population
threshold.
Eliminate Eligibility Restrictions For Certain Licenses In
Tiers
We further propose to remove the auction eligibility restrictions
for certain of the newly reconfigured 10 MHz C block licenses, thereby
establishing ``open'' bidding for these licenses. We tentatively
conclude that we will allow ``open'' bidding (i.e., remove the
eligibility restrictions) for two of the three 10 MHz C Block licenses
in Tier 1, and one of the three 10 MHz C Block licenses in Tier 2. We
also invite comment on whether to allow ``open'' bidding for all three
of the 10 MHz C Block licenses in Tier 1, and two of the three 10 MHz C
Block licenses in Tier 2.
We tentatively conclude that we will allow ``open'' bidding for all
available 15 MHz C block licenses, which have previously been auctioned
but not sold.
We seek comment on whether to allow ``open'' bidding for all
available F block licenses. We also seek comment on whether, instead,
to adopt a tiered approach to eligibility for F block licenses or to
retain existing F block eligibility requirements.
Retain Our Current License Grouping for Bidding in the
Auction
We tentatively conclude that we will retain BTA service areas and a
license-by-license bidding design for Auction No. 35.
Clarify the Grandfather Exception
We invite comment in this proceeding on a number of issues raised
by parties seeking reconsideration of the grandfather exception to the
eligibility rules, which is provided in Sec. 24.709(b)(9)(i) of the
Commission's rules. On the issue of how the exception applies in a
merger situation, we tentatively conclude that when each of the merging
entities is eligible for the ``grandfather'' exception, the exception
extends to the resulting entity, but that when one (or more) of the
merging entities is not eligible for the ``grandfather'' exception, the
exception does not extend to the resulting entity.
Revise the Bidding Credits Available for Auction No. 35
We seek comment on whether to retain existing small and very small
business bidding credits (15 percent and 25 percent, respectively) for
licenses subject to ``open'' bidding or whether to increase them to 25
percent and 40 percent, respectively. We also seek comment on whether
we should change the bidding credits for licenses subject to ``closed''
bidding, i.e., bidding where eligibility restrictions apply.
Alter the Transfer Requirements for Certain Licenses
Licenses Won in ``Open'' Bidding: We tentatively conclude that we
will eliminate the Sec. 24.839 eligibility requirements for the
assignment or transfer of control of C and F block licenses won in
Auction No. 35 ``open'' bidding.
Licenses Won in ``Closed'' Bidding: We seek comment on allowing a
licensee to assign or transfer its license to any qualified entity,
entrepreneur or not, upon the licensee's completion of its first
construction benchmark, whether or not it takes the full five years
allowed under our rules.
Licenses Held by Incumbent Licensees: We seek comment on allowing
an incumbent licensee to assign or transfer its license to any
qualified entity, entrepreneur or not, upon the licensee's completion
of its first construction benchmark, whether or not it takes the full
five years allowed under our rules. We also seek comment on whether we
should allow some flexibility for incumbent licensees to transfer
certain licenses where the carrier can demonstrate ``substantial
service'' throughout its system, rather than on a market-by-market
basis.
Eliminate the License Cap
We tentatively conclude that we will eliminate the Sec. 24.710 cap
on the number of C and F block licenses a single entity may win at
auction.
Retain the Spectrum Cap
We tentatively conclude that we will retain the current spectrum
cap.
II. Background
5. In the Omnibus Budget Reconciliation Act of 1993, Congress
authorized the Commission to use systems of competitive bidding to
award licenses for rights to use the radio spectrum. This authorization
is codified as section 309(j) of the Communications Act. Section
309(j)(3) directs the Commission to ``seek to promote'' a number of
objectives, including:
The development and rapid deployment of new services for
the benefit of the public, including those residing in rural areas;
Promoting economic opportunity and competition and
ensuring that new and innovating technologies are readily accessible to
the public 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
members of minority groups and women, i.e., ``designated entities;''
[[Page 37094]]
Recovery for the public of a portion of the value of the
public spectrum resource made available for commercial use;
Avoidance of unjust enrichment through the methods
employed to award uses of that resource; and
Efficient and intensive use of the electromagnetic
spectrum.
6. Section 309(j)(4) directs the Commission, in prescribing
regulations to implement the objectives of section 309(j)(3), to, inter
alia, (i) establish performance requirements to ensure prompt delivery
of service to rural areas and prevent warehousing of spectrum by
licensees; (ii) prescribe area designations and bandwidth assignments
that promote an equitable geographic distribution of licenses and
services, economic opportunity for a wide variety of applicants,
including designated entities, and rapid deployment of services; and
(iii) ensure that designated entities are given the opportunity to
participate in the provision of spectrum-based services, and, for such
purposes, consider using bidding preferences and other procedures.
7. The Commission outlined the original framework for C and F block
auctions in 1994, establishing the C and F blocks as ``set-aside''
blocks for ``entrepreneurs'' in which eligibility would be restricted
to entities below a specified financial threshold. The Commission
concluded that if it was to meet the Congressional goals of promoting
economic opportunity and competition by dissemination of licenses among
a wide variety of providers, it should take certain affirmative steps
to mitigate barriers to entry faced by smaller businesses. The
Commission also stated its intention to take steps to assure that
designated entities that win licenses have the opportunity to become
strong competitors in providing service. Thus, in attempting to address
the imbalance between small businesses' and large businesses' relative
abilities to access capital, the Commission established two set-aside
blocks (C and F) in which large companies (those over the financial
thresholds) would be prohibited from bidding or holding licenses for a
period of time.
8. The initial C block licenses were awarded through two auctions,
Auction No. 5, which ended on May 6, 1996, and Auction No. 10, which
concluded on July 16, 1996. Auction No. 11, the initial F block
auction, ended on January 14, 1997, and also included D and E block
licenses. Auction No. 22, which concluded on April 15, 1999, made
available C and F block licenses that had been returned to, or
reclaimed by, the Commission. Since the establishment of C and F block
rules in 1994, no auctions, other than the C and F block auctions, have
been conducted on a closed basis due to eligibility restrictions.
Instead, in the other 23 auctions held by the Commission, we have
typically provided opportunities for small businesses through bidding
credits without a set-aside.
9. Since adoption of the original rules for auctions of C and F
block licenses, these rules have steadily evolved in response to
legislative changes, judicial decisions, the needs of licensees
striving to succeed in a rapidly developing wireless market, and the
demand of the public for greater access to wireless services. Two-and-
a-half years ago, in this docket, the Commission responded to requests
from some C block auction winners to revise the auction rules and
procedures for the C and F blocks. In the 1997 C Block Second Report
and Order, as modified by the 1998 C Block Reconsideration Order, the
Commission created a package of financial restructuring options to be
offered to C block licensees experiencing financial difficulties in the
wake of Auctions No. 5 and No. 10. See Amendment of the Commission's
Rules Regarding Installment Payment Financing for Personal
Communications Services (PCS) Licenses Second Report and Order, (C
Block Second Report and Order) 62 FR 55348 (October 24, 1997) and (C
Block Reconsideration Order) 63 FR 17111 (April 8, 1998). The
Commission also decided in the C Block Second Report and Order, as
modified by the 1998 C Block Fourth Report and Order, to allow, for a
period of two years from the beginning of the first post-restructuring
C block auction (Auction No. 22), participation in bidding for C block
licenses by entities that had participated in Auctions No. 5 and 10,
even if such entities had since become too large to qualify as
entrepreneurs under the Commission's rules. See Amendment of the
Commission's Rules Regarding Installment Payment Financing for Personal
Communications Services (PCS) Licenses Fourth Report and Order, (C
Block Fourth Report and Order), 65 FR 14213 (March 16, 2000).
10. Prior to the start of Auction No. 22, three C block licensees
filed for bankruptcy protection. Other C block licensees defaulted on
payments owed for their licenses. Bankruptcy filings and payment
defaults by other C block licensees followed the auction; and, to date,
a total of 232 C and F block licenses, covering a population (``pops'')
of approximately 191 million, have been involved in bankruptcy
proceedings and/or defaulted on license payments. It appears that the
vast majority of the defaulted licenses have never been placed into
service.
11. The Bureau, pursuant to its delegated authority, announced that
we would be holding a C and F block auction on July 26, 2000. The
current inventory for this auction includes 93 30-MHz C block licenses,
21 15-MHz C block licenses and 40 10-MHz F block licenses for operation
on frequencies for which previous licenses have automatically
cancelled, see 47 CFR 1.2110(f)(4)(iii) and (iv) or have been returned
to the Commission. The announcement of Auction No. 35 prompted
petitions from SBC Communications Inc. (``SBC''), Nextel
Communications, Inc. (``Nextel''), and other parties asking that we
waive, modify, or eliminate our entrepreneur eligibility requirements
for participation in the auction. In response to those filings, a
number of parties also proposed that we make other modifications to our
C and F block rules. Additionally, US WEST Wireless, LLC (``US West'')
and Sprint Spectrum L.P. dba Sprint PCS (``Sprint'') filed a joint
petition for reconsideration of our, Order on Reconsideration of the
Fourth Report and Order in WT Docket No. 97-82. The C Block Fourth
Report and Order addressed certain of the rules governing auctions of C
block licenses. Sprint and US West request that the Commission
eliminate its eligibility restrictions for participation in the
upcoming auction as well as modify other C block rules. In addition,
Verizon Wireless (``Verizon'') petitioned the Commission for
clarification or reconsideration of our two-year C block auction
eligibility ``grandfather'' rule, Sec. 24.709(b)(9)(i). The SBC,
Nextel, and US West/Sprint petitions were placed on public notice,
prompting more than 210 comments and other pleadings in response. A
number of parties argue that all, or at least some portion, of the C
and F block spectrum should be open to all participants in order to
satisfy the Commission's obligations under section 309(j)(4). Other
parties oppose these arguments.
12. We have also received petitions from three parties that, under
our proposed revisions to the C block rules, would become eligible to
bid for licenses in the upcoming C and F block auction. These parties
request that the Commission waive, or forbear from applying, the CMRS
spectrum cap with regard to the spectrum available in Auction No. 35.
We placed these petitions on public notice and received comments from
23 parties and reply comments from 14 parties.
[[Page 37095]]
13. Based upon the extensive record before us, and our continuing
obligation to weigh important spectrum policy management considerations
in addressing the public interest, we have tentatively concluded that
we will revise our rules for C and F block spectrum. We set forth our
proposals and tentative conclusions concerning possible revisions in
the rules in this Further Notice.
III. Discussion
A. Reconfiguration of C Block Spectrum License Size
14. Background. In 1994, the Commission established a band plan for
broadband PCS that provides for 30 MHz ``C block'' licenses and 10 MHz
``F block'' licenses. Each C and F block license covers a specific
geographic service area known a Basic Trading Area (``BTA''). BTAs fall
within still larger geographic service areas known as Major Trading
Areas (``MTAs''). BTA and MTA service areas are based on the Rand
McNally 1992 Commercial Atlas Marketing Guide. As noted, in 1997 the
Commission created a package of financial restructuring options
designed to provide limited relief to C block licensees experiencing
financial difficulties in the wake of Auction No. 5. Under one of the
available options, licensees were allowed to disaggregate 15 MHz of
each of their 30 MHz C block licenses in an MTA. In disaggregating a 30
MHz C block license, a licensee would retain a 15 MHz C block license
and would return the remaining 15 MHz of C block spectrum to the
Commission for inclusion in the next C block auction, Auction No. 22.
Because several of the available 15 MHz C block licenses were not won
in Auction No. 22, the license inventory for Auction No. 35 includes
both 15 and 30 MHz C block licenses, as well as 10 MHz F block
licenses.
15. A number of parties have suggested various proposals to alter
the Commission's current band plan. Several parties propose that we
subdivide each available 30 MHz C block license into three 10 MHz
licenses. Others suggest that we subdivide each available 30 MHz C
block license into a 20 MHz and a 10 MHz license. Other parties argue
against subdividing the C block license spectrum size.
16. Discussion. We tentatively conclude that each 30 MHz C block
license available in Auction No. 35 should be reconfigured into three
10 MHz C block licenses. We believe that by increasing the number of
available licenses through this reconfiguration, taken together with
our proposals to lift certain of our eligibility requirements, we will
promote wider auction participation and license distribution in
accordance with the goals of section 309(j) of the Communications Act.
Small bidders should find bidding for 10 MHz licenses more affordable,
while large bidders should enjoy greater flexibility in tailoring their
bidding to their business plans without running afoul of the spectrum
cap. We further tentatively conclude that a 10 MHz C block license is a
viable minimum size for voice and some data services including Internet
access and provides an appropriate building block for bidders that wish
to acquire a larger amount of spectrum. Accordingly, we propose to
permit bidders to aggregate the 10 MHz C block licenses, subject only
to the overall 45 MHz CMRS spectrum cap, and the relevant remaining
eligibility restrictions for these licenses. We seek comment on this
proposal and our tentative conclusions. We also seek comment on whether
a different configuration, including adoption of blocks of 20 MHz where
possible, would be more appropriate to provide meaningful opportunities
for potential bidders, including new entrants into particular
geographic markets.
17. Finally, with respect to aggregation of 10 MHz licenses, we
note that the Wireless Telecommunications Bureau recently sought
comment on procedures for implementing a combinatorial (``package'')
bidding design for the auction of licenses in the 700 MHz bands, which
would facilitate aggregations of complementary licenses into larger
blocks. See Auction of Licensees in the 747-762 and 777-792 MHz Bands
Scheduled for September 6, 2000; Comment Sought on Modifying the
Simultaneous Multiple Round Auction Design to Allow Combinatorial
(Package) Bidding, 65 FR 35636 (June 5, 2000). While given the much
larger number of licenses in this auction, true combinatorial bidding
would be more complex and perhaps impractical to implement in the near
term, we invite parties to suggest ways in which bidders could
efficiently aggregate licenses in the auction process.
B. Eliminate Eligibility Restrictions for Certain Licenses Under a
Tiered Approach
18. Background. Under the Commission's current rules, only
qualified ``entrepreneurs'' are permitted to participate in auctions of
C and F block licenses. To be considered an entrepreneur eligible for C
and F block auction participation, an applicant (together with its
affiliates and persons or entities that hold interests in the applicant
and their affiliates) must have had gross revenues of less than $125
million in each of the last two years and must have total assets of
less than $500 million. See 47 CFR 24.709.
19. We seek comment on proposals to lift the entrepreneur
eligibility restrictions for some, but not all, licenses available in
Auction No. 35 and in future C and F block auctions. Our proposals take
into account the contention of many entrepreneurs and their
representatives that argue that fairness requires the Commission to
continue to maintain the present eligibility requirements. These
parties contend that entrepreneurs developed business plans in the
expectation that the C and F block licenses would remain set aside for
them and that any auctions of reclaimed C and F block licenses would be
subject to the same eligibility restrictions that applied in the
original auctions of those licenses. These parties also point out that
successful entrepreneurs have achieved substantial public interest
benefits by providing types of services and service packages not
offered by larger providers, and extending service to rural markets.
These parties also argue that the continuation of the eligibility
restrictions will better serve their ability to expand their service
area as a competing carrier and to enter roaming relationships with
other regional carriers.
20. Our proposals also take into account some of the arguments of
several CMRS providers seeking to participate in the upcoming auction
that currently do not qualify for entrepreneur eligibility. Such
providers argue that opening up the entire auction to all bidders would
be pro-competitive because it would allow them to acquire additional
spectrum to meet capacity concerns, provide advanced services, and
increase the size of their subscriber ``footprints.'' They contend that
they, unlike many entrepreneurs, possess the operational expertise and
substantial resources necessary to construct and successfully operate
PCS systems in already highly competitive markets. These commenters
also point to evidence that suggests that the set-aside of C and F
Block spectrum has not been successful in encouraging entrepreneurs to
participate in the provision of spectrum-based services, particularly
in large markets.
21. We note that, in apparent recognition of the Commission's
obligation to balance a number of spectrum policy considerations, many
parties have offered compromise
[[Page 37096]]
suggestions as alternatives to the current C block rules should the
Commission choose not to adopt their preferred approaches. Some
commenters, including a number of entrepreneurs, have suggested
compromise alternatives that would eliminate the set-aside (in whole or
in part) for markets with populations in excess of certain specified
amounts ranging from 700,000 to five million. According to these
commenters, such compromise alternatives to the current C block rules
would provide companies with greater financial resources access to
licenses for markets with larger populations, without foreclosing the
opportunity for entrepreneurs to bid for those licenses. The suggested
alternatives would also maintain the eligibility restrictions in
markets where entrepreneurs might have a reasonable chance of success.
22. Some commenters suggest compromises that would not use tiers,
but would disaggregate the 30 MHz C block licenses into three 10 MHz
blocks and would open up the bidding on one or two of the three 10 MHz
licenses in all markets.
23. While most of the commenters have focused on the Commission's
treatment of the C block spectrum, as a general matter, current
entrepreneurs argue in favor of keeping the 10 MHz F block licenses as
restricted. On the other hand, companies currently ineligible to
participate in Auction 35 argue in favor of open eligibility for those
licenses.
24. Discussion. As the expert agency charged with the management of
the nation's radio spectrum, the Commission must continually evaluate
the provision of service to the American public, weigh a variety of
public interest considerations, and assess the changing needs of the
industry. In doing so, we must always remain cognizant of our statutory
obligations. These obligations often require that we balance a number
of different, and at times competing, spectrum policy goals. In
discharging these responsibilities, we seek to provide meaningful
opportunities to small businesses, to speed the deployment and
development of new services to the public to encourage the efficient
use of spectrum, and to recover for the public a portion of the value
of spectrum.
25. When we adopted the original rules for C and F block spectrum
in 1994, PCS was in its infancy. Since 1994, circumstances in the
industry have changed. In light of significant technology developments
and increased demand for spectrum, it is appropriate for the Commission
to consider reassessing the proper balance of its spectrum policies
including whether its current C and F block rules continue to serve the
public interest in all respects. In crafting rules for the upcoming
auction, we recognize that we cannot overlook the difficulties that
followed the original C block spectrum auction and our commitment, to
promote opportunities for designated entities. We maintain our
commitment to provide meaningful opportunities for entrepreneurs,
including those that participated in our most recent auction of C block
spectrum. We also recognize that some qualifying entrepreneurs have
been successful innovators, providing service to rural markets and
niche services in other markets. Our desire to promote the continued
success of such entities, as they seek to fill in gaps in their service
areas or otherwise strive to expand their service offerings, also
factor into our decision regarding the extent to which we should revise
our current rules.
26. Thus, we believe that entrepreneurs raise legitimate issues
about preserving the eligibility restrictions on at least a portion of
the spectrum that will be awarded in the upcoming auction. However,
based on the demand for spectrum to satisfy congestion, new technology
and competitive needs, we tentatively conclude that it would serve the
public interest to make some additional spectrum available to all
interested bidders. In balancing these factors, we believe parties on
both sides of this debate have suggested a number of possible
compromises that better advance the public interest than either
maintaining the status quo or, conversely, eliminating the eligibility
restrictions entirely. In particular, we think the parties suggesting
tiering approaches have proposed creative solutions to balancing the
competing interests by recognizing both that the need for additional
unrestricted spectrum is greatest in the larger markets and that the
track record for success for smaller entities is strongest in mid-sized
and smaller markets.
27. With these factors in mind, we seek comment on the following
proposals to lift the entrepreneur eligibility requirements for some of
the licenses available in Auction No. 35 and future auctions.
Consistent with several of the recommendations we have received, these
proposals vary in the amount of spectrum that would remain set-aside
according to the size of both the available licenses and the markets.
28. Available 30 MHz C block licenses: For markets with available
30 MHz C block licenses, we seek comment on a proposal based on our
tentative conclusion to reconfigure these licenses into three 10 MHz
licenses. Our proposal is further based on dividing the available BTAs
into two tiers: ``Tier 1'' would comprise BTAs with populations at or
above a certain threshold, and ``Tier 2'' would comprise BTAs below
that population threshold. We tentatively conclude that we should allow
``open'' bidding (i.e. remove eligibility requirements) for two of the
three 10 MHz C block licenses in Tier 1, and one of the three 10 MHz C
block licenses in Tier 2. We seek comment on this tentative conclusion.
29. We recognize that in balancing the interests served by
preserving meaningful opportunities for designated entities and those
served by opening up the spectrum to bidding by all entities, there may
be other proposals we should consider. Thus, we also seek comment on
whether we should allow ``open'' bidding for all three of the 10 MHz C
block licenses in Tier 1, and two of the three 10 MHz C block licenses
in Tier 2.
30. Tiers: We also seek comment on what population threshold we
should use to divide the Tier 1 and Tier 2 BTAs. As discussed, the
record provides some indication that designated entities have had
greater success in markets with smaller populations, particularly below
the top twenty markets. Markets with larger populations inevitably
require more capital to build out and provide service. Moreover, as
noted by commenters, there is evidence that spectrum is needed by
incumbents to provide new generation wireless services and to alleviate
congestion or by new entrants to fill out service footprints.
Accordingly, we tentatively conclude that a population of 2.5 million
or greater is the proper cut-off for Tier 1 BTAs (the 17 largest
markets); however, we also seek comment on establishing the threshold
for Tier 1 at those BTAs with populations at or greater than either 2
million (the 23 largest markets) or 1.5 million (the 32 largest
markets). We recognize that other alternatives might also make sense.
For example, we might also create a ``Tier 3'' for BTAs with
populations below 700,000, the demarcation line that SBC recommends,
establishing in this tier a larger set-aside for entrepreneurs. We also
might instead decline to adopt a tiered approach at all, instead
applying changes in eligibility restrictions to all BTAs, regardless of
size. We seek comment on these alternatives, as well as on other
possible tier divisions and other options for opening the bidding for
some of the available C block licenses.
31. Available F block licenses: We seek comment on eliminating the
[[Page 37097]]
eligibility requirements for all of the 10 MHz F block licenses
available in Auction No. 35. We note that from a historical
perspective, F block did not face the same types of problems and
difficulties as C block. This difference is evidenced by the fact that
the Commission did not see the need to allow F block licensees to
restructure their spectrum holdings, nor did it provide for the
grandfathering of eligibility for entrepreneur entities in future F
block auctions. Thus, we have consistently treated the F block spectrum
differently than C block in recognition of the fact that the history of
these spectrum blocks evolved in divergent manners. Accordingly, we may
not be faced with the same equity considerations in maintaining a set-
aside of F block spectrum as we are for C block. Moreover, we note that
in virtually all markets where there is an available F block license,
there is a 30 MHz license held by a current C block entrepreneur. Thus,
there is already significant set-aside spectrum in each of these
markets. Further, despite the lack of historical controversy regarding
the F block spectrum, build out of these licenses has not progressed as
quickly as we may have anticipated, especially in larger markets.
Allowing open eligibility for all 10 MHz F block licenses might lead to
more expeditious provision of service to American consumers.
Alternatively, we recognize that we could adopt a tiered approach
similar to the proposals for C block licenses discussed, or we could
retain the existing F block eligibility requirements. We seek comment
on these alternatives.
32. 15 MHz C block licenses: Finally, we propose, and seek comment
on, eliminating the eligibility requirements for all 15 MHz C block
licenses that will be available in Auction No. 35 and in future C block
auctions. As noted previously, all of the 15 MHz licenses available in
Auction No. 35 were available in restricted Auction No. 22, yet
remained unsold. Accordingly, we believe that it is appropriate to make
these licenses, located principally in rural markets, immediately
available to any interested bidder.
33. Unsold C and F block licenses: We also seek comment on whether
we should establish a rule that lifts eligibility restrictions on any C
or F block licenses that remain unsold after Auction No. 35 or in other
future auctions. Such licenses could then promptly be put up for
auction under open bidding.
C. License Grouping for Bids
34. Background. In past C and F block auctions (as well as D and E
block auctions), participants have bid separately for each license.
Nextel proposes that all available 30 MHz licenses be reconfigured into
20 MHz and 10 MHz licenses and that the newly created 20 MHz C block
licenses and the available 15 MHz C block licenses be offered together
on a ``bulk bid'' (i.e., winner take all) basis in an expedited
auction.
35. Discussion. We tentatively conclude that we will take bids
separately on each license in Auction No. 35 on a simultaneous multiple
round basis as we have done in the past. We are persuaded by commenters
that the massive scale of Nextel's bulk bid proposal (or something
similar based upon a 10 MHz C block license configuration) would
exclude all but a very few competitors. Small entities would be hard
pressed to obtain the financing necessary to win and pay for the
licenses and construct the systems included in the bulk bid proposal.
Many other carriers would be constrained from participating by the CMRS
spectrum cap. While we agree with Nextel that bidding for individual
licenses will make it somewhat more challenging for it to win the very
broad aggregation of licenses it seeks to acquire, we do not think this
requires us to resort to its bulk bid proposal. Experience in our
auctions to date demonstrates that significant aggregations of licenses
through the auction process are feasible. For this reason, we believe
that bidding for each license separately is unlikely to preclude
carriers from aggregating licenses on a nationwide or regional basis,
and at the same time provides carriers who have intense spectrum needs
in a particular market the opportunity to compete for licenses as well.
D. Grandfather Exception
36. Background: In the C Block Second Report and Order, the
Commission established in Sec. 24.709(b)(9)(i) a ``grandfather''
exception to the entrepreneur eligibility requirement for participation
in C block auctions. Under that exception, all entities that had been
eligible for and had participated in Auction No. 5 or Auction No. 10
would be eligible to bid on C block licenses in Auction No. 22,
regardless of their financial size at the time of the auction. We
declined to apply the ``grandfather'' exception to bidding on F block
licenses, based on our belief that F block licensees did not have the
same need for financial relief. In the C Block Fourth Report and Order,
we decided, in fairness to other future bidders, to limit the
grandfather exception to a two-year period beginning on the start date
of Auction No. 22, i.e., through March 23, 2001. In the C Block Fourth
Report and Order, we denied a petition by Omnipoint asking that we
extend the grandfather exception indefinitely.
37. Discussion: In a petition for reconsideration or clarification
of the C Block Fourth Report and Order, Verizon asks us to reexamine
the grandfather exception and limit resulting eligibility to those
Auction No. 5 and 10 participants that won licenses in the auctions and
then returned spectrum pursuant to the Commission's C block
restructuring options. We seek comment on the issues raised in the
Verizon petition and, more generally, on whether the grandfather
exception should be revised or clarified in light of current
circumstances.
38. We note that Nextel makes arguments similar to Verizon's in
response to the US West/Sprint petition and also objects to the fact
that the grandfather exception in that it does not extend to Auction
No. 11 and Auction No. 22 participants. We have received notice that
currently ``grandfathered'' companies intend to combine with other
carriers, some of which are also eligible for the grandfather
exception. We believe that the eligibility of successor entities for
participation in ``closed'' bidding is a subject that may also be ripe
for clarification in our upcoming order. Accordingly, we seek comment
on our tentative conclusion that upon the merger of two entities, each
of which is eligible for the ``grandfather'' exception, the exception
extends to the resulting entity, but that, upon the merger of two
entities, only one of which is eligible for the ``grandfather''
exception, the exception does not extend to the resulting entity. We
recognize that our tentative conclusion is based upon simplified
examples, and we encourage comment on how to determine C and F block
eligibility when faced with more complex transactions.
E. Bidding Credits
39. Under current rules, a winning C or F block bidder that
qualifies as a small business (i.e., a business that, together with its
affiliates and persons or entities that hold interests in such entity
and their affiliates, has had average annual gross revenues that are
not more than $40 million for the preceding three years) or a small
business consortium may use a bidding credit of 15 percent. See 47 CFR
24.712(a); 24.717(a); id., 1.2110(e)(2)(iii). A winning bidder that
qualifies as a very small business (i.e.,
[[Page 37098]]
a business that, together with its affiliates and persons or entities
that hold interests in such entity and their affiliates, has had
average annual gross revenues that are not more than $15 million for
the preceding three years) or a very small business consortium may use
a bidding credit of 25 percent. See 47 CFR 24.712(b); 24.717(b); id.,
1.2110(e)(2)(ii).
40. Since the Commission first established the entrepreneurs' block
set-aside and C and F block bidding credits, its experience has
demonstrated that bidding credits without a set-aside enable small
businesses to compete effectively in open auctions, even auctions of
broadband PCS licenses.
41. Discussion. A number of entrepreneurial firms have argued that
if we open eligibility for some portion of the C block spectrum, we
should increase the bidding credits applicable to those licenses. We
seek comment on whether we should retain existing small and very small
business bidding credits (15 percent and 25 percent, respectively) for
licenses subject to ``open'' bidding or whether we should increase them
to 25 percent and 40 percent, respectively.
42. We also seek comment on whether we should change the bidding
credits for licenses subject to ``closed'' bidding, i.e., bidding where
eligibility restrictions apply. For example, we could increase the
bidding credits for these licenses, or we could keep them at their
current level since the rationale for increasing the credits in open
auctions--to provide additional assistance for small companies bidding
against major wireless providers--does not apply to restricted
auctions. Finally, we could eliminate bidding credits altogether on the
ground that they are unnecessary and perhaps even counterproductive in
ensuring opportunities for small business in the set-aside auctions. In
this regard, we recognize that among those eligible to participate in
the closed, entrepreneurs' auctions, some well capitalized new entities
with small gross revenues qualify for bidding credits, while some older
companies with small total assets and net revenues but high gross
revenues do not. We seek comment on these various proposals.
F. Transfer Requirements
43. To ensure that C and F block licensees did not take advantage
of the eligibility set-aside by immediately assigning or transferring
control of their licenses to entities that do not meet the eligibility
requirements, the Commission established a holding rule for these
licenses as well as unjust enrichment provisions. Under the current
holding rule, C and F block licensees may, for the first five years
from the date of their initial license grant, assign or transfer
control of their C and F block licenses only to entities that meet the
eligibility requirements or to other C and F block licensees that
obtained their licenses while meeting the requirements. See 47 CFR
24.839. The Commission set the current holding period at five years to
guarantee that a C or F block licensee would hold and build out the
license until the first construction benchmark, which currently occurs
five years after the date of licensing.
44. Discussion. We propose to modify our transfer requirements to
correspond to our proposed changes in the eligibility requirements and
to encourage rapid construction of C and F block systems. Specifically,
we tentatively conclude that C and F block licenses won pursuant to
open bidding at Auction No. 35, or any future open auction for such
spectrum, would not be subject to a transfer holding rule. For licenses
won in closed bidding in any C or F block auction, past or future, we
seek comment on tying the holding period to completion of build-out
requirements. Under this proposal, a licensee would be able to assign
or transfer its license to any qualified entity, entrepreneur or not,
upon the licensee's completion of its first construction benchmark,
whether or not it takes the full five years allowed by our rules. In
this way, we can continue to minimize the trafficking of C and F block
licenses won pursuant to closed bidding, while enhancing the likelihood
of early build-out. We seek comment on these proposals.
45. Additionally, we seek comment on whether to allow some further
flexibility for incumbent licensees that may not have fully satisfied
their construction requirements for all their licenses. We wish to
examine whether we should, under certain circumstances, evaluate a
licensee's compliance with construction requirements on a system-wide
basis. For example, we seek comment on whether we should allow a
carrier to exchange and transfer licenses if the carrier can
demonstrate ``substantial service'' throughout its system, rather than
in that particular market. We also seek comment on any other
modifications to our transfer restrictions that would provide incumbent
licensees with the flexibility to restructure their business plans
without decreasing their incentive to rapidly construct systems and
place them in operation.
G. License Cap
46. Background. Section 24.710 of the Commission's rules prohibits
an auction applicant from winning more than 98 C and F block licenses.
The rule requires an applicant that is the high bidder for more than 98
C and F block licenses to withdraw its bids for a sufficient number of
licenses to comply with the 98-license limit. The limit applies only to
licenses won at auction, not to the total number of licenses that may
be obtained post auction. When established in 1994, the license cap was
intended to facilitate a fair distribution of licenses within the two
blocks by preventing an entity from winning more than approximately 10
percent of the then-total of 986 C and F block licenses.
47. Discussion. We tentatively conclude that we will remove
Sec. 24.710 from the Commission's rules. In 1994, when the rule was
implemented, the Commission anticipated holding only one C block and
one F block auction. To date, however, four C and F block auctions have
been held, with the fifth, Auction No. 35, scheduled and one or more
additional auctions anticipated. Many different entrepreneurs have won
C and F block licenses at auction, and substantial diversity among C
and F block licensees continues to exist. The Commission has achieved
its initial objective of a fair distribution C and F block licenses.
Moreover, our proposal to reconfigure available 30 MHz C block
licenses, if implemented, would create an additional 186 C block
licenses, while adoption of our proposal to eliminate the eligibility
restrictions for many of the available C and F block licenses would
significantly enhance the likelihood that these licenses would be won
by a variety of entities. Accordingly, we seek comment on this
tentative conclusion.
H. Spectrum Cap
48. Background. The CMRS spectrum cap, set forth in Sec. 20.6 of
the Commission's rules, limits the amount of cellular, broadband PCS,
and digital Specialized Mobile Radio (``SMR'') spectrum in which any
entity may have an attributable interest in any geographic area. As
discussed, we received petitions from three parties that request that
the Commission waive, or forbear from applying, the CMRS spectrum cap
with regard to any spectrum awarded in the upcoming C and F blocks
auction.
49. Discussion. We tentatively conclude that we should not grant
the petitions seeking waiver of or forbearance from, the CMRS spectrum
cap rules and, accordingly, we will
[[Page 37099]]
apply the cap to licenses of PCS C and F block spectrum to be auctioned
in Auction No. 35. In September 1999, after extensive analysis of
spectrum allocation and competitive market conditions, we determined in
our Biennial CMRS Spectrum Cap Order that the CMRS spectrum cap, with
some modification, continued to be a necessary and efficient means to
promote competition and protect the public interest. Specifically, we
concluded that a cap on this spectrum serves the public interest by
promoting competition, preventing excessive concentration of licenses,
providing incentives for licensees to make more efficient use of their
spectrum, encouraging innovation, and promoting dissemination of
licenses to a wide variety of applicants. We also concluded that the
``bright-line'' test afforded by the CMRS spectrum cap rule efficiently
promoted regulatory certainty and regulatory efficiency. For any
carrier with a demonstrable need for additional spectrum in a
particular geographic area, we established and clarified a process by
which it could obtain a waiver of the spectrum cap rule.
50. On the basis of the petitions and the record filed in response,
we propose not to revise the CMRS spectrum cap in light of the upcoming
auction and our proposed rule changes described herein. Since its
inception in 1994, the cap on the 180 MHz of CMRS spectrum (i.e.,
cellular A and B blocks, PCS A through F blocks, and digital SMR) has
limited the amount of spectrum any carrier could aggregate from any
part of the CMRS spectrum, including spectrum in the PCS C and F
blocks, so as to ensure the many benefits of competition. The pleadings
filed in connection with the upcoming auction contain no new material
information regarding the costs and benefits of the spectrum cap and do
not purport to make a waiver showing under the standard set forth in
the Biennial CMRS Spectrum Cap Order. See 1998 Biennial Regulatory
Review, Report and Order 64 FR 54564 (October 7, 1999). Our proposal to
revise the rules pertaining to the PCS C and F block spectrum helps
ease the impact of the cap in this auction, and thereby renders cap
relief unnecessary. By proposing to divide the 30 MHz blocks of C block
spectrum into 10 MHz blocks in the upcoming auction, we would better
enable carriers to obtain additional spectrum without the need to
exceed the CMRS spectrum cap. Carriers currently have accumulated
spectrum up to the CMRS spectrum cap limits, either the general 45 MHz
cap or the 55 MHz cap that applies to rural areas, in only a few
locations. With regard to the C and F block spectrum to be auctioned,
in every market almost all carriers could obtain additional spectrum in
blocks of 10 MHz (or 15 MHz where applicable) and still comply with the
spectrum cap without any need for disaggregation. As discussed, for
those carriers that require more than 45 MHz of spectrum in the near
term, we have established a process for granting waiver of the spectrum
cap. We stated that we would consider granting a waiver of the spectrum
cap in a particular geographic area to the extent a carrier could
credibly demonstrate that the spectrum cap was having a significantly
adverse effect on its ability to provide 3G or other advanced services.
We also note that our year 2000 biennial review of the spectrum cap
rule commences later this year. This proceeding will provide us another
opportunity to revisit, in a more comprehensive manner than the
pleadings before us, issues pertaining to the CMRS spectrum cap and
whether it should be retained, modified, or eliminated. We seek comment
on our tentative conclusion to retain the CMRS spectrum cap on the PCS
C and F block spectrum scheduled for auction.
IV. Conclusion
51. Based on the foregoing, we seek comment on overall changes to
the C and F block rules that take into account our competing statutory
objectives to manage spectrum in the public interest. We conclude that
this Further Notice will provide us with an opportunity to develop a
record on the specific proposals to open eligibility for this spectrum
and otherwise revise the C and F block rules for the benefit of
consumers and the economy.
V. Procedural Matters
A. Ex Parte Rules--Permit-But-Disclose Proceeding
52. This is a permit-but-disclose notice and comment rulemaking
proceeding. Ex parte presentations are permitted, except during the
Sunshine Agenda period, provided they are disclosed pursuant to the
Commission's rules. See generally 47 CFR 1.1202, 1.1203, and 1.1206.
B. Regulatory Flexibility Act Analysis
53. As required by the Regulatory Flexibility Act (RFA), the
Commission has prepared an Initial Regulatory Flexibility Analysis
(IRFA) of the possible impact on small entities of the proposals and
tentative conclusions set forth in the Further Notice in WT Docket No.
97-82. Written public comments are requested on the IRFA. Comments on
the IRFA must have a separate and distinct heading designating them as
responses to the IRFA and must be filed by the deadlines for comments
on the Further Notice. In accordance with the RFA, the Commission will
send a copy of this Further Notice, including the IRFA, to the Chief
Counsel for Advocacy of the Small Business Administration.
C. Paperwork Reduction Act Analysis
54. This Further Notice contains neither a new nor a modified
information collection.
D. Comment Dates
55. Pursuant to Secs. 1.415 and 1.419 of the Commission's rules,
interested parties may file comments on or before June 22, 2000, and
reply comments on or before June 30, 2000. 47 CFR 1.415, 1.419.
Comments may be filed using the Commission's Electronic Comment Filing
System (ECFS) or by filing paper copies. See Electronic Filing of
Documents in Rulemaking Proceedings, 63 FR 24121 (May 1, 1998).
56. Comments filed through ECFS may be sent as an electronic file
via the Internet to http://www.fcc.gov/e-file/ecfs.html. Comments filed
through the ECFS may be sent as an electronic file via the Internet to
http://www.fcc.gov/e-file/ecfs.html. Generally, only one copy of an
electronic submission must be filed; however, if multiple docket or
rulemaking numbers appear in the caption of this proceeding, commenters
must transmit one electronic copy of the comments to each docket or
rulemaking number referenced in the caption. When completing the
transmittal screen, commenters should include their full name, Postal
Service mailing address, and the applicable docket or rulemaking
number. Parties may also submit an electronic comment by Internet e-
mail. To receive filing instructions for e-mail comments, commenters
should send an e-mail to [email protected], and should include the following
words in the body of the message, ``get form your e-mail address>.'' A
sample form and directions will be sent in reply.
57. Parties who choose to file by paper must file an original and
four copies of each filing. If participants want each Commissioner to
receive a personal copy of their comments, an original plus nine copies
must be filed. 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. All filings
must be sent to the Commission's Secretary, Magalie Roman Salas, Office
of the Secretary, Federal
[[Page 37100]]
Communications Commission, 445 12th Street, SW, Room TW-A325,
Washington, DC 20554. A courtesy copy should be delivered to Audrey
Bashkin, Auctions and Industry Analysis Division, Wireless
Telecommunications Bureau, Federal Communications Commission, 445 12th
Street, SW, Room 4A-665, Washington, DC 20554. Parties should reference
WT Docket No. 97-82 in their comments. Pursuant to Sec. 1.1200(a) of
the Commission's rules, presentations on issues in this proceeding will
be prohibited after 7 p.m., July 12, 2000, until release of the
Commission's order dealing with those issues. 47 CFR 1.1200(a) and
1.1202(a). All relevant and timely comments will be considered by the
Commission before final action is taken in this proceeding. Comments
and reply comments will be available for public inspection during
regular business hours in the FCC Reference Information Center of the
Federal Communications Commission, 445 12th Street, SW, Washington, DC
20554.
E. Ordering Clauses
58. Authority for issuance of this Further Notice is contained in
sections 4(i), 309(r), and 309(j) of the Communications Act of 1934, as
amended, 47 U.S.C. 154(i), 303(r), and 309(j).
Initial Regulatory Flexibility Analysis
59. As required by the Regulatory Flexibility Act (RFA), the
Commission has prepared an Initial Regulatory Flexibility Analysis
(IRFA) of the possible economic impact on small entities of the rules
proposed in this Further Notice in WT Docket No. 97-82. Written public
comments are requested on the IRFA. Comments on the IRFA must have a
separate and distinct heading designating them as responses to the IRFA
and must be filed by the deadlines for comments on the Notice. The
Commission will send a copy of the Further Notice, including this IRFA,
to the Chief Counsel for Advocacy of the Small Business Administration.
See 5 U.S.C. 603(a).
A. Need for, and Objectives, of the Proposed Rules
60. Section 309(j) of the Communications Act directs the Commission
to disseminate licenses among a wide variety of applicants, including
small businesses and other designated entities. Section 309(j) also
requires that the Commission ensure the development and rapid
deployment of new technologies, products, and services for the benefit
of the public, and recover for the public a portion of the value of the
public spectrum resource made available for commercial use. To date,
the Commission has received numerous requests to waive, modify, or
eliminate certain of the C and F block auction and service rules for C
and F block broadband Personal Communications Services (``PCS'')
licenses. As discussed more fully in section E of this IRFA, infra,
these requests seek, among other things, modification of the C and F
block entrepreneur eligibility requirements for the upcoming C and F
block auction, reconfiguration of available 30 MHz C block licenses,
and adoption of an alternative bidding plan. Upon consideration of
these numerous requests, the Commission has tentatively concluded that
it is in the public interest to revise certain aspects of the C and F
block rules. This Further Notice sets forth the Commission's proposals
and tentative conclusions concerning possible revisions to the rules
governing the C and F block spectrum. The Commission believes that this
Further Notice will provide the Commission with an opportunity to
develop a record on the specific proposals to open eligibility for this
spectrum and otherwise revise the C and F block rules for the benefit
of consumers and the economy. In addition, the Commission believes that
the tentative conclusions and proposals set forth in this Further
Notice help meet the goals and objectives of section 309(j), and
promote competition while maintaining the fair and efficient
implementation of the auctions program. Accordingly, the Commission
seeks comment on all proposals, alternatives, tentative conclusions,
and other issues described in the Further Notice; and the impact that
such proposals, alternatives, tentative conclusions, and other issues
may have on small entities.
B. Legal Basis
61. This action is authorized under sections 4(i), 303(r), and
309(j) of the Communications Act of 1934, as amended, 47 U.S.C. 154(i),
303(r), and 309(j).
C. Description and Estimate of the Number of Small Entities to Which
the Proposed Rules Will Apply
62. The RFA directs agencies to provide a description of and, where
feasible, an estimate of the number of small entities that will be
affected by the proposed rules, if adopted. Generally, the RFA defines
the term ``small entity'' as having the same meaning as the terms
``small business,'' ``small organization,'' and ``small governmental
jurisdiction.'' The term ``small business'' has the same meaning as the
term ``small business concern'' under the Small Business Act, unless
the Commission has developed one or more definitions that are
appropriate for its activities. Under the Small Business Act, a ``small
business concern'' is one which: (i) Is independently owned and
operated; (ii) is not dominant in its field of operation; and (iii)
meets any additional criteria established by the Small Business
Administration (SBA). A small organization is generally ``any not-for-
profit enterprise which is independently owned and operated and is not
dominant in its field.'' Nationwide, as of 1992, there were
approximately 275,801 small organizations.'' ``Small governmental
jurisdiction'' generally means ``governments of cities, counties,
towns, townships, villages, school districts, or special districts,
with a population of less than 50,000.'' As of 1992, there were
approximately 85,006 local governments in the United States. This
number includes 38,978 counties, cities, and towns; of these, 37,566,
or 96 percent, have populations of fewer than 50,000. The Census Bureau
estimates that this ratio is approximately accurate for all
governmental entities. Thus, of the 85,006 governmental entities, we
estimate that 81,600 (91 percent) are small entities.
63. The possible rule changes described in the Further Notice
affect all small entities that choose to participate in the upcoming
auction of C and F block spectrum and other future auctions of C and F
block spectrum, including small businesses currently holding C and F
block licenses and other small businesses that may acquire licenses
through the auction. The broadband PCS spectrum is divided into six
frequency blocks designated A through F, and the Commission has
auctioned licenses in each block. Frequency blocks C and F have been
designated by the Commission as ``entrepreneurs' blocks,'' and
participation in auctions of C and F block licenses is limited to
entities qualifying under the Commission's rules as entrepreneurs. The
Commission's rules define an entrepreneur as an entity, together with
its affiliates, having gross revenues of less than $125 million and
total assets of less than $500 million at the time the FCC Form 175
application is filed. For blocks C and F, the Commission has defined
``small business'' as a firm, together with its affiliates, that had
average gross revenues of not more than $40 million in the three
previous calendar years, and ``very small business'' has been
[[Page 37101]]
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 definitions have been approved by the SBA.
64. On May 6, 1996, the Commission concluded the first broadband
PCS C block auction. On July 16, 1996, the second C block auction
closed. On January 14, 1997, the broadband PCS D, E, and F block
auction closed. Ninety bidders (prior to any defaults by winning
bidders) won 493 C block licenses and 88 bidders won 491 F block
licenses. Small businesses, placing high bids in these C and F block
auctions were eligible for bidding credits and installment payment
plans. On April 15, 1999, Auction No. 22, which included 347 C and F
block licenses, closed. On January 12, 2000, the Wireless
Telecommunications Bureau announced the Commission's intention to
auction C and F block PCS licenses on July 26, 2000. The auction is
currently scheduled to include ninety-three 30 MHz C block licenses,
twenty-one 15 MHz C block licenses, and forty 10 MHz F block licenses.
For purposes of our evaluations and conclusions in this IRFA, we assume
that all of the original 90 C block broadband PCS licensees and 88 F
block broadband PCS licensees, a total of 178 licensees potentially
affected by this Further Notice, are small entities. In addition to the
178 original small business licensees that may participate in the
auction of the C block licenses, a number of additional small business
entities may seek to acquire licenses through auction; thus, these
business entities would be affected by these rules.
D. Reporting, Recordkeeping, and Other Compliance Requirements
65. At this time, the Commission does not anticipate the imposition
of new reporting, recordkeeping, or other compliance requirements as a
result of this Notice. We seek comment on this tentative conclusion.
Auction participants will need to follow the standard procedural rules
used for broadband PCS spectrum auctions, including application and
payment rules.
E. Steps Taken to Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
66. 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): (i)
The establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (ii) the clarification, consolidation, or simplification of
compliance or reporting requirements under the rule for small entities;
(iii) the use of performance, rather than design, standards; and (iv)
an exemption from coverage of the rule, or any part thereof, for small
entities. 5 U.S.C. 603.
67. The Commission tentatively concludes that it is in the public
interest to revise certain aspects of the C and F block rules to
encourage participation by small businesses while at the same time
helping to ensure the best use of spectrum through the competitive
bidding process.
68. Reconfigure C Block Spectrum Size: The Commission tentatively
concludes it will reconfigure each 30 MHz C block license available in
future broadband PCS auctions into three 10 MHz C block licenses. The
Commission believes that by increasing the number of available licenses
through this reconfiguration, taken together with the Commission's
proposals to lift certain of our eligibility requirements, the
Commission will promote wider auction participation and license
distribution in accordance with the goals of section 309(j) of the
Communications Act. Small bidders should find bidding for 10 MHz
licenses more affordable, while large bidders should enjoy greater
flexibility in tailoring their bidding to their business plans without
running afoul of the spectrum cap. The Commission also seeks comment on
whether a different configuration would be more appropriate to provide
meaningful opportunities for potential bidders, including new entrants
into particular markets.
69. Eliminate Eligibility Restrictions for Certain Licenses in
Tiers: The Commission proposes to remove the entrepreneur eligibility
restrictions for some, but not all, licenses available in Auction No.
35 and in future C and F block auctions. Based on the demand for
spectrum to satisfy congestion, new technology and competitive needs,
the Commission tentatively concludes that it would serve the public
interest to make some additional spectrum available to all interested
bidders. In light of the Commission's commitment to providing
meaningful opportunities for entrepreneurs, the Commission seeks
comment on proposals to lift the entrepreneur eligibility requirements
for some of the licenses available in Auction No. 35 and future
auctions, which vary in the amount of spectrum that would remain set-
aside according to the size of both the available licenses and the
markets. The Commission tentatively concludes that it will divide BTAs
into two tiers according to population size of the BTA. ``Tier 1''
would comprise BTAs at and above a 2.5 million population threshold;
``Tier 2'' would comprise BTAs below that population threshold. For
available 30 MHz C block licenses, the Commission tentatively concludes
to allow ``open'' bidding for two of the three 10 MHz C block licenses
in Tier 1, and one of the three 10 MHz C block licenses in Tier 2. The
Commission also seeks comment on whether there should be ``open''
bidding for all three of the 10 MHz licenses in Tier 1, and two of the
three in Tier 2. With respect to available F block licenses, the
Commission seeks comment on eliminating the eligibility requirements,
or, alternatively, applying a tiered approach or retaining the existing
eligibility rules. Finally, the Commission also tentatively concludes
it will allow ``open'' bidding for all available 15 MHz C block
licenses, which have previously been auctioned but not sold. These
alternatives would affect the configuration and set-aside of spectrum.
We seek comment on the impact of these alternatives on small
businesses.
70. Retain Current License Grouping for Bidding in Auction: The
Commission tentatively concludes to take bids on each license
separately in Auction No. 35 on a simultaneous multiple round basis as
the Commission has previously done in the past. The Commission believes
that bidding for each license separately is unlikely to preclude
carriers from aggregating licenses on a nationwide or regional basis,
and at the same time will provide carriers that have intense spectrum
needs in a particular market the opportunity to compete for licenses as
well.
71. Grandfather Exception: The Commission seeks comment on whether
the grandfather eligibility exception should be revised or clarified.
The Commission also tentatively concludes that upon the merger of two
entities, each of which is eligible for the ``grandfather'' exception,
the exception extends to the resulting entity; but that, upon the
merger of two entities, only one of which is eligible for the
``grandfather'' exception, the exception does not extend to the
resulting entity.
72. Revise the Bidding Credits Available for Auction No. 35: For
those licenses that are not subject to eligibility restrictions, the
Commission seeks comment on whether to increase bidding credits for
small and very small businesses, and consortia thereof, to 25 and 40
percent, respectively, or to retain existing bidding credit levels. We
expect that this departure from previous
[[Page 37102]]
procedure will provide small businesses with a meaningful opportunity
to compete in an open auction.
73. Alter the Transfer Requirements for Certain Licenses: The
Commission proposes to modify the Commission's transfer requirements to
correspond to the Commission's proposed changes in the eligibility
requirements, and to encourage rapid construction of C and F block
systems. Specifically, the Commission tentatively concludes that C and
F block licenses won pursuant to open bidding at Auction No. 35, or any
future open auction for such spectrum, would not be subject to a
transfer holding rule. For licenses won in closed bidding in any C or F
block auction, the Commission seeks comment on a proposal that will
allow a licensee to assign or transfer its license to any qualified
entity, entrepreneur or not, upon the licensee's completion of its
first construction benchmark, whether or not it takes the full five
years allowed by the rules. The Commission also seeks comment on
whether it should evaluate a licensee's compliance with construction
requirements on a system-wide basis.
74. Eliminate the License Cap: The Commission proposes to remove
Sec. 24.710 from the Commission's rules which prohibits an auction
applicant from winning more than 98 C and F block licenses. When this
rule was established, the license cap was intended to facilitate a fair
distribution of licenses within the C and F blocks. The Commission has
achieved this objective; moreover, the Commission's proposal to
reconfigure the available 30 MHz C block licenses would create
additional C block licenses, while the Commission's proposal to
eliminate the eligibility restrictions would increase the chances of C
and F block licenses being won by a variety of entities.
75. Retain the Spectrum Cap: The Commission tentatively concludes
that it should not grant the petitions seeking waiver of, or
forbearance from, the CMRS spectrum cap rules and, accordingly, it
would apply the spectrum cap to licenses of PCS C and F block spectrum
to be auctioned in Auction 35. The Commission's proposal to revise the
rules pertaining to the PCS C and F block spectrum helps ease the
impact of the cap in this auction, and thereby renders cap relief
unnecessary.
76. Section 309(j) of the Communications Act directs the Commission
to disseminate licenses among a wide variety of applicants, including
small businesses and other designated entities. Section 309(j) also
requires that the Commission ensure the development and rapid
deployment of new technologies, products, and services for the benefit
of the public, and recover for the public a portion of the value of the
public spectrum resource made available for commercial use. The
Commission believes that the proposals, alternatives, and tentative
conclusions described in this Notice promote these goals while
maintaining the fair and efficient execution of the auctions program.
The Commission, therefore, seeks comment on all issues, proposals,
tentative conclusions, and alternatives described in the Notice, and
the impact they may have on small entities.
F. Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rules
77. None.
List of Subjects in 47 CFR Part 24
Communications common carriers, Personal communications services,
Radio.
Federal Communications Commission.
William F. Caton,
Deputy Secretary.
[FR Doc. 00-14881 Filed 6-12-00; 8:45 am]
BILLING CODE 6712-01-P