Before the
                FEDERAL COMMUNICATIONS COMMISSION
                     Washington, D.C.  20554

In the Matter of

Extending Wireless Telecommunications
Services to Tribal Lands

WT Docket No. 99-266
                                
     Comments of the Office of Advocacy, U.S. Small Business
                         Administration
                                
     The Office of Advocacy of the United States Small Business

Administration ("Advocacy") (1)respectfully submits these

Comments to the Notice of Proposed Rulemaking ("NPRM") and

initial regulatory flexibility analysis ("IRFA") in the above-

captioned proceeding.(2) The Federal Communications Commission

("Commission") is proposing rules designed to bring basic

telephone services to unserved Native American tribal lands and

other unserved areas through wireless local loop services and

other wireless technologies.  The Commission seeks comment on

whether wireless technologies can substitute for traditional

wireline technologies in supporting basic fixed telephony in

areas currently suffering very low telephone penetration levels.

Advocacy applauds this effort and agrees that no American should

be without basic telephone services.  But the Commission's

proposal promotes provision of these services by large business,

to the detriment of small business.  This results from an

inadequate regulatory flexibility analysis.

     The Commission proposes to lift transfer restrictions on C-

and F-Block personal communications service ("PCS") licenses.

These restrictions preserve incentives designed to assure small

business representation in the provision of PCS.  The Commission

has tentatively concluded that large businesses are more likely

than small businesses to "have more of the resources necessary to

build out on tribal lands and other unserved areas".(3) Advocacy

questions this conclusion.  The Commission provides no

substantiation to justify its conclusion, and what little

rationale the Commission gives ignores the many small and local

telecommunications businesses that already serve this country's

rural communities.  In light of this, why does the Commission

assume that small business will not be able to use PCS spectrum

to provide fixed telephony services to unserved areas?  The

Commission should not eliminate the restrictions on transfer that

apply to PCS licenses subject to designated entity benefits

unless it can provide credible justification for its conclusion

that large businesses will likely "have more of the resources

necessary to build out on tribal lands and other unserved areas".

     The Commission also proposes to offer bidding credits in

future auctions to companies that commit to serve unserved areas,

without regard to business size.  The Commission fails to discuss

whether this would give an unfair advantage to prospective big-

money big-business bidders.  Congress recognizes that small,

minority, and women owned businesses do not have the ready access

to capital enjoyed by large businesses.(4) Therefore, Congress

directs the Commission to provide incentives that would promote

opportunities among small businesses.(5) The Commission has borne

Congress's will in mind in developing designated entity

provisions in past spectrum auctions.  In applying such

provisions to future auctions relating to unserved tribal lands,

the Commission should consider an applicant's business size, as

well as its commitment to providing service to unserved areas.

The Commission should help assure that small businesses can

compete in spectrum auctions on a level field, so they are in a

position to compete in the marketplace.

     The Commission's regulatory flexibility analysis fails to

discuss adequately the impact that its designated entity

proposals would have on small business, and fails to propose any

alternatives that would minimize this impact while promoting the

goal of bringing basic telephony to unserved areas.  Small

business is an innovative force in the American economy.

Therefore, the Commission should not simply hand dominance of

these niche markets to big business.  The Commission's rules

should encourage any interested carrier, large or small, to serve

rural communities that lack basic telephony, without

disadvantaging small business.

1.   The Commission's Designated Entity Proposals Disadvantage
     Small Businesses

     The Commission established incentives to encourage small

business participation in PCS spectrum auctions by setting aside

the C- and F-Blocks for small business participation.  These

incentives were designed to fulfill the statutory objectives of

the Communications Act of 1934, as amended, of "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".(6)

Congress recognizes that small businesses, minorities, and women-

owned businesses do not have ready access to capital nor the

resources to acquire telecommunications licenses despite being

competent to provide quality services.(7) Therefore, Congress

directs the Commission to consider special incentives to promote

economic opportunities for these designated entities that would

compensate for capital access problems.(8)

     To prevent trafficking of licenses, the Commission prohibits

the transfer of C- and F-Block PCS licenses from small businesses

or "designated entities" ("DEs") to non-DEs (e.g. large entities)

during the first five years of the license term.(9) In this

proceeding, however, the Commission proposes to lift these

restrictions.  The Commission reasons that "it is likely that non-

DEs will have more of the resources necessary to build out on

tribal lands and other unserved areas, particularly in more

remote areas."(10) This statement can be interpreted in one of

two ways:  first, as a truism, that large business has greater

resources than small business, or second, that only large

business would have the minimum resources needed to roll out

fixed wireless services to areas that are unserved by basic

telephony.  Since large business generally has greater resources

than small business, Advocacy understands the Commission to mean

by this statement that small business, in the Commission's view,

essentially cannot provide these services. (The Commission

presents no other rationale for removing DE transfer

restrictions.)

     The Commission offers no support for its apparent conclusion

that only large businesses can bring telephony to unserved areas.

And this conclusion ignores the many small businesses that have

demonstrated a willingness and ability to serve rural areas, with

both wired and wireless services.(11) Market realities may well

have kept wired telephony services from low-income sparsely

populated areas, but this does not mean that small businesses

lack the capacity to provide these services.  Common sense

indicates that smaller local businesses would be better able and

more inclined to respond to local rural needs than larger

companies.  Large companies may lack cultural and other

connections to local communities, and have high overhead costs

that may limit their flexibility in fashioning services that

satisfy the particular needs of poor and under-served

communities.

     Without evidence that only large businesses are equipped to

reach out to sparse communities that rebuts historical data, the

Commission should not propose lifting its designated entity

transfer restrictions.  The Commission should not handicap small

business when there is no evidence of any small business

incapacity.  Without cause, the Commission should not pave the

path toward large business dominance of wireless local loop

services.

     Additionally, the Commission has inexplicably singled out

PCS C- and F-Block licenses from other wireless services that are

subject to designated entity transfer restrictions.  For

instance, the Commission fails to discuss DE restrictions on

auctioned services such as local multipoint distribution service

("LMDS")(12), which the Commission expects could provide fixed

wireless services to tribal lands.(13) Chairman Kennard has

pointed out that 74% of the recently auctioned LMDS spectrum was

won by small business.(14) Yet rightly, the Commission does not

suggest that small LMDS licensees will be unable to provide

wireless local loop services to sparsely populated tribal and

other rural lands within their service areas.  The Commission

does not propose carving out these areas for transfer to large

businesses, which may have greater resources.  In light of this,

it is curious that the Commission would single out the PCS C- and

F-Blocks for transfer to large businesses.  The Commission may

have other motivations for wanting these licenses to go to large

businesses.  If so, the Commission does not state them.  Its

stated rationale makes no sense, and even less sense if applied

solely to PCS C- and F-Block licensees and not other DE services.

     The Commission also proposes granting designated entity

benefits in future auctions to  companies that agree to provide

services to areas unserved by wired telephony, without regard to

the business size.  Presumably this decision is again based on

the premise that only large businesses can provide these

services.  But the Commission again offers no support for this

supposition.  In the past, the Commission has established

designated entity credits where it appeared that large business

would outspend small business in spectrum auctions and thereby

dominate the auctioned service.(15) But here, the Commission does

not even discuss the issue.

     Is the Commission suggesting that designated entity

provisions are keeping large businesses away from unserved tribal

areas, and that only large businesses can accommodate the needs

of residents in those areas?  Such a conclusion lacks support and

is counterintuitive.  The Commission itself has acknowledged the

innovative force of small business.(16)

     As the Commission points out, high costs have prevented the

laying of cable to low-income, sparsely populated areas.(17) But

high costs affect both small and large businesses; cost and

revenue judgments influence any company's decision to provide or

not provide a good or service.  While cost issues may impact

small business more than large business, it is not a factor that

uniquely affects small business.  If filling a consumption demand

makes sense from a revenue standpoint, then small businesses,

just like large businesses, will step into the market.

     The Commission's rules should promote cost-effective use of

wireless spectrum to provide fixed telephony.  The Commission

should not act to cut small business from segments of the

wireless local loop market without real evidence of small

business incapacity to serve that market.  The Commission should

not simply presume such incapacity exists based merely on the

premise that large business resources exceed small business

resources.

2.   The Commission's IRFA Does Not Discuss the Regulatory Impact
     on Small Entities Nor Does it Propose Alternatives Designed
     to Minimize the Impact.

     The Commission does not discuss the significant economic

impact its proposal may have on small business nor does it

propose alternatives that might minimize this impact, as is

required by the RFA. (18)The Commission runs through its usual

litany, vaguely listing numbers of small businesses that might

fall within the ambit of its rules.  But the Commission offers no

analysis of what impact its proposed rules might have.  And some

of this impact is obvious.  For example, the Commission proposes

to eliminate designated entity transfer restrictions and proposes

to offer bidding credits in future auctions regardless of

business size.  These proposals would tend to ensure that

wireless licenses for tribal lands go to large business, and

discourage small business participation in this segment of the

wireless market.  But the Commission offers no discussion of this

impact.  The Commission produces its "boilerplate" list of

licensee numbers without a single sentence of analysis.

     The Commission also fails to propose a single alternative

that would bring local phone service to tribal lands with minimal

impact on small business.(19) The Commission lists the general

alternatives its NPRM discussed, but none of these contemplate

minimizing impact on small business.  In fact, the Commission

lists its designated entity proposals among its "IRFA

alternatives", even though these would impose burdens on small

business, not minimize them.

     The RFA requires the Commission to propose at the least four

enumerated alternatives:  (1) different compliance requirements

or timetables, (2) clarification, consolidation, or

simplification of compliance requirements, (3) use of performance

rather than design standards, and (4) exemption - either in whole

or in part - for small entities. (20)The Commission does not

propose or analyze a single one of these alternatives and

proposes none of its own.  Thus, the Commission does not propose

or analyze alternatives, as required by law.(21)

     For these reasons, the Commission does not conduct a

sufficient IRFA; it should promulgate no rules in this proceeding

until it has analyzed the significant impact its proposals might

have on small business and until it has proposed alternatives

designed to minimize this impact while serving the Commission's

regulatory goals.

Conclusion

     The Commission's proposed changes to its designated entity

provisions risk driving small and local wireless businesses from

tribal lands and other areas not reached by basic telephony.  The

Commission identifies the serious problem that some rural and

tribal residents lack access to vital communications.  But the

Commission concludes, without support, that designated entity

provisions contribute to this problem and that small wireless

businesses are unable to provide these services.  The Commission

fails to identify and discuss the unintended regulatory impact

its rules may place on small entities and proposes no

alternatives to minimize this impact.

     This rulemaking threatens to eliminate small and local

companies from segments of the wireless market.  But if left on a

level playing field, small business can help provide innovative

ways to bring basic telephony and other communications services

to Americans who lack these services.

Respectfully submitted,

Jere W. Glover
Chief Counsel for Advocacy

R. Bradley Koerner
Assistant Chief Counsel for Telecommunications

Eric E. Menge
Assistant Chief Counsel for Telecommunications

November 9, 1999

ENDNOTES

1.  Congress established Advocacy in 1976 by Pub. L. No. 94-305
to represent the views and interests of small business within the
Federal government.  (Codified as amended at 15 U.S.C.  634 a-
g, 637.)  Advocacy serves as a focal point for concerns regarding
the government's policies as they affect small business, develops
proposals for changes in Federal agencies' policies, and
communicates these proposals to the agencies.  (See 15 U.S.C.
634c(1)-(4).)  Advocacy also monitors agency compliance with the
RFA and reports this to Congress.
2.  Extending  Wireless Telecommunications Services to Tribal
Lands, Notice of Proposed Rulemaking, WT Docket No. 99-266, FCC
99-205 (rel. August 18, 1999); 64 Fed. Reg. 49,128 (1999).
3.  NPRM, para 35.
4.  .C.  309(j)(3)(B).
5.  H.R. Rep. No. 103-111, at 254-55 (1993)
6.  .S.C.  309(j)(3)(B).
7.  H.R. Rep. No. 103-111, at 254-55 (1993) ("[U]nless the
Commission is sensitive to the need to maintain opportunities for
small businesses, competitive bidding could result in a
significant increase in concentration in the telecommunications
industries. . .. One of the primary criticisms of utilizing
competitive bidding to issue licenses is that the process could
inadvertently have the effect of favoring only those with `deep
pockets', and therefore have the wherewithal to participate in
the bidding process.").
8.  at 255.
9.  , para 35.
10. Id.
11. In 1996, about half of all rural communications
establishments were operated by small businesses (fewer than 500
employees); these employed almost half of the total rural
workforce.  More than a third of these establishments employed
fewer than twenty persons each.  See Statistics of U.S. Business,
Bureau of the Census, 1996.
12. As with PCS, the Commission determined that DE benefits were
necessary in the LMDS auction to help small business overcome
disadvantages gaining capital required to compete for spectrum
with very large entrenched communications companies.  See
Rulemaking to Establish Rules and Policies for Local Multipoint
Distribution Service and for Fixed Satellite Services, Second
Report and Order, CC Docket No. 92-297, FCC 97-82 ("LMDS Second
R&O"), para. 348 (rel. March 13, 1997).  The Commission requires
repayment of bidding credits in case of transfer of a DE license
to a non-DE entity.  Id., para 350.
13. NPRM, para 11.
14. See Federal Communications Commission, Auction of Wireless
Communications Service Raises $45,064,450, May 12, 1999.
15. See, e.g., LMDS Second R&O, para. 356.
16. See, e.g., LMDS Second R&O, para. 348.
17. NPRM, para. 4.
18. 5 U.S.C.  603(c).
19. The Commission does invite commenters to propose alternatives
that would minimize impact on small business but this amounts to
asking commenters to conduct the Commission's IRFA.  See NPRM,
Appendix, para. 35.
20. 5 U.S.C.  603(c)(1)-(4).
21. See 5 U.S.C.  603(c).