Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | WT Docket No. 02-68          |
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| Amendment of Parts 21 and 74     | ) | RM-9718                      |
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| of the Commission\'s Rules With  | * |                              |
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| Licensing in the Multipoint      | * |                              |
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| Distribution Service and in the  | * |                              |
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| Instructional Television Fixed   |   |                              |
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**NOTICE OF PROPOSED RULEMAKING**

**Adopted: March 27, 2002 Released: May 3, 2002**

Comments Due: 60 days after publication of this Notice in the Federal
Register

Reply Comments Due: 90 days after publication of this Notice in the
Federal Register

By the Commission:

**I. INTRODUCTION**

1\. The Commission has before it an amended petition for rulemaking
filed by PetroCom License Corporation ("Petitioner"), requesting that
the Commission amend its rules to permit licensing of the Multipoint
Distribution Service ("MDS") and Instructional Television Fixed Service
("ITFS") spectrum in the Gulf of Mexico.[^1] MDS operators and ITFS
licensees share spectrum in the 2500-2690 MHz band.[^2] Both services
operate as either point-to-point or point-to-multipoint services, with
MDS serving businesses and consumers. ITFS channels are allocated to
educational organizations and are used primarily for the transmission of
instructional, cultural and other types of educational material.
Petitioner is the successor in interest to Gulf Coast MDS Service
Company, which filed a similar Petition for Rulemaking on May 21,
1996.[^3] Petitioner asks that the Commission establish a Basic Trading
Area like-service area[^4] in the Gulf similar to the ones established
in *Amendment of Parts 21 and 74 of the Commission\'s Rules With Regard
to Filing Procedures in the Multipoint Distribution Service and in the
Instructional Television Fixed Service and Implementation of Section
309(j) of the Communications Act ‑ Competitive Bidding*, 10 FCC Rcd
9589, 9619 (1995) ("*MDS Report and Order"*).[^5]

2\. We propose to establish a BTA-like area in the Gulf of Mexico ("Gulf
Service Area"). The proposed area would be subject to the same rules,
with certain limitations, as those BTA-like service areas established in
the *MDS Report and Order*. We solicit comment on the technical and
economic effects of implementing our proposals.

3\. In the *MDS Report and Order*, we defined the service areas for MDS
authorizations and established competitive bidding procedures to select
among mutually exclusive applicants for those authorizations. In
*Amendment of Parts 21 and 74 to Enable Multipoint Distribution Service
and Instructional Television Fixed Service Licensees to Engage in Fixed
Two-Way Transmissions*, 13 FCC Rcd 19112 (1998), *recon.*, 14 FCC Rcd
12764 (1999), *further recon.*, 15 FCC Rcd 14566 (2000) ("*Two-Way
Order*"), we amended Parts 21 and 74 of our rules to provide licensees
in MDS and ITFS with substantially increased operational and technical
flexibility.

4\. Our goal in instituting this proceeding is to continue the work
begun in the *Two-Way Order* to encourage the most efficient utilization
of spectrum. As discussed in the *Two-Way Order*, although the MDS
spectrum historically has been primarily used to provide either one-way
video service or wireless cable service to subscribers, some of the
subject spectrum has been used in recent years for the provision of
two-way service. This type of usage is expected to increase dramatically
in the next few years as two-way systems are deployed. These two-way
systems will be capable of very high speed and high capacity data
transmission, making them particularly suited for business use.[^6] Due
to its relatively small and transient population and almost exclusively
industrial use, we expect business use to predominate in the proposed
Gulf Service Area.

5\. An initial filing window for two-way service was held from August
14 - 18, 2000. Following this initial filing window, on April 16, 2001,
the Bureau commenced a rolling one-day filing window process, which
permits licensees to apply for authorizations on a first-come
first-served basis.[^7] To date, approximately 1,600 of those
applications have been granted.

**II. BACKGROUND**

6\. Petitioner applied to the Commission for developmental authority to
construct and operate a digital microwave network on platforms in the
Gulf using MDS and ITFS frequencies. The developmental authority was
granted on January 23, 1997 and modified on May 1, 1998. Petitioner's
request for extension of its developmental authorization was denied.[^8]

7\. In the *MDS Report and Order*, we adopted a licensing plan under
which we assigned, through a simultaneous multiple round bidding
process[^9], one MDS authorization for each of the 487 BTAs and six
additional BTA-like geographic areas.[^10] A BTA authorization holder
may construct facilities to provide service over any usable MDS channels
within the BTA.[^11] A MDS channel is usable if the proposed station
design is in compliance with the Commission\'s interference
standards.[^12]

8\. The signals of a BTA authorization holder cannot interfere with
those of any other BTA authorization holder.[^13] Because BTA lines do
not always track desired service areas, however, the rules permit BTA
authorization holders to negotiate interference protection rights.[^14]
In addition, BTA authorization holders must honor the protected service
areas of incumbent MDS operators and ITFS licensees within their
BTAs.[^15] The rules permit BTA authorization holders to assign or to
transfer their entire BTAs, or to partition portions of BTAs, to other
parties.[^16]

**III. DISCUSSION**

**A. Creation of Service Area**

9\. According to Petitioner, the principal users of the services
operating over the MDS/ITFS spectrum in the Gulf of Mexico will be the
oil and gas industries, which are increasing their demand for
telecommunications capabilities in a variety of offshore environments
and applications. Petitioner contends that many of these
telecommunications needs are not being met by currently authorized
services in the Gulf, including point-to-point microwave, very small
aperture terminal systems and cellular communications. Petitioner argues
that the absence of incumbent licensees on the MDS and ITFS frequencies
in the Gulf makes those frequencies appropriate to meet "pent-up demand"
for new services. The use of these frequencies is especially apt,
Petitioner asserts, because increased sophistication and versatility of
equipment designed to operate in the 2500-2690 MHz band would enable
industrial users to more efficiently conduct their exploration and
production operations from sites such as drilling rigs and production
platforms.[^17]

10\. In response, WCA argues that MDS service in the Gulf is not needed
and that MDS auction winners whose authorizations lie along the Gulf
planned their bidding strategies and paid a higher price for their
authorizations based on the assumption that they would not need to
address interference problems on the sides of their BTAs that abut the
Gulf. WCA claims that these authorization holders might not have paid as
much for their BTA authorizations if they had known that a Gulf Service
Area was to be established in the future.[^18]

11\. We reject WCA\'s contention that it would have been reasonable for
applicants in the original MDS auction to have based their bidding
strategy upon the assumption that, in the future, the Commission would
not designate a Gulf service area or auction authorizations for such a
service area. As a general matter, in circumstances such as this, we
expect all applicants when developing their bidding strategies to take
into consideration potential allocation or auction determinations that
would result in additional auctions in the service. Therefore, we
tentatively agree with Petitioner's assertions and propose to auction a
BTA-like service area in the Gulf of Mexico. We note that there is
precedent for our action here in that we have licensed
telecommunications service in the Gulf of Mexico before, notably in
*Petroleum Communications, Inc.*, 54 Rad. Reg. 2d (P&F) 1020
(1983).[^19] Furthermore, the *MDS Report and Order* never indicated
that new BTA-like areas could not be created or that the existing BTAs,
including those bordering United States territorial waters, were in some
way protected against the future creation of new service areas. Indeed,
in light of the Commission\'s actions over the last several years to
encourage the most efficient use of spectrum by private users, WCA and
other interested parties had no reason to expect that, absent
substantial and compelling public interest reasons, we would leave a
portion of the spectrum under our jurisdiction permanently fallow.[^20]
Finally, with respect to WCA's concerns about land-based BTA holders
receiving potential unreasonable interference from any Gulf system(s),
we address these concerns *supra* ¶¶ 14-15, in the section entitled,
"Amount of Spectrum to be Licensed" and *supra* ¶¶ 38-45, in the section
entitled, "Interference Protection Requirements."

**B. Use of ITFS Spectrum**

12\. Petitioner has requested that all of the spectrum currently
available for wideband land-based MDS/ITFS operations, *i.e.*, the
entire spectrum encompassing the blocks 2500-2690 MHz and 2150-2162 MHz,
be made available for use in the Gulf of Mexico.[^21]

13\. We propose to exclude all ITFS channels from licensing in the new
Gulf Service Area. ITFS licensees have not expressed interest in
obtaining licenses in the Gulf, the area most likely has little need for
educational service, and the requested commercial use does not require
the full bandwidth available in the 2500-2690 MHz band. We seek comments
on this proposal, in particular from educational organizations.

**C. Amount of Spectrum to be Licensed**

14\. In evaluating the amount of spectrum to be licensed, we believe 4
essential factors should be considered: (a) the current and potential
future demand for the communications service to be provided in the Gulf;
(b) the emissions and bandwidths likely to be used to satisfy the
service needs; (c) any alternative spectrum available which can also be
used to provide the service; and (d) the potential for harmful
interference to existing services using the same, or adjacent, spectrum.
With respect to Petitioner's proposal to license the entire bandwith
available in the 2500-2690 MHz band, we make the following observations
regarding these four factors and request comment where appropriate:

> \(a\) [Demand]{.underline} Petitioner states that the population in
> the Gulf consists of approximately 20,000 potential users, located on
> oil platforms spread out over thousands of square miles proximate to
> the shoreline extending from Texas to Florida.[^22] In contrast to
> this figure, WCA points out that there are over 16 million potential
> customers residing in the land-based areas proximate to Gulf
> waters.[^23] Based on the figures provided to us by the parties, it
> appears that the density of users (*i.e.* response stations per sq.
> mile) in the Gulf will be extremely low and will grow very slowly, if
> at all.[^24] However, in nearby cities such as New Orleans and
> Houston, heavy spectrum demands will likely continue. We seek comment
> on the accuracy of the population density estimates provided by
> Petitioner and WCA as well as comment on the discrepancy of use
> (predicted low spectrum use in the Gulf vs. continued high spectrum
> use in nearby land-based cities) in the region.
>
> \(b\) [Emissions and Bandwidth]{.underline} Petitioner's proposed
> wireless local loop service consists essentially of voice-grade
> telephony circuits and slow-speed data circuits (*e.g.* 64 kilobits).
> Using trailing edge technology, over 100 such simultaneous circuits
> could easily fit within a single 6 MHz MDS channel. Using leading edge
> coding and modulation, several hundred such circuits could fit within
> 6 MHz. Thus, a single main or booster station at a single location,
> using an omnidirectional antenna, could simultaneously serve 100
> individual response stations. Using a sectorized transmitting antenna,
> such as those typically proposed for land-based stations, this single
> main or booster station could serve 100+ response stations per sector,
> or a total of many hundreds or thousands of stations, depending on the
> number of sectors chosen. Within a Gulf of Mexico BTA, hundreds of
> booster stations could be operated within a 6 MHz bandwidth providing
> tens of thousands of communications circuits. We seek comment on
> whether authorizing a single channel would be adequate to meet the
> potential needs of users in the Gulf.
>
> \(c\) [Alternative Spectrum]{.underline} Petitioner acknowledges that
> fixed wireless local loop service can also be provided over
> frequencies licensed in the Wireless Communications Service (WCS) and
> the Local Multipoint Distribution Service (LMDS). Many hundreds of MHz
> are available in these services, and cellular telephone service is
> also available in portions of the Gulf. We seek comment on what
> effect, if any, the availability of alternative spectrum should have
> on the amount of bandwith licensed in the Gulf.
>
> \(d\) [Interference]{.underline} As noted above, millions of
> households are situated in the cities, suburbs and rural areas
> proximate to the Gulf of Mexico. As a result of the *Two-Way Order*, a
> significant increase in usage of the MDS/ITFS spectrum is expected to
> occur in these areas as new two-way systems are constructed and put
> into operation. These new systems will be intensive users of this
> spectrum, configured so as to offer service to as many locations as
> possible while protecting each other from harmful interference. Thus,
> to the extent that Gulf operations make use of all or part of the MDS
> spectrum allocation, a potential for interference is created which
> must be carefully considered.

15\. Based upon the evaluation criteria set out above, taken both
individually and collectively, there appears to be sufficient
justification to propose limiting the scope of any MDS spectrum
allocation in the Gulf. We realize that, absent (d)
[Interference]{.underline}, it could be argued that no harm would come
from a large MDS spectrum allocation in the Gulf owing to the fact that,
as with all relatively isolated areas, an abundance of spectrum gives
users much more flexibility in system design and operation than is
possible in geographic areas where spectrum is scarce. However, because
of the potential for interference to land-based MDS and ITFS systems in
the Gulf coast area, we believe that an offshore frequency allocation
should be limited in size to no more than is absolutely essential for
successful deployment and growth of the proposed service. For example,
given the type of communications circuits deployed in Petitioner's
existing developmental system, and the circuits likely to be deployed if
we authorize regular service in the Gulf, we propose to license one
BTA-like service area in the Gulf, consisting of two blocks of spectrum
in the 2500-2690 MHz band, each containing two 6 MHz MDS channels. We
invite comment on how much bandwith is necessary for service in the Gulf
especially in light of the potential interference to nearby land-based
MDS and ITFS systems.

**D. Boundaries**

16\. As discussed above, we determined in the *MDS Report and Order* to
award MDS authorizations based on BTA and BTA-like service areas. BTAs
were designed by Rand McNally to represent the natural flow of commerce,
comprising areas within which consumers have a community of interest.
BTAs vary in size and shape, typically including a population center(s)
(city or large town) and the surrounding rural area. BTA boundaries are
based on county lines, but specific boundaries were drawn after a study
of such factors as physiography, population distribution, economic
activities, newspaper distribution and transportation facilities. The
six additional BTA-like service areas created pursuant to the *MDS
Report and Order* were based on the same criteria Rand McNally used in
creating its 487 BTAs.[^25] The proposed Gulf of Mexico service area
differs from those previously created in that it lacks any significant
population center and is primarily based on the geographic confines of
the Gulf and on the commonality of commercial interests of the potential
users of any service provided.

17\. Petitioner sets forth boundary suggestions for the proposed Gulf
Service Area. According to Petitioner, along the coastline from the
southernmost tip of Texas to the southernmost tip of Florida, the
boundary between the Gulf MDS licensee and the land-based MDS licensees
should be the county lines of the adjacent land BTAs. Petitioner cites
authority that the county lines in Texas and Florida extend 3 marine
leagues (9 nautical miles) from the coastline, while the county lines in
Alabama, Mississippi and Louisiana extend 3 geographic miles from the
coastline.[^26] WCA provides contrary authority that Louisiana extends 3
marine leagues (9 nautical miles) from the coastline.[^27] Petitioner
further suggests that the outer, seaward boundary of the Gulf service
area should be coterminous with the southern boundary of the Exclusive
Economic Zone ("EEZ") defined by a 1983 presidential proclamation.[^28]
The EEZ extends approximately 200 nautical miles from the baseline from
which the breadth of the territorial sea is measured. The area beyond
this point is international waters, according to Petitioner.[^29]

18\. In response to Petitioner's suggestions for designating this new
BTA-like area, we are proposing to utilize the same boundary definitions
for the Gulf Service Area that we adopted for service areas for the
wireless communications service in the Gulf of Mexico in the *WCS Report
and Order*.[^30] In that proceeding, we determined that land-based
license regions abutting the Gulf of Mexico will extend to the limit of
the territorial waters of the United States in the Gulf, which is the
maritime zone that extends approximately twelve nautical miles from the
United States coastline.[^31] Beyond that line of demarcation, we
created a Gulf of Mexico service area which extended from that line
outward to the geographic limits consistent with international
agreements.[^32] We emphasize that any licensing of MDS spectrum in the
Gulf would be subject ongoing negotiations with Mexico regarding border
coordination issues. Such negotiations may result in different border
coordination or protection zones, and different operational
restrictions, that would apply to Gulf operations near the Mexican
border.[^33] We solicit comments on both the economic and technical
advantages of this proposal.

**E. Filing and auction procedures**

1\. Statutory Requirements

19\. The Balanced Budget Act revised the Commission\'s auction
authority.[^34] Specifically, it amended Section 309(j) of the Act to
require the Commission to grant licenses through the use of competitive
bidding when mutually exclusive applications for initial licenses are
filed, unless certain specific statutory exemptions apply.[^35] The
Balanced Budget Act also added to Section 309(j)(1) a reference to the
Commission\'s obligation under Section 309(j)(6)(E) to use engineering
solutions, negotiation, threshold qualifications, service regulations,
or other means to avoid mutual exclusivity where it is in the public
interest to do so.[^36] The Balanced Budget Act did not amend Section
309(j)(3)\'s directive to consider certain public interest objectives in
identifying classes of licenses and permits to be issued by competitive
bidding.[^37]

20\. In a Report and Order and Further Notice of Proposed Rule Making,
the Commission established a framework for exercise of its auction
authority, as amended by the Balanced Budget Act.[^38] The Report and
Order affirmed that in identifying which classes of licenses should be
subject to competitive bidding, the Commission is required to pursue the
public interest objectives set forth in Section 309(j)(3).[^39] The
Report and Order also affirmed that, as part of this public interest
analysis, the Commission must continue to consider alternative
procedures that avoid or reduce the likelihood of mutual
exclusivity.[^40] The Commission concluded, however, that its obligation
to avoid mutual exclusivity does not preclude it from adopting licensing
processes in the non-exempt services that result in the filing of
mutually exclusive applications where it determines that such an
approach would serve the public interest.[^41]

21\. As discussed above, we propose to continue the use of a BTA-like
licensing scheme for assigning of MDS licenses in the Gulf. Consistent
with the requirement of Section 309(j)(1), if we adopt this licensing
scheme, under which mutual exclusivity is possible, mutually exclusive
applications will be resolved through competitive bidding.[^42]

2\. Incorporation by Reference of Part 1 Standardized Auction Rules

22\. In the Part 1 proceeding, general competitive bidding rules were
adopted with the goal of simplifying and streamlining the rule making
process for all auctionable services.[^43] We propose to conduct the
auction for MDS licenses in the Gulf in conformity with the general
competitive bidding rules set forth in Part 1, subpart Q of the
Commission\'s rules, and substantially consistent with the bidding
procedures that have been employed in previous Commission auctions.[^44]
Specifically, we propose to employ the Part 1 rules governing designated
entities, application issues, payment issues, competitive bidding
design, procedure and timing issues, and anti-collusion.[^45] Under this
proposal, such rules would be subject to any modifications that the
Commission may adopt in the Part 1 proceeding. In addition, consistent
with current practice, matters such as minimum opening bids and reserve
prices would be determined by the Wireless Telecommunications Bureau and
the Mass Media Bureau pursuant to their delegated authority.[^46] We
seek comment on whether any of our Part 1 rules would be inappropriate
in an auction for this service.

3\. Provisions for Designated Entities

23\. The Communications Act provides that, in developing competitive
bidding procedures, the Commission shall consider various statutory
objectives and consider several alternative methods for achieving
them.[^47] Specifically, the statute provides that, in establishing
eligibility criteria and bidding methodologies, the Commission shall
"promote economic opportunity and competition and ensure that new and
innovative technologies are readily accessible to the American people by
avoiding excessive concentration of licenses and by disseminating
licenses among a wide variety of applicants, including small businesses,
rural telephone companies, and businesses owned by members of minority
groups and women."[^48]

24\. Petitioner proposes that in light of our policy to encourage the
participation of small businesses in the licensing process, one of two
licenses in the Gulf should be set aside for a small business and that
such a small business license be the only one auctioned at this time.
With respect to the second license, Petitioner suggests that the
Commission review in five years whether to auction a second license.
Petitioner proposes that eligibility for the small business license
should be limited to entities whose average revenues do not exceed \$25
million and whose average total assets do not exceed \$75 million for
the past three years. Petitioner proposes that we should provide small
businesses with a 25% bidding credit for bids placed on the set-aside
license.[^49] We seek comment on whether bidding credits or other
special measures are necessary to encourage participation by small
businesses.[^50] In particular, we request comment on the advisability
of adopting bidding credits or other measures to promote diversification
of ownership, and on the appropriateness of adopting rules to prevent
unjust enrichment in connection with the special measures approved for
designated entities.

25\. Section 1.2110(b)(1) of our rules states that the Commission "will
establish the definition of a small business on a service-specific
basis, taking into consideration the characteristics and capital
requirements of the particular service."[^51] Currently, Section 21.960
of our rules governs designated entity provisions for MDS.[^52] The rule
provides that, "A winning bidder that qualifies as a small business, or
as a small business consortia, may use a bidding credit of fifteen (15)
percent to lower the cost of its winning bid on any of the BTA
authorizations awarded in the MDS auction."[^53] In addition, Section
21.961(b)(1) defines a small business as "an entity that together with
its affiliates has average annual gross revenues that are not more than
\$40 million for the preceding three calendar years."[^54] In support of
its decision to issue this specific bidding credit and small business
standard, the Commission stated, "Although other services have provided
larger bidding credits to certain designated entities, we believe that
the fifteen percent credit is sufficient for MDS because, unlike . . .
other services, we will offer this bidding credit on all authorizations
to be awarded to small businesses."[^55] Furthermore, the Commission
stated, "Given the capital requirements of the wireless cable industry
and its past difficulties in attracting capital, we believe that the
\$40 million gross revenue standard is appropriate for MDS. If the
Commission were to adopt a significantly lower standard for the
definition of small business, we would exclude companies with the
financial wherewithal to operate wireless cable systems competitive with
cable television from eligibility for installment payments, reduced
upfront payments and bidding credits."[^56]

26\. In the wake of the *Two-Way Order*, MDS licensees have seen the
value and commercial viability of their companies increase dramatically,
in light of the fact that MDS licensees are constructing extremely
flexible, digital two-way systems that provide ultra-high-speed,
ultra-high-capacity broadband service, including two-way internet
service via cellularized communication systems.[^57] Petitioner
indicates that it desires to provide fixed, broadband digital
communication services to the oil and gas industry in the Gulf.[^58]
Petitioner's proposed use of MDS spectrum in the Gulf is consistent with
the types of broadband services which are being deployed by other MDS
licensees across the country.[^59] WCA asserts that current land-based
BTA authorization holders may have a significant interest in securing
all or part of a Gulf BTA-like service area to assure themselves of
interference-free service to land-based subscribers. Therefore, WCA
opines that land-based BTA authorization holders would likely
participate in an auction of a Gulf BTA-like service area.[^60] In light
of the changes to the nature and use of MDS, as well as the fact that a
wide variety of entities of various sizes may participate in an auction
of a Gulf BTA-like service area, we believe that the use of different
designated entity provisions and small business standard should be
applied to such an auction. We propose small business definitions and
levels of bidding credits consistent with other wireless services that
are equivalent to the type of services MDS licensees are currently
providing. We propose three small business definitions and three levels
of bidding credits would provide a variety of businesses, including
local businesses, with opportunities to participate in the auction of
licenses for this spectrum, and may also be appropriate to promote
opportunities for the provision of services with varying capital costs.
Accordingly, we propose to define a very small business as an entity
with average annual gross revenues not exceeding \$3 million for the
preceding three years, a small business as an entity with average annual
gross revenues not exceeding \$15 million for the preceding three years,
and an entrepreneur as an entity with average annual gross revenues not
exceeding \$40 million for the preceding three years. We further propose
to provide very small businesses with a bidding credit of 35%, small
businesses with a bidding credit of 25%, and entrepreneurs with a
bidding credit of 15%. The bidding credits we propose here are those set
forth in the standardized schedule in Part 1 of our Rules.[^61] The
first two of these definitions are consistent with the small business
definitions we have established for the broadband Personal
Communications Services ("PCS") C and F blocks.[^62] Given the
similarities between broadband PCS and broadband MDS, we tentatively
conclude that this consistency is appropriate. We note, however, smaller
businesses may be interested in acquiring licenses to provide service in
the Gulf and may benefit from bidding credits. For this reason we
tentatively conclude that, in addition to establishing small business
definitions consistent with those of broadband PCS, we should also adopt
the definition of very small business that we propose today. We note
that the three-tiered approach to bidding credits we propose here is
consistent with the approach we have adopted for the 24 GHz band and
that we have proposed for the 3650 - 3700 MHz band.[^63]

27\. We seek comment on whether this approach is also appropriate here,
or whether there is anything about the characteristics and capital
requirements of MDS service in the Gulf that would require a different
approach. In discussing these issues, commenters are requested to
address the expected capital requirements for MDS services in the Gulf.
Commenters are invited to use comparisons with other services for which
the Commission has already established auction procedures as a basis for
their comments regarding the appropriate definitions for small and very
small businesses.

28\. Petitioner also argues that only one license should be auctioned
initially and that the Commission should review in five years whether to
auction a second license. Petitioner reasons that unlike land markets,
the demand for wireless services is not increasing at an exponential
rate in the Gulf.[^64] However, WCA, in their opposition to Petitioner's
argument, states that the Commission "has recognized that liberal
partitioning and disaggregation, coupled with bidding credits, and
reduced upfront payments/downpayments" are better ways to increase
opportunities for small businesses."[^65] We tentatively reject
Petitioner's suggestion that we set aside one or more licenses for small
businesses. In the *Two-Way Order*, we declined to adopt spectrum
set-asides for MDS. We stated, "Such a measure is inappropriate for MDS,
given the . . . the lack of sizable, discrete blocks of spectrum to
auction."[^66] Because we are only proposing to auction two blocks of
spectrum, each consisting of two 6 MHz MDS channels, we believe that a
set-aside would prevent the timely and efficient use of such spectrum.
In lieu of set-asides, we propose to adopt small business bidding
credits (see discussion, *supra*). We seek comment on our rejection of
Petitioner's request to set aside one or more licenses for small
businesses.

4\. Filing Procedures

29\. Petitioner has suggested that in any auction of the proposed Gulf
Service Area, we should streamline the filing and auction procedures we
adopted in the *MDS Report and Order and Two-Way Order*.[^67]
Specifically, Petitioner proposes to amend the rules to abrogate the
requirement that the winning bidder of a Gulf Service Area auction area
submit a long-form application pursuant to Section 21.956 of our
rules.[^68] Under Section 21.956, within thirty business days of being
notified of its status as a winner of a BTA service area, each bidder
must submit an initial long-form application for an MDS station license,
along with any required exhibits. Alternatively, the winner may submit a
statement of intention with regard to the BTA service area, along with
any required exhibits, showing the encumbered nature of the BTA,
identifying all previously authorized or proposed MDS and ITFS
facilities, and describing in detail the winning bidder's plans for
obtaining the previously authorized and/or proposed MDS stations within
the BTA. Petitioner claims that the application process rules were
intended to protect the incumbent land-based MDS and ITFS licensees
against interference. Petitioner submits that because there are no
incumbent MDS licenses in the Gulf, a Gulf licensee should not be
required to file a separate long-form application for each proposed MDS
station in the market.[^69]

30\. We tentatively disagree with Petitioner that amendments to the
filing and auction rules should be made to specifically address
licensing in the Gulf. Rather, we propose to continue to use the
existing filing and auction procedures. [^70] This would enable
potential applicants to apply for authorizations and to participate in
an auction relying on rules and utilizing electronic auction software
which already exist and which have proven to be effective in earlier
auctions. We believe use of the existing procedures will not only prove
easier for auction participants, but will also be more efficient for the
Commission. We find no reason to make special exceptions for the Gulf
licensee with regard to the filing of long-form applications merely
because no incumbent MDS licensees presently exist. On the contrary,
issues with interference do arise in the context of adjoining land-based
licensees. Accordingly, the long-form application rules, including
Section 21.956, will help to ensure that proposed MDS stations will not
interfere with adjoining land-based licensees. In addition, designated
entities must describe on their long-form applications how they satisfy
the requirements for eligibility for designated entity status.[^71] We
note that in our *Two-Way Order,* we adopted a streamlined application
processing system based on applicant certifications of compliance with
the technical and notice rules, timely notice to all potentially
affected parties and random audits of submitted applications. Thus,
after the initial main station applications are filed, a Gulf licensee
can use the streamlined process for two-way service.[^72] We invite
comment on our proposals.

**F. Limitations on WCS and LMDS Licensees**

31\. Petitioner proposes that to promote competition and avoid excessive
concentration of licenses, eligibility for the Gulf license should be
limited to applicants that do not already hold Gulf licenses for WCS.
Petitioner also proposes to preclude any future LMDS licensees from
being eligible to hold a Gulf license.[^73] In response, WCA states that
Petitioner has provided no evidence that allowing one entity to control
the MDS authorizations and the WCS and/or LMDS licenses for the Gulf
coast would deter competition or resulting in excessive concentration.
In support of its position, WCA asserts that Petitioner's request is
self-serving, in that Petitioner has not proposed excluding the Gulf
cellular licensees from eligibility because Petitioner itself is
affiliated with a Gulf cellular licensee.[^74]

32\. Sections 27.12 and 27.302 of the Commission\'s Rules[^75] impose no
restrictions on eligibility, other than the foreign ownership
restrictions set forth in Section 310 of the Communications Act.[^76] We
believe that Petitioner has provided no evidence that WCS and/or LMDS
licensees for the Gulf of Mexico exercise market power and that the use
of eligibility restrictions would be appropriate. We tentatively
conclude that we will not impose restrictions on eligibility for a
license in the Gulf.[^77] Thus, no prospective licensee would be barred
from participation in the auction or from post-auction acquisition of a
license for this spectrum based on its status as a provider of WCS, LMDS
or other telecommunications services. We believe that opening this
spectrum to as wide a range of applicants as possible will encourage
entrepreneurial efforts to develop new technologies and services, while
helping to ensure the most efficient use of the spectrum. We invite
comments on this proposal.

**G. Partitioning and Disaggregation**

33\. Partitioning is a method of subdividing the operating authority for
a market area. Licensees that partition create a geographic subdivision
of their market area. Petitioner proposes that we defer any decision
whether to allow partitioning in the Gulf. According to Petitioner,
customers in the Gulf are found on oil platforms, meaning that no
customers exist in over 90% of the Gulf. Further, as stated in ¶ 14,
*supra*, Petitioner asserts that the market is very small in terms of
population, with only approximately 20,000 persons present. Finally,
Petitioner states that it is unclear what would constitute a
geopolitical boundary in the Gulf.[^78] WCA responds that Petitioner's
proposal to prevent partitioning in the Gulf is an effort to minimize
competition. According to WCA, the Commission permits WCS licensees in
the Gulf to partition their spectrum.[^79] Similarly, WCA points out
that when the Commission adopted service rules for the public coast
service, which permits licensees to provide maritime commercial mobile
radio services, regional licensees were permitted to freely partition
and/or disaggregate licenses in part to mitigate the impact that
competitive bidding would have upon small businesses.[^80]

34\. The Commission presently permits geographic partitioning and
spectrum disaggregation for MDS.[^81] We tentatively reject Petitioner's
proposal to deny a Gulf Licensee the right to partition. The Commission
has recognized that liberal partitioning "will provide licensees with
the flexibility to use their spectrum more efficiently, will increase
opportunities for small businesses and other entities to enter the
broadband market, and ill speed service to underserved or unserved
areas."[^82] In particular, the Commission has noted that permitting
parties to partition licenses freely without regard to geopolitical
boundaries may promote service to smaller markets.[^83] As WCA asserts,
the ability to tailor service to one's needs is particularly valuable
when as large a service area as the Gulf is being auctioned. We invite
comments on this proposal.

35\. We also seek comment on possible market incentives for
disaggregating spectrum in the Gulf.[^84] We currently permit or are
considering similar partitioning and disaggregation rules in many
services, including the 800 MHz SMR, paging, 220 MHz, 38 GHz fixed
point-to-point microwave, WCS, LMDS, and cellular.[^85] In the Upper 700
MHz First Report and Order, we provided licensees in the 746-764 MHz and
776-794 MHz bands flexibility by permitting spectrum disaggregation
without restriction on the amount of spectrum to be disaggregated.[^86]
We tentatively conclude that we also should permit licensees in the Gulf
to disaggregate their licenses. We tentatively conclude that spectrum
disaggregation can result in efficient spectrum use and economic
opportunity for a wide variety of applicants, including small business,
rural telephone, minority-owned, and women-owned applicants.[^87] We
seek comment on this proposal.

**H. System Configuration**

36\. Petitioner states that its Gulf system configuration will differ
from that contemplated for land-based two-way MDS systems. Land-based
two-way systems will typically consist of three elements: (a) one or
more central transmitting stations (*i.e.* main and/or booster stations)
providing the "downstream" signals beamed to customer premises; (b)
response stations located at customer premises which are used to send
"upstream" signals from the customer to the service provider; and (c)
hub stations, which are centrally-located receive-only sites used for
receiving and processing the signals transmitted by all of the
surrounding response stations. Petitioner argues that it has no need for
hub stations because of the very low density of potential customer sites
in the Gulf of Mexico.[^88] There are only a limited number of fixed
sites which they propose to serve and these sites can transmit directly
back to the associated Main or Booster station. Petitioner therefore
proposes to amend Rule Parts 21 and 74 to permit this form of operation
and to also relieve Gulf of Mexico systems of the necessity of
conforming to the requirements of the *Methodology for Predicting
Interference from Response Station Transmitters and to Response Station
Hubs and for Supplying Data on Response Station Syste*ms ("*Two-Way*
Methodology"), which sets forth the manner in which MDS/ITFS applicants
must specify the proposed number of response stations, as well as their
locations and various technical parameters.[^89]

37\. In evaluating Petitioner's proposal, we recognize that a two-way
MDS system in the Gulf could differ substantially from a land-based
two-way system in terms of design and message routing patterns.
Petitioner's proposed system configuration is a mix of
point-to-multipoint and point-to-point operations, where some customers
in some areas can be served directly by a single centralized downstream
transmitter (*i.e.* main or booster station) and other customers, in
more remote areas, will need an intervening relay station or some other
method in order in order to receive and respond to signals from the
nearest central station. It is understandable, therefore, why Petitioner
would wish to make major changes in the existing MDS two-way rules in
order to accommodate their communications system architecture. In
response, we would note that the MDS and ITFS services were created
*specifically* to provide for point-to-multipoint communications and
this concept was strongly reaffirmed in the *Two-Way Order* when we
significantly expanded and enhanced the flexibility for system operators
to provide their customers with upstream communications capabilities
back to centrally-located receiving points (*i.e.* hub stations).
Notwithstanding the differences noted by Petitioner between Gulf-based
and land-based two-way systems, we believe that the existing MDS rules
should be applied intact (with the exception noted below relating to
interference standards) uniformly to all MDS systems. Nevertheless,
because Petitioner's requested system architecture is essentially a
request to waive our rules, we believe that if and when Petitioner
ultimately becomes a Gulf licensee, it, or any other auction winner, can
make waiver requests at that time.[^90]

**I. Interference Protection Requirements**

38\. In finalizing the new rules and regulations for MDS/ITFS operations
in the *Two-Way Order*, the Commission adopted a very rigorous approach
to the calculation of inter-system interference. Our goal was to
minimize, to the maximum extent possible, any interference which might
occur from system to system. Our approach consists of four fundamental
limitations on the amount of interfering power which one system may
project into a neighboring system: (a) A limit of --73 dBW/sq. meter on
the power flux density extending beyond the outer edge of a system;[^91]
(b) A requirement for a ratio of at least 45 dB between the strength of
a desired signal within an incumbent system vs. an undesired interfering
signal radiated from a neighboring system within a distance of 100
miles, if both signals occupy the same frequency channel;[^92] (c) A
requirement for a ratio of at least 0 dB between the strength of a
desired signal within an incumbent system vs. an undesired interfering
signal radiated from a neighboring system within 100 miles, if the
signals are on adjacent channels;[^93] and, (d) A requirement that the
noise floor of hub station receivers be protected from degradation by
all co- and adjacent channel transmitters in neighboring systems within
a distance of 100 miles.[^94] For calculating interference involving
two-way systems, the Commission adopted a standard signal propagation
model which must be used in determining whether or not the three
criteria above are met. Petitioner proposes to extend the use of these
criteria to interference calculations involving Gulf stations, although
with some modifications. Petitioner would limit the power flux density
of its interfering signal to --75 dBW/sq. meter (*i.e.*, 2 dB less
interference) at neighboring land-based systems, and Petitioner would
extend the 100 mile distance to 150 miles for calculation of the 45 dB
and 0 dB criteria.[^95]

39\. As noted by WCA in their opposition to Petitioner's argument, the
overriding issue with respect to possible interference from, and to,
Gulf systems is the matter of signal propagation, specifically, the
propagation of signals over large bodies of water.[^96] Although not an
exact science, the process of evaluating the propagation of signals over
land masses has been refined to the point where the results of applying
widely-accepted propagation models, such as the modified
Epstein/Peterson model required by the Commission's *Two-Way Order* for
MDS and ITFS two-way systems, are sufficiently reliable for all but the
most unusual signal paths. Unfortunately, the propagation of signals
over large bodies of water can differ markedly from signal propagation
over land and no comparably acceptable and standardized model is
available for calculating over-water propagation. The principal
difference involved, at least with respect to Gulf waters, is the
presence of "ducting" along the signal path. Simply put, ducting is a
phenomenon whereby a radio signal is trapped within and between
stratified layers of the atmosphere which have non-uniform refractivity
indexes. This layering is caused by climatological processes such as
subsidence, advection, surface heating and radiative cooling and the
ducts created due to these factors can extend for distances of tens to
hundreds of miles. Ducting of signals, including MDS/ITFS microwave
signals, enables these signals to travel relatively unattenuated for
distances far greater than would occur without the presence of the duct.
Numerous studies have been conducted of signals propagated in ducting
environments, such as the study cited by Petitioner published by
Dougherty/Dutton for the U.S. Department of Commerce in 1981.[^97]
Petitioner cites a passage from this study which concludes that ducting
is as likely to occur in southern Illinois and Alabama as it is in the
Gulf, indicating ducting is as much of a problem over land as over
water.[^98] Petitioner does not cite a later passage, however, which
more closely focuses on the issue of ducting over bodies of water vs.
ducting over land, where the Dougherty/Dutton study states:

> There are some uncertainties associated with these ground-based ducts,
> especially those observed at the many recording stations on land. The
> widespread simultaneous observation of ducts over land does not mean,
> necessarily, that those ducts are horizontally extensive (*i.e*.
> continuous) unless the terrain is approximately flat. The larger-scale
> irregularities of terrain (hills, cities, etc.) tend to modify the
> characteristics and limit the continuity or horizontal extent of ducts
> over land. Sea-surface ducts tend to be more prevalent and extensive
> than those over land, although there is some evidence that ocean depth
> and ocean currents can limit their horizontal extent.[^99]

40\. This passage indicates that ducting over water is more likely to
produce ducts of significant horizontal extent than will be produced by
ducting over land. Thus, although for land-based systems the naturally
occurring limitations of terrain obstructions such as hills and foliage
provide significant barriers to the very long range propagation of
interfering signals from one system into another, no such obstructions
are present over water and this effect is magnified by the presence of
ducting of the signal beyond the natural barrier of the radio horizon.
The implications of these facts are extremely important because the
entire system Petitioner proposes would be located over water and thus
in an area prone to ducting. We see three principal ramifications of
this situation relevant to the instant proceeding:

> \(a\) Stations located in Gulf waters will have the potential to cause
> interference to each other at distances far greater than would occur
> for land-based systems interfering with each other. Thus, for
> applicants and licensees in the Gulf, extra care would be necessary to
> make certain that the effects of long-range interfering signals have
> been included in the design and operation of all main, booster,
> response and hub stations. Each licensee would need to adequately
> protect all the stations in its own system, as well as all of the
> stations in any other systems in the Gulf, even those beyond the radio
> horizon.
>
> \(b\) Stations licensed in the Gulf waters will have to protect
> land-based systems from harmful interference due to ducting. Licensees
> in Gulf waters will need to exercise the same precautions against
> causing interference to land-based stations as would be necessary for
> protecting other stations situated in Gulf waters, *i.e.*, the
> assumption of an entirely non-obstructed path subject to ducting. For
> protecting land-based stations near to, but not directly adjoining
> Gulf waters, a degree of protection would still be necessary which is
> greater than that now required for protection between land-based
> stations.
>
> \(c\) Land-based stations near Gulf waters will have the potential to
> cause harmful interference to stations situated in Gulf waters due to
> ducting of the signal on over-water paths. Guarding against this would
> require land-based system designers to take any and all steps
> necessary so that they not only protected all other nearby land-based
> systems (using standard propagation models) but also implemented
> sufficient precautions to reduce to an acceptable level the amount of
> interference power being radiated on azimuths in the direction of Gulf
> systems.

41\. With respect to (a) above, we believe that Gulf licensees will be
able to configure their systems so that intra- and intersystem
interference will not be a problem. In the event of a conflict where
multiple Gulf licensees cannot resolve an interference situation, either
at the application stage or operating stage of system implementation, we
will resolve the dispute and may, at our discretion, require either or
both Gulf applicants/licensees to make system modifications to alleviate
potential, or actual, harmful interference.

42\. Issues (b) and (c) are far more troublesome. Turning first to (b),
the modifications proposed by Petitioner (*See* ¶38, *supra*) to
ameliorate interference from Gulf stations to land-based stations are
inadequate, in that they do not meaningfully account for the effects of
ducting likely to greatly strengthen interfering Gulf signals received
at land-based stations. Absent a generally accepted signal propagation
model for the waters of the Gulf of Mexico, and given the *certainty*
that ducting will occur between Gulf and land-based stations, we see
three mutually exclusive alternative solutions: (i) evaluate each and
every potential interference situation on a case-by-case basis; or (ii)
permit use of our existing interference standards and propagation model
and then, when interference occurs, invoke the provisions of Sections
21.238 and 21.239 of our rules and place the burden of rectifying
interference upon the interferer; or (iii) propose an alternative
propagation calculation methodology which is sufficiently conservative
to ensure that, in the vast majority of instances, no interference will
occur. Our choice, for reasons of fairness and practicality, is
alternative (iii), and we are proposing a method for the calculation of
signal attenuation specifically applicable to Gulf of Mexico
paths.[^100] Also, we do not believe that imposition of Sections 21.238
and 21.239 required by (ii) would be efficacious, in that it would
necessarily result in an after-the-fact scenario, where a land-based
system and its customers were already receiving destructive interference
prior to the commencement of any remedial actions.

43\. As the basis for a propagation calculation methodology for ducted
MDS signals in the Gulf, we are proposing to require that the amount of
attenuation along the path from the Gulf transmitters to the protected
land-based systems/stations be premised on free-space path attenuation
without regard to the actual radio horizon along the path. Therefore, we
would require that these interference calculations be based on a
"flat-earth" model rather than on the standard 4/3 curved-earth model.
In this way, we will be assured that the methodology will yield a value
for the strength of the interfering signal which is the largest that
could reasonably occur. We are proposing to require the use of this
methodology for interfering paths from the systems of all Gulf of Mexico
licensees into those portions of the systems of land-based MDS licensees
which are within 20 miles of the Gulf Service Areas. For the portions of
land-based MDS systems more than 20 miles inland from the Gulf Service
Areas, we are proposing to require that free-space attenuation be
assumed up to the 20 mile point, and then standard Epstein/Peterson
propagation methods (from the *Two-Way* Methodology) be used inland
beyond the 20 mile point. We realize that this methodology is
conservative, in that, the actual interfering signal from the Gulf of
Mexico station may be below the level predicted by this model. Ducting
is a weather-related phenomenon and is thus highly variable both in
location and intensity throughout the Gulf area. However, given the very
low spatial density of potential MDS stations in the Gulf Service Areas
we are proposing, we believe that system designers will have adequate
flexibility to establish system architecture such that they can achieve
the levels of interference protection required and still comfortably
meet all of the communications needs of their customers.

44\. Issue (c) raises considerations similar to (b), above, and also
raises another consideration which could have a serious adverse impact
on land-based systems, namely: If land-based systems must fully protect
Gulf stations from harmful interference, then the measures taken to
comply with this requirement could also impact the capability of the
land-based systems to deliver services to their own customers. This
could happen because the technical modifications made to the land-based
systems in order to minimize the strength of their signals in the
direction of nearby Gulf systems could also affect the strength of their
signals received by their customers. For example, the land-based system
may find it necessary, in order to protect a Gulf system, to reduce its
main, booster or response station transmitter power levels, or to use
transmitting antennas at these stations at lower heights, or to use
different transmitting (or receiving) antennas with patterns optimized
for interference reduction rather than for transmission of signals to or
from their customers. In its opposition to Petitioner's petition, WCA is
concerned about the impact of this issue, saying:

> WCA believes that under Petitioner's proposal, wireless cable systems
> along the Gulf coast might have to make substantial modifications that
> would reduce their ability to provide service to the 16.7 million
> people residing in Gulf Coast BTAs, just to meet their interference
> protection obligations under the existing rules to a Gulf of Mexico
> BTA authorization holder. The wireless systems that WCA's members and
> others are operating and developing have been designed to optimize
> coverage over land. Since those systems have been designed in an
> environment without a Gulf of Mexico BTA-like service area, they have
> been designed without regard to the potential for interference to a
> Gulf of Mexico BTA.[^101]

45\. As indicated in this *Notice*, we have found sufficient merit in
Petitioner's argument to justify serious exploration of, and concrete
proposals for, establishing MDS operations in the Gulf of Mexico.
However, in our proposals, we also intend to fully protect the rights of
all current MDS licensees to serve their BTAs, including those portions
of the BTAs which border directly on the Gulf of Mexico. In order to do
this, current licensees must have as much flexibility as possible to
design their systems to achieve maximum coverage. We believe it will be
virtually impossible for current licensees to achieve this degree of
coverage if they must afford full interference protection to Gulf of
Mexico systems and use the free-space calculation methodology described
above for determining the strength of their interfering signals at
protected Gulf receivers. Given the much greater population density of
the land-based relative to Gulf systems, the steps taken to modify one
land-based main or booster station so that it can fully protect a very
few Gulf stations might mean the loss of service to hundreds or
thousands of households in the urban or suburban area the main or
booster station was designed to serve. We believe this tradeoff would be
unacceptable and we are therefore proposing that land-based stations be
allowed to provide a lesser degree of protection to Gulf stations than
Gulf stations must provide to land stations. Specifically, we are
proposing to permit use of the (*Two-Way* Methodology) Epstein/Peterson
propagation model by land-based stations for calculating interference
into Gulf systems. As a practical matter, this lesser requirement may
have little adverse effect on Gulf systems because those systems, in
being designed to provide a very high level of protection to land-based
systems, will themselves then be much more protected from interference
from land-based systems, *i.e.*, in arranging their paths so as to not
cause interference, those paths will also be less vulnerable to
receiving interference.

**J. Five year Build-out Period**

46\. The Commission presently requires that BTA authorization holders
have five years from the grant date of the initial BTA authorization to
construct, develop and expand MDS station operations in their respective
protected service areas.[^102] We propose to apply the five-year
build-out requirement to any Gulf licensee. We seek comment on this
proposal.

**K. Period of Station License**

47\. Under the Commission\'s rules, licenses for MDS stations are to be
"issued for a period not to exceed 10 years."[^103] In the *MDS Report
and Order*, we determined that all MDS station licenses granted in every
BTA service area auctioned should be for a ten-year period to run from
the date that the Commission declared bidding in the MDS auction to be
closed.[^104] The Commission reasoned that beginning the ten-year
license term from the date that the bidding closed, rather than from the
date that each individual station license was issued, would allow the
Commission to easily process the licenses and deal more expeditiously
with their renewal.[^105] We propose to apply the ten-year license
period set forth Section 21.45(a) of the Commission's rules to any Gulf
Service Area licensee. However, because we are auctioning a discrete
amount of spectrum, the administrative convenience concerns present in
the 1996 auction will not be present in an auction of the Gulf Service
Area. Therefore, we propose that the ten-year license period for Gulf
Service Area licensees should run from the date that such licenses
issued. We seek comments on these proposals.

**IV. REGULATORY FLEXIBILITY ANALYSIS**

48\. As required by the Regulatory Flexibility Act (RFA),[^106] we have
prepared an Initial Regulatory Flexibility Analysis of the possible
significant economic impact on small entities by the proposals adopted
in this document. *See* Appendix A.

**V. PROCEDURAL MATTERS**

**A. [Ex Parte]{.underline} Presentations**

49\. This is a permit-but-disclose notice-and-comment rulemaking
proceeding. Ex parte presentations are permitted, except during the
Sunshine Agenda period, provided that they are disclosed as provided in
the Commission\'s rules. [See generally]{.underline} 47 C.F.R. §§
1.1202, 1.1203, 1.1206. Written submissions, however, will be limited as
discussed below.

B. Initial Paperwork Reduction Act of 1995 Analysis

50\. The action contained herein has been analyzed with respect to the
Paperwork Reduction Act of 1995 and found to impose new or modified
reporting and recordkeeping requirements or burdens on the public.
Implementation of these new or modified reporting and recordkeeping
requirements will be subject to approval by the Office of Management and
Budget (OMB) as prescribed by the Act. The new or modified paper work
requirement contained in this *Notice of Proposed Rulemaking* (which are
subject to approval by OMB) will go into effect upon OMB approval.

> C. Comment Filing Procedures

51\. General Requirements. Pursuant to Sections 1.415 and 1.419 of the
Commission\'s rules, 47 C.F.R. §§ 1.415, 1.419, interested parties may
file comments on or before 60 days after publication of this Notice in
the Federal Register, and reply comments on or before 90 days after
publication of this Notice in the Federal Register. Comments may be
filed using the Commission\'s Electronic Comment Filing System (ECFS) or
by filing paper copies. [See]{.underline} [Electronic Filing of
Documents in Rulemaking Proceedings]{.underline}, 63 Fed. Reg. 24121
(1998). To file formally in this proceeding, you must file an original
and four copies of all comments, reply comments, and supporting
comments. If participants want each Commissioner to receive a personal
copy of their comments, an original plus nine copies must be filed.

52\. In addition, comments may be filed using the Commission\'s
Electronic Comment Filing System ("ECFS"). Comments filed through the
ECFS can be sent as an electronic file via the Internet to
\<http://www.fcc.gov/e-file/ecfs.html\>. Generally, only one copy of an
electronic submission must be filed. If multiple docket or rulemaking
numbers appear in the caption of this proceeding, however, commenters
must transmit one electronic copy of the comments to each docket or
rulemaking number referenced in the caption. In completing the
transmittal screen, commenters should include their full name, U.S.
Postal Service mailing address, and the applicable docket or rulemaking
number. Parties may also submit an electronic comment by Internet
e-mail. To get filing instructions for e-mail comments, commenters
should send an e-mail to ecfs@fcc.gov, 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. Parties who choose
to file by paper must file an original and four copies of each filing.
If more than one docket or rulemaking number appear in the caption of
this proceeding, commenters must submit two additional copies for each
additional docket or rulemaking number. Filings can be sent by hand or
messenger delivery, by commercial overnight courier, or by first-class
or overnight U.S. Postal Service mail (although we continue to
experience delays in receiving U.S. Postal Service mail). The
Commission\'s contractor, Vistronix, Inc., will receive hand-delivered
or messenger-delivered paper filings for the Commission\'s Secretary at
236 Massachusetts Avenue, N.E., Suite 110, Washington, D.C. 20002. The
filing hours at this location are 8:00 a.m. to 7:00 p.m. All hand
deliveries must be held together with rubber bands or fasteners. Any
envelopes must be disposed of before entering the building. Commercial
overnight mail (other than U.S. Postal Service Express Mail and Priority
Mail) must be sent to 9300 East Hampton Drive, Capitol Heights, MD
20743. U.S. Postal Service first-class mail, Express Mail, and Priority
Mail should be addressed to 445 12th Street, SW, Washington, D.C. 20554.
All filings must be addressed to the Commission\'s Secretary, Office of
the Secretary, Federal Communications Commission. Finally, we request
that a courtesy copy be filed with Shellie Blakeney, Wireless
Telecommunications Bureau, Room 3-A223, Federal Communications
Commission.

53\. Other requirements. Comments and reply comments must include a
short and concise summary of the substantive arguments raised in the
pleading. Comments and reply comments must also comply with Section 1.49
and all other applicable sections of the Commissions rules.[^107] We
also direct all interested parties to include the name of the filing
party and the date of the filing on each page of their comments and
reply comments.

54\. Parties who choose to file by paper should also submit their
comments on diskette. Parties should submit diskettes to Jonathan Levy,
Office of Plans and Policy, 445 12th Street N.W., Room 7-C362,
Washington, D.C. 20554. Such a submission should be on a 3.5-inch
diskette formatted in an IBM compatible form using MS DOS 5.0 and
Microsoft Word, or compatible software. The diskette should be
accompanied by a cover letter and should be submitted in \"read only\"
mode. The diskette should be clearly labeled with the party\'s name,
proceeding (including the lead docket number in this case), type of
pleading (comments or reply comments), date of submission, and the name
of the electronic file on the diskette. The label should also include
the following phrase \"Disk Copy - Not an Original.\" Each diskette
should contain only one party\'s pleadings, referable in a single
electronic file.

55\. Additional Information. For additional information on this
proceeding, contact Shellie Blakeney, (202) 418-1784, Wireless
Telecommunications Bureau, 445 Twelfth Street, S.W., Room 3-A223,
Washington, D.C. 20554.

VI\. ORDERING CLAUSES

56\. IT IS ORDERED THAT, pursuant to the authority contained in Sections
pursuant to the authority contained in 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), this *Notice of Propose Rulemaking* is hereby
ADOPTED.

57\. IT IS FURTHER ORDERED that the Commission\'s Office of Consumer and
Governmental Affairs, Reference Information Center, SHALL 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.

> FEDERAL COMMUNICATIONS COMMISSION
>
> Marlene H. Dortch
>
> Secretary

APPENDIX A\--INITIAL REGULATORY FLEXIBILITY ANALYSIS

*Notice of Proposed Rulemaking*

As required by the Regulatory Flexibility Act (RFA),[^108] this Initial
Regulatory Flexibility Analysis (IRFA) of the possible significant
economic impact on small entities by the policies and rules proposed in
the *Notice of Proposed Rulemaking ("NPRM")*. Written public comments
are requested on this IRFA. Comments must be identified as responses to
the IRFA and must be filed by the deadlines for comments as set forth in
paragraph 47 of the *NPRM*. The Commission will send a copy of the
*NPRM*, including this IRFA, to the Chief Counsel for Advocacy of the
Small Business Administration. *See* 5 U.S.C. § 603(a). In addition, the
*NPRM* and IRFA (or summaries thereof) will be published in the Federal
Register. *Id*.

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

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.[^109] 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.[^110] On November
23, 1998, PetroCom License Corporation ("Petitioner") filed an amended
petition for rulemaking requesting that the Commission amend its rules
to permit licensing of the Multipoint Distribution Service (\"MDS\") and
Instructional Television Fixed Services ("ITFS") spectrum in the Gulf of
Mexico. Petitioner asks that the Commission establish a Basic Trading
Area like-service area in the Gulf similar to the 1995 *MDS Report and
Order*.[^111]

Upon consideration of these numerous requests, the Commission has
tentatively concluded that it is in the public interest to permit
licensing of the MDS spectrum in the Gulf of Mexico. The Commission
believes that this *NPRM* will provide the Commission with an
opportunity to develop a record on the specific proposals to open
eligibility for this spectrum in the Gulf of Mexico and otherwise revise
the MDS rules for the benefit of consumers and the economy. In addition,
the Commission believes that the tentative conclusions and proposals set
forth in this *NPRM* 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 *NPRM*; and the impact that such
proposals, alternatives, tentative conclusions, and other issues may
have on small entities.

II\. Legal Basis

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).

III\. Description and Estimate of the Number of Small Entities To Which
the Proposed Rules Will Apply

The RFA directs agencies to provide a description of, and, where
feasible, an estimate of the number of small entities that may be
affected by the proposed rules, if adopted.[^112] The Regulatory
Flexibility Act defines the term "small entity" as having the same
meaning as the terms "small business," "small organization," and "small
governmental jurisdiction" under section 3 of the Small Business
Act.[^113] 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 SBA.[^114]

A small organization is generally "any not-for-profit enterprise which
is independently owned and operated and is not dominant in its
field."[^115] Nationwide, as of 1992, there were approximately 275,801
small organizations.[^116] The definition of "small governmental
jurisdiction" is one with populations of fewer than 50,000.[^117] There
are 85,006 governmental jurisdictions in the nation.[^118] This number
includes such entities as states, counties, cities, utility districts
and school districts. There are no figures available on what portion of
this number has populations of fewer than 50,000. However, this number
includes 38,978 counties, cities and towns, and of those, 37,556, or 96
percent, have populations of fewer than 50,000.[^119] The Census Bureau
estimates that this ratio is approximately accurate for all government
entities. Thus, of the 85,006 governmental entities, we estimate that 96
percent, or about 81,600, are small entities that may be affected by our
rules. Nationwide, there are 4.44 million small business firms,
according to SBA reporting data.[^120] 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.[^121]
According to the Bureau of the Census, only 12 radiotelephone firms from
a total of 1,178 such firms that operated during 1992 had 1,000 or more
employees;[^122] therefore, at least 1,166 radiotelephone firms in 1992
had 1,500 or fewer employees. We are unable at this time to quantify the
specific impact of our proposals on these firms, but invite comment on
this issue.

MDS historically provided primarily point-to-multipoint, one-way video
services to subscribers.[^123] The Commission later amended its rules to
allow MDS licensees to provide a wide range of high-speed, two-way
services to a variety of users.[^124] In connection with the 1996 MDS
auction, the Commission defined small businesses as entities that had
annual average gross revenues for the three preceding years not in
excess of \$40 million.[^125] The Commission established this small
business definition in the context of this particular service and with
the approval of the SBA.[^126] The MDS auction resulted in 67 successful
bidders obtaining licensing opportunities for 493 Basic Trading Areas
(BTAs).[^127] Of the 67 auction winners, 61 met the definition of a
small business. At this time, we estimate that of the 61 small business
MDS auction winners, 48 remain small business licensees. In addition to
the 48 small businesses that hold BTA authorizations, there are
approximately 392 incumbent MDS licensees that are considered small
entities.[^128] After adding the number of small business auction
licensees to the number of incumbent licensees not already counted, we
find that there are currently approximately 440 MDS licensees that are
defined as small businesses under either the SBA or the Commission\'s
rules. Some of those 440 small business licensees may be affected by the
proposals in this Order.

IV\. Description of Projected Reporting, Recordkeeping and Other
Compliance Requirements:

At this time, the Commission does not anticipate the imposition of new
reporting, recordkeeping, or other compliance requirements as a result
of this *NPRM*. We seek comment on this tentative conclusion.

V. Steps Taken to Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered:

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 party thereof, for small entities.

In this action, we tentatively reject Petitioner's suggestion that we
set aside one or more licenses for small businesses. Because we are only
proposing to auction two blocks of spectrum, each consisting of two 6
MHz MDS channels, we believe that a set-aside would prevent the timely
and efficient use of such spectrum. We seek comment on our rejection of
Petitioner's request to set aside one or more licenses for small
businesses. In lieu of setting aside a license in the Gulf, we note that
Section 309(j)(4)(A) of the Communications Act provides that to promote
small businesses, we shall consider alternative payment schedules,
including lump sums or guaranteed installment payments.[^129] However we
note that previous Commission actions, the Commission has upheld its
prior determination that installment payments should not be used in the
immediate future as a means of financing small business participation in
our auction program. Moreover, in recent legislation, Congress dictated
that certain future auctions effectively be conducted without
installment payments.[^130]

The Commission expects that the creation of a Gulf Service Area will
have a minimal impact on small entities. Moreover, the *NPRM* does not
propose any reporting requirements applicable to small entities. We
tentatively conclude that our proposals in the *NPRM* would impose
minimum burdens on small entities. We encourage comment on this
tentative conclusion.

VI\. Federal Rules that May Duplicate, Overlap, or Conflict With
Proposed Rules

None.

[^1]: Amended Petition for Rulemaking of PetroCom License Corporation
    ("Amended Petition") (November 23, 1998).

[^2]: We note that this band and other bands are being considered for
    possible advanced wireless service use pursuant to a notice of
    proposed rulemaking issued January 5, 2001. *See* *Amendment of Part
    2 of the Commission's Rules to Allocate Spectrum Below 3 GHz for
    Mobile and Fixed Services to Support the Introduction of New
    Advanced Wireless Services, including Third Generation Wireless
    Systems*, FCC 00-455 (January 5, 2001). On September 24, 2001, the
    Commission adopted a *First Report and Order and Memorandum Opinion
    and Order* *("First R&O/MO&O")*, FCC 01-256, in the New Advanced
    Wireless Services proceeding. *The First R&O* adds a mobile
    allocation to the 2500-2690 MHz band to provide additional near-term
    and long-term flexibility for use of this spectrum, thereby making
    this band potentially available for advanced mobile and fixed
    terrestrial wireless services, including third generation and future
    generations of wireless systems. The Commission decided not to
    relocate the existing licensees and recognized that it will have to
    explore the service rules that would apply to permit mobile
    operations in the 2500-2690 MHz band in a separate future
    proceeding.

[^3]: After Petitioner filed its Amended Petition on November 23, 1998,
    The Wireless Communications Association International, Inc. ("WCA")
    filed an opposition to the Amended Petition on September 10, 1999.
    In addition, Bachow/Coastel, L.L.C. ("Barchow/Coastel") and RIG
    Telephones Inc. d/b/a Datacom ("DataCom") each filed comments on
    September 10, 1999. Petitioner thereafter filed additional comments
    on September 10, 1999 and reply comments on September 27, 1999.
    Bachow/Coastel filed reply comments on September 24, 1999, WCA filed
    a reply on September 27, 1999, and DataCom filed reply comments on
    September 27, 1999. Finally, on October 8, 1999, WCA filed comments
    in the form of a letter and Petitioner responded by letter on
    November 10, 1999. These letters were not authorized pleadings
    pursuant to our rules; however, they have been made part of the
    record in this proceeding.

[^4]: Rand McNally defined 487 Basic Trading Areas ("BTAs") in the 1992
    *Commercial Atlas and Marketing Guide*. Because Rand McNally did not
    include some geographic areas that were the subject of the MDS
    auction, those areas were added to Rand McNally\'s list as BTA-like
    geographic areas, bringing the total to 493 authorizations to be
    auctioned. Specifically, under Section 21.924(b) of the Commission's
    Rules, 47 C.F.R. § 21.924(b), the six BTA-like areas are set forth
    as follows: American Samoa, Guam, Northern Mariana Islands, San
    Juan, Puerto Rico; Mayaguez/Aguadilla-Ponce, Puerto Rico; and the
    United States Virgin Islands. Under the proposal in this proceeding,
    the Gulf of Mexico would become the 494th authorization and be
    subject to the same rules and obligations as other BTA holders as
    defined in pursuant 47 C.F.R. § 21.2. For further discussion, see
    *infra* ¶ 16.

[^5]: Petition for Rulemaking of Gulf Coast MDS Service Company ("Gulf
    Petition") (May 21, 1996) at 5; Amended Petition at 4.

[^6]: *Two-Way Order*, 13 FCC Rcd at 19116.

[^7]: *Public Notice*, DA 01‑751 (MMB March 26, 2001).

[^8]: *Letter to Richard Myers, et al, from Charles E. Dziedzic,
    Assistant Chief, Video Services Division, Mass Media Bureau* (May
    15, 2000). In denying Petitioner continued developmental authority,
    the Commission specifically noted, "PetroCom has shown that a
    \[Wireless Local Loop\] WLL system can be viable in the Gulf, and
    therefore, a move to commercialization of the spectrum and/or system
    is appropriate." *Id.* On June 14, 2000, PetroCom filed an
    application for interim operating authority, as well as a request
    for special temporary authority, to continue operation of its
    developmental system in the Gulf. On August 15, 2000, the Bureau
    denied that request. *Letter to Richard S. Myers, Esq., et al, from
    Charles E. Dziedzic, Assistant Chief, Video Services Division, Mass
    Media Bureau* (August 15, 2000). PetroCom also filed applications
    for review of the Bureau's May 15th denial of PetroCom's request for
    extension of developmental authority and the Bureau's August 15th
    denial of PetroCom's application for interim operating authority and
    its request for special temporary authority. On February 21, 2001,
    the Commission denied PetroCom's applications for review. *In the
    Matter of PetroCom License Corporation*, 16 FCC Rcd 4980 (2001).

[^9]: On March 28, 1996, the Federal Communications Commission completed
    its auction of authorizations to provide MDS in 493 BTAs and
    BTA-like areas. *See Public Notice, Winning Bidders in the Auction
    of Authorizations to Provide Multipoint Distribution Service in 493
    Basic Trading Areas*, No. 62216 (released March 29, 1996).

[^10]: *MDS Report and Order*, 10 FCC Rcd at 9608-09.

[^11]: *Id.* at 9615-18.

[^12]: *Id.* at 9591.

[^13]: 47 C.F.R. § 21.902.

[^14]: 47 C.F.R. § 21.937.

[^15]: 47 C.F.R. § 21.933.

[^16]: 47 C.F.R. §§ 21.931, 21.934.

[^17]: Gulf Petition at 3.

[^18]: WCA's Opposition to Petition for Rulemaking ("WCA Opposition")
    (September 10, 1999) at 5-8, 13-15.

[^19]: In addition, the Commission has adopted the Second Further Notice
    of Proposed Rulemaking concerning the licensing of cellular service
    and other commercial mobile radio services ("CMRS") in the Gulf of
    Mexico. *Public Notice,* *Federal Register Publication of the Second
    Further Notice of Proposed Rule Making Regarding the Licensing of*
    *Cellular Service and Other Commercial Mobile Radio Services in the
    Gulf of Mexico,* 15 FCC Rcd 5697 (2000); *Cellular Service and Other
    Commercial Mobile Radio Services in the Gulf of Mexico*, *Second
    Further Notice of Proposed Rule Making*, 12 FCC Rcd 4578 (1997).

[^20]: *See* 47 U.S.C. § 309(j)(3)(D) (Commission to promote efficient
    and intensive use of the electromagnetic spectrum). The Commission
    has routinely held that "spectrum should not lie fallow when there
    are applicants ready and willing to use it." *Mobilcomm Pittsburg,
    Inc*., 8 FCC Rcd 351 (1993). *See also* *Amendment of Section
    73.202(b), Table of Assignments, FM Broadcast Stations*, 62 FCC 2d
    76, 80 (1976) (finding "little benefit to the public interest in
    allowing a channel to lie fallow and unused . . . ."); *Aeronautical
    Radio Inc*., 3 FCC Rcd 6994, 6995 (1998) (stating that the FCC\'s
    channel recovery policies ensure that scarce spectrum space is
    either put to prompt use by the existing licensee or returned for
    reassignment to another ready and able to construct).

[^21]: Amended Petition at 1-2.

[^22]: Amended Petition at 9.

[^23]: WCA Opposition at 5.

[^24]: The MDS spectrum is currently limited to fixed stations and is
    therefore not available for use by vessels associated with oil
    drilling or other activities in the Gulf area.

[^25]: *MDS Report and Order*, 10 FCC Rcd at 9609.

[^26]: Amended Petition at 4.

[^27]: WCA Opposition at 6-7.

[^28]: *See* Proclamation No. 5030, 48 Fed. Reg. 10601 (1983)*.*

[^29]: Amended Petition at 4.

[^30]: *Report and Order in the Matter of Amendment of the Commission\'s
    Rules to Establish Part 27, the Wireless Communications Service,* 12
    FCC Rcd 10785, 10816 (1997) ("*WCS Report and Order*").

[^31]: *Se*e 47 C.F.R. § 27.6(a)(2). *See also Service Rules for the
    746-764 and 776-794 MHz Bands, and Revisions to Part 27 of the
    Commission\'s Rules*, 15 FCC Rcd 476 (2000); *Service Rules for the
    746-764 and 776-794 MHz Bands and Revisions to Part 27 of the
    Commission\'s Rules,* 15 FCC Rcd 5299 (2000). In those proceedings,
    the Commission created geographic areas for the 700 MHz band
    consistent with geographic area configurations originally
    established for WCS. Specifically, in creating a Gulf of Mexico
    Economic Area, the Commission created boundaries consistent with on
    the *WCS Report and Order*.

[^32]: Proclamation No. 5928, 54 Fed. Reg. 777 (1988). One U.S. nautical
    mile is equal to 6080 feet, or 1.853 kilometers.

[^33]: *See also* 47 C.F.R. § 21.902(b)(6) (stating that a proposed
    station within 50 miles of the Mexican border must be designed to
    meet the requirements set forth in international treaties).

[^34]: 47 U.S.C. § 309(j)(1), (2) (as amended by Balanced Budget Act, §
    3002).

[^35]: *Id*. 47 U.S.C. § 309(j)(2) exempts from auctions licenses and
    construction permits for public safety radio services, digital
    television service licenses and permits given to existing
    terrestrial broadcast licensees to replace their analog television
    service licenses, and licenses and construction permits for
    noncommercial educational broadcast stations and public broadcast
    stations.

[^36]: 47 U.S.C. §§ 309(j)(1), 309(j)(6)(E).

[^37]: 47 U.S.C. § 309(j)(3).

[^38]: *Implementation of Sections 309(j) and 337 of the Communications
    Act of 1934 as Amended*, 15 FCC Rcd 22709 (2000).

[^39]: *Id*. at ¶¶ 20-27

[^40]: *Id*.

[^41]: *Id.*

[^42]: 47 U.S.C. § 309(j)(1) ("If . . . mutually exclusive applications
    are accepted for any initial license or construction permit, then,
    except as provided in paragraph (2), the Commission shall grant the
    license or permit to a qualified applicant through a system of
    competitive bidding . . . .")*.* *See also Amendment of Parts 2 and
    25 of the Commission's Rules to Permit Operation of NGSO FSS Systems
    Co-Frequency With GSO and Terrestrial Systems in the KU-Band
    Frequency Range; Amendment of the Commission\'s Rules to Authorize
    Subsidiary Terrestrial Use of the 12.2-12.7 GHz Band by Direct
    Broadcast Satellite Licensees and Their Affiliates; and Applications
    of Broadwave USA, PDC Broadband Corporation, and Satellite
    Receivers, Ltd. to Provide A Fixed Service in the 12.2-12.7 GHz
    Band*, ET Docket No. 98-206, FCC 00-418 (released December 8, 2000)
    at ¶¶ 331-334 (finding that mutually exclusive applications for
    Multichannel Video Distribution and Data Service (MVDDS) licenses
    must be resolved through competitive bidding).

[^43]: *Amendment of Part 1 of the Commission\'s Rules - Competitive
    Bidding Procedures, WT Docket No. 97-82, Order on Reconsideration of
    the Third Report and* Order, *Fifth Report and Order, and Fourth
    Further Notice of Proposed Rulemaking*, 15 FCC Rcd 15293 (2000)
    ("*Part 1 Fifth Report and Order*").

[^44]: In the *MDS Report and Order,* the Commission adopted specific
    competitive bidding procedures and rules to govern MDS auction for
    authorizations in 493 BTAs. *See* 47 C.F.R. § 21.951 (MDS
    competitive bidding procedures), 47 C.F.R. § 21.952 (Bidding
    application procedures), 47 C.F.R. § 21.953 (Prohibition of
    collusion), 47 C.F.R. § 21.954 (Submission of up front payments), 47
    C.F.R. § 21.955 (Submission of down payments), 47 C.F.R. § 21.956
    (Filing of long-form applications or statements of intention), 47
    C.F.R. § 21.958 (Full payment and issuance of BTA authorizations),
    47 C.F.R. § 21.959 (Withdrawal, default and disqualification), 47
    C.F.R. § 21.960 (Designated entity provisions for MDS) and 47 C.F.R.
    § 21.961 (Definitions applicable to designated entity provisions).
    The Commission stated that in promulgating rules for the 1996 MDS
    auction, it attempted to design auction rules and procedures that
    were compatible with the distinct characteristics of MDS. *MDS
    Report and Order*, 10 FCC Rcd at 9634. On April 11, 2002, the
    Wireless Telecommunications Bureau pursuant to its delegated
    authority issued an Order identifying and removing service-specific
    competitive bidding rules, including those listed above, which had
    been superseded or made redundant by the Part 1 general competitive
    bidding rules. *In the Matter of Amendment of Parts 1, 21, 22, 24,
    25, 26, 27, 73, 74, 80, 95, 100 and 101 of the Commission Rules --
    Competitive Bidding*, DA 02-847 (released April 11, 2002).
    Accordingly, the previously effective service-specific MDS auction
    rules will not be applied to a Gulf auction.

[^45]: *See Part 1 Fifth Report and Order*; *See also Amendment of Part
    1 of the Commission\'s Rules - Competitive Bidding Procedures*, WT
    Docket No. 97-82, *Erratum*, DA 00-2475 (released November 3, 2000).

[^46]: *In The Matter Of Implementation Of Section 309(j) Of The
    Communications Act \--Competitive Bidding For Commercial Broadcast
    And Instructional Television Fixed Service Licenses, Reexamination
    Of The Policy Statement On Comparative Broadcast Hearings, Proposals
    To Reform The Commission\'s Comparative Hearing Process To Expedite
    the Resolution Of Cases*, 13 FCC Rcd 15920 (1998); *see also
    Amendment of Part 1 of the Commission\'s Rules \-- Competitive
    Bidding Procedures, WT Docket No. 97-92, Third Report and Order and
    Second Further Notice of Proposed Rule Making*, 13 FCC Rcd 374,
    448-49, 454-55 ("*Part 1 Third Report and Order*") (directing the
    Bureau to seek comment on specific mechanisms relating to auction
    conduct pursuant to the Balanced Budget Act); *Part 1 Fifth Report
    and Order* (delegating authority to seek comment on and set forth
    mechanisms relating to the day-to-day conduct of specific auctions).

[^47]: *See Sections 309(j)(3) and 309(j)(4) of the Communications Act*,
    47 U.S.C. §§ 309(j)(3), 309(j)(4).

[^48]: *See* 47 U.S.C. § 309(j)(3)(B).

[^49]: Amended Petition at 6-7.

[^50]: Of the 67 winning bidders in the Commission's March 1996 MDS
    auction, 61 qualified as small entities at the time of the auction.

[^51]: 47 C.F.R. § 1.2110(b)(1).

[^52]: 47 C.F.R. § 21.960.

[^53]: 47 C.F.R. § 21.960(d).

[^54]: 47 C.F.R. § 21.961(b)(1).

[^55]: *MDS Report and Order*, 10 FCC Rcd at 9669. The Commission
    compared MDS to a number of other services and determined that *all*
    MDS authorizations for small businesses should receive bidding
    credits as opposed to merely just *some* of the authorizations.
    *Compare Third Report and Order*, PP Docket No. 93-253, 9 FCC Rcd
    2941, 2970 (1994) (Third Memorandum Opinion and Order) (providing
    twenty‑five percent bidding credit on specified channels to certain
    designated entities in nationwide narrowband PCS auction); *Fourth
    Report and Order* at 2337 *Fourth Report and* Order, PP Docket No.
    93-253, 9 FCC Rcd 2330, 2337 (1994) (offering twenty‑five percent
    bidding credit on one of two IVDS licenses available in each
    geographic license area).

[^56]: *Id*. at 9671 (footnotes omitted).

[^57]: FCC Staff Report issued by the Office of Engineering and
    Technology, Mass Media Bureau, Wireless Telecommunications Bureau,
    and International Bureau: "Spectrum Study of the 2500-2690 MHz Band:
    The Potential for Accommodating Third Generation Mobile Systems,"
    *Final Report*, ET Docket No. 00-258, released March 30, 2001
    ("*Final Report"*).

[^58]: Amended Petition at 1.

[^59]: *See Final Report* at 16-17.

[^60]: WCA Opposition at 27.

[^61]: In our *Part 1 Third Report and Order*, 13 FCC Rcd at 403-04, we
    adopted a standard schedule of bidding credits, the levels of which
    were developed based on our auction experience. *See also* 47 C.F.R.
    § 1.2110(f)(2).

[^62]: In our auctions of broadband PCS C and F block licenses, we have
    provided bidding credits to entities with average annual gross
    revenues for the preceding three years not exceeding \$40 million
    and entities with average annual gross revenues for the preceding
    three years not exceeding \$15 million. *See* 47 C.F.R. §
    24.720(b)(1) & (2).

[^63]: *See Amendments to Part 1, 2, 87 and 101 of the Commission\'s
    Rules to License Fixed Services at 24 GHz*, 15 FCC Rcd 16934 (2000);
    *Amendment of the Commission\'s Rules With Regard to the 3650-3700
    MHz Government Transfer Band*, *First Report and Order and Second
    Notice of Proposed Rule Making*, FCC 00-363, 15 FCC Rcd 20488
    (2000).

[^64]: Amended Petition at 8-9.

[^65]: WCA Opposition at 28. The Commission has determined not to use
    set-asides as a mechanism for promoting small business participation
    in several proceedings. *See, e.g., WCS Report and Order*, 12 FCC
    Rcd at 10882 (declining to adopt set-asides in favor of substantial
    bidding credits and other small business preferences); *Amendment of
    Part 90 of the Commission\'s Rules to Provide for the Use of 220-222
    MHz Band by the Private Land Mobile Radio Service,* 12 FCC Rcd
    10943, 11077 (1997) (declining the use of set-asides because of the
    large number and variety of licenses); *Amendment of Commission's
    Rules Regarding the 37.0 -38.6 GHz and 38.6 - 40.0 GHz Bands,
    Implementation of Section 309(j) of the Communications Act -
    Competitive Bidding, 37.0 and 38.6 - 40.0 GHz,* 12 FCC Rcd 18600,
    18727 (1997) (rejecting set-asides because of the large number of
    licenses offered and the opportunities provided to small business by
    way of bidding credits). However, the Commission provided set-asides
    for C block PCS licenses to ensure that entrepreneurs are provided
    opportunities to acquire spectrum for their needs. *Implementation
    of Section 309(j) of the Communications Act \-- Competitive
    Bidding*, 9 FCC Rcd 5532, 5585 (1994). Subsequently, the Commission
    asserted that maintaining set-asides for entrepreneurs, for some but
    not all C block spectrum, will help smaller businesses in that band
    continue to achieve their business goals as well as providing
    meaningful opportunities for new entrepreneurial firms to enter the
    market. *Amendment of the Commission\'s Rules Regarding Installment
    Payment Financing for Personal Communications Services (PCS)
    Licensees*, *Sixth Report and Order*, 15 FCC Rcd 16266 (2000).

[^66]: 10 FCC Rcd 9589, 9664 (1995).

[^67]: Amended Petition at 9-10.

[^68]: 47 C.F.R. § 21.956.

[^69]: Specifically, Petitioner suggests that as long as certain
    criteria are met, the Gulf licensee should be able to construct MDS
    stations anywhere within the Gulf without filing separate long-form
    applications. Petitioner states that as long as the Gulf licensee's
    operations do not exceed a signal strength of -75 dBw/m2 along the
    border between it and any land licensee and the proposed signal
    strength is 2 dB lower than the signal strength at which the
    licensee is permitted to operate at the border, no long-form
    applications are necessary. Petitioner does acknowledge that a Gulf
    licensee still should be required to file a certification of
    completion of construction of MDS stations so that the Commission
    can remain informed about the licensee's operations. *Id.* at 10.

[^70]: *See* discussion at ¶ 22, *supra*.

[^71]: 47 C.F.R. § 1.2110(j); 47 C.F.R. § 21.960(e).

[^72]: *Two-Way Order*, 13 FCC Rcd at 19146-50.

[^73]: Amended Petition at 7-8.

[^74]: WCA Opposition at 29-30.

[^75]: 47 C.F.R. §§ 27.12, 27.302. *See also WCS Report and Order*, 12
    FCC Rcd at 10829.

[^76]: 47 U.S.C. § 310.

[^77]: *See In the Matter of Rulemaking to amend Parts 1, 2, 21 and 25
    of the Commission's Rules to Redesignate the 27.5-29.5 GHz Frequency
    Band, to Reallocate the 29.5-30.0 GHz Frequency Band, to Establish
    Rules and Polices for Local Multipoint Distribution Serve and For
    Fixed Satellite Services*, 15 FCC Rcd 11857 (2000) (concluding that
    the LMDS eligibility restriction should be allowed to sunset because
    open eligibility (1) will not pose a significant likelihood of
    substantial competitive harm in any market; (2) is likely to provide
    access to additional capital to fully develop LMDS; (3) will treat
    LMDS similarly to substitutable spectrum; and (4) should help make
    services more available in rural areas).

[^78]: Amended Petition at 9.

[^79]: WCA Opposition at 30-31. *See also WCS Report and Order,* 12 FCC
    Rcd at 10836-9.

[^80]: WCA Opposition at 30-31. *See also Amendment of the Commission's
    Rules Concerning Maritime Communications*, 12 FCC Rcd 16949, 16966
    (1997).

[^81]: 47 C.F.R. § 21.931; *Amendment of Parts 21 and 74 of the
    Commission\'s Rules With Regard to Filing Procedures in the
    Multipoint Distribution Service and in the Instructional Television
    Fixed Service,* 10 FCC Rcd 9589, 9614-15 (1995). Additionally, we
    impose unjust enrichment provisions for partitioning by small
    businesses to non-small businesses. *See Amendment of Parts 21 and
    74 of the Commission\'s Rules With Regard to Filing Procedures in
    the Multipoint Distribution Service and in the Instructional
    Television Fixed Service*, 10 FCC Rcd 13821, 13833 (1995).

[^82]: *See In the Matter of Geographic Partitioning and Spectrum
    Disaggregation by Commercial Mobile Radio Services Licenses*, 11 FCC
    Rcd 21831 (1996).

[^83]: *Id.*

[^84]: "Disaggregation" is the assignment of discrete portions or
    "blocks" of spectrum licensed to a geographic licensee or qualifying
    entity. Disaggregation allows for multiple transmitters in the same
    area operated by different companies (thus the possibility of
    harmful interference increases). With partitioning, one company
    operates in a licensed area.

[^85]: *800 MHz SMR*, 11 FCC Rcd at 1576, 1578-1580 (permitting
    partitioning for rural telephone companies and requesting comment on
    partitioning and disaggregation for EA licensees in the upper 10 MHz
    block); *Paging Second Report and Order*, 12 FCC Rcd at 2821-2826
    (permitting geographic partitioning for paging licensees and seeking
    comment on disaggregation for all licensees); *220 MHz Third Report
    and Order*, FCC 97-57 (permitting partitioning for all Phase II 220
    MHz licensees and seeking comment on partitioning for Phase I
    licensees and disaggregation for all licensees); *Amendment of the
    Commission\'s Rules Regarding the 37.0-38.6 GHz and 38.6-40.0 GHz
    Bands*, Notice of Proposed Rulemaking and Order, 11 FCC Rcd 4930,
    4972-73, PP 89-90 (1995) (proposing partitioning for rural telephone
    companies and seeking comment on whether partitioning and
    disaggregation should be available to all licensees); *WCS Report
    and Order* (permitting partitioning and disaggregation for all WCS
    licensees); *Rulemaking to Amend Parts 1, 2, 21, and 25 of the
    Commission\'s Rules to Redesignate the 27.5-29.5 GHz Frequency Band,
    to Reallocate the 29.5-30.0 GHz Frequency Band to Establish Rules
    and Policies for Local Multipoint Distribution Service and Fixed
    Satellite Services*, Second Report and Order, Order on
    Reconsideration, and Fifth Notice of Proposed Rulemaking, CC Docket
    No. 92-297, FCC 97-82 (1997) (permitting geographic partitioning and
    spectrum disaggregation for LMDS licensees).

[^86]: *Upper 700 MHz First Report and Order*, 15 FCC Rcd at 506, P 74.

[^87]: *See* 47 U.S.C. S 309(j)(4)(C).

[^88]: Amended Petition at 3.

[^89]: We released a revised version of the Two-Way Methodology,
    pursuant to the provisions of footnote 129 of the *Two-Way Order*.
    *See Public Notice, Commission Amends Methodology Used for
    Calculation of Interference Protection and Data Submission for MDS
    and ITFS Station Applications for Two-Way Systems*, DA-0093
    (released April 27, 2000). The full text of the revised Two-Way
    Methodology can be found at
    http://www.fcc.gov/mmb/vsd/files/methodology.doc.

[^90]: To the extent that Petitioner's system would involve
    point-to-point operations, we believe that these operations can be
    accommodated within existing two-way rules by the use of additional
    booster stations and additional hub (and non-hub) receiving
    stations, located as necessary, in order to link outlying response
    stations to central stations.

[^91]: 47 C.F.R. § 21.902.

[^92]: *Id.*

[^93]: *Id.*

[^94]: 47 C.F.R. § 21.909.

[^95]: Amended Petition at 14-16.

[^96]: WCA Opposition at 20-22.

[^97]: H.T. Dougherty and E.J. Dutton, *The Role of Elevated Ducting for
    Radio Service and Interference Fields*, U.S. Department of Commerce,
    National Telecommunications and Information Administration Report
    81-69 (March, 1981).

[^98]: Amended Petition at 15-16.

[^99]: Dougherty and Dutton, *The Role of Elevated Ducting for Radio
    Service and Interference Fields, supra*.

[^100]: 47 C.F.R. §§ 21.238 and 21.239.

[^101]: WCA Opposition at 23.

[^102]: 47 C.F.R. § 21.930.

[^103]: 47 C.F.R. § 21.45(a).

[^104]: *MDS Report and Order*, 10 FCC Rcd at 9657-58.

[^105]: *Id.*

[^106]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. § 601 *et. seq*.,
    has been amended by the Contract With America Advancement Act of
    1996, Pub. L. No. 104-121, 110 Stat. 847 (1996) (CWAAA). Title II of
    the CWAAA is the Small Business Regulatory Enforcement Fairness Act
    of 1996 (SBREFA).

[^107]: *See* 47 C.F.R. § 1.49. We require, however, that a summary be
    included with all comments and reply comments. The summary may be
    paginated separately from the rest of the pleading (*e.g.*, as \"i,
    ii\"). *See* 47 C.F.R. § 1.49.

[^108]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. § 601 *et. seq*.,
    has been amended by the Contract With America Advancement Act of
    1996, Pub. L. No. 104-121, 110 Stat. 847 (1996) (CWAAA). Title II of
    the CWAAA is the Small Business Regulatory Enforcement Fairness Act
    of 1996 (SBREFA).

[^109]: 47 U.S.C. § 309(j)(3)(B).

[^110]: *Id.* §§ 309(j)(3)(A),(C)

[^111]: *Report and Order on Amendment of Parts 21 and 74 of the
    Commission\'s Rules With Regard to Filing Procedures in the
    Multipoint Distribution Service and in the Instructional Television
    Fixed Service and Implementation of Section 309(j) of the
    Communications Act ‑ Competitive Bidding*, 10 FCC Rcd 9589, 9619
    (1995) ("*MDS Report and Order"*).

[^112]: 5 U.S.C. § 603(b)(3).

[^113]: *Id*. § 601(3).

[^114]: *Id*. § 632.

[^115]: *Id*. § 601(4).

[^116]: Department of Commerce, U.S. Bureau of the Census, 1992 Economic
    Census, Table 6 (special tabulation of data under contract to Office
    of Advocacy of the U.S. Small Business Administration).

[^117]: 5 U.S.C. § 601(5).

[^118]: 1992 Census of Governments, U.S. Bureau of the Census, U.S.
    Department of Commerce.

[^119]: *Id*.

[^120]: *See* 1992 Economic Census, U.S. Bureau of the Census, Table 6
    (special tabulation of data under contract to Office of Advocacy of
    the U.S. Small Business Administration).

[^121]: 13 C.F.R. § 121.201, NAICS codes 513321, 513322, and 513330.

[^122]: [1992 Census, Series UC92-S-1]{.underline}, at Table 5, NAICS
    codes 513321, 513322, and 513330.

[^123]: For purposes of this item, MDS includes both the single channel
    Multipoint Distribution Service (MDS) includes Local Multipoint
    Distribution Service (LMDS), and the Multichannel Multipoint
    Distribution Service (MMDS).

[^124]: *Amendment of Parts 21 and 74 to Enable Multipoint Distribution
    Service and Instructional Television Fixed Service Licensees to
    Engage in Fixed Two-Way Transmissions*, 13 FCC Rcd 19112 (1998),
    recon., 14 FCC Rcd 12764 (1999), further recon., 15 FCC Rcd 14566
    (2000).

[^125]: 47 CFR 21.961 and 1.2110.

[^126]: *Amendment of Parts 21 and 74 of the Commission\'s Rules with
    Regard to Filing Procedures in the Multipoint Distribution Service
    and in the Instructional Television Fixed Service and Implementation
    of Section 309(j) of the Communications Act - Competitive Bidding*,
    10 FCC Rcd 9589, 9670 (1995), 60 FR 36524 (July 17, 1995).

[^127]: Basic Trading Areas (BTAs) were designed by Rand McNally and are
    the geographic areas by which MDS was auctioned and authorized.
    *See* *Id*. at 9608.

[^128]: 47 U.S.C. 309(j). (Hundreds of stations were licensed to
    incumbent MDS licensees prior to implementation of Section 309(j) of
    the Communications Act of 1934, 47U.S.C. Section 309(j). For these
    pre-auction licenses, the applicable standard is SBA\'s small
    business size standard for \"other telecommunications\" (annual
    receipts of \$11 million or less). *See* 13 CFR 121.201, NAICS code
    513220.

[^129]: 47 U.S.C. § 309(j)(4)(A).

[^130]: See Section 3001 of the Omnibus Consolidated Appropriations Act
    for 1997, P.L. 104-208, 110 Stat. 3009 (1996). See also the Balanced
    Budget Act of 1997, P.L. 105-33, 111 Stat. 251 (1997).