Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of )

)

Rulemaking to Amend Parts 1, 2, 21, and 25 ) CC Docket No. 92-297

of the Commission's Rules to Redesignate )

the 27.5-29.5 GHz Frequency Band, to )

Reallocate the 29.5-30.0 GHz Frequency )

Band, to Establish Rules and Policies for )

Local Multipoint Distribution Service )

and for Fixed Satellite Services )

)

)

Hyperion Communications Long Haul, L.P. )

)

Application for Expedited Review )

Third Report and Order and Memorandum Opinion and Order

**Adopted: June 20, 2000 Released: June 27, 2000**

By the Commission: Commissioner Furchtgott-Roth concurring and issuing a
statement.

**[TABLE OF CONTENTS Para.No]{.underline}**

I. INTRODUCTION 1

II\. BACKGROUND 2

III\. Discussion 6

A. Appropriate Standard 6

B. Application of the 39 GHz Standard 13

1\. Services Provided on LMDS 13

2\. Broadband Competition 17

3\. Benefits of Sunsetting the LMDS Eligibility Restriction 22

IV\. conclusion 34

V. HYPERION\'S WAIVER REQUEST 35

VI\. PROCEDURAL MATTERS 37

A. Paperwork Reduction Act 37

B. Final Regulatory Flexibility Act Analysis 38

C. Authority 39

D. Further Information 40

VI\. ORDERING CLAUSES 41

Appendix A List of Commenters

Appendix B LMDS Launches

Appendix C Rule Changes

Appendix D Final Regulatory Flexibility Analysis

# 1NTRODUCTION

1.  In this Third Report and Order, we complete our review of the Local
    Multipoint Distribution Service (LMDS) eligibility restriction. That
    restriction prohibits incumbent local exchange carriers (LECs) and
    cable companies from having an attributable interest in the LMDS A
    block license that overlaps with ten percent or more of the
    population in their service areas.[^1] As a result of that review,
    we decide to allow the scheduled sunset of that restriction to occur
    as of June 30, 2000. Specifically, we conclude that the standard for
    determining whether to sunset the eligibility restriction should be
    whether open eligibility poses a significant likelihood of
    substantial competitive harm in specific markets, and, if so,
    whether eligibility restrictions are an effective way to address
    that harm.[^2] We conclude that the record does not support a
    conclusion that open eligibility poses such a significant threat of
    substantial competitive harm in specific markets; indeed, open
    eligibility may improve the availability of services, especially in
    rural areas. Accordingly, we allow the restriction to expire. We
    also dismiss as moot the request for waiver of the LMDS eligibility
    restriction filed by Hyperion.

# II. BACKGROUND {#ii.-background .unnumbered}

2.  On March 13, 1997, we allocated 1,300 megahertz of spectrum per
    basic trading area for LMDS.[^3] In the *Second Report and Order* in
    that proceeding, we adopted an eligibility restriction which
    provides that no incumbent LEC or incumbent cable company, nor any
    entity owning an attributable interest in an incumbent LEC or
    incumbent cable company, shall have an attributable interest in an
    LMDS license whose geographic service area significantly overlaps
    such incumbent's authorized or franchised service area.[^4] The
    restriction was subject to an expiration date of June 30, 2000. We
    specifically noted, however, that we would undertake a review of the
    restriction prior to its sunset. Specifically, our rule stipulates
    the restriction shall terminate "unless the Commission extends its
    applicability based on a determination that the incumbent LECs or
    incumbent cable companies continue to have substantial market power
    in the provision of local telephony or cable television
    services."[^5]

3.  In establishing the LMDS eligibility restriction, we considered four
    factors. First, we found that LMDS was a likely vehicle for the
    provision of local telephony, MVPD service, or both. Second, we
    found that the incumbent LECs and incumbent cable companies were
    dominant in their respective markets, would have a strong incentive
    to obtain a LMDS license in order to prevent a new entrant from
    obtaining the license and competing directly in the incumbent's
    current market, and would have no incentive to use the LMDS spectrum
    to offer services that would compete with their own services. Third,
    we determined that a short-term eligibility restriction, with an
    opportunity for review, would be the best means to increase
    competition in the local telephony and MVPD markets, in light of our
    belief that there would be sufficient entry and increases in
    competition to permit sunset within three years. Fourth, we found
    that efficiencies arising from ownership of a LMDS system by an
    incumbent LEC or incumbent cable provider had not been shown.[^6] We
    emphasized that the LMDS spectrum allocation "provided the
    Commission with a rare opportunity to enable the creation of a
    facilities-based provider of local exchange services, MVPD services,
    broadband data services, or all of the above."[^7]

4.  On December 13, 1999, we released the S*ixth Notice* for the purpose
    of inquiring whether the eligibility restriction should be extended.
    In the *Sixth Notice*, we first analyzed the state of competition in
    the local exchange telephone and MVPD markets, concluding that,
    while competition has increased in both of these markets, the
    incumbent LECs and incumbent cable companies continue to hold
    dominant positions.[^8] We sought comment on whether the substantial
    market power test or an alternative standard should be applied in
    determining whether the eligibility restriction should be extended.
    We then sought comment on a variety of other issues, including what
    services are likely to be provided on LMDS; the extent and
    robustness of demand for broadband services; whether the incumbents
    would have an incentive to acquire LMDS spectrum to forestall its
    use by another provider of broadband services; and whether the
    broadband offerings of the incumbents justify the extension of the
    restriction.[^9] Fourteen parties filed comments and eight parties
    filed reply comments in response to the S*ixth Notice*.[^10] Most
    parties urged the Commission to allow the LMDS eligibility
    restriction to sunset, based on the lack of success of the
    restriction in developing competition for local exchange and MVPD
    services, the need for new entrants to fully develop the use of the
    LMDS spectrum, or the need of rural communities for broadband
    services. [^11] However, a few parties claimed that sunset at this
    time would be premature.[^12]

5.  On February 2, 2000, the Wireless Telecommunications Bureau issued
    an Order denying Hyperion's request for a waiver of the divestiture
    provision of the LMDS eligibility restriction.[^13] Hyperion filed
    an application for expedited review of the denial of its request for
    an extension of the divestiture requirement pending the outcome of
    the sunset proceeding in this Docket, together with a request for an
    emergency stay until the Commission acts on the application for
    review.[^14] The Wireless Telecommunications Bureau granted a stay
    until ninety days following Commission action in either the
    eligibility restriction proceeding or on Hyperion's application for
    review, whichever is earlier.[^15]

# III. Discussion {#iii.-discussion .unnumbered}

## A. Appropriate Standard  {#a.-appropriate-standard .unnumbered}

6.  [Background.]{.underline} The *Sixth Notice* requested comment
    generally on what standard should be applied in determining if the
    eligibility restriction should be extended. The *Sixth Notice*
    sought comment on three specific alternative standards: (1) whether
    the incumbent LECs or cable companies continue to have substantial
    market power in the provision of local telephone or cable television
    services, the test that was used in the *Second Report and
    Order*; (2) whether the incumbent companies possess the incentive
    and ability to purchase the LMDS block to prevent entry of a
    competitor; or (3) whether the *39 GHz* standard should be the
    appropriate test, *i.e.,* there is a significant likelihood of
    substantial competitive harm in specific markets, and, if so,
    eligibility restrictions are an effective way to address that
    harm.[^16] While most commenters supported the sunset of the LMDS
    restriction, not all commented on the appropriate standard. Nearly
    all of those who did so urged that the Commission adopt the *39 GHz*
    standard,[^17] or at least reject the "substantial market power"
    standard.[^18]

7.  [Discussion]{.underline}. We adopt the *39 GHz* test as the
    appropriate standard to use in making this determination. We find
    that the *39 GHz* test is a better test for addressing the key
    issues to be determined, *i.e.,* whether, despite the substantial
    market power of incumbents in the local exchange telephone and cable
    markets, restrictions on eligibility to use LMDS spectrum are an
    effective way to induce competitive entry in those markets, and
    whether the incumbents are likely to cause substantial competitive
    harm in the markets where LMDS technology is likely to be used. For
    the reasons discussed below, we find that the test of substantial
    market power in the local exchange and MVPD markets is not the
    appropriate standard to use in determining whether the eligibility
    restriction should be allowed to sunset.[^19]

8.  We find that the *39 GHz* test is the appropriate standard to apply
    in determining whether the LMDS eligibility restriction should
    sunset. We concur with Hyperion, RTG, NTCA, CTTC and NCTA[^20] that
    the 39 GHz test is consistent with the 1996 Act's[^21] mandate to
    stimulate competition in telecommunications markets with a minimum
    of regulatory interference. A core objective of the 1996 Act was to
    establish "a pro-competitive de-regulatory national policy framework
    designed to accelerate rapidly private sector deployment of advanced
    telecommunications and information technologies and services to all
    Americans by opening all telecommunications markets to
    competition."[^22] The standard demands that this regulatory
    restriction be imposed on LMDS only when there is a significant
    likelihood of substantial harm to competition in specific markets
    and when the restriction will be effective in eliminating that
    harm.[^23]

9.  Specifically, the *39 GHz* test is a more discerning standard than
    the substantial market power standard. The *39 GHz* test entails
    examining other relevant market facts and circumstances: economic
    incentives, entry barriers, and potential competition. The *39 GHz*
    standard will allow the Commission to focus on the issues it needs
    to decide---whether the incumbents are likely to use their market
    power to cause substantial competitive harm by preventing the use of
    LMDS spectrum for services that would otherwise be provided by LMDS
    licensees, such as broadband, and whether the restrictions will
    prevent such actions---rather than on whether the incumbents have
    market power in markets that LMDS licensees appear not to be
    entering.[^24]

10. We disagree with the comments of MCI Worldcom and Gateway who urge
    that we should use the substantial market power test to decide
    whether the eligibility restriction should sunset.[^25] As we found
    in the *Sixth Notice*, commenters who support retaining the
    eligibility restriction assert that incumbent LECs and cable
    companies remain dominant in their respective markets.[^26] These
    commenters argue that as of 1999 incumbent LECs held a 93% national
    market share and incumbent cable companies held a 82.45% market
    share, while competing carriers had made only modest competitive
    inroads.[^27] As further evidence of ongoing ILEC dominance, MCI
    Worldcom points to the rejection of five Bell operating company
    section 271 applications prior to Bell Atlantic's application being
    granted on December 22, 1999.[^28]

11. We agree, however, with the majority of commenters that we need to
    consider more in deciding whether to sunset the restriction than
    whether the incumbent LECs and incumbent cable companies possess
    substantial market power in the local exchange and cable
    markets.[^29] Moreover, unlike the *39 GHz* test discussed above,
    the substantial market power standard does not fully take into
    account market complexities and evolution. The substantial market
    power test does not consider whether incumbents are likely to use
    their market power to cause substantial competitive harm in the
    markets which LMDS licensees would otherwise enter, and whether the
    restriction will prevent such actions.

12. In sum, we find that the *39 GHz* test is the appropriate standard
    to apply in determining whether the LMDS restriction should sunset.
    The *39 GHz* test is the most informed standard. It not only
    considers the broadest set of market facts and circumstances, but it
    also includes analyses of incumbents' market power and incumbents'
    incentive and ability to preclude competition by LMDS licensees.

## B. Application of the 39 GHz Standard {#b.-application-of-the-39-ghz-standard .unnumbered}

### 1. Services Provided on LMDS {#services-provided-on-lmds .unnumbered}

13. [Background]{.underline}. The S*ixth Notice* sought comment on a
    number of issues that would aid the Commission in determining
    whether the LMDS eligibility restriction should be extended. These
    issues included what services are likely to be provided on LMDS
    systems.[^30] Most of the parties who addressed this issue contend
    that the LMDS licensees provide or are expected to provide broadband
    services, instead of local telephone or cable services.[^31]

14. [Discussion]{.underline}. We agree with commenters that the LMDS A
    block is not being used primarily to provide local exchange or MVPD
    services. LMDS spectrum has been used primarily for broadband data
    services.[^32] Most deployments use LMDS for broadband service or
    some bundle containing broadband service to the narrower business
    market. [^33] NextLink, the largest holder of LMDS licenses, is
    deploying LMDS as part of its strategy to expedite buildout of
    broadband service to businesses.[^34] Prime Companies' subsidiary,
    LMDS Communications, is field-testing LMDS for small- and
    medium-size business access.[^35] As Hyperion states, virtually all
    LMDS spectrum is licensed to entities with data and related
    telecommunications objectives, rather than to entities with local
    exchange telephone or cable service objectives.[^36]

15. The substantial market power test reflected the assumption that it
    would maximize the opportunity for new facilities-based providers to
    offer competitive local exchange services and MVPD services.[^37] In
    fact, the LMDS A block is not being used to provide services which
    are primarily local exchange or MVPD.[^38] We do not believe we
    should continue the LMDS restriction based on possible competitive
    effects in markets that LMDS licensees are not entering.

16. Thus, contrary to our original expectations, experience has
    demonstrated that the LMDS restriction has not resulted in
    non-incumbents making competitive incursions into local exchange and
    MVPD services.[^39] Based on the above circumstances, we conclude
    that it is unlikely that the possible use of LMDS spectrum by
    incumbents will result in the blocking of entry into those services.

### 2. Broadband Competition {#broadband-competition .unnumbered}

17. [Background]{.underline}. The *Sixth Notice* also sought comment
    on (1) the extent and robustness of demand for broadband
    services; (2) whether the incumbents would have an incentive to
    acquire LMDS spectrum to forestall its use by another provider of
    broadband services; and (3) whether the broadband offerings of the
    incumbents justify the extension of the restriction. Commenters
    generally contend that the broadband market is robust and
    competitive, and that incumbent cable companies and incumbent LECs
    could not use LMDS spectrum to dominate the broadband market.[^40]

18. [Discussion]{.underline}. An increasing number of broadband firms
    and technologies are providing growing competition to incumbent LECs
    and incumbent cable companies, apparently limiting the threat that
    they will be able to preclude competition in the provision of
    broadband services. Both competitive LECs and incumbent LECs are
    expanding their use of DSL service, cable modem providers are
    providing substantial competition to DSL offerings, and satellite
    companies are offering one-way nationwide broadband service.[^41]
    Moreover, emerging broadband providers are likely to furnish even
    more choices.[^42] High speed Internet access is being offered by
    major companies such as Sprint and AT&T, which are offering such
    services on a trial basis.[^43] Satellite broadband services are
    being offered by a variety of companies, and fixed wireless
    companies are using LMDS, 39 GHz and 24 GHz spectrum to provide
    broadband services.[^44] Further, MCI and Sprint have acquired MMDS
    licenses to transmit broadband, and other companies are providing
    broadband through the use of unlicensed spectrum.[^45]

19. The record before us, which shows a continuing increase in consumer
    broadband choices within and among the various delivery
    technologies---xDSL, cable modems, satellite, fixed wireless, and
    mobile wireless, suggests that no group of firms or technology will
    likely be able to dominate the provision of broadband services.[^46]
    Moreover, we are inclined to intervene only if there is market
    failure or anti-competitive conduct, and the record does not show
    that either of these factors exist with respect to LMDS.

20. Price reductions on xDSL and cable modem services, particularly in
    highly competitive local markets like San Francisco, support the
    growth of competition in these local markets. SBC initially priced
    its DSL service, inaugurated in California, at \$89 per month with
    \$299 of additional equipment costs.[^47] After AT&T dropped its Bay
    Area price of <Excite@Home> cable modem service to \$30 per month
    with modem purchase, SBC's Pacific Bell responded with a
    limited-time DSL promotional price of \$39.95 per month with free
    modem.[^48] Other instances of price competition include Covad
    reducing the price of its monthly service to as low as \$40 per
    month.[^49] Additionally, free DSL service offerings have commenced
    in Spring 2000. Beginning in April 2000, Broadband Digital Group has
    provided free DSL service to subscribers willing to accept
    advertising via FreeDSL's "browser assistant" always-on top
    bar.[^50] To date over 400,000 have signed up to receive Broadband
    Digital Group's FreeDSL.[^51] Smart World Technologies announced it
    will offer its own free DSL service, freexDSL, over Smart World's
    own network, which covers 95 percent of the U.S.[^52] The prices of
    the new technologies coming on line are already lower than the
    prices of some existing broadband technologies. MCI Worldcom has
    priced its trial Warp310 residential MMDS broadband service offering
    at \$39.95 per month.[^53] AT&T has announced a monthly \$34.95
    starting price for its 1.9 GHz residential broadband service.[^54]

21. The arguments of commenters that fixed broadband-suitable spectrum
    is difficult to monopolize to forestall competing broadband entry
    are also persuasive in the current marketplace. As RTG contends, to
    control all fixed broadband capable wireless spectrum, a firm would
    have to acquire nearly 3,700 MHz: 36 MHz UHF; 400 MHz at 24 GHz;
    1,300 MHz at LMDS; 1,400 MHz at 39 GHz; 186 MHz MMDS; and the 202
    MHz proposed in the Commission's *Spectrum Policy Statement*.[^55]
    This total is perhaps an underestimate as it excludes satellite
    frequencies, the Industrial Scientific and Medical (ISM) bands, and
    the Unlicensed National Information Infrastructure (U-NII). We
    conclude that foreclosing broadband competition via all of these
    avenues under these market conditions is fairly remote and does not
    pose a significant likelihood of substantial competitive harm. As
    commenters point out, even if the regulatory authorities were to
    permit all of the required license acquisitions, the purchases would
    prove prohibitively expensive.[^56] Under these circumstances, we
    find that the concerns expressed in the *Sixth Notice* that the
    incumbent LECs or incumbent cable companies have the incentive to
    warehouse LMDS licenses in order to protect their control of these
    markets from competition are not supported by the record.[^57]
    Moreover, LMDS licensees are subject to specific construction
    requirements, requiring them to make a showing of substantial
    service in their license area within ten years of being
    licensed.[^58] Failure to meet the requirement will result in the
    forfeiture of the license and the licensee will be unable to regain
    it. Nonetheless, we will not hesitate to act aggressively to
    eliminate warehousing of the spectrum if such activity comes to our
    attention.[^59]

### 3. Benefits of Sunsetting the LMDS Eligibility Restriction  {#benefits-of-sunsetting-the-lmds-eligibility-restriction .unnumbered}

22. The *Sixth Notice* sought comment on a number of other issues which
    would help the Commission decide whether the eligibility restriction
    should be extended. These included: (1) whether the net benefits of
    extending the restriction are greater than the net benefits of
    eliminating it; (2) the effect of cost and line-of-sight limitations
    of LMDS; (3) whether other services are substitutable for LMDS; (4)
    whether the restriction should be extended to allow the market more
    time to reveal how LMDS and competing media will be deployed;
    and (5) how the the extension will affect LMDS licensees' access to
    capital.[^60] Most commenters contend that the benefits of allowing
    the restriction to sunset outweigh any detriments, recognize that
    cost and line-of-sight limitations would restrict the ability of
    LMDS licensees to implement service, argue that various services
    were substitutable for LMDS, and contend that only by removing the
    restriction would LMDS licensees be able to have adequate access to
    capital.[^61] Most commenters contend that the LMDS eligibility
    restrictions should be allowed to sunset because LMDS services have
    been and will continue to be provided in the competitive broadband
    market, that the entry of incumbent LECs will help develop the LMDS
    broadband market, that the restriction has not helped the LMDS
    licensees to penetrate the local telephone or cable markets, and
    that the broadband markets are so competitive that they are unlikely
    to be dominated by the incumbent LECs or incumbent cable
    operators.[^62] On the other hand, MCI argues that terminating the
    restriction now would be premature.[^63]

23. [Discussion]{.underline}. We find that the benefits of allowing the
    eligibility restriction to expire outweigh any benefits of extending
    it. As shown above, the restriction has not resulted in LMDS entry
    into the local telephone or MVPD markets. Moreover, the competitive
    nature of the broadband market supports allowing the eligibility
    restriction to sunset. Thus, the number of consumer broadband
    options within the various broadband technologies, including DSL,
    cable modems, satellite, and fixed wireless, together with the
    active price competition and price reductions in that market,
    convinces us that the incumbent carriers will not be able to use
    LMDS spectrum to dominate the market.[^64] Consequently, under the
    *39 GHz* test, we conclude that there is no significant likelihood
    that open eligibility will enable these companies to cause
    substantial competitive harm in any market, or that the eligibility
    restriction has been or will be an effective way to address any such
    harm to competition. Moreover, as explained in more detail below,
    removal of the eligibility restriction will result in consistent
    treatment of wireless services and may well result in access to
    capital resources to more fully develop LMDS. In addition, it may
    speed the availability of broadband services to rural areas.

24. We reject MCI's contention that it is premature to terminate the
    restriction because the first LMDS products are just becoming
    available in the United States due to delays caused by the lack of
    roof-top access, lack of equipment, and line-of-sight issues.[^65]
    We are considering roof-top access issues in the *Competitive
    Networks* proceeding.[^66] While our action in the *Competitive
    Networks* proceeding may enable the LMDS providers to gain roof-top
    access, they have other significant obstacles, including equipment,
    line-of-sight limitations, and costs that may impact their ability
    to successfully compete in the local exchange and residential cable
    markets, as well as in the broadband market.[^67] Some of these
    obstacles may be overcome by the sunsetting of the restriction.
    Thus, LMDS equipment is available, but the equipment necessary to
    overcome line-of-sight and other obstacles is expensive, and
    requires large infusions of capital.[^68] The market research firm
    Analysys contends, "Because the price of consumer terminals is high,
    LMDS will not be used to connect individual small business or
    residential users in the near future, although it can be used to
    serve clusters of users, for example in office buildings."[^69]
    Frost & Sullivan's *World LMDS Equipment and Service Markets* report
    found that "project financing is among the most important issues
    affecting the growth of the industry."[^70] The LMDS carrier pool is
    dominated by new entities with little telecommunications experience
    whom investors may be hesitant to back in head-to-head competition
    with incumbents.[^71] We conclude that allowing sunset of the
    eligibility restriction may speed LMDS deployment for all firms,
    including small and rural carrier LMDS carriers, who may be able to
    partner with larger firms.

25. As stated above, the available evidence confirms commenters'
    assertions that LMDS, MMDS, 24 GHz, 39 GHz, and other fixed wireless
    media are extremely competitive with one another.[^72] All of these
    spectrum bands are presently being deployed to provide broadband or
    bundled broadband services to some market segment, particularly to
    business subscribers. The number of competing alternatives suggests
    permitting the LMDS eligibility restriction to sunset will not
    significantly diminish competition among fixed wireless providers,
    and will allow LMDS to more fairly compete with other substitutable
    services.

26. Moreover, we find no reason here to treat LMDS differently from
    other substitutable spectrum. First, we are persuaded by commenters'
    arguments that LMDS is not unique for broadband service provision.
    We agree with RTG's assertion that LMDS is neither a "specific"
    service nor a specific technology.[^73] RTG further points out that
    LMDS is merely four bands of high frequency spectrum that, in
    theory, can be used to provide, or to assist in the provision of
    consumer services such as video, voice, data, and broadband
    telecommunications services generally as well as backbone facilities
    and wireless fiber. Other technologies can span the last mile to
    deliver broadband telecommunications services.[^74] Satellites,
    cable modems, xDSL, MMDS spectrum, and optical lasers are other
    technologies deploying or being market tested to deploy broadband or
    bundled broadband services.[^75] The evidence demonstrates that
    LMDS, MMDS, 24 GHz, 39 GHz, and other fixed wireless services are
    virtually indistinguishable not only to consumers, but also in their
    capability to provide services.[^76]

27. Second, there is no particular advantage conferred by the large size
    of the LMDS A block. A licensee in another spectrum band can
    aggregate fixed wireless spectrum in excess of 1,150 MHz, the size
    of the LMDS A block. For example, acquiring all of the 39 GHz
    licenses in a given geographic area would leave one firm with 1,400
    MHz of spectrum.[^77] Although advantageous, a large block of
    spectrum may not be essential: a licensee can offer competitive
    local exchange or broadband services with much less spectrum.[^78]
    MCI WorldCom, Sprint, and other MMDS licensees with 200 MHz of
    spectrum may have an approximately equal amount of effective
    bandwidth as LMDS licensees with more than 1,000 MHz because the
    MMDS lower frequencies support higher modulation levels, hence
    greater bits per hertz.[^79] LMDS has disadvantages compared with
    other technologies. Because LMDS has a smaller transmission radius
    than MMDS, LMDS requires more transmission towers to cover a given
    area, increasing LMDS deployment cost.[^80] An elevated MMDS
    transmission tower can cover a 35-mile radius,[^81] while an LMDS
    transmitter has a broadcast radius of just over 24 miles.[^82]
    Moreover, LMDS requires cellularization to limit rain
    attenuation,[^83] and the cells are small---five kilometers (3
    miles) or less in radius.[^84] LMDS is no longer unencumbered. All
    LMDS licenses have been auctioned, meaning incumbents now occupy the
    spectrum.

28. We conclude that allowing the eligibility restriction to sunset also
    will remove possible impediments to small and rural carrier LMDS
    deployment. Rural commenters allege the LMDS in-region eligibility
    restriction imposes several disadvantages on small, rural
    telecommunications carriers.[^85] First, the restriction prevents
    the formation of alliances, partnerships, and joint ventures that
    may facilitate LMDS deployment. Second, the eligibility restriction
    limits access to capital. Third, the eligibility restriction
    frustrates leveraging existing network infrastructure to achieve
    minimum cost.

29. Although we have always recognized the need to ensure that rural
    markets were served adequately, we initially imposed the restriction
    on rural markets because we believed that it could stimulate
    competition to local exchange carriers in these markets. However, in
    view of the fact that this has not occurred, the benefits of LMDS
    for rural markets furnish another reason to terminate the
    restriction. We find that, because of longer copper loops, rural
    areas may be less able to receive DSL, and therefore may be more
    reliant on wireless technologies like LMDS. Forty percent to fifty
    percent of local lines in the National Exchange Carrier Association
    pools exceed three miles,[^86] at or beyond DSL's practical limit of
    3.4 miles, which can be shortened by the age and condition of the
    copper lines and the type of DSL used.[^87] Facilitating the
    availability of alternative broadband technologies, like LMDS, takes
    on added urgency for rural customers unable to receive DSL.

30. Additionally, LMDS equipment vendors may be reluctant to provide
    reasonably priced equipment until LMDS carriers can deliver a
    critical mass of subscribers.[^88] The LMDS eligibility restriction
    frustrates the formation of coalitions by excluding incumbent local
    exchange telephone and incumbent cable television companies whose
    service areas overlap the LMDS market area.[^89] The pool of
    eligible partners is made smaller in rural areas where there is
    already a scarcity of telecommunications firms.

31. The promise of LMDS may be uneconomically slowed by prohibiting
    incumbent LECs and incumbent cable operators from holding this
    spectrum and bringing their financial and technical resources to
    bear on deployment of LMDS spectrum.[^90] Given its high equipment
    cost and line-of-sight and rain-fade limitations, LMDS should be
    deployed where topography and structural design facilitate signal
    transmission.[^91] The eligibility restriction precludes incumbent
    local exchange and cable operators from using LMDS to extend their
    geographic coverage to areas where LMDS would be ideal, and
    transmission by cable or wire might be prohibitively expensive.[^92]
    Incumbents so precluded may either fail to launch service in certain
    areas or do so at greater than optimal cost. One consequence is that
    prompt and efficient utilization of advanced technologies may be
    inhibited.[^93] Another consequence is that small and rural carriers
    are less able to enhance service offerings to respond competitively
    to emerging wireless broadband service offerings priced and packaged
    to compete directly with local exchange carrier service.[^94]

32. From the consumers' perspective, small and rural subscribers who
    would get video, voice, or broadband service absent the eligibility
    restriction might fail to receive these services or may get them
    from fewer firms with the restriction. Allowing the sunset to
    expedite service deployment is consistent with section 706 of the
    1996 Telecommunications Act, which calls upon the FCC to encourage
    the deployment of advanced services in rural areas.[^95]

33. The inability to obtain LMDS A-block spectrum may also impede some
    competitive LECs in whom cable incumbents have attributable
    interests. Other competing local exchange carriers not subject to
    the LMDS eligibility restriction can use an optimum mix of wired and
    wireless facilities---among them LMDS---to travel the last mile to
    subscribers.[^96] Both the incumbents and the other competitive LECs
    enjoy a cost advantage that might impair the viability or dissuade
    the entry of a competitive LEC constrained by the eligibility
    restriction. The possible reduction in the number of competing firms
    is also at odds with the 1996 Act's broader mandate to the
    Commission to increase competition in telecommunications market. The
    additional competition that these competitive LECs will be able to
    provide, on the other hand, is likely to improve services and reduce
    rates for consumers, which is consistent with the Act's
    purposes.[^97]

# iv. conclusion {#iv.-conclusion .unnumbered}

34. We conclude that the LMDS eligibility restriction should be allowed
    to sunset because open eligibility (1) will not pose a significant
    likelihood of substantial competitive harm in any market; (2) is
    likely to provide access to additional capital to fully develop
    LMDS; (3) will treat LMDS similarly to substitutable spectrum;
    and (4) should help make services more available in rural areas.

# v. hyperion's waiver request {#v.-hyperions-waiver-request .unnumbered}

35. Hyperion filed a request for a waiver of the divestiture provision
    of the LMDS eligibility restriction.[^98] Hyperion sought the waiver
    so that it would not be required to divest of an overlap in service
    areas created when its parent, Adelphia Communications Corp.,
    acquired two incumbent cable companies with franchise areas
    significantly overlapping two of Hyperion's LMDS service areas. Upon
    denial of its request, Hyperion then filed an application for
    expedited review of the denial of its request for an extension of
    the divestiture requirement, pending the outcome of the sunset
    proceeding in this Docket; Hyperion also requested an emergency stay
    until the Commission acts on the application for review.[^99] The
    Wireless Telecommunications Bureau granted a stay until ninety days
    following Commission action in either the eligibility restriction
    proceeding or on Hyperion's application for review, whichever is
    earlier.[^100]

36. Our action allowing the LMDS eligibility restriction to sunset
    terminates the requirement that Hyperion divest itself of an overlap
    in service areas. Hyperion will not be required to divest of the
    overlapping interest. Accordingly, we find that the Hyperion request
    for a waiver of the LMDS eligibility restriction is moot and dismiss
    it for that reason.

# Vi. PROCEDURAL MATTERS {#vi.-procedural-matters .unnumbered}

## Paperwork Reduction Act

37. The Third Report and Order contained herein has been analyzed with
    respect to the Paperwork Reduction Act of 1995, Pub. L. 104-13, and
    contains no new or modified information collections subject to
    Office of Management and Budget review.

## Final Regulatory Flexibility Act Analysis

38. As required by Section 603 of the Regulatory Flexibility Act, the
    Commission has prepared a Final Regulatory Flexibility Analysis of
    the expected impact on small entities of the changes adopted in

39. this Third Report and Order. The analysis is set forth in Appendix
    F.

## Authority

40. This action is taken pursuant to sections 1, 2, 4, 7, 303(r), 314
    and 332 of the Communications Act of 1934, as amended, 47 U.S.C. §§
    151, 152, 154, 303(r), 314 and 332 of the Communications Act of
    1934, as amended.

## Further Information

41. For further information regarding this Order, contact Stacey Jordan
    or Peter Wolfe, Wireless Telecommunications Bureau, Policy Division,
    at (202) 418-1310.

# VI. ORDERING CLAUSES {#vi.-ordering-clauses .unnumbered}

42. Accordingly, IT IS ORDERED, that 47 C.F.R. §101.1003 is eliminated,
    as set forth in Appendix E. This modification shall become effective
    on June 30, 2000.[^101]

43. IT IS FURTHER ORDERED that the application for expedited review
    filed by Hyperion Communications Long Haul, L.P. is dismissed as
    moot.

44. IT IS FURTHER ORDERED that The Commission\'s Office of Public
    Affairs, Reference Operations Division SHALL SEND a copy of this
    Third Report and Order and Memorandum Opinion and Order, including
    the Final Regulatory Flexibility Analysis, to the Chief Counsel for
    Advocacy of the Small Business Administration.

> FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

**APPEDIX A**

**List of Commenters**

**Comments:**

Central Texas Telephone Cooperative (CTTC)

Gateway Telecom, LLC (Gateway)

Hyperion Communications Long Haul, L.P. (Hyperion)

The Independent Alliance (Independent)

MCI WorldCom, Inc. (MCI)

National Cable Television Association (NCTA)

National Telephone Cooperative Association (NTCA)

Organization for the Promotion and Advancement of Small Telephone
Companies (OPASTCO)

Personal Communications Industry Association (PCIA)

Rural Telecom Group (RTG)

Sully Buttes Telephone Cooperative, Inc. and Golden West
Telecommunications

Cooperative, Inc. (Sully Buttes)

Teligent, Inc. (Teligent)

United States Telecom Association (USTA)

U S West, Inc.(US West)

**Reply Comments:**

Competition Policy Institute (CPI)

Horry Telephone Cooperative, Inc. (Horry)

Independent Alliance

NCTA

Nextlink

Sully Buttes

Teligent

USTA

**APPENDIX B**

#### LMDS Launches[^102] {#lmds-launches .unnumbered}

+-----------------+-----------------+-----------------+-----------------+
| # Carrier       | # S             | # E             | #               |
|                 | ervice Location | quipment Vendor | Type of Service |
+-----------------+-----------------+-----------------+-----------------+
| NextLink        | Dallas, Los     | Ericsson        | Launched        |
|                 | Angeles         | (Mini-Link      | commercial      |
|                 |                 | Broad Access    | service after   |
|                 |                 | system),        | field tests     |
|                 |                 | SpectraPoint    |                 |
|                 |                 | Wireless,       |                 |
|                 |                 | Wavetrace,      |                 |
|                 |                 | Digital         |                 |
|                 |                 | Microwave       |                 |
+-----------------+-----------------+-----------------+-----------------+
| Winstar         | Holds 9 LMDS    | Wavetrace       | LMDS service    |
|                 | A-block         |                 | rollout         |
|                 | licenses,       |                 | scheduled for   |
|                 | including the   |                 | 2000.           |
|                 | San             |                 |                 |
|                 | Fr              |                 |                 |
|                 | ancisco-Oakland |                 |                 |
|                 | BTA             |                 |                 |
+-----------------+-----------------+-----------------+-----------------+
| South Central   | Medicine Lodge, | Newbridge       | Telemedicine,   |
| Telecom         | KS              | Networks        | distance        |
|                 |                 |                 | learning, and   |
|                 |                 |                 | leased line     |
|                 |                 |                 | services        |
+-----------------+-----------------+-----------------+-----------------+
| Formus          | Denver          | Wavetrace       | Testing LMDS    |
| Communications  |                 |                 | equipment for   |
|                 |                 |                 | deployment in   |
|                 |                 |                 | Europe, Latin   |
|                 |                 |                 | America, New    |
|                 |                 |                 | Zealand         |
+-----------------+-----------------+-----------------+-----------------+
| Virginia Tech   | Blacksburg,VA   | Wavetrace       | Acquired 4 LMDS |
| University      |                 |                 | licenses at     |
|                 |                 |                 | auction. Use    |
|                 |                 |                 | LMDS to provide |
|                 |                 |                 | two-way         |
|                 |                 |                 | high-speed      |
|                 |                 |                 | data,voice, and |
|                 |                 |                 | video from an   |
|                 |                 |                 | on-campus to    |
|                 |                 |                 | three           |
|                 |                 |                 | off-campus      |
|                 |                 |                 | office          |
|                 |                 |                 | buildings       |
+-----------------+-----------------+-----------------+-----------------+
| Touch America   | Billings,       | Nortel Networks | Full voice and  |
| (telecom        | Butte, MT       |                 | data service to |
| subsidiary of   |                 |                 | business and    |
| Montana Power)  |                 |                 | government      |
+-----------------+-----------------+-----------------+-----------------+
| SpeedUS.com     | New York metro  | SpeedUS.com     | F               |
| (formerly       |                 | developed its   | acilities-based |
| CellularVision) |                 | LMDS network    | high-speed      |
|                 |                 | from            | Internet        |
|                 |                 | C               | service         |
|                 |                 | ellularVision's |                 |
|                 |                 | patented        |                 |
|                 |                 | technology      |                 |
+-----------------+-----------------+-----------------+-----------------+
| Central Texas   | San Angelo,     | Newbridge       | LMDS system is  |
| Communications  | Brownwood,      | Networks        | functioning,    |
|                 | Goldthwaite, TX |                 | but has no      |
|                 |                 |                 | customers.      |
|                 |                 |                 | Scheduled to    |
|                 |                 |                 | launch service  |
|                 |                 |                 | by year-end     |
|                 |                 |                 | 2000            |
+-----------------+-----------------+-----------------+-----------------+
| PVT Networks,   | Artesia, N.M.   |                 | Testing LMDS.   |
| subsidiary of   |                 |                 | Scheduled to    |
| Penasco Valley  |                 |                 | launch          |
| Telephone       |                 |                 | commercial      |
|                 |                 |                 | service by end  |
|                 |                 |                 | of second       |
|                 |                 |                 | quarter 2000    |
+-----------------+-----------------+-----------------+-----------------+
| US Unwired      | Lake Charles,   | SpectraPoint    | LMDS voice and  |
|                 | LA              | Wireless        | data trials     |
+-----------------+-----------------+-----------------+-----------------+
| Liberty         | Salinas, KS     |                 | Trial service   |
| Cellular        |                 |                 | started in      |
|                 |                 |                 | mid-1999.       |
+-----------------+-----------------+-----------------+-----------------+
| Home Telephone, | Charleston, SC  | Newbridge       | LMDS trials     |
| Inc.            |                 | Networks        |                 |
+-----------------+-----------------+-----------------+-----------------+
| HighSpeed.Com   | Walla Walla, WA | Spectrapoint    | CLEC voice and  |
|                 |                 | Wireless        | data            |
+-----------------+-----------------+-----------------+-----------------+
| Prime           | New Castle, PA  | Alcatel USA     | Market test     |
+-----------------+-----------------+-----------------+-----------------+
| Frazier/King    | Irving, TX      | Spectrapoint    | LMDS            |
| Media           |                 | Wireless        | demonstration   |
|                 |                 |                 | to deliver      |
|                 |                 |                 | voice, data,    |
|                 |                 |                 | and video       |
|                 |                 |                 | services to     |
|                 |                 |                 | residences and  |
|                 |                 |                 | businesses      |
+-----------------+-----------------+-----------------+-----------------+

**APPENDIX C**

**Rule Change**

Title 47, Part 101 of the Code of Federal Regulations is amended to read
as follows:

1\. The authority citation for Part 101 continues to read as follows:

Authority: 47 U.S.C. 154, 303

2\. Section 101.1003 is removed.

**APPENDIX D**

**FINAL REGULATORY FLEXIBILITY ANALYSIS (FRFA)**

45. In order to ensure compliance with the requirements contained in the
    Regulatory Flexibility Act (RFA),[^103] and to alert all affected
    entities of the repercussions of the Commission's action an Initial
    Regulatory Flexibility Analysis (IRFA) was incorporated in Appendix
    B of the Sixth Notice of Proposed Rulemaking (Sixth NPRM) in this
    proceeding. Additionally, a Final Regulatory Flexibility Analysis
    was included in Appendix D of the Second Report and Order (Second
    R&O) in this proceeding.[^104] The Commission sought written public
    comment on the proposals in Fifth NPRM, including comment on the
    IRFA. The comments received in response to the IRFA and the Final
    Regulatory Flexibility Analysis contained in the Second R&O are
    discussed below. The present Final Regulatory Flexibility Analysis
    (FRFA), contained in the Third Report and Order and Memorandum
    Opinion and Order (Third R&O), conforms to the RFA.[^105]

# Need for, and Objectives of, the Third R&O  {#need-for-and-objectives-of-the-third-ro .unnumbered}

46. The Commission allows to sunset the Local Multipoint Distribution
    Service (LMDS) eligibility restriction which prohibits incumbent
    local exchange carriers (ILECs) and cable companies from having an
    attributable interest in the LMDS A-block license that overlaps with
    ten percent or more of the population in their service areas. This
    restriction was initially imposed because of concern the ILECs and
    the cable companies would use LMDS spectrum to eliminate the threat
    of competitive entry in the local exchange telephone and cable
    markets, in which they are dominant. The Third R&O finds that the
    LMDS A-block eligibility restriction is no longer necessary to
    protect LMDS as a source of competition with ILECs and incumbent
    cable companies, and that the benefits of removing the restriction
    outweigh any benefits of the restriction.

    **SUMMARY OF SIGNIFICANT ISSUES RAISED BY PUBLIC COMMENTS IN
    RESPONSE TO THE IRFA OR THE FRFA**

47. The central issue in this proceeding is the continued need for the
    eligibility restriction. The restriction was adopted subject to an
    expiration date of June 30, 2000. The expiration date, like the
    other issues in this proceeding, was the result of notice and
    comment procedures.[^106] The Commission adopted the expiration date
    to allow time for a review of the continued effectiveness and need
    for an eligibility restriction to ensure that our rules remain
    current with constantly changing technological developments and
    market trends. Also, as described below, the Sixth NPRM sought
    comment on several topics critical to the Commission's determination
    of the continued relevance of the eligibility rule. The Commission
    received fourteen comments and eight reply comments in response to
    the Sixth NPRM. No comments were received directly regarding the
    IRFA or the FRFA contained in the Second R&O.

48. First, the Sixth NPRM sought comment on whether the standard for
    determining whether the restriction is extended should be that the
    incumbent LECs or cable companies continue to have substantial
    market power in the provision of local telephone or cable television
    services, or if a different standard should be used. As discussed in
    paragraphs 6-7 of the Third R&O, the Sixth NPRM also suggested two
    alternative standards. Although most of the commenters support
    allowing the eligibility rule to sunset, those who comment on the
    standard are somewhat divided.

49. Several commenters argue in favor of using the market dominance
    standard to decide whether the eligibility should sunset. These
    commenters maintain that ILECS and cable companies remain dominant
    in their respective markets. Those who support continuing the LMDS
    eligibility restriction offer data which appears to reinforce their
    arguments regarding market dominance and point to the rejection of
    five Bell Company section 271 applications prior to Bell Atlantic's
    application being granted on December 22, 1999.

50. The Commission agrees with the majority of parties who comment on
    the standard issue, and either urge the Commission to adopt the *39
    GHz* standard or at least to reject the "substantial market power"
    standard. Therefore, the Commission adopts the *39 GH* standard,
    *i.e.,* there is a significant likelihood of substantial competitive
    harm in specific markets, and, if so, eligibility restrictions are
    an effective way to address that harm. In paragraphs 8-9 of the
    Third R&O, the Commission details the rationale for selecting the 39
    GHz test as the appropriate standard to apply in determining whether
    the LMDS restriction should sunset.

51. Second, the Sixth NPRM sought comment on a number of issues that
    would aid the Commission in determining whether the LMDS eligibility
    restriction should be extended. For example, the Sixth NPRM asked
    what services are likely to be provided on LMDS. The Commission
    agrees with the majority of commenters on this issue who contend
    that the LMDS A block licensees provide or are expected to provide
    broadband services, instead of local telephone or cable services.
    Because the Commission believes that the LMDS A block is not being
    used to provide services which are primarily local exchange or
    multi-channel video distribution (MVPD), the Third R&O concludes
    that it is unlikely that the possible use of LMDS spectrum by
    incumbents will result in the blocking of entry into those services,
    and thus allows the restriction to lapse. Commenters also generally
    contend that the broadband market is robust and competitive, and
    that incumbent cable companies and incumbent LECs could not use LMDS
    spectrum to dominate the broadband market. The Commission finds that
    an increasing number of broadband firms and technologies providing
    growing competition to incumbent LECs and cable companies,
    apparently limiting the threat that they will be able to preclude
    competition in the provision of broadband services. and also finds
    no evidence that the incumbent LECs or incumbent cable companies
    have the incentive to warehouse LMDS licenses in order to protect
    their control of these markets from competition. These issues are
    discussed at paragraphs 14 through 21in the Third R&O.

52. As indicated above, the majority of commenters favor the sunset of
    LMDS eligibility restrictions. However, some commenters argue that
    it is premature to terminate the restriction because the first LMDS
    products are just becoming available in the United States.
    Paragraphs 23-33 in the Third R&O explain the Commission's rationale
    for rejecting this contention. The Commission finds that the
    benefits of allowing the eligibility restriction to expire outweigh
    any benefits of extending it. Briefly, the Third R&O sunsets the
    LMDS eligibility restriction because open eligibility (1) will not
    pose a significant likelihood of substantial competitive harm in any
    market; (2) is likely to provide access to additional capital to
    fully develop LMDS; (3) will treat LMDS similarly to substitutable
    spectrum; and (4) should help make services more available in rural
    areas. Paragraphs 14 through 21 find that the record does not
    support a conclusion that open eligibility poses a significant
    threat of substantial competitive harm in specific markets, LEC or
    multi-channel video program distribution (MVPD), or that eligibility
    restrictions are an effective way of addressing potential
    competitive harm. Paragraph 24 discusses how removal of the
    restriction may well result in access to capital resources to more
    fully develop LMDS. Paragraphs 26 and 27 detail why LMDS should be
    treated no differently from other substitutable spectrum.

53. Paragraphs 28-29 discuss allegations by rural commenters that the
    LMDS in-region eligibility restriction imposes several disadvantages
    on small, rural telecommunications carriers. Specifically, these
    commenters maintain that the restriction prevents the formation of
    alliances, partnerships, and joint ventures that may facilitate LMDS
    deployment, limits access to capital, and frustrates leveraging
    existing network infrastructure to achieve minimal cost. The Third
    R&O, while recognizing that the eligibility restriction was
    initially imposed on rural markets because the Commission believed
    that it could stimulate competition to LEC's in these markets, finds
    that this has not occurred, and, based in part on such rural
    commenters, now finds that allowing the eligibility restriction to
    sunset will remove possible impediments to small and rural carrier
    LMDS deployment. The negative effects of the eligibility restriction
    on small and rural entities and consumers, are discussed more fully
    in paragraphs 28-32 of the Third R&O.

**Description and Estimate of the Number of Small Entities To Which
Rules Will Apply.**

54. 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 actions taken in this Third R&O, if adopted.[^107]
    The RFA generally defines the term "small entity" as having the same
    meaning as the terms "small business," "small organization," and
    "small governmental jurisdiction."[^108] In addition, the term
    "small business" has the same meaning as the term "small business
    concern" under the Small Business Act.[^109] 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).[^110] A small organization is generally "any not-for-profit
    enterprise which is independently owned and operated and is not
    dominant in its field."[^111] Nationwide, as of 1992, there were
    approximately 275,801 small organizations.[^112] Below, we further
    describe and estimate the number of small entity licensees and
    regulatees that may be affected by the actions taken in this Third
    R&O.

55. **Common Carrier Services and Related Entities.** The most reliable
    source of information regarding the total numbers of certain common
    carrier and related providers nationwide, as well as the number of
    commercial wireless entities, appears to be data the Commission
    publishes in its *Carrier Locator Interstate Service Providers*
    report.[^113] According to data in the most recent report, there are
    3,528 interstate carriers.[^114] These carriers include, *inter
    alia*, local exchange carriers, wireline carriers and service
    providers, interexchange carriers, competitive access providers,
    operator service providers, pay telephone operators, providers of
    telephone toll service, providers of telephone exchange service, and
    resellers.

56. The SBA has defined establishments engaged in providing
    "Radiotelephone Communications" and "Telephone Communications,
    Except Radiotelephone" to be small businesses when they have no more
    than 1,500 employees.[^115] Below, we discuss the total estimated
    number of telephone companies falling within the two categories and
    the number of small businesses in each, and we then attempt to
    refine further those estimates to correspond with the categories of
    telephone companies that are commonly used under our rules.

57. We have included small incumbent LECs in this present RFA analysis.
    As noted above, a "small business" under the RFA is one that, *inter
    alia*, meets the pertinent small business size standard (*e.g.*, a
    telephone communications business having 1,500 or fewer employees),
    and "is not dominant in its field of operation." [^116] The SBA's
    Office of Advocacy contends that, for RFA purposes, small incumbent
    LECs are not dominant in their field of operation because any such
    dominance is not "national" in scope.[^117]

58. **Total Number of Telephone Companies Affected.** The U.S. Bureau of
    the Census (Census Bureau) reports that, at the end of 1992, there
    were 3,497 firms engaged in providing telephone services, as defined
    therein, for at least one year.[^118] This number contains a variety
    of different categories of carriers, including local exchange
    carriers, interexchange carriers, competitive access providers,
    cellular carriers, mobile service carriers, operator service
    providers, pay telephone operators, covered specialized mobile radio
    providers, and resellers. It seems certain that some of these 3,497
    telephone service firms may not qualify as small entities or small
    ILECs because they are not "independently owned and operated."[^119]
    For example, a reseller that is affiliated with an interexchange
    carrier having more than 1,500 employees would not meet the
    definition of a small business. It is reasonable to conclude that
    fewer than 3,497 telephone service firms are small entity telephone
    service firms or small ILECs that may be affected by the actions
    taken in this Third R&O.

59. **Wireline Carriers and Service Providers.** The SBA has developed a
    definition of small entities for telephone communications companies
    except radiotelephone (wireless) companies. The Census Bureau
    reports that there were 2,321 such telephone companies in operation
    for at least one year at the end of 1992.[^120] According to the
    SBA\'s definition, a small business telephone company other than a
    radiotelephone company is one employing no more than 1,500
    persons.[^121] All but 26 of the 2,321 non-radiotelephone companies
    listed by the Census Bureau were reported to have fewer than 1,000
    employees. Thus, even if all 26 of those companies had more than
    1,500 employees, there would still be 2,295 non‑radiotelephone
    companies that might qualify as small entities or small ILECs. We do
    not have data specifying the number of these carriers that are not
    independently owned and operated, and thus are unable at this time
    to estimate with greater precision the number of wireline carriers
    and service providers that would qualify as small business concerns
    under the SBA\'s definition. Consequently, we estimate that fewer
    than 2,295 small telephone communications companies other than
    radiotelephone companies are small entities or small ILECs that may
    be affected by the actions taken in this Third R&O.

60. **Local Exchange Carriers, Competitive Access Providers, Competitive
    Local Exchange Carriers.** Neither the Commission nor the SBA has
    developed a definition for small providers of local exchange
    service, competitive access providers, or competitive local exchange
    carriers. The closest applicable definition under the SBA rules is
    for telephone communications companies other than radiotelephone
    (wireless) companies.[^122] According to the most recent
    telecommunications industry revenue data, 1,348 carriers reported
    that they were engaged in the provision of incumbent local exchange
    services, and 212 carriers reported that they were providing
    competitive access or competitive local exchange services.[^123] We
    do not have data specifying the number of these carriers that are
    not independently owned and operated, or have more than 1,500
    employees, and thus are unable at this time to estimate with greater
    precision the number of LECs that would qualify as small business
    concerns under the SBA\'s definition. Consequently, we estimate that
    fewer than 1,560 providers of local exchange service, or of
    competitive access or competitive local exchange services are small
    entities or small entities that may be affected by the actions taken
    in this Third R&O.

61. **A-Block LMDS Providers.** The total number of A-block LMDS
    licenses is limited to 493, one for each Basic Trading Area.[^124]
    The Commission has held auctions for all 493 licenses, in which it
    defined "very small business" (average gross revenues for the three
    preceding years of not more than \$15 million), "small business"
    (more than \$15 million but not more than \$40 million), and
    "entrepreneur" (more than \$40 but not more than \$75 million)
    bidders.[^125] There have been 99 winning bidders that qualified in
    these categories in these auctions all of which may be affected by
    the actions taken in this Sixth NPRM.

62. **Cable Services or Systems.** The SBA has developed a definition of
    small entities for cable and other pay television services, which
    includes all such companies generating \$11 million or less in
    revenue annually.[^126] This definition includes cable systems
    operators, closed circuit television services, direct broadcast
    satellite services, multipoint distribution systems, satellite
    master antenna systems and subscription television services.
    According to the Census Bureau data from 1992, there were 1,788
    total cable and other pay television services and 1,423 had less
    than \$11 million in revenue.

63. The Commission has developed its own definition of a small cable
    system operator for the purposes of rate regulation. Under the
    Commission\'s rules, a \"small cable company\" is one serving fewer
    than 400,000 subscribers nationwide*.*[^127] Based on our most
    recent information, we estimate that there were 1,439 cable
    operators that qualified as small cable system operators at the end
    of 1995. Since then, some of those companies may have grown to serve
    over 400,000 subscribers, and others may have been involved in
    transactions that caused them to be combined with other cable
    operators. Consequently, we estimate that there are fewer than 1,439
    small entity cable system operators.

64. The Communications Act also contains a definition of a small cable
    system operator, which is \"a cable operator that, directly or
    through an affiliate, serves in the aggregate fewer than 1 percent
    of all subscribers in the United States and is not affiliated with
    any entity or entities whose gross annual revenues in the aggregate
    exceed \$250,000,000.\"[^128] The Commission has determined that
    there are 66 million subscribers in the United States. Therefore, we
    found that an operator serving fewer than 660,000 subscribers shall
    be deemed a small operator, if its annual revenues, when combined
    with the total annual revenues of all of its affiliates, do not
    exceed \$250 million in the aggregate.[^129] Based on available
    data, we find that the number of cable operators serving 660,000
    subscribers or less totals 1,450. We do not request nor do we
    collect information concerning whether cable system operators are
    affiliated with entities whose gross annual revenues exceed \$250
    million, and thus are unable at this time to estimate with greater
    precision the number of cable system operators that would qualify as
    small cable operators under the definition in the Communications
    Act. It should be further noted that recent industry estimates
    project that there will be a total of 66 million subscribers.

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

65. The actions taken in the Third R&O entail no new or revised
    reporting, recordkeeping or other compliance requirements.

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

66. Although the Commission LMDS eligibility restriction was initially
    intended to stimulate competition between all sorts of entities,
    including small entities, only two of the 19 comments that were
    filed ask that the restriction be retained. The restriction was
    adopted with a June 30, 2000, sunset date to allow sufficient time
    for the Commission to conduct a thorough review of the effectiveness
    of the restriction. The Commission first adopts the 39 GHz approach
    to determine if the restriction should be extended. In that regard,
    the Sixth NPRM offered two alternative standards. The first option
    allows that the incumbent LECs or cable companies continue to have
    substantial market power in the provision of local telephone or
    cable television services. Two commenters urge the Commission to
    retain the restriction using the market dominance standard and
    arguing that LCDs and cable companies remain dominant in their
    respective markets. As discussed previously in this FRFA, and in
    paragraphs 10-11 of the Third R&O, the Commission rejects continued
    use of the market power standard, because the substantial market
    power test does not address whether the incumbents are able to
    preclude competition in other markets which LMDS licensees wish to
    enter. No comments were submitted in support of the second option
    that would provide that the incumbent companies possess the
    incentive and ability to purchase the LMDS block to prevent entry of
    a competitor.

67. Thus, the Commission, in the Third R&O concludes that the 39 GHz
    test is the appropriate standard to apply in determining whether the
    LMDS eligibility should sunset.[^130] The 39 GHz test is a more
    discerning standard than the standard market power test in that it
    not only considers the broadest set of market facts and
    circumstances, but it also will allow the Commission to focus on the
    issues it needs to decide ---whether the incumbents are likely to
    use their market power to cause substantial competitive harm by
    preventing the use of LMDS spectrum for services that would
    otherwise be provided by LMDS licensees, such as broadband, and
    whether the restrictions will prevent such actions.

68. Finally, the Commission has considered the benefits of allowing the
    eligibility restriction to expire as opposed to the benefits of
    extending it, and determines, with the support of the large majority
    of commenters, that allowing the restriction to sunset offers the
    most benefit to the most parties.[^131] Small businesses in
    particular stand to benefit from removal of the eligibility
    restriction. Paragraphs 28-32 of the Third MO&O, for example,
    discuss the effect of the LMDS eligibility restriction on small and
    rural carrier LMDS deployment, finding that the restriction causes
    undue hardship for rural carriers, of which many are small entities,
    possibly in violation of the Telecommunications Act of 1996.
    Commenters who argue against retaining the restriction contend that
    application of the restriction to rural telephone companies imposes
    significant economic and social costs, that communities served by
    rural ILEC's are often not sufficiently lucrative markets to attract
    other providers, that competitive concerns are not applicable in a
    rural market, and that rural carriers lack the resources to
    warehouse spectrum. For these reasons, the Commission believes that
    small businesses will benefit from allowing the LMDS eligibility
    restriction to sunset rather than to retain the restriction.

69. [Report to Congress]{.underline}**:** The Commission will send a
    copy of this Third Report and Order and Memorandum Opinion and
    Order, including this FRFA, in a report to be sent to Congress
    pursuant to the Small Business Regulatory Enforcement Fairness Act
    of 1996, 5 U.S.C. 801(a)(1)(A). In addition, the Commission will
    send a copy of the Third Report and Order and Memorandum Opinion and
    Order and this FRFA to the Chief Counsel for Advocacy of the Small
    Business Administration.

70. CONCURRING STATEMENT OF

# COMMISSIONER HAROLD FURCHTGOTT-ROTH 

Re Rulemaking to Amend Parts 1,2 21, and 25 of the Commission's Rules to
Redesignate the 27.5-29.5 GHz Frequency Band, to Reallocate the
29.5-30.0 GHz Frequency Band, to Establish Rules and Policies for Local
Multipoint Distribution Service and for Fixed Satellite Services*, Third
Report and Order and Memorandum Opinion and Order, CC Docket No. 92-297*
*(rel. June 26, 2000)*

Finally, the end.

Today the Commission will finally allow the LMDS ownership restrictions
on LECs and cable operators to sunset. After years of wrangling, after
countless filings, and after virtually no offering of service, the
Commission is willing to let the LMDS eligibility restriction fade into
the sunset on June 30, 2000. On July 1, 2000 I am happy to report, the
American people will finally have their first opportunity to see the
full potential of the LMDS market. After years of fighting to have these
restrictions lifted, I welcome today's decision as a hopeful sign that
such ownership rules will be relegated to the dustbin of history.

All of this, unfortunately, occurs far too late.

Three and a half years ago, the Commission adopted these ownership
restrictions over the strong and prescient dissent of my colleague,
Commissioner Chong. As she wrote, "by precluding the participation of
incumbent LEC and cable operators, competition in those markets may well
be harmed by arbitrarily denying some of the strongest potential
competitors the ability to branch out into new markets."[^132] She
described the majority as subscribing to the belief that "government
must second guess the marketplace and impose heavy regulatory
restrictions on the basis of sheer conjecture."[^133]

Two and a half years ago, when the majority decided to initiate this
proceeding to determine whether or not the eligibility restrictions
should sunset, I dissented as well. In doing so, I stated my view that
"\[e\]ligibility restrictions on an innovative new service are a
draconian measure; such bans on competition should be used only to
prevent a substantial competitive harm to a specific market. Here, the
eligibility restrictions are imposed not to prevent a specific harm, but
in an attempt to enhance the mere possibility of competition."[^134] Six
months ago, as the Commission issued its Sixth Notice of Proposed
Rulemaking, I once again called attention to the speculative basis and
lack of record support for these ownership restrictions.[^135]

Today's Order comes to the same conclusions that Commissioner Chong and
I have been advocating. Most fundamentally, today's Order employs a
different standard of review for these regulatory limitations. The
original restriction was based on a substantial market power test, and
allowed the speculative competitive fears of the majority to withstand
scrutiny. Today's Order evaluates the eligibility restriction based on
the far more reasonable question of whether "open eligibility poses a
significant likelihood of substantial competitive harm in specific
markets, and, if so, whether eligibility restrictions are an effective
way to address this harm."[^136] This standard reflects my reluctance to
impose these types of restrictions.

Two other fundamental principles of Commissioner Chong's and my dissents
were (1) the flexibility afforded LMDS licensees undercut the need for
predictive service-specific ownership limitations, and (2) the
availability of other fixed wireless spectrum made it extremely
difficult, if not impossible, for any provider to monopolize the market.
Years later, today's Order reaches the same conclusions. LMDS is "not
being primarily used to provide local exchange or MVPD services" -- the
original theory for the imposition of the ownership rules. Therefore,
the Order reaches the now obvious conclusion that "\[w\]e do not believe
we should continue the LMDS restriction based on possible competitive
effects in markets that LMDS licensees are not entering.\"[^137]

Second, the Order also notes that there is "no reason here to treat LMDS
differently from other substitutable spectrum", like MMDS, 24 GHz, 39
GHz and other fixed wireless services.[^138] The Order comes to the
well-documented and widely accepted conclusion that "no group of firms
or technology will likely be able to dominate the provision of broadband
services" and that the possibility of monopolizing all of the spectrum
available for broadband is "fairly remote."[^139] Moreover, the Order
cites to a number of potential benefits of sunseting the rule --
benefits also outlined by the dissenting statements of the past three
years: increased access to capital, more rapid deployment, better
equipment availability, etc.[^140]

In short, while I endorse much of the reasoning of today's order, I only
lament that it did not hold sway with my colleagues sooner.

It is not clear whether the lackluster performance of LMDS to date is
the result of the marketplace or our restrictive rules. That is one of
the core problems with intrusive regulation -- one never knows whether a
service has failed or government policy has failed. But with today's
decision, we can finally be sure that LMDS will rise or fall on its own
merits -- not based on government fiat.

[^1]: *See Rulemaking to Amend Parts 1,2, 21, and 25 of the Commission's
    Rules to Redesignate the 27.5 GHz Frequency Band, to Reallocate the
    29.5-30.0 GHz Frequency Band, To Establish Rules and Policies For
    Local Multipoint Distribution Service and For Fixed Satellite
    Services*, CC Docket No. 92-297, Second Report and Order, Order on
    Reconsideration and Fifth Notice of Proposed Rulemaking, 12 FCC Rcd
    12545, 12556 (1997)(*Second Report and Order).*

[^2]: *See Rulemaking to Amend Parts 1,2, 21, and 25 of the Commission's
    Rules to Redesignate the 27.5-29.5 GHz Frequency Band, to Reallocate
    the 29.5-30.0 GHz Frequency Band, to Establish Rules and Policies
    for Local Multipoint Distribution Service and for Fixed Satellite
    Services*, CC Docket No. 92-297, Sixth Notice of Proposed
    Rulemaking, 14 FCC Rcd 21520, 21536 (1999) (*Sixth Notice).*

[^3]: *Second Report and Order*, 12 FCC Rcd at 12556.

[^4]: 47 C.F.R. § 101.1003(a). The eligibility restriction was not made
    applicable to the 3.1-3.1075 GHz and the 3.1225-3.13 GHZ B-bands
    because we found that this 150 megahertz of spectrum provides
    inadequate capacity to enable the provision of attractive
    multi-channel video distribution (MVPD) service, and that the
    incumbent LECs will not have a meaningful incentive to acquire the
    150 megahertz license to preempt entry into local exchange service.
    *Second Report and Order*, 12 FCC Rcd at 12626.

[^5]: 47 C.F.R. § 101.1003(a) (1).

[^6]: *See Sixth Notice,* 14 FCC Rcd at 21522-23.

[^7]: *See id.* at 21521.

[^8]: *Id.* at 21525-35.

[^9]: *Id.* at 21536-38.

[^10]: A list of the commenters is set forth in Appendix A.

[^11]: Comments of US West at 2; Comments of NCTA at 3; Comments of
    Independent Alliance at 2; Comments of PCIA at 2; Comments of RTG at
    1; Comments of OPASTCO at 2; Comments of Sully Buttes at 1; Comments
    of CTTC at 1; Comments of USTA at 3; Comments of Hyperion at 1;
    Comments of NTCA at 2; Reply Comments of NextLink at 2; Reply
    Comments of CPI at 3; Reply Comments of Horry at 2.

[^12]: Comments of MCI at 1; Comments of Gateway at 1.

[^13]: *Request for Waiver of Section 101.1003(a) of the Commission's
    Rules Establishing Eligibility Restrictions on Incumbent LECs and
    Cable Operators in the Local Multipoint Distribution Service,*
    Order, DA 00-184 (rel. Feb. 2000)(*Waiver Order)*.

[^14]: Application of Hyperion Communications Long Haul, L.P. for
    Expedited Review (Mar. 3, 2000); Request of Hyperion Communications
    Long Haul, L.P. for Emergency Stay (Mar. 3, 2000).

[^15]: *Hyperion Communications Long Haul, L.P.*, Order, DA 00-787 (rel.
    Apr. 11, 2000).

[^16]: *Sixth Notice,* 14 FCC Rcd at 21536.

[^17]: *See* Comments of Hyperion at 4; Comments of RTG at 14; Comments
    of NTCA at 6-7; Comments of CTTC at 3; Comments of National Cable TV
    Association at 8.

[^18]: *See* Comments of Teligent at 5; Comments of Sully Buttes at 2;
    Comments of OPASTCO at 4.

[^19]: We note that no party addressed Alternative 1, *i.e.*, that the
    incumbent companies possess the incentive and ability to purchase
    the LMDS block to prevent entry of a competitor, which is merely a
    more explicit version of the market dominance test.

[^20]: *See* Comments of Hyperion at 4; Comments of RTG at 14; Comments
    of NTCA at 6-7; Comments of CTTC at 3; Comments of NCTA at 8.

[^21]: Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56
    (1996).

[^22]: H.R. Rep. 104-458, 104^th^ Cong. 2d Sess. 1996.

[^23]: This standard was adopted in *Amendment of The Commission's Rules
    Regarding The 37.0-38.6 GHz Bands and Implementation of Section
    309(j) of the Communications Act---Competitive Bidding, 37.0-38.6
    GHz and 38.6-40.0 GHz*, ET Docket No. 95-183, RM-8553 and PP Docket
    No. 93-253, Report and Order and Second Notice of Proposed
    Rulemaking, 12 FCC Rcd 18600, 18619 (1997).

[^24]: *See* Comments of NTCA at 7.

[^25]: *See, e.g.,*Comments of MCI Worldcom at 6.

[^26]: Comments of Gateway Telecom, LLC at 1-2; Comments of MCI Worldcom
    at 4.

[^27]: Comments of Gateway Telecom, LLC at.1-2; Comments of MCI
    Worldcom.at 4.

[^28]: Comments of MCI Worldcom at 4.

[^29]: *See* Comments of Hyperion at 4; Comments of RTG at 14; Comments
    of NTCA at 6-7; Comments of CTTC at 3; Comments of NCTA at 8;
    Comments of Teligent at 5; Comments of Sully Buttes at 2; Comments
    of OPASTCO at 4.

[^30]: *Sixth Notice* at 21536-37.

[^31]: *See* Comments of US West at 5-6; Comments of Hyperion at 3-4;
    Comments of NTCA at 4.

[^32]: *See* Comments of US West at 10-11; Comments of Hyperion at 3-4;
    Comments of NTCA at 4.

[^33]: Appendix B. *See LMDS Rollouts Slow, But Future Looks Bright*,
    ISP BUSINESS NEWS, January 10, 2000, at 1-2; *Nextlink Selects
    Nortel BWA Solution*, Hilary Smith, RCR Radio Communications Report,
    March 20, 2000, at 1; *Prime Candidate*, Carl Weinschenk, tele.com,
    April 3, 2000; *Touch America Launches Wireless, High-speed
    Broadband LMDS Service in Butte, Montana*, PR NEWSWIRE, November 5,
    1999; *Touch America Launches Wireless, High-Speed Broadband LMDS
    Commercial Service Using Nortel Networks Equipment,* CAMBRIDGE
    TELECOM REPORT, September 27, 1999, at 1-2; *SPEEDUS.COM Agrees to
    Acquire CT&T*, PR NEWSWIRE, March 30, 2000; *Virginia Tech and
    Wavtrace Announce Results of LMDS Trial; First of Its Kind,*
    BUSINESS WIRE, September 8, 1999, at 1,3; *Bosch Telecom and
    Frazier/King Media Deploy Multimedia LMDS Network; Showcase Reveals
    Industry's First Advanced Real-life LMDS applications*, BUSINESS
    WIRE, April 6, 1998; *Newbridge Makes Hit in US LMDS Market*,
    ELECTRONICS COMMUNICATOR, May 6, 1999.

[^34]: *A Tree Grows in Phoenix,* Karen J. Bannan*,* INTERACTIVE WEEK
    FROM ZDWIRE*,* at *2.* LMDS appears to be a stop-gap for fiber
    deployment. Next Link claims, however, that it will provide local
    exchange services to customers in the future but has not done so to
    date. Reply Comments of NextLink at 2.

[^35]: *Alcatel and Prime Companies to Conduct Field Trials of National
    LMDS Broadband Wireless Network in March 2000,* BUSINESS WIRE VIA
    NEWS EDGE CORPORATION, March 9, 2000 at 1.

[^36]: Hyperion Comments at 3-4.; *see also* NTCA Comments at 4; US West
    Comments at 6.

[^37]: *Second Report and Order* at 12615.

[^38]: *See* Comments of US West at 6; Comments of Sully Buttes at 3;
    Comments of NTCA at 5; Comments of Hyperion at 4.

[^39]: *See* Comments of US West at 11; Comments of Sully Buttes at 3.

[^40]: *See* Comments of US West at 11-17; Comments of USTA at 5-6;
    Comments of NTCA at 7-8. The Commission has previously defined
    \"full broadband\" services synonymously with \"advanced
    telecommunications capability\" as those having the capability of
    supporting, in both the provider-to-consumer (downstream) and the
    consumer-to-provider (upstream) directions, a speed (in technical
    terms, \"bandwidth\") in excess of 200 kilobits per second (kbps) in
    the last mile. *See Inquiry Concerning the Deployment of Advanced
    Telecommunications Capability to All Americans in a Reasonable and
    Timely Fashion, and Possible Steps To Accelerate Such Deployment
    Pursuant to Section 706 of the Telecommunications Act of 1996*,
    Report, CC Docket No. 98-146, 14 FCC Rcd 2398, 2406 (1999) (*Section
    706 Proceeding*). *See also Inquiry Concerning the Deployment of
    Advanced Telecommunications Capability to All Americans in a
    Reasonable and Timely Fashion, and Possible Steps To Accelerate Such
    Deployment Pursuant to Section 706 of the Telecommunications Act of
    1996,* Notice of Inquiry, FCC 00-57, CC Docket No. 98-146 (rel. Feb.
    18, 2000) and *Local Competition and Broadband Reporting*, Report
    and Order, CC Docket No. 99-301, FCC 00-114 (rel. Mar. 30, 2000)
    (*Data Gathering Report*). In the *Second Advanced
    Telecommunications NOI*, the Commission explained that the *NOI*
    used the term \"broadband services\" to refer to a larger set of
    services that end users can access which may have aysmmetric
    capabilities and speeds less than 200 kbps, but are generally
    considered high speed. See *Second Advanced Telecommunications NOI*,
    n.2*; Data Gathering Report*, n. 8

[^41]: *See* Telechoice, xDSL.com, Deployment and Projections,
    http://www.xdsl.com/content/resources/deployment_info.asp; DSL
    Prime, www.dslprime.com/News_Articles/Availablity/availabilty.html;
    www.covad.com/covad overview.cfm, March 13, 2000; www.rhythms.com,
    March 13, 2000; www.northpointcom.com/pressroom/2000, March 13,
    2000; *DSL holesalers race to the hinterlands,* Tom Davey,
    REDHERRING.COM, January 21, 2000; *Let It Ride, R*ebecca Cantwell,
    INTERACTIVE WEEK FROM ZDWIRE, March 6, 2000, at 9; *Fiber Optics to
    the Home*, Jeff Hecht, MIT T4ECHNOLOGY REVIEW, volume 103, issue 2,
    at 3; B*usiness Models Duel in the Race to the Broadband Frontier,*
    Paul Clark and Mark Sheehan, ISP BUSINESS NEWS, January 10, 2000;
    *Annual Assessment of the Status of Competition in Markets for the
    Delivery of Video Programming,* Sixth Annual Report, CS Docket No.
    99-230, FCC 99-418 (rel. Jan. 14, 2000) at Para. 44; *MSN, Gilat
    Unveil 2-Way satellite broadband*, Dick Kelsy, NEWSBYTES NEWS
    NETWORK, February 16, 2000; *Satellite Based Television Merges
    Computer Technologies,* DALLAS MORNING NEWS, December 31, 1999, at
    2; *Why Wait for DSL, Cable Modem When There's Wireless?*, Todd
    Wallack, SAN FRANCISCO CHRONICLE, March 28, 2000; *Dishing Out
    Data,* Peter Spiegel, FORBES, January 24, 2000; CONSUMER
    ELECTRONICS, January 24, 2000, vol. 40, issue 4; *High Speed
    Surfing,* Fred Langa, WINDOWS MAGAZINE, February 1, 1999; *SoftNet
    Systems, Inc. Reports First Quarter Fiscal 2000 Results, PR
    NEWSWIRE,* February 7, 2000.

[^42]: *See* Comments of US West at 14-15; Comments of RTG at 5-7;
    Comments of NTCA at 7-8.

[^43]: *See Sprint's ION Launches Hit Cable, Telcos*, Fred Dawson,
    MULTICHANNEL NEWS, November 29, 1999, at 1; *AT&T Launches Fixed
    Wireless in Fort Worth*, Andrea Ahles, FORT Worth Star-Telegram,
    March 23, 2000.

[^44]: *MSN and Gilat Offering First 2-Way Internet Service*,
    COMMUNICATIONS DAILY, vol. 20, No. 33, at 5-6; *EchoStar to Add
    Internet Access*, Eric Hubler, DENVER POST, February 24, 2000, at 1;
    *Wireless High-speed Access for Everyone*, Robert Lemos, ZDNET NEWS
    FROM ZDWIRE, January 13, 2000, at 1; *Arianespeace to Fund iSky*,
    INTERSPACE, February 9, 2000, Issue 686; *R&D Swords into Dow
    Shares*, Neil Weinberg, FORBES, March 6, 2000; *Broadband Via
    Satellite-Where are We?*, Marc Crossman and Ahn Steninger, VIA
    SATELLITE, November 10, 1999; *Why Wait for DSL, Cable Modem When
    There's Wireless*?, Todd Wallack, SAN FRANCISCO CHRONICLE, March 28,
    2000; *Carriers-News Briefs*, NETWORK NEWS, March 22, 2000;
    *Business Briefs,* DESERET NEWS, March 6, 2000; *Wireless Enters the
    CLEC Market*, WIRELESS DATA NEWS, vol. 8, issue 3, at 2; *A Tree
    Grows in Phoenix,* Karen J. Bannan, INTERACTIVE WEEK FROM ZDWIRE,
    August 30, 1999, at 2; *Atlanta Tech: The High-speed Building
    Chase*, Michael E. Kanell, THE ATLANTA CONSTITUTION, February 16,
    2000, at 3-4; CAMBRIDGE TELECOM REPORT, March 13, 2000, at 3-4.

[^45]: *Cisco's Wireless Net Act*, Richard Tedesco, BROADCASTING &
    CABLE, vol. 129, issue 50, at 2; *MCI Worldcom Launches Fixed
    Wireless Trials*, Mary Mosquera, CMP TECHWEB, March 7, 200, at 1-2;
    *mci Worldcom Plans Wireless Test,* Peter Goodman, WASHINGTON POST,
    March 28, 2000; *Fuzion Wireless Communications the First to
    Commercially Deploy Wireless Broadband Internet Service,* BUSINESS
    WIRE, November 22, 1999; *AT&T Exec Trades Prosperity for
    Uncertainty,* Elizabeth Douglas, LOS ANGELES TIMES, March 13, 2000,
    at 2.

[^46]: *See On Location With the Digital Divide,* Rebecca Cantwell,
    INTERACTIVE Week from zdwire, april 3, 2000; Comments of US West at
    11-15.

[^47]: *SBC Communications Cuts Prices to Stimulate DSL Demand,*
    Jonathan Burns, February 15, 2000, DOW JONES NEWS SERVICE at 3*.*

[^48]: *Increased Competition Drives Down Prices of High-Speed Internet
    Access,* Chris O'Brien*,* KNIGHT-RIDDER TRIBUNE NEWS at 2.

[^49]: *Id.*

[^50]: *www.freedsl.com.*

[^51]: *Id.*

[^52]: *www.freexdsl.com.*

[^53]: *MCI WorldCom Launches Fixed-Wireless* Trials, Mary Mosquera, CMP
    TECHWEB, March 7, 2000.

[^54]: *AT&T Cuts The Cord In Fort Worth For Voice & Data,* Steve Gold,
    NEWSBYTES NEWS NETWORK, March 23, 2000.

[^55]: *Principles for Reallocation of Spectrum to Encourage the
    Development of Telecommunications Technologies for the New
    Millenium*, Policy Statement (rel. Nov. 22, 1999); Comments of RTG
    at 10-11.

[^56]: Comments of RTG at 10.

[^57]: *See Sixth Notice*, 14 FCC Rcd at 21536 (para. 41); Comments at
    NCTA at 7; Comments of RTG at 4; Reply Comments of CPI at 11; Reply
    Comments of Sully Buttes at 5.

[^58]: 47 C.F.R. § 101.1011.

[^59]: *See* Comments of US West at 17.

[^60]: *Sixth Notice*, 14 FCC Rcd at 21537-39 (paras. 42-49).

[^61]: *See* Comments of Independent Alliance at 4; Comments of RTG at
    5, 7; Comments of NTCA at 7-8; Comments of Sully Buttes at 3;
    Comments of Teligent at 4; Comments of USTA at 4; Comments of PCIA
    at 3; Comments of CTTC at 3.

[^62]: *See, e.g.,* Comments of US West at 11-12; Comments of PCIA at 4;
    Comments of Hyperion at 3-5, Comments of National Cable TV
    Association at 12-18.

[^63]: Comments of MCI at 5-6.

[^64]: *See* Comments of US West at 11-15; Comments of Hyperion at 8-9.

[^65]: *Id.*

[^66]: *Promotion of Competitive Networks in Local Telecommunications
    Markets*, Notice of Proposed Rulemaking and Notice of Inquiry in WT
    Docket No. 99-217 and Third Further Notice of Proposed Rulemaking in
    CC Docket No. 96-98, WT Docket No. 99-217 and CC Docket No. 96-98,
    FCC 99-141 (rel. July 9, 1999).

[^67]: *See* Comments of PCIA at 4.

[^68]: *See* Appendix B; Comments of US West at 7, n. 19.

[^69]: *Id.*

[^70]: *Racing for the Last Mile,* John Williamson*,* GLOBAL
    TELEPHONY*,* February 28, 2000 (quoting Frost & Sullivan's World
    LMDS Equipment and Service Markets).

[^71]: *Id.*

[^72]: Comments of Teligent at 4; Comments of US West; Comments of NTCA
    at 7-8; Comments of Sully Buttes at 4.

[^73]: Comments of RTG at 5.

[^74]: *Id**.***

[^75]: *See* Comments of RTG at 5-7; Comments of NTCA at 7; Comments of
    USTA at 5; Comments of Sully Buttes at 4; Comments of US West at
    12-15; Comments of Hyperion at 7-8.

[^76]: Comments of Teligent at 4; Comments of US West at 13-14; Comments
    of NTCA at 7-8; Comments of Sully Buttes at 4.

[^77]: Comments of RTG at 7.

[^78]: *Id.*

[^79]: *Broadband Wireless: The Big Hertz,* Fred Dawson*,* INTERACTIVE
    WEEK FOR ZDDWIRE*,* May 17, 1999 (quoting George Harter, Chief
    Technology Officer, Hardin & Associates).

[^80]: *TeleCommunications Providers Tap Wireless Internet Access for
    Local Loop,* Matt Hicks*,* PC WEEK*,* August 2, 1999, vol. 16, issue
    31.

[^81]: *Id.*

[^82]: *Wired for Speed,* Cynthia Morgan*,* WINDOWS MAGAZINE*,* December
    1, 1997*.*

[^83]: *Will LMDS Develop into a New Video Competitor?,* Richard
    Bergen*,* MULTICHANNEL NEWS*,* January 12, 1999. MMDS may also use
    cellularization, but it is not required to. *See Fixed Broadband on
    Verge of Boom,* WCA INTERNATIONAL, James Careless.

[^84]: *Id.* Taking into account the city's terrain and rainfall,
    Cisco/Bosch and AAPT are deploying in Sydney, Australia an LMDS
    system with an effective cell radius of 2.7 kilometers (1.67 miles).

[^85]: Comments of Sully Buttes at 5; Comments of RTG at 11; Comments of
    Independent Alliance at 6; Comments of OPASTCO at 5; Comments of
    CTTC at 5.

[^86]: David Cohen, USTA, in an April 12, 2000 *ex parte* meeting with
    Commission staff.

[^87]: Older and damaged copper loops have a shorter range. HDSL and
    symmetric DSL have a 12,000-foot limit.

[^88]: *See* Comments of Sully Buttes at 6-7.

[^89]: *See* Comments of PCIA at 3; Comments of Sully Buttes at 7.

[^90]: *See* Comments of US West at 16-17.

[^91]: *See* Comments of OPASTCO at 5; Comments of RTG at 5.

[^92]: *See* Comments of OPASTCO at 5.

[^93]: *See* Comments of OPASTCO at 6; Comments of CTTC at 4; Comments
    of RTG at 14.

[^94]: *Id.*.

[^95]: Comments of OPASTCO.

[^96]: *Id.*

[^97]: *See* 47 U.S.C. § 160.

[^98]: *Request for Waiver of Section 101.1003(a) of the Commission's
    Rules Establishing Eligibility Restrictions on Incumbent LECs and
    Cable Operators in the Local Multipoint Distribution Service,*
    Order, DA 00-184 (rel. Feb. 2000)(*Waiver Order)*.

[^99]: Application of Hyperion Communications Long Haul, L.P. for
    Expedited Review (Mar. 3, 2000); Request of Hyperion Communications
    Long Haul, L.P. for Emergency Stay (Mar. 3, 2000).

[^100]: *Hyperion Communications Long Haul, L.P.*, Order, DA 00-787
    (rel. Apr. 11, 2000).

[^101]: This rule modification may become effective on less than 30
    days' notice because it relieves a restriction. *See* 5 U.S.C.
    Section 553(d)(1). Moreover, we find good cause to make this
    modification effective on less than 30 days' notice because the
    restriction in the previous rule terminates on June 30, 2000. *See*
    5 U.S.C. Section 553(d)(3).

[^102]: ^?^ *See LMDS Rollouts Slow, But Future Looks Bright*, ISP
    BUSINESS NEWS, January 10, 2000, at 1-2; *Nextlink Selects Nortel
    BWA Solution*, Hilary Smith, RCR Radio Communications Report, March
    20, 2000, at 1; *Prime Candidate*, Carl Weinschenk, tele.com, April
    3, 2000; T*ouch America Launches Wireless, High-speed Broadband LMDS
    Service in Butte, Montana*, PR NEWSWIRE, November 5, 1999; T*ouch
    America Launches Wireless, High-Speed Broadband LMDS Commercial
    Service Using Nortel Networks Equipment,* CAMBRIDGE TELECOM REPORT,
    September 27, 1999,at 1-2; *SPEEDUS.COM Agrees to Acquire CT&T*, PR
    NEWSWIRE, March 30, 2000; *Virginia Tech and Wavtrace Announce
    Results of LMDS Trial; First of Its Kind,* BUSINESS WIRE, September
    8, 1999, at 1,3; *Bosch Telecom and Frazier/King Media Deploy
    Multimedia LMDS Network; Showcase Reveals Industry's First Advanced
    Real-Life LMDS applications*, BUSINESS WIRE, April 6, 1998;
    *Newbridge Makes Hit in US LMDS Market*, ELECTRONICS COMMUNICATOR,
    May 6, 1999.

[^103]: *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).

[^104]: The IFRA may be found in the Appendix B of the Sixth NPRM (FCC
    99-379, released December 13, 1999, and the Final Regulatory
    Flexibility Analysis may be found in the Second Report and Order,
    Order on Reconsideration and Fifth Notice of Proposed Rulemaking, 12
    FCC Rcd 12545, 12768 (1997).

[^105]: *See* 5 U.S.C. § 604.

[^106]: *See* Fourth Notice of Proposed Rulemaking in this proceeding,
    11 FCC Rcd 19005 (1996).

[^107]: 5 U.S.C. § 603(b)(3).

[^108]: *Id*. § 601(6).

[^109]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small business concern" in 15 U.S.C. § 632). Pursuant to the RFA,
    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." 5 U.S.C. § 601(3).

[^110]: Small Business Act, 15 U.S.C. § 632 (1996).

[^111]: 5 U.S.C. § 601(4).

[^112]: [U.S. Bureau of the Census]{.smallcaps}, [U.S. Dept. of
    Commerce, 1992 Economic Census]{.smallcaps}, Table 6 (special
    tabulation of data under contract to Office of Advocacy of the U.S.
    Small Business Administration).

[^113]: FCC, Common Carrier Bureau, Industry Analysis Division, *Carrier
    Locator Interstate Service Providers*, Figure 1 (January 2000).

[^114]: *Id.*

[^115]: 13 C.F.R. § 121.201, Standard Industrial Classification (SIC)
    codes 4812 and 4813. *See also* Executive Office of the President,
    Office of Management and Budget, *Standard Industrial Classification
    Manual* (1987).

[^116]: 5 U.S.C. § 601(3).

[^117]: Letter *from* Jere W. Glover, Chief Counsel for Advocacy, SBA
    *to* William E. Kennard,

[^118]: [U.S. Bureau of the Census]{.smallcaps}, [U.S. Dept. of
    Commerce,]{.smallcaps} [1992 Census of Transportation,
    Communications, and Utilities: Establishment and Firm
    Size]{.smallcaps}, at Firm Size 1‑123 (1995) (*1992 Census*).

[^119]: *See generally* 15 U.S.C. § 632(a)(1).

[^120]: *1992 Census*, at Firm Size 1‑123.

[^121]: 13 C.F.R. § 121.201, SIC code 4813.

[^122]: *Id.*

[^123]: *Carrier Locator Interstate Service Providers,* Figure 1
    (January 2000).

[^124]: 47 CFR 101.1005, 101.1007.

[^125]: 47 CFR 101.1107(a)-(c), 101.1112.

[^126]: 13 CFR 121.201, SIC 4841.

[^127]: 47 CFR 76.901(e). The Commission developed this definition based
    on its determination that a small cable system operator is one with
    annual revenues of \$100 million or less. [Implementation of
    Sections of the 1992 Cable Act: Rate Regulation, Sixth Report and
    Order and Eleventh Order on Reconsideration]{.underline}, 10 FCC Rcd
    7393 (1995), 60 FR 10,534 (Feb. 27, 1995).

[^128]: 47 U.S.C. 543(m)(2).

[^129]: 47 U.S.C. 76.1403(b).

[^130]: *See* paragraphs 8-9 of the Third R&O for a complete discussion
    of the benefits of the 39 GHz standard.

[^131]: *See* paragraphs 22-33 of the Third R&O.

[^132]: *Statement of Commissioner Rachelle B. Chong, Dissenting in
    Part,* Second Report and Order, Order on Reconsideration and Fifth
    Notice of Proposed Rulemaking, CC Docket No. 92-297 (March 11,
    1997).

[^133]: Id.

[^134]: *Separate Statement of Commissioner Harold Furchtgott-Roth*, in
    Third Order on Reconsideration, CC Docket 92-297 (Feb. 3, 1998); see
    also *Separate Statement of Commissioner Michael Powell*, in Third
    Order on Reconsideration, CC Docket 92-297 (raising some of the same
    concerns).

[^135]: Commissioner Powell raised similar concerns. *See* *Dissenting
    Statement of Commissioner Michael Powell* in Third Order on
    Reconsideration, Sixth Notice of Proposed Rulemaking, CC Docket
    92-297 (Dec. 13, 1999).

[^136]: Third Report and Order and Memorandum Opinion and Order, CC
    Docket No. 92-297 (rel. June 23, 2000), at ¶ 1.

[^137]: Id. at ¶ 15.

[^138]: See id. at ¶ 26.

[^139]: Id. at ¶¶ 19, 21.

[^140]: See *Dissenting Statement of Commissioner Harold
    Furchtgott-Roth,* in Third Order on Reconsideration, Sixth Notice of
    Proposed Rulemaking, CC Docket 92-297 (Dec. 13, 1999)*; Statement of
    Commissioner Rachelle B. Chong, Dissenting in Part,* Second Report
    and Order, Order on Reconsideration and Fifth Notice of Proposed
    Rulemaking, CC Docket No. 92-297 (March 11, 1997).