Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | WT Docket No. 99-266         |
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**SECOND REPORT AND ORDER**

**AND**

**SECOND FURTHER NOTICE OF PROPOSED RULEMAKING**

**Adopted: March 7, 2003** **Released: March 14, 2003**

**By the Commission: Chairman Powell, Commissioners Copps and Adelstein
issuing separate statements.**

**Comment Date: 30 days after publication in the Federal Register**

**Reply Comment Date: 45 days after publication in the Federal
Register**

**[TABLE OF CONTENTS]{.underline}**

**[Paragraph]{.underline}**

**i. introduction 1**

**ii. background 4**

**III. DiSCUSSION. 10**

A.  **Modification and Clarification of Bidding Credit Procedures 10**

B.  **Use of Bidding Credits in Non-Tribal Areas or Areas with Telephone
    Penetration**

> **Rates of More than 70 Percent 15**

C.  **Applying Bidding Credits to Existing Licenses 17**

D.  **Transferable Bidding Credits for Licensees that Partition Tribal
    Areas 19**

**IV. SECOND FURTHER NOTICE OF PROPOSED RULEMAKING. 20**

**A. Modifying the Construction Requirements of the Tribal Lands Bidding
Credit. 21**

**B. Increasing the Bidding Credit Limit 25**

**C. Adjustment of the Bidding Credit Based on 2000 Census Data 27**

**D. Extending the Tribal Lands Bidding Credit to Adjacent Non-Tribal**

**Areas with Low Penetration Rates. 29**

**V. PROCEDURAL MATTERS. 36**

## **A. *Ex Parte* Rules -- Permit-But-Disclose Proceeding 36**

## **B. Final Regulatory Flexibility Analysis 37**

## **C. Paperwork Reduction Act Analysis 38**

## **D. Initial Regulatory Flexibility Analysis 39**

## **E. Initial Paperwork Reduction Act Analysis 40**

## **F. Comment Dates 41**

**VI. ORDERING CLAUSES. 47**

**Appendix A: Rules.**

**Appendix B: Final Regulatory Flexibility Analysis.**

**Appendix C: Initial Regulatory Flexibility Analysis.**

**I. INTRODUCTION**

1.  In this *Second Report and Order*, we clarify rules previously
    adopted in the *Report and Order and Further Notice of Proposed
    Rulemaking* in WT Docket 99-266[^1] to provide incentives for
    wireless telecommunications carriers to serve individuals living on
    tribal lands.[^2] In that *Report and Order*, the Commission adopted
    rules to grant bidding credits to winning bidders who deploy
    facilities and provide service to federally-recognized tribal areas
    that have a telephone service penetration rate below 70 percent.[^3]
    In the present item, we extend, on our own motion, the time period
    during which winning bidders can negotiate with the relevant tribes
    to obtain the certification needed to obtain the credit. We also
    clarify various administrative matters involved in implementing the
    credit.

2.  This *Second Report and Order* also addresses issues raised in the
    *Further Notice of Proposed Rulemaking* (*Further Notice*). In the
    *Further Notice*, the Commission requested comment on whether the
    bidding credits program should be expanded beyond its current scope.
    Because the program is still in its early stages, and based on the
    limited comment we received in the proceeding, we conclude that the
    existing record does not justify enlarging the scope of the bidding
    credit as set out in the *Further Notice*.

3.  However, while we do not expand the scope of the tribal lands
    bidding credit in this order, we continue to seek ways in which we
    can encourage greater participation in the existing tribal lands
    bidding credit program. We also believe that consideration should be
    given to extending the program to underserved tribal communities
    that are situated on non-tribal lands adjacent to tribal lands.
    Accordingly, in the *Second Further Notice of Proposed Rulemaking*
    (*Second Further Notice*), we seek comment regarding ways to adjust
    our current program in order to encourage further deployment by
    carriers of wireless services on tribal lands. We also seek comment
    on possible adjustments to the program based on use of data from the
    2000 Census that was not available when the program was initiated.
    Finally, we seek comment on a limited expansion of the credit
    program that would allow carriers who obtain bidding credits to
    serve qualifying tribal lands to obtain additional credit for
    extending their coverage to immediately adjacent non-tribal areas
    that also have low penetration rates.

**II. BACKGROUND**

4.  In the *Report and Order*, the Commission established bidding
    credits for use by winning bidders who pledge to deploy facilities
    and provide service to federally recognized tribal areas that have a
    telephone service penetration rate at or below 70 percent. In
    setting out the bidding credit, the Commission noted that
    communities on tribal lands have had less access to
    telecommunications services than any other segment of the U.S.
    population.[^4]

5.  The *Report and Order* provided that, in order to obtain a bidding
    credit in a particular market, a winning bidder must indicate on its
    long-form application (FCC Form 601) that it intends to serve tribal
    lands in that market.[^5] Following the long-form application filing
    deadline, the applicant has 90 calendar days to amend its
    application to identify the tribal lands to be served, and provide
    certification from the tribal government(s) that: (1) it will allow
    the bidder to site facilities and provide service on its tribal
    land(s), in accordance with our rules; (2) it has not and will not
    enter into an exclusive contract with the applicant precluding entry
    by other carriers, and will not unreasonably discriminate against
    any carrier; and (3) its tribal land is a qualifying tribal land as
    defined in our rules, *i.e*., an area that has a telephone
    penetration rate at or below 70 percent.[^6] In addition, at the
    conclusion of the 90-day period, the applicant must amend its
    long-form application to file a certification that it will comply
    with the bidding credit build-out requirement, and that it will
    consult with the tribal government regarding the siting of
    facilities and deployment of service on the tribal land. Upon
    receipt by the Commission of the certifications, the bidding credit
    is awarded and the applicant makes payment of the final net adjusted
    bid amount.[^7] If the required certifications are not provided at
    the conclusion of the 90-day period, the bidding credit is not
    awarded and the applicant is required to pay the balance on the
    original gross bid amount in order to be awarded the licenses.

6.  In order to ensure that applicants awarded bidding credits actually
    deploy facilities and provide service to tribal lands, the
    Commission imposed performance requirements as a condition of
    obtaining the bidding credit. The Commission required that a
    licensee construct and operate its system to cover 75 percent of the
    population of the qualifying tribal land within three years of the
    grant of the license.[^8] While this 75 percent benchmark is higher
    than the construction benchmarks applicable to auctioned wireless
    licenses generally, the Commission determined that it would ensure
    that only carriers that are committed to serving tribal lands will
    receive bidding credits, and that wireless telecommunications
    services will be deployed rapidly to underserved tribal areas.[^9]
    In the *Report and Order*, the Commission required that, at the
    conclusion of the three-year period, licensees file a notification
    of construction indicating that they have met the 75 percent
    construction requirement on the tribal lands for which the credit
    was awarded.[^10] If the licensee fails to comply with any
    condition, it is required to repay the bidding credit plus interest
    thirty days after the conclusion of the construction period.[^11] In
    the event the licensee fails to repay the amount, the license
    automatically cancels.[^12]

7.  In limiting the scope of the bidding credit to federally recognized
    tribal areas with telephone penetration rates equal to or less than
    70 percent, the Commission concluded that the credits would target
    the tribal communities with the greatest need for access to
    telecommunications service.[^13] Although the Commission
    acknowledged that there are some non-tribal areas with penetration
    rates lower than the national average, it was determined that almost
    all non-tribal areas have penetration rates greater than 70 percent
    and that non-tribal areas have penetration rates significantly
    greater than most tribal areas.[^14] Accordingly, the Commission
    found it appropriate to limit the program to tribal lands with a 70
    percent or less penetration rate. The Commission did not, however,
    foreclose the possibility of extending the credit both to non-tribal
    areas and to areas with higher penetration rates.

8.  In the *Further Notice*, the Commission solicited comment on ways
    the bidding credit could be extended to encourage further deployment
    of wireless telecommunications services. The Commission specifically
    sought comment on whether it should award bidding credits to
    carriers who commit to serve non-tribal areas with a 70 percent or
    less penetration rate, or tribal and/or non-tribal areas with
    penetration levels above 70 percent but significantly below the
    national average. Further, comment was requested regarding whether
    the Commission should expand the program to give transferable
    bidding credits to be used in future auctions to existing licensees
    in already-established wireless services who deploy and provide
    service to unserved tribal communities. The Commission also asked
    whether it should make credits available to licensees that enter
    into partitioning agreements with tribal authorities that allow the
    tribal government to provide service, either directly or through
    negotiation with a third-party carrier.

9.  We received limited comment in response to the *Further Notice*.
    Four entities filed comments in this proceeding, while other
    entities filed reply comments.[^15] In general, the commenters
    agreed that we should institute new measures to encourage further
    deployment of wireless services onto tribal lands.

**III. DISCUSSION**

> **A. Modification and Clarification of Bidding Credit Procedures.**

10. *Certification Procedure*. When the Commission adopted the tribal
    lands bidding credit in the *Report and Order*, it established the
    method by which a bidding credit would be calculated, as well as the
    application process involved in obtaining a bidding credit. Since
    the inception of the tribal lands bidding credit, there have been 10
    auctions,[^16] with 375 winning bidders purchasing 10,479
    licenses.[^17] However, only 27 winning bidders to date have
    initially indicated on their long-form applications that they would
    be seeking the tribal lands bidding credit, and of those applicants,
    only five submitted the required 90-day certifications.[^18] Upon
    review of this proceeding, we find that the small number of
    applications seeking the credit is due, at least in part, to the
    administrative process established by the Commission. Specifically,
    we find that the 90-day deadline for obtaining the certifications
    from the applicable tribal government(s) makes it extremely
    difficult to qualify for the credit. The 90-day deadline and
    certifications were established: (1) to ensure prompt issuance of
    licenses to winning bidders; (2) to provide a time frame for making
    contact with tribal governments and obtaining requisite
    certifications; and (3) to ensure that the wireless carrier intends
    to provide service to the tribal land. Because ninety days may not
    be a sufficient amount of time for licensees and tribal authorities
    to complete the certification process,[^19] we extend the tribal
    lands certification period to 180 days. Accordingly, a winning
    bidder claiming a tribal lands bidding credit will now have 180 days
    to amends its long-form application to identify the tribal lands to
    be served, and provide the required certification from the tribal
    government. Further, the winning bidder will have 180 days to file a
    certification that it will comply with the tribal lands build-out
    requirements, and consult with the tribal government regarding the
    siting of facilities and deployment of service on the tribal land.
    If the winning bidder fails to submit the required certifications
    within the 180-day period, the bidding credit will not be awarded,
    and the winning bidder will be required to pay the balance on the
    original gross bid amount in order to obtain the license.

11. *Full or partial assignments of licenses involving tribal lands
    bidding credits*. An issue that was inadvertently omitted in the
    *Report and Order* is the impact of license assignments on licenses
    with tribal lands bidding credit construction/repayment obligations.
    We therefore clarify that if the license is assigned to another
    entity, the construction/repayment obligations associated with the
    credit are transferred as well. Because all obligations of the
    license automatically transfer to the assignee, we will not require
    the assignee to seek re-certification where the original licensee
    received certifications from the appropriate tribal authorities. It
    is important to note that an assignee contracting with a licensee to
    transfer a license for which a tribal lands bidding credit was
    received bears the risk that the tribal government may not allow the
    assignee to deploy facilities on its land. We expect that parties
    interested in obtaining wireless licenses will exercise due
    diligence in identifying whether or not a tribal lands bidding
    credit construction obligation is associated with the license, and,
    therefore, take into account the heightened construction obligation,
    the dependence of the credit on obtaining the consent of the tribal
    government, and the potential for a repayment penalty in case the
    construction requirement is not met within the original three-year
    time frame. It is up to the assignee to verify that the tribe will
    consent to allowing the assignee access to its lands.

12. Also, we clarify that in partial license transfers involving
    geographic partitioning,[^20] the tribal land must be wholly
    contained within either the assignor's or assignee's proposed
    license area after the partition. We will not permit, for example, a
    tribal area for which a credit was awarded to be "split" between
    partitioned areas because this would be inconsistent with the
    original purpose of issuing the credit, *i.e.*, to ensure that at
    least 75 percent of the tribal land is served. Where a partition
    occurs, the construction/repayment obligation will attach to the
    license for the partitioned area that encompasses the tribal land
    for which the credit was awarded. However, in partial license
    transfers involving spectrum disaggregation[^21] (but not
    partitioning), the construction/repayment obligation will be
    presumed to remain with the original licensee whose stated intention
    was to serve the tribal land unless the parties to the transaction
    inform us otherwise. As is the case with partitioning, spectrum
    covering the tribal land must be disaggregated in its entirety
    (*i.e*. a disaggregation involving only a portion of a tribal area
    subject to a bidding credit will not be permitted).

13. *Notification of Construction*. In the *Report and Order*, the
    Commission did not clearly set out the notification of construction
    procedures applicable to licensees that are granted tribal lands
    bidding credits. Pursuant to the goals of section 309(j)(4)(B) of
    the Act,[^22] the Commission has set out performance requirements
    for the various services, with alternative construction obligations
    for those licensees using tribal land bidding credits. As noted, the
    Commission imposed more stringent construction requirements for
    those licensees that choose to utilize the tribal lands bidding
    credit in order to ensure that only those most committed to building
    out their facilities will receive bidding credits and that service
    is deployed as quickly as possible. In order to verify compliance
    with the tribal lands construction requirement, any licensee
    employing a bidding credit must file a notification of construction
    (FCC Form 601, Schedule K) electronically at the conclusion of the
    three-year construction period along with an attachment stating
    affirmatively that it is providing coverage to 75 percent of the
    population of the tribal area for which the credit was awarded. In
    its notification of construction, the licensee must provide the
    total population of the tribal area covered by its license as well
    as the number of persons it is serving in the tribal area. If the
    licensee fails to make an adequate showing that it has met the 75
    percent benchmark, it will be required to repay the bidding credit,
    plus interest, thirty days after the conclusion of the construction
    period.[^23] Failure to repay this amount will result in automatic
    termination of the license.[^24]

14. *Penalty for failure to construct and failure to timely repay
    bidding credit*. We also take this opportunity to correct an
    omission in the rules implemented in connection with the *Report and
    Order*, in which the Commission stated that a licensee's failure to
    comply with build-out requirements, and subsequent failure to repay
    the bidding credit, plus interest, thirty days after the conclusion
    of the construction period, would result in automatic termination of
    the licensee's license, *i.e*., termination without any further
    notification being sent to the licensee, opportunity for a hearing,
    or other Commission action.[^25] This penalty will now be expressly
    codified in Part 1 of our rules.

**B. Use of Bidding Credits in Non-Tribal Areas or Areas with Telephone
Penetration Rates of More than 70 Percent.**

15. In the *Further Notice*, the Commission sought comment on whether it
    should apply the bidding credit to non-tribal areas on the same
    terms and conditions as for tribal areas, or alternatively, whether
    it should extend the bidding credit to areas (tribal and non-tribal)
    with penetration levels greater than 70 percent, but below the
    national average of 94 percent.[^26] As noted, very few commenters
    submitted responses to the *Further Notice*. Those who filed
    comments generally support extending bidding credits to entities
    seeking to provide service to non-tribal areas with telephone
    penetration rates below the national average.[^27]

16. We conclude that it is premature to expand the program to non-tribal
    areas or to areas with penetration rates of greater than 70 percent
    at this time. Because this program is still in its early stages and
    few entities have taken advantage of the bidding credit thus far, we
    cannot yet determine whether it would be constructive to expand the
    use of the bidding credit to non-tribal areas generally. Moreover,
    we are concerned about the paucity of comment regarding this issue.
    It is necessary to have a more substantial record as to whether the
    use of bidding credits is appropriate to encourage deployment of
    services into non-tribal areas, particularly from those most
    familiar with dealing with rural and high-cost service issues.[^28]
    Similarly, we believe the record is insufficient at this time to
    support expanding the use of the bidding credit to areas having
    telephone penetration rates of greater than 70 percent However, in
    an effort to develop a more complete and up-to-date record on
    possible adjustment of the penetration rate threshold, we seek
    comment below in our *Second Further Notice* on information from the
    2000 Census regarding increases in tribal penetration rates that has
    recently been released by the Census Bureau.[^29]

**C. Applying Bidding Credits to Existing Licenses.**

17. The Commission noted in the *Report and Order* that the current
    tribal lands bidding credit can be applied only in the auction in
    which it is obtained.[^30] Accordingly, the bidding credit is not
    available to carriers with existing licenses that were acquired in
    prior auctions or through transfer or assignment. The Commission
    therefore asked in the *Further Notice* whether a more flexible form
    of credit should be made available to existing licensees who have
    constructed facilities, using currently-licensed spectrum to provide
    service to qualifying tribal lands.[^31] Under this approach,
    carriers who use their existing spectrum to provide service to such
    areas could receive bidding credits that could be used in future
    auctions.[^32] Further, the Commission sought comment on whether
    such a credit should be transferable to third parties for use in
    future auctions.[^33] The Commission also sought comment on our
    legal authority under Section 309(j) of the Communications Act to
    adopt the flexible bidding credit.

18. Although we continue to believe that the tribal lands bidding credit
    is a valuable means to encourage greater deployment of
    telecommunications services into underserved tribal areas, we
    conclude that in light of our still-limited experience with the
    bidding credit program, we should not extend the program to
    already-licensed carriers or make the credit transferable at this
    juncture. We believe that before taking such a step, additional time
    is needed to determine the effectiveness of the program as currently
    structured in meeting its intended goals. We also find that the
    limited comment we have received in this proceeding does not provide
    sufficient support or guidance for such an expansion of the program.
    [^34] Accordingly, we decline to extend the program to
    already-licensed carriers or make the credit transferable at this
    time.

**D. Transferable Bidding Credits for Licensees that Partition Tribal
Areas**

19. In the *Further Notice*, the Commission solicited comment on whether
    bidding credits should be made available to carriers that enter into
    partitioning agreements with tribal governments to facilitate
    deployment of service to tribal lands.[^35] The Commission proposed
    that a credit would be awarded to a geographic area licensee that
    partitioned portions of its license area covering tribal lands to
    the appropriate tribal government.[^36] Again, we received limited
    comment regarding this issue, and therefore we conclude that the
    record does not at this time support expanding the bidding credit
    program as proposed.

**IV. SECOND FURTHER NOTICE OF PROPOSED RULEMAKING**

20. In this *Second Further Notice*, we solicit comment on whether it is
    necessary to modify our existing tribal lands bidding credit program
    in order to further facilitate the use of the bidding credit. As
    noted *supra,* the tribal lands bidding credit program is still in
    its early stages and few carriers have taken advantage of the
    bidding credit thus far. The record, however, is unclear regarding
    the reasons behind the lack of response to the bidding credit.
    Because the record in this proceeding thus far is not sufficient to
    make reasoned decisions as to what steps, if any, we should take to
    further encourage carriers to provide coverage to tribal lands, we
    seek additional comment regarding this issue.

**A. Modifying the construction requirements of the tribal lands bidding
credit.**

21. As noted, our rules currently impose more stringent construction
    requirements on carriers who seek the tribal lands bidding credit
    than those who do not. All carriers taking advantage of the bidding
    credit are required to serve 75 percent of the population of the
    qualifying tribal land for which the credit was awarded, and must do
    so within three years of license grant.[^37] The Commission
    initially set out the more stringent performance requirement because
    it believed that the accelerated buildout requirement ensures
    that: (1) only entities making a serious commitment to serving
    tribal lands will receive bidding credits; and (2)
    telecommunications services will be rapidly deployed to unserved
    tribal areas.[^38]

22. It is possible, however, that one reason behind the lack of
    participation in our bidding credit program is that carriers find
    that difficulties involved in meeting the enhanced construction
    requirements are not sufficiently mitigated by the existing bidding
    credit. For example, there may be conditions, such as technical
    obstacles, economic factors, or other difficulties, that may make it
    difficult for carriers to satisfy the stricter construction
    requirement. Circumstances may exist on remote tribal lands such as
    low population density, rough terrain, and other factors that can
    negatively affect the ability of carriers to provide the requisite
    coverage to facilities in those areas. Accordingly, we seek comment
    as to whether we should reconsider the buildout obligations imposed
    on carriers utilizing the tribal lands bidding credit. Given that
    the public has now had a period of time to evaluate the bidding
    credit program, we seek comment on whether the requirement that
    carriers cover 75 percent of the population within three years
    remains feasible, or whether we should moderate the buildout
    criteria. Specifically, we request comment on what factors or
    circumstances exist that warrant an across-the-board relaxation of
    the bidding credit construction requirements.

23. In the event that we determine that the construction requirements
    should be eased, we seek comment on how the requirements should be
    modified. For example, should the population of the qualifying
    tribal land covered by a carrier be lessened (*i.e.* reduced to a
    number below 75 percent)? Alternatively, should the time period in
    which to provide coverage to 75 percent of the tribal population be
    extended to a construction period longer than three years? Or is the
    appropriate remedy a combination of a reduced population coverage
    requirement and an expanded construction period? Should we adopt a
    variation of the combination method, such as a tiered approach in
    which construction would occur in phases, *e.g.*, a certain
    percentage of the total tribal population must be covered in three
    years, and a greater percentage would be covered at the five-year
    mark. We seek comment regarding these alternatives, as well as any
    other options. We note that any across-the-board revision of the
    construction requirements must balance our desire to implement
    achievable construction requirements with the underlying purpose of
    the requirements, that is, to ensure that service is actually
    deployed on tribal lands.[^39]

24. We are also aware that a comprehensive change of the construction
    requirements may not be the appropriate solution. It may be that
    satisfying the tribal lands buildout requirement may be more
    difficult in certain tribal areas in the country than in others.
    There may be difficulties or conditions specific to certain tribal
    lands, that may make it difficult for carriers to satisfy the
    stricter construction requirement, while other carriers deploying
    the same type of service may have no difficulties in meeting the
    construction requirements in other tribal areas. Similarly, the
    ability to comply with the tribal lands bidding credit may depend on
    the particular wireless service at issue. Our rules governing
    general construction and operation obligations of licensees reflect
    several approaches that match a type of license (*i.e.* site-based
    versus geographic market) or service (*e.g.* PCS or lower band 700
    MHz) with a specific buildout requirement.[^40] It may therefore be
    preferable to deal with these situations on a case-by-case or
    service-by-service basis rather than an across-the-board method. We
    therefore seek comment on whether we should resolve any buildout
    difficulties using an ad hoc or waiver approach.

**B. Increasing the bidding credit limit.**

25. The Commission established the tribal lands bidding credit in order
    to encourage participation in auctions by carriers who are in a
    position to provide service to tribal lands, and to help mitigate
    the economic risks associated with the deployment of such service.
    In recognition of the underlying economic difficulties in providing
    service to high cost areas, the Commission sought to fashion a
    bidding credit that bore a correlation to the infrastructure
    investment necessary to deploy facilities on tribal lands.[^41]

26. As noted, it is not clear why few applicants have thus far taken
    advantage of the tribal lands bidding credit. In addition to the
    required construction requirements, another possibility for the poor
    response may be that the existing bidding credit may not provide
    carriers sufficient incentive to deploy facilities on tribal lands.
    Although no applicant has yet requested a larger credit than the one
    called for under our tribal lands bidding credit methodology,[^42]
    it may be that the current bidding credit amounts are not adequate
    to allow carriers to recoup a significant portion of infrastructure
    costs. Accordingly, we seek comment on whether the existing tribal
    lands bidding credit remains effective in encouraging carriers to
    provide service in tribal areas. We also request comment on whether
    and how the bidding credit amount and methodology should be modified
    to provide a greater incentive for carriers to deploy facilities on
    tribal lands.

**C. Adjustment of the Bidding Credit based on 2000 Census Data.**

27. The Commission initiated this proceeding in recognition of the
    unusually low telephone service penetration rates on tribal lands as
    identified by the 1990 Census.[^43] In the *Notice of Proposed Rule
    Making*, the Commission cited 1990 Census data indicating that,
    although the nationwide average penetration rate for those with
    incomes below \$5,000 living in rural areas was 78.7 percent, the
    telephone penetration rates for individuals on tribal lands at the
    same income level averaged 46.6 percent.[^44] Further, the 1990
    Census found that only 53 percent of those living on tribal lands
    had basic telephone service, as opposed to 94 percent for the
    country as a whole.[^45]

28. Recently, the Census Bureau has begun to issue data from the 2000
    Census indicating that average telephone penetration rates on tribal
    lands have increased appreciably from the levels reported in
    1990.[^46] However, despite the improvement that this census data
    indicates in access to basic telephone service experienced in some
    tribal areas, the data also reveals that telephone penetration rates
    on virtually all tribal lands remain well below the 97.6 percent
    penetration rate found in the country as a whole.[^47] Indeed,
    certain tribal lands continue to have unusually low telephone
    penetration levels despite gains in subscribership numbers since the
    1990 Census.[^48] We therefore believe that it is appropriate to
    continue to develop and apply policies aimed at promoting further
    deployment of wireless services to tribal lands. In this regard, we
    seek comment on whether and to what extent we should use the updated
    information now available regarding tribal penetration rates to
    modify certain aspects of the bidding credit. First, should we
    adjust the credit formula to require the use of 2000 Census figures
    instead of 1990 Census figures in calculating tribal penetration for
    purposes of determining eligibility for the credit? Second, to the
    extent that the 2000 census indicates that penetration rates in some
    tribal areas have risen above 70 percent but remain below the
    national average, should we modify the bidding credit formula so
    that tribal areas with penetration rates greater than 70 percent but
    some percentage below the national average are eligible for the
    credit? If we conclude that it is desirable to raise the level at
    which tribal areas are eligible for a credit, what should the
    benchmark be? Further, with respect to tribal lands that have been
    identified by the 2000 Census as continuing to have unusually low
    penetration rates, we request comment on whether we should make
    adjustments to the bidding credit to create additional and more
    targeted incentives for wireless carriers to provide services in
    such areas.

**D. Extending the Tribal Lands Bidding Credit to Adjacent Non-tribal
Areas with Low Penetration Rates.**

29. We also solicit comment on whether we should extend bidding credits
    to non-tribal areas with penetration rates that fall below the
    percentage threshold used to calculate eligibility for the tribal
    credit. Specifically, we seek comment on whether we should allow a
    limited expansion of the tribal lands bidding credit program that
    would allow carriers who obtain bidding credits in order to serve
    qualifying tribal lands to seek additional credit for extending
    their coverage to immediately adjacent non-tribal areas that have
    comparably low penetration rates.

30. In the *Report and Order*, the Commission limited the bidding credit
    program to qualifying tribal areas with penetration rates of 70
    percent or less because we determined that this limitation would
    target the tribal communities with the greatest need for access to
    telecommunications services.[^49] The Commission concluded that it
    would be appropriate to limit application of the bidding credit to
    tribal lands because the Commission believed that, even though there
    are non-tribal areas with penetration rates below the national
    average of 94 percent (as reported in the 1990 Census), almost all
    non-tribal areas have telephone penetration rates higher than 70
    percent.[^50] In reviewing this proceeding, however, we recognize
    that there may be certain areas abutting tribal lands that also lack
    adequate access to telecommunications services. It is likely that
    some non-tribal areas share with their neighboring tribal
    communities the same barriers to access, such as geographic
    remoteness, sparse population clusters, and low income levels.
    Further, it is likely that areas adjacent to tribal communities also
    have significant Native American populations.

31. Extending the bidding credit to underserved non-tribal areas could
    serve dual purposes. First, extending the credit furthers the
    objectives of the Communications Act which directs us to ensure the
    rapid and efficient deployment of wire and radio communications "to
    all the people of the United States."[^51] Further, allowing
    applicants to seek bidding credits for non-tribal areas immediately
    adjacent to tribal communities may make it more likely that entities
    will seek bidding credits to serve tribal lands. Accordingly, we
    seek comment on whether we should give those applicants who commit
    to serve a qualifying tribal area the ability to augment the bidding
    credit for also serving adjacent non-tribal areas.

32. In the event that we extend the bidding credit to non-tribal areas,
    we seek comment on how to define the geographic areas that would
    trigger eligibility for an additional credit amount. For example, is
    it suitable to use county-wide penetration rates to establish
    eligibility, or, given the large size of certain counties, would the
    use of county-wide figures fail to accurately gauge the penetration
    level of some specific areas? Alternatively, we seek comment on
    whether measuring telephone penetration based on smaller geographic
    areas would more accurately reflect underserved areas. For example,
    the Census Bureau tabulates data according to a variety of small
    geographic areas, such as census tracts or census blocks.[^52]

33. We also request comment on the appropriate certification process;
    *e.g.* is it sufficient that the applicant itself certify that the
    applicable non-tribal area has a telephone penetration rate that
    meets the percentage threshold to qualify for the credit. In
    particular, we request comment on the possible method(s) that would
    enable us to accurately target the non-tribal areas that share the
    same characteristics of tribal lands and are thus appropriate to
    target for support through bidding credits. Although it is likely
    that areas adjacent to tribal lands have significant tribal
    populations, and may possess characteristics (*i.e.* geographic
    remoteness, low subscribership) that similarly warrant support, we
    recognize that certain areas immediately adjacent to tribal lands
    include highly populated, urban areas.[^53] We therefore request
    comment on any widely applicable methodology that would enable us to
    easily distinguish between urban/highly populated areas with high
    telephone penetration rates and those that have characteristics
    warranting support. We seek comment on any other measures or
    conditions that should be adopted that will safeguard the integrity
    of our bidding credit program..

34. Further, we tentatively conclude that, in the event we extend the
    bidding credit's applicability to adjoining non-tribal lands, we
    should use the existing formula to calculate the additional credit.
    In order to determine the total credit for a market, the applicable
    \"square kilometers\" of the relevant non-tribal area would be added
    to the qualifying tribal area within the license market. We seek
    comment on this approach, and on any alternative ways to calculate
    the credit.

35. In the *Report and Order*, the Commission concluded that it has the
    authority to establish the tribal lands bidding credit because the
    Act, *inter alia*, directs the Commission to: (1) facilitate the
    rapid and efficient deployment of wire and radio communications "to
    all the people of the United States;" (2) foster "the development
    and rapid deployment of new technologies, products, and services for
    the benefit of the public, including those residing in rural areas;"
    and, (3) promote the "efficient and intensive use of the
    electromagnetic spectrum."[^54] The Commission further concluded
    that section 706(A) of the Act authorizes bidding credits designed
    to remove or reduce economic barriers to infrastructure
    investment.[^55] We tentatively conclude that these provisions also
    allow us to extend the bidding credit to cover adjacent non-tribal
    areas. We request comment on this analysis.

**V. PROCEDURAL MATTERS**

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

36. This proceeding is a permit-but-disclose notice and comment
    rulemaking proceeding. *Ex parte* presentations are permitted,
    except during the Sunshine Agenda period, provided they are
    disclosed as provided in Commission rules. *See generally* 47 C.F.R.
    §§ 1.1202, 1.1203, and 1.1206.

**B. Final Regulatory Flexibility Act Analysis.**

37. The Final Regulatory Flexibility Analysis for this *Second Report
    and Order,* as required by Section 604 of the Regulatory Flexibility
    Act of 1980, 5 U.S.C. § 604, is set forth in Appendix B.

**C. Paperwork Reduction Act Analysis.**

38. The actions taken in the *Second Report and Order* have been
    analyzed with respect to the Paperwork Reduction Act of 1995 (PRA),
    Pub. L. No. 104-13, 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 PRA, and will go into effect
    upon announcement in the Federal Register of OMB approval.

**D. Initial Regulatory Flexibility Analysis.**

39. The Commission has prepared an Initial Regulatory Flexibility
    Analysis for the *Second Further Notice*, as required by the
    Regulatory Flexibility Act. *See* Appendix C. We request written
    public comment on the analysis. Comments must be filed in accordance
    with the same filing deadlines as comments filed in response to the
    *Second Further Notice*, and must have a separate and distinct
    heading designating them as responses to the IRFA. The Commission
    will send a copy of the *Second Further Notice*, including this
    IRFA, to the Chief Counsel for Advocacy of the Small Business
    Administration (SBA).[^56] In addition, the *Second Further Notice*
    and IRFA (or summaries thereof) will be published in the Federal
    Register.

**E. Initial Paperwork Reduction Act Analysis.**

40. The *Second Further Notice* has been analyzed with respect to the
    PRA and found to impose no new or modified reporting and
    recordkeeping requirements or burdens on the public.

**F. Comment Dates.**

41. We invite comment on the issues and questions set forth in the
    *Second Further Notice,* Paperwork Reduction Analysis, and Initial
    Regulatory Flexibility Analysis contained herein. Pursuant to
    sections 1.415 and 1.419 of the Commission's rules,[^57] interested
    parties may file comments on or before 30 days after this *Second
    Further Notice* is published in the Federal Register, and reply
    comments on or before 45 days after this *Second Further Notice* is
    published in the Federal Register. Comments may be filed using the
    Commission's Electronic Comment Filing System (ECFS) or by filing
    paper copies. *See* Electronic Filing of Documents in Rulemaking
    Proceedings, 63 Fed. Reg. 24,121 (1998).

42. Comments filed through the ECFS can be sent as an electronic file
    via the Internet to
    \<[http://www.fcc.gov/e-file/ecfs.html]{.underline}\>. 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, Postal Service mailing address, and the
    applicable docket or rulemaking number. Parties may also submit
    electronic comments by Internet e-mail. To receive filing
    instructions for e-mail comments, commenters should send an e-mail
    to [ecfs@fcc.gov]{.underline}, 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. Or
    you may obtain a copy of the ASCII Electronic Transmittal From
    (FORM-ET) at
    \<[www.fcc.gov/e-file/email.html](http://www.fcc.gov/efile/email.html)\>.

43. Parties who choose to file by paper must file an original and four
    copies of each filing. Filings can be sent by hand or messenger
    delivery, by commercial overnight courier, or by first-class or
    overnight U.S. Postal Service mail (although we continue to
    experience delays in receiving U.S. Postal Service mail). The
    Commission's contractor, Vistronix, Inc., will receive
    hand-delivered or messenger-delivered paper filings for the
    Commission\'s Secretary at 236 Massachusetts Avenue, NE, Suite 110,
    Washington, DC 20002. The filing hours at this location will be 8:00
    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.

44. 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, DC 20554. All filings must be addressed to
    the Commission\'s Secretary, Office of the Secretary, Federal
    Communications Commission.

+----------------------------------+-----------------------------------+
| **If you are sending this type   | **It should be addressed for      |
| of document or using this        | delivery to...**                  |
| delivery method...**             |                                   |
+----------------------------------+-----------------------------------+
| Hand-delivered or                | 236 Massachusetts                 |
| messenger-delivered paper        |                                   |
| filings for the Commission's     | Avenue, NE, Suite 110,            |
| Secretary                        |                                   |
|                                  | Washington, DC 20002 (8:00 to     |
|                                  | 7:00 p.m.)                        |
+----------------------------------+-----------------------------------+
| Other messenger-delivered        | 9300 East Hampton Drive,          |
| documents, including documents   |                                   |
| sent by overnight mail (other    | Capitol Heights, MD 20743         |
| than United States Postal        |                                   |
| Service Express Mail and         | (8:00 a.m. to 5:30 p.m.)          |
| Priority Mail)                   |                                   |
+----------------------------------+-----------------------------------+
| United States Postal Service     | 445 12^th^ Street, SW             |
| first-class mail, Express Mail,  |                                   |
| and Priority Mail                | Washington, DC 20554              |
+----------------------------------+-----------------------------------+

45. Regardless of whether parties choose to file electronically or by
    paper, parties should also file one copy of any documents filed in
    this docket with the Commission's copy contractor, Qualex
    International, Portals II, 445 12th Street, SW, CY-B402, Washington,
    DC 20554 (see alternative addresses above for delivery by hand or
    messenger) (telephone 202-863-2893; facsimile 202-863-2898) or via
    e-mail at <qualexint@aol.com>.

46. The full text of this document is available for public inspection
    and copying during regular business hours at the FCC Reference
    Information Center, Portals II, 445 12^th^ Street, SW, Room CY-A257,
    Washington, DC, 20554. This document may also be purchased from the
    Commission\'s duplicating contractor, Qualex International, Portals
    II, 445 12^th^ Street, SW, Room CY-B402, Washington, DC, 20554,
    telephone 202-863-2893, facsimile 202-863-2898, or via e-mail
    <qualexint@aol.com>**.** Alternative formats (computer diskette,
    large print, audio cassette and Braille) are available to persons
    with disabilities by contacting Brian Millin at (202) 418‑7426,
    TTY (202) 418‑7365, or at <bmillin@fcc.gov>.

**VI. ORDERING CLAUSES.**

47. Accordingly, IT IS ORDERED that, pursuant to Sections 1, 4(i),
    303(r), and 309(j) of the Communications Act of 1934, as amended, 47
    U.S.C. §§ 151, 154(i), 303(r), and 309(j), the REPORT AND ORDER is
    hereby ADOPTED.

48. IT IS FURTHER ORDERED that, pursuant to Sections 1, 4(i), 303(r),
    309(j) and 706 of the Communications Act of 1934, as amended, 47
    U.S.C. §§ 151, 154(i), 303(r), 309(j), and 706, that the SECOND
    FURTHER NOTICE OF PROPOSED RULEMAKING is hereby ADOPTED.

49. IT IS FURTHER ORDERED that, pursuant to the authority of Sections
    4(i), 7, 303(c), 303(f), 303(g), 303(r), and 332 of the
    Communications Act of 1934, as amended, 47 U.S.C. §§ 154(i), 303(c),
    303(f), 303(g), 303(r), and 332, the rule changes specified in
    Appendix A ARE ADOPTED.

50. IT IS FURTHER ORDERED that the rule changes set forth in Appendix A
    WILL BECOME EFFECTIVE 60 days after publication in the *Federal
    Register.*

51. IT IS FURTHER ORDERED that the Commission's Consumer and
    Governmental Affairs Bureau, Reference Information Center, SHALL
    SEND a copy of this *Second Report and Order and Second Further
    Notice of Proposed Rulemaking*, including the Final Regulatory
    Flexibility Analysis, and 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**

**RULES**

Subpart Q of Part 1 of Title 47 of the Code of Federal Regulations is
amended as follows:

1\. Section 1.2110(f)(3) is amended to read as follows:

§ 1.2110 Designated Entities.

\* \* \* \* \*

\(f\) \* \* \*

\* \* \* \* \*

> \(3\) \* \* \*
>
> \(i\) Qualifying tribal land means any federally recognized Indian
> tribe\'s reservation, Pueblo, or Colony, including former reservations
> in Oklahoma, Alaska Native regions established pursuant to the Alaska
> Native Claims Settlement Act (85 Stat. 688), and Indian allotments,
> that has a wireline telephone subscription rate equal to or less than
> seventy (70) percent based on the most recently available U.S. Census
> Data.
>
> \(ii\) *Certification*.
>
> \(A\) Within 180 days after the filing deadline for long-form
> applications, the winning bidder must amend its long-form application
> and attach a certification from the tribal government stating the
> following:
>
> \(1\) The tribal government authorizes the winning bidder to site
> facilities and provide service on its tribal land;
>
> \(2\) The tribal area to be served by the winning bidder constitutes
> qualifying tribal land; and
>
> \(3\) The tribal government has not and will not enter into an
> exclusive contract with the applicant precluding entry by other
> carriers, and will not unreasonably discriminate among wireless
> carriers seeking to provide service on the qualifying tribal land.
>
> \(B\) In addition, within 180 days after the filing deadline for long-
> form applications, the winning bidder must amend its long-form
> application and file a certification that it will comply with the
> construction requirements set forth in § 1.2110(e)(vi) and consult
> with the tribal government regarding the siting of facilities and
> deployment of service on the tribal land.
>
> \(C\) If the winning bidder fails to submit the required
> certifications within the 180-day period, the bidding credit will not
> be awarded, and the winning bidder must pay the balance on the
> original gross bid amount.
>
> \* \* \* \* \*
>
> \(vi\) *Post-construction certification*. Within fifteen (15) days of
> the third anniversary of the initial grant of its license, a recipient
> of a bidding credit under this section shall file a certification that
> the recipient has constructed and is operating a system capable of
> serving seventy-five (75) percent of the population of the qualifying
> tribal land for which the credit was awarded. The recipient must
> provide the total population of the tribal area covered by its license
> as well as the number of persons that it is serving in the tribal
> area.
>
> \(vii\) *Performance penalties*. If a recipient of a bidding credit
> under this section fails to provide the post-construction
> certification required by §1.2110(f)(3)(vi), then it shall repay the
> bidding credit amount in its entirety, plus interest. The interest
> will be based on the rate for ten-year U.S. Treasury obligations
> applicable on the date the license is granted. Such payment shall be
> made within thirty (30) days of the third anniversary of the initial
> grant of its license. Failure to repay the bidding credit amount and
> interest within the required time period will result in automatic
> termination of the license without specific Commission action.
>
> \(viii\) *Partitioning and disaggregation.* Parties seeking approval
> for partitioning or disaggregation of tribal areas obtained pursuant
> to the tribal lands bidding credit shall request an authorization for
> partial assignment of a license pursuant to §1.948 of this chapter.
>
> \(A\) *Partitioning.* A licensee of a market obtained using a tribal
> lands bidding credit may partition the tribal lands within its market.
> The partitioned area must include all tribal areas within the market
> subject to the tribal lands bidding credit. The partitionee must
> certify that it will satisfy the construction requirements set forth
> in §1.2110(f)(3)(vi).
>
> \(B\) *Disaggregation*. Spectrum covering tribal lands may be
> disaggregated in any amount. The disaggregated spectrum must include
> all tribal areas within the market subject to the tribal lands bidding
> credit. The original licensee must certify that it will satisfy the
> construction requirements set forth in §1.2110(f)(3)(vi), unless the
> parties to the transaction inform the Commission otherwise.
>
> \* \* \* \* \*

**APPENDIX B**

**FINAL REGULATORY FLEXIBILITY ANALYSIS**

As required by the Regulatory Flexibility Act of 1980, as amended
(RFA),[^58] an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated in the *Report and Order and Further Notice of Proposed
Rulemaking* in WT Docket No. 99-266, released June 20, 2000 (*Report and
Order/Further Notice*).[^59] The Commission sought written public
comment on the proposals in the *Further Notice*, including comment on
the IRFA. This present Final Regulatory Flexibility Analysis (FRFA)
conforms to the RFA.[^60]

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

In the *Second Report and Order*, we clarify rules previously adopted in
the *Report and Order and Further Notice of Proposed Rulemaking* in WT
Docket 99-266 to provide incentives for wireless telecommunications
carriers to serve individuals living on tribal lands.[^61] In that
*Report and Order*, we authorized the grant of bidding credits to
winning bidders who deploy facilities and provide service to
federally-recognized tribal areas that have a telephone service
penetration rate below 70 percent.[^62] In the present item, we clarify,
on our own motion, administrative matters involved in implementing the
bidding credit, such as the process by which carriers obtain
certifications permitting them to deploy facilities on tribal lands.
This *Second Report and Order* also addresses issues raised in the
*Further Notice*. In the *Further Notice*, we requested comment on
whether we should expand the use of bidding credits. Specifically, we
sought comment as to whether to: 1) apply bidding credits to entities
who undertake to serve non-tribal areas and/or tribal areas with
telephone penetration levels above 70 percent, but significantly below
the national penetration average; 2) award bidding credits for use in
future auctions to existing geographic area licensees who deploy
facilities in unserved tribal communities; and, 3) grant bidding credits
to licensees who enter into partitioning agreements with tribal
governments that enable tribal entities to provide service, either
directly or by way of a third-party carrier. It is our goal to ensure
that all Americans have access to telecommunications service.

While we continue to believe that the tribal lands bidding credit is a
useful device in improving telephone penetration rates on tribal lands,
we conclude that the specific measures proposed in our *Further Notice*
to encourage greater deployment should not be adopted at this time.
Given the nascent state of the tribal lands bidding credit program, as
well as the lack of a comprehensive record supporting the proposed
extensions of the bidding credit, we believe that it is premature to
expand the use of bidding credits as proposed.

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

No comments were filed that specifically addressed the rules and
policies proposed in the IRFA.

**C. Description and Estimate of the Number of Small Entities to which
the 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 rules adopted herein.[^63] The RFA generally defines the
term "small entity" as having the same meaning as the terms "small
business," "small organization," and "small governmental
jurisdiction."[^64] In addition, the term "small business" has the same
meaning as the term "small business concern" under the Small Business
Act.[^65] A "small business concern" is one which: (1) is independently
owned and operated; (2) is not dominant in its field of operation; and
(3) satisfies any additional criteria established by the Small Business
Administration (SBA).[^66]

[Cellular Licensees]{.underline}. The SBA has developed a small business
size standard for small businesses in the category "Cellular and Other
Wireless Telecommunications."[^67] Under that SBA category, a business
is small if it has 1,500 or fewer employees.[^68] According to the
Bureau of the Census, only twelve firms from a total of 1238 cellular
and other wireless telecommunications firms operating during 1997 had
1,000 or more employees.[^69] Therefore, even if all twelve of these
firms were cellular telephone companies, nearly all cellular carriers
were small businesses under the SBA's definition. In addition, we note
that there are 1807 cellular licenses; however, a cellular licensee may
own several licenses. According to the most recent *Trends in Telephone
Service* data, 858 carriers reported that they were engaged in the
provision of either cellular service, Personal Communications Service
(PCS), or Specialized Mobile Radio telephony services, which are placed
together in that data.[^70] We have estimated that 291 of these are
small under the SBA small business size standard.[^71] Accordingly,
based on this data, we estimate that not more than 291 cellular service
providers will be affected by these revised rules.

[220 MHz Radio Service -- Phase I Licensees]{.underline}. The 220 MHz
service has both Phase I and Phase II licenses. Phase I licensing was
conducted by lotteries in 1992 and 1993. There are approximately 1,515
such non‑nationwide licensees and four nationwide licensees currently
authorized to operate in the 220 MHz band. The Commission has not
developed a definition of small entities specifically applicable to such
incumbent 220 MHz Phase I licensees. To estimate the number of such
licensees that are small businesses, we apply the definition under the
SBA rules applicable to "Cellular and Other Wireless Telecommunication"
companies. This category provides that a small business is a wireless
company employing no more than 1,500 persons.[^72] According to the
Bureau of the Census, only twelve firms from a total of 1238 cellular
and other wireless telecommunications firms operating during 1997 had
1,000 or more employees.[^73] If this general ratio continues in 2002 in
the context of Phase I 220 MHz licensees, we estimate that nearly all
such licensees are small businesses under the SBA\'s small business
standard.

[220 MHz Radio Service -- Phase II Licensees]{.underline}. The Phase II
220 MHz service is a new service, and is subject to spectrum auctions.
In the *220 MHz Third Report and Order*, we adopted a small business
size standard for defining "small" and "very small" businesses for
purposes of determining their eligibility for special provisions such as
bidding credits and installment payments.[^74] This small business
standard indicates that a "small business" is an entity that, together
with its affiliates and controlling principals, has average gross
revenues not exceeding \$15 million for the preceding three years.[^75]
A "very small business" is defined as an entity that, together with its
affiliates and controlling principals, has average gross revenues that
do not exceed \$3 million for the preceding three years.[^76] The SBA
has approved these small size standards.[^77] Auctions of Phase II
licenses commenced on September 15, 1998, and closed on October 22,
1998.[^78] In the first auction, 908 licenses were auctioned in three
different‑sized geographic areas: three nationwide licenses, 30 Regional
Economic Area Group (EAG) Licenses, and 875 Economic Area (EA) Licenses.
Of the 908 licenses auctioned, 683 were sold.[^79] Thirty-nine small
businesses won licenses in the first 220 MHz auction. The second auction
included 225 licenses: 216 EA licenses and 9 EAG licenses. Fourteen
companies claiming small business status won 158 licenses.[^80]

[700 MHz Guard Band Licenses]{.underline}. In the *700 MHz Guard Band
Order*, we adopted a small business size standard for "small businesses"
and "very small businesses" for purposes of determining their
eligibility for special provisions such as bidding credits and
installment payments.[^81] A small business is an entity that, together
with its affiliates and controlling principals, has average gross
revenues not exceeding \$40 million for the preceding three years.[^82]
Additionally, a "very small business" is an entity that, together with
its affiliates and controlling principals, has average gross revenues
that are not more than \$15 million for the preceding three years.[^83]
An auction of 52 Major Economic Area (MEA) licenses commenced on
September 6, 2000, and closed on September 21, 2000.[^84] Of the 104
licenses auctioned, 96 licenses were sold to 9 bidders. Five of these
bidders were small businesses that won a total of 26 licenses. A second
auction of 700 MHz Guard Band licenses commenced on February 13, 2001
and closed on February 21, 2001. All eight of the licenses auctioned
were sold to three bidders. One of these bidders was a small business
that won a total of two licenses.[^85]

[Lower 700 MHz Band Licenses]{.underline}. We adopted criteria for
defining three groups of small businesses for purposes of determining
their eligibility for special provisions such as bidding credits.[^86]
We have defined a small business as an entity that, together with its
affiliates and controlling principals, has average gross revenues not
exceeding \$40 million for the preceding three years. A very small
business is defined as an entity that, together with its affiliates and
controlling principals, has average gross revenues that are not more
than \$15 million for the preceding three years. Additionally, the lower
700 MHz Service has a third category of small business status that may
be claimed for Metropolitan/Rural Service Area (MSA/RSA) licenses. The
third category is entrepreneur, which is defined as an entity that,
together with its affiliates and controlling principals, has average
gross revenues that are not more than \$3 million for the preceding
three years. An auction of 704 licenses (one license in each of the 734
MSAs/RSAs and one license in each of the six Economic Area Groupings
\[EAGs\]) commenced on August 27, 2002, and closed on September 18,
2002.[^87] Of the 740 licenses available for auction, 484 licenses were
sold to 102 winning bidders. Seventy-two of the winning bidders claimed
small business, very small business or entrepreneur status and won a
total of 329 licenses.

[Private and Common Carrier Paging]{.underline}. In the *Paging* *Second
Report and Order*, we adopted a small size standard for "small
businesses" for purposes of determining their eligibility for special
provisions such as bidding credits and installment payments.[^88] A
small business is an entity that, together with its affiliates and
controlling principals, has average gross revenues not exceeding \$15
million for the preceding three years.[^89] The SBA has approved this
definition.[^90] An auction of Metropolitan Economic Area (MEA) licenses
commenced on February 24, 2000, and closed on March 2, 2000.[^91] Of the
985 licenses auctioned, 440 were sold. Fifty-seven companies claiming
small business status won. At present, there are approximately 24,000
Private Paging site-specific licenses and 74,000 Common Carrier Paging
licenses. According to the most recent *Trends in Telephone Service,*
608 carriers reported that they were engaged in the provision of either
paging or "other mobile" services.[^92] Of these, we estimate that 589
are small, under the SBA-approved small business size standard. We
estimate that the majority of private and common carrier paging
providers would qualify as small entities under the SBA definition.

[Broadband Personal Communications Service (PCS).]{.underline} The
broadband PCS spectrum is divided into six frequency blocks designated A
through F, and the Commission has held auctions for each block. The
Commission has created a small business size standard for Blocks C and F
as an entity that has average gross revenues of less than \$40 million
in the three previous calendar years.[^93] For Block F, an additional
small business size standard for "very small business" was added and is
defined as an entity that, together with their affiliates, has average
gross revenues of not more than \$15 million for the preceding three
calendar years.[^94] These small business size standards, in the context
of broadband PCS auctions, have been approved by the SBA.[^95] No small
businesses within the SBA-approved small business size standards bid
successfully for licenses in Blocks A and B. There were 90 winning
bidders that qualified as small entities in the Block C auctions. A
total of 93 "small" and "very small" business bidders won approximately
40% of the 1,479 licenses for Blocks D, E, and F.[^96] On March 23,
1999, the Commission reauctioned 347 C, D, E, and F Block licenses;
there were 48 small business winning bidders. Based on this information,
we conclude that the number of small broadband PCS licensees will
include the 90 winning C Block bidders and the 93 qualifying bidders in
the D, E, and F blocks plus the 48 winning bidders in the re-auction,
for a total of 231 small entity PCS providers as defined by the SBA
small business standards and the Commission\'s auction rules. On January
26, 2001, the Commission completed the auction of 422 C and F Broadband
PCS licenses in Auction No. 35. Of the 35 winning bidders in this
auction, 29 qualified as "small" or "very small" businesses.

[Narrowband PCS]{.underline}. The Commission has auctioned nationwide
and regional licenses for narrowband PCS. There are 11 nationwide and 30
regional licensees for narrowband PCS. The Commission does not have
sufficient information to determine whether any of these licensees are
small businesses within the SBA-approved definition for radiotelephone
companies. In March 2002, 106 MTA and BTA narrowband PCS licenses were
granted to 4 licensees.[^97] Each of the licensees are small or very
small businesses.

[Specialized Mobile Radio (SMR).]{.underline} Pursuant to 47 C.F.R. §
90.814(b)(1), the Commission has established a small business size
standard for purposes of auctioning 900 MHz SMR licenses, 800 MHz SMR
licenses for the upper 200 channels, and 800 MHz SMR licenses for the
lower 230 channels on the 800 MHz band as a firm that has had average
annual gross revenues of \$15 million or less in the three preceding
calendar years.[^98] The SBA has approved this small business size
standard for the 800 MHz and 900 MHz auctions.[^99] Sixty winning
bidders for geographic area licenses in the 900 MHz SMR band qualified
as small businesses under the \$15 million size standard. The auction of
the 525 800 MHz SMR geographic area licenses for the upper 200 channels
began on October 28, 1997, and was completed on December 8, 1997. Ten
(10) winning bidders for geographic area licenses for the upper 200
channels in the 800 MHz SMR band qualified as small businesses under the
\$15 million size standard.

The auction of the 1,050 800 MHz SMR geographic area licenses for the
General Category channels began on August 16, 2000, and was completed on
September 1, 2000. Eleven (11) winning bidders for geographic area
licenses for the General Category channels in the 800 MHz SMR band
qualified as small businesses under the \$15 million size standard. In
an auction completed on December 5, 2000, a total of 2,800 Economic Area
licenses in the lower 80 channels of the 800 MHz SMR service were sold.
Of the 22 winning bidders, 19 claimed "small business" status. Thus, 40
winning bidders for geographic licenses in the 800 MHz SMR band
qualified as small business. In addition, there are numerous incumbent
site-by-site SMR licensees on the 800 and 900 MHz band. The Commission
awards bidding credits in auctions for geographic area 800 MHz and 900
MHz SMR licenses to firms that had revenues of no more than \$15 million
in each of the three previous calendar years.[^100] This analysis
applies to SMR providers in the 800 MHz and 900 MHz bands that either
hold geographic area licenses or have obtained extended implementation
authorizations. We do not know how many firms provide 800 MHz or 900 MHz
geographic area SMR pursuant to extended implementation authorizations,
nor how many of these providers have annual revenues of no more than
\$15 million. One firm has over \$15 million in revenues. We assume, for
purposes of this analysis, that all of the remaining existing extended
implementation authorizations are held by small entities, as that small
business size standard is established by SBA.

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

The *Second Report and Order* modifies the certification process that
wireless carriers must follow in order to obtain a tribal lands bidding
credit. The Commission extends the time period during which winning
bidders can negotiate to obtain the certification needed to obtain the
credit, however, the Commission declines to expand the credit beyond its
current scope.

> **E. Steps Taken to Minimize Significant Economic Impact on Small
> Entities, and Significant Alternatives Considered.**

The RFA requires an agency to describe any significant, specifically
small business, alternatives that it has considered in developing its
approach, which may include the following four alternatives (among
others): (1) the establishment of differing compliance or reporting
requirements or timetables that take into account the resources
available to small entities; (2) the clarification, consolidation, or
simplification of compliance or reporting requirements under the rule
for small entities; (3) the use of performance, rather than design,
standards; and (4) an exemption from coverage of the rule, or any part
thereof, for small Entities.[^101]

A certification period of 90 days was previously identified in the final
regulatory flexibility analysis in the *Report and Order*.[^102] In the
*Second Report and Order*, we extend the time period in which an
applicant must obtain a certification from tribal governments regarding
the siting of facilities and deployment of service on tribal lands. The
*Second Report and Order* extends the certification period from 90 days
to 180 days in order to allow applicants more time to conduct necessary
research and negotiate with tribal governments.[^103] The change we are
adopting in the certification process is minor, and will not have
additional significant economic impact on tribal governments or carriers
seeking to serve tribal lands. The extension of the certification period
from 90 to 180 days benefits all carriers, particularly small entities.

Further, the *Second Report and Order* clarifies partitioning and
disaggregation rules specific to licensees electing to use the tribal
lands bidding credit.[^104] In clarifying these rules, we considered
whether or not to apply our existing partitioning and disaggregation
rules to situations in which a tribal lands bidding credit is utilized.
While the partitioning and disaggregation rules are slightly more
restrictive in situations in which tribal lands bidding credits are
involved, we believe these rules further our original goal of promoting
service to tribal lands by helping to ensure that those using bidding
credits fulfill their construction obligations.

[Report to Congress]{.underline}: The Commission will send a copy of the
*Second Report and Order*, including this FRFA, in a report to be sent
to Congress pursuant to the *Congressional Review Act*.[^105] In
addition, the Commission will send a copy of the Order, including this
FRFA, to the Chief Counsel for Advocacy of the Small Business
Administration. A copy of the *Second Report and Order* and FRFA (or
summaries thereof) will also be published in the Federal Register.[^106]

**APPENDIX C**

**INITIAL REGULATORY FLEXIBILITY ANALYSIS**

As required by the Regulatory Flexibility Act (RFA),[^107] the
Commission has prepared an Initial Regulatory Flexibility Analysis
(IRFA) of the possible significant economic impact on small entities of
the policies and rules proposed in this *Second Further Notice of
Proposed Rulemaking* (*Second Further Notice*). Written public comments
are requested regarding this IRFA. Comments must be identified as
responses to the IRFA and must be filed by the deadlines for comments on
the *Second Further Notice.* The Commission will send a copy of the
*Second Further Notice*, including this IRFA, to the Chief Counsel for
Advocacy of the Small Business Administration.[^108] In addition, the
*Second Further Notice* and IRFA (or summaries thereof) will be
published in the Federal Register.[^109]

**A. Need for, and Objectives of, the *Second Further Notice.***

The tribal lands bidding credit program is still in its early stages and
few carriers have taken advantage of the bidding credit thus far. The
record, however, is unclear regarding the reasons behind the lack of
response to the bidding credit. Because the record in this proceeding
thus far is not sufficient to make reasoned decisions as to what steps,
if any, should be taken to further encourage carriers to provide
coverage to tribal lands, the Commission seeks additional comment
regarding this issue.

[Modifying the construction requirements of the tribal lands bidding
credit]{.underline}. The Commission's rules currently impose more
stringent construction requirements on carriers who seek the tribal
lands bidding credit than those who do not. All carriers taking
advantage of the bidding credit are required to serve 75 percent of the
population of the qualifying tribal land for which the credit was
awarded, and must do so within three years of license grant.[^110] One
possible reason behind the lack of participation in the bidding credit
program is that carriers find that difficulties involved in meeting the
enhanced construction requirements are not sufficiently mitigated by the
existing bidding credit. For example, there may be conditions, such as
technical obstacles, economic factors, or other difficulties, that may
make it difficult for carriers to satisfy the stricter construction
requirement. Circumstances may exist on remote tribal lands such as low
population density, rough terrain, and other factors that can negatively
affect the ability of carriers to provide the requisite coverage to
facilities in those areas. Accordingly, the Commission seeks comment as
to whether it should reconsider the buildout obligations imposed on
carriers utilizing the tribal lands bidding credit. Given that the
public has now had a period of time to evaluate the bidding credit
program, the Commission seeks comment on whether the requirement that
carriers cover 75 percent of the population within three years remains
feasible, or whether it should moderate the buildout criteria.
Specifically, the Commission requests comment on what factors or
circumstances exist that warrant an across-the-board relaxation of the
bidding credit construction requirements.

In the event that it is determined that the construction requirements
should be eased, the Commission seeks comment on how the requirements
should be modified. For example, should the population of the qualifying
tribal land covered by a carrier be lessened (*i.e.* reduced to a number
below 75 percent)? Alternatively, should the time period in which to
provide coverage to 75 percent of the tribal population be extended to a
construction period longer than three years? Or is the appropriate
remedy a combination of a reduced population coverage requirement and an
expanded construction period? Should the Commission adopt a variation of
the combination method such as a tiered approach? In other words,
construction would occur in phases, *e.g.*, a certain percentage of the
total tribal population must be covered in three years, and a greater
percentage would be covered at the five-year mark.

A comprehensive change of the construction requirements may not be the
appropriate solution. It may be that satisfying the tribal lands
buildout requirement may be more difficult in certain tribal areas in
the country than in others. There may be difficulties or conditions
specific to certain tribal lands, that may make it difficult for
carriers to satisfy the stricter construction requirement, while other
carriers deploying the same type of service may have no difficulties in
meeting the construction requirements in other tribal areas. Similarly,
the ability to comply with the tribal lands bidding credit may depend on
the particular wireless service at issue. The Commission's rules
governing general construction and operation obligations of licensees
reflect several approaches that match a type of license (*i.e.*
site-based versus geographic market) or service (*e.g.* PCS or lower
band 700 MHz) with a specific buildout requirement. It may therefore be
preferable to deal with these situations on a case-by-case or
service-by-service basis rather than an across-the board method. The
Commission therefore seeks comment on whether buildout difficulties
should be resolved using an ad hoc or waiver approach.

[Increasing the bidding credit limit]{.underline}. In addition to the
required construction requirements, another possibility for the poor
response may be that the existing bidding credit may not provide
carriers sufficient incentive to deploy facilities on tribal lands.
Although no applicant has yet requested a larger credit than the one
called for under the tribal lands bidding credit methodology, it may be
that the current bidding credit amounts are not adequate to allow
carriers to recoup a significant portion of infrastructure costs.
Accordingly, the Commission seeks comment on whether the existing tribal
lands bidding credit remains effective in encouraging carriers to
provide service in tribal areas. The Commission also requests comment on
whether and how the bidding credit amount and methodology should be
modified to provide a greater incentive for carriers to deploy
facilities on tribal lands.

[Adjustment of the Bidding Credit based on 2000 Census
Data]{.underline}. Recently issued data from the 2000 Census indicates
that telephone penetration rates on tribal lands have increased
appreciably from the levels reported in 1990. However, despite the
improvement in access to basic telephone service experienced by many
tribal areas, the census information reveals that telephone penetration
rates on tribal lands remain well below the 97.6 percent penetration
rate found in the country as a whole. Certain tribal lands continue to
have unusually low telephone penetration levels despite gains in
subscribership numbers since the 1990 Census. Accordingly, the
Commission seeks comment on whether the improved tribal penetration
rates require that certain aspects of the bidding credit be modified.
For example, should the credit formula be adjusted using 2000 Census
figures instead of 1990 Census figures? While some of the more populous
tribal areas continue to have penetration rates below 70 percent, many
tribal lands now have penetration rates above 70 percent. Accordingly,
to the extent that tribal penetration rates have improved, but remain
below the national average, should the bidding credit formula be
modified so that tribal areas with penetration rates greater than 70
percent but below the national average are eligible for the credit? What
should the benchmark be? Further, with respect to tribal lands that have
been identified by the 2000 Census as continuing to have unusually low
penetration rates, the Commission requests comment on whether we should
make adjustment to the bidding credit to provide additional incentives
for such areas.

[Extending the Tribal Lands Bidding Credit to Adjacent Non-tribal Areas
with Low Penetration Rates]{.underline}. The Commission recognizes that
there may be certain areas abutting tribal lands that also lack adequate
access to telecommunications services. It is likely that some non-tribal
areas share with their neighboring tribal communities the same barriers
to access, such as geographic remoteness, sparse population clusters,
and low income levels. Further, it is likely that areas adjacent to
tribal communities also have significant Native American populations.
Accordingly, in the *Second Further Notice*, the Commission solicits
comment on whether bidding credits should be extended to non-tribal
areas with penetration rates of less than 70 percent. Specifically, the
Commission seeks comment on whether it should allow a limited expansion
of the tribal lands bidding credit program that would allow carriers who
seek bidding credits in order to serve qualifying tribal lands to obtain
additional credit for extending their coverage to immediately adjacent
non-tribal areas that also have penetration rates of less than 70
percent.

**B. Legal Basis.**

We tentatively conclude that we have authority under Sections 4(i),
303(r), 309(j) and 706 of the Communications Act of 1934, as amended, 47
U.S.C. §§ 154(i), 303(r), 309(j) and 706, to adopt the proposals set
forth in the *Second Further Notice*.

**C. Description and Estimate of the Number of Small Entities to which
the 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 rules adopted herein.[^111] The RFA generally defines
the term "small entity" as having the same meaning as the terms "small
business," "small organization," and "small governmental
jurisdiction."[^112] In addition, the term "small business" has the same
meaning as the term "small business concern" under 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 Small Business
Administration (SBA).[^114]

[Cellular Licensees]{.underline}. The SBA has developed a small business
size standard for small businesses in the category "Cellular and Other
Wireless Telecommunications."[^115] Under that SBA category, a business
is small if it has 1,500 or fewer employees.[^116] According to the
Bureau of the Census, only twelve firms from a total of 1238 cellular
and other wireless telecommunications firms operating during 1997 had
1,000 or more employees.[^117] Therefore, even if all twelve of these
firms were cellular telephone companies, nearly all cellular carriers
were small businesses under the SBA's definition. In addition, we note
that there are 1807 cellular licenses; however, a cellular licensee may
own several licenses. According to the most recent *Trends in Telephone
Service* data, 806 carriers reported that they were engaged in the
provision of either cellular service, Personal Communications Service
(PCS), or Specialized Mobile Radio telephony services, which are placed
together in that data.[^118] We have estimated that 291 of these are
small under the SBA small business size standard.[^119] Accordingly,
based on this data, we estimate that not more than 291 cellular service
providers will be affected by these revised rules.

[220 MHz Radio Service -- Phase I Licensees]{.underline}. The 220 MHz
service has both Phase I and Phase II licenses. Phase I licensing was
conducted by lotteries in 1992 and 1993. There are approximately 1,515
such non‑nationwide licensees and four nationwide licensees currently
authorized to operate in the 220 MHz band. The Commission has not
developed a definition of small entities specifically applicable to such
incumbent 220 MHz Phase I licensees. To estimate the number of such
licensees that are small businesses, we apply the definition under the
SBA rules applicable to "Cellular and Other Wireless Telecommunication"
companies. This category provides that a small business is a wireless
company employing no more than 1,500 persons.[^120] According to the
Bureau of the Census, only twelve firms from a total of 1238 cellular
and other wireless telecommunications firms operating during 1997 had
1,000 or more employees.[^121] If this general ratio continues in 2002
in the context of Phase I 220 MHz licensees, we estimate that nearly all
such licensees are small businesses under the SBA\'s small business
standard.

[220 MHz Radio Service -- Phase II Licensees]{.underline}. The Phase II
220 MHz service is a new service, and is subject to spectrum auctions.
In the *220 MHz Third Report and Order*, we adopted a small business
size standard for defining "small" and "very small" businesses for
purposes of determining their eligibility for special provisions such as
bidding credits and installment payments.[^122] This small business
standard indicates that a "small business" is an entity that, together
with its affiliates and controlling principals, has average gross
revenues not exceeding \$15 million for the preceding three years.[^123]
A "very small business" is defined as an entity that, together with its
affiliates and controlling principals, has average gross revenues that
do not exceed \$3 million for the preceding three years.[^124] The SBA
has approved these small size standards.[^125] Auctions of Phase II
licenses commenced on September 15, 1998, and closed on October 22,
1998.[^126] In the first auction, 908 licenses were auctioned in three
different‑sized geographic areas: three nationwide licenses, 30 Regional
Economic Area Group (EAG) Licenses, and 875 Economic Area (EA) Licenses.
Of the 908 licenses auctioned, 683 were sold.[^127] Thirty-nine small
businesses won licenses in the first 220 MHz auction. The second auction
included 225 licenses: 216 EA licenses and 9 EAG licenses. Fourteen
companies claiming small business status won 158 licenses.[^128]

[700 MHz Guard Band Licenses]{.underline}. In the *700 MHz Guard Band
Order*, we adopted a small business size standard for "small businesses"
and "very small businesses" for purposes of determining their
eligibility for special provisions such as bidding credits and
installment payments.[^129] A small business is an entity that, together
with its affiliates and controlling principals, has average gross
revenues not exceeding \$40 million for the preceding three years.[^130]
Additionally, a "very small business" is an entity that, together with
its affiliates and controlling principals, has average gross revenues
that are not more than \$15 million for the preceding three years.[^131]
An auction of 52 Major Economic Area (MEA) licenses commenced on
September 6, 2000, and closed on September 21, 2000.[^132] Of the 104
licenses auctioned, 96 licenses were sold to 9 bidders. Five of these
bidders were small businesses that won a total of 26 licenses. A second
auction of 700 MHz Guard Band licenses commenced on February 13, 2001
and closed on February 21, 2001. All eight of the licenses auctioned
were sold to three bidders. One of these bidders was a small business
that won a total of two licenses.[^133]

[Lower 700 MHz Band Licenses]{.underline}. We adopted criteria for
defining three groups of small businesses for purposes of determining
their eligibility for special provisions such as bidding credits.[^134]
We have defined a small business as an entity that, together with its
affiliates and controlling principals, has average gross revenues not
exceeding \$40 million for the preceding three years. A very small
business is defined as an entity that, together with its affiliates and
controlling principals, has average gross revenues that are not more
than \$15 million for the preceding three years. Additionally, the lower
700 MHz Service has a third category of small business status that may
be claimed for Metropolitan/Rural Service Area (MSA/RSA) licenses. The
third category is entrepreneur, which is defined as an entity that,
together with its affiliates and controlling principals, has average
gross revenues that are not more than \$3 million for the preceding
three years. An auction of 704 licenses (one license in each of the 734
MSAs/RSAs and one license in each of the six Economic Area Groupings
\[EAGs\]) commenced on August 27, 2002, and closed on September 18,
2002.[^135] Of the 740 licenses available for auction, 484 licenses were
sold to 102 winning bidders. Seventy-two of the winning bidders claimed
small business, very small business or entrepreneur status and won a
total of 329 licenses.

[Private and Common Carrier Paging]{.underline}. In the *Paging* *Second
Report and Order*, we adopted a small size standard for "small
businesses" for purposes of determining their eligibility for special
provisions such as bidding credits and installment payments.[^136] A
small business is an entity that, together with its affiliates and
controlling principals, has average gross revenues not exceeding \$15
million for the preceding three years.[^137] The SBA has approved this
definition.[^138] An auction of Metropolitan Economic Area (MEA)
licenses commenced on February 24, 2000, and closed on March 2,
2000.[^139] Of the 985 licenses auctioned, 440 were sold. Fifty-seven
companies claiming small business status won. At present, there are
approximately 24,000 Private Paging site-specific licenses and 74,000
Common Carrier Paging licenses. According to the most recent *Trends in
Telephone Service,* 608 carriers reported that they were engaged in the
provision of either paging or "other mobile" services.[^140] Of these,
we estimate that 589 are small, under the SBA-approved small business
size standard. We estimate that the majority of private and common
carrier paging providers would qualify as small entities under the SBA
definition.

[Broadband Personal Communications Service (PCS).]{.underline} The
broadband PCS spectrum is divided into six frequency blocks designated A
through F, and the Commission has held auctions for each block. The
Commission has created a small business size standard for Blocks C and F
as an entity that has average gross revenues of less than \$40 million
in the three previous calendar years.[^141] For Block F, an additional
small business size standard for "very small business" was added and is
defined as an entity that, together with their affiliates, has average
gross revenues of not more than \$15 million for the preceding three
calendar years.[^142] These small business size standards, in the
context of broadband PCS auctions, have been approved by the SBA.[^143]
No small businesses within the SBA-approved small business size
standards bid successfully for licenses in Blocks A and B. There were 90
winning bidders that qualified as small entities in the Block C
auctions. A total of 93 "small" and "very small" business bidders won
approximately 40% of the 1,479 licenses for Blocks D, E, and F.[^144] On
March 23, 1999, the Commission reauctioned 347 C, D, E, and F Block
licenses; there were 48 small business winning bidders. Based on this
information, we conclude that the number of small broadband PCS
licensees will include the 90 winning C Block bidders and the 93
qualifying bidders in the D, E, and F blocks plus the 48 winning bidders
in the re-auction, for a total of 231 small entity PCS providers as
defined by the SBA small business standards and the Commission\'s
auction rules. On January 26, 2001, the Commission completed the auction
of 422 C and F Broadband PCS licenses in Auction No. 35. Of the 35
winning bidders in this auction, 29 qualified as "small" or "very small"
businesses.

[Narrowband PCS]{.underline}. The Commission has auctioned nationwide
and regional licenses for narrowband PCS. There are 11 nationwide and 30
regional licensees for narrowband PCS. The Commission does not have
sufficient information to determine whether any of these licensees are
small businesses within the SBA-approved definition for radiotelephone
companies. In March 2002, 106 MTA and BTA narrowband PCS licenses were
granted to 4 licensees.[^145] Each of the licensees are small or very
small businesses.

[Specialized Mobile Radio (SMR).]{.underline} Pursuant to 47 C.F.R. §
90.814(b)(1), the Commission has established a small business size
standard for purposes of auctioning 900 MHz SMR licenses, 800 MHz SMR
licenses for the upper 200 channels, and 800 MHz SMR licenses for the
lower 230 channels on the 800 MHz band as a firm that has had average
annual gross revenues of \$15 million or less in the three preceding
calendar years.[^146] The SBA has approved this small business size
standard for the 800 MHz and 900 MHz auctions.[^147] Sixty winning
bidders for geographic area licenses in the 900 MHz SMR band qualified
as small businesses under the \$15 million size standard. The auction of
the 525 800 MHz SMR geographic area licenses for the upper 200 channels
began on October 28, 1997, and was completed on December 8, 1997. Ten
(10) winning bidders for geographic area licenses for the upper 200
channels in the 800 MHz SMR band qualified as small businesses under the
\$15 million size standard.

The auction of the 1,050 800 MHz SMR geographic area licenses for the
General Category channels began on August 16, 2000, and was completed on
September 1, 2000. Eleven (11) winning bidders for geographic area
licenses for the General Category channels in the 800 MHz SMR band
qualified as small businesses under the \$15 million size standard. In
an auction completed on December 5, 2000, a total of 2,800 Economic Area
licenses in the lower 80 channels of the 800 MHz SMR service were sold.
Of the 22 winning bidders, 19 claimed "small business" status. Thus, 40
winning bidders for geographic licenses in the 800 MHz SMR band
qualified as small business. In addition, there are numerous incumbent
site-by-site SMR licensees on the 800 and 900 MHz band. The Commission
awards bidding credits in auctions for geographic area 800 MHz and 900
MHz SMR licenses to firms that had revenues of no more than \$15 million
in each of the three previous calendar years.[^148] This analysis
applies to SMR providers in the 800 MHz and 900 MHz bands that either
hold geographic area licenses or have obtained extended implementation
authorizations. We do not know how many firms provide 800 MHz or 900 MHz
geographic area SMR pursuant to extended implementation authorizations,
nor how many of these providers have annual revenues of no more than
\$15 million. One firm has over \$15 million in revenues. We assume, for
purposes of this analysis, that all of the remaining existing extended
implementation authorizations are held by small entities, as that small
business size standard is established by SBA.

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

The *Second Further Notice* does not propose any specific reporting,
recordkeeping or compliance requirements. However, we seek comment on
what, if any, requirements we should impose if we adopt the proposals
set forth in the *Second Further Notice*.

> **E. Steps Taken to Minimize Significant Economic Impact on Small
> Entities, and Significant Alternatives Considered.**

The RFA requires an agency to describe any significant, specifically
small business, alternatives that it has considered in developing its
approach, which may include the following four alternatives (among
others): (1) the establishment of differing compliance or reporting
requirements or timetables that take into account the resources
available to small entities; (2) the clarification, consolidation, or
simplification of compliance or reporting requirements under the rule
for small entities; (3) the use of performance, rather than design,
standards; and (4) an exemption from coverage of the rule, or any part
thereof, for small Entities.[^149]

The *Second Further Notice* seeks comment regarding ways to adjust the
current tribal lands bidding credit program in order to encourage
further deployment by carriers, as well as on additional uses of the
bidding credit program to facilitate the provision of service to
underserved non-tribal areas adjacent to tribal communities.[^150] The
*Second Further Notice* does not make specific implementation proposals,
but seeks guidance from the public on how to further expand our bidding
policies. The Commission tentatively concludes that these proposals
should not have a significant economic impact on small carriers.

**STATEMENT OF CHAIRMAN MICHAEL K. POWELL**

Re: *Extending Wireless Telecommunications Services to Tribal Lands; WT
Docket No. 99-266*

Our government-to-government relationship with tribal authorities make
us partners in the quest to bring access to all modern communications to
Indian Country. We share a common goal: to increase the availability of
telecommunications services on tribal lands. While penetration rates
have increased in the last decade, the chasm between penetration rates
on tribal lands and the national average must be closed. Current
penetration rates -- which are below 50% of the population in some
tribal areas -- are unacceptable. Spectrum-based services provide an
ideal opportunity to close this gap.

The order we adopt today takes common sense steps to increase the
availability of wireless services on underserved tribal lands. By
refining the bidding credit program adopted previously -- including by
extending the certification period to allow ample time for tribal
consultation -- we make the program more "user-friendly," increasing the
probability that the credits will be used and service will be delivered.
We also seek comment on ways to make the bidding credit program more
attractive and to create incentives for wireless deployment in areas
adjacent to tribal lands, which often suffer from the same low
penetration rates as tribal lands themselves. We must work together to
utilize our resources in new and creative ways to tackle these
challenges. To that end, I note the productive government-to-government
meetings and discussions we held recently with tribal leaders and
representatives from the National Congress of American Indians and our
stepped up outreach and consultation with tribes on issues of
significant importance, such as historic preservation. I am committed to
continuing this positive direction and building the solid relationship
that will yield the results we all seek.

I applaud the leadership and imagination of Commissioners Copps and
Adelstein in developing some of the proposals in the further notice. I
look forward to working with them and my other colleagues to ensure that
all Americans enjoy technology-neutral access to modern
telecommunications services and can participate fully in the digital
economy.

**SEPARATE STATEMENT OF**

**COMMISSIONER MICHAEL J. COPPS**

***Re: In the Matter of Extending Wireless Telecommunications
Services***

***To Tribal Lands; WT Docket No. 99-266***

According to the census a mere 54 percent of Americans living on tribal
lands had basic telephone service in the 1990's. The Department of
Commerce paints an even bleaker picture, stating that the average
penetration rate for basic telephone service on reservations and trust
lands in rural areas was 39 percent. Nationwide, in contrast, 94 percent
of Americans have phone service.[^151]

These numbers should shock us. They should be a clear call to action. It
is unjust and unacceptable for one group of Americans' access to
telecommunications to be radically inferior to the population as a
whole. It also violates the clear policy and language of the
Communications Act. The first sentence of the Act states that the
purpose of the legislation is:

> "\[T\]o make available, so far as possible, to *[all]{.underline}* the
> people of the United States, without discrimination on the basis of
> race, color, religion, national origin, or sex, a rapid, efficient,
> Nation-wide, and world-wide wire radio communication service with
> adequate facilities at reasonable prices."[^152]

The Act also says that our competitive bidding system must seek to
promote:

> "\[T\]he development and rapid deployment of new technologies,
> products, and services for the benefit of the public, including those
> residing in rural areas", and "to promote economic opportunity and
> competition and ensuring that new and innovative technologies are
> readily accessible to the American people 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."[^153]

The unacceptable disparity in access to telecommunications services
between Americans living on tribal lands and those who do not means that
the FCC is not currently meeting these mandates. We have a legal and a
moral responsibility to improve the situation.

This item makes some progress. It keeps alive the possibility of our
making significant changes to improve access. For example, we consider
whether we need to increase the size of the tribal lands bidding credit,
whether we should change the build-out requirements to account for the
unique challenges encountered in Indian Country, and whether we should
expand the bidding credit to underserved areas adjacent to tribal areas.
While we decide not to expand the credit to non-tribal areas where
penetration levels are below the national average, we only do so because
the current bidding credit program is new and untested. The Commission
does not find any substantive problem with this expansion, and leaves
open the possibility of expanding the program to other areas in the
future.

Time will tell whether this Commission will fulfill its responsibilities
in Indian Country. How we conduct this proceeding and whether we can
find creative ways to increase telephone penetration is the next test. I
am also looking for action in the near future on making sure our
universal service policies are effective for those in Indian Country,
including those who live in near-reservation lands. But the
responsibility is not the Commission's alone. Communities who want FCC
policy changes to help spur development must participate in our process.
Companies must look to tribal areas for business opportunities and help
us determine how we can make investment more attractive. A decision made
without you is often a decision made against you. So let's pull together
and make progress.

**SEPARATE STATEMENT OF**

**COMMISSIONER JONATHAN S. ADELSTEIN**

***Re: In the Matter of Extending Wireless Telecommunications
Services***

***to Tribal Lands; WT Docket No. 99-266***

My family's presence on the Great Plains has endured for four
generations. I grew up in South Dakota, which also is home to more than
62,000 American Indians. I feel duty-bound by my heritage to ensure that
the benefits of the most advanced telecommunications reach all
Americans, particularly those who live on tribal lands.

I fully endorse the previous Commission's decision to provide incentives
for wireless telecommunications carriers to serve individuals living on
tribal lands. I also support today's decision to extend the time period
during which winning bidders can negotiate with tribes to obtain the
certification required for obtaining a bidding credit.

I believe, however, that we need to explore additional modifications to
the tribal lands bidding credit system in order to ensure that the
credit is utilized to its fullest possible extent. We most do more as an
agency to support the deployment of wireless services in tribal areas,
particularly those that are underserved by traditional wireline
services. This proceeding represents one of our best opportunities to
truly make a difference to the types of communications services
available on tribal lands.

The order indicates that since the inception of the tribal lands bidding
credit, there have been 10 auctions, with 375 winning bidders purchasing
10,479 licenses. While 27 winning bidders to date have initially
indicated that they would be seeking the tribal lands credit, of those
applicants, only five have submitted the required certification.

I strongly support the Second Further Notice of Proposed Rulemaking,
which includes questions regarding the construction period associated
with the bidding credit and the size of the discount offered by the
tribal land bidding credit program. Given that the program has met with
such limited success, it may be that the incentives just are not enough.

Finally, I strongly encourage interested tribes and wireless carriers to
participate in this proceeding and the several other proceedings
referenced in the item that are looking at service area sizes and
performance requirements. The Commission wants to hear from you, so that
we can learn how best to facilitate and improve wireless service on
tribal lands.

[^1]: In the Matter of Extending Wireless Telecommunications Services to
    Tribal Lands, WT Docket No. 99-266, *Report and Order and Further
    Notice of Proposed Rulemaking*, 15 FCC Rcd 11794 (2000) (*Report and
    Order*).

[^2]: Section 1.2110(f)(3)(i) of the Commission's rules provides that a
    qualifying tribal land is any federally recognized Indian tribe's
    reservation, Pueblo, or Colony, including former reservations in
    Oklahoma, Alaska Native regions established pursuant to the Alaska
    Native Claims Settlement Act (85 Stat. 688), and Indian allotments
    that has a wireline telephone subscription rate to or less than
    seventy (70) percent based on the most recently available U.S.
    Census Data. 47 C.F.R. § 1.2110(f)(3)(i). We note that since the
    adoption of section 1.2110(f)(3)(i), the Bureau of Indian Affairs
    (BIA) revised its definition of "reservation" in such a way as to no
    longer explicitly include "former reservations in Oklahoma" or
    "Indian allotments." *See* 25 C.F.R. § 20.100. Although we based our
    designation of "qualifying tribal land" on BIA's previous definition
    of the term "reservation," we are retaining the definition as set
    out in section 1.2110(f)(3)(i). We amend section 1.2110(f)(3)(i) to
    delete the reference to former rule section 25 C.F.R. § 20.1(v).

[^3]: The "telephone penetration rate," or telephone subscribership
    rate, represents the actual percentage of households that subscribe
    to telephone service. *See* *Telephone Subscribership in the United
    States* (rel. February 2003), available at
    \<http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/IAD/subs0702.pdf\>.

[^4]: *Report and Order,* 15 FCC Rcd at 11798, para. 8.

[^5]: *Id.* at 11805, para. 31.

[^6]: *See id.*

[^7]: *Id.* at 11806, para. 33.

[^8]: *Id.* at 11806, para. 35.

[^9]: *Id.*

[^10]: *Id.* at 11807, para. 37.

[^11]: *Id.* The interest is set according to the rate for ten-year U.S.
    Treasury obligations applicable on the date the license is granted.
    47 C.F.R. §1.2110(f)(3)(vii).

[^12]: *Report and Order*, 15 FCC Rcd at 11807, para. 37.

[^13]: *Id.* at 11802, para. 22.

[^14]: *Id.*

[^15]: *See* Comments of National Telephone Cooperative Association
    (NTCA), Titan Wireless, Inc, Verizon Wireless, and Western Wireless
    Corporation. *See also* Reply Comments of Cheyenne River Sioux Tribe
    Telephone Authority, and Salt River Pima-Maricopa Indian Community
    and Saddleback Communications. Another entity, Alaska Native
    Wireless, L.L.C., filed an *ex parte* in this matter.

[^16]: *See* "C and F Block Broadband PCS Auction Closes: Winning
    Bidders Announced," *Public Notice*, 16 FCC Rcd 2339 (WTB 2001) (C
    and F Block Broadband PCS Auction); "700 MHz Guard Band Auction
    Closes: Winning Bidders Announced, " *Public Notice,* 16 FCC Rcd
    4590 (WTB 2001) (700 MHz Guard Band Auction); "800 MHz SMR Service
    Lower 80 Channels Auction Closes: Winning Bidders Announced,"
    *Public Notice*, 16 FCC Rcd 1736 (WTB 2000) (800 MHz SMR Service
    Lower 80 Channels Auction); "VHF Public Coast and Location and
    Monitoring Service Spectrum Auction Closes: Winning Bidders
    Announced," *Public Notice*, DA 01-1443 (rel. June 15, 2001)
    (Combined Public Coast and LMS Auction); "Narrowband PCS Auction
    Closes; Winning Bidders Announced," *Public Notice*, 16 FCC Rcd
    18663 (WTB 2001); \"Lower and Upper Paging Bands Auction Closes:
    Winning Bidders Announced,\" Public Notice, 16 FCC Rcd 21821 (WTB
    2001); "Multiple Address Systems Spectrum Auction Closes: Winning
    Bidders Announced,\" Public Notice, 16 FCC Rcd 21011 (WTB 2001);
    \"Multi-Radio Service Auction Closes: Winning Bidders Announced,\"
    Public Notice, 17 FCC Rcd 1446 (WTB 2002); \"Lower 700 MHz Band
    Auction Closes: Winning Bidders Announced,\" Public Notice, 17 FCC
    Rcd 17272 (WTB 2002); \"Cellular Rural Service Areas Auction Closes:
    Winning Bidders Announced,\" Public Notice, 17 FCC Rcd 10582 (WTB
    2002).

[^17]: Not all of these licenses have tribal lands. For more
    information, visit the FCC Auctions web site at
    \<<http://www.fcc.gov/wtb/auctions/>\>, select the link for "Info on
    Tribal Land Bidding Credit," and refer to the files under "List of
    Tribal Lands and Market Cross References."

[^18]: Two of the applicants did not submit timely certifications. There
    are currently seven pending requests for extensions of the 90-day
    certification period.

[^19]: For example, it takes time for licensees to determine the
    appropriate individuals within a tribal government to approach and
    the appropriate procedures to follow in order to obtain the
    certifications from tribal authorities. Further, depending upon the
    particular tribal entity, there may be lengthy processes involved in
    evaluating the proposed service and determining whether to adopt the
    certification (*e.g.* such considerations could include determining
    whether the proposed service fits within the tribal government's
    technology plan).

[^20]: Partitioning is the assignment of geographic portions of a
    license along geopolitical or other boundaries.

[^21]: Disaggregation is the assignment of discrete portions or blocks
    of spectrum licensed to a geographic market licensee or qualifying
    entity.

[^22]: Section 309(j)(4)(B) of the Act directs the Commission to
    "include performance requirements ... to ensure prompt delivery of
    rural services to rural areas...and to promote investment in and the
    rapid deployment of new technologies and services. 47 U.S.C. §
    309(j)(4)(B).

[^23]: 47 C.F.R. § 1.2110(f)(3)(vii).

[^24]: 47 C.F.R § 1.946(c).

[^25]: *Report and Order*, 15 FCC Rcd at 11807, para. 37.

[^26]: *Id.* at 11809, para. 66.

[^27]: *See, e.g.,* NTCA Comments at 2-3; Titan Wireless Comments at
    4-5; UTStarcom Comments at 2; Verizon Comments at 2.

[^28]: Because non-tribal areas generally have higher telephone
    penetration rates than do tribal areas, there is less indication of
    a need for the availability of bidding credits in addition to other
    existing support mechanisms to encourage deployment of
    telecommunications services in non-tribal areas. We note that both
    tribal and non-tribal communities are eligible for
    telecommunications funding in the form of federal universal service
    support, including the high cost program (which provides support to
    eligible telecommunications service providers that serve residents
    of high cost regions), and the low-income program, comprised of the
    Lifeline and LinkUp programs (which provide discounts on telephone
    installation and monthly telephone service to qualifying consumers).
    We also note that there has recently been interest in Congress in
    facilitating the deployment of telecommunications infrastructure in
    rural and underserved areas. Bills introduced regarding this issue
    included the Rural Wireless Telecommunications Consumer Enhancement
    Act of 2002, which was introduced in March 2002 as a means of
    fostering the deployment of wireless telecommunications services to
    consumers in rural areas. H.R. 4012, 107th Cong. (2002). Another
    bill, the Rural America Technology Enhancement Act of 2001, sought
    to amend Section 254(e) of the Communications Act to provide federal
    universal service support for the deployment of broadband service to
    eligible rural communities. Such support could be used for the
    deployment of wireless technologies. H.R. 2847, 107th Cong. (2001).
    A further bill introduced in the House of Representatives, the Rural
    Telecommunications Enhancement Act, sought to authorize the
    Secretary of Agriculture to make loans and grants to eligible
    entities to finance the improvement, expansion, construction,
    acquisition, and operation of facilities to furnish or improve
    broadband transmission service in rural areas. H.R.2669, 107th Cong.
    (2001). Additionally, the Community Telecommunications Planning Act
    was introduced to authorize a total of \$60 million for Fiscal Year
    2002, and such sums as necessary in following years, for the
    creation of grants for community telecommunications infrastructure
    planning. Priority for funding would be given to eligible entities
    that propose to use their awards in rural and underserved areas. S.
    1056, 107th Cong. (2001). Although these items have not as yet been
    re-introduced in the 108th Congress, another bill, the Rural America
    Digital Accessibility Act, was introduced in January 2003. This bill
    would authorize grants or guaranteed loans to facilitate the
    deployment of broadband telecommunications networks (including
    wireless services) to underserved rural areas. H.R. 138, 108th Cong.
    (2003).

[^29]: *See* section IV.C. *infra.*

[^30]: *Report and Order*, 15 FCC Rcd at 11817, para. 68.

[^31]: *Id.* at 11817, para. 69.

[^32]: *Id.*

[^33]: *Id.* at 11817, para. 70.

[^34]: *See e.g.* National Telephone Cooperative Association Comments at
    4; Western Wireless Comments at 2-3; Cheyenne River Sioux Tribe
    Authority Reply Comments at 1-2; Salt River Pima-Maricopa Indian
    Community and Saddleback Communications Joint Reply Comments at 2.

[^35]: *Report and Order*, 15 FCC Rcd at 11818, para. 72.

[^36]: *Id.*

[^37]: 47 C.F.R. § 1.2110(f)(3)(vi).

[^38]: *See* *Report and Order*, 15 FCC Rcd at 11807-11807, para. 35.

[^39]: We are currently exploring whether our current regulatory
    framework is effective in facilitating the delivery of
    spectrum-based services to rural areas, and how to modify our
    policies to promote further deployment of such services to rural
    areas. *See* Facilitating the Provision of Spectrum-Based Services
    to Rural Areas and Promoting Opportunities for Rural Telephone
    Companies To Provide Spectrum-Based Services, WT Docket No. 02-381,
    *Notice of Inquiry*, 17 FCC Rcd 24135 (2002) (*Rural Areas NOI*). In
    that proceeding, we sought comment on how construction benchmarks
    may be utilized to facilitate the delivery of wireless services to
    rural populations. *Id*. at 25566, para. 21. Because we believe that
    many of the issues raised in the *Rural Areas NOI* are equally
    applicable to tribal lands, we encourage interested parties to
    supplement the record in that proceeding regarding how performance
    requirements and construction benchmarks can be utilized to improve
    wireless service to tribal lands.

[^40]: As a general matter, we continue to seek methods, including the
    targeting of service and licensing rules, that will encourage
    deployment of services to tribal lands. Accordingly, we encourage
    interested parties to participate in rulemaking proceedings
    regarding services for which we are in the process of adopting
    service and licensing rules. For example, we are currently
    evaluating spectrum that may be suitable for the provision of new
    services, including Advanced Wireless Services (AWS). The questions
    asked in that proceeding include how best to use the reallocated
    Mobile-Satellite Service (MSS) spectrum as well as other bands
    previously proposed for AWS use, and on whether we should provide
    additional flexibility for the Unlicensed Personal Communications
    Service (UPCS) band spectrum. *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, ET Docket No.
    00-258; The Establishment of Policies and Service Rules for the
    Mobile-Satellite Service in the 2 GHz Band, IB Docket No. 99-81;
    Amendment of the U.S. Table of Frequency Allocations to Designate
    the 2500-2520/2670-2690 MHz Frequency Bands for the Mobile-Satellite
    Service, RM-9911; Petition for Rule Making of the Wireless
    Information Networks Forum Concerning the Unlicensed Personal
    Communications Service, RM-9498; Petition for Rule Making of
    UTStarcom, Inc., Concerning the Unlicensed Personal Communications
    Service, RM-10024, *Third Report and Order, Third Notice Of Proposed
    Rulemaking and Second Memorandum Opinion and Order*, FCC 03-16 (rel.
    February 10, 2002). We also began an examination of ways to promote
    the commercial development and growth of the \"millimeter wave\"
    spectrum in the 71-76 GHz, 81-86 GHz and 92-95 GHz bands ("70/80/90
    GHz"). *See* Allocations and Service Rules for the 71-76 GHz, 81-86
    GHz and 92-95 GHz Bands, WT Docket No. 02-146, *Notice of Proposed
    Rulemaking*, 17 FCC Rcd 12182 (2002). We encourage interested
    parties to submit comments in such proceedings, specifying the
    licensing procedures and rules that will best facilitate the
    deployment of such services to tribal lands.

[^41]: The Commission also concluded that it was appropriate to consider
    the coverage area of a transmitter as well as the size of the tribal
    area in determining the amount of the credit. Under the existing
    bidding credit formula, a winning bidder may receive a \$300,000
    credit for up to the first 200 square miles (518 square kilometers)
    of qualifying tribal land within its license area. In instances
    where qualifying tribal lands within a license area exceed 200
    square miles (518 kilometers), a winning bidder may receive an
    additional \$1500 per square mile (2.59 square kilometer), or
    \$300,000 for each additional 200 square miles (518 square
    kilometers). All credits are subject to a maximum limit based on the
    gross bid amount for the license for which the credit is sought.
    Where the gross bid amount is \$1 million or less, the cap is 50
    percent of the gross bid. Where the gross bid amount is greater than
    \$1 million and equal to or less than \$2 million, the cap is
    \$500,000. Finally, where the gross bid amount exceeds \$2 million,
    the cap is 25 percent of the gross bid. 47 C.F.R. §
    1.2110(f)(3)(iii)-(iv).

[^42]: In the *Report and Order*, we set out a waiver process by which
    applicants can request additional bidding credits if they can show
    that their infrastructure costs exceed the available credit set out
    by the formula. These waiver requests, however, remain subject to
    applicants' applicable percentage caps. *Report and Order*, 15 FCC
    Rcd at 11805, para. 31.

[^43]: *See* Extending Wireless Telecommunications Services to Tribal
    Lands, WT Docket No. 99-266, *Notice of Proposed Rulemaking*, 14 FCC
    Rcd 13679, 13682, para. 5.

[^44]: *Id.*

[^45]: U.S. Bureau of the Census, "Housing of American Indians on
    Reservations: Equipment and Fuels," SB/95-11, April 1995.

[^46]: The average telephone penetration rate for all tribal areas
    reported by the 2000 Census is 83.1 percent. U.S. Bureau of the
    Census, "Occupancy, Equipment, and Utilization Characteristics of
    Occupied Housing Units: 2000," Table GCT-H8. A 1999 study
    commissioned by the U.S. Department of Commerce's Economic
    Development Administration found that the average penetration rate
    for basic telephone service on reservation and trust lands in rural
    areas was 39 percent. U.S. Department of Commerce, Economic
    Development Administration, and New Mexico State University,
    "Assessment of Technology Infrastructure in Native Communities,"
    June 1999 (*Assessment of Technology Infrastructure in Native
    Communities*). This report, which was based on survey responses of
    tribal governments rather than Census data, noted that because 20
    percent of those residing on tribal lands live on the Navajo
    Reservation, the low penetration rate reported in the study was
    significantly affected by the 22 percent penetration rate found on
    the Navajo Reservation at the time of the study. The study indicated
    that excluding the Navajo Reservation from the calculation, resulted
    in a reported penetration rate for the remaining tribal lands in
    rural areas of 71 percent. *Assessment of Technology Infrastructure
    in Native Communities*, p. 16-17. Although the Commission has
    determined penetration levels according to Census data in
    administering the tribal lands bidding credit, we are not opposed to
    considering other methods of determining the actual telephone
    penetration rate on tribal lands. Accordingly, we welcome comments
    proposing the use of other sources of data that accurately reflect
    penetration rates.

[^47]: U.S. Bureau of the Census, "Profile of Selected Housing
    Characteristics: 2000," Table: DP-4.

[^48]: For example, although the penetration rates of tribal areas such
    as the Navajo Reservation, Fort Apache Reservation, and Mississippi
    Choctaw Reservation and Trust Lands each increased by over 20
    percent since the 1990 Census, these tribal lands continue to have
    very low penetration rates (39.9 percent, 57.2 percent, and 62.6
    percent, respectively).

[^49]: *See* *Report and Order*, 15 FCC Rcd at 11802, para. 22.

[^50]: *Id*.

[^51]: 47 U.S.C. § 151.

[^52]: Census tracts are small, relatively permanent statistical
    subdivisions of a county; they are designed to be relatively
    homogeneous units with respect to population characteristics,
    economic status, and living conditions. Census blocks are among the
    smallest geographical entities for which the Census Bureau tabulates
    data.

[^53]: For example, the Commission previously included "near
    reservations" as areas which would receive enhanced Lifeline and
    Link-Up support. However, the Commission subsequently stayed the
    application of enhanced Lifeline and Link-Up support to such areas
    because it concluded that the near reservation definition used by
    BIA at the time included certain wide geographic areas that
    encompass highly populated and urban areas. *See* Federal-State
    Joint Board on Universal Service; Promoting Deployment and
    Subscribership in Unserved and Underserved Areas, Including Tribal
    and Insular Areas, CC Docket No. 96-45, *Order and Further Notice of
    Proposed Rulemaking*, 15 FCC Rcd 17112 (2000). Accordingly,
    extending bidding credits based on near reservations could be
    overinclusive in terms of furthering the goal of increasing
    telephone deployment and subscribership to the most underserved
    areas.

[^54]: *See* *Report and Order*, 15 FCC Rcd at 11801, para. 18, citing
    47 U.S.C.§ 151, 47 U.S.C. § 309(j)(3)(A), and 47 U.S.C. §
    309(j)(3)(D).

[^55]: *Id.* at 11802, para. 20. *See* 47 U.S.C. 157 (directing the
    Commission to "encourage the deployment on a reasonable and timely
    basis of advanced telecommunications capability to all Americans\...
    by utilizing\... regulating methods that remove barriers to
    infrastructure investment.")

[^56]: *See* 5 U.S.C. § 603(a).

[^57]: 47 C.F.R. §§ 1.415, 1.419.

[^58]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. § 601 *et. seq*.,
    has been amended by the Small Business Regulatory Enforcement
    Fairness Act of 1996 (SBREFA), Title II, Pub. L. No. 104-121, 110
    Stat. 857 (1996).

[^59]: In the Matter of Extending Wireless Telecommunications Services
    to Tribal Lands, WT Docket No. 99-266, *Report and Order and Further
    Notice of Proposed Rulemaking*, 15 FCC Rcd 11794, 11833 (2000).

[^60]: *See* 5 U.S.C. § 604.

[^61]: Section 1.2110(f)(3)(i) of the Commission's rules provides that a
    qualifying tribal land "means any federally recognized Indian
    tribe's reservation, Pueblo, or Colony, including former
    reservations in Oklahoma, Alaska Native regions established pursuant
    to the Alaska Native Claims Settlement Act (85 Stat. 688), and
    Indian allotments," (*see* 25 C.F.R. § 20.1(v)), that has a wireline
    telephone subscription rate to or less than seventy (70) percent
    based on the most recently available U.S. Census Data." 47 C.F.R. §
    1.2110(f)(3)(i).

[^62]: The "telephone penetration rate," or telephone subscribership
    rate, represents the actual percentage of households that subscribe
    to telephone service. *See* *Telephone Subscribership in the United
    States* (rel. November 2001), available at
    \<[http://www.fcc.gov/Bureaus/
    Common_Carrier/Reports/FCC-State_Link/recent.html](http://www.fcc.gov/Bureaus/Common_Carrier/Reports/FCC-State_Link/recent.html)\>.

[^63]: 5 U.S.C. § 604(a)(3).

[^64]: 5 U.S.C. § 601(6).

[^65]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small business concern" in the Small Business Act, 15 U.S.C. §
    632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a
    small business applies "unless an agency, after consultation with
    the Office of Advocacy of the Small Business Administration and
    after opportunity for public comment, establishes one or more
    definitions of such term which are appropriate to the activities of
    the agency and publishes such definition(s) in the Federal
    Register."

[^66]: 15 U.S.C. § 632.

[^67]: 13 C.F.R. § 121.201, North American Industry Classification
    System (NAICS) code 513322.

[^68]: *Id.*

[^69]: U.S. Department of Commerce, U.S. Census Bureau, 1997 Economic
    Census, Information - Subject Series, Establishment and Firm Size,
    Table 5 -- Employment Size of Firms Subject to Federal Income Tax at
    64, NAICS code 513322 (October 2000).

[^70]: *See Trends in Telephone Service*, Industry Analysis Division,
    Wireline Competition Bureau , Table 5.3 - Number of
    Telecommunications Service Providers that are Small Businesses (May
    2002).

[^71]: *Id.* Data found in *Trends in Telephone Service* is based on
    information filed by service providers on FCC Form 499-A worksheets,
    in combination with employment information obtained from ARMIS and
    Securities and Exchange Commission filings as well as industry
    employment estimates published by the Bureau of Labor Statistics.

[^72]: 13 C.F.R. § 121.201, NAICS code 513322.

[^73]: U.S. Department of Commerce, U.S. Census Bureau, 1997 Economic
    Census, Information - Subject Series, Establishment and Firm Size,
    Table 5 -- Employment Size of Firms Subject to Federal Income Tax at
    64, NAICS code 513322 (October 2000).

[^74]: Amendment of Part 90 of the Commission\'s Rules to Provide for
    the Use of the 220-222 MHz Band by the Private Land Mobile Radio
    Service, PR Docket No. 89-552, *Third Report and Order*, 12 FCC Rcd
    10943, 11068‑70, paras. 291‑295 (1997) (*220 MHz Third Report and
    Order*).

[^75]: *Id.* at para. 291.

[^76]: *Id.*

[^77]: *See* Letter to Daniel Phythyon, Chief, Wireless
    Telecommunications Bureau, Federal Communications Commission, from
    Aida Alvarez, Administrator, Small Business Administration, dated
    January 6, 1998.

[^78]: *See generally* \"220 MHz Service Auction Closes,\" *Public
    Notice*, 14 FCC Rcd 605 (WTB 1998).

[^79]: "FCC Announces It is Prepared to Grant 654 Phase II 220 MHz
    Licenses After Final Payment is Made,\" *Public Notice*, 14 FCC Rcd
    1085 (WTB 1999).

[^80]: "Phase II 220 MHz Service Spectrum Auction Closes," *Public
    Notice*, 14 FCC Rcd 11218 (WTB 1999).

[^81]: *See* Service Rules for the 746-764 MHz Bands, and Revisions to
    Part 27 of the Commission's Rules, WT Docket No. 99-168, *Second
    Report and Order*, 15 FCC Rcd 5299 (2000).

[^82]: *Id.* at para. 133.

[^83]: *Id.*

[^84]: *See generally* "220 MHz Service Auction Closes: Winning Bidders
    In the Auction of 908 Phase II 220 MHz Service Licenses," *Public
    Notice*, DA 98-2143 (rel. October 23, 1998).

[^85]: "700 MHz Guard Bands Auction Closes: Winning Bidders Announced,"
    *Public Notice*, 16 FCC 4590 (WTB 2001).

[^86]: *See* Reallocation and Service Rules for the 698-746 MHz Spectrum
    Band (Television Channels 52-59), GN Docket No. 01-74, *Report and
    Order*, 17 FCC Rcd 1022 (2002).

[^87]: *See* "Lower 700 MHz Band Auction Closes, 17 FCC Rcd 17272
    (2002).

[^88]: Revision of Part 22 and Part 90 of the Commission\'s Rules to
    Facilitate Future Development of Paging Systems, WT Docket No.
    96-18, *Second Report and Order*, 12 FCC Rcd 2732, 2811-2812, paras.
    178-181 (*Paging Second Report and Order*); *see also* Revision of
    Part 22 and Part 90 of the Commission\'s Rules to Facilitate Future
    Development of Paging Systems, WT Docket No. 96-18*, Memorandum
    Opinion and Order on Reconsideration*, 14 FCC Rcd 10030, paras.
    98-107 (1999).

[^89]: *Paging Second Report and Order*, 12 FCC Rcd at 2811, para. 179.

[^90]: *See* Letter to Amy J. Zoslov, Chief, Auctions and Industry
    Analysis Division, Wireless Telecommunications Bureau, from Aida
    Alvarez, Administrator, Small Business Administration, dated
    December 2, 1998.

[^91]: *See generally* "220 MHz Service Auction Closes," *Public
    Notice*, 14 FCC Rcd 605 (WTB 1998).

[^92]: *See Trends in Telephone Service,* Industry Analysis Division,
    Wireline Competition Bureau , Table 5.3 - Number of
    Telecommunications Service Providers that are Small Businesses (May
    2002).

[^93]: *See* Amendment of Parts 20 and 24 of the Commission\'s Rules --
    Broadband PCS Competitive Bidding and the Commercial Mobile Radio
    Service Spectrum Cap, WT Docket No. 96-59, *Report and Order*, 11
    FCC Rcd 7824, paras. 57-60 (1996); *see also* 47 C.F.R. § 24.720(b).

[^94]: *See* Amendment of Parts 20 and 24 of the Commission\'s Rules \--
    Broadband PCS Competitive Bidding and the Commercial Mobile Radio
    Service Spectrum Cap, *Report and Order*, 11 FCC Rcd 7824, para. 60
    (1996).

[^95]: *See* Letter to Amy Zoslov, Chief, Auctions and Industry Analysis
    Division, Wireless Telecommunications Bureau, Federal Communications
    Commission, from A. Alvarez, Small Business Administration, dated
    December 2, 1998.

[^96]: FCC News, *Broadband PCS, D, E and F Block Auction Closes*, No.
    71744 (rel. January 14, 1997).

[^97]: *See* "Wireless Telecommunications Bureau Announces It is
    Prepared to Grant 109 Narrowband PCS Auction Licenses Upon Full And
    Timely Payment," *Public Notice,* 17 FCC Rcd 1559 (WTB 2002).

[^98]: 47 C.F.R. § 90.814(b)(1).

[^99]: *See* Letter to Tom Sugrue, Chief, Wireless Telecommunications
    Bureau, Federal Communications Commission, from Aida Alvarez,
    Administrator, Small Business Administration, dated August 10, 1999.

[^100]: 47 C.F.R. § 90.814(b)(1).

[^101]: 5 U.S.C. § 603 (c).

[^102]: *See Report and Order*, Appendix C.

[^103]: *Id.* para. 9.

[^104]: *Id.* at paras. 10-11.

[^105]: *See* 5 U.S.C. § 801(a)(1)(A).

[^106]: *See* 5 U.S.C. § 604(b).

[^107]: *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).

[^108]: *See* 5 U.S.C. § 603(a).

[^109]: *See* *id.*

[^110]: 47 C.F.R. § 1.2110(f)(3)(vi).

[^111]: 5 U.S.C. § 604(a)(3).

[^112]: 5 U.S.C. § 601(6).

[^113]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small business concern" in the Small Business Act, 15 U.S.C. §
    632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a
    small business applies "unless an agency, after consultation with
    the Office of Advocacy of the Small Business Administration and
    after opportunity for public comment, establishes one or more
    definitions of such term which are appropriate to the activities of
    the agency and publishes such definition(s) in the Federal
    Register."

[^114]: 15 U.S.C. § 632.

[^115]: 13 C.F.R. § 121.201, North American Industry Classification
    System (NAICS) code 513322.

[^116]: *Id.*

[^117]: U.S. Department of Commerce, U.S. Census Bureau, 1997 Economic
    Census, Information - Subject Series, Establishment and Firm Size,
    Table 5 -- Employment Size of Firms Subject to Federal Income Tax at
    64, NAICS code 513322 (October 2000).

[^118]: *See Trends in Telephone Service*, Industry Analysis Division,
    Wireline Competition Bureau , Table 5.3 - Number of
    Telecommunications Service Providers that are Small Businesses (May
    2002).

[^119]: *Id.* Data found in *Trends in Telephone Service* is based on
    information filed by service providers on FCC Form 499-A worksheets,
    in combination with employment information obtained from ARMIS and
    Securities and Exchange Commission filings as well as industry
    employment estimates published by the Bureau of Labor Statistics.

[^120]: 13 C.F.R. § 121.201, NAICS code 513322.

[^121]: U.S. Department of Commerce, U.S. Census Bureau, 1997 Economic
    Census, Information - Subject Series, Establishment and Firm Size,
    Table 5 -- Employment Size of Firms Subject to Federal Income Tax at
    64, NAICS code 513322 (October 2000).

[^122]: Amendment of Part 90 of the Commission\'s Rules to Provide for
    the Use of the 220-222 MHz Band by the Private Land Mobile Radio
    Service, PR Docket No. 89-552, *Third Report and Order*, 12 FCC Rcd
    10943, 11068‑70, paras. 291‑295 (1997) (*220 MHz Third Report and
    Order*).

[^123]: *Id.* at para. 291.

[^124]: *Id.*

[^125]: *See* Letter to Daniel Phythyon, Chief, Wireless
    Telecommunications Bureau, Federal Communications Commission, from
    Aida Alvarez, Administrator, Small Business Administration, dated
    January 6, 1998.

[^126]: *See generally* \"220 MHz Service Auction Closes,\" *Public
    Notice*, 14 FCC Rcd 605 (WTB 1998).

[^127]: "FCC Announces It is Prepared to Grant 654 Phase II 220 MHz
    Licenses After Final Payment is Made,\" *Public Notice*, 14 FCC Rcd
    1085 (WTB 1999).

[^128]: "Phase II 220 MHz Service Spectrum Auction Closes," *Public
    Notice*, 14 FCC Rcd 11218 (WTB 1999).

[^129]: *See* Service Rules for the 746-764 MHz Bands, and Revisions to
    Part 27 of the Commission's Rules, WT Docket No. 99-168, *Second
    Report and Order*, 15 FCC Rcd 5299 (2000).

[^130]: *Id.* at para. 133.

[^131]: *Id.*

[^132]: *See generally* "220 MHz Service Auction Closes: Winning Bidders
    In the Auction of 908 Phase II 220 MHz Service Licenses," *Public
    Notice*, DA 98-2143 (rel. October 23, 1998).

[^133]: "700 MHz Guard Bands Auction Closes: Winning Bidders Announced,"
    *Public Notice*, 16 FCC 4590 (WTB 2001).

[^134]: *See* Reallocation and Service Rules for the 698-746 MHz
    Spectrum Band (Television Channels 52-59), GN Docket No. 01-74,
    *Report and Order*, 17 FCC Rcd 1022 (2002).

[^135]: *See* "Lower 700 MHz Band Auction Closes," 17 FCC Rcd 17272
    (2002).

[^136]: Revision of Part 22 and Part 90 of the Commission\'s Rules to
    Facilitate Future Development of Paging Systems, WT Docket No.
    96-18, *Second Report and Order*, 12 FCC Rcd 2732, 2811-2812, paras.
    178-181 (*Paging Second Report and Order*); *see also* Revision of
    Part 22 and Part 90 of the Commission\'s Rules to Facilitate Future
    Development of Paging Systems, WT Docket No. 96-18*, Memorandum
    Opinion and Order on Reconsideration*, 14 FCC Rcd 10030, paras.
    98-107 (1999).

[^137]: *Paging Second Report and Order*, 12 FCC Rcd at 2811, para. 179.

[^138]: *See* Letter to Amy J. Zoslov, Chief, Auctions and Industry
    Analysis Division, Wireless Telecommunications Bureau, from Aida
    Alvarez, Administrator, Small Business Administration, dated
    December 2, 1998.

[^139]: *See generally* "220 MHz Service Auction Closes," *Public
    Notice*, 14 FCC Rcd 605 (WTB 1998).

[^140]: *See Trends in Telephone Service,* Industry Analysis Division,
    Wireline Competition Bureau , Table 5.3 - Number of
    Telecommunications Service Providers that are Small Businesses (May
    2002).

[^141]: *See* Amendment of Parts 20 and 24 of the Commission\'s Rules --
    Broadband PCS Competitive Bidding and the Commercial Mobile Radio
    Service Spectrum Cap, WT Docket No. 96-59, *Report and Order*, 11
    FCC Rcd 7824, paras. 57-60 (1996); *see also* 47 C.F.R. § 24.720(b).

[^142]: *See* Amendment of Parts 20 and 24 of the Commission\'s Rules
    \-- Broadband PCS Competitive Bidding and the Commercial Mobile
    Radio Service Spectrum Cap, *Report and Order*, 11 FCC Rcd 7824,
    para. 60 (1996).

[^143]: *See* Letter to Amy Zoslov, Chief, Auctions and Industry
    Analysis Division, Wireless Telecommunications Bureau, Federal
    Communications Commission, from A. Alvarez, Small Business
    Administration, dated December 2, 1998.

[^144]: FCC News, *Broadband PCS, D, E and F Block Auction Closes*, No.
    71744 (rel. January 14, 1997).

[^145]: *See* "Wireless Telecommunications Bureau Announces It is
    Prepared to Grant 109 Narrowband PCS Auction Licenses Upon Full And
    Timely Payment," *Public Notice,* 17 FCC Rcd 1559 (WTB 2002).

[^146]: 47 C.F.R. § 90.814(b)(1).

[^147]: *See* Letter to Tom Sugrue, Chief, Wireless Telecommunications
    Bureau, Federal Communications Commission, from Aida Alvarez,
    Administrator, Small Business Administration, dated August 10, 1999.

[^148]: 47 C.F.R. § 90.814(b)(1).

[^149]: 5 U.S.C. § 603 (c).

[^150]: *See Second Further Notice*, paras. 19-23*.*

[^151]: *In the Matter of Extending Wireless Telecommunications Services
    to Tribal Lands*; WT Docket No. 99-266.

[^152]: 47 U.S.C. § 151.

[^153]: 47 U.S.C. §309.