[Federal Register Volume 65, Number 248 (Tuesday, December 26, 2000)]
[Proposed Rules]
[Pages 81475-81486]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-32789]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 13, 20, 22, 24, 26, 27, 80, 87, 90, 95, 97, and 101

[WT Docket No. 00-230; FCC 00-402]


Promoting Efficient Use of Spectrum Through Elimination of 
Barriers to the Development of Secondary Markets

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

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SUMMARY: In this document, we open a proceeding to examine ways in 
which we could remove, relax, or modify Commission rules to remove 
unnecessary regulatory barriers to the development of more robust 
secondary markets in radio spectrum usage rights. We inquire generally 
about how best to clarify our rules, and revise them where necessary, 
to promote the wider use of spectrum leasing, particularly in our 
Wireless Radio Services in which licensees hold ``exclusive'' authority 
to use spectrum in their service areas. We also ask whether the 
Commission should take additional actions to improve the effectiveness 
of secondary markets in the context of other terrestrial licenses, as 
well as satellite licenses. We inquire whether the Commission should 
revise its rules to increase flexibility in its technical and service 
rules. Finally, we seek comment on actions the Commission might take to 
impose the availability of information on the use of wireless radio 
spectrum.

DATES: The agency must receive comments on or before February 9, 2001, 
and reply comments on or before March 9, 2001.

FOR FURTHER INFORMATION CONTACT: Paul Murray or Donald Johnson, 
Wireless Telecommunications Bureau, at (202) 418-7240, or via the 
Internet at [email protected] or [email protected], respectively; for 
additional information concerning the information collections contained 
in this document, contact Judy Boley at (202) 418-0214, or via the 
Internet at [email protected].

SUPPLEMENTARY INFORMATION: This is a summary of the Federal 
Communications Commission's Notice of Proposed Rulemaking (NPRM), FCC 
00-402, in WT Docket No. 00-230, adopted on November 9, 2000 and 
released on November 27, 2000. The full text of this NPRM is available 
for inspection and copying during normal business hours in the FCC 
Reference Center, Room CY-A257, 445 12th Street, SW., Washington, DC. 
The complete text may be purchased from the Commission's copy 
contractor, International Transcription Service, Inc., 1231 20th 
Street, NW., Washington, DC 20037. The full text may also be downloaded 
at: www.fcc.gov. Alternative formats are available to persons with 
disabilities by contacting Martha Contee at (202) 418-0260 or TTY (202) 
418-2555.

Synopsis of Notice of Proposed Rulemaking

I. Introduction and Executive Summary

    1. In this document, we open a proceeding to examine a number of

[[Page 81476]]

actions we might take to remove unnecessary regulatory barriers to the 
development of more robust secondary markets in radio spectrum usage 
rights. We believe that enabling the development of more robust 
secondary markets will help promote spectrum efficiency and full 
utilization of Commission-licensed spectrum and thereby make more 
spectrum available for the purposes for which it is needed.
    2. First, we seek to remove, relax, or modify our rules and 
procedures to eliminate unnecessary impediments to the operation of 
secondary market processes. In this document, we set forth a number of 
proposals for reducing regulations that unnecessarily inhibit the 
development of secondary markets. We initially ask generally how best 
to clarify our rules, and revise them where necessary, to promote the 
wider use of the leasing of spectrum usage rights (``spectrum 
leasing''), particularly in our Wireless Radio Services. We next focus 
on a specific proposal for furthering leasing in the context of a broad 
set of licenses in which spectrum leasing could most easily be 
implemented, namely those Wireless Radio Services in which licensees 
hold ``exclusive'' authority to use the spectrum in their service 
areas. We also inquire whether there are additional actions the 
Commission might take to improve the effectiveness of secondary markets 
in the context of other terrestrial wireless services, as well as 
satellite services. Finally, working within the statutory framework of 
the Communications Act, we undertake to remove impediments posed by our 
policies, such as our interpretation of requirements pertaining to 
transfer of control issues under Section 310(d), 47 U.S.C. 310(d), and 
the standard set forth in Intermountain Microwave, 12 FCC 2d 559 
(1963), that appear to inhibit unnecessarily the development of 
secondary markets through spectrum leasing and other market 
arrangements. In addition to our spectrum leasing proposals, we seek to 
find ways to increase flexibility in technical and service rules to 
further promote secondary markets.
    3. Our second goal is to encourage advances in equipment that will 
facilitate use of available spectrum for a broad range of services. 
Although we address many of our efforts in this regard in other 
proceedings, such as those on Software Defined Radio (SDR) and Ultra-
Wideband technology, we inquire here about ways in which the Commission 
might revise its rules to promote technical flexibility in a manner 
that might further enable the use of spectrum efficient technologies. 
Finally, our third goal is to encourage the development of mechanisms, 
such as information sources, that help enable markets to work better. 
We also inquire about whether and how the Commission and the private 
sector could facilitate the availability of information on spectrum use 
that would further promote the development of secondary markets in 
radio spectrum usage rights.

II. Proposals for Advancing Secondary Markets

    A. Removing Barriers to Leasing of Spectrum Usage Rights
1. General Concept and Approach
    4. We tentatively conclude that permitting wider use of spectrum 
leasing would promote the public interest by increasing the efficiency 
of spectrum use. By bringing market forces more heavily to bear and 
facilitating more robust secondary markets in spectrum usage rights, 
leasing should promote more efficient use of spectrum and allow more 
entities to gain access to spectrum so that it may be put to innovative 
uses. We here are requesting comment on how to provide enhanced 
opportunities for spectrum leasing in a manner that best serves our 
public interest goals.
    5. Under the general concept of spectrum leasing advanced in this 
document, we propose to allow licensees greater flexibility, consistent 
with the public interest and statutory requirements, to subdivide and 
apportion the spectrum and to lease their rights to use it to various 
third party users--in any geographic or service area, in any quantity 
of frequency, and for any period of time during the term of their 
licenses `` without having to secure prior Commission approval.
    6. We recognize that spectrum leasing may encompass a continuum of 
arrangements, from the leasing of excess capacity on a licensee's 
system to the leasing of the rights to use all of the licensed spectrum 
itself. In certain ways, spectrum leasing conceptually resembles a kind 
of temporary partitioning, disaggregation, or partial assignment of a 
licensee's spectrum usage rights, without the complete and permanent 
transfer of control or assignment of the discrete leased portion of 
that spectrum license, and the full panoply of licensee 
responsibilities, to that particular lessee of spectrum usage rights 
(``spectrum lessee'') for the remainder of the license term.
    7. We also seek comment on the potential role of band manager 
licensing as a vehicle for facilitating the leasing of the rights to 
use spectrum. In those instances to date in which we have adopted or 
proposed band manager licensing, we have envisioned band managers as a 
specifically designated class of licensees that engage in spectrum 
leasing as their core function.
    8. We invite comment on whether the general concept of spectrum 
leasing described in this section is appropriately defined, or whether 
it should be defined differently, more narrowly, or more broadly. We 
seek comment on the potential benefits of spectrum leasing. We also 
invite comment on what problems such an approach might raise. Are there 
parties, such as other licensees, spectrum users, and the public, that 
may not benefit from the wider use of spectrum leasing? We invite 
comment on the practical limits to various forms of such leasing. For 
instance, would potential spectrum lessees be willing to build out 
facilities if they would be leasing the rights to use spectrum for only 
a short period of time? Also, we request comment on whether, for the 
purposes of our general analysis, it matters whether the spectrum 
leasing involves leasing of excess capacity on a licensee's system or 
the leasing of the rights to the use of the licensee's raw spectrum. We 
also seek comment on how spectrum leasing fits within the Commission's 
overall spectrum management and licensing responsibilities under the 
Communications Act. Finally, we invite comment on whether we should 
consider other types of arrangements that would meet similar goals.
2. Spectrum Leasing Proposal
    9. We propose to clarify and/or revise our policies and rules to 
permit most Wireless Radio Services licensees with exclusive rights to 
use licensed spectrum in their service areas to lease all or portions 
of their licensed spectrum for use by non-licensees. We propose that 
these licensees be permitted to lease spectrum usage rights in any 
amount of spectrum and for any period during the term of the license, 
so long as the non-licensee spectrum users--the ``spectrum lessees''--
comply with the technical and non-technical service rule requirements 
as discussed below. We apply our proposal to these particular licenses 
chiefly because, compared with the other Wireless Radio Services (i.e., 
those in which licensees ``share'' spectrum), exclusive licenses raise 
the fewest and least complicated concerns relating to interference, 
frequency coordination, and restricted use. We invite comment on this 
approach. We propose to permit not only leasing by these licensees to 
non-licensees, but also further subleasing by

[[Page 81477]]

spectrum lessees to other non-licensees. We invite comment on this 
approach as well.
    (i) Responsibility for compliance with Commission rules.
    10. As a core feature of our proposal on leasing of spectrum usage 
rights, we propose that the licensee retain ultimate responsibility for 
ensuring that the spectrum lessee complies with the Act and the 
Commission's applicable technical and service rules.
    11. We invite comment on policies and rules we might adopt, or 
actions we might take, to ensure that the licensee meets this core 
responsibility with regard to the use of licensed spectrum being 
leased. We note at the outset that any requirements we would impose 
would be designed to ensure that the licensee had the full authority 
and duty to take whatever actions necessary to ensure the spectrum 
lessee's compliance with the Act and the rules. We do not intend to 
propose any requirements that would unnecessarily interfere with the 
ability of licensees and spectrum lessees to structure appropriately 
flexible arrangements.
    12. Licensee's ultimate responsibility for ensuring compliance. As 
indicated, under our proposal the licensee would remain ultimately 
responsible to the Commission for compliance with all of the 
obligations of the Communications Act and our rules. We propose that, 
in the event of licensee or lessee non-compliance, the Commission would 
hold the licensee directly responsible and may take any action against 
the licensee provided for under our rules. We seek comment on this 
proposal. We also ask for comment on whether there are circumstances in 
which the Commission should hold a spectrum lessee responsible for its 
non-compliance with the rules in addition to, or instead of, the 
licensee. We seek comment, too, on how the licensee would remain 
ultimately responsible in the context of subleasing.
    13. We also invite comment on whether we should impose any 
additional requirements on the licensee to ensure that each of its 
spectrum lessees complies with all of the applicable interference, 
technical, and service rules (as those rules may be revised, in this 
proceeding, with respect to spectrum leasing). Should there, for 
instance, be any ``due diligence'' required on the part of the licensee 
to ensure its lessees'' compliance? Should the spectrum lessee have to 
certify to the licensee that it complies with all rules? Should the 
licensee be required in some way to verify its lessees' compliance with 
the applicable rules? If the lessee is not also being held responsible, 
are there any requirements we need to place on the lessor? Another 
approach to ensuring that the licensee and spectrum lessee(s) meet 
their respective responsibilities could be to require all spectrum 
leasing arrangements to include certain contractual provisions 
defining, at a minimum, basic rights, obligations, and responsibilities 
of the licensee and the spectrum lessee(s) with respect to the 
Commission.
    14. Enforcement issues. In authorizing wider use of spectrum 
leasing, the Commission must maintain its ability to exercise its duty 
to ensure compliance with the Act, our policies, and our rules, and to 
take action regarding violations when they occur. Because our leasing 
proposal relies on a licensee retaining ultimate responsibility for 
ensuring compliance by its spectrum lessees, we concluded that 
licensees should be held responsible for the operations of their 
spectrum lessees. Nonetheless, under the spectrum leasing provisions 
proposed in this document, we tentatively conclude that this action 
would not relieve spectrum lessees of their individual responsibilities 
to comply with the Act, our policies, and our rules.
    15. Under our leasing proposal, a lessee or sublessee would operate 
its mobile or fixed stations under the authority included in the 
Commission license issued to the licensee. Thus, if a lessee operates 
outside the parameters of the licensee's authorization, the licensee 
would be subject to license revocation or other enforcement action. We 
seek comment on also holding the lessee directly responsible for 
violations of the Act or our rules. In addition, it may be necessary 
for the Commission to be able to obtain relevant information not only 
about the licensee, but also about spectrum lessees and sublessees.
    16. Contractual disputes. The spectrum leasing proposals in this 
document, if adopted, may at times result in disputes between licensees 
and lessees regarding compliance with contractual terms. We tentatively 
conclude that such disputes should be resolved in the same manner that 
parties would resolve commercial disputes arising under contract, such 
as through the courts or some other means of dispute resolution (e.g., 
arbitration panels or mediators). We seek comment on this tentative 
conclusion, and what role, if any, the Commission should have in 
resolving such disputes.
    (ii) Interference, frequency coordination, and other technical 
rules.
    17. Background. At the heart of the Commission's concerns and 
obligations relating to Wireless Radio Services licenses is the need to 
protect the public and licensees providing service to the public from 
interference caused by other authorized or unauthorized users of 
spectrum. Under our proposal, the licensee retains ultimate 
responsibility to ensure that the spectrum lessee complies with all of 
the interference, frequency coordination, and other technical rules 
applicable to the licensed spectrum being leased.
    18. Interference and frequency coordination. We tentatively 
conclude that the licensee would be responsible for ensuring that all 
spectrum lessees comply with the interference rules applicable to the 
license. We seek comment on how this requirement would work in 
practice.
    19. Other technical rules. Similarly, we also tentatively conclude 
that the spectrum lessee would be required to comply with all other 
technical rules applicable to the licensed spectrum. Examples of these 
rules include equipment requirements (e.g., tower height and power 
output), equipment authorizations, emission mask requirements, radio 
frequency (RF) safety standards, and spectral efficiency standards.
    (i) Service rules.
    20. In this document, we seek comment on the extent to which the 
existing service rules applicable to licensees should apply to spectrum 
lessees as well. In considering these issues, we seek to assess what 
measures can be taken to facilitate leasing, while at the same time 
ensuring that our approach does not invite circumvention of the 
underlying purposes of our service rules.
    21. In the discussion that follows, we set forth and seek to 
examine a continuum of possible approaches to this issue. At one end of 
the continuum, one proposal would be to make all service rules that are 
applicable to the licensee applicable to the lessee as well. We examine 
and clarify how such a proposal might be implemented, and seek comment. 
We recognize, however, that strict adherence to such a proposal might 
unnecessarily impede the development of many kinds of spectrum leasing 
arrangements that would serve the public interest. Thus, at the other 
end of the continuum, we also set forth and seek comment on proposals 
under which spectrum lessees would not be subject to the same service 
rules as licensees. There may well be contexts in which such an 
approach would be justified, especially in the case of short term 
spectrum capacity leases. Ultimately, we seek to develop a record 
regarding how our service rules should be crafted in the context of 
spectrum

[[Page 81478]]

leasing in order to facilitate secondary markets without circumventing 
the underlying purposes of the rules.
    22. Qualification, eligibility and use restrictions. As indicated, 
one possible proposal would be to apply the qualification and 
eligibility rules applicable to the licensee of any particular service 
to the entity seeking to lease the licensed spectrum. Under such a 
proposal, licensees would be responsible for ensuring that the same 
rules that restrict their qualification or their eligibility would 
restrict the respective qualification or eligibility of entities 
seeking to enter into spectrum leasing arrangements. We also seek 
comment on a different proposal, under which we would not require 
lessees to meet the same qualifications as that of the licensee. In 
what circumstances would such requirements not be necessary, without 
undermining the underlying purposes) of the particular service rule? 
Are there any implementation considerations we should take into account 
in this context?
    23. Attribution rules. For many licenses, we have established 
various attribution rules that affect which entities might be licensees 
as well as what other interests entities may have in licenses that 
raise issues under various Commission policies and rules. One possible 
approach to addressing these service rules in the leasing context would 
be to require the attribution rules applicable to a licensee to be 
applied to a spectrum lessee as if that lessee were the licensee. We 
seek comment on this approach. We also seek comment on alternative 
proposals with regard to our attribution rules in the context of 
spectrum leasing. In what circumstances should we not apply our 
attribution rules to lessees? Why would such circumstances not 
circumvent the underlying purposes of our rules? To the extent we 
determine that attribution rules should apply to lessees, we also seek 
comment on how best to ensure that licensees and lessees comply with 
those rules. Should, for instance, licensees and/or lessees have to 
certify that they comply with the applicable attribution rules, and if 
so, to whom must they certify? Are there any additional compliance 
concerns raised with regard to subleasing?
    24. Aggregation limits. With regard to the aggregation limit or 
``spectrum cap'' that applies to some licenses, one approach would be 
to apply that aggregation limit to any of the licensed spectrum leased. 
Under this approach, if an entity leases any licensed spectrum that 
falls under the CMRS spectrum cap rule, 47 CFR 20.6, the amount of 
spectrum leased is attributable under current rules both to the 
licensee and to the spectrum lessee for the purpose of determining 
compliance with the cap. We seek comment on such a proposal. We also 
request comment on possible alternative proposals, including not 
applying the CMRS spectrum cap to spectrum leasing. In what instances 
does spectrum leasing not raise concerns about market concentration 
that the CMRS spectrum cap seeks to address?
    25. Construction or substantial service requirements. Because a 
spectrum lessee operates under the authority granted to the licensee, 
we propose to permit a licensee to rely on the activities of its 
lessee(s) when establishing that the licensee has met the applicable 
construction, substantial service, or similar requirements.
    26. Bidding credits, installment payments, and unjust enrichment. 
Bidding credits for small businesses are often made available for 
particular auctioned licenses. In addition, installment payment plans 
were available with respect to licenses won in certain past auctions. 
If we applied the existing rules to spectrum lessees, then if a 
licensee that received bidding credits or participates in an 
installment payment plan wishes to lease its rights to use portions of 
its licensed spectrum to an entity that would not meet the eligibility 
standards for a similar bidding credit, we would require the licensee 
to reimburse the government for unjust enrichment. We seek comment on 
such an approach, and how it could be implemented. We also seek comment 
on a different proposal, in which lessees would not be required to pay 
unjust enrichment payments in leasing contexts. In which spectrum 
leasing arrangements should we not require any unjust enrichment 
payments? Would there be any reason to apply unjust enrichment payments 
with respect to short-term leases, such as leases for one year or less? 
Should we establish any ``safe harbors'' in which unjust enrichment 
payments should not be required? Should we require such payments if the 
licensee leases only excess capacity on its own facilities?
    27. Regulatory status. We also seek comment on how issues relating 
to a licensee's regulatory status should be applied with respect to 
spectrum lessees. We could require that spectrum lessees would be 
subject to the same rules regarding regulatory classification as the 
licensee, and would be required to meet the same regulatory 
requirements associated with its classification. For instance, in 
services such as cellular, our rules require licensees to provide 
service on a common carrier basis and to comply with the requirements 
of Title II of the Communications Act, 47 U.S.C. 201 et seq. Thus, 
under this approach, an entity leasing spectrum usage rights from a 
cellular carrier would also be classified as a common carrier (just as 
cellular resellers are currently), and would be held to the 
requirements of Title II. We seek comment on such a proposal. We also 
invite comment on a completely different approach. Should we determine 
that a licensee's regulatory status should not necessarily be applied 
to spectrum lessees? We also seek comment on whether the requirements 
placed on the licensee should apply to lessees in cases where services 
are not limited to one regulatory classification.
    28. Periodic filings and other interactions with Commission. As for 
the filing requirements not discussed above and the other required 
interactions with the Commission, we propose that the licensee remain 
responsible for compliance. We seek comment, however, on whether 
placing this regulatory burden directly on licensees may unnecessarily 
restrict their ability to lease spectrum usage rights. Commenters 
should specifically address how the leasing of spectrum usage rights in 
the secondary market may be hindered by requiring licensees, rather 
than lessees (or sublessees), to bear these administrative burdens.
    29. Renewal. Finally, given that a spectrum lessee can have no 
greater rights than the licensee, no spectrum lease agreement may 
legally grant an absolute term beyond the term of the licensee's 
authorization. This restriction does not, however, prohibit a spectrum 
lessee from entering into a contingent agreement with the licensee 
providing for an option or right to renew the agreement if it is able 
to renew its authorization with the Commission.
3. Other Licenses
    30. As noted above, in this document our specific proposals focus 
on licenses in the Wireless Radio Services in which licensees have 
exclusive rights to use the licensed spectrum. We seek comment on 
whether we should clarify and/or revise policies and rules with respect 
to the following licenses in order further to promote the development 
of secondary markets in radio spectrum usage rights.
    a. ``Shared use'' Wireless Radio Services licenses.
    31. We invite comment on whether we should permit spectrum leasing 
by licensees that share use of the same spectrum. We believe there may 
be reasons to look at spectrum leasing

[[Page 81479]]

differently in the context of shared spectrum. First, radio services in 
which licensees share the use of spectrum raise interference and 
frequency coordination issues that are more complex than for licensees 
that have exclusive rights to use their licensed spectrum. In addition, 
where licensees do not hold spectrum on an exclusive basis, other 
potential spectrum users are not precluded from obtaining their own 
licenses, provided that appropriate sharing arrangements can be 
reached. This may reduce the need for leasing as an alternative to 
facilitate efficient spectrum use. We therefore seek comment on whether 
allowing spectrum leasing is likely to have any practical applicability 
to shared spectrum. Assuming that we do allow some form of spectrum 
leasing on shared spectrum, we seek comment on how it would be 
implemented. In particular, we seek comment on how licensees and 
lessees would coordinate frequency use with neighboring licensees and 
lessees so as to avoid interference problems.
    b. Satellite licenses.
    32. The Commission has interpreted its rules for the Fixed 
Satellite Service (FSS) in a manner that has fostered the development 
of a secondary market in space station capacity. Since 1981, the 
Commission has permitted satellites located in geostationary orbits and 
licensed as FSS satellites to lease or sell any or all of the 
transponders on the satellite to third parties. Further, we have 
permitted licensees of satellite systems operating on a non-common 
carrier basis, such as most Big and Little Low-Earth Orbit (LEO) 
satellite systems, to offer capacity on their satellites to individual 
customers on individualized terms, ranging from short-term leases to 
sales. In this document, we request comment on whether any changes are 
needed with respect to the Commission's policy on transponder leases or 
sales. In particular, are there any changes that we should consider 
making that would make it even easier to develop a market in the use of 
transponders or in the leasing of rights to use satellite spectrum? 
More generally, we also request comment on any other proposals to 
bolster secondary markets in or otherwise improve the efficiency of the 
use of satellite spectrum. We also seek comment on whether any 
modifications to our earth station rules might be appropriate as a 
means of fostering a more efficient secondary market in earth station 
capacity.
    c. Mass Media licenses.
    33. At this time, we are not exploring whether the Commission 
should revise any of its policies and rules within the mass media 
services to facilitate more robust secondary markets in the broadcast 
field. We make this decision because of the unique obligations placed 
on broadcasters and the public interest considerations applicable in 
this context. We seek comment on this approach and, in particular, 
whether the Commission should address the mass media services in any 
subsequent rulemaking regarding these issues.
    4. The Commission's Requirements Relating to Transfer of Control
    34. As we explore these spectrum leasing initiatives, we are 
mindful that there are statutory limitations on the kinds of 
arrangements which licensees may enter into with third parties without 
Commission approval. In particular, licensees may not enter into 
arrangements that would violate Section 310(d) of the Act, 47 U.S.C. 
310(d), which requires prior Commission approval to transfer control of 
or assign licenses (or parts of licenses, where permitted) to third 
parties. This section has been interpreted such that approval must be 
sought not only for transfers of legal (de jure) control, but also for 
transfers of actual (de facto) control under the special circumstances 
presented.
    35. For many of the Wireless Radio Services licenses, the 
Commission historically has interpreted Section 310(d) control 
requirements pursuant to its 1963 Intermountain Microwave decision, 12 
FCC 2d 558, which set forth the following six factors for determining 
whether a de facto transfer of control has occurred: (1) Does the 
licensee have unfettered use of all facilities and equipment? (2) who 
controls daily operations? (3) who determines and carries out policy 
decisions, including preparing and filing applications with the 
Commission? (4) who is in charge of employment, supervision, and 
dismissal of personnel? (5) who is in charge of payment of financial 
obligations, including expenses arising out of operation? and (6) who 
receives monies and profits from the operations of the facilities? For 
other sets of licenses, however, the Commission has determined to apply 
other criteria, depending on the Commission's particular concerns about 
licensee control with respect to those licenses.
    36. We recognize that the types of leasing arrangements that we 
propose to allow in this document potentially conflict with the six 
criteria that the Commission used to evaluate Section 310(d) control in 
the Intermountain Microwave decision. The Intermountain Microwave 
factors focus on whether the licensee, as opposed to an unlicensed 
third party, controls the operation of the facilities that are the 
subject of the license. In the leasing arrangements we propose here, 
however, a licensee could lease its facilities for use by a third party 
lessee, or could lease all or a portion of its spectrum usage rights, 
to enable a third party lessee to use the spectrum with facilities 
constructed and owned by the lessee.
    37. In the context of the spectrum leasing arrangements discussed 
in this document, we tentatively conclude that the Intermountain 
Microwave criteria do not provide the appropriate framework for 
analysis of control under Section 310(d). As we consider the ``current 
realities'' of spectrum licensing today, however, we believe that it is 
no longer viable to analyze spectrum leasing arrangements through the 
lens of the Intermountain Microwave factors, even if we attempt to 
apply those factors ``flexibly.''
    38. In our discussion of Intermountain Microwave in this document, 
we neither address, nor propose to limit, the use of the Intermountain 
Microwave standard in contexts other than spectrum leasing as discussed 
above. For instance, the Intermountain Microwave standard is applied 
when interpreting our spectrum aggregation and cellular cross-ownership 
rules. These rules deal with ``control'' issues that are distinct from 
those in this document. In particular, these rules are concerned with 
whether entities have a sufficient attributable interest in certain 
licenses to affect competition, even when such interests do not rise to 
the level of ``control'' under our precedent. Similarly, we have relied 
in part on Intermountain Microwave to determine de facto control for 
attribution purposes to determine eligibility for small business status 
under our competitive bidding rules and eligibility for the PCS C- and 
F-Blocks. These rules are intended to ensure that small entities are 
not controlled by larger entities that would not be eligible under our 
auction rules, and accordingly address concerns that are distinct from 
the secondary market issues we address here.
    39. In lieu of Intermountain Microwave, we propose to develop a new 
standard for the purpose of interpreting Section 310(d) requirements 
relating to de facto control with respect to spectrum leasing 
arrangements and the licenses affected in this document. We seek to 
develop a standard that would permit greater flexibility to licensees 
to enter into spectrum leasing arrangements without the need for prior 
Commission approval.
    40. We seek comment on a specific proposal that, at a minimum, 
includes certain essential rights and obligations

[[Page 81480]]

that licensees must retain as part of any lease agreement in order to 
ensure that licensees retain control for Section 310(d) purposes when 
entering into leasing arrangements. Specifically, we propose that a 
wireless licensee entering into a leasing arrangement must: (1) retain 
full responsibility for compliance with the Act and our rules with 
regard to any use of licensed spectrum by any lessee or sublessee; (2) 
certify that each spectrum lessee (or sublessee) meets all applicable 
eligibility requirements and complies with all applicable technical and 
service rules; (3) retain full authority to take all actions necessary 
in the event of noncompliance, including the right to suspend or 
terminate the lessee's operations if such operations do not comply with 
the Act or Commission rules.
    41. We also seek comment on whether holding licensees responsible 
for their lessees' compliance with the Act and our rules, as described 
above, is sufficient to ensure that the licensee retains control of the 
license for purposes of Section 310(d), or whether additional 
provisions are also needed to ensure that the licensee retains control. 
We seek comment on whether other standards incorporating such 
provisions, or taking a different approach, might be appropriate.
    42. To the extent that commenters believe instead that Section 
310(d) requires licensees to obtain approval from the Commission in 
order to enter into some or all of the types of spectrum leasing 
arrangements proposed in this document, we seek comment on whether the 
Commission could make a blanket determination that such transfers of 
control were in the public interest and would be automatically granted, 
so long as the licensees complied with certain minimal requirements, as 
specified by the Commission. In other words, could the Commission, by 
policy or rule, determine that if licensees leased spectrum usage 
rights under the specific conditions set forth in this document, those 
transfers should be deemed automatically approved because they would 
satisfy the requirement under Section 310(d) that the Commission find 
that the transfers are in the public interest? We have issued such 
blanket determinations in other instances.
    43. Finally, to the extent that commenters believe that Section 
310(d) requires licensees to obtain approval from the Commission in 
order to lease spectrum usage rights, or alternatively that the 
Commission could not issue a blanket determination automatically 
approving such agreements, we seek comment on whether forbearance from 
enforcement of Section 310(d), pursuant to Section 10 of the Act, is 
permitted and warranted for spectrum in use for those 
telecommunications services subject to forbearance.

B. Increasing Flexibility in Technical Rules

    44. We seek comment on whether there are technical requirements in 
spectrum-based services that unnecessarily deter the operation of 
secondary markets. As we observe in the Policy Statement, essential 
ingredients of fluid secondary markets include clearly defined 
technical rights and obligations, and harmonization of operating rules 
for similar services to promote the fungibility of spectrum usage 
rights. Where the potential uses of spectrum are fungible, or easily 
substitutable in a different frequency band or radio service, 
transactional costs of trading are lower and trading in spectrum rights 
may be facilitated. Put another way, where blocks of spectrum can be 
readily defined and grouped in a manner that spectrum users can easily 
understand, spectrum usage rights becomes more like a commodity and may 
be readily exchanged in a secondary market. Thus, we request comment on 
whether there are rules in specific services that might be revised to 
make spectrum usage rights in various bands more fungible. If so, how 
might these rules be changed?

C. Increasing Flexibility in Service Rules

    45. We seek comment on revisions that should be made to our service 
rules that could promote the development of secondary markets while 
also continuing to serve the public interest objectives upon which the 
service rules are based. We are particularly interested in steps that 
can be taken to harmonize our service rules so that spectrum usage 
rights may be an increasingly fungible commodity in secondary markets. 
These steps may include eliminating unnecessary requirements, reducing 
the number of service categories, and other changes that will allow 
spectrum to be put to use in ways that maximize its value. These 
changes not only enhance secondary markets in the rights to use 
spectrum, but may also allow existing licensees to introduce innovative 
and distinct services that may not be permissible under our existing 
rules.
    46. Flexible use--that is, expanding the range of permissible uses 
within a particular service--may increase efficient use of spectrum in 
general and enhance the operation of secondary markets in the use of 
spectrum. The Commission has recognized that public interest 
considerations may favor flexible use, particularly in regard to new 
spectrum allocations. We have taken a number of steps to establish or 
update our rules to provide more flexibility and eliminate unnecessary 
burdens. The Commission has, however, recognized that increased 
flexibility may not be appropriate in all instances.
    47. We invite comment on specific service rules that might be 
revised to achieve more fluid secondary markets in spectrum usage 
rights. We encourage commenters to advance suggestions for changes to 
our service rules that may promote more flexible and efficient use of 
licensed spectrum either by licensees or through secondary market 
mechanisms. Specifically, we seek comment on whether the Commission 
should in some circumstances modify its various service rules to allow 
spectrum to be used for services other than that for which it was 
licensed.
    48. In this context, we also seek specific comment on whether we 
should revise our policies and rules to allow for either license 
``swaps'' or ``cross-leasing'' of spectrum usage rights by licensees 
for whom different eligibility or use restrictions apply.
    49. We also seek comment on whether the Commission might take steps 
to lower barriers which unnecessarily inhibit the development and 
introduction of new spectrum-efficient technologies.

D. Facilitating Availability of Information on Spectrum

    50. We believe that secondary markets in spectrum usage rights will 
operate more efficiently if adequate information on licensed spectrum 
that could potentially be available to secondary markets is readily 
accessible by entities interested in using such spectrum. We also 
request comment on whether the Commission should have a greater role in 
collecting and disseminating such information beyond the activities 
described above. We tentatively conclude, however, that the private 
sector is better suited both to determine what types of information 
parties might demand, and to develop and maintain information on the 
licensed spectrum that might be available for use by third parties. For 
example, band manager licensees will have incentives to disseminate 
this type of information in order to obtain third party spectrum users. 
We seek comment on how the Commission can encourage the creation of 
private information clearinghouses on available spectrum. We also seek 
comment on whether any regulatory barriers exist that may have the 
unintended effect of hindering private parties from developing such

[[Page 81481]]

information and contributing to fluid secondary markets in the use of 
licensed spectrum.

III. Procedural Matters

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

    51. 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. See generally 47 CFR 1.1202, 1.1203, and 1.1206.

B. Initial Regulatory Flexibility Analysis

    52. As required by the Regulatory Flexibility Act, see 5 U.S.C. 
603, the Commission has prepared an Initial Regulatory Flexibility 
Analysis (IRFA) of the possible impact on small entities of the 
proposals in the Notice of Proposed Rulemaking. The IRFA is set forth. 
Written public comments are requested on the IRFA. These comments must 
be filed in accordance with the same filing deadlines for comments on 
the Notice of Proposed Rulemaking, and they must have a separate and 
distinct heading designating them as responses to the Initial 
Regulatory Flexibility Analysis. The Commission's Consumer Information 
Bureau, Reference Information Center, will send a copy of this Notice 
of Proposed Rulemaking, including the Initial Regulatory Flexibility 
Analysis, to the Chief Counsel for Advocacy of the Small Business 
Administration, in accordance with the Regulatory Flexibility Act. See 
5 U.S.C. 603(a).

C. Initial Paperwork Reduction Act of 1995 Analysis

    53. This document seeks comment on a proposed information 
collection. As part of the Commission's continuing effort to reduce 
paperwork burdens, we invite the general public and the Office of 
Management and Budget (OMB) to take this opportunity to comment on the 
information collections contained in this document, as required by the 
Paperwork Reduction Act of 1995, Public Law 104-13. Public and agency 
comments are due at the same time as other comments on this document 
and must have a separate heading designating them as responses to the 
Initial Paperwork Reduction Analysis (IPRA). OMB comments are due 60 
days from date of publication of this document in the Federal Register. 
Comments should address: (a) Whether the proposed collection of 
information is necessary for the proper performance of the functions of 
the Commission, including whether the information shall have practical 
utility; (b) the accuracy of the Commission's burden estimates; (c) 
ways to enhance the quality, utility, and clarity of the information 
collected; and (d) ways to minimize the burden of the collection of 
information on the respondents, including the use of automated 
collection techniques or other forms of information technology.
    OMB Control Number: 3060-XXXX.
    Title: Promoting Efficient Use of Spectrum Through Elimination of 
Barriers to the Development of Secondary Markets.
    Form No.: N/A.
    Type of Review: New collection.
    Respondents: Business or other for-profit.
    Number of Respondents: 50,000.
    Estimated Time per Response: 1,050,000 hours.
    Cost to Respondents: $144,250,000.00.
    Needs and Uses: The information and verification requirements and 
the prospective coordination requirement proposed by this document will 
be used by the Commission to verify licensee compliance with Commission 
rules and regulations, and to ensure that licensees continue to fulfill 
their statutory responsibilities in accordance with the Communications 
Act of 1934, as amended. Such information and verification requirements 
have been used in the past and will continue to be used to minimize 
interference, verify that applicants are legally and technically 
qualified to hold licenses, and determine compliance with Commission 
Rules. The information that licensees and lessees may ultimately be 
asked to file will be used to assist parties interested in obtaining 
such spectrum.

D. Comment Dates

    54. Pursuant to applicable procedures set forth in Secs. 1.415 and 
1.419 of the Commission's Rules, 47 CFR 1.415 and 1.419, interested 
parties may file comments on or before February 9, 2001, and reply 
comments on or before March 9, 2001. Comments and reply comments should 
be filed in WT Docket No. 00-230. All relevant and timely comments will 
be considered by the Commission before final action is taken in this 
proceeding. To file formally in this proceeding, interested parties 
must file an original and four copies of all comments, reply comments, 
and supporting comments.
    55. Comments may also be filed using the Commission's Electronic 
Comment Filing System (ECFS). Comments filed through the ECFS can be 
sent as an electronic file via the Internet to http://www.fcc.gov/e-file/ecfs.html>. Generally, only one copy of an electronic submission 
must be filed. In completing the transmittal screen, commenters should 
include their full name, Postal Service mailing address, and the 
applicable docket or rulemaking number. Parties may also submit an 
electronic comment by Internet E-Mail. To obtain filing instructions 
for E-Mail comments, commenters should send an e-mail to [email protected], 
and should include the following words in the body of the message: 
``get form your E-Mail address>.'' A sample form and directions will be 
sent in reply.
    56. Comments and reply comments will be available for public 
inspection during regular business hours at the FCC Reference Center, 
Room CY-A257, at the Federal Communications Commission, 445 Twelfth 
Street, S.W., Washington, D.C. 20554. Copies of comments and reply 
comments are available through the Commission's duplicating contractor: 
International Transcription Service, Inc. (ITS, Inc.), 1231 20th 
Street, N.W., Washington, D.C. 20037, (202) 857-3800.

Initial Regulatory Flexibility Analysis

    57. As required by the Regulatory Flexibility Act (RFA), 5 U.S.C. 
601 et seq., the Commission has prepared this Initial Regulatory 
Flexibility Analysis (IRFA) of the possible significant economic impact 
on small entities of the policies and proposals in this Notice of 
Proposed Rulemaking (document), WT Docket No. 00-230. Written public 
comments are requested on this IRFA. These comments must be filed in 
accordance with the same filing deadlines for comments on the rest of 
this document, as set forth above, and they must have a separate and 
distinct heading designating them as responses to IRFA.

A. Need for, and Objectives of, the Proposed Rules

    58. This rulemaking proceeding outlines a number of approaches that 
would promote more robust secondary markets in radio spectrum usage 
rights. First, we propose to promote wider use of leasing of spectrum 
usage rights throughout our wireless services, particularly our 
Wireless Radio Services. In so doing, we examine whether Section 310(d) 
of the Communications Act, as amended (the ``Act''), 47 U.S.C. 310(d), 
or the Commission's policies and rules, including its application of 
the Intermountain Microwave standard for interpreting de facto transfer 
of control of licenses, may unnecessarily impede the ability of 
licensees to enter such leasing arrangements. Second, we

[[Page 81482]]

explore whether additional flexibility in our technical and service 
rules would further enhance the development of secondary markets. 
Finally, we request comment on whether, and if so how, the Commission 
should facilitate the development of secondary markets by making 
certain information on spectrum available to the public.

B. Legal Basis

    59. The potential actions on which comment is sought in this 
document would be 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), and Secs. 1.411 and 1.412 of the Commission's rules, 47 CFR 
1.411 and 1.412.

C. Description and Estimate of the Small Entities Subject to the Rules

    60. The RFA requires that an initial regulatory flexibility 
analysis be prepared for notice-and-comment rulemaking proceedings, 
unless the Agency certifies that ``the rule will not, if promulgated, 
have a significant impact on a substantial number of small entities.'' 
See 5 U.S.C. 603(b)(3). 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). A small organization is generally ``any not-for-profit 
enterprise which is independently owned and operated and is not 
dominant in its field.'' This IRFA describes and estimates the number 
of small-entity licensees that may be affected if the proposals in this 
document are adopted.
    61. This document could result in rule changes that, if adopted, 
would create new opportunities and obligations for Wireless Radio 
Services licensees and other entities that may lease spectrum usage 
rights from these licensees. To assist the Commission in analyzing the 
total number of potentially affected small entities, we request 
commenters to estimate the number of small entities that may be 
affected by any rule changes resulting from this document.
Wireless Radio Services
    62. Many of the potential rules on which comment is sought in this 
document, if adopted, would affect small licensees of the Wireless 
Radio Services identified.
    63. Cellular Licensees. Neither the Commission nor the SBA has 
developed a definition of small entities applicable to cellular 
licensees. Therefore, the applicable definition of small entity is the 
definition under the SBA rules applicable to radiotelephone (wireless) 
companies. This provides that a small entity is a radiotelephone 
company employing no more than 1,500 persons. According to the Bureau 
of the Census, only twelve radiotelephone firms from a total of 1,178 
such firms, which operated during 1992, had 1,000 or more employees. 
Therefore, even if all twelve of these firms were cellular telephone 
companies, nearly all cellular carriers were small businesses under the 
SBA's definition. In addition, we note that there are 1,758 cellular 
licenses; however, a cellular licensee may own several licenses. In 
addition, according to the most recent Telecommunications Industry 
Revenue data, 808 carriers reported that they were engaged in the 
provision of either cellular service or Personal Communications Service 
(PCS) services, which are placed together in the data. We do not have 
data specifying the number of these carriers that are not independently 
owned and operated or have more than 1,500 employees, and thus are 
unable at this time to estimate with greater precision the number of 
cellular service carriers that would qualify as small business concerns 
under the SBA's definition. Consequently, we estimate that there are 
fewer than 808 small cellular service carriers that may be affected by 
these proposals, if adopted.
    64. 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 definition under the SBA rules 
applicable to Radiotelephone Communications companies. This definition 
provides that a small entity is a radiotelephone company employing no 
more than 1,500 persons. According to the Bureau of the Census, only 12 
radiotelephone firms out of a total of 1,178 such firms, which operated 
during 1992, had 1,000 or more employees. Therefore, if this general 
ratio continues in 1999 in the context of Phase I 220 MHz licensees, we 
estimate that nearly all such licensees are small businesses under the 
SBA's definition.
    65. 220 MHz Radio Service--Phase II Licensees. The Phase II 220 MHz 
service is a new service, and is subject to spectrum auctions. In the 
220 MHz Third Report and Order, 62 FR 15978 (April 3, 1997), we adopted 
criteria for defining small businesses and very small businesses for 
purposes of determining their eligibility for special provisions such 
as bidding credits and installment payments. We have defined a small 
business as 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 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 definitions. An auction of Phase II licenses commenced on 
September 15, 1998, and closed on October 22, 1998. Nine hundred and 
eight (908) licenses were auctioned in 3 different-sized geographic 
areas: three nationwide licenses, 30 Regional Economic Area Group 
Licenses, and 875 Economic Area (EA) Licenses. Of the 908 licenses 
auctioned, 693 were sold. Companies claiming small business status won 
one of the Nationwide licenses, 67% of the Regional licenses, and 54% 
of the EA licenses.
    66. 700 MHz Guard Band Licensees. In the 700 MHz Guardband Order, 
65 FR 17594 (April 4, 2000), we adopted criteria for defining small 
businesses and very small businesses for purposes of determining their 
eligibility for special provisions such as bidding credits and 
installment payments. We have defined a small business as 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 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. An auction of 176 Economic Area (EA) licenses 
commenced on September 6, 2000, and closed on September 21, 2000. Of 
the 104 licenses auctioned, 96 licenses were sold.
    67. Private and Common Carrier Paging. In the Paging Third Report 
and

[[Page 81483]]

Order, 62 FR 15978, we adopted criteria for defining small businesses 
and very small businesses for purposes of determining their eligibility 
for special provisions such as bidding credits and installment 
payments. We have defined a small business as 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 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 definitions. An auction of 
Metropolitan Economic Area (MEA) licenses commenced on February 24, 
2000, and closed on March 2, 2000. Of the 985 licenses auctioned, 440 
were sold. 57 companies claiming small business status won. At present, 
there are approximately 24,000 Private Paging site-specific licenses 
and 74,000 Common Carrier Paging licenses. According to the most recent 
Telecommunications Industry Revenue data, 172 carriers reported that 
they were engaged in the provision of either paging or ``other mobile'' 
services, which are placed together in the data. We do not have data 
specifying the number of these carriers that are not independently 
owned and operated or have more than 1,500 employees, and thus are 
unable at this time to estimate with greater precision the number of 
paging carriers that would qualify as small business concerns under the 
SBA's definition. Consequently, we estimate that there are fewer than 
172 small paging carriers that may be affected by these proposals and 
policies, if adopted. We estimate that the majority of private and 
common carrier paging providers would qualify as small entities under 
the SBA definition.
    68. Mobile Service Carriers. Neither the Commission nor the SBA has 
developed a definition of small entities specifically applicable to 
mobile service carriers, such as paging companies. As noted above in 
the section concerning paging service carriers, the closest applicable 
definition under the SBA rules is that for radiotelephone (wireless) 
companies, and the most recent Telecommunications Industry Revenue data 
shows that 172 carriers reported that they were engaged in the 
provision of either paging or ``other mobile'' services. Consequently, 
we estimate that there are fewer than 172 small mobile service carriers 
that may be affected by the policies and proposals, if adopted.
    69. 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 
defined ``small entity'' 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 classification for ``very 
small business'' was added and is defined as an entity that, together 
with their 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 broadband PCS auctions have 
been approved by the SBA. No small businesses within the SBA-approved 
definition 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% of the 1,479 licenses for Blocks D, E, and F. On 
March 23, 1999, the Commission reauctioned 347 C, D, E, and F Block 
licenses; there were 48 small business winning bidders. Based on this 
information, we conclude that the number of small broadband PCS 
licensees will include the 90 winning C Block bidders and the 93 
qualifying bidders in the D, E, and F blocks plus the 48 winning 
bidders in the re-auction, for a total of 231 small entity PCS 
providers as defined by the SBA and the Commission's auction rules.
    70. Narrowband PCS. The Commission has auctioned nationwide and 
regional licenses for narrowband PCS. There are 11 nationwide and 30 
regional licensees for narrowband PCS. The Commission does not have 
sufficient information to determine whether any of these licensees are 
small businesses within the SBA-approved definition for radiotelephone 
companies. At present, there have been no auctions held for the major 
trading area (MTA) and basic trading area (BTA) narrowband PCS 
licenses. The Commission anticipates a total of 561 MTA licenses and 
2,958 BTA licenses will be awarded by auction. Such auctions have not 
yet been scheduled, however. Given that nearly all radiotelephone 
companies have no more than 1,500 employees and that no reliable 
estimate of the number of prospective MTA and BTA narrowband licensees 
can be made, we assume, for purposes of this IRFA, that all of the 
licenses will be awarded to small entities, as that term is defined by 
the SBA.
    71. Rural Radiotelephone Service. The Commission has not adopted a 
definition of small entity specific to the Rural Radiotelephone 
Service. A significant subset of the Rural Radiotelephone Service is 
the Basic Exchange Telephone Radio Systems (BETRS). We will use the 
SBA's definition applicable to radiotelephone companies--i.e.,  stan 
entity employing no more than 1,500 persons. There are approximately 
1,000 licensees in the Rural Radiotelephone Service, and we estimate 
that almost all of them qualify as small entities under the SBA's 
definition.
    72. Air-Ground Radiotelephone Service. The Commission has not 
adopted a definition of small entity specific to the Air-Ground 
Radiotelephone Service. Accordingly, we will use the SBA's definition 
applicable to radiotelephone companies, i.e., an entity employing no 
more than 1,500 persons. There are approximately 100 licensees in the 
Air-Ground Radiotelephone Service, and we estimate that almost all of 
them qualify as small under the SBA definition.
    73. Specialized Mobile Radio (SMR). Pursuant to 47 CFR 
90.814(b)(1), the Commission has defined ``small business'' for 
purposes of auctioning 900 MHz SMR licenses, 800 MHz SMR licenses for 
the upper 200 channels, and 800 MHz SMR licenses for the lower 230 
channels on the 800 MHz band as a firm that has had average annual 
gross revenues of $15 million or less in the three preceding calendar 
years. The SBA has approved this small business size standard for the 
800 MHz and 900 MHz auctions. Sixty winning bidders for geographic area 
licenses in the 900 MHz SMR band qualified as small businesses under 
the $15 million size standard. The auction of the 525 800 MHz SMR 
geographic area licenses for the upper 200 channels began on October 
28, 1997, and was completed on December 8, 1997. Ten (10) winning 
bidders for geographic area licenses for the upper 200 channels in the 
800 MHz SMR band qualified as small businesses under the $15 million 
size standard.
    74. The auction of the 1,030 800 MHz SMR geographic area licenses 
for the General Category channels began on August 16, 2000, and was 
completed on September 1, 2000. Eleven (11) winning bidders for 
geographic area licenses for the General Category channels in the 800 
MHz SMR band qualified as small businesses under the $15 million size 
standard. The Commission anticipates that a total of 2,823 EA licenses 
will be auctioned in the lower 80 channels of

[[Page 81484]]

the 800 MHz SMR service. Therefore, we conclude that the number of 800 
MHz SMR geographic area licensees for the lower 80 channels that may 
ultimately be affected by these proposals could be as many as 2,823. In 
addition, there are numerous incumbent site-by-site SMR licensees on 
the 800 and 900 MHz band. The Commission awards bidding credits in 
auctions for geographic area 800 MHz and 900 MHz SMR licenses to firms 
that had revenues of no more than $15 million in each of the three 
previous calendar years.
    75. Private Land Mobile Radio (PLMR). PLMR systems serve an 
essential role in a range of industrial, business, land transportation, 
and public safety activities. Companies of all sizes operating in all 
U.S. business categories use these radios. The Commission has not 
developed a definition of small entity specifically applicable to PLMR 
licensees due to the vast array of PLMR users. For the purpose of 
determining whether a licensee is a small business as defined by the 
SBA, each licensee would need to be evaluated within its own business 
area.
    76. The Commission is unable at this time to estimate the number of 
small businesses, which could be impacted by these policies and 
proposals. However, 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 policies and proposals in this context could 
potentially impact every small business in the United States.
    77. Fixed Microwave Services. Microwave services include common 
carrier and private-operational fixed services. At present, there are 
approximately 22,015 common carrier fixed licensees and 61,670 private 
operational-fixed licensees and broadcast auxiliary radio licensees in 
the microwave services. The Commission has not yet defined a small 
business with respect to microwave services. For purposes of this IRFA, 
we will utilize the SBA's definition applicable to radiotelephone 
companies `` i.e., an entity with no more than 1,500 persons. We 
estimate, for this purpose, that all of these Fixed Microwave licensees 
(excluding broadcast auxiliary licensees) would qualify as small 
entities under the SBA definition for radiotelephone companies.
    78. Offshore Radiotelephone Service. This service operates on 
several 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 are 
unable at this time to estimate the number of licensees that would 
qualify as small under the SBA's definition for radiotelephone 
communications.
    79. Local Multipoint Distribution Service. The auction of the 1,030 
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 their 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 reauctioned 161 licenses; there were 40 winning bidders. 
Based on this information, we conclude that the number of small LMDS 
licensees will include the 93 winning bidders in the first auction and 
the 40 winning bidders in the re-auction, for a total of 133 small 
entity LMDS providers as defined by the SBA and the Commission's 
auction rules.
    80. 39 GHz Service. The auction of the 2,173 39 GHz licenses began 
on April 12, 2000 and closed on May 8, 2000. The Commission defined 
``small entity'' for 39 GHz licenses as an entity that has average 
gross revenues of less than $40 million in the three previous calendar 
years. An additional classification for ``very small business'' was 
added and is defined as an entity that, together with their 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 39 GHz auctions have been approved by the 
SBA.
    81. 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 Commission auctioned 
geographic area licenses in the WCS service. In the auction, there were 
seven winning bidders that qualified as very small business entities, 
and one that qualified as a small business entity. We conclude that the 
number of geographic area WCS licensees affected is eight entities.
International Services
    82. International Broadcast Stations. Commission records show that 
there are 20 international broadcast station licensees. We do not 
request or collect annual revenue information for these licenses, and 
thus are unable to estimate the number of international broadcast 
licensees that would constitute a small business under the SBA 
definition.
    83. International Public Fixed Radio (Public and Control Stations). 
There are 3 licensees in this service. We do not request or collect 
annual revenue information for these licenses, and thus are unable to 
estimate the number of international broadcast licensees that would 
constitute a small business under the SBA definition.
    84. Fixed Satellite Transmit/Receive Earth Stations. There are 
approximately 2,679 earth station authorizations, a portion of which 
are Fixed Satellite Transmit/Receive Earth Stations. We do not request 
or collect annual revenue information for these licenses, and thus are 
unable to estimate the number of the earth stations that would 
constitute a small business under the SBA definition.
    85. Fixed Satellite Small Transmit/Receive Earth Stations. There 
are approximately 2,679 earth station authorizations, a portion of 
which are Fixed Satellite Small Transmit/Receive Earth Stations. We do 
not request or collect annual revenue information for these licenses, 
and thus are unable to estimate the number of fixed satellite transmit/
receive earth stations that would constitute a small business under the 
SBA definition.
    86. Fixed Satellite Very Small Aperture Terminal (VSAT) Systems. 
These stations operate on a primary basis, and frequency coordination 
with terrestrial microwave systems is not required. Thus, a single 
``blanket'' application may be filed for a specified number of small 
antennas and one or more hub stations. The Commission has processed 377 
applications. We do not request or collect annual revenue information 
for these licenses, and thus are unable to estimate the number of VSAT 
systems that would constitute a

[[Page 81485]]

small business under the SBA definition.
    87. Mobile Satellite Earth Stations. There are 11 licensees. We do 
not request or collect annual revenue information for these licenses, 
and thus are unable to estimate the number of mobile satellite earth 
stations that would constitute a small business under the SBA 
definition.
    88. Radio Determination Satellite Earth Stations. There are four 
licensees. We do not request or collect annual revenue information for 
these licenses, and thus are unable to estimate the number of radio 
determination satellite earth stations that would constitute a small 
business under the SBA definition.
    89. Space Stations (Geostationary). Commission records reveal that 
there are 64 Geostationary Space Station licensees. We do not request 
or collect annual revenue information for these licenses, and thus are 
unable to estimate the number of geostationary space stations that 
would constitute a small business under the SBA definition.
    90. Space Stations (Non-Geostationary). There are 12 Non-
Geostationary Space Station licensees, of which only three systems are 
operational. We do not request or collect annual revenue information 
for these licenses, and thus are unable to estimate the number of non-
geostationary space stations that would constitute a small business 
under the SBA definition.
    91. Direct Broadcast Satellites. Because DBS provides subscription 
services, DBS falls within the SBA-recognized definition of ``Cable and 
Other Pay Television Services.'' This definition provides that a small 
entity is one with $11.0 million or less in annual receipts. As of 
December 1996, there were eight DBS licensees. However, the Commission 
does not collect annual revenue data for DBS and, therefore, is unable 
to ascertain the number of small DBS licensees that would be impacted 
by these policies and proposals. Although DBS service requires a great 
investment of capital for operation, there are several new entrants in 
this field that may not yet have generated $11 million in annual 
receipts, and therefore may be categorized as small businesses, if 
independently owned and operated.

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

    92. With certain exceptions, the polices and proposals in this 
document could apply to all Commission licensees holding licenses under 
Title III of the Communications Act or which engage in spectrum leasing 
on their authorized systems. This document proposes to require 
licensees and lessees engaging in spectrum leasing to comply with the 
Commission's rules and policies, including, but not limited to, 
regulatory fees, universal service fund, and reporting requirements. 
Licensees and lessees would ordinarily comply with these requirements 
as part of their normal business practices. This document also seeks 
comment on potential reporting, recordkeeping and compliance 
requirements for spectrum lessors and lessees including: (1) Retention 
of lease agreements; (2) reporting of spectrum leasing terms to the 
Commission; (3) licensee and lessee compliance with the Commission's 
technical and service rules; (4) licensee filings with the Commission 
on behalf of the lessee; (5) licensee verification of lessee compliance 
with FCC rules; (6) licensee supervision of a lessee's adherence to the 
Commission's rules and policies; and (7) the leasing of spectrum by 
entities designated as ``small business'' or ``very small business'' 
under the Commission's rules. Licensees and lessees may retain or hire 
outside professionals (e.g., legal and engineering staff) to draft 
lease agreements, provide consulting service, maintain records, and 
comply with applicable Commission rules. They also may choose employees 
to be responsible for reporting, recordkeeping and other compliance 
requirements.

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

    93. 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: (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.
    94. This document proposes to reduce regulatory burdens on 
Commission licensees (including small-business) that may wish to lease 
their spectrum to third parties. It also creates economic opportunities 
for third parties (including small businesses) that may wish to lease 
spectrum usage rights from certain licensees. In particular, it would 
provide licensees, including small-business licensees, flexibility to 
subdivide and apportion the spectrum and lease the spectrum usage 
rights to various third party users--in any geographic or service area, 
in any quantity of frequency, and for any period of time during the 
term of their licenses--without having to secure prior Commission 
approval. In addition, many different types of spectrum users 
(including small businesses) would be permitted to satisfy their 
spectrum needs without having to acquire a license or go through the 
Commission's procedures for assigning or transferring control of a 
license or a partial license through partitioning, disaggregation, or 
partial assignment. By reducing the transactional costs for users, 
including small businesses, spectrum leasing could facilitate more 
intensive and efficient use of spectrum in both underserved areas and 
more congested areas.
    95. A key issue in this proceeding concerns how the Commission can 
ensure that licensees and lessees comply with the Communications Act 
and the Commission's rules. As explained below, we are considering a 
number of alternative approaches to achieve this goal. We consider 
these different alternatives partly because we seek to minimize, to the 
extent possible, the economic impact of these potential requirements on 
small businesses.
    96. A core feature of this proposal is that licensees (including 
small-business licensees) will retain ultimate responsibility for 
ensuring that spectrum lessees comply with the Communications Act and 
the Commission's rules. We therefore solicit comment on whether we 
should impose additional requirements on the licensee to ensure that 
each lessee complies with the Commission's rules. These requirements 
could include having the licensee require that the lessee certify that 
it complies with all rules, and requiring the licensee to verify that 
the lessee is complying with all rules.
    97. In addition, we seek comment on whether there are circumstances 
in which we should hold lessees (which would include small businesses) 
responsible for non-compliance with the Communications Act or the 
Commission's rules in addition to, or instead of, the licensee.
    98. We also solicit comment on whether to require all spectrum 
leasing agreements to include certain contractual provisions, which 
would define the minimum basic rights, obligations, and 
responsibilities of the licensee and lessee. We also seek comment on 
whether to require licensees and lessees to keep copies of

[[Page 81486]]

spectrum leasing agreements and keep them current and available upon 
request for the inspection by the Commission.
    99. The Commission's unjust enrichment rules require that licensees 
that received bidding credits or participated in installment plans, 
which are often small entities, reimburse the U.S. Treasury if they 
assign or transfer all or part of the licenses to an entity that would 
not meet the eligibility standards for similar bidding credits. In this 
document, we inquire whether licensees that received bidding credits or 
participates in installment plans should reimburse the U.S. Treasury if 
they lease spectrum usage rights to entities that would not meet the 
eligibility standards for similar bidding credits.

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

    None.

Ordering Clauses

    100. Pursuant to the authority of Sections 1, 4(i), 7, 10, 201, 
202, 208, 214, 301, 303, 308, 309, and 310 of the Communications Act of 
1934, as amended, 47 U.S.C. 151, 154(i), 157, 160, 201, 202, 208, 214, 
301, 303, 308, 309, and 310, this Notice of Proposed Rulemaking is 
hereby adopted.
    101. The Commission's Consumer Information Bureau, Reference 
Information Center, shall send a copy of the Notice of Proposed 
Rulemaking, including the Initial Regulatory Flexibility Analysis, to 
the Chief Counsel for Advocacy of the Small Business Administration.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.
[FR Doc. 00-32789 Filed 12-22-00; 8:45 am]
BILLING CODE 6712-01-P