NOTICE
*************************************************************************
                         NOTICE
*************************************************************************
This document was originally prepared in Word Perfect.
If the original document contained--
                    *  Footnotes
                    *  Boldface & Italics
--this information  is missing in this version
The document format (spacing, margins, tabs, etc.) is changed too.
If you need the complete document, download the Word Perfect version.
For information about downloading documents (FTP) see file pnmc5021.
File  pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous.
*************************************************************************
/$ NPRM, Digital Audio Radio Service, FCC 95-229  $/
//$ Part 25    Satellite Communications    $//
            FCC 95-229
Before the
Federal Co               mmunications Commission
Washington                   , D.C.   20554
In the Matter of )     IB  Docket No. 95-91
     )     GEN Docket No. 90-357
     )     RM No. 8610
Establishment of Rules and Policies  for the        )     PP-24
Digital Audio Radio Satellite Service in the        )     PP-86
2310-2360 MHz Frequency Band             )     PP-87
                       Notice of Proposed Rulemaking
     Adopted:  June 14, 1995                        Released:  June 15, 1995
Comment Date:  September 15, 1995
Reply Comment Date:  October 13, 1995
By the Commission:  Commissioners Quello and Ness issuing separate statements.
                             TABLE OF CONTENTS
I.  INTRODUCTION      1-9
II. DISCUSSION
 A. Economic Impact on Existing Terrestrial Broadcasters and Impact on the Public Interest10-20
       B.  Design of Service                                                   . .21
 1. Classification of Service  . . . . . . . . . . . . . . . . . . . . . 22-26
 2. Public Interest Obligations. . . . . . . . . . . . . . . . . . . . . 27-28
 3. Ancillary Services 29-30
 C. Licensing Approaches                                                       31-40
 D. Licensing Procedures . . . . . . . . . . . . . . . . . . . . . . . . . .41
 1. Technical Rules 42
       a. Service Area 43
 b. Service Link Margin 44-46
          c. Receiver Inter-Operability and Tunability . . . . . . . . . 47-51
       d. Data Rates 52-54
       e. Terrestrial Gap Fillers  . . . . . . . . . . . . . . . . . . . 55-56
       f.    Cross Polarized Emissions . . . . . . . . . . . . . . . . . 57-59
 g. Inter-service sharing. . . . . . . . . . . . . . . . . . . . . . . . . .60
 i. Domestic61
 ii. International62-67
 iii. Adjacent Band Services . . . . . . . . . . . . . . . . . . . . . . 68-69
 h. Feeder Links70-75
 2. Rules Applicable to a Licensing Approach Based on Four Current Applicants76
 a. Intra-Service Sharing. . . . . . . . . . . . . . . . . . . . . . . . 77-78
 i. Band Segments79-83
 ii. Frequency Assignments . . . . . . . . . . . . . . . . . . . . . . . 84-85
 iii. Interim Frequency Assignments. . . . . . . . . . . . . . . . . . . 86-87
 b. Financial Qualifications/Milestone Requirements. . . . . . . . . . . 88-93
 3. Rules Applicable to a Licensing Approach Based on Auction Procedures94-111
 4. Pioneer's Preference Requests. . . . . . . . . . . . . . . . . . . 112-114
 5. Miscellaneous Issues115-121
III.CONCLUSION   . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122
IV. PROCEDURAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . 123-125
V.  ORDERING CLAUSES . . . . . . . . . . . . . . . . . . . . . . . . . 126-127
APPENDIX I:     Proposed Rules and Regulations to be Added to 47 C.F.R. Part 25 of the
                Commission's Rules
APPENDIX II: Initial Regulatory Flexibility Analysis
I.   INTRODUCTION
 1.    Earlier this year we allocated the 2310-2360 MHz band for satellite-delivered digital audio
radio service (DARS).  With this Notice of Proposed Rulemaking, we initiate consideration of service
and licensing rules to govern this service.  Specifically, we request comment on issues that include how
many licenses should be awarded; how much spectrum each licensee should be assigned; how licensees
should be selected if mutually exclusive applications are filed; whether applications already pending before
the Commission should receive special consideration; how those licensees should be classified; whether
licensees should be permitted to use some of their spectrum for non-DARS services; and what rules should
govern the operation of DARS transmissions to ensure service to the public and to prevent interference
to competitors and other services.
 2.    Satellite DARS will both compete with and complement traditional terrestrial AM and FM
radio service. It has the capability to serve geographic areas that terrestrial radio does not reach.  Because
of terrain features and other factors, such as small population, certain areas of the United States receive
few or no terrestrial radio broadcasts.  Individuals living in or traveling through these areas would be
given expanded options by DARS due to its mobile capabilities and nationwide service area.  Even in
areas with substantial radio service, satellite DARS also could expand and complement the audio
programming choices now available to listeners.  By offering a nationally based service, satellite DARS
providers could target niche audiences that have not been served by traditional local radio but now could
be served as an aggregate national audience.  Such specialized program offerings could include foreign
language programming, music formats not usually carried by radio broadcasts, and programming geared
to children or senior citizens.
 3.    It also is apparent that satellite DARS, to some extent, will  compete with terrestrial radio.
Proposed satellite DARS systems will provide 30 or more channels of national digital audio programming
to fixed and mobile receivers, with the potential for each licensee to offer high quality audio channels
throughout the country.  By way of contrast, terrestrial broadcasters are limited to four channels in a single
geographic area.  Thus, satellite DARS may have an advantage in both cost and channel offerings over
local broadcast stations in delivering national programming to listeners, as well as an advantage in the
number of channel outlets available in each community.  Some of these DARS channels may provide
some programming that is similar to what is available on local stations.
 4.    However, it does not necessarily follow that satellite DARS would have a significant
adverse impact on terrestrial broadcasters, many of whom offer essentially locally oriented programming.
Terrestrial broadcasting has the ability to provide local public affairs programming, local news and
weather, local traffic reports and local personalities. We believe that consumers attach great significance
to such programming.  We request comment on whether consumers would alter their listening patterns by
abandoning local stations to any significant degree.  In this regard, we note that existing audio services
provided at fixed locations by satellite do not appear to have adversely effected local radio broadcasting.
 5.    Implementation of satellite DARS potentially will stimulate significant economic growth
by creating jobs in various sectors.  Satellite DARS could create jobs in industries involved in
technological development and manufacture of spacecraft and receiver components, installation of receivers
in vehicles, programming creation and origination, building and operation of satellite uplink facilities and
construction and operation of customer service centers.  These activities will require employees with
various levels of expertise and training.  Moreover, many of these economic opportunities would be
available to non-licensees, including small and minority owned businesses.  Because the construction costs
for the  space stations proposed in the pending applications range from $320 million to over $622 million,
and the manufacturing costs for their proposed ground segment(s), including the feeder link earth stations
and the end user receivers, are expected to be millions of dollars more,  satellite DARS potentially will
lead to substantial investment in the U.S. economy.
 6.    The process of establishing DARS in the United States began in 1990 when  Satellite CD
Radio (CD Radio) filed a Petition for Rulemaking to allocate spectrum for DARS.  At the same time, CD
Radio filed an application to provide digital quality audio by satellite which was accepted as tendered for
filing on October 19, 1990.  In February 1992, the World Administrative Radio Conference (WARC 92)
adopted international frequency allocations for satellite digital audio broadcasting.  Per U.S. proposals,
the frequencies designated in this country are 2310-2360 MHz (S-Band).  In November 1992, the
Commission released a Notice of Proposed Rulemaking and Further Notice of Inquiry (Allocation Notice)
proposing to implement the WARC 92 allocation domestically.
 7.      The Commission established a December 15, 1992 cut-off date for applications proposing
satellite DARS service to be considered in conjunction with CD Radio's application.  In response to the
cut-off notice, five additional applications were filed.  As two of those five applicants have withdrawn,
the remaining applicant pool consists of CD Radio, Primosphere Limited Partnership (Primosphere),
Digital Satellite Broadcasting Corporation (DSBC) and American Mobile Radio Corporation (AMRC).
 8.    In its recent Allocation Order, the Commission amended the Table of Frequency
Allocations to allocate 50 MHz of spectrum, 2310-2360 MHz, for satellite DARS use on a primary basis.
The Commission further noted that this proceeding would be initiated to address satellite DARS
implementation.
 9.    In the DARS allocation proceeding we also addressed terrestrial digital technology that
may permit licensees in our current AM and FM services to convert to digital transmission with CD
quality sound.  Two industry committees are studying technical standards that relate to this issue.  We
continue to fully support these activities, and when we receive the reports of these two committees, we
will act expeditiously to consider changes to our rule to also permit AM and FM licensees to improve
their service by offering digital sound.
                              II.  DISCUSSION
A.  Economic Impact on Existing Terrestrial Broadcasters and Impact on the Public Interest
 10.   When we allocated spectrum for satellite DARS last January, we stated that we would
examine the effect that this new service could have on terrestrial broadcasting.  In the Allocation Order
we concluded that the allocation of frequencies for nationwide satellite DARS is consistent with our
obligations under Section 307(b) of the Communications Act, which requires us to ensure equitable
geographic distribution of radio services.  Additionally, we stated that in our satellite DARS service rules
proceeding, we would "request information on and consider all relevant and available information which
addresses the impact of satellite DARS on traditional service".  We noted the possibility that "competition
from a new regional or national satellite radio service might diminish the financial ability of some
terrestrial stations to provide local service" and listed a series of factors that might be relevant for
analyzing the potential economic impact of satellite DARS.
 11.   Evaluation of the potential impact on broadcasters should be made in the context of
Section 7 of the Communications Act.  Section 7 makes it clear that opponents of this new technology
bear the burden to show that licensing DARS is inconsistent with the public interest.  The public interest
in this regard is the provision of services of value to the listening public and includes the protection of
competition, not competitors.  The economic impact of satellite DARS on existing radio broadcasters is
relevant to this inquiry to the extent that such impact would predictably lead to serious loss of important
services to consumers, taking into account the potential for future enhancements of terrestrial broadcasting
by the introduction of new technologies and by appropriate changes in the Commission's rules for
terrestrial broadcasting.  In this section, we seek comment on how satellite DARS might affect terrestrial
broadcasters and, consequently, affect the interests of the listening public.  We also seek comment on what
might be an appropriate regulatory response to such impact.
 12.   In the Allocation Order, we concluded that allocation of spectrum for satellite DARS was
in the public interest.  We cited several benefits the public would receive from this service.  These include
the provision of continuous radio service of compact disc quality, an increased choice of over-the-air audio
programming and service to underserved and unserved areas.  We noted that satellite DARS has the
potential to provide new services to rural listeners, minority and ethnic groups, and non-English speaking
audiences.  Finally we stated that the service has the potential to provide opportunities for economic
development and improve the U.S. position in the international marketplace.  We continue to believe that
satellite DARS has the potential to offer substantial benefits to the public.  We request comment on this
conclusion and on other possible public interest benefits that might accrue from this service.
 13.   We recognize that initiation of satellite DARS may not be without some costs to local
broadcasters, particularly in the area of their advertising revenues.  Specifically, although satellite DARS
may increase the total amount of time spent listening to radio, satellite DARS may also reduce the
audience for terrestrial radio.  That reduction in audience may, in turn, reduce the advertising revenues
available to local broadcasting.  We seek comment on the potential and likelihood of such an impact, and
its effect, if any, on the continued financial viability of traditional broadcasting and on the amount of local
and public affairs programming that traditional broadcasters provide.  We particularly seek comment on
the effect of satellite DARS given the disparity between the services in the number of stations permitted
to broadcast to each community as a whole, the number of commonly owned channels that will be
available in each community, and the reach of each station in the two services.
 14.   We also seek comment  on whether, and to what extent, satellite DARS may decrease
terrestrial radio listenership.  In addressing this, commenters should provide the models and assumptions
underlying their predictions and answer, at a minimum, the following questions:  What is the expected
customer equipment cost and any subscription fee?  What service will be provided on a partially or fully
advertiser-supported basis?  How much of satellite DARS listening will be in automobiles and how much
will be at stationary sites?  In responding, commenters should take account of the nature of the service
provided.  For example, listeners of  CD quality music might be primarily in automobiles, but the same
might not be true for children's programming or programming in languages other than English.  Satellite
DARS's impact on the local radio audience will also depend on the availability of terrestrial DARS, so
commenters should include in their analyses their assumptions regarding the probable timetable for
introduction of that service.
 15.   In estimating any decline in terrestrial radio audiences, we request commenters to consider
the currently available alternatives to terrestrial radio and their impact on the terrestrial radio industry.
Subscription packages of digital audio service already are available to U.S. households via cable and
direct-to-home satellite transmissions. These services include Digital Music Express (DMX), which
initiated service in September 1991.  DMX currently offers digital audio service to cable subscribers
through a satellite feed to a cable company or directly to commercial companies via a one meter satellite
antenna.  DMX's basic service offers thirty channels of digital audio with no voice-overs and no
commercials.  Those receiving directly from a satellite antenna also can choose an enhanced service
offering seventy-seven channels of digital audio.  Another company, Music Choice, offers similar digital
audio services to cable customers and, through secondary vendor DirecTV, to DBS satellite system
owners. What, if anything, does the impact of existing national digital audio systems on terrestrial
broadcasting indicate about the potential impact of satellite DARS on terrestrial broadcasting?  How does
the added factor of mobile service proposed by satellite DARS proponents affect this analysis?
 16.   We also seek comment regarding advertising revenues that may be lost due to competition
from satellite DARS.  We note national advertising presently accounts for an estimated 17-18 percent of
total radio advertising revenues and local advertising accounts for the other estimated 82-83 percent.
In their analyses, commenters should treat separately the effect on national and local advertising revenues.
In addressing the question of advertising revenues, commenters should consider the following factors:
Will a loss of listeners to satellite DARS services that may not sell advertising reduce the quantity of radio
advertising offered for sale?  If so, would such a reduction cause the price of advertising to change?  How
would these factors, in turn, affect  broadcast radio advertising revenues?  For satellite DARS services that
are based on advertising, advertising will most likely be sold on a national basis.  Commenters should
address the impact of this additional competition for radio advertising dollars for small, medium, and large
stations.  Additionally, because of differences in demographics and other factors, not all advertising
exposures are of equal value.  Commenters should consider expected satellite DARS listening patterns in
estimating the value of advertising exposures that might be lost to terrestrial radio.  For example, is
satellite DARS listening likely to be concentrated in morning and evening "drive time" periods and are
advertising rates higher than average during those periods?
 17.   We also recognize that advertising revenue losses could significantly vary among local
broadcasters.  Therefore, we seek comment on whether, and the extent to which, local station
characteristics, including, but not limited to, profitability, market share, programming format (including
the share of local programming), the number of households in the market, and the number of stations in
the market could affect a particular station's revenue loss.  We specifically solicit comment on this issue
with respect to terrestrial stations operating in small markets.
 18.   Because revenue losses may translate into reduced profit margins, reductions in services
offered, or other operational changes, we seek comment on radio station profit margins, with data
disaggregated by market size and other relevant station characteristics.  We note that large numbers of
radio stations apparently operate at losses and request comment on how we should utilize reported
accounting profitability data to assess radio station viability.   In particular, we seek comment on whether
any stations might offer less local programming or go off the air as a result of competition from satellite
DARS service.  The viability of a radio station is determined by a variety of factors, and consequently,
comments should establish a credible connection between satellite DARS competition and any predicted
impact on radio station viability.
 19.   To the extent that satellite DARS would result in advertising revenue losses or other
adverse financial impacts for local terrestrial broadcasters, we seek comment on how such revenue losses
would affect the public interest.  In particular, how would DARS competition affect the programming that
local radio broadcasters provide? While listeners could turn to satellite DARS services for national
programming and advertising, we believe that even with spot beams, local news, weather, traffic, and
public affairs programming could not practically be provided via satellite DARS.  Would the advent of
satellite DARS lead to changes in local programming, including news, traffic, and weather?  What
percentage of terrestrial audio broadcast programming is currently devoted to local issues?  Does this
percentage vary systematically with market size or station characteristics?  Will competition from satellite
DARS give local broadcasters an incentive to provide more local programming, or less?  How profitable
is local programming?  Are the potential risks of decreased local service greater in these areas?  Will
stations with strong local programming schedules benefit from increased audiences at the expense of
stations without such programming?   In what other ways would DARS financially affect a local
broadcaster's ability to serve the public interest, convenience and necessity?  In analyzing the effect of
local broadcasters' revenue losses on the public interest, we also seek comment on the extent to which
competition may spur incumbents to improve their service, thereby benefitting the public interest.  We
seek comment on innovative measures terrestrial radio stations may take to respond to competition from
satellite DARS, particularly implementing digital transmission techniques in their own service offerings,
and the impact of these measures on terrestrial radio's ability to compete.  We also seek comment on any
possible effects of satellite DARS on terrestrial radio not specifically mentioned herein and on local
broadcasters' ability to continue to serve the public interest.
 20.   Given our concern about the effect of satellite DARS on local broadcasting, we seek
comment on appropriate ways to evaluate such effects.  In the course of normal, market-driven economic
development some local broadcasters experience continuing losses. These broadcasters usually undergo
extensive re-organization, often after a change in ownership. Occasionally, they actually turn in their
broadcast licenses.  How could we best determine if  these failures reflect normal market conditions or
whether they reflect significant problems in the local broadcasting industry resulting from competitive
satellite DARS systems?
B.  Design of Service
 21.   In establishing satellite DARS, our goal is to ensure that the listening public's needs are
met by the most efficient and responsive service possible.  To this end, we discuss below possible service
requirements for satellite DARS.  We solicit comment on these proposals.  We also request comment on
whether other service requirements are warranted.  Commenters should explain and justify their analysis
of each proposal, including consideration of the public interest benefits.  Commenters should also indicate
the extent to which their service rule proposals and analysis apply in the event that satellite DARS
spectrum is auctioned.
 1 .  Classification of Service
 22.   First, we seek comment on whether licensees should be able to determine their own
regulatory classification or whether there are reasons to justify requiring them to provide service in a
particular manner.  Three of the four current satellite DARS applicants propose non-broadcast/subscription
services.  The fourth applicant, Primosphere, proposes to operate as an advertiser supported broadcast
service.
 23.   Historically, all domestic satellite (domsat) operators were licensed to provide services on
a common carrier basis.  Shortly thereafter, domsat operators began to request authorization to provide
service on a non-common carrier basis to particular customers.  In response, the Commission established
its transponder sales policy.  Pursuant to this policy, the Commission relies on the analysis set forth in
NARUC I which identified two criteria as determinative of whether a service may be provided on a non-
common carrier basis:  1) whether there are reasons implicit in the nature of the service to expect an
indifferent holding out to the eligible user public and 2), if not, whether there is or should be any legal
compulsion to serve the public indifferently.  In the DARS service, there does not appear to be a reason
to impose common carrier status on licensees.  First, under the NARUC I criteria and based on the
examples of applications on file, DARS providers will not be holding themselves out indifferently to serve
the public but instead will be providing programming of their own selection. Further, we see nothing on
the face of the applications or comments to suggest that it would be necessary to require that this service
be common carrier.  We request comment on this tentative conclusion.
 24.   A broadcasting  service involves the transmission of programming intended for direct
reception by the general public. In the context of developing service rules for DBS, a satellite based
national programming distribution service, the Commission has held that  a service offered pursuant to
a subscription agreement using a scrambled signal is not broadcasting.   Here, three out of four of the
applications on file propose services offered pursuant to a private contractual relationship with the
subscribing audience using a scrambled signal.   Thus, it is clear that the intention of three applicants is
to provide non-broadcast service within the meaning of Section 2.1 of the Commission's rules and
Subscription Video.  Accordingly, a requirement that all DARS licensees operate as broadcasters appears
to be unwarranted and inappropriate.  We request comments on this tentative conclusion.
 25.   As noted above, three of the four current applicants propose to operate in a subscription
mode.  These applicants also could accept advertising in conjunction with subscription fees or as a sole
revenue source.  NAB has requested that satellite DARS be authorized on a "subscription only" basis,
arguing that to do so would differentiate satellite DARS from terrestrial stations and thereby help minimize
harm to traditional broadcasting.  NAB also posited that a subscription requirement would provide satellite
DARS providers with the economic framework to permit delivering niche programming to specialized or
geographically dispersed markets.  We request comment on the legal, policy and practical implications
of requiring DARS service to be provided on a subscription basis.  We also request comment on whether
advertising should or should not be permitted if this option is chosen, but tentatively conclude that
requiring subscription service should not limit providers from accepting advertisements.
 26.   We could allow satellite DARS providers to tailor their services to meet the requirements
of their targeted customers.  Under this option, any regulatory classification of licensees would depend
on their business choices.  Further, once applicants are granted licenses, they  would be free to tailor their
DARS service offerings in response to market demand.  This approach is similar to that taken by the
Commission in its 1982 rules to govern DBS.   The Commission decided to avoid requiring DBS
licensees to operate under a specified service classification.  Instead, the Commission indicated that it
would consider the particular services proposed by individual applicants in making any service
classification decisions.
 2.    Public Interest Obligations
 27.   We seek proposals for and comments on possible public service rules for satellite DARS.
In this regard, the Commission has the obligation to make licensing decisions that are consistent with the
public interest, convenience and necessity.  In addition, licensees providing broadcast services are subject
to specific public interest obligations.  We seek comment on whether satellite DARS providers offering
subscription or non-broadcast services should also be subject to similar public interest obligations.
Commenters offering proposals on this issue are specifically requested to consider what public service
offerings would not necessarily be provided absent regulatory obligations.  Should public service rules be
limited to licensees offering broadcasting services, those providing subscription services, or should they
be imposed on all satellite DARS licensees?  With regard to non-broadcast satellite DARS licensees, we
seek comment on the Commission's authority under the Communications Act to regulate licensees in this
manner.  Commenters should also address any constitutional implications of imposing such public service
obligations in light of Daniels Cablevision, Inc. v U.S., where the U.S. District Court for the District of
Columbia struck down provisions of the 1992 Cable Act requiring certain public interest obligations for
DBS operators, and rendered other relevant decisions.   We recognize that public interest obligations
would impose a cost on satellite DARS providers.  We request commenters to estimate the cost of
providing public interest programming.  Are the estimated costs outweighed by the public interest benefits
of more news and informational programming?  Could these costs be so significant that they might
potentially hamper the deployment and success of the service?
 28.   We seek comment on public interest requirements that terrestrial radio broadcasters face
and on the impact of those requirements on the current and future profitability of terrestrial radio stations.
We believe that this information will have predictive value in determining whether DARS providers should
be subject to similar obligations.  For example, one of the major public interest obligations of terrestrial
radio broadcasters is to provide reasonable access to their facilities for use by legally qualified candidates
for federal elective office.  Radio broadcasters who permit use of their facilities by any legally qualified
candidate must also afford equal opportunities to use such facilities to all other candidates for that office.
In addition, broadcasters are required to develop and carry out an EEO program designed to ensure that
potential employees are not discriminated against on the basis of race, color, religion, national origin or
sex.  Perhaps most importantly, broadcasters are obliged to serve the needs and interests of the members
of their communities of license.  As a means to this end, the Commission requires broadcasters to maintain
lists of programs aired which address community issues.  Commenters are asked to discuss the following:
What public interest offerings would not be included by service providers in an unregulated market
environment? Do terrestrial radio public interest programming requirements increase profitability by
providing valuable information to listeners or do they reduce profitability?
 3.  Ancillary Services
 29.   We also seek comment on whether  licensees in the 2310 -2360 MHz band, allocated
domestically for Broadcast-satellite (sound) on a primary basis, should be permitted to offer non-DARS
services on an ancillary basis.  If so, what limits, if any, should apply?  The current satellite DARS
applicants propose to offer additional services to their end users which are ancillary to DARS.  These
include high-speed broadcast data or location-based geographic information, electronic graphic/visual
information, voice mail, and alphanumeric messages on dedicated channels or in conjunction with
(multiplexed into) the channels used for digital audio.
 30.   Ancillary uses of allocated bands are legally permissible.  For example, with regard to
DBS, we permitted temporary ancillary uses of satellite spectrum.  We seek comment on whether
ancillary uses should be permitted in this service and if so, how they should be defined, specifically in
the context of satellite DARS.  For example, since the principal use of the spectrum capacity is for satellite
DARS audio programming, what percentage of the spectrum capacity could be devoted to ancillary
services?  In addition, how would we monitor such a requirement, particularly in a digital environment
where different service offerings may not appear to be different from a technical perspective?  Would a
requirement to certify compliance and reliance on complaints be sufficient?  Would such a requirement
create an unwarranted burden on licensees?
C.  Licensing Approaches
 31.   In the Allocation Order, we adopted domestically the international frequency allocation
of 50 MHz of spectrum for this service. To alleviate potentially difficult and lengthy coordination with
other administrations, particularly Canada, we propose to initially license a maximum of 40 MHz.  We
now request comment on how much of this spectrum should be authorized for immediate use by DARS,
how much spectrum should be assigned to each licensee, and the number of competitors that should be
accommodated in the available spectrum.   In connection with this, we request comment on the minimum
number of channels necessary to provide effective and economically viable nationwide DARS service and
on  how much spectrum is necessary to support this minimum number of channels?  We note that the four
current satellite DARS applications propose various numbers of near CD quality channels for each system,
e.g., 11, 23, 30, and 32 (16 CONUS channels and 16 additional channels in 31 spot beams).   These
applicants originally stated that their spectrum requirements to offer their channels were 10 MHz, 50 MHz,
20 MHz and 25 MHz, respectively.  We also note that the ATV Grand Alliance system claims to have
enough capacity to deliver 75 CD quality stereo channels in 6 MHz as a terrestrial service.  We ask how
many channels per megahertz can be delivered by satellite to mobile users.
 32.   How many service providers are necessary to provide competition in this market?  To what
extent would the existence of multiple DARS providers increase the likelihood that public interest benefits,
including low consumer costs, can be achieved?  To what extent are other licensing models, such as those
used for DBS or PCS, helpful in making decisions regarding the number of satellite DARS providers?
We also seek comment on how to assign spectrum that might become available if one or more applicants
fail to implement their proposals.  Should new applications be solicited, or should the spectrum be
assigned in equal shares to the existing applicants?
 33.   In determining the entities eligible to be licensed in this service, we have identified three
basic options: to license the available spectrum to the current four applicants; to license less that the total
available spectrum to the four applicants and auction the remainder; or to accept new applications and
auction all licenses.  These approaches are described below and we seek comment on them and on any
other alternatives.  The first option would assign the available spectrum to the four applicants that filed
in response to the Commission's 1992 cut-off notice.  The spectrum would be divided equally among the
qualified applicants.  Assuming all four of the pending applications are qualified, each would be awarded
a 12.5 MHz segment or, if we determine that the lower 10 MHz of spectrum is not available for
assignment at this time, a 10 MHz spectrum segment.  Two of the current applicants suggested the
available spectrum be divided equally among the four.  We seek comment on this proposal and whether
a 10 MHz assignment would be feasible, i.e., whether a viable satellite DARS service could be provided
using a 10 MHz spectrum block.
 34.   We believe that this approach would recognize certain equities in favor of the current
applicants.  It has been almost five years since the first DARS application was filed by CD  Radio.   Since
that time we have accepted CD Radio's application, accepted competing applications by establishing  and
issuing an official cut-off date notice, and allocated spectrum for DARS on a primary basis as had been
requested in CD Radio's petition.  These actions have been fully consistent with the procedures previously
used in establishing other satellite services where applications are often accepted before the Commission
allocates spectrum and establishes service rules.  Moreover, the Commission has held that adherence to
cut-off procedures promotes " 'orderliness, expedition and finality' in the licensing process".  It has also
found that in some instances, reopening the cut-off to new applications would delay the proceeding.
Applicants state that they have expended substantial sums of money in apparent reliance on the
Commission's satellite cut-off procedures including filing and other application related fees and expenses.
We seek comment on the merits of these and any other equities in favor of the current applicants and  on
the fairness of any action that would reopen the cut-off.
 35.     On the other hand, the satellite application cut-off procedures are in contrast to the
practices followed in licensing other services.  For example, in the broadcast service, applications are not
accepted for filing and afforded cut-off protection until spectrum is allocated to the service, channels
established and allotted to specific communities, and service rules are adopted. Similarly, in other recently
established services such as broadband and narrowband PCS and Interactive Video Distribution Service
(IVDS), we allocated spectrum and established licensing and service rules before accepting applications.
We seek comment on whether the public is better served by following the broadcast cut-off model or the
satellite model.  In this regard, we also seek to determine answers to a number of questions related to any
equities of the four applicants presumably tied to reliance on continued Commission adherence to the
satellite cut-off model.  Specifically, what is the level of actual investment by the four applicants to date
and how does that investment compare to the value of the spectrum and the potential sales value of a
DARS license in an immediate, post-grant private transfer.  How would the Commission assess the value
of the contributions made by the current applicants in furthering the development of satellite DARS?  If
we were to reopen the proceeding for new applicants and we receive mutually exclusive applications, is
it possible and desirable to compensate for such value in an auction environment by, e.g., assigning
appropriate bidding  credits to the current applicants?
 36.   A second option would be to designate a segment of less than the full amount of spectrum
that we believe is useable at this time, and to award the remaining spectrum to other new applicants.
The spectrum designated for the current four applicants would still be divided equally, but the band
segments ultimately licensed to each would be less than 10 MHz, either in equal segments or in segments
of different amounts.  Under this scenario, we would need to determine how much spectrum to keep for
new applicants, whether the remaining spectrum can accommodate the pending applicants, how and for
what purpose to license the spectrum not assigned to the four current applicants, and how to choose an
additional applicant or applicants for the remaining spectrum.  If any of the two band segments (i.e., the
spectrum band for current applicants and the spectrum band for new applicants) could not accommodate
all applicants eligible to be licensed in each, we could assign the "mutually exclusive" band segment
through the auction procedures proposed herein.  This approach offers a compromise between a desire to
acknowledge the equities in favor of the four current applicants and an interest in efficient spectrum
management that auction procedures might achieve.  We seek comment on all aspects of this option,
including the minimum spectrum block required to provide a viable satellite DARS service, and its
possible implementation.
 37.   A third option would be to re-open the processing window and allow additional applicants
to file satellite DARS proposals.  If this option is chosen, it is likely that additional applications will be
filed and that a mutually exclusive situation could result.  The Commission must then determine whether
to assign licenses through lottery, comparative hearing or competitive bidding.  We discuss a framework
for a possible auction below.  We seek comment on this option, including mechanisms such as an
appropriate bidding credit or similar mechanism that would recognize the extent of investment by each
of the four current applicants to date.  We also seek comment on the magnitude of the expected recovery
for the public of a portion of the value of this public spectrum resource made available for commercial
use.
 38.   If auctions are used under option three, we propose to divide the 50 MHz of spectrum into
blocks of an appropriate size and license those spectrum blocks on a nationwide basis.  Each applicant
would be permitted to bid successfully on several blocks of spectrum, contiguous or not.  This band plan
would permit applicants to assemble blocks of spectrum best suited to the service that they intend to
provide.  The current  satellite DARS applicants differ significantly regarding the digital signal coding
rates needed to produce near compact disk (CD) quality sound.  These differences translate into differences
in the amount of spectrum required to transmit a channel of near CD quality music.  Thus, while the
applicants have apparently agreed that they can share the 50 MHz allocated,  dividing the allocation evenly
among them might not lead to optimal service to the public.  We seek comment on whether, because
satellite DARS will face competition from terrestrial radio services, CD players in automobiles and homes,
and audio services delivered as part of cable and satellite services, there could be effective competition
in delivery of audio services with fewer than four satellite DARS providers.
 39.   We seek comment on an appropriate band plan for option three and on whether a spectrum
cap is needed.  One band plan possibility is to divide the 50 MHz into 10 five MHz blocks.  Alternatively,
we could attempt to fashion a band plan for auctions that is more consistent with the plan to divide
spectrum evenly among the four existing applicants.  We seek comment on these options as well as on
other alternatives.  The purpose of a spectrum cap would be to ensure reasonable competition in the
provision of near CD quality audio services.  One spectrum cap possibility is 20 MHz.  Under this option,
if we were to divide the band into 5 MHz blocks, licensees could hold up to four blocks.  We seek
comment on this and on other spectrum cap possibilities.
 40.   With respect to option two, a combination of licensing the four applicants and possible
auctions, the choice of a band plan would depend on the amount of spectrum that we would plan to
auction.  Similarly, the band plan would depend on whether all 40 MHz we expect to be initially available
should be licensed initially, or if some smaller amount should be licensed first and the remainder at a later
time.  In addressing this issue, we request that parties address how much spectrum and how many
providers should be licensed as discussed below.  Rather than propose a specific plan, we ask commenters
to address the issues of how much spectrum to assign to each licensee and how to structure the plan.
D.  Licensing  Procedures
 41.   To enable us to license  applicants as expeditiously as possible, we are proposing
alternative licensing approaches that will be consistent with the three options outlined above.  First, we
propose service rules that will enable licensees to operate systems efficiently, avoiding harmful
interference to other licensees.  Second, we propose additional rules and licensing qualifications specific
to a licensing approach based on Commission approval of the four current applicants.  Finally, we propose
auction procedures that would allow the Commission to implement such a selection method if it chooses
to reopen the processing group to additional applicants.
 1.  Technical Rules
 42.     As in past satellite licensing proceedings, we propose technical requirements that reflect
the unique nature of the service proposed and that promote entry opportunities for applicants.
Comments received throughout the allocation proceeding and in response to the filed applications,
including the supplemental comments recently filed by CD Radio and DSBC, form the basis of our
technical proposals.  We seek comment on whether these proposals maximize spectrum and orbit resource
efficiency.   We seek additional comment on whether these technical rules will accomplish our goal to
ensure that satellite DARS applications can be considered and the service can be implemented
expeditiously.
 a.   Service Area
 43.   First, we seek comment on whether we should adopt rules mandating a service area
coverage requirement for satellite DARS systems.  Two of  the four pending satellite DARS applications
propose service solely to the 48 contiguous states of the United States (CONUS).   Two propose coverage
of the CONUS, Alaska, Hawaii, Puerto Rico and/or the Virgin Islands.  Recognizing that there are areas
outside the CONUS underserved by terrestrial broadcasting, we seek comment on whether to require
satellite DARS systems to provide 50-state coverage or 50-state plus Puerto Rico/Virgin Island coverage,
as we do in the fixed-satellite service.
 b.  Service Link Margin
 44.   Satellite DARS reception in any geographic area, including within the CONUS, and
especially to mobile end users, depends heavily on the available service link margin for a high percentage
of service availability.   The service link margin necessary for satellite DARS reception has been a topic
of discussion throughout the comments on the satellite DARS proposals.  Service link margin is related
to satellite visibility which may be limited in some urban and suburban areas.  Satellite visibility may
also be limited in geographic areas outside of the CONUS where low elevation angles above the horizon
from the end user to the DARS space station could lead to increased instances of signal blockage.  An
increase in signal blockage decreases the available service link margin of a satellite DARS system.
 45.   The service link margins identified in the pending satellite DARS applications range from
approximately 4 dB to 14 dB.  Parties question whether the satellite DARS proposals provide the amount
of service link margin necessary for urban and suburban environments.  Comments do not offer technical
analyses to demonstrate and specify the service link margin necessary for mobile reception in urban and
suburban environments.   The satellite DARS applicants do, however, propose several techniques to solve
the complex problem of maintaining adequate service link margin in a mobile environment.  DSBC, for
example, notes that coverage in urban canyons may be enhanced by using rake receivers.  Two of the
satellite DARS applicants propose to employ a frequency and satellite diversity system which they contend
will maintain sufficient service link margin.
 46.   We propose that applicants be required to identify the service link margin for their systems
and to demonstrate that their systems will provide that service link margin in a mobile environment, under
clear sky conditions, to the geographic areas they intend to serve.    We also seek comment on whether
a specific value should be used to define an adequate service link margin for the specified service areas
in urban and suburban environments and, if so, what that value is and the analysis for it.
 c.   Receiver Inter-Operability and Tunability
 47.   Comments on the satellite DARS applications raise the issue of whether the Commission
should set receiver inter-operability standards for satellite DARS.  Some parties contend that substantial
benefits would be gained if a single standard is adopted.  Another party asserts that a single standard
would encourage consumer investment in satellite DARS equipment and create the economies of scale
necessary to make DARS receiving equipment affordable.  Multi-standard DARS receivers almost
inevitably would be more expensive than single standard receivers.  Parties did not address whether a
single satellite DARS receiver design should be compatible with competing satellite DARS formats and/or
terrestrial broadcasting services such as traditional AM and FM and planned digital in-band, on-channel
(IBOC) DARS on AM and FM frequencies.
 48.   Testing and evaluation of proposed digital audio radio technologies has been on-going
since 1991.  As we noted in the Allocation Order, two industry committees are considering issues relating
to DARS technical standards.  The Electronic Industry Association's Consumer Electronics Group
(EIA/CEG) is developing standards for terrestrial and satellite DARS and the National Radio Systems
Committee (NRSC), sponsored jointly by EIA/CEG and NAB, is pursuing the development and
implementation of standards for terrestrial DARS systems to operate in the AM and/or FM broadcast
bands. Both committees are cooperating in testing DARS technologies.  Laboratory testing is expected to
be completed in June or July 1995.  EIA/CEG currently plans to conduct field measurements in July and
August 1995.  A final report and recommendation is anticipated by the end of 1995.
 49.   One concern is that the additional cost to manufacture a receiver that is compatible with
all competing satellite DARS and terrestrial formats may exceed the price range applicants are targeting
for their individual satellite receivers.  We are further concerned that the market penetration projected
by the satellite DARS applicants may not be attainable if the cost of individual satellite DARS receivers
is too high.  We request comment on the costs and benefits of adopting a single standard for satellite
DARS.
 50.   We also seek comment on whether individual satellite DARS receivers should be remote
command tunable across the entire 2310-2360 MHz band.  This tunability would be accomplished by
transmitting a signaling channel from the feeder link earth station, through the spacecraft and to the
individual DARS receivers, and would be necessary for satellite DARS licensees to be able to operate in
any portion of the allocated DARS frequency band.  It would also be necessary to facilitate sharing among
the different satellite systems according to our band sharing proposal. Applicants would therefore be
required to demonstrate how they would implement the forward signalling command through the space
station for receivers to select and tune to any center frequency in the allocated bandwidth and demonstrate
how the channelling plan seen by the end user would be affected.
 51.   We seek comment on the issue of receiver inter-operability standards for satellite and
terrestrial DARS.  Commenters should provide specific proposals that take note of the diverse modulation
and channelling techniques of the satellite DARS applications before us and that the technology for
terrestrial DARS is still being developed.  We also encourage satellite DARS proponents to continue to
participate actively in standards setting organizations such as the National Radio Systems Committee
(NRSC) and the Electronics Industry Association (EIA).  This will facilitate design of individual satellite
DARS receivers according to state-of-the-art standards.
 d.   Data Rates
 52.   The four current satellite DARS applicants propose different digital signal coding rates
which range from 128 to 384 kbps to produce near compact disc (CD) quality audio.  Two satellite DARS
applicants assert that CD quality audio is possible using a 128 kbps data rate.  One applicant questions
whether a data rate of 128 kbps is sufficient to provide the high level of signal quality needed to
differentiate digital sound broadcasting from other sound broadcasting media.   National Public Radio
maintains that if acceptable audio quality is obtained at a bit rate of 128 kbps, then proposals using higher
bit rates make inefficient use of the spectrum.  It asserts further that if the lower bit rates are unworkable
for high quality audio, however, then proposals employing them do not offer significant advantages over
analog radio.
 53.   Moreover, some satellite DARS applicants propose to use variable data rates to transmit
a mix of audio formats.  The bandwidth necessary to produce one CD quality channel, for example,
would be used to provide several high quality channels at data rates which are lower than those necessary
to produce CD quality.   Use of variable data rates would  promote efficient use of the spectrum.
 54.   We believe that DARS system licensees should be permitted to implement a mix of audio
formats at variable data rates.  We therefore do not propose to limit the licensees to a  single standard for
digital audio coding.  We propose, instead, that satellite DARS applicants be required to identify which
coding scheme and coding rate(s) they plan to implement on their satellite DARS systems and require
those satellite DARS systems which intend to offer audio formats other than CD quality to be capable of
transmitting lower quality audio at lower data rates.  An applicant that intends to implement variable data
rates, therefore, would be required to demonstrate how its space station will deliver signals at variable
rates and how its individual satellite DARS receivers would be capable of adjusting the coding rate to
provide less than CD quality audio channel selections to the end user.  We propose to refrain from
requiring a particular level of audio quality or other quality for satellite DARS.  We seek comment on this
conclusion.
 e.   Terrestrial Gap Fillers
 55.   As previously discussed, signal blockage and multipath interference can affect the service
link margin of a satellite DARS system.  It is important for the satellite DARS systems to maintain
sufficient service link margin to reproduce the original information transmitted by the satellite.  Some
satellite DARS applicants indicate that they intend to implement, as they find necessary, terrestrial
repeaters, or "gap-fillers", in urban canyons and other areas where it may be difficult to receive DARS
signals transmitted by a satellite.  These terrestrial gap-fillers would re-transmit the information from the
satellite to overcome the effects of signal blockage and multipath interference.  None of the satellite DARS
applicants, however, provided the necessary technical information in their applications to demonstrate how
these complementary terrestrial repeater networks would be implemented.   The proposed rules for satellite
DARS provided in the supplemental comments include a number of provisions for complementary
terrestrial networks, however.
 56.   We are not proposing rules to govern complementary terrestrial gap-fillers at this time
because we do not have sufficient information.  We request comment on whether separate applications
for complementary terrestrial DARS authorization should be required to identify the number and locations
of these terrestrial repeaters and also their operating frequencies.  We request comment on whether, if a
large number of gap fillers is required, there comes a point at which the service becomes essentially a
terrestrial rather than a satellite service. We also request comment on other specifics of operation that
would have to be identified.  This would include whether the gap-fillers would require a  bandwidth the
same as the satellite's and whether the gap-fillers use the same frequencies as the satellite transmitters.
If other frequencies would be used, what would they be?  How would the end user tune the receiver to
receive the signal, or would this be done automatically by the receiver according to signal strength?  Until
such information is available and applicants demonstrate how these complementary terrestrial networks
would be implemented in the overall satellite system design, we cannot determine if  terrestrial gap-fillers
should be permitted and what rules should govern their use.  Because gap-fillers are complementary to
the satellite service, we propose to prohibit their operation except in conjunction with an operating satellite
DARS system.
 f.  Cross Polarized Emissions
 57.   Cross polarized signals are orthogonal signals as seen by the receiver.  This technique
is used extensively in the fixed-satellite service because it facilitates re-use of frequencies to accommodate
multiple signals.  It is proposed by the two parties filing Supplemental Comments that each licensee with
an operational system may employ cross polarization within its frequency assignment and may transmit
cross polarized signals in another licensee's frequency assignment under mutual agreement with that
licensee.
 58.   Parties in this proceeding, however, disagree on the feasibility of cross polarization for
multiple entry in a mobile environment.   CD Radio maintains that sufficient cross-polarization isolation
can be attained to permit use of cross polarization as a service enhancement for satellite DARS.
However, AMRC contends that cross-polarization will not be effective for transmission to mobile users
since mobile receivers typically will not be able to discriminate cross-polarized signals after the
polarization reversal effects of multipath reflections.
 59.   The record is insufficient for us to analyze the benefits of potential capacity increases, if
any, that may result from use of  cross-polarized transmissions.  It is not clear whether optimum cross-
polarization isolation would be available to allow use of this technique for multiple entry in a mobile
environment.  However, licensees may be able to use this technique as a means of increasing system
capacity.  We therefore propose that satellite DARS licensees, pursuant to mutual agreement with other
satellite DARS licensees, may transmit on cross polarized frequencies in frequency assignments of other
licensees.  We seek comment on whether any mutual agreements to share cross polarized frequencies
should be subject to a spectrum cap should one be adopted.  Licensees who come to mutual agreement
on the use of cross-polarized transmissions would be required to notify the Commission and demonstrate
that cross-polarization sharing is feasible under shadowing and multipath conditions.  The parties who
achieve mutual agreement would also be required to apply to the Commission for approval of the
agreement.  Approval would be conditioned on the outcome of coordination with other administrations.
 g.  Inter-service Sharing
 60.   The issues related to inter-service sharing and, specifically, international coordination, are
relevant regardless of the licensing option the Commission chooses to adopt, including an auction of
spectrum.  Satellite DARS licensees are required to coordinate with other Administrations over that portion
of the 2310 - 2360 MHz band they are exclusively licensed to operate.  Licensees may also reach mutual
agreements with other licensees to maximize efficient use of the spectrum.  Licensees would be required
to submit their agreement to the Commission for authorization and would be required to coordinate their
exclusive frequency assignments.  We seek comment on any of the proposed requirements which follow
and any additional requirements that would be necessary to facilitate international coordination in the most
efficient manner, under any licensing approach.
 i.    Domestic
 61.   The Commission  noted in the Allocation Order that by allocating the 2310 - 2360 MHz
band to satellite DARS, it would be necessary to accommodate aeronautical telemetry services now
operating in the 2310 - 2390 MHz band in the upper portion of the band from 2360 - 2390 MHz.  The
aeronautical telemetry community supported this re-accommodation.  Footnote US328 was therefore
added to Section 2.106 of our rules which allocated satellite DARS in the 2310  - 2360 MHz band on a
primary basis.  Continued use of the 2310-2360 MHz band by aeronautical telemetry and radiolocation
users will be on a secondary basis only.   There is no need, therefore, to develop specific rules or
coordination provisions for inter-service sharing between satellite DARS and existing users of the 2310 -
2360 MHz band in the U.S.
 ii.  International
 62.   Both Canada and Mexico are allocated the 1452 - 1492 MHz frequency band (L-band)
for satellite and/or terrestrial DARS.  Since U.S. satellite DARS systems will operate in the 2310 - 2360
MHz frequency band (S-band), coordination between U.S. satellite DARS and satellite and/or terrestrial
DARS systems of adjacent countries is not necessary.  Canada does, as we describe below, operate fixed
terrestrial point-to-point microwave and mobile aeronautical telemetry systems in the 2310 - 2360 MHz
band and the U.S. satellite DARS systems will be required to coordinate with these systems.  We also note
that the U.S. government uses the 1452-1492 MHz band extensively for mobile aeronautical telemetry
operations and coordination of Canadian satellite and/or terrestrial DARS could be extremely difficult for
U.S. government systems.  This difficult coordination at 1452-1492 MHz between Canadian DARS and
U.S. government systems could impact the coordination of U.S. satellite DARS systems with Canadian
systems at 2310-2360 MHz.
 63.   CD Radio conducted an independent study which analyzes the coordination of  U.S.
satellite DARS systems with Canadian terrestrial systems in S-band and submitted it to the Commission.
This study identifies that the 2310-2350 MHz band is allocated, in Canada, for Fixed Service and
Multipoint Communications Systems.  The 2350 - 2360 MHz band is allocated for Mobile Telemetry.
The majority of Canadian fixed terrestrial systems operate in the lower 10 MHz of the 2310 - 2360 MHz
band.  It is also noted that 11 aeronautical telemetry base stations operate in the 2350 - 2360 MHz band.
The majority of these base stations are located at high latitudes, however, where reduced power flux-
density, the measured power of the satellite transmission in a specified area and bandwidth, would be
received at the Earth's surface from the U.S. DARS satellite.
 64.   CD Radio also argues that coordination of satellite DARS systems would be facilitated
if all systems were required to meet a power flux-density (pfd) level at the Earth's surface of  -139
dB(W/m2/4kHz).  It maintains further that the failure to meet this limit by any of the satellite DARS
operators would lead to delays in service initiation by all licensees.  DSBC disagrees with CD Radio
regarding its proposal to require pfd limits on satellite DARS downlink transmissions.  It adds that there
is no pfd limit in the international Radio Regulations or the Commission's Rules for the 2310-2360 MHz
band.
 65.   DSBC is correct that there is no pfd limit or threshold level to trigger coordination
specified in the international Radio Regulations or in the Commission's Rules.  We do not propose to
require limits here.  Further, our band sharing proposal could allow coordination of U.S. satellite DARS
systems to proceed independently if necessary.  It is therefore not likely that one satellite DARS operator
would delay the coordination and implementation of other satellite DARS systems in the event the pfd
at the Earth's surface is greater than -139 dB(W/m2/4kHz) for each system.  Applicants are reminded,
however, that they are required to identify in their satellite DARS system applications the pfd at the
Earth's surface from their spacecraft according to Section 25.114 (c)(11) of the Commission's Rules.
 66.   To alleviate the potentially difficult and lengthy coordination with other administrations,
especially Canada, we propose to consider only spectrum above 2320 MHz for initial U.S. satellite DARS
systems unless we decide to auction this spectrum.  We believe our proposal will equitably distribute
the allocated satellite DARS spectrum.   We further note that the Supplemental Comments propose that
the first satellite DARS licensee(s) assigned spectrum would be authorized use of the uppermost available
frequency assignment.  It appears from the Coordination Study and the Supplemental Comments filed that
the Canadian aeronautical base stations located in the upper portion of the 2310 - 2360  MHz band could
be less difficult to coordinate  than the fixed terrestrial stations located in the lower portion of the band.
We request specific comment on whether our conclusions are correct.
 67.   Our proposal is to require that each satellite DARS licensee coordinate with other
Administrations over that portion of the 2310 - 2360 MHz band they are exclusively licensed to operate.
Since we propose to allow satellite DARS operators under mutual agreement with other licensees to
transmit on cross polarized frequencies, we propose that licensees who come to mutual agreement apply
to the Commission for approval of the agreement before coordination is initiated with other administrations
by the licensee of the exclusive frequency assignment.  The coordination process would begin after the
systems' pertinent information is provided to the Commission for the advance publication, coordination
and notification of frequency assignments pursuant to the international Radio Regulations as required by
Section 25.111(b) of our Rules. We request comment on whether these proposals would require change
if the proceeding is reopened and spectrum is auctioned.
 iii.  Adjacent Band Services
 68.   Space Research has a primary allocation in Region 2 for deep space operations in the
2290-2300 MHz band.  This radiocommunication service uses spacecraft or other objects located two
million kilometers or more from Earth for scientific or technological research purposes.  As AMRC
maintains, it is important that this service remain protected from emissions that may be produced by
operating satellite DARS transponders in the 2310-2360 MHz band.
 69.   Satellite DARS licensees must suppress emissions outside of the 2310-2360 MHz band
to an acceptable level according to Section 25.202(f) of our rules.  Techniques such as spectral shaping,
coding, offset quadraphase modulation and filtering, we believe, will minimize these emissions.  We
solicit specific comment, however, on the levels of out-of-band emissions from satellite DARS space
stations necessary to protect deep space operations and other radiocommunication services operating below
the 2310-2360 MHz band and  U.S. aeronautical telemetry systems which are to operate in the 2360-2390
MHz band.
 h.  Feeder Links
 70.   In addition to the service links from the space station to the mobile, portable and fixed
DARS receivers, one, or possibly more, feeder uplink earth stations in each satellite DARS system are
required to transmit the audio programming information to be received by the end user.  The feeder link
portion of the satellite DARS network is essential to deliver service to the end user and  ample contiguous
spectrum is necessary to implement a viable satellite DARS service.
 71.   We do not propose a separate allocation of spectrum specifically for DARS feeder link
use, however.  Satellite DARS feeder link earth stations will operate at fixed locations and therefore are
to be operated within fixed-satellite service (FSS) allocations. We propose not to permit, for DARS feeder
links, use of  the conventional FSS 4/6 GHz (C-band) and 12/14 GHz (Ku-band) frequency bands already
used for U.S. fixed-satellite services.  We do not believe that satellite DARS feeder links operating in
the conventional C-band and Ku-band FSS frequencies at orbital locations between 60 to 145 degrees west
longitude would be an efficient use of the geostationary orbit and FSS spectrum.  The DARS space
stations do not require the entire 500 MHz of spectrum allocated to the FSS in these conventional bands.
Use of these frequency bands for satellite DARS feeder links would therefore preclude an FSS space
station from using those particular orbital locations and spectrum for conventional FSS services and inhibit
the fungibility of these orbit locations for future domestic FSS assignments.
 72.   The satellite DARS applicants propose feeder link operations in FSS bands other than the
conventional 4/6 and 12/14 GHz bands and comments were received on these proposals.  Broadcast
auxiliary users at 7 GHz generally agree that the portions of the satellite DARS applications which pertain
to feeder link operations in the 7 GHz band should be denied.   They contend that the broadcast auxiliary
bands are heavily used for electronic news gathering, inter-city relays and studio-to-transmitter links and
that use of the 7 GHz band for satellite DARS feeder link operations would not be feasible.  There has
been no indication from the satellite DARS applicants which propose to use the 7 GHz band for feeder
links whether mobile Electronic News Gathering (ENG) equipment would cause interference to satellite
receivers.  We request comment on this matter.
 73.   We note, however, that satellite DARS feeder link earth stations would undoubtedly
employ highly directive antennas at high elevation angles.  It is likely that satellite DARS feeder links in
the 7025-7075 MHz band could be coordinated to operate compatibly with fixed point-to-point terrestrial
TV broadcast auxiliary microwave stations.  We also recognize that the mobile nature of  ENG operations
in the 7 GHz band could make coordination difficult in areas where ENG is heavily used.  We therefore
believe that in those markets where TV broadcast auxiliary stations are fixed links and light ENG use is
presently conducted at 7 GHz, a carefully engineered and coordinated satellite DARS uplink may well be
able to co-exist with point-to-point terrestrial TV broadcast auxiliary microwave stations.
 74.   We propose not to delay the licensing and implementation of the space segment for
satellite DARS.  We are encouraged that sufficient non-congested FSS frequency bands will be available
for use for satellite DARS feeder link operations.  We also recognize that, in light of our proposed band
sharing plan, feeder link requirements for each satellite DARS system may change.  To this end, we are
placing the satellite DARS applicants on notice that the bands which have been indicated in their initial
satellite DARS applications for feeder link operations may not be available and they may consequently
be required to modify their system designs.  Applicants should identify in their amended satellite DARS
applications which non-congested FSS frequency band it proposes for feeder link operations, and should
identify alternative non-congested FSS frequency bands that would be suitable for its feeder link
operations.
 75.   In addition, we will act on the space station and earth station filings for satellite DARS
separately.  Choice of earth station sites and frequencies is typically provided in an earth station
application as well as analyses to determine the impact on existing users of the frequency bands.
Satellite DARS applicants that propose to use the 7 GHz band for feeder link operations, for example,
would be required in their earth station filing to demonstrate that no mutually unacceptable interference
exists with broadcast auxiliary and mobile ENG users in the band.  Satellite DARS applicants are also
cautioned that feeder link operations for non-geostationary MSS networks are proposed in non-congested
FSS frequency bands.  In this regard we invite comment on the feasibility of satellite DARS feeder link
networks and non-geostationary MSS feeder link networks operating compatibly in the same frequency
bands.
 2.  Rules Applicable to a Licensing Approach Based on the Four Current Applicants
 76.   In addition to the generic technical proposals that would apply to any satellite DARS
applicant, we also propose several specific rules and licensee qualifications that will allow prompt action
on the four current applications if the Commission chooses not to reopen the processing group.
 a.  Intra -Service Sharing
 77.   The four pending satellite DARS applications, as originally filed, have combined spectrum
requirements which exceed the 50 MHz of spectrum allocated for satellite DARS.  The four applicants
also propose system designs which differ in channelling plans, modulation schemes, and multiple entry
techniques.  The applicants have made efforts, however, to demonstrate that their applications are not
mutually exclusive and, as a result, two of the applicants have submitted proposed rules for satellite DARS
intra-service sharing.   On November 9, 1994, CD Radio filed supplemental comments including, among
other proposals, a plan that would permit each of the four applicants to share the available spectrum on
an equal basis.  CD Radio filed the proposed rules on behalf of itself but stated that they were a result
of negotiations among the parties.  It stated that no final agreement was reached on all of the rules but
that, to CD Radio's knowledge, no controversy among the applicants exists over spectrum sharing.  Indeed,
DSBC replied to CD Radio's supplemental comments and submitted its own proposals, stating that any
differences between its proposals and CD Radio's proposals can be harmonized and should not block the
development of an NPRM.  The Supplemental Comments propose a band segment approach for intra-
service sharing to avoid imposing complex sharing arrangements on satellite DARS licensees that may
result from the wide diversity in satellite DARS system designs.  We propose to use this approach as a
basis for our proposed rules and intra-service sharing arrangement if we determine to license the four
current applicants and do not accept additional applications.  Applicants would be permitted to amend their
applications to conform with the sharing approach, if adopted.
 78.   Based on preliminary technical analysis, we believe that the four pending applicants should
be able to operate over 40 MHz of the available spectrum, with each assigned to a minimum spectrum
block of 10 MHz.  We base this on the coding schemes and channeling plans presented in the originally
filed applications.  It is also based on the provision in our proposed rules that licensees would be permitted
to operate on the cross polarized frequencies of other licensees' assignments under mutual agreement.  This
approach would accommodate the pending applicants, even assuming that the lower 10 MHz of the
allocated DARS spectrum is not readily available for DARS licensing  because of interference constraints.
We request comment on whether our tentative conclusion is correct that exclusive assignment of 10 MHz
of spectrum is sufficient for each proposed satellite DARS system.
 i.  Band Segments
 79.   The Supplemental Comments identify the term "usable bandwidth".  Both DSBC and CD
Radio define the term as that portion of the 2310-2360 MHz band that is usable by satellite DARS
licensees.  DSBC more specifically defines the usable bandwidth as the 2310-2360 MHz band, and
indicates that this may be changed by the Commission or by mutual agreement of the satellite DARS
licensees.   Nevertheless, it was proposed that the usable bandwidth be divided into four frequency
assignments and that these frequency assignments be distributed equally among the four pending applicants
from the initial processing group.  Should any system license be cancelled, it is proposed that the usable
bandwidth be re-divided, pro-rata, among the remaining licensees.
 80.   We propose a similar band sharing approach but based specifically on 10 MHz band
assignments.  As discussed elsewhere in this NPRM in further detail, due to the number of Canadian fixed
point-to-point microwave facilities in the lower 10 MHz (2310-2320 MHz) portion of the band, a satellite
DARS licensee assigned these frequencies would experience relatively greater coordination difficulties with
Canadian terrestrial services than those licensees assigned to the upper 40 MHz (2320-2360 MHz).  It
therefore appears that the proposals submitted in the Supplemental Comments could lead to an inequitable
coordination burden for the licensee assigned the lower 10 MHz of the DARS band.  If we decide not to
accept additional applications, we propose to divide the 2310-2360 MHz band into five equal 10 MHz
bands and to assign each satellite DARS licensee a minimum of 10 MHz of exclusive spectrum located
in one of the four 10 MHz bands above 2320 MHz.  The term "usable bandwidth" defined by the
applicants would therefore be considered as the 2320-2360 MHz band in our proposal.  We also propose
to allow licensees to use the channelling plans, modulation schemes, and multiple entry techniques of their
choice in their exclusive frequency assignments as proposed in the Supplemental Comments.  In addition,
subject to any applicable legal restrictions, we propose that licensees be permitted to acquire additional
spectrum from other licensees.
 81.   We request comment on whether this sharing arrangement furthers the public interest in
efficient use of spectrum and in maximizing competition in this market.  Commenters addressing this issue
should also indicate whether this proposed 10 MHz band segment approach would render the current
applications mutually exclusive by limiting the amount of spectrum assigned to such an extent that viable
service is not possible and all four applicants can not be accommodated.  We propose to auction any
additional spectrum that becomes available if any of the four current applicants fails to implement its
proposal and we receive mutually exclusive applications for that spectrum.  Also, if the Commission
ultimately adopts the 10 MHz band segment approach, what uses for the lower 10 MHz of spectrum would
be appropriate and how should it be licensed?  Could a similar band segment approach be implemented
if the Commission chose to assign only part of the usable bandwidth such as a total of 25 MHz?
 82.   We request overall comment on our band sharing proposal for licensing the four
applicants, including whether the four applicants can be accommodated in 40 MHz, and on other
alternative spectrum sharing approaches that could accommodate multiple entry in this service.  If the
record in response to this Notice clearly reveals that assignment of the lower 10 MHz would not result
in an inequitable coordination burden among the licensees, we would re-consider defining the usable
bandwidth as 2310-2360 MHz and the four 12.5 MHz band segment approach.  We also request comment
on how our band sharing proposal would impact individual satellite DARS receiver designs including the
incorporation of the command signalling channels necessary for the satellite DARS operator to remotely
tune the receivers to operate at various center frequencies.
 83.   Specific comment is also sought on how our band sharing approach would affect the
location of telemetry beacons.  The Supplemental comments suggest that each system operator reduce its
bandwidth occupancy by 0.1 MHz to create two 0.2 MHz assignments adjacent to the edge of the usable
bandwidth for location of telemetry beacons.  In light of our proposed band sharing plan, however, we
request comment on how location of telemetry beacons would be impacted if unlicensed spectrum is
assigned to other licensees and a center frequency shift is necessary for each satellite DARS system.  An
alternative might be to locate all telemetry beacons at the lower edge of the 2310 - 2360 MHz band.
Though this would put less of a constraint on the use of the upper 40 MHz of spectrum, an added
constraint would be placed on any future licensee of the lower 10 MHz band.  We request comment on
this alternative and the appropriate location for telemetry beacons.
 ii.   Frequency Assignments
 84.   CD Radio proposes in its Supplemental Comments that, unless the licensees agree
otherwise, each licensee shall be assigned the highest frequency assignment available on the date of launch
of its first spacecraft.  It further proposes that each licensee must notify the Commission of the specific
frequency assignment it is using at the same time it certifies to the Commission it has met the milestone
and launched its first spacecraft.  DSBC asserts that the frequency assignment should be assigned on the
date the applicant is authorized to commence construction.
 85.   The coordination process with Canada and Mexico will need to begin long before the first
satellite DARS licensee certifies to the Commission that it has met the milestone requiring launch of its
spacecraft.  CD Radio's approach would therefore require satellite DARS licensees to begin coordination
with Canada across the entire 2310 - 2360 MHz band since each licensee would not know in the interim
which exclusive frequency assignment it must coordinate.  This approach, we believe, would be overly
burdensome for both the Commission and the licensees.  We propose to authorize specific satellite DARS
frequency assignments upon grant of satellite DARS licenses to begin construction.  We propose to assign
frequencies on the basis that, pursuant to our band sharing plan, each assignment is equally suitable for
service.  This approach would expedite the U.S./Canada coordination process and the implementation of
U.S. satellite DARS systems.  We request comment on our proposal to assign frequencies.
 iii.  Interim Frequency Assignments
 86.   CD Radio proposes in its Supplemental Comments that a satellite DARS system operator
be permitted temporarily to occupy frequency assignments other than its own provided its transmissions
can be reconfigured to use only its own frequency assignment upon launch of the satellite operated by the
licensee assigned to the frequency. DSBC objects to this proposal in its reply comments.  It asserts that
while temporary use by the first operator(s) might avoid having frequencies lie fallow for a short time,
prescribing temporary use may be disruptive and contrary to the public interest because the temporary
operator could be faced with reducing its services, discontinuing its service to its customers, or seeking
to utilize frequencies that are rightfully assigned to another licensee once the temporary spectrum is no
longer available for use.
 87.    It is unclear whether an interim assignment would be necessary to implement a satellite
DARS system.  We expect that the coordination of the individual satellite DARS licensed systems will
proceed simultaneously according to our proposed milestone requirements and spectrum would not lie
fallow during the coordination process.  Also, in the event that one or more licensed systems are not
implemented, and remaining spectrum is assigned to other licensees, we agree with DSBC that an interim
assignment may be disruptive and contrary to public interest because of possible service interruption or
reduction.  We therefore propose not to authorize interim frequency assignments to satellite DARS
licensees but request comment on this issue.
 b.  Financial Qualifications/Milestone Requirements
 88.   The Commission has historically imposed financial qualifications on applicants seeking
to provide satellite based services.  The huge costs involved in implementing satellite proposals have
proven to be a significant obstacle to new entrants and have often led to unsuccessful and prolonged
attempts to obtain financing while service to the public is delayed and other qualified applicants are
precluded from participating.
 89.   Two DARS applicants suggested financial qualification rules.  CD Radio suggests that
applicants be required to demonstrate their financial ability to proceed with construction, launch and
operation of their proposed systems in accordance with an established schedule of milestones.  While CD
Radio suggests that each applicant submit the same financial information as that required from domestic
fixed-satellite applicants, it is not clear at what point in the construction process that CD Radio intends
to require satellite DARS licensees to obtain full financing.  DSBC urges the Commission to adopt a
financial qualification standard based on due diligence requirements identical to the one used in the Direct
Broadcast Service.  DSBC argues that such a relaxed standard is appropriate because DARS is a new
high-technology, high risk, capital intensive venture where it may be difficult to attract financial support.
 90.   Although we appreciate DBSC's concerns about the difficulty in obtaining financing for
new, unproven ventures, our experience in licensing satellite system applicants that have not been able to
raise sufficient funds to implement their systems makes us wary of adopting a standard that does not
ensure that the public will be offered service in a timely fashion.  We also believe that DARS applicants
should not be held to the stricter standard imposed on applicants in the domestic fixed-satellite service.
Because it appears that all pending applications can be granted if the Commission chooses to license the
current applicants and not reopen the processing group, and that one licensee's pursuit of financial
resources will not preclude another applicant from implementing its system, we see no need to require
applicants to demonstrate full funding before we will award licenses.  Rather, we propose to adopt a
standard  that will give applicants an additional year to arrange financing but will nonetheless assure that
limited frequencies do not remain unused.  Pursuant to this standard, applicants may demonstrate
financial qualifications in stages.  In order to receive a license, we propose to require applicants to provide
evidence of financial capability, through a balance sheet showing the funding, a commitment from a
corporate parent if the applicant is relying on the parent for the funds, or showing estimated income or
revenues anticipated from proposed operations.
 91.   In addition, we propose to require each satellite DARS licensee to show that, within one
year of grant and in conjunction  with its showing that it has commenced construction of its first satellite,
it has firmly committed resources sufficient to cover the cost of construction, launch and one year's
operation of its proposed system.  This second demonstration is to be made in the same manner as that
required of domestic fixed-satellite licensees.  This will provide DARS licensees with a year to complete
financing arrangements once they have a license in hand.  In addition, the public interest will be served
by bringing DARS service to consumers in a timely manner.
 92.   In addition to financial qualifications, strict adherence to  milestones will assure that
licensees are proceeding expeditiously with their plans and that scarce spectrum resources do not remain
unused.  Applicants filing supplemental comments, CD Radio and DSBC, suggest that licensees be
required to begin construction of the first satellite within one year of license grant, begin construction of
the second satellite, if applied for, within two years and have at least one satellite in operation within six
years of grant.  We are concerned that the final operational milestone of six years suggested by the
applicants will not provide the Commission with sufficient control over the prompt implementation of
satellite DARS systems.  After a contract has been signed, the typical time required to complete
construction of a space station is three years.  Thus, if a licensee is actively pursuing its plans, its first
satellite should be ready to launch within four years of license grant. Therefore, in addition to requiring
that licensees begin construction of their first satellite within one year, we propose a rule requiring launch
and operation of the first satellite within four years of license grant and full operation of an entire satellite
system comprised of more than one satellite within six years of grant.  Such a schedule, together with the
financial showing proposed, will allow careful monitoring of licensees' progress.  We request comment
on whether this tighter milestone schedule  is appropriate.  DARS licenses will be conditioned on meeting
these milestones, licensees will be required to notify the Commission when they have met them, and
failure to conform to this schedule will render the licenses null and void.
 93.   Under an auction-based procedure, given the substantial up-front payments expected, we
assume that financial qualifications and construction milestones for licensees would be unnecessary.  We
seek comments on this assumption.  The Commission's statutory authority directs it to include in auction
rules performance requirements necessary to ensure that service is implemented promptly and spectrum
is not warehoused.  Raising additional capital necessary to prevail in an auction creates additional
pressure from investors to use licenses efficiently and intensively.  We seek comment on whether the
auction-based assignment procedure should include less stringent administrative requirements and
supervision of progress in system implementation than do the other licensing options.  We seek further
comment on appropriate performance requirements for the auction-based option, and anti-warehousing and
anti-trafficking rules appropriate in an auction environment.
 3.  Rules Applicable to a Licensing Approach Based on Auctions Procedures
 94.   If the Commission chooses to reopen the application cut-off window and if additional
applications are filed that create a mutually exclusive situation, competitive bidding auctions would be a
possible selection method.  Section 309( j) of the Communications Act gives the Commission the authority
to employ competitive bidding procedures to select licensees if certain factors are present.  These factors
include: 1) mutual exclusivity between applicants, 2) the principal use of the spectrum would be to provide
subscription services, and 3) the use of auctions would further certain public interest objectives.  In this
NPRM we propose rules that would enable us to use auctions as a licensing method for satellite DARS
if that decision appears warranted.
 95.   In order to employ auctions in any given service, the Commission must determine if
mutual exclusivity exists between applications.  Although it does not appear on the existing record that
the four current applicants are mutually exclusive, if additional entities file, given the limited amount of
spectrum available, i.e. 50 MHz,  all applicants' proposals might not be able to be accommodated.   We
seek comment on whether, if the processing group were reopened, new applicants would file and whether
these applications would result in a mutually exclusive situation.
 96.   In addition, the Commission must determine if
       ...the principal use of such spectrum will involve, or is likely to involve, the licensee
       receiving compensation from subscribers in return for which the licensee (i) enables those
       subscribers to receive communications signals that are transmitted utilizing frequencies
       on which the licensee is licensed to operate; or (ii) enables those subscribers to transmit
       directly communications signals utilizing frequencies on which the licensee is licensed to
       operate...
The Commission has previously decided that auctions were authorized if at least a majority of the use of
the spectrum would be for service to subscribers and in making this determination, we decided to look
to classes of licenses and permits rather than at individual licenses.  With respect to satellite DARS, we
tentatively conclude it is likely that the principal use of the spectrum will be to provide subscription based
services.  We base this tentative conclusion on the proposals by the four current applicants,  three out
of four of whom propose subscription service.  We request comment on this issue, including information
from any potential applicants on the type of service they contemplate offering.
 97.   Further, we tentatively conclude, but ask for comment on this tentative conclusion, that
a competitive bidding procedure could further the statutory public interest objectives we are obliged to
consider.  These objectives include:
 (A)   the development and rapid deployment of new technologies, products, and services for the
benefit of the public, including those residing in rural areas, without administrative or judicial delays:
 (B)   promoting economic opportunity and competition and ensuring that new and innovative
technologies are readily accessible to the American people by avoiding excessive concentration of licenses
and by disseminating licenses among a wide variety of applicants, including small businesses, rural
telephone companies, and businesses owned by members of minority groups and women;
 (C)   recovery for the public of a portion of the value of the public spectrum resource made
available for commercial use and avoidance of unjust enrichment through the methods employed to award
uses of that resource and
 (D)   efficient and intensive use of the electromagnetic spectrum.
 98.   First, a competitive bidding procedure for satellite DARS could permit this new technology
to be rapidly introduced, particularly to those residing in rural areas without a wide range of terrestrial
radio choices.   We ask for comment on whether auctions would be a faster licensing process than other
approaches such as lotteries or comparative hearings for mutually exclusive applications.  Alternatively,
would licensing the four current applicants pursuant to rules proposed in this notice provide quicker
service to the public than would auctions?
 99.   Second, the statutory policy objective of promoting economic opportunity by awarding
licenses to a variety of entities including small businesses, and businesses owned by minorities and
women, has been addressed in our auction rules in other services via bidding credits, installment payments
and set-asides.  We seek comment on how to address this directive in the context of satellite DARS.
Third, an auction also would allow the public to recover the value of the spectrum resource.  Finally, it
could encourage efficient spectrum use and force bidding applicants to develop concrete and realistic
business plans in the process of preparing bids.  We note that the Commission, in its discretion under the
1993 Budget Act, could choose to utilize a lottery to issue satellite DARS licenses.  We seek comment
on whether the factors that led the Commission to prefer lotteries over auctions for pending applications
in existing services, such as concern about delay in licensing and equitable considerations in favor of
existing applicants, are  present here.
 100.  If an auction is employed for satellite DARS, we anticipate conducting it pursuant to the
general framework adopted in the Second Report and Order, the Commission's rules, and consistent
with other Commission proceedings where auctions have been employed.  We also propose certain
service specific  parameters if we choose to auction this spectrum.
 101.  In addition, if the Commission chooses the auction option, we also request comment on
whether there are any ways within the context of competitive bidding procedures, that the investment of
the four current satellite DARS applicants and accompanying equities in their favor could be recognized.
In designing auctions, the Commission has an obligation to enact payment schedules that prevent unjust
enrichment.  Current DARS applicants' efforts and expenditures in the past may have lowered the cost
of developing DARS service and increased consumer receptivity to DARS.  Assuming this is so, new
applicants will benefit from these efforts and expenditures.  We seek comment about whether such benefits
would cause unjust enrichment for new applicants if this spectrum were auctioned.  We request comment
on whether current DARS applicants could be given bidding credits equal to the estimated value of the
benefits that they have created for new applicants or whether they could be permitted to use a system of
installment payments to satisfy their commitments pursuant to an auction.  We also seek comment on how
the value of such benefits could be measured, and on their magnitude.  We request comment on these
possibilities and on any other procedures the Commission could employ and on the extent of our legal
authority to do so.  For example, we may provide a licensee up to a 15% discount and guaranteed license
pursuant to the pioneer's preference provisions in Section 309(j)(13) if it qualifies for a preference.  Below
we seek comment on the pending pioneer's preference requests filed by DSBC, Primosphere and CD
Radio.
 102.  We propose to auction 50 MHz of downlink frequency segments according to a band
plan that we choose based on comments in this proceeding and we may also limit the number of segments
on which a licensee may bid successfully.  Licenses would be national in scope.  We propose that our
rules on a band plan and spectrum cap  be structured to allow flexibility in DARS system design while
also ensuring competition among service providers.  The size of the proposed spectrum blocks may be
different for the auction based approach than for the approach based on spectrum sharing between the four
current applicants.
 103.  In addition, we tentatively conclude to use a single, simultaneous multiple round procedure
to allow licensees to aggregate and/or substitute spectrum blocks. The International Bureau would
announce the time and place of the auction and provide additional information to bidders by future public
notice.
 104.  We propose to adopt the short-form application procedures, payment requirement, public
notice procedures, and anti-collusion rules, and default and disqualification payment requirements set forth
in Subpart Q of Part 1 of the Commission's rules.  We propose adoption of the standard upfront
payment formula of $0.02 per pop-MHz, based on the number of 5-MHz blocks identified in the
applicants' Form 175.  Requiring applicants to make significant financial arrangements prior to
participation helps assure that applicants take the licensing procedure seriously.  In addition, upfront
payments provide available funds for the collection of possible bid withdrawal and default payments.  The
formula proposed would result in an upfront payment of about twenty-five million dollars for a national
license of 5MHz.  We seek comment on whether this is an appropriate amount for an upfront payment
for an auction of S-band spectrum. We also seek comment on whether and to what extent rules on upfront
payments should include special consideration for the four current applicants.  We also ask whether the
upfront payment should be reduced for small businesses.  Would such a large upfront fee impose a
significant barrier to entry to these auctions that it would be contrary to the directives of Section 309(j)
regarding opportunities for small businesses or, as discussed below, should a substantial upfront payment
be imposed to ensure that applicants are financially qualified to acquire a DARS license and to construct
and operate a DARS system?
 105.  Section 309(j) of the Communications Act also provides that, when promulgating
competitive bidding regulations, the Commission must "ensure that small businesses, rural telephone
companies, and businesses owned by members of minority groups and women are given the opportunity
to participate in the provision of spectrum-based services."  To implement the statute's provisions
concerning these "designated entities," the Commission specified several possible measures, including
installment payments, bidding credits and spectrum set-asides, to choose from when establishing
competitive bidding procedures for particular services.
 106.   In the Competitive Bidding Second Report and Order, we also indicated that special
measures for such entities may not be appropriate in all circumstances.  For example, we stated that
installment payments should not be available for all spectrum auctions.  Rather, in order to match such
measures with eligible recipients (i.e., small businesses), installment payments would only be available
for certain licenses that do not involve the largest spectrum blocks and service areas. We did not want to
delay service to the public by encouraging under-capitalized firms to receive licenses for facilities which
they lack the resources adequately to finance.  In addition to installment payments, we also indicated
that, in service-specific rules, we may determine that bidding credits are necessary to provide designated
entities the opportunity to bid successfully for a license.  This determination, we stated, would "rest in
whole or in part on our assessment of the available opportunities in, and characteristics of, a specific
spectrum-based service."
 107.    We note further that, as discussed above, Section 309(j)(3) also requires the Commission
to promote economic opportunity and competition and ensure that new and innovative technologies are
readily accessible to the American people by avoiding excessive concentration of licenses and by
disseminating licenses among a wide variety of applicants, including designated entities.  The statute,
however, directs the Commission, in specifying auction procedures, to pursue other objectives: "the
development and rapid deployment of new technologies, products, and services for the benefit of the
public, including those residing in rural areas, without administrative or judicial delays" and of promoting
"efficient and intensive use of the electromagnetic spectrum."
 108.   In light of the above discussion and the Commission's previous determination in another
satellite service,  we seek comment on how the Commission can strike a proper balance in the public
interest among the statutory objectives if competitive bidding is used for licensing satellite DARS.  In
particular, we seek comment on what, if any, special measures for designated entities are necessary in this
service to achieve each of the statute's objectives.  In this regard, parties should comment on appropriate
eligibility criteria for such measures.  Specifically, if installment payments are adopted for small
businesses, we invite comment on the appropriate definition of "small business," taking into account the
likely capital requirements for DARS licensees and the other characteristics of the service.  We also
request comment on whether to implement a bidding credit program for satellite DARS.  In connection
with any measures for designated entities, commenters should also address means of preventing unjust
enrichment through trafficking of licenses.
 109.  We propose that each applicant would be required to specify on its Form 175 its status
as a designated entity (if applicable), the frequency blocks applied for, and the persons authorized to place
or withdraw bids. Applicants would have to identify any arrangements or agreements with other parties
relating to the licenses that are subject to auction.  The timing and duration of auction rounds would be
determined by the International Bureau and announced by public notice. This notice would include
information on the size of bid increments, activity rule, and stopping rules, and the proposed end of an
auction after a specified number of rounds.
 110.  We propose to employ bid withdrawal and default rules similar to prior auctions.  At the
conclusion of the auction, winning bidders would be required to supplement their upfront payments and
file their long-form applications pursuant to our rules on satellite applications.   Applicants would have
30 days to file their long form applications and when these are filed, the International Bureau would issue
a public notice announcing the acceptance of the applications for filing.
 111.  Finally, recognizing that we have not yet identified specific frequencies for feeder links
in this service, we request comment on whether auctionable satellite DARS spectrum segments should
include accompanying feeder link spectrum.  The Commission has previously concluded that service
used as part of end-to-end subscriber based offerings would meet the statutory criteria for auctions.  While
the Commission decided in its Second Report and Order in the Competitive Bidding rulemaking
proceeding, not to auction intermediate links, including feeder links in the Mobile Satellite Services
(MSS), it appears that this determination was based not on the failure of such services to meet the
principal use test, but on the finding that auctions for intermediate links would not achieve the public
interest objectives in 309(j)(3).  We tentatively conclude, however, that mutually exclusive applications
for feeder link spectrum for satellite DARS would satisfy the principal use test and the public interest
objectives in the competitive bidding statute.  We seek comment on this tentative conclusion and whether
feeder link spectrum should be auctioned separately or in conjunction with the S-band frequencies.  We
also seek comment on whether auctions would apply to feeder links for satellite DARS if a mutually
exclusive situation arises with other users of this spectrum, for example fixed satellite services or broadcast
auxiliary services. Commenters should also take into consideration our previous discussion of feeder links
in this NPRM.
 4.  Pioneer's Preference Requests
 112.  DSBC, Primosphere and CD Radio each have pending satellite DARS pioneer's preference
requests in GEN Docket No. 90-357.  CD Radio's request, filed July 30, 1991, and its supplemental
request, filed January 23, 1992, were placed on public notice January 31, 1992 and assigned file number
PP-24.  CD Radio's second supplemental request and the requests of DSBC and Primosphere, each of
which were filed June 2, 1993, were not placed on public notice.  We are associating CD Radio's second
supplemental request with file number PP-24 and are assigning file number PP-86 to DSBC's request and
file number PP-87 to Primosphere's request, all in GEN Docket No. 90-357.
 113.  In the Notice of Proposed Rulemaking and Further Notice of Inquiry in GEN Docket No.
90-357, we deferred consideration of pioneer's preference requests because we found that DARS
technology was rapidly evolving, but was not yet fully developed.  In the Allocation Order,  we
continued to defer action on pioneer's preference requests because we were conducting a review of the
pioneer's preference rules in ET Docket No. 93-266 to assess the preference program following the
enactment of competitive bidding authority.  In the Second Report and Order and Further Notice of
Proposed Rule Making in ET Docket No. 93-266, we adopted new rules and procedures for pioneer's
preference requests, which are applicable to the pending DARS requests.  We have recently amended our
pioneer's preference rule to implement Section 309(j)(13) of the Communications Act which was added
by legislation implementing the General Agreement on Tariffs and Trade (GATT).  These new rules will
also apply to the pending satellite DARS requests.  Accordingly, DSBC, Primosphere, and CD Radio will
be required to amend or supplement their pioneer's preference requests to bring them into compliance with
the new rules.
 114.  Under our revised rules adopted in the Second Report and Order in ET Docket No. 93-
266, pioneer's preference requests complying with our acceptability requirements and procedures "will be
accepted for filing and listed by file number in a notice of proposed rulemaking addressing the new
service or technology proposed in the request." 47 C.F.R.  1.402(d).  Because each of the requests
referenced above appears to be acceptable for filing, we herein solicit comment on these requests.
Pursuant to Section 1.402(e) of the Commission's rules, 47 C.F.R.  1.402(e), parties wishing to comment
on any of these three pioneer's preference requests should file comments separate from any comments filed
on the rules proposed in this Notice and should reference both the appropriate pioneer's preference file
number(s) and GEN Docket No. 90-357 on the cover page of their comments.
 5.  Miscellaneous Issues
 115.  These issues are generally associated with our analysis of the four current applicants but
we seek comment on which might be applicable to licenses awarded pursuant to auctions.  As a non-
common carrier/subscription service, DARS licensees would not be subject to the foreign ownership
restrictions of the Communications Act.   However, licensees providing broadcast services would be
covered by these restrictions and would thus be limited in the amount of foreign investment they could
attract.  We request comment on whether foreign ownership restrictions should apply to any DARS
licensees, to all DARS licensees or only to those DARS licensees proposing broadcast services.
 116.  We propose that licenses for DARS space segment facilities would be issued for ten
years.  We note that Primosphere proposes to offer broadcast services.  Broadcast licenses are limited
to seven years.  We seek comment on whether the license term we select should differ based on the
operational classification of the service or on whether licenses are granted through a competitive bidding
process.  In addition, we propose that the license term would begin when each satellite is launched and
put into operation.  We propose that receivers would not be licensed.  In addition, we propose that
licensees in this service will  be required to file reports with the Commission on an annual basis and
provide information similar to that required of domestic fixed-satellite operators regarding transponder
loading and general satellite operation.
 117.   The Recording Industry Association of America (RIAA) has filed comments asking the
Commission to impose conditions on licensees requiring them to secure license agreements from copyright
owners  of the sound recordings they intend to transmit.  We do not believe that it is appropriate for this
Commission to address copyright issues in the context of proposing DARS service rules.  We would
expect, however, that DARS licensees will comply with all applicable copyright laws and if they do not,
copyright owners have appropriate legal remedies available to them.
 118.  Because the U.S. is the only country in Region 2 with an allocation of  S-Band frequencies
for DARS, licensees can only provide domestic service.  As discussed above, significant international
coordination issues  exist in this band and thus it would be impractical to permit international service.
 119.  National Public Radio (NPR)  suggests that the Commission  establish an Industry
Advisory Committee (IAC)  to guide the nature and continuing development of proposed DARS system
diversity.  While there are substantial technical and regulatory issues that must be resolved as a result of
the differences among the four satellite DARS proposals, we do not believe an IAC is necessary in this
instance. We believe that we have sufficient flexibility to craft service rules  that will accommodate
diverse satellite DARS systems.  We request comment on whether an IAC would be appropriate in this
proceeding if we proceed with licensing the four current applicants.
 120.  As we provided in our Allocation Order, the mobile and radiolocation services are
allocated primary use of the 2310-2360 MHz band until January 1, 1997 or until the first Broadcasting
Satellite (sound) system is brought into use.  After that time, mobile and radiolocation use of the band
would be permitted only on a secondary basis.  It was also noted in the Allocation order that, of particular
importance, the aeronautical telemetry community supported the reaccommodation of existing aeronautical
telemetry users of the 2310-2390 MHz band to the 2360-2390 MHz band.  The Allocation Order further
noted that when service rules are adopted for satellite DARS, the frequencies allocated for space
telecommand in the 2310-2360 MHz band may also need to be reaccommodated.
 121.  Modification to Part 87 (Aviation Services) of our rules therefore would be consequential
to the licensing of  satellite DARS systems in the 2310-2360 MHz band.  Specifically, our proposal to
modify Part 87 can be found in Appendix II.  We seek comment on this proposal and we seek comment
on any additional modifications to Part 87 that may be necessary.
                             III.  CONCLUSION
 122.  Based on the considerations discussed above, we conclude that the proposals set forth in
this Notice will facilitate the implementation of DARS in the United States.  We seek comment on all
aspects of these service rules and anticipate an extensive record on which to base decisions on final
regulations
                         IV.  PROCEDURAL MATTERS
 123.  This is a non-restricted notice and comment rulemaking proceeding.  Ex parte
presentations are permitted, except during the Sunshine Agenda period, provided they are disclosed as
provided in Commission rules.  See generally 47 CFR  1.1202, 1.1203, and 1.1206(a).  The individual
satellite DARS applications and pioneer's preference proceedings are restricted proceedings, to the extent
that any party has formally opposed an application or pioneer's preference request.  Ex parte presentations
concerning any formally opposed application or request are prohibited.  See 47 CFR  1.1208.
 124.  As required by Section 603 of the Regulatory Flexibility Act, the Commission has
prepared an Initial Regulatory Flexibility Analysis (IRFA) of the expected impact on small entities of the
proposals suggested in this document.  The IRFA is set forth in Appendix III.  Written public comments
are requested on the IRFA.  These comments must be filed in accordance with the same filing deadlines
as comments on the rest of the Notice, but they must have a separate and distinct heading designating
them as responses to the Initial Regulatory Flexibility Analysis.
 125.  Pursuant to applicable procedures set forth in sections 1.415 and 1.419 of the
Commission's Rules, 47 CFR  1.415 and 1.419, interested parties may file comments on or before
September 15, 1995 and reply comments on or before October 13, 1995.  To file formally in this
proceeding, parties  must file an original and five copies of all comments, reply comments, and supporting
comments.  If parties want each Commissioner to receive a personal copy of their comments, they must
file an original plus nine copies.  Parties should send comments and reply comments to Office of the
Secretary, Federal Communications Commission, Washington, D.C. 20554.  Comments and reply
comments will be available for public inspection during regular business hours in the Reference Center
of the Federal Communications Commission, 1919 M Street, N.W., Washington, D.C. 20554, room 239.
For further information contact Rosalee Chiara or Ron Repasi at (202) 739-0735.  Parties filing comments
on the pioneer's preferences requests must file comments separate from those on the rules proposed in this
notice and reference both the file numbers and the General Docket No. 90-357.  For further information
on pioneer's preference requests contact Rodney Small at (202) 776-1622.
                           V.  ORDERING CLAUSES
 126.  Accordingly,  IT IS ORDERED that, pursuant to sections 1, 4(i), 4(j), 7, and 309(j) of the
Communications Act of 1934, as amended, 47 U.S.C.  151, 154(i) and 154(j), 157, and 309(j), NOTICE
IS HEREBY GIVEN of the proposed amendments to Part 25 of the Commission's Rules, 47 CFR Part 25,
in accordance with the proposals in this Notice of Proposed Rulemaking, and that COMMENT IS
SOUGHT regarding such proposals.
 127.  IT IS FURTHER ORDERED that the Secretary shall send a copy of this Notice of
Proposed Rulemaking, including the Initial Regulatory Flexibility Analysis, to the Chief Counsel for
Advocacy of the Small Business Administration in accordance with paragraph 603(a) of the Regulatory
Flexibility Act, Pub. L. No. 96-354, 94 Stat. 1164, 5 U.S.C.  601 et seq (1981).
 FEDERAL COMMUNICATIONS COMMISSION
 William F. Caton
 Acting Secretary

                               APPENDIX I
             Proposed Rules and Regulations to be Added to
               47 C.F.R. Part 25 of the Commission's Rules
1.        The Table of Contents for Part 25 is revised to read as follows:
PART 25 - SATELLITE
CO                            MMUNICATIONS
                                   Su                          bpart A - General
Sec.
25.101    Basis and Scope.
25.102    Station authorization required.
25.103    Definitions.
25.104    Preemption of local zoning of earth stations.
25.105-25.108   [Reserved]
25.109    Cross-reference.
Subpart B - Applications and Licenses
25.110    Filing of applications, fees, and number of copies.
25.111    Additional information.
25.112    Defective applications.
25.113    Construction permits.
25.114    Applications for space station authorizations.
25.115    Applications for earth station authorizations.
25.116    Amendments to applications.
25.117    Modification of station license.
25.118    Assignment or transfer of control of station authorization.
25.119    Application for special temporary authorization.
25.120    License term and renewals.
EARTH STATIONS
25.130    Filing requirements for transmitting earth stations.
25.131    Filing requirements for receive-only earth stations.
25.132    Verification of earth station antenna performance standards.
25.133    Period of construction; certification of commencement of operation.
25.134    Licensing provision of very small aperture terminal (VSAT) networks.
25.135    Licensing provisions for earth station networks in the non-voice, non-geostationary mobile-
          satellite service.
25.136    Operating provisions for earth station networks in the 1.6/2.4 GHz mobile-satellite service.
SPACE STATIONS
25.140    Qualifications of domestic fixed-satellite space station licensees.
25.141    Licensing provisions for the radiodetermination satellite service
25.142    Licensing provisions for the non-voice, non-geostationary mobile-satellite service.
25.143    Licensing provisions for the 1.6/2.4 GHz mobile-satellite service.
25.144    Licensing provisions for the 2.3 GHz satellite digital audio radio service.
PROCESSING OF APPLICATIONS
25.150    Receipt of applications.
25.151    Public notice period.
25.152    Dismissal and return of applications.
25.153    Repetitious applications.
25.154    Opposition to applications and other pleadings.
25.155    Mutually exclusive applications.
25.156    Consideration of applications.
FORFEITURE, TERMINATION, AND
REINST              ATEMENT OF STATION AUTHORIZATION
25.160    Administrative sanctions.
25.161    Automatic termination of station authorization.
25.162    Cause for termination of interference protection.
25.163    Reinstatement.
Subpart C - Technical Standards
25.201    Definitions.
25.202    Frequencies, frequency tolerance and emission limitations.
25.203    Choice of sites and frequencies.
25.204    Power limits.
25.205    Minimum angle of antenna elevation.
25.206    Station identification.
25.207    Cessation of emissions.
25.208    Power flux density limits.
25.209    Antenna performance standards.
25.210    Technical requirements for space stations in the Fixed-Satellite Service.
25.211    Video transmissions in the Domestic Fixed-Satellite Service.
25.212    Narrowband transmission in the Fixed-Satellite Service.
25.213    Inter-service coordination requirements for the 1.6/2.4 GHz Mobile-Satellite Service.
25.214    Technical requirements for space stations in the satellite digital audio radio service.
25.251    Special requirements for coordination.
25.252    Maximum permissible interference power.
25.253    Determination of coordination distance for near great circle propagation mechanisms.
25.254    Computation of coordination distance contours for propagation modes associated with
  precipitation scatter.
25.255    Guidelines for performing interference analyses for near great circle propagation mechanisms.
25.256    Guidelines for performing interference analyses for precipitation scatter modes.
Subpart D - Technical Operations
25.271    Control of transmitting stations.
25.272    General inter-system coordination procedures.
25.273    Duties regarding space communications transmissions.
25.274    Procedures to be followed in the event of interference.
25.275    Particulars of operation.
25.276    Points of communication.
25.277    Temporary fixed earth station operations.
25.278    Additional coordination obligations for non-geostationary and geostationary satellite systems in
          frequencies allocated to the Fixed-Satellite Service.
25.279    Inter-Satellite Service
Subpart E - Developmental Operations
25.300    Developmental operation.
25.308    Automatic Transmitter Identification System (ATIS).
Subparts F-G -- [Reserved]
Subpar            t H - Authorization to own stock in
the Co             mmunications Satellite Corporation
25.501    Scope of this sub-part.
25.502    Definitions.
25.503-25.504   [Reserved]
25.505    Persons requiring authorization.
25.506-25.514   [Reserved]
25.515    Method of securing authorization.
25.516-25.519   [Reserved]
25.520    Contents of application.
25.521    Who may sign applications.
25.522    Full disclosures.
25.523    Form of application, number of copies, fees, etc.
25.524    [Reserved]
25.525    Action upon applications.
25.526    Amendments.
25.527    Defective applications.
25.528-25.529   [Reserved]
25.530    Scope of authorization.
25.531    Revocation of authorization.
                Subpart I -- Equal Employment Opportunities
25.601    Equal employment opportunity requirement.
2.        The authority citation for Part 25 continues to read as follows:
  AUTHORITY:  Sections. 101-404, 76 Stat. 419-427;  47 U.S.C. 701-744, Sec. 4, 48 Stat.
  1066, as amended; 47 U.S.C. 154.  Interprets or applies sec. 303, 48 Stat. 1082, as
  amended; 47 U.S.C. 303.
3.        Section 25.114 is amended by revising paragraph (c)(18), to read as follows:
   25.114.  Applications for space station authorizations.
*          *         *
  (c)     * * *
          (18)    Detailed information demonstrating the financial qualifications of the applicant
          to construct and launch the proposed satellites.  Applications for domestic fixed-
          satellite systems and mobile-satellite systems shall provide the financial information
          required by  25.140(b)-(e),  25.142(a)(4), or  25.143(b)(3), as appropriate.
          Applications for satellite DARS systems shall comply with the requirements of 
          25.144(b)(3).  Applications for international satellite systems authorized pursuant to
          Establishing of Satellite Systems Providing International Communications, 50 FR
          42266 (October 18, 1985), 101 FCC 2d 1046 (1985), recon. 61 RR 2d 649 (1986),
          further recon. 1 FCC Rcd 439 (1986), shall provide the information required by that
          decision.
4.        A new Section 25.144 is added to read as follows:
   25.144  Licensing provisions for the 2.3 GHz satellite digital audio radio service.
  (a)     Definitions
          (1)     "System"  The term "System" refers to the constellation of one or more
          satellite DARS space stations, the feeder link earth station(s), and the mobile, fixed
          and/or portable receivers.
          (2)     "Allocated bandwidth."  The term "allocated bandwidth" refers to the entry in
          the Table of Frequency Allocations of a given frequency band for the purpose of its
          use by one or more terrestrial or space radiocommunication services or the radio
          astronomy service under specified conditions.  This term shall be applied to the 2310-
          2360 MHz band for satellite DARS.
          (3)     "Frequency Assignment."  The term "frequency assignment" refers to the
          authorization given by the Commission for a radio station to use a radio frequency or
          radio frequency channel under specified conditions.
  (b)     Qualification Requirements:
          (1)     General Requirements:  Each application for a system authorization in the
          satellite digital audio radio service in the 2310-2360 MHz band shall describe in detail
          the proposed satellite digital audio radio system, setting forth all pertinent technical
          and operational aspects of the system, and the technical, legal, and financial
          qualifications of the applicant.  In particular, satellite DARS applicants must file
          information demonstrating compliance with  25.114 and all of the requirements of
          this section.
          (2)     Technical Qualifications:  In addition to the information specified in (b)(1),
          each applicant shall:
                  (i)     identify the service link margin of its satellite DARS
                  system and demonstrate that its system will, in a mobile environment under
                  clear sky conditions, provide that service link margin to the geographical areas
                  it intends to serve;
                  (ii)    demonstrate that its satellite DARS system is capable
                  of remotely tuning its individual mobile, fixed, and/or portable receivers across
                  the allocated bandwidth 2310-2360 MHz and demonstrate how it will
                  implement the forward signalling command for its receivers to select and tune
                  to any center frequency(ies) in the allocated bandwidth;
                  (iii)   identify the coding scheme and coding rate it will use
                  to transmit CD quality audio.  If applicable, the applicant shall identify any
                  other audio format(s) it will provide to its end users as well as their associated
                  coding scheme and coding rates.  If audio formats which are less than CD
                  quality will be provided,  it shall demonstrate that it is capable of transmitting
                  those audio formats at variable data rates which are less than those necessary
                  to produce CD quality audio;
          (3)     Financial Qualifications:
                  (i)     Each applicant for a space station system authorization
                  in the 2.3 GHz  satellite digital audio radio service must demonstrate, on the
                  basis of a detailed business plan, how it proposes to meet the estimated costs
                  of the construction and launch of its proposed space station(s) and the
                  estimated operating expenses for one year after the launch of its space
                  station(s).
                  (ii)    Within one year of license grant, licensees are required
                  to demonstrate full financing of their systems in the form specified in 
                  25.140(c) and (d).  In addition, applicants relying on current assets or
                  operating income must submit evidence of a management commitment to the
                  proposed satellite system.  Failure to make such a showing will result in the
                  dismissal of the application.
  (c)     Milestone Requirements.
          (1)     Each applicant for system authorization in the satellite digital audio radio
          service must demonstrate within 10 days after a required implementation milestone as
          specified in the system authorization, and on the basis of the documentation contained
          in its application, certify to the Commission by affidavit that the milestone has been
          met or notify the Commission by letter that it has not been met.  At its discretion, the
          Commission may require the submission of additional information (supported by
          affidavit of a person or persons with knowledge thereof) to demonstrate that the
          milestone has been met.  This showing shall include all information described in 
          25.140 (c), (d) and (e) of this part.  The satellite DARS milestones are as follows,
          based on the date of authorization:
                  (i)     One year:  Complete contracting for construction of
                  first space station or begin space station construction.
                  (ii)    Two years:  If applied for, complete contracting for
                  construction of second space station or begin second space station construction.
                  (iii)   Four years:  In orbit operation of at least one space
                  station.
          (iv)    Six years:  Full operation of the satellite system
  (d)     Reporting requirements.  All operators of satellite digital audio radio service systems
  shall, on June 30 of each year, file a report with the International Bureau and the
  Commission's Laurel, Maryland field office containing the following information:
          (1)     Status of space station construction and anticipated launch date, including any
          major problems or delay encountered;
          (2)     A listing of any non-scheduled space station outages for more than thirty
          minutes and the cause(s) of such outages;
          (3)     Identification of any space station(s) not available for service or otherwise not
          performing to specifications, the cause(s) of these difficulties, and the date any space
          station was taken out of service or the malfunction identified.
6.        A new paragraph is added, in alphabetical order Section 25.201 to read as follows (addition of
this paragraph to Section 2.1 is consequential):
   25.201Definitions
  * * * *
  Satellite Digital Audio Radio Service ("DARS").  A radiocommunication service in which
  compact disc quality audio programming is digitally transmitted by one or more space stations
  directly to fixed, mobile, and/or portable stations.
  * * * *
7.        Section 25.202 is amended by adding a new paragraph (a)(6), as follows:
   25.202.  Frequencies, frequency tolerance and emission limitations.
*          *           *
                                       (a)     *  *  *
          (6)     The following frequencies are available for use by the satellite digital audio
          radio service:
          2310-2360 MHz:  space-to-Earth (primary)
8.        A new Section 25.214 is added to read as follows:
   25.214  Technical requirements for space stations in the satellite digital audio radio
service.
  (a)     Each system authorized under this section will be conditioned upon construction,
  launch and operation milestones as outlined in Section 25.144(c).  The failure to meet any of
  the milestones contained in an authorization will result in its cancellation, unless such failure is
  due to circumstances beyond the licensee's control or unless otherwise determined by the
  Commission upon proper showing by the licensee in any particular case.
  (b)     Frequency assignments will be made for each satellite DARS system as follows:
          (1)     All licensees are limited to the allocated bandwidth of 2310-2360 MHz.
          (2)     [Subject to Decision -- Band Segments]
          (3)     [Subject to Decision -- Frequency Assignments]
          (4)     Each satellite DARS licensee shall reduce its assigned bandwidth occupancy
          by 0.1 MHz to create two (2) 0.2 MHz assignments adjacent to the edge of the
          allocated bandwidth for location of telemetry beacons.
          (5)     Each licensee may employ cross polarization within its exclusive frequency
          assignment and/or may employ cross polarized transmissions in frequency assignments
          of other satellite DARS licensees under mutual agreement with those licensees.
          Licensees who come to mutual agreement to use cross-polarized transmissions shall
          apply to the Commission for approval of the agreement before coordination is initiated
          with other administrations by the licensee of the exclusive frequency assignment.APPENDIX II
                              Proposed Rule       s and Regulations to be Added to
47 C.F.R. Par        t 87 of the Commission's Rules
                              PART 87 - AVI                ATION SERVICES
1.  The authority citation in Part 87 continues to read:
AUTHORITY:  48 Stat. 1066, 1082, as amended; 47 U.S.C. 154, 303, unless otherwise noted.
Interpret or apply 48 Stat. 1064-1068, 1081-1105, as amended; 47 U.S.C. 151-156, 301-609.
2.   Paragraph (d)(1) of Section 87.303 is revised to read as follows:
 87.303  Frequencies.
* * * * *
  (d)(1) Frequencies in the bands 1435-1525 MHz and 2360-2390 MHz are assigned primarily for
telemetry and telecommand operations associated with the flight testing of manned or unmanned
aircraft and missiles, or their major components.  The bands 1525-1535  MHz and 2310-2360 MHz
are also available for these purposes on a secondary basis.  Permissible uses of these bands include
telemetry and telecommand transmissions associated with the launching and reentry into the earth's
atmosphere as well as any incidental orbiting prior to reentry of manned or unmanned objects
undergoing flight tests.  In the 1435-1530 MHz band, the following frequencies are shared with flight
telemetry mobile stations:  1444.5, 1453.5, 1501.5, 1515.5, 1524.5 and 1525.5 MHz.  In the 2360-
2390 MHz band, the following frequencies may be assigned on a co-equal basis for telemetry and
associated telecommand operations in fully operational or expendable and re-usable launch vehicles
whether or not such operations involve flight testing:  2364.5, 2370.5 and 2382.5 MHz.  In 2310-2390
MHz band, all other telemetry and telecommand uses are secondary.
* * * * *                                          APPENDIX III
                  Initial Regulatory Flexibility Analysis
Reason for Action
The rulemaking is initiated to obtain comment on the proposed satellite Digital Audio Radio licensing
and service rules.
Objectives
The Commission seeks to evaluate whether the proposed rules will facilitate efficient implementation
of DARS in the U.S.
Legal Basis
The proposed action is authorized under Sections 1, 4(j) and 4(j) of the Communications Act of 1934,
as amended, 47 U.S.C.  151(i), 154(i) and 154 (j).
Reporting, Recordkeeping and Other Compliance Requirements
Satellite DARS licensees would be required to file annual reports with the Commission.
Federal rules that Overlap, Duplicate or Conflict with These Requirements
None
Description, Potential Impact and Number of Small Entities Involved
Small businesses that do not meet the proposed financial qualifications could become involved in
producing programming for DARS providers, especially in niche markets not now served by traditional
broadcasting.  Opportunities for leasing satellite time from DARS Satellite licensees to provide service
could also be available to small businesses as well as opportunities in equipment design and
manufacturing.
Any significant Alternatives Minimizing the Impact on Small Entities Consistent With the Stated
Objectives
This Notice solicits comments on any suggested alternatives.