Before the
                FEDERAL COMMUNICATIONS COMMISSION
                      Washington D.C.  20554



In the Matter of                   )
                              )
Revision of Part 22 and Part 90         )    WT Docket No. 96-18
of the Commission's Rules to Facilitate      )
Future Development of Paging Systems    )    
                              )
Implementation of Section 309(j)        )    PP Docket No. 93-253
of the Communications Act --       )    
Competitive Bidding                )


                     SECOND REPORT AND ORDER
            AND FURTHER NOTICE OF PROPOSED RULEMAKING

     Adopted:  February 19, 1997             Released:  February 24, 1997

Comment Date:  April 17, 1997
Reply Comment Date:  May 1, 1997


By the Commission: 

                        Table of Contents
                                                    Paragraph No.

I.  INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . .  1

II.  EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . .  2

III.  BACKGROUND . . . . . . . . . . . . . . . . . . . . . . .  3

IV.  DISCUSSION
     A.  Geographic Licensing for Non-Nationwide Channels. . .  7
          1.  Overview . . . . . . . . . . . . . . . . . . . .  7
          2.  Geographic Area Licensing for Exclusive 929 MHz and 931 MHz Bands  10
          3.  Geographic Area Licensing for Common Carrier Paging in the 35-36
               MHz, 43-44 MHz, 152-159 MHz, and 454-460 MHz Bands 20
               a.  Common carrier paging services in the 35-36 MHz, 43-44 MHz,
                    152-159 MHz, and 454-460 MHz bands . . . . 20
               b.  Other services in the 152-159 MHz and 454-460 MHz bands 26
          4.  Shared PCP Channels. . . . . . . . . . . . . . . 37
          5.  Exempting Certain Incumbents from Competitive Bidding 44
     B.  Geographic Area Licensing for Nationwide Channels . . 46
     C.  Protection for Incumbents . . . . . . . . . . . . . . 55
     D.  Coverage Requirements . . . . . . . . . . . . . . . . 59
     E.  Co-Channel Interference Protection. . . . . . . . . . 66
          1.  Co-Channel Interference Protection -- Incumbent Licensees 66
          2.  Co-Channel Interference Protection -- Adjacent Geographic Licensees 70
          3.  Maximum Power and Height-Power Limits. . . . . . 74
     F.  Licensing in Mexican and Canadian Border Areas. . . . 80
     G.  Eligibility to Participate in Competitive Bidding . . 83
     H.  Channel Aggregation Limit . . . . . . . . . . . . . . 86
     I.  Competitive Bidding Issues. . . . . . . . . . . . . . 89
          1.  Competitive Bidding Design . . . . . . . . . . . 89
               a.  Bidding methodology . . . . . . . . . . . . 89
               b.  License grouping. . . . . . . . . . . . . . 93
               c.  Bidding procedures. . . . . . . . . . . . . 98
          2.  Procedural and Payment Issues. . . . . . . . .  117
               a.  Pre-auction application procedures. . . . .117
               b.  Short-form applications . . . . . . . . .  122
               c.  Amendments and modifications. . . . . . .  129
               d.  Upfront payments. . . . . . . . . . . . .  132
               e.  Down payments . . . . . . . . . . . . . .  137
               f.  Bid withdrawal, default, and disqualification 141
               g.  Long-form applications. . . . . . . . . .  147
               h.  Petitions to deny and limitations on settlements 150
          3.  Regulatory Safeguards. . . . . . . . . . . . .  151
               a.  Anti-collusion rules. . . . . . . . . . .  151
               b.  Transfer disclosure requirements. . . . .  160
          4.  Treatment of Designated Entities . . . . . . .  163
               a.  Overview and objectives . . . . . . . . .  163
               b.  Small businesses. . . . . . . . . . . . .  165
               c.  Minority- and women-owned businesses. . .  169
               d.  Bidding credits . . . . . . . . . . . . .  174
               e.  Installment payments and down payments. .  182
               f.  Partitioning  . . . . . . . . . . . . . .  188
               g.  Unjust enrichment provisions for full transfers 196
               h.  Spectrum set-aside. . . . . . . . . . . .  200

V.  FURTHER NOTICE OF PROPOSED RULEMAKING
     A.  Coverage Requirements for Nationwide Channels . . .  203
     B.  Partitioning and Disaggregation . . . . . . . . . .  204
     C.  Shared Channels . . . . . . . . . . . . . . . . . .  220

VI.  CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . .222

VII.  PROCEDURAL MATTERS and ORDERING CLAUSES. . . . . . . . .223

APPENDIX A:  Final Rules
APPENDIX B:  List of Commenters
APPENDIX C:  Final Regulatory Flexibility Analysis (Second Report and Order)
APPENDIX D:  Initial Regulatory Flexibility Analysis (Further Notice of Proposed Rulemaking)
                        I.  INTRODUCTION 

     1.  In this Second Report and Order (Order) we adopt rules governing geographic area
licensing of Common Carrier Paging (CCP) and 929 MHz Private Carrier Paging (PCP), and
competitive bidding procedures for auctioning mutually exclusive applications for these licenses.  We
also allow geographic area paging licensees to partition their license area.  In this Further Notice of
Proposed Rulemaking (Further Notice) we seek comment on (1) whether we should adopt coverage
requirements for nationwide licenses, (2) various issues related to geographic partitioning by paging
licensees and whether spectrum disaggregation is appropriate for paging, and (3) whether to revise
the application procedures for shared channels. 

                      II.  EXECUTIVE SUMMARY

     2.  In the Notice, we proposed a transition to geographic area licensing for CCP and PCP
channels, and competitive bidding procedures for resolving mutually exclusive applications for these
licenses.  We received 83 comments and 17 reply comments to the issues raised in the Notice.  After
considering the record of this proceeding, we are adopting geographic area licensing and competitive
bidding procedures for paging, as follows:

    All mutually exclusive applications for non-nationwide 931 MHz channels and exclusive non-nationwide 929 MHz channels will be subject to competitive bidding for geographic area
     licenses for 51 Major Trading Areas (MTAs).  In addition to the 47 Rand McNally MTAs,
we are adding three MTAs for the U.S. territories of (1) Guam and the Northern Mariana
Islands, (2) Puerto Rico and the U.S. Virgin Islands, and (3) American Samoa.  We are also
licensing Alaska as a single area separate from the Seattle MTA.

    Nationwide 931 MHz and 929 MHz geographic area licenses will be granted for the
     nationwide channels.  The three nationwide CCP channels are those identified in 47 C.F.R.
      22.531(b).  The 23 nationwide 929 MHz channels are those channels where a licensee had
     sufficient authorizations as of February 8, 1996 to qualify for nationwide exclusivity under
     47 C.F.R.  90.945.  The nationwide geographic area licenses will not be subject to
     competitive bidding.
 
    All remaining CCP channels (i.e., 35-36 MHz, 43-44 MHz, 152-159 MHz, and 454-460
     MHz) will be subject to competitive bidding for geographic area licenses in 172 Economic
     Areas (EAs) for each channel.  The Rural Radiotelephone Service, including Basic Exchange
     Telecommunications Radio Service (BETRS), is included in the geographic area licensing
     and the competitive bidding process on paging channels for which these services are also
     eligible.  Rural Radiotelephone Service and BETRS operators may also obtain additional
     facilities on a secondary basis.

    Shared Part 90 paging channels will not be subject to geographic area licensing or competitive
     bidding. 

    After receiving an MTA or EA license for a channel, licensees will be subject to the following
     coverage requirements:  for each MTA or EA, the licensee must provide coverage to one-third of the population within three years of the license grant, and to two-thirds of the
     population within five years of the license grant.  In the alternative, the MTA or EA licensee
     may provide substantial service to the geographic license area within five years of license
     grant.

    If the MTA or EA licensee fails to meet the above coverage requirements, the geographic
     area license will be terminated and subject to auction.  The licensee may retain any sites that
     were authorized, constructed, and operating at the time the geographic area license was
     granted.
 
    For co-channel interference protection (with respect to incumbent licensees) we will use the
     fixed distances in Tables E-1 and E-2 in Section 22.537 of the Commission's rules for the
     exclusive 929 MHz and 931 MHz channels.  The formulas for determining the service and
     interference contours for the remaining CCP channels will not be changed.

    All pending mutually exclusive applications for paging licenses filed with the Commission on
     or before the adoption date of this Order will be dismissed.  All non-mutually exclusive
     applications filed with the Commission on or before July 31, 1996 will be processed.  All
     applications (other than applications on nationwide and shared channels) filed after July 31,
     1996 will be dismissed. 

Further Notice of Proposed Rulemaking

    In the Further Notice, we seek comment on coverage requirements for nationwide licensees,
     partitioning of paging licenses by small businesses, the feasibility of disaggregating paging
     spectrum, and modifying the application process for shared channels to reduce or eliminate
     paging license application fraud.

                          *  *  *  *  *
     The Commission makes no representations or warranties about the use of this spectrum for
particular services.  Applicants should be aware that an FCC auction represents an opportunity to
become an FCC licensee in this service, subject to certain conditions and regulations.  An FCC
auction does not constitute an endorsement by the FCC of any particular services, technologies or
products, nor does an FCC license constitute a guarantee of business success.  Applicants should
perform their individual due diligence before proceeding as they would with any new business
venture.

                         III.  BACKGROUND

     3.  In this proceeding we examine our paging regulations for Part 22 and Part 90 paging
services pursuant to the statutory objective for regulatory symmetry for all Commercial Mobile Radio
Services (CMRS) set forth in the Omnibus Budget Reconciliation Act of 1993 (1993 Budget Act). 
The 1993 Budget Act mandated that substantially similar mobile services receive comparable
regulatory treatment.  In the CMRS Second Report and Order, we held that PCP services offered for
profit were subject to reclassification as CMRS as of August 10, 1996.  In our Further Notice of
Proposed Rulemaking, we tentatively concluded that these paging services, CMRS and former PMRS
reclassified as CMRS, should be deemed substantially similar for statutory purposes.  In the CMRS
Third Report and Order, we concluded that all CMRS are substantially similar services.  We noted,
however, that not all substantially similar services must have identical technical and operational rules,
especially if the imposition of such identical rules would require carriers to reconfigure their services
in ways that would adversely affect their ability to compete.  We also stated that our goal is to give
carriers offering substantially similar services the flexibility to compete in whatever manner they
choose.

     4.  In our Notice, we proposed a transition from site-by-site licensing to geographic area
licensing for all exclusive, non-nationwide paging services.  We also proposed to adopt competitive
bidding rules for the geographic area licenses.  We stated that a goal in this proceeding is to ensure
that our rules for paging services are consistent with our rules for competing services, such as
narrowband Personal Communications Services (PCS), so that competitive success is dictated by
the marketplace, rather than by regulatory distinctions.  

     5.  Due to the fundamental changes we proposed in the Notice, we suspended acceptance of
new applications for paging channels as of February 8, 1996.  We observed that continuing to
accept new applications after releasing the Notice with the proposed rule changes would impair the
objectives of this proceeding.  Subsequently, we partially lifted the paging freeze for incumbent
licensees by allowing incumbents to file applications for additional sites within 65 kilometers (40
miles) of operating sites in the First Report and Order in this docket.  We stated that the Bureau
would process all paging applications filed by July 31, 1996 for additional sites under the interim
rules.  

     6.  In this Order we adopt final rules governing licensing of paging systems, including a
transition to geographic area licensing for exclusive, non-nationwide channels in the 35-36 MHz, 43-44 MHz, 152-159 MHz, 454-460 MHz, 929-930 MHz, and 931-932 MHz bands allocated for
paging; competitive bidding rules for granting the mutually exclusive geographic area non-nationwide
licenses; and a standard methodology for providing protection to incumbent licensees from co-channel
interference for the 929-930 MHz and 931-932 MHz paging bands.  Due to the transition to
geographic area licensing in this Order, all pending mutually exclusive paging applications will be
dismissed, including those filed under the interim rules.  Non-mutually exclusive paging applications
filed on or before July 31, 1996 will be processed.  All applications filed after July 31, 1996 will be
dismissed (other than applications for nationwide or shared channels) and, other than for the shared
channels, no additional site-by-site applications will be accepted (with the exception of applications
filed pursuant to Sections 22.369 and 90.177, applications filed for coordination with Mexico and
Canada, and applications required under Section 1.1301 et seq.) The Bureau will also release a Public
Notice setting forth the deadlines and instructions for filing the FCC Form 175 for geographic area
licenses.

                         IV.  DISCUSSION

A.  Geographic Licensing for Non-Nationwide Channels

1.  Overview

     7.  Common Carrier Paging.  Under our current rules, all CCP channels are assigned on an
exclusive basis.  Licensees must apply for additional transmitter locations on a site-by-site basis
when expanding their systems.  On CCP applications for the paging channels below 931 MHz, the
applicant specifies a channel.  Any timely filed applications for the same channel in the same area are
considered mutually exclusive.  A paging license applicant may request a particular channel in the
931 MHz band, but the Commission has the discretion to assign a channel different from the one
requested.  Mutually exclusive CCP applications are subject to selection by competitive bidding;
however, competitive bidding procedures had not been adopted prior to commencement of this
proceeding.    

     8.  Private Carrier Paging.  Under the rules in effect when the Notice was adopted, applicants
for all non-929 MHz Part 90 paging channels and five of the forty 929 MHz channels submit their
applications to a frequency coordinator who recommends a channel to be assigned by the
Commission.  In the PCP Exclusivity Order, we established a mechanism for exclusive licensing on
thirty-five of the forty 929 MHz channels in order to encourage the development of wide-area paging
systems.  We allowed licensees to earn exclusivity on a local, regional, or nationwide basis by
constructing multi-transmitter systems meeting certain minimum criteria.  Incumbent 929 MHz
systems that met the new criteria were granted immediate exclusivity.  Applications for the exclusive
PCP channels were to be submitted to a frequency coordinator and processed on a first-come, first-served basis.  

     9.  Notice of Proposed Rulemaking.  In the Notice, we explained that in other CMRS services,
such as cellular, PCS, and Specialized Mobile Radio (SMR), we recognized that licensing based on
pre-defined service areas has significant advantages over site-by-site licensing because of the greater
flexibility it gives licensees and the greater ease of administration.  We tentatively concluded that
the public interest would be served by converting to geographic area licensing for exclusive, non-nationwide paging channels.  We also observed that geographic area licensing may be advantageous
in the paging industry because paging has evolved from single-site systems toward multi-site systems,
regulatory symmetry between paging and narrowband PCS would be enhanced, and inefficiencies in
the paging licensing process would be eliminated.  We proposed that incumbent systems would be
entitled to continue to operate under current authorizations with full protection from co-channel
interference.  Parties were invited to comment on our geographic licensing proposals.  We asked
the commenters to address whether geographic licensing would be practicable on all bands, and the
appropriate geographic area for such licensing.

2.  Geographic Area Licensing for Exclusive 929 MHz and 931 MHz Bands 

     10.  Comments.  The commenters, including the Personal Communications Industry
Association (PCIA) and the Federal Trade Commission (FTC), generally support the proposal to
convert to geographic area licensing for 931 MHz and 929 MHz exclusive channels.  AT&T
Wireless, MTel, PageNet, and Source One observe that the regulatory flexibility afforded by
geographic area licensing will enable paging operators to react quickly to modify their systems to
meet the demands of customers, and will facilitate further build-out of wide-area paging systems. 
PCIA contends that geographic area licensing for 931 MHz systems would provide greater flexibility
for the paging operators in these frequencies, reduce the number of license filings, minimize
processing delays, provide greater parity with narrowband PCS licensees, and strengthen the carriers'
ability to obtain capital.  PCIA states that it reluctantly supports transitioning to geographic
licensing for the exclusive frequencies in the 929 MHz band.  

     11.  The FTC supports geographic area licensing to combat paging license application fraud. 
According to the FTC, this fraud is of two types:  (1) application mills that sell application
preparation services for a fee of several thousand dollars per license; and (2) build-out schemes in
which investors are sold interests in limited liability companies or partnerships that claim they will
acquire licenses and build and operate telecommunications systems.  These schemes are carried out
by deceiving consumers about the profitability of the paging licenses.  The FTC notes that
geographic licensing, combined with the use of auctions to select licensees, will reduce the volume
of applications on which application mills depend and will make it more difficult for speculators to
deceive unsophisticated investors with offers of "free" (i.e., unauctioned) licenses.

     12.  Not all the commenters support geographic area licensing for the exclusive 929 MHz and
931 MHz channels.  Ameritech argues that the FTC's concern -- consumer fraud -- does not justify
disrupting a multi-billion dollar industry.  Ameritel and Ameritech contend that the competitive
bidding process will not stop consumer fraud.  Word argues that geographic area licensing would
be disruptive to existing licensees, as well as to the public, without promising any overriding benefit.

     13.  PCIA and several of the larger paging companies support the use of MTAs for
geographic area licensing.  These commenters contend that geographic licensing of paging systems
using MTAs would offer substantial administrative benefits to both the Commission and the paging
licensees, as well as service benefits to customers.  Some commenters, however, disagree with the
proposal to use MTAs, and offer other suggestions for appropriate geographic areas for these
channels, such as BTAs or EAs.
  
     14.  Discussion.  In the Notice we stated that geographic licensing may be particularly
appropriate for exclusive 929 MHz and 931 MHz paging channels because of the large number of
wide-area systems in these bands.  We noted that the two services are virtually identical, and that
the differences in regulatory treatment are due to the pre-1993 Budget Act dichotomy between
common carrier and private paging services.  Our recent revisions to the rules for 929 MHz and 931
MHz channels, in the PCP Exclusivity Order and the Part 22 Rewrite Order, recognized that paging
in these bands has evolved from single-site to multi-site systems.  

     15.  The commenters contend, and we agree, that geographic area licensing provides flexibility
for licensees and ease of administration for the Commission, facilitates further build-out of wide-area
systems, and enables paging operators to act quickly to meet the needs of their customers.  We find,
therefore, that converting the 931 MHz channels and the exclusive 929 MHz channels to geographic
area licensing will further our goal to give carriers offering substantially similar services more
flexibility to compete, and will enhance regulatory symmetry between paging and narrowband PCS. 
Exclusive 929 MHz and 931 MHz licensees will be extended the same flexibility as narrowband PCS
licensees in terms of the location, design, construction, and modification of their facilities throughout
their geographic areas.  

     16.  In the Notice we stated that the geographic definition should correspond as much as
possible to the geographic area that paging licensees seek to serve, and we proposed using MTAs as
the market areas.  We conclude that MTAs form an appropriate geographic area for most of the
paging systems because they are economically-defined regions that appear to best mirror the size and
development of existing paging systems.  We are implementing geographic area licensing in lieu of
the current site-by-site licensing, with MTAs as the geographic area for the 931 MHz and exclusive
929 MHz channels.  We are licensing these channels using 51 MTA geographic areas.  In addition
to the 47 Rand McNally MTAs, we are adding three MTAs for the U.S. territories of (1) Guam and
the Northern Mariana Islands, (2) Puerto Rico and the U.S. Virgin Islands, and (3) American Samoa. 
We are also licensing Alaska as a single area separate from the Seattle MTA.  The concerns raised
by Ameritech, Ameritel, Metrocall, Source One, and other commenters that MTAs are not the
appropriate size for geographic area licensing, can be alleviated by geographic partitioning.  

     17.  Geographic area licensees will have the flexibility to construct transmitters at any place
within their license area, subject to the co-channel interference rules discussed in Section E, and will
not be required to file applications with the Commission for additional sites or modifications. 
Geographic area licensees will be able to act quickly to add sites or make modifications of existing
sites to meet the needs of their customers.  Due to the prevalence of wide-area paging systems on
these channels and the flexibility geographic area licensing will afford paging licensees, we believe
that geographic area licensing for exclusive 929 MHz and 931 MHz channels, with MTAs as the
geographic area, is consistent with the public interest, convenience and necessity, and the purposes
of the Communications Act of 1934, as amended (Communications Act).  We believe that our rules
for geographic area licensing for exclusive 929 MHz and 931 MHz channels, with MTAs as the
geographic area, fulfill the objectives of Section 309(j)(4)(C) because a wide variety of applicants,
including small businesses, rural telephone companies, and businesses owned by members of minority
groups and women may have an opportunity to successfully compete against larger, well-financed
bidders for MTAs through the use of bidding credits and installment payments.  

     18.  We conclude that spectrum within a geographic area recovered by the Commission will
revert automatically to the geographic area licensee.  We will consider transfers and assignments
between a geographic area licensee and incumbents operating in the geographic area presumptively
to be in the public interest.  We conclude that granting these rights to geographic area licensees will
give them greater flexibility in managing their spectrum, establish greater consistency with our cellular
and PCS rules, and reduce the regulatory burdens on both licensees and the Commission with respect
to future management of the spectrum.  We also eliminate finders' preferences immediately for
paging services.  All pending finders' preference requests are dismissed, and we will no longer accept
finders' preference requests following the adoption of this Second Report and Order.

     19.  Mutually exclusive applications for geographic area licenses will be processed pursuant
to the competitive bidding rules set forth below in Section IV.I.  The incumbent (non-geographic)
paging licensees will continue to operate under their existing authorizations with full protection from
co-channel interference, and will not be required to file applications for additional internal sites. 
Incumbents will not be permitted to expand their composite interference contours unless the
incumbent and the geographic licensee have reached agreement on such modifications.  
3.  Geographic Area Licensing for Common Carrier Paging Services in the 35-36 MHz, 43-44
MHz, 152-159 MHz, and 454-460 MHz Bands 

     a.  Common carrier paging services in the 35-36 MHz, 43-44 MHz, 152-159 MHz, and
     454-460 MHz bands 

     20.  Comments.  Many commenters, including the smaller and medium-sized paging
companies, the Organization for the Promotion and Advancement of Small Telecommunications
Companies (OPASTCO), and Small Business in Telecommunications (SBT), are generally opposed
to geographic area licensing for the 35-36 MHz, 43-44 MHz, 152-159 MHz, and 454-460 MHz
paging channels and contend that geographic area licensing will prevent the continued growth of
small paging businesses presently using these channels.  These commenters state that the
Commission has not shown that geographic licensing is needed, that regulatory symmetry among
CMRS is necessary or practical, or that our proposals, if adopted, would provide such regulatory
symmetry.  Commenters observe that once the geographic license is auctioned, an incumbent (non-geographic) licensee will not be able to expand the range of its paging system beyond the existing
interference contour.  Commenters note that the paging spectrum is heavily licensed, and that while
sites are needed for fill-in purposes, much of the application processing has already been
accomplished so that the administrative savings will be minimal.  Commenters contend that
geographic area licensing may make sense for a new service, but in paging it would impede rather
than facilitate service in the industry.  

     21.  Some commenters, however, support geographic area licensing for these bands.  PCIA
states that it previously opposed implementation of geographic licensing in these bands because
overlaying a geographic area licensing scheme on existing operations would be highly complex and
would have reduced regulatory benefits for licensees, the Commission, and the public.  PCIA now
endorses the Commission's proposal to transition these paging bands to geographic area licensing
because it has determined that the industry is better served by a quick resolution of this rulemaking
proceeding, permitting licensees to understand new processing policies and resuming the filing of
applications for necessary authorizations.   

     22.  Several commenters suggest that if geographic area licensing is implemented, the
Commission should use BTAs or EAs for the VHF and UHF bands instead of MTAs.  Sunbelt
suggests that incumbent licensees should be able to aggregate their licenses into one license that
covers the entire geographic area, and should be allowed to expand on a transmitter-by-transmitter
basis.  PCIA, however, contends that MTAs should apply to all of the paging bands where the
Commission decides to implement geographic licensing.

     23.  Discussion.  We believe that the advantages of geographic licensing -- flexibility,
enhanced regulatory symmetry with other CMRS, and eliminating the inefficiencies in the licensing
process -- are applicable to these channels, particularly for regional and wide-area paging services. 
One of our goals in this proceeding is to revise the paging rules so that substantially similar mobile
services receive comparable regulatory treatment, to the extent feasible, in a manner consistent with
the public interest, convenience, necessity, and the purposes of the Communications Act.  We note
that paging providers on these CCP channels generally have smaller paging systems than the 931
MHz band paging services, and therefore smaller market areas would be more appropriate than
MTAs for these bands.  Most commenters addressing this issue contend that MTAs do not mirror
their geographic areas, primarily because MTAs are too large for the numerous small- and medium-
sized paging systems on these bands.  The United States is organized into 487 BTAs, some of which
are smaller than counties, and we believe that BTAs, suggested by several commenters, would be too
small for most paging systems.  EAs, which are larger than BTAs, would be an appropriate size for
geographic licensing on these bands.  The Bureau of Economic Analysis of the Department of
Commerce has divided the United States into 172 EAs.  Each EA consists of metropolitan areas or
similar areas that serve as centers of economic activity -- and the surrounding counties that are
economically related to the nodes.  Allowing licensees to operate over EAs, instead of smaller BTAs,
will enhance their ability to construct wide-area systems.  Consequently, we adopt EAs as the
geographic area for these paging bands, a suggestion offered by commenters.  

     24.  We agree with the commenters that the geographical definition used should correspond
as much as possible to the geographic area that the paging licensees seek to serve.  EAs, which are
smaller than MTAs, will facilitate the ability of paging operators of smaller systems to participate in
geographic area licensing.  Geographic area licensees will have the flexibility to construct transmitters
at any place within their EA, subject to the co-channel interference rules discussed in Section IV.E. 
Our rules for geographic area licensing for these channels, with EAs as the geographic area, will fulfill
the objectives of Section 309(j)(4)(C) because a wide variety of applicants, including small businesses,
rural telephone companies, and businesses owned by members of minority groups and women may
have an opportunity to successfully compete against larger, well-financed bidders for EAs through
the use of bidding credits and installment payments.  These smaller market areas will also provide
more opportunities for the entry of new applicants into the paging market.  

     25.  The EA geographic area licenses will be assigned pursuant to the competitive bidding
rules set forth below in Section IV.I.  Incumbent (non-geographic) paging licensees will continue to
operate under their existing authorizations with full protection from co-channel interference, and will
not be required to file applications for additional internal sites.  Incumbents will not be permitted
to expand their composite interference contour, as suggested by Sunbelt, unless the incumbents and
the geographic licensee have reached agreement on such modifications.  

     b.  Other services in the 152-159 MHz and 454-460 MHz bands

     26.  Background.  Rural Radiotelephone Service and two-way mobile telephone service also
use the paired channels allocated to paging services.  BETRS, licensed under the Rural
Radiotelephone Service, is a fixed service and by definition is not CMRS.  BETRS uses these
channels to provide basic exchange telephone service to rural areas where it would be impractical to
provide wireline telephone service.  Only local exchange carriers (LECs) that have been state
certified to provide basic exchange telephone service, or others having state approval to provide such
service, are eligible to hold authorizations for BETRS.  Conventional Rural Radiotelephone Service
is provided on the channels listed in Section 22.725.  These channels are also allocated for assignment
for paging services.  In the Notice, we stated that it is important to ensure that any changes to our
paging rules do not prevent BETRS from providing service to areas that otherwise would lack basic
telephone service.  We noted that new wireless services, such as PCS, may eventually provide
telecommunications service to remote areas.

     27.  Comments.  Commenters disagree with our observation that new mobile technologies
such as PCS may be widely available in the near future to serve sparsely populated or remote areas. 
Rule contends that there is substantial demand for two-way mobile telephone service in rural America
and in the western United States.  Rule notes that the carriers providing two-way mobile telephone
service are unlike paging operators in that they do not license a common frequency over a wide area;
instead they operate on numerous radio channels within a frequency band.  Rule recommends that
we continue licensing on a site-by-site basis, but suggests that the paired channels be licensed on a
county-by-county basis if geographic area licensing is imposed.  
     28.  The United States Telephone Association (USTA) and other commenters argue that it
is not in the public interest to use competitive bidding to select between applications for BETRS and
paging, as this may leave some rural areas without any local exchange service.  Commenters observe
that requiring LECs to bid for BETRS spectrum would defy the 1996 Telecommunications Act's
requirements for universal service and jeopardize the Commission's goal to increase subscriber
penetration.  

     29.  In ex parte comments filed on July 24, 1996, Puerto Rico Telephone contends that if
BETRS channels are subject to competitive bidding, BETRS will no longer be a cost-effective means
for providing rural service.  Puerto Rico Telephone argues that an auction would result in additional
costs imposed on the BETRS operator.  Additionally, access to spectrum needed for BETRS
expansion could be blocked by the geographic area license winner.  Puerto Rico Telephone contends
that the practical result of this would be to deny basic telephone service to rural areas.  Puerto Rico
Telephone argues that under Section 307(b) of the Communications Act the Commission must take
into the account the needs of rural communities, like those in Puerto Rico.  Puerto Rico Telephone
suggests that instead of requiring BETRS operators to bid at auction for a geographic area license,
the Commission should allow BETRS operators to apply for additional licenses on a site-by-site basis;
additionally (1) BETRS operators would have preferential treatment over paging operators for
mutually exclusive applications (on a site-by-site basis), and (2) the Commission should designate a
frequency block from reallocated frequencies solely for BETRS use.  According to Puerto Rico
Telephone, this proposal will preserve the status of BETRS licensees and provide for the future
opportunity for telecommunications carriers to expand service in rural areas.

     30.  In ex parte comments filed on September 6, 1996, Puerto Rico Telephone observes that
BETRS technology is a cost-effective means to provide basic telephone service to rural areas. 
Puerto Rico Telephone explains that on the island of Puerto Rico, BETRS and paging sites that serve
different constituencies are located in the same geographic licensing area, and may even have adjacent
interference contours.  Puerto Rico Telephone contends that a geographic area licensee should not
be able to charge a fee to the BETRS operator if it is necessary to expand the existing interference
contour to extend telephone service.  Puerto Rico Telephone proposes that consent from the
geographic area licensee should not be required to permit changes in the BETRS licensee's
interference contour if (1) the BETRS provider can demonstrate that change in its service area will
enable the provision of basic telephone service to an unserved area, or (2) the geographic area
licensee has not met its build-out requirement.

     31.  In reply to the comments filed by the parties, Arch and AirTouch contend that there is
no need to provide special considerations for BETRS operators, and that alternatives exist for
providing telephone service to remote areas, such as PCS, cellular, and mobile satellite services. 
SBT charges that the commenters fail to explain with particularity how the Commission could
reasonably continue to offer BETRS while auctioning wide-area UHF licenses.

     32.  Discussion.  In order to discuss the implementation of geographic area licensing for
paging systems on these channels, we must define the rights of BETRS and Rural Radiotelephone
Service operators to obtain spectrum within each area.  In the Competitive Bidding Second Report
and Order, we stated that we would not conduct auctions to resolve mutual exclusivity between
initial BETRS or rural radiotelephone applications and common carrier mobile service applications. 
We noted that it would not serve the public interest for the Commission to establish services such as
BETRS as a potential less costly alternative to wireline service, and then require the BETRS applicant
to bid against a radio common carrier applicant for those frequencies.  Since the release of the
Competitive Bidding Second Report and Order we have expanded our rules to allow CMRS licensees
the flexibility to provide fixed or mobile services, or a combination of the two, over spectrum
allocated for CMRS services.  In the CMRS Flex Report and Order we observed that fixed wireless
services could be used to provide wireless local loop as an alternative to end-to-end wiring by the
carrier from the switch to the end user in rural areas.  Thus the local exchange service currently
offered by BETRS could be offered by wireless or wireline providers in the future.  In such a
potentially competitive environment, it may not be logical to continue to exempt BETRS from
geographic area licensing and auctions.

     33.  BETRS operators argue that they should be exempted from the geographic licensing
process and from competitive bidding so that they will be able to obtain authorizations to use these
channels regardless of whether a paging operator has acquired the geographic area license.  Two
paging operators, Arch and AirTouch, disagree and argue that BETRS operators should be required
to obtain licenses under the same rules and procedures applicable to paging licensees.  
     34.  We conclude that BETRS and Rural Radiotelephone Service licensees can participate in
the geographic area licensing framework we are adopting for paging, but we will also allow them to
obtain site licenses on a secondary basis.  We do not believe it is necessary to exempt BETRS from
geographic area licensing or adopt the plan proposed by Puerto Rico Telephone.  In terms of
auctionability, we see no basis for distinguishing BETRS from other services that use radio spectrum
to provide commercial communications service to subscribers and are therefore auctionable under
Section 309(j) of the Communications Act.  We are aware that BETRS primarily serves rural,
mountainous, and sparsely populated areas that might not otherwise receive basic telephone service. 
Our decision to apply geographic licensing to BETRS will not deprive rural areas of local exchange
service or result in higher costs to BETRS customers.  All existing BETRS systems will remain in
place and will be fully protected from interference by geographic area licensees.  We also note that
there has been only limited demand for expansion by BETRS into new areas in recent years.  Thus,
it does not appear that geographic licensing of paging systems will significantly preempt growth of
BETRS.  

     35.  To the extent that demand for expanded Rural Radiotelephone Service or BETRS exists
or arises in the future, our geographic area licensing and partitioning rules are tailored to
accommodate any potential expansion.  The channels for which BETRS is eligible will be licensed
using EAs rather than MTAs, creating more opportunities for licensing of smaller markets to BETRS. 
In addition, our partitioning rules allow BETRS licensees to enter into partitioning agreements with
geographic area licensees both before and after geographic licensing occurs.  Finally, we will allow
the Rural Radiotelephone Service or BETRS licensee to obtain site licenses and operate facilities on
a secondary basis.  If any geographic area licensee subsequently notifies the Rural Radiotelephone
or BETRS licensee that a secondary facility must be shut down because it may cause interference to
the paging licensee's existing or planned facilities, the Rural Radiotelephone or BETRS licensee must
discontinue use of the particular channel at that site no later than six months after such notice.

     36.  With respect to mobile telephone service on the two-way channels under Section 22.561,
we do not believe these licensees should be exempt from the geographic area licensing process and
competitive bidding.  Two-way service primarily serves rural areas in the western part of the country,
and typically does not conflict geographically with paging service.  It would not be feasible to license
the service on a county-by-county basis, as one commenter suggested, instead of EAs.  It would be
difficult to license two-way mobile radiotelephone service by counties and paging services by EAs,
when both services use the same channels.  Additionally, counties are too small in many states to be
a practical geographic area for paging services which precludes using counties instead of EAs as the
geographic area for all services on these channels.  Therefore, two-way mobile telephone operators
on these channels will be subject to geographic area licensing on the same basis as paging operators.    

 4.  Shared PCP Channels

     37.  Background.  In the Notice we tentatively concluded that if we were to convert to
exclusive licensing of shared paging channels, a geographic licensing approach would be
appropriate.  We asked for comment on whether we should (1) convert lower band shared channels
to exclusive use and implement geographic area licensing; (2) issue only a certain number of licenses
per shared channel and use competitive bidding to choose among mutually exclusive applications once
the limit is reached; or (3) retain the status quo.  

     38.  Comments.  Most of the commenters addressing this issue are opposed to geographic
area licensing for the shared channels and request that the Commission maintain the present licensing
process.  Commenters contend that the Commission lacks authority to impose competitive bidding
for these channels because mutual exclusivity, i.e., the grant of one application that would preclude
the grant of another, cannot occur.  OPASTCO opposes geographic area licensing for shared
channels and contends that geographic area licensing for these channels would have a crippling effect
on taxi cabs and ambulances and the communities they serve if they are "frozen" and cannot expand
beyond the existing interference contour.  Teletouch contends that the policy considerations set
forth in the Notice -- such as enhancing symmetry between paging and narrowband PCS -- do not
apply to the shared PCP channels because one-way paging is fundamentally different from
narrowband PCS.  Teletouch explains that narrowband PCS users can use the service for two-way
response paging as well as sending e-mail, data, and documents, whereas shared-use paging licensees
generally provide only a simple, low cost paging service.  In addition, Teletouch, along with Page
Hawaii, observe that auctioning the shared channels to combat speculation and consumer fraud is
unwarranted because the harm from consumer fraud pales in comparison with the harm to the
industry and its customers that will result from geographic area licensing.

     39.  Several commenters suggest that certain shared channels with extensive regional coverage
should be subject to exclusivity and geographic area licensing.  A+ Network states that if auctions
are adopted for the exclusive channels, there will be a "stampede" to the shared channels, and urges
the Commission to protect the commercial incumbents with some form of exclusivity.  PNI
suggests that the Commission impose a cap on the number of licensees which may operate on a
shared channel in a geographic area.  ProNet, on the other hand, opposes such a licensing cap, and
argues that the shared channels should continue to be licensed under current procedures.  

     40.  Discussion.  While it is theoretically possible to convert shared channels to exclusive
channels and to license them using competitive bidding, we conclude that the cost and disruption that
would be entailed by such a transition outweighs any benefits that would be achieved.  Only a
relatively small amount of paging spectrum -- approximately 10 percent -- is licensed on a shared
basis.  The comments indicate that these channels are heavily used by incumbent systems, many of
whom have entered into time-sharing or interconnection arrangements to avoid interference with one
another.  Most of these systems provide service on a local, rather than a regional or nationwide basis. 
In addition, many of the systems on these channels are licensed to businesses, hospitals, and other
entities for private, internal use rather than for provision of service to commercial subscribers.  For
example, SERS, a limited eligibility service restricted to emergency service providers, may be
offered on shared channels in bands listed in Section 90.53 and also may be offered on the PCP
channels.  The SERS operators provide essential life-saving services in localized areas, and sharing
of the SERS channels and PCP channels is working effectively.

     41.  We believe that it is unlikely that creating geographic overlay licenses on these channels
would significantly improve efficiency of spectrum use.  Because of the heavy existing use of the
channels on a shared basis, granting "exclusive" rights to a geographic licensee would have little
practical value: the geographic licensee would either have to share the channel with incumbents
throughout most of its licensed area, or it would have to buy out all existing incumbents in order to
use the channel on an exclusive basis.  The conversion process would also be highly disruptive to
existing incumbents, many of whom operate small, private systems and have no need for or interest
in obtaining geographic area licenses.  As several commenters point out, these incumbents would not
benefit from receiving interference protection for their existing service areas, because systems on
shared channels have not developed based on a protected service area model.  Thus, the primary
impact on incumbents would be to preclude them from adding to or modifying their systems even
though such additions or modifications would have been allowed in a shared-use environment.

     42.  We also decline to adopt a "cap" on licensing of shared channels, or to convert some but
not all shared channels to exclusive licensing.  The difficulty with a licensing cap, as noted by several
commenters, is that it is the amount of time a paging channel is used and the transmission equipment
and protocol used, not the number of licensees, that determine the capacity limits of a paging channel. 
Thus, closing off licensing of a channel after a particular number of licenses have been granted would
not necessarily ensure efficient spectrum use.  We are also concerned that picking certain shared
channels to be designated as exclusive would only cause greater pressure on the remaining shared
channels and could limit opportunities for entry by smaller systems.  

     43.  While we conclude that the existing shared paging channels should continue to be
licensed on a shared basis, we are concerned about the consumer fraud and license application
speculation issues raised in the comments filed by the FTC.  Therefore, in order to ensure that these
channels are not susceptible to speculative applications, we seek comment in our Further Notice on
changes in our license application and frequency coordination procedures.  Pending resolution of the
issues raised in the Further Notice, we will retain our interim licensing rules for these channels, which
limit applications to incumbent licensees seeking to expand their current systems.  We will, however,
eliminate the 40-mile requirement for new sites; thus incumbents may file for new sites at any
location.  Additionally, we will allow new applicants to file applications for private, internal-use
systems.  We do not believe that granting private licensees' applications for sites will encourage
speculative applications, because these systems cannot be operated on a commercial basis.  SERS
providers will also remain exempt from the licensing freeze and may continue to file applications on
shared channels under the existing rules.  

5.  Exempting certain incumbents from competitive bidding

     44.  Comments.  Commenters contend that the Commission should adopt a procedure
whereby channels already extensively used by an existing carrier be exempted from the auction
procedure.  For example, several commenters suggest that the Commission should award geographic
area licenses without competitive bidding to any incumbent providing coverage to 70 percent or more
of the population in the license area.  Other commenters suggest that the Commission award
geographic area licenses without competitive bidding if the incumbent covers two-thirds of the
population of the geographic area.  SBT contends that if a designated entity provides service to
one-third or greater of the population, or one-half or greater of the geographic area, it should be
awarded a dispositive preference for the wide-area license.  Priority states that auctions are
unnecessary where incumbents already provide substantial service in their markets and that
geographic area licenses should be issued to incumbents providing substantial service.  Pass Word
contends that auctions should not be held where, in the geographic area involved, the relevant channel
is serving at least 50 percent of that area or the population therein.  

     45.  Discussion.  We are not persuaded by the commenters that channels already extensively
used by an incumbent should be exempt from the competitive bidding procedures or that eligibility
should be restricted to incumbent licensees.  We believe that all otherwise qualified paging applicants
should be eligible to bid for any geographic area license.  We note that if an incumbent already has
a significant presence in a geographic area, other potential applicants may choose not to bid for that
geographic area.  Nevertheless, we believe that the market, not regulation, should determine
participation in competitive bidding for geographic area licenses.  We believe that open eligibility for
paging licenses will result in a more competitive auction and potentially will result in further wide-area coverage of paging services.

B.  Geographic Area Licensing for Nationwide Channels

     46.  Background.  Three 931 MHz channels, 931.8875, 931.9125, and 931.9375, ("CCP
nationwide channels") were allocated for nationwide network paging, and have been assigned to
licensees on a nationwide basis.  The three CCP nationwide channels have been exclusively
allocated for nationwide network paging for over ten years.  We have recently allowed 929 MHz
licensees to earn nationwide exclusivity under Section 90.495 by constructing networks of at least
300 transmitters that meet certain criteria for coverage of major markets and regional areas.  In the
Notice, we proposed to grant nationwide geographic area licenses, without competitive bidding, for
the three CCP nationwide channels and the PCP channels for which licensees had met the
construction requirements for nationwide exclusivity as of February 8, 1996.  We also asked for
comment on MTel's request to have its 931.4375 MHz channel designated a nationwide channel.

     47.  Comments.  Some commenters contend that our proposal would be anti-competitive
because nationwide licensees offer local and regional service on the nationwide channels as well as
nationwide service and directly compete with licensees that will be subject to competitive bidding. 
PCIA, PageNet, Arch, and MTel, on the other hand, contend that channels already authorized on a
nationwide basis should be awarded nationwide geographic area licenses and excluded from
competitive bidding.  Several commenters argue that licensees who had obtained sufficient
authorizations to be eligible for conditional nationwide exclusivity prior to the Notice should also
receive nationwide geographic area licenses and be exempt from competitive bidding.  TSR argues
the Commission's only justification for including the conditional nationwide channels in geographic
area licensing is to increase revenues from auctions, which is in violation of Section 309(j)(7)(A) of
the Communications Act.  SBT contends that if the Commission exempts nationwide channels from
competitive bidding it would be consistent to exempt all local paging systems that serve a substantial
portion of an MTA from competitive bidding for that MTA.  

     48.  MTel contends that 931.4375 MHz is operated by SkyTel, in concert with 931.9375
MHz, to provide nationwide paging service.  MTel argues that 931.4375 MHz should be
redesignated on a nationwide basis to promote the Commission's goal of creating regulatory parity
among CCP and PCP providers, and notes that no other party is licensed on 931.4375 MHz.  MTel
argues that if the Commission does not designate this as a nationwide channel, SkyTel would be at
a disadvantage compared to its PCP competitors.  

     49.  MobileMedia contends that it also operates de facto nationwide channels, 931.8125 and
931.8625 MHz, that have more transmitters than MTel's channel and that its channels therefore
should also be awarded nationwide geographic licenses and be exempt from geographic licensing. 
PageNet opposes the treatment of MTel's second channel as a nationwide channel and states that
unless the Commission is willing to consider other substantially constructed 931 MHz local channels
as eligible for nationwide geographic area licenses, it should not grant 931.4375 MHz a nationwide
geographic area license.  TeleBEEPER contends that 931.4375 MHz should not be designated a
nationwide channel, and states that MTel has only constructed on this channel in urban areas.

     50.  Discussion.  At the time the Notice was adopted, licensees on three 931 MHz channels
and on eighteen 929 MHz channels had constructed sufficient stations to obtain nationwide
exclusivity under our prior rules.  As we proposed in the Notice, we will award nationwide licenses
for these channels and exclude them from competitive bidding adopted for non-nationwide channels. 
In our view, it would not serve the public interest or be fair to take away exclusivity rights that these
licensees earned before the commencement of this proceeding.  The record indicates that they have
developed successful and efficient nationwide networks under the pre-existing rules -- in fact, in most
cases they have substantially exceeded the construction thresholds required to earn nationwide
exclusivity under those rules.  Thus, we do not believe imposition of competitive bidding is needed
to further the goal of developing competitive nationwide paging networks on these channels.  

     51.  We also grant nationwide geographic area licenses, without competitive bidding, to those
929 MHz paging licensees with sufficient authorizations as of February 8, 1996 to qualify for
nationwide exclusivity on a conditional basis.  Our records indicate that four licensees -- Tri-State
Radio Co., Inc. (929.2125 MHz), AirTouch (929.4875 MHz), PageMart II, Inc. (929.7625), and
Communications Innovations Corp. (929.8125 MHz) -- had conditionally qualified for nationwide
exclusivity under our rules, although they had not completed construction at the time the Notice was
adopted.  All of these licensees have since met this condition by constructing the required number of
transmitters to earn permanent nationwide exclusivity.  We agree with the commenters that licensees
who had obtained sufficient authorizations to be eligible for conditional nationwide exclusivity prior
to the Notice, and have since constructed nationwide systems, should also receive nationwide
geographic area licenses and be exempt from competitive bidding.  These licensees have sufficient
operating sites to now qualify for nationwide exclusivity, and we see no reason to treat them
differently than the licensees who had built out as of February 8, 1996.  

     52.  We are also granting the request of Nationwide 929.8875 LLC ("Nationwide") for
nationwide exclusivity on the frequency 929.8875 MHz.  Nationwide is jointly owned and controlled
by AirTouch and Arch who are in the process of securing Commission consent to assign their
respective exclusive regional system licenses to Nationwide.  AirTouch and Arch have regional
exclusivity under Section 90.495(a)(2) on 929.8875 MHz for four regional systems.  AirTouch and
Arch are parties to an agreement to operate their 929.8875 MHz facilities on an integrated basis to
provide nationwide service.  On November 22, 1995, prior to the adoption of the Notice, AirTouch
and Arch requested nationwide exclusivity on 929.8875 MHz for their combined systems.  AirTouch
and Arch certify that they had more than 300 transmitters in over 40 states as of February 8, 1996
for the combined systems to meet the nationwide exclusivity criteria under Section 90.495(a)(3). 
We find that the public interest is served by granting a nationwide geographic area license to
Nationwide.

     53.  We decline to extend nationwide exclusivity rights to MTel's 931.4375 MHz channel. 
Although MTel has been extensively licensed on this channel for some time, we did not recognize it
as having nationwide exclusive rights at the time this proceeding commenced.  Thus, granting MTel
exclusivity would confer benefits that it did not expect or earn under the old rules, and that it would
not be otherwise eligible for under our geographic licensing rules.  For the same reasons, we decline
to confer nationwide exclusivity on MobileMedia's 931 MHz channels.  We recognize that many
paging carriers, including MTel and MobileMedia, have built out extensively on channels that are not
specifically designated as nationwide channels.  We decline to award presumptive nationwide
exclusivity on this basis, however, because these licensees had no expectation that nationwide
exclusivity would result from their build-out. 

     54.  With respect to licensees who are granted nationwide geographic area licenses by virtue
of this order, we will issue single nationwide licenses for each channel.  In addition, while we
conclude that nationwide licenses should not be subject to competitive bidding, we believe that the
long-term rules governing development of nationwide paging systems warrant further notice and
comment.  Our existing Part 90 and Part 22 requirements for construction of nationwide systems are
not consistent, and both sets of requirements differ from the construction and coverage requirements
applicable to nationwide narrowband PCS licensees.  Therefore, we seek comment in our Further
Notice below on possible changes to our rules governing nationwide paging channels. 

C.  Protection for Incumbents

     55.  Background.  In the Notice, we tentatively concluded that the public interest would be
served by allowing all incumbent paging licensees to either continue operating under existing
authorizations, or trade in their site-specific licenses for a single system-wide license, demarcated by
the aggregate of the service contours around each of the incumbents' contiguous sites operating on
the same channel.  We also tentatively concluded that the incumbent licensees would be able to
continue to operate, and the geographic licensee would be required to provide protection to all co-channel systems operating within their service areas.  The incumbent licensees would not, however,
be allowed to expand beyond their existing interfering contours without the consent of the geographic
licensee.  

     56.  Comments.  Several commenters agree that incumbent licensees should not be permitted
to expand beyond their interference contours without the consent of the geographic licensee.  Other
commenters contend that if wide-area licensing is adopted it would be contrary to the public interest
to lock in non-geographic licensee incumbents within their present interference contour, and that
paging carriers must be able to add to or modify their systems in response to the customers' needs. 
CCMS contends that the geographic licensee could interfere with the incumbent's signal, and drive
the incumbent's customers away.  CCMS offers two proposals:  (1) incumbents should be allowed
to move into unserved areas after having given the geographic licensee fair opportunity to provide
service; and (2) the Commission should declare all contiguous unserved areas to be immediately and
continually available to the incumbent.  Western Radio Services suggests that incumbents should
be permitted to add stations so long as 50 percent or more of the proposed coverage of the new
facility overlapped the coverage provided by the existing station.  Ameritech proposes that
incumbent (non-geographic) licensees be allowed to expand their systems after the auction under the
following criteria: (1) each additional site is located within 40 miles of one of the incumbent's
previously authorized transmitter sites; or (2) the area to be served by the additional site is
surrounded by the incumbent's authorized co-channel transmitters within 70 miles, forming a pocket
around the proposed site.

     57.  Discussion.  In the CMRS Third Report and Order we discussed co-channel interference
protection for incumbents and stated that incumbent 900 MHz SMR systems are entitled to full co-channel interference protection for existing facilities, but are not allowed to expand beyond existing
service areas unless they obtain the MTA license for the relevant channels.  In the 900 MHz Second
Report and Order we explained that our objective is to allow 900 MHz SMR incumbents to continue
existing operations without harmful interference and to give them the flexibility to modify or augment
their systems so long as they do not encroach on the MTA licensee's operations.  We believe that
in paging services the public interest would be served by allowing incumbent (non-geographic) paging
licensees to continue to operate under their existing authorizations with full protection from co-channel interference, and similarly protecting the geographic area licensees from co-channel
interference from the incumbent licensees.  Therefore, consistent with our rules for 900 MHz SMR,
we will not allow incumbent (non-geographic) licensees to expand beyond their composite
interference contour unless the incumbents and the geographic licensee have reached agreement on
such modifications.

     58.  We believe that the public interest would be served by allowing all incumbent paging
licensees to either continue operating under existing authorizations or trade in their site-specific
licenses for a single system-wide license demarcated by the aggregate of the interference contours
around each of the incumbents' contiguous sites operating on the same channel.  The incumbent (non-geographic) licensees may add or modify sites without filing site specific applications; however,
they cannot expand their existing interfering contours without the consent of the geographic licensee.

D.  Coverage Requirements

     59.  Background.  In the Notice, we requested comment on whether geographic paging
licensees should be subject to minimum coverage requirements as a condition of licensing.  We
observed that we have imposed coverage requirements on licensees in other services to ensure that
spectrum is used effectively and service is implemented promptly.  We tentatively concluded that the
geographic area licensees should be required to provide coverage to one-third of the population
within their licensing areas within three years of the license grant, and to two-thirds of the population
within five years, or that in the alternative, they provide substantial service to the geographic license
area within five years of the license grant.  

     60.  Comments.  Several commenters agree with the coverage requirements proposed in the
Notice.  Most commenters, however, contend that more stringent coverage requirements are
needed to deter speculation while promoting prompt service to the public.  For example, some
commenters suggest that we should require licensees to construct facilities covering ten percent of
the population of the geographic area within one year of the license grant.  TeleBEEPER proposes
that geographic licensees be required to cover 75 percent of the geographic area covered by the
license in the first five years.  Rule suggests that licensees be required to place at least one
transmitter in operation within six months, that at least 25 percent of the unserved population should
receive service within the first year, and that 50 percent of the population should receive service
within the second year.  AT&T Wireless proposes that geographic licensees cover one-third of the
population within one year of licensing, rather than three years.  Several commenters oppose
allowing a geographic licensee to meet its construction requirement by showing it provided
substantial service to the area, contending that this standard is too vague and would allow geographic
area licensees to block expansion of competitors' systems.  

     61.  Commenters propose that if a geographic licensee fails to meet the coverage
requirements, the cancellation of the geographic license should be automatic, without public notice
or correspondence from the Commission.  Additionally, ProNet suggests that the Commission
reinstate all operational sites held prior to auction and those constructed pursuant to the geographic
area license.  PageNet proposes that if an incumbent licensee acquires a geographic license and fails
to meet its coverage requirements, it should be allowed to retain constructed sites licensed prior to
the auction on a site-specific basis.  PageNet further suggests that additional facilities constructed
under the geographic license would be converted to secondary status pending relicensing of the
geographic area.

     62.  Discussion.  Section 309(j)(3) of the Communications Act states in part that, when
designing competitive bidding systems, "the Commission shall include safeguards to protect the public
interest in the use of the spectrum . . . ."  In addition, Section 309(j)(4)(B) states that the
Commission shall include performance requirements, such as appropriate deadlines and penalties for
performance failures, to ensure prompt delivery of service to rural areas, to prevent stockpiling or
warehousing of spectrum by licensees or permittees, and to promote investment in and rapid
deployment of new technologies and services.  

     63.  We agree with the commenters that coverage requirements are needed as performance
requirements to deter speculation while promoting prompt service to the public.  Coverage
requirements are also necessary to prevent warehousing, promote rapid deployment of new
technologies and services, and promote service to rural areas.  We believe that the coverage
requirements proposed in the Notice will be sufficient performance requirements:  for each MTA or
EA, the geographic area licensee must provide coverage to one-third of the population within three
years of the license grant, and to two-thirds of the population within five years of the license grant. 
In the alternative, the MTA or EA licensee may provide substantial service to the geographic license
area within five years of license grant.  Substantial service is defined as service that is sound,
favorable, and substantially above a level of mediocre service, which would barely warrant renewal. 


     64.  The failure to meet these coverage requirements will result in automatic termination of
the geographic area license.  This is consistent with our rules for broadband PCS, 900 MHz SMR
services, and Multipoint Distribution Services (MDS).  We will reinstate any licenses that were
authorized, constructed, and operating at the time of termination of the geographic area license.
 
     65.  We also note that paging licensees remain subject to performance standards elsewhere
in our rules.  In the CMRS Third Report and Order, we adopted a uniform ten-year license term and
renewal expectancy for all CMRS providers, including paging providers.  Under this provision, a
CMRS licensee will be entitled to a renewal expectancy if it demonstrates that it has provided
substantial service during the license term and has complied with the Commission rules and policies,
and the Communications Act.  This renewal expectancy standard provides additional incentive for
licensees to provide service, thereby promoting investment in and rapid deployment of new
technologies and services in compliance with Section 309(j)(4)(B) of the Communications Act. 

E.  Co-Channel Interference Protection

1.  Co-Channel Interference Protection -- Incumbent Licensees

     66.  Background.  Under our current rules, exclusive paging systems are protected from co-channel interference by a variety of rules that govern transmitter height and power, distance between
transmission stations, the licensee's protected service area, and/or the field strength of the licensee's
service and interfering signals.  The purpose of the co-channel interference rules is to protect the
service of each licensee's facilities from interference caused by the operation of co-channel facilities
of other licensees.  We believe that it is necessary to have a uniform methodology to determine the
service and interference contours of incumbent licensees to allow them to make minor modifications
without exceeding the interference contour and causing interference to the geographic licensee.  We
also need a uniform methodology to determine the service and interference contours of the
geographic area licensee to allow the geographic licensee to construct a paging system without
causing interference to an incumbent licensee.  

     67.  For the CCP channels below 931 MHz, we currently use formulas to determine the
distance from each transmitting antenna site to its service and interference contours along the eight
cardinal radials from the transmitter site.  We proposed in the Notice that we would continue to use
these formulas for interference protection purposes if we adopted geographic area licensing for these
bands.  For the 931 MHz channels, the rules contain two tables of fixed radii, Tables E-1 and E-2,
rather than formulas, to establish the distance to the service and interference contours.  For the 929
MHz exclusive channels, assignments are made using geographic separation rules that agree with the
separations which result from the application of the fixed radii for 931 MHz.  In the Notice, we
proposed to adopt formulas to determine the service and interference contours for the exclusive
929 MHz and the 931 MHz channels similar to the formulas used in the lower bands.

     68.  Comments.  Commenters addressing this issue strenuously object to the proposal to
change the method by which service and interference contours are determined for the exclusive 929
MHz and 931 MHz facilities, and state that the proposed method of computing these contours could
require incumbents to reduce coverage or be required to accept interference from geographic
licensees.  Ameritech notes that adoption of the formulas, and subsequent degradation of existing
service, could threaten public safety because many of Ameritech's customers are medical, police, and
fire personnel.  PCIA, and other commenters, suggest that the Commission use the Tables E-1 and
E-2 in Section 22.537 for both 929 MHz and 931 MHz because these standards generally provide
appropriate levels of interference protection.  Several commenters suggest that we should consider
all exclusive 929 MHz and 931 MHz as having a circular service contour radius of 20 miles and a
circular interference contour radius of 50 miles.

     69.  Discussion.  We proposed using the specified formulas in the Notice for the 929 MHz and
931 MHz channels because we believed that these formulas would produce service and interference
contours that would better reflect actual coverage.  The formulas would be a function of the technical
parameters actually used rather than of the maximum technical parameters that could be used for a
given set of radii.  Additionally, using these formulas would provide licensees with flexibility to
establish transmitter sites nearer the periphery of their systems by adjusting the effective antenna
height and transmitting power, instead of having to obtain written consent from co-channel licensees. 
After review of the record, however, we are persuaded that the advantages of adopting the proposed
formulas are outweighed by the disadvantages noted by the commenters.  As the commenters
observed, changing from Tables E-1 and E-2 to the proposed formulas would, in most cases, reduce
the service area and composite interference contour that incumbent licensees have relied on in
developing their systems to date.  Additionally, the proposed formulas may underestimate the actual
reliable coverage of the paging systems.  Using the fixed distances in Tables E-1 and E-2 in Section
22.537 for the 929 MHz and 931 MHz channels would maintain the status quo for 931 MHz channels
and conform 929 MHz channels to the current procedure for 931 MHz.  Therefore, we are adopting
the fixed distances in Tables E-1 and E-2 in Section 22.537 for the exclusive 929 MHz and 931 MHz
channels.  Geographic area licensees must provide co-channel protection to all incumbent licensees,
including incumbents on the nationwide channels and incumbents in other geographic areas.  We will
allow geographic and incumbent licensees to use short-spaced locations pursuant to mutual written
consent.  As we proposed in the Notice, we will continue to use the current formulas for the CCP
channels below 931 MHz.

2.  Co-Channel Interference Protection -- Adjacent Geographic Licensees

     70.  Background.  In the Notice we discussed the interference obligations of geographic
licensees with respect to neighboring geographic licensees, and proposed that interference protection
should be provided by (1) reducing the signal level at the service area boundary or (2) negotiating a
mutually acceptable agreement with the neighboring geographic licensees.   

     71.  Comments.  Pacific contends that licensees should have the option of providing
interference protection either by reducing the signal strength or negotiating some other agreement
with those affected.  Ameritech and Ameritel contend that the Commission should require the
geographic licensee to give advance notice to co-channel incumbents before activating transmitters
that are located less than 70 miles from existing facilities, and should comply with a request by the
incumbent for interference testing prior to operation.  PCIA supports the proposal that geographic
licensees should provide interference protection either by reducing the signal level at the service area
boundary by positioning directional antennas, or some other mutually acceptable agreement.  

     72.  PageNet contends that paging licensees should have the flexibility to reach the best
solution for the carrier's business goals and for service to the public, and that licensees should be
given wide latitude in permissible sharing and other arrangements geared toward eliminating harmful
interference in the border areas.  PageNet suggests that in the absence of an agreement with the
adjacent co-channel licensees, the geographic licensee should employ technical solutions, such as
directional antennas, to reduce the signal level at the service area boundary.  PageNet contends that
the Commission should only entertain complaints regarding border area transmitters in this situation
if the complaining geographic licensee is able to demonstrate actual harmful interference to its
operations.

     73.  Discussion.  We note that the co-channel interference protection discussed above requires
incumbents and geographic licensees to provide interference protection to each other, but does not
apply to interference between geographic licensees.  Geographic licensees generally are not required
to file applications with the Commission, therefore it is possible that a geographic licensee with a
transmitter at or close to the border of the MTA or EA could unknowingly cause interference to a
neighboring geographic licensee.  It is in the interest of the geographic licensees to find mutually
beneficial ways to accommodate their needs in providing service within their respective MTAs and
EAs.  Instead of specifying a minimum distance a geographic licensee's transmission site must be from
the geographic border, which may result in unserved areas, we are allowing geographic licensees to
negotiate  mutually acceptable agreements with all adjacent geographic area licensees if the interfering
contour of one geographic area licensee will extend into the adjacent geographic area or areas. 
Adjacent geographic area licensees have a duty to negotiate with each other in good faith regarding
co-channel interference protection.  We believe that informal negotiations between parties in
determining mutually agreeable arrangements between adjacent MTAs and EAs will achieve the most
expeditious and effective resolution of co-channel interference.  The lack of adequate service to the
public due to failure to negotiate reasonable solutions to co-channel interference problems with
adjacent geographic area licensees could reflect negatively on  licensees seeking renewal.

3.  Maximum Power and Height-Power Limit

     74.  Background.  Under our existing rules, the maximum effective radiated power (ERP)
limit for 931 MHz, nationwide 929 MHz, and narrowband PCS facilities is 3500 Watts ERP.  In
the Part 22 Rewrite Order, we concluded that a maximum power limit of 3500 Watts ERP is
appropriate for paging facilities in the 931 MHz band, because it allows for the use of high power
facilities where needed, yet provides sufficient protection from intermodulation interference and
receiver desensitization.  For example, high power facilities might be needed in areas where
shadowing or building penetration is a problem, for high speed data transmission, or where the use
of several smaller facilities would not be economical.  In the PCP Exclusivity Order, we established
the ERP limit of 1000 Watts for local and regional 929 MHz systems, and 3500 Watts for nationwide
systems.  In the PCP Exclusivity Reconsideration we allowed non-nationwide 929 MHz PCP
systems to operate sites within their existing service area at up to 3500 Watts ERP, provided that
such operation would not increase the minimum geographical separation applicable to co-channel
systems under Section 90.495(b)(2).  

     75.  In the Notice, we tentatively concluded that the maximum ERP limit for non-nationwide
929 MHz PCP systems should be raised to a maximum of 3500 Watts in order to bring the rules
governing non-nationwide 929 MHz facilities into conformity with those for 931 MHz, nationwide
929 MHz, and narrowband PCS facilities.  We observed that this would provide 929 MHz licensees
with the benefits of higher power operation without unduly increasing the risk of interference.  We
proposed to retain the current maximum ERP limits for the various CCP lower band paging
channels.  These limits were increased in 1989 after careful consideration, and we believe that the
limits adopted in that proceeding remain appropriate.  

     76.  Height-power limits serve to limit the service and interfering range of a facility to a
constant distance.  If a facility is modified to raise the antenna height, the power must be lowered so
that the service and interfering ranges remain essentially unchanged.  Height-power limits are useful
when co-channel assignments are made on a site-by-site basis using a single fixed minimum
geographical separation distance requirement, because they allow licensees flexibility to employ
various combinations of antenna height and transmitting power while maintaining the validity of the
fixed separation method.  Height-power limits are also useful for limiting the area that can be
covered by a single facility.  In the 931 MHz band, we eliminated the height-power limit, because
most systems in that band are multi-transmitter wide-area systems covering large areas.  We
concluded that it is more cost-effective for licensees to cover a large area with a high power facility
than with numerous smaller facilities.  In the Notice, we proposed to eliminate the height-power
limit for 929 MHz licensees, because many of the paging systems in the 929 MHz band are also multi-transmitter wide-area systems.  We proposed to maintain the current height-power limits for the
lower band CCP channels because most of these channels are occupied by smaller systems.  

     77.  Comments.  Pacific agrees with our proposal to eliminate the height-power limit for 929
MHz systems, and argues that we should also eliminate the height-power requirement for the lower
band channels.  Rule contends that the existing height/power requirements for 150 and 450 MHz
should be changed, and observes that the Part 90 licensees do not have such requirements. 
AirTouch agrees that the Commission should retain the current maximum ERP limit for the lower
bands, and should conform the 929 MHz height-power and power rules to those for the 931 MHz
band.  PCIA, PageMart, and Caraway support the Commission's proposal to increase the maximum
power for 929 MHz non-nationwide facilities to 3500 watts, and to eliminate the height-power limit
for 929 MHz.  PageNet and TeleBEEPER contend that the non-nationwide 929 MHz carriers
should be able to operate their facilities at up to 3500 watts effective radiated power.  

     78.  Discussion.  One of our goals in this proceeding is to promote technical parity within the
paging industry, when feasible.  Paging systems operating on the 929 MHz band are virtually identical
to those operating on the 931 MHz band and should be subject to the same power and height-power
rules.  We also note that conforming these rules will allow paging operators to design their systems
in the most economical manner, particularly when integrating two systems where one operates in the
931 MHz band and the other operates in the 929 MHz band.  Most of the commenters addressing this
issue contend that the Commission should eliminate the disparity between the rules governing the 931
and those governing the 929 MHz channels, and conform the ERP limit and the height-power limit
in these two bands.  We agree with these commenters that carriers operating on 929 MHz and 931
MHz should operate with the same power and height-power rules.  Therefore, we are eliminating the
height-power limit for 929 MHz systems, to conform them to the 931 MHz systems.  We are also
increasing the maximum permitted ERP for all 929 MHz systems to 3500 Watts, to conform these
systems with the nationwide 929 MHz systems and the 931 MHz systems.  

     79.  With respect to the CCP bands below 931 MHz, we proposed to retain the current
maximum ERP limits for these channels.  In CC Docket No. 88-135, we completed a comprehensive
evaluation of our power and height-power rules governing these channels.  In that proceeding, we
developed an extensive record and considered many technical factors, including co-channel and
adjacent channel interference potential, interference to TV reception, accuracy limitations of
propagation prediction tools, blanketing interference and service area gains.  As a result of our
evaluation in that proceeding, we increased the power limits for certain frequency bands, declined to
increase them for other frequency bands, adopted certain geographic separations to protect adjacent
channel Public Safety and other private radio operations, and provided for averaged height-power
limits instead of radial-by-radial limits.  These power limits and other rules were incorporated without
substantial change into the power limit and technical channel assignment criteria rules we adopted
subsequently in the Part 22 Rewrite Order.  There have been no substantial technological changes
to the systems operating on these channels since the existing power limits were adopted. 
Accordingly, we believe that the carefully considered power and height-power limits adopted in the
aforementioned proceedings remain appropriate.  Discarding the results of our previous analysis and
increasing the maximum ERP limits again for the sake of sameness, without a more detailed record
analyzing the possible consequences, could pose an unacceptable increased risk of interference to
other CMRS, public safety and private radio systems and television reception.  Therefore, we are
maintaining the current power and height-power limits for the CCP bands below 931 MHz.

F.  Licensing in Mexican and Canadian Border Areas

     80.  Background.  In the Mexican and Canadian border areas, paging channel availability may
be restricted by international agreement, and there may be limitations on ERP and antenna height. 
In other services where we have converted to geographic area licensing, we have decided not to
distinguish between border areas and non-border areas for licensing purposes.  In the Notice, we
proposed that geographic licensees be entitled to use any available border-area channels, subject to
the relevant rules regarding international assignment and coordination of such channels.

     81.  Comments.  Commenters agree that border areas should be treated like any other
geographic area for licensing purposes.  Ameritech observes that the lower CCP bands still require
site-by-site coordination with Canada.  PageNet contends that the Commission should continue the
practice of allowing the placement of transmitters by the U.S. geographic licensee on the U.S. side
of the border if the U.S. licensee has consent from the foreign licensee and the appropriate foreign
regulatory authority.  PageNet states that this cooperation is vital to the development of
international roaming service offerings and will serve the public interest.

     82.  Discussion.  Commenters agree with our proposal that border areas should be treated like
any other area for licensing purposes and carriers can determine whether spectrum is usable in border
areas under applicable treaties and protocols.  Therefore, we will not distinguish between border and
non-border areas in geographic licensing.  We note that the geographic licensees will be responsible
for advising the Commission of any transmitter site changes or additions if site-by-site coordination
is required by Canada or Mexico.

G.  Eligibility to Participate in Competitive Bidding

     83.  Background.  In the Notice we tentatively concluded that both incumbents and new
entrants could apply for geographic area licenses, without restrictions on eligibility, and that the
marketplace should determine the level of demand for licenses.

     84.  Comments.  PageNet and AirTouch contend that eligibility should not be restricted. 
AT&T Wireless suggests that short form applications should be filed only by entities that already
provide coverage to 70 percent of the geographic area.  Ameritel contends that the Commission
should restrict eligibility to existing carriers or entities with applications pending as of February 8,
1996, the date of the Notice.  Priority suggests that eligibility to bid on 931 MHz spectrum should
be limited to incumbents already providing service on the particular channel to ensure that the high
bidder is a serious applicant intending to provide paging service to the public.  

     85.  Discussion.  We believe that it is important to allow all parties to participate in the
competitive bidding process for geographic area licenses, and accordingly, apart from foreign
ownership limitations, we will not restrict eligibility.  We believe that non-incumbents should be
allowed to bid for available spectrum, or to enter into joint ventures with incumbents for purposes
of bidding in a geographic area.  The competitive bidding process itself should deter speculation by
those not genuinely interested in providing service to the public.  In addition, we believe that the open
eligibility for the geographic area licenses will be pro-competitive and potentially will result in a
diverse group of entities providing paging services to the public.

H.  Channel Aggregation Limit

     86.  Background.  In the Notice, we requested comment on whether a channel aggregation
limit would be appropriate for the paging channels, and if so, what the limit should be.  We noted
that significant aggregation of paging channels has not occurred. 

     87.  Comments.  The commenters addressing this issue generally argue that we should not
impose a channel aggregation limit or spectrum cap for paging channels.  Ameritech notes that
incumbents should not be limited in the number of paging channels they hold because they have
already developed existing paging operations and may have to bid at auction to defend the integrity
of such systems.  PageNet observes that broadband carriers have a spectrum cap of 45 MHz, and
a paging channel is 25 kHz, which is 1/40 of 1 MHz.  AirTouch contends that no carrier is remotely
close to having the channel position or market power to dominate the paging industry, therefore
channel aggregation limits would not be in the public interest.  Additionally, notes AirTouch,
cellular and PCS licensees are allowed to and do provide paging services, and it would be unfair to
arbitrarily limit paging carriers when they are competing against broadband licensees. 
TeleBEEPER supports aggregation limits insofar as an applicant would not be permitted to have a
929 MHz and a 931 MHz license in the same geographic area.

     88.  Discussion.  In the CMRS Third Report and Order, we imposed a spectrum aggregation
cap of 45 MHz as the total amount of combined PCS, cellular, and SMR spectrum classified as
CMRS in which an entity may have an attributable interest in any geographic area at any point in
time.  We declined to include narrowband radio services in the spectrum cap, noting that it is highly
unlikely that one entity could ever accumulate as much as 5 MHz in any given geographic market. 
For similar reasons, we conclude that a channel aggregation limit is unnecessary for paging.  The
record indicates that the paging market is highly competitive and diversified, making it unlikely that
any one licensee could accumulate sufficient spectrum to dominate the paging market, much less the
CMRS market as a whole.  There are between 500 and 600 paging carriers in the United States
today.  Fifteen large companies account for approximately sixty percent of the paging customers. 
In most markets, paging service is provided by several competing carriers, and large metropolitan
areas typically have twelve or more carriers.  There has been some merger activity among large
paging carriers in recent years, but these mergers have been geographic market extension mergers
for the most part, and no showing has been made that these mergers have increased horizontal
concentration to levels that are significant for purposes of competitive analysis.  Therefore, we do not
find any evidence that excessive channel aggregation has occurred in the paging industry; to the
contrary, paging channel use is highly dispersed among numerous competing licensees.  Additionally,
we anticipate that many applicants for geographic area paging licenses will be incumbents seeking to
obtain geographic area licenses where their existing facilities reside.  Thus, we do not believe that
geographic area licensing is likely to increase market concentration in the paging industry.  Finally,
we believe that a cap could arbitrarily limit a carrier's capacity to provide services that may require
multiple channels.  Therefore, we are not imposing a spectrum or channel aggregation cap on paging
licenses at this time.

I.  Competitive Bidding Issues

1.  Competitive Bidding Design

     a.  Bidding methodology
     
     89.  Background.  In the Notice we sought comment on which auction methodology should
be used to award paging licenses.  We noted that we had conducted simultaneous multiple round
auctions for broadband and narrowband PCS, 900 MHz SMR, and Multipoint Distribution Service
(MDS), observing that this is the preferred auction design where licenses have strong value
interdependencies.  We also noted, however, that a large number of paging licenses might be
auctioned.  Given this large number, we sought comment on whether simultaneous multiple round
bidding might be too burdensome administratively, and whether another bidding design would be
more appropriate for auctioning paging licenses.  

     90.  Comments.  A number of commenters support the use of a simultaneous multiple round
auction design for paging licenses.  ProNet, for example, asserts that this design will give bidders
maximum information about license values and result in bids that reflect licenses' true value.     

     91.  A number of commenters suggest other approaches to competitive bidding for paging
licenses.  For instance, A+ Communications proposes that each available market or frequency be
auctioned separately.  Other commenters propose that auctions be held only after competing
applications are filed.  Thus, when two or more parties seek a particular license, an auction would be
held, limited to these interested parties.  An open outcry auction or a sealed bid auction would,
these commenters contend, be most appropriate to then resolve mutual exclusivity among
applicants.  Ameritel disagrees with the use of sealed bidding, contending that it would force small
businesses to overbid or risk losing the license to speculators.  Instead, Ameritel supports a
sequential multiple round auction on a frequency-by-frequency basis.  

     92.  Discussion.  Based on the record in this proceeding and our successful experience
conducting simultaneous multiple round auctions for other CMRS services and MDS, we believe this
type of auction is most appropriate for paging licenses.  We believe that, for certain bidders, these
licenses will be significantly interdependent because of the desirability of aggregation across spectrum
blocks and geographic areas and because some licenses are likely to be substitutes.  Given such
interdependence, simultaneous multiple round bidding generates more information about license
values during the course of the auction and provides bidders with more flexibility to pursue back-up
strategies than if the licenses were auctioned separately or through sealed bidding.  We likewise
expect the value of these licenses to be sufficiently high to warrant simultaneous multiple round
bidding.  Our experience in running simultaneous multiple round auctions shows that they can be run
very efficiently and the aggregate value of the large number of licenses is likely to justify the use of
this system.  We will retain the discretion, however, to use a different methodology if that proves to
be more efficient administratively.  Prior to the auction, we will provide information about the bidding
design to be used.

     b.  License grouping

     93.  Background.  In the Notice, we sought comment on how paging licenses should be
grouped for competitive bidding purposes.  We sought comment on the benefits of various possible
license groupings, including, but not limited to the grouping of all paging licenses together for a single
simultaneous multiple round auction and the grouping of licenses on a channel-by-channel basis by
geographic license area.  

     94.  Comments.  Most commenters support grouping licenses by frequency bands.  For
example, API, AirTouch, Arch, and PageNet propose that the licenses in the 929 and 931 MHz bands
be auctioned together, followed by auctions, if appropriate, of the lower band paging frequencies. 
 The best method for striking the balance between making substitutable channels available
simultaneously while avoiding auctioning too many licenses at the same time, these commenters
contend, is achieved by grouping the 929 and 931 MHz licenses together in a single auction.  They
also state that auctioning the 900 MHz licenses together would ensure that technically similar services
would be auctioned at the same time and those licenses most in demand would be auctioned first.

     95.  ProNet proposes a single simultaneous multiple round auction for all paging licenses with
no license grouping.  Under this framework, ProNet contends, participants will have access to the
maximum amount of information available concerning the paging market.  In the event this approach
proves unwieldy, ProNet prefers auctioning by band.  API states that should auctioning of the 900
MHz licenses as a group prove administratively burdensome, licenses should be grouped, to the
maximum extent feasible, based upon frequency or channel blocks.  Metrocall expresses the
concern that license grouping would favor bidders for one service over bidders for other services.

     96.  A+ Communications proposes a separate auction for each frequency by license areas. 
Rule argues against auctioning the smaller markets last, noting that such a license grouping may
encourage speculators, unsuccessful in prior auctions, to bid prices up in order to have something to
promote investor sales.  

     97.  Discussion.  Although it may be desirable to hold a single simultaneous multiple round
auction for all paging licenses, such an auction is not currently feasible from an operational standpoint
because there will be more than 15,000 paging licenses available for auction.  We agree with API,
AirTouch, Arch, and PageNet that there is significant interdependence among licenses in the 929 and
931 MHz services, and similar interdependency among the licenses of the lower band paging services. 
We also think that grouping interdependent licenses and putting them up for bid at the same time
promotes awarding licenses to bidders who value them most highly by providing bidders with
information about the prices of complementary and substitutable licenses during the course of an
auction and by facilitating back up strategies.  We therefore will award the paging licenses in a series
of simultaneous multiple round auctions, grouping them based on interdependency and operational
feasibility.  We reserve the discretion to decide on specific license groupings as administrative
circumstances dictate.

     c.  Bidding procedures

          i.  Bid increments and tie bids

     98.  Background.  In a multiple round auction the bid increment is the amount or percentage
by which the bid must be raised above the previous round's high bid in order to be accepted as a valid
bid in the current bidding round.  The application of a minimum bid increment speeds the progress
of the auction and, along with activity and stopping rules, helps to ensure that the auction comes to
closure within a reasonable period of time.  In the Notice, we sought comment on appropriate
minimum bid increments for paging auctions.  We proposed to adopt a minimum bid increment of
five percent of the high bid for the previous round, or $0.01 per activity unit, whichever was
greater.  In addition, we proposed to retain the discretion to vary the minimum bid increments for
individual licenses or groups of licenses at any time before or during the course of the auction, based
on the number of bidders, bidding activity, and the aggregate high bid amounts.

     99.  Comments.  Commenters generally support the use of a minimum bid increment for
paging licenses.  AirTouch agrees that a minimum bid increment of five percent of the high bid in the
previous round or $0.01 per activity unit, whichever is greater, is the appropriate formula for paging
license auctions, and also believes that the Commission should have the discretion to vary the
minimum bid increment.  PageNet proposes an increment of 10 percent of the high bid, with no
minimum bid for the first round.   Rule asserts there should be no minimum bid amount.

     100.  Discussion.  The Commission will announce, by Public Notice prior to the auction,
general guidelines for minimum bid increments.  Minimum bid increments for individual paging
licenses or groups of licenses may vary over the course of the auction and will be announced before
or during the auction.  In the case of a tie bid, the high bidder will be determined by the order in
which the bids are received by the Commission. 

          ii.  Stopping rules

     101.  Background.  In the Notice, we indicated that if a simultaneous multiple round auction
design is used for the paging licenses, we believed a market-by-market stopping rule would be most
appropriate.  We noted that a market-by-market stopping rule would be the least complex approach
from an administrative perspective.  We also sought comment on whether a stopping rule is needed
should the Commission elect not to use a simultaneous multiple round auction design.  We further
proposed to retain the discretion to declare when the auction would end.

     102.  Comments.  The majority of commenters agree that a market-by-market, frequency-by-frequency or license-by-license stopping rule is most appropriate for the paging services because such
a rule would avoid prolonging the auction, and thus facilitate more expeditious service to the
public.  Second, they argue that such a rule would bring an earlier end to the auction by reducing
the complexity of the auction and permitting the earlier close of uncontested markets.  
Commenters also assert that a market-by-market stopping rule will reduce the likelihood that
speculators will bid on all markets indiscriminately and will permit bidders interested in applying
for only a limited number of licenses to more easily manage their participation in the auction. 
Several commenters suggest that bidding on a market or a license close after a specified number of
rounds pass without any acceptable bids.  The suggested number of rounds ranged from two to ten. 
They contend that such a rule would provide bidders with a last clear opportunity to bid for a license
and a safety valve to avoid inadvertent failure to bid.  AirTouch also noted that a license-by-license
stopping rule might be implemented only in Stages II or III of the auction to preserve more of the
simultaneous quality of the auction.  They also argued that back up strategies are likely to be far less
important in this auction than for PCS because pagers are tuned to specific channels and because
highly encumbered licenses may have little value except to incumbents.  ProNet, on the other hand,
strongly prefers use of a simultaneous stopping rule. MobileMedia, however, states that the use of
a simultaneous stopping rule encourages "bid parking" (i.e., placing bids solely for the purpose of
maintaining bidding eligibility) and leads to prolonged auctions. 

     103.  Discussion.   With more than ten times the largest number of licenses the Commission
has ever auctioned simultaneously, there is an increased risk of an excessively prolonged auction if
a significant proportion of the licenses are auctioned simultaneously using a simultaneous stopping
rule.   To reduce this risk and to promote expeditious service to the public, while at the same time
preserving most of the efficiency benefits of a simultaneous stopping rule, we adopt a hybrid
simultaneous/license-by-license stopping rule.  The hybrid rule has three phases.  During Phase I,
which lasts one month, or 100 rounds, whichever comes later, we will employ our standard
simultaneous stopping rule whereby bidding will remain open on all licenses until bidding stops on
every license. The auction will close after one round passes in which no new valid bids or proactive
activity rule waivers are submitted.   This provides bidders some protection against the risk that
bidding on a license will be closed before they have sufficient information to start bidding on it as a
back up strategy.  In Phase II, the Wireless Telecommunications Bureau will assess the extent to
which bidders are pursuing back up strategies and implement a license-by-license stopping  rule if the
Bureau determines that the use of back up strategies is minimal.  Under the license-by-license
stopping rule, bidding on a license will close whenever 10 consecutive rounds pass with no new valid
bids for that license.  The remaining licenses will close according to the standard simultaneous
stopping rule -- when a round passes with no new valid bids on any license.  Phase III begins after
two months and 100 rounds have passed.  If the auction has not closed by then, the Commission
intends to implement the license-by-license stopping rule that is discretionary in the second phase. 
This approach balances concerns about the time to complete the paging auction and the benefits of
preserving back up strategies which give bidders the flexibility to acquire licenses that are consistent
with their business plans.  We reserve the discretion not to employ this hybrid stopping rule in future
paging auctions based on our experience in this auction and depending on the circumstances in future
auctions with respect to factors such as the number of licenses and degree that licenses are
encumbered. 

     104.  We further retain the discretion, in Phase III, to declare after 200 rounds that the auction
will end after some specified number of additional rounds.  If we choose to employ this method, bids
will be accepted only on licenses where the high bid has increased in the last three rounds.  This will
provide the Commission with a mechanism to end the auction in the unlikely event that a small
number of bidders are continuing to bid on a few low value licenses solely to delay the closing of the
auction.  It also will enable the Commission to end the auction when it determines that the benefits
of terminating the auction and issuing licenses exceed the likely benefits of continuing to allow
bidding.  The disadvantage of declaring an imminent end to an auction, however, is that the procedure
may result in a far less efficient allocation of licenses than if the auction closed under either the hybrid
or the simultaneous stopping rule.  Therefore, we will declare the imminent end of the auction only
in the case of extremely dilatory bidding. 

          iii.  Revealing bidders' identities

     105.  In the Competitive Bidding Second Memorandum Opinion and Order, because of the
advantages of providing more information to bidders, and the difficulties involved in ensuring that
bidder identities remain confidential, the Commission determined that it generally would release the
identities of bidders before each auction.  However, we retained the flexibility to conceal bidder
identities if further experience showed that it would be feasible and desirable to do so.  Consequently,
we reserved the option to withhold bidder identities on an auction-by auction basis.  

     106.   In the case of the upcoming paging auctions, we have determined that the advantages
of limiting information disclosed to the bidders outweigh the disadvantages of this approach.  Given
the large number of licenses involved, we believe that shielding certain information from the bidders
will help to speed the bidding along since there will be less of an opportunity for strategic gaming
practices to occur.  We will announce by Public Notice prior to the auction the precise information
that will be revealed to bidders during the auction.  This information may be limited to the high bids
(no identities of bidders) and may also include the total number of bids on each license.  We note also
that limiting information is likely to speed the pace of the auction by reducing the time the
Commission needs to report round results, and reducing the time that bidders need to analyze the
data.  The loss of efficiency from denying bidders the identities of likely winners of adjacent licenses
should be minimal because, in contrast to broadband PCS, for paging there is no roaming and little
uncertainty about technologies (i.e., GSM versus CDMA technology).   
                 
          iv.  Activity rule

     107.  Background.  In the Notice, we tentatively concluded that it would not be necessary to
adopt an activity rule for paging auctions because of our proposal to use a market-by-market stopping
rule.  We sought comment on this tentative conclusion, and also asked commenters to address what
activity rules, if any, would be appropriate if an alternative stopping rule was adopted. 

     108.  Comments.  Most commenters agree that there is no need for an activity rule if a
market-by-market stopping rule is used.  API, however, disagrees, proposing that an activity rule
still be used in order to guard against opportunistic bidders seeking to prolong the auction.  API
proposes the use of the Milgrom-Wilson activity rule with percentages of 60 percent for Stage I, 80
percent for Stage II, and 95 percent for Stage III.  Having supported use of a simultaneous
stopping rule, ProNet urges adoption of the Milgrom-Wilson activity rule to prevent a protracted
auction.  A+ Communications proposes that the Commission severely limit the number of waivers
an applicant may utilize in each auction.

     109.  Discussion.  We will employ the Milgrom-Wilson activity rules for the paging auctions. 
These rules discourage delay by bidders and expedite simultaneous multiple round auctions in which
a simultaneous stopping rule is used.  Under the Milgrom-Wilson rules, the auction is divided into
three stages and the minimum required activity level, measured as a fraction of the bidder's eligibility
in the current round, will increase during the course of the auction.  We establish the following
minimum required activity levels for each stage of the auction:

    In each round of Stage One, a bidder that wishes to maintain its current eligibility is required
     to be active on licenses encompassing at least 60 percent of the activity units for which it is
     currently eligible.  Failure to maintain the requisite activity level will result in a reduction in
     the amount of activity units upon which a bidder will be eligible to bid in the next round of
     bidding (unless an activity rule waiver, as defined in paragraphs 111-113, is used).  During
     Stage One, if bidding activity is below the required minimum level, eligibility in the next round
     will be calculated by multiplying the current round activity by five-thirds (5/3).  Eligibility for
     each applicant at the start of the auction is determined by the amount of the upfront payment
     received and the licenses identified in its auction application. 

    In each round of Stage Two, a bidder that wishes to maintain its current eligibility is required
     to be active on at least 80 percent of the activity units for which it is eligible in the current
     round.  During Stage Two, if activity is below the required minimum level, eligibility in the
     next round will be calculated by multiplying the current round activity by five-fourths (5/4). 
     

    In each round of Stage Three, a bidder that wishes to maintain its current eligibility must be
     active on licenses encompassing at least 98 percent of the activity units for which it is eligible
     in the current round.  In Stage Three, if activity in the current round is below 98 percent of
     current eligibility, eligibility in the next round will be calculated by multiplying the current
     round activity by fifty forty-ninths (50/49).  We believe that starting at this level in Stage
     Three, a higher activity level for this stage than that used in previous auctions, will encourage
     bidders to bid more of their eligibility in each round and thus make the auction more efficient. 
     

    We reserve the discretion to set and, by announcement before or during the auction, vary the
     requisite minimum activity levels (and associated eligibility calculations) for each auction
     stage.  Retaining this flexibility will improve the Commission's ability to control the pace of
     the auction and help ensure that the auction is completed within a reasonable period of time. 
     

     110.  For paging auctions, we will use the following general transition guidelines.  The auction
will start in Stage One and typically will move to Stage Two when the auction activity level is below
ten percent for three consecutive rounds in Stage One.  In general, the auction will move from Stage
Two to Stage Three when the auction activity level is below ten percent for three consecutive rounds
in Stage Two.  In no case can the auction revert to an earlier stage.  However, we retain the
discretion to determine and announce during the course of an auction when, and if, to move from one
auction stage to the next.  These determinations will be based on a variety of measures of bidder
activity including, but not limited to, the auction activity level defined above, the percentage of
licenses (measured in terms of activity units) on which there are new bids, the number of new bids,
and the percentage increase in revenue.  

     111.  To avoid the consequences of clerical errors and to compensate for unusual
circumstances that might delay a bidder's bid preparation or submission in a particular round, we will
provide bidders with five activity rule waivers that may be used in any round during the course of the
auction.  If a bidder's activity level is below the required activity level, a waiver automatically will be
applied.  That is, if a bidder fails to submit a bid in a round, and its activity level from any standing
high bids (high bids at the end of the bid withdrawal period in the previous round) falls below its
required activity level, a waiver automatically will be applied.  A waiver will preserve current
eligibility in the next round, but cannot be used to correct an error in the amount bid.  An activity rule
waiver applies to an entire round of bidding and not to a particular service area.
     
     112.  Bidders will be afforded an opportunity to override the automatic waiver mechanism
when they place a bid, if they wish to reduce their bidding eligibility and do not want to use a waiver
to retain their eligibility at its current level.  If a bidder overrides the automatic waiver mechanism,
its eligibility permanently will be reduced (according to the formulas specified above), and it will not
be permitted to regain its bidding eligibility from a previous round.  An automatic waiver invoked in
a round in which there are no valid bids will not keep the auction open.  Bidders will have the option
to proactively enter an activity rule waiver during the bid submission period.  If a bidder submits a
proactive waiver in a round in which no other bidding activity occurs, the auction will remain open. 

     113.  We retain the discretion to issue additional waivers during the course of an auction for
circumstances beyond a bidder's control.  We also retain the flexibility to adjust, by Public Notice
prior to an auction, the number of waivers permitted, or to institute a rule that allows one waiver
during a specified number of bidding rounds or during specified stages of the auction.

          v.  Duration of bidding rounds

     114.  Background.  In the Notice, we proposed to retain the discretion to vary the duration
of bidding rounds or the interval at which bids are accepted (e.g., run two or more rounds per day
rather than one), in order to move the auction toward closure more quickly.

     115.  Comments.  Commenters support our proposal to retain the discretion to vary the
duration of bidding rounds and the interval between rounds.  AirTouch and Arch suggest that we
permit bidding on an every-other-day basis during the first week or so of the auction, with the
expectation of running one or two rounds a day relatively soon after the auction commences. 
PageNet suggests that we conduct one round a day for the first few rounds, noting that, if other
commenters prefer, it would accept bidding on an every-other-day basis.  After two weeks of
Monday, Wednesday and Friday bidding, PageNet continues, we should implement one round per
day and then assess whether more than one round a day would be more appropriate for the remaining
licenses.  PCIA urges us to ensure that bidders have adequate time between rounds for review of
bids, verification of bid accuracy, and decision making about bidding strategy.

     116.  Discussion.  We retain the discretion to vary the duration of the bidding rounds or the
interval at which bids are accepted in order to move the auction to closure more quickly.  The
duration of and intervals between bidding rounds will be announced either by Public Notice prior to
the auction or by announcement during the auction.

2.  Procedural and Payment Issues

     a.  Pre-auction application procedures

     117.  Background.  In the Notice, we proposed to follow the procedural and payment rules
established in the Competitive Bidding Second Report and Order, with certain minor modifications
designed to address the particular characteristics of the paging services.  

     118.  Comments.  PCIA, for the most part, supports imposition of the competitive bidding
rules that have been generally applied in the context of a number of other services.  The FTC
suggests, however, that our application and competitive bidding procedures should require that
bidding agents and application preparers disclose material information about paging license
regulations to their customers -- potential licensees and real parties-in-interest.  A fundamental
problem in FCC license-related fraud cases, the FTC contends, has been that the consumer licensees
do not have adequate information about FCC licenses when they make an investment decision.

     119.  Discussion.  We will use the pre-auction application procedures established in the
Competitive Bidding Second Report and Order for the paging services.  A Public Notice
announcing the auction will specify the licenses to be auctioned and the time and place of the auction
in the event that mutually exclusive applications are filed.  The Public Notice will also specify, inter
alia, the short-form filing deadline.  

     120.  We will adopt the same general bidding procedures used for the PCS, 900 MHz SMR,
and MDS auctions.  Under these procedures, bidders will be able to submit bids remotely, either
electronically or by telephone.  We have established a schedule of fees that participants in the
competitive bidding process will be assessed for certain on-line computer services, bidding software,
and Bidder Information Packages.  However, bidders will be permitted to bid electronically only
if they have filed a short-form application electronically.  Bidders who file their short-form
applications manually may bid only telephonically.  

     121.  Like the FTC, we are greatly concerned about reports of consumer fraud in connection
with the acquisition of FCC licenses.  Indeed, the Commission has taken a number of initiatives to
combat fraud.   For example, in 1995 the Commission released a Consumer Alert warning consumers
about the existence of scams and providing information to enable them to evaluate investment
proposals.  In addition, FCC staff operating call centers have been trained to answer consumer
investment inquiries and provide information about specific investment proposals to the FTC, SEC,
and the National Fraud Information Center.  We also now include a warning about the seriousness
of false certifications in applications and signs of fraudulent business opportunities in public notices
announcing auctions.  Finally, our auction bidder packages include strong language alerting
potential bidders in the auctions to guard against unscrupulous fraudulent conduct in connection with
the acquisition of licenses.  We believe the foregoing safeguards will serve to greatly reduce the
likelihood of deceptive conduct in the paging license auction process.  We will also take the FTC's
suggestions under advisement and will consider implementing stricter safeguards in conjunction with
our Further Notice of Proposed Rule Making, which seeks comment on revising our application
procedures to help reduce fraud.  

     b.  Short-form applications

     122.  Background.  In the Competitive Bidding Second Report and Order, we determined that
we should require only a short-form application (FCC Form 175) prior to an auction, and that only
winning bidders should be required to submit a long-form license application (FCC Form 600) after
the auction.  In the Notice, we proposed to require applicants for paging licenses to file an initial
short-form application in order to qualify for competitive bidding.

     123.  Comments.  Several commenters suggest that we require bidders to identify all of the
licenses for which they intend to bid on the short-form application.  Otherwise, these commenters
assert, bidders will apply for all markets, including markets they are not interested in acquiring. 
In this connection, they argue that permitting "blanket" applications will artificially create mutual
exclusivities where none actually exist, will delay carriers' good faith efforts to expand, and will
allow speculators to "gridlock" or "game" the system.  PageNet also argues that blanket bidding
produces "bid jumping," a technique that may have had utility when the spectrum was fungible, but
is inappropriate in the highly encumbered paging spectrum.  Certain commenters propose that
applicants make separate upfront payments and maintain separate eligibility for each license.

     124.  The FTC suggests that applicants should be required to disclose the real party-in-interest
on the short-form application, such as the general partners, and whether the company is a limited
partnership or limited liability corporation.  The FTC likewise suggests that applicants certify before
the auction that they will comply with transfer rules and performance requirements for paging
licenses.  

     125.  Discussion. Section 309(j)(5) of the Communications Act provides that no person may
participate in an auction unless such bidder "submits such information and assurances as the
Commission may require to demonstrate that such bidder's application is acceptable for filing." 
Moreover, "[n]o license shall be granted to an applicant selected pursuant to this subsection unless
the Commission determines that the applicant is qualified pursuant to [Section 309(a)] and Sections
308(b) and 310" of the Communications Act.  The legislative history also explains that the
Commission may require that bidders' applications contain all information and documentation
sufficient to demonstrate that the application is not in violation of Commission rules and that
applications not meeting those requirements may be dismissed prior to the competitive bidding. 
We will, therefore, dismiss applications not meeting the requirements of our rules prior to the
auction.

     126.  We disagree with commenters who state that we should no longer permit bidders to
apply for all market areas by checking the "all" markets box on their FCC Form 175.  While a party
may not intend to bid for every license offered, we believe bidders should have the flexibility to
pursue back-up strategies if they are unable to obtain their first choice of licenses.  Indeed, without
flexibility, we believe the true value of individual licenses may not be reflected in the ultimate bid
price.  Moreover, any potential problems associated with so-called blanket bidding will be cured
through our eligibility rules and the submission of a corresponding upfront payment.  We have seen
no evidence that "bid jumping" or other "gaming" has had an adverse impact upon previous auctions. 
Finally, because we have permitted incumbents to expand their systems pending the commencement
of the auction, as described in the interim Orders, we believe current application rules will have no
impact on planned expansions by incumbents.  We therefore see no reason to change our current
application procedures at this time.
 
     127.  If we receive only one application that is acceptable for filing for a particular market,
and thus there is no mutual exclusivity, we will issue a Public Notice cancelling the auction for that
license and establish a date for the filing of a long-form application, the acceptance of which will
trigger the procedures permitting petitions to deny, as discussed below.  

     128.  Finally, we agree with the FTC's concerns about ensuring that bidders in our auctions
are serious about providing service to the public.  As discussed above, we have taken steps to educate
bidders and the public about fraudulent practices in connection with acquiring FCC licenses, and we
will consider taking other anti-fraud measures in the context of our Further Notice of Proposed Rule
Making.  We therefore decline at this time to add further requirements to our short-form applications. 
  

     c.  Amendments and modifications

     129.  Background.  In the Notice, to encourage maximum bidder participation, we proposed
to provide applicants for paging auctions with an opportunity to correct minor defects in their short-form applications prior to the auction.

     130.  Comments.  The comments received support the approach outlined in the Notice. 
AirTouch notes that the public interest is served by the proposal to give applicants a reasonable
chance to correct their short-form applications before the auction.  The harsh results experienced by
applicants for cellular licenses, AirTouch contends, should not be repeated.

     131.  Discussion.  We will adopt the procedures proposed in the Notice for amendments to
and modifications of short-form applications in the paging services.  Upon reviewing the short-form
applications, we will issue a Public Notice listing all defective applications.  Applicants with minor
defects in their applications will be given an opportunity to cure them and resubmit a corrected
version.   

     d.  Upfront payments

     132.  Background.  In the Notice, we proposed to require paging license auction participants
to tender in advance a substantial upfront payment.  Specifically, we proposed to require an upfront
payment of $2,500.00 or $0.02 per MHz-pop, whichever is greater, for the largest combination of
MHz-pops on which a bidder anticipates bidding in any round, as a condition of bidding.  We
tentatively concluded that, regardless of bidding methodology, a minimum upfront payment of
$2,500.00 should be required.

     133.  Comments.  Commenters unanimously agree that a minimum upfront payment amount
should be established for participation in paging license auctions.  A number of commenters suggest
an upfront payment for each license in order to ensure that bidders are sincere, deter speculation and,
to some extent, ensure that bidders are qualified.  With respect to amount, PageNet proposes that
applicants for the top ten markets pay $10,000, and that applicants for markets 11 through 51 pay
$5,000.  Because an applicant would have specifically identified each license it intends to bid on, and
would have paid a specific upfront payment for each license, PageNet contends, the application of
activity units to determine eligibility for bidding is unnecessary.  API proposes a $10,000 upfront
payment amount for the top ten markets and $5,000 for all other markets.  AirTouch and Arch
contend that the upfront payment amount should be $10,000 for the top ten markets, $5,000 for
markets 11 to  30, and $2,500 for all other markets.  PCIA notes that the upfront payment level
should be set high enough to ensure that all participants are serious about constructing and operating
a paging system, but, at the same time, not so high as to prevent smaller paging operators from
participating in the auction and bidding for the license areas in which they currently have facilities. 
AirTouch notes that a separate upfront payment for each license would avoid phantom mutual
exclusivity.

     134.  Discussion.  We believe the upfront payment should bear a relation to the value of the
licenses to be awarded.  We likewise agree with commenters that a specific upfront payment amount
should be established for each license upon which bids are to be made.  We further believe it is
important, as commenters point out, to deter speculation and ensure, to the greatest extent
practicable, that only sincere bidders participate in the auction.

     135.  Accordingly, we delegate to the Bureau the authority and discretion to determine an
appropriate upfront payment for each license being auctioned, taking into account such factors as the
population and the approximate amount of unencumbered spectrum in each geographic license area. 
We expect that the Bureau will follow the guidelines laid out in the Competitive Bidding Second
Report and Order and establish upfront payments equal to approximately five percent of the expected
amounts of winning bids for the various licenses.  In no event will the upfront payment for any
license be less than $2,500, the minimum suggested in the Competitive Bidding Second Report and
Order, and the Bureau will retain the flexibility to modify this minimum if experience demonstrates
that a higher amount would better deter speculative filings.

     136.  Prior to a paging license auction, the Bureau will issue a Public Notice listing the upfront
payment amounts corresponding to the licenses to be auctioned.  The number of activity units
determines the amount of the upfront payment for a license.  A prospective bidder must submit an
upfront payment equal to the largest combination of activity units on which the bidder anticipates
being active in any single round.  Although a bidder may file applications for every license being
auctioned, the total upfront payment submitted by each applicant will determine the combinations on
which the applicant will actually be permitted to be active in any single round of bidding.  Upfront
payments will be due by a date specified by Public Notice, but generally no later than 14 days before
the scheduled auction.  

     e.  Down payments

     137.  Background.  In the Notice, we proposed to require the winning bidders for paging
licenses (with the exception of winners that are small businesses, as discussed below) to supplement
their upfront payments with a down payment sufficient to bring their total deposit up to 20 percent
of their winning bid.  As proposed in the Notice, such a down payment would be due within five
business days of the Public Notice announcing winning bidders. 

     138.  Comments.  Commenters support the requirement of a down payment from winning
bidders.  PageNet suggests that winning bidders have 45 days to pay the remainder of their winning
bid.  Diamond urges a down payment requirement of only five percent, with 95 percent of the
winning bid deferred and amortized over a ten-year period at the applicable U.S. Treasury instrument
rate, plus one percent.

     139.  Discussion.  We conclude that winning bidders (including winners that are small
businesses, as discussed below) must supplement their upfront payments with a down payment
sufficient to bring their total deposits up to 20 percent of their winning bid(s).  If the upfront payment
amount on deposit is greater than 20 percent of the winning bid amount after deducting any bid
withdrawal and default payments due, the additional monies will be refunded.  If a bidder has
withdrawn a bid or defaulted, but the amount of the withdrawal or default payment cannot yet be
determined, the bidder will be required to make a deposit of up to 20 percent on the amount bid on
such licenses.  When it becomes possible to calculate and assess the payment, any excess deposit
will be refunded.  Monies on account will be applied to bid withdrawal and default payments due
before being applied toward the bidder's down payment on licenses the bidder has won and seeks to
acquire.

     140.  We will require winning bidders, except small businesses, to submit the required down
payment by cashier's check or by wire transfer to our lock-box bank within 10 business days following
release of a Public Notice announcing the close of bidding.  All auction winners, except those that
qualify for installment payments, will be required to make full payment of the balance of their winning
bids within 10 business days following Public Notice that licenses are ready for grant.   

     f.  Bid withdrawal, default, and disqualification

     141.  Background.  In the Notice, we proposed to adopt bid withdrawal, default, and
disqualification rules for the paging services, based on the procedures established in our general
competitive bidding rules. 

     142.  Comments.  Commenters support our proposal to adopt rules regarding the withdrawal
of bids, defaults, and disqualifications.  A+ Communications urges us to adopt severe penalties both
for any high bid withdrawal and for default on a winning bid.  These procedures, A+ Communications
concludes, will discourage indiscriminate speculation in bidding and require bidders to determine the
viability of their business plans for each license area in advance.  However, Ameritel states that
without the ability to correct obvious typographical bidding errors, bidders are potentially liable for
huge withdrawal or default payments as the result of minor keying mistakes.

     143.  Discussion.  We will apply our general bid withdrawal, default, and disqualification rules
in paging license auctions.  If a license is re-offered by auction, the "winning bid" refers to the high
bid in the auction in which the license is re-offered.  If a license is re-offered in the same auction, the
"winning bid" refers to the high bid amount made subsequent to the withdrawal in that auction.  If
a license which is the subject of withdrawal or default is offered to the highest losing bidders in the
initial auction, as opposed to being re-auctioned, the "winning bid" refers to the bid of the highest
bidder who accepts the offer.  In the unlikely event that there is more than one bid withdrawal on the
same license, we will hold each withdrawing bidder responsible for the difference between its
withdrawn bid and the amount of the winning bid the next time the licenses are offered for auction.

     144.  If a license winner defaults or is otherwise disqualified after an auction is closed, the
Commission must exercise its discretion to hold a new auction or offer the license to the second
highest bidder.  In exercising our discretion, we will evaluate the particular facts and circumstances
of the particular case.  For example, in the context of paging licenses it may be that defaults or
disqualifications occur on only a very small number of relatively low value licenses.  In such a case,
we might choose to offer the license(s) to the highest losing bidder(s) because the cost of conducting
an auction might exceed the benefits of an auction.  On the other hand, there may be countervailing
reasons for choosing to re-auction such licenses.

     145.  If a default or disqualification involves gross misconduct, misrepresentation or bad faith
by an applicant, the Commission may declare the applicant and its principals ineligible to bid in future
auctions, and may take any other action that it deems necessary, including institution of proceedings
to revoke any existing licenses held by the applicant.

     146.  We agree with Ameritel that further steps are necessary to reduce the possibility of
mistaken bids.  The Bureau has recently instituted an additional procedure that warns bidders of the
possibility of a mistaken bid, and this procedure will be utilized in the paging license auctions.
 
     g.  Long-form applications

     147.  Background.  In the Competitive Bidding Second Report and Order, we established
rules requiring winning bidders to submit a long-form application.  In the Notice, we proposed to
apply these rules to paging auctions.

     148.  Comments.  All responsive comments support our proposal.  

     149.  Discussion.  We will follow these procedures, which are set forth in  1.2107 of our
rules, if the winning bidder makes the down payment in a timely manner. 
  
     h.  Petitions to deny and limitations on settlements

     150.  As we indicated in the Notice, the petition to deny procedures in Sections 22.130 and
90.163 of our rules will apply to the paging services.  A party filing a petition to deny against a paging
license application will be required to demonstrate standing and meet all other applicable filing
requirements.  Sections 90.162 and 22.129 of our rules prevent the filing of speculative applications
and pleadings for purposes of extracting money from paging applicants.  Thus, we will limit the
consideration that an individual or entity is permitted to receive for agreeing to withdraw an
application or petition to deny to the legitimate and prudent expenses of the withdrawing applicant
or petitioner.  In the Notice, we proposed to amend Section 22.129 to prohibit settlements between
applicants after the deadline for filing short-form applications.  We believe that, to the extent
Sections 22.129 and 90.162 conflict with Section 1.2105 of our rules, these provisions should not
apply to paging licenses awarded through competitive bidding.  Therefore, we will amend these
provisions to prohibit agreements to withdraw mutually exclusive applications, or pleadings filed by
one applicant against another applicant for a license in the same geographic area, after the deadline
for filing short-form applications. 

3.  Regulatory Safeguards

     a.  Anti-collusion rules

     151.  Background.  In the Competitive Bidding Second Report and Order, as modified by the
Competitive Bidding Reconsideration Order, we adopted special rules prohibiting collusive conduct
in the context of competitive bidding.  In the Notice, we proposed to apply these rules to paging
license auctions. 

     152.  Comments.  Commenters generally support the adoption of anti-collusion rules for
paging license auctions.  However, PageNet contends that, given the large number of incumbents,
the Commission should fully consider whether an absolute prohibition on discussing the auction with
other auction participants would serve a legitimate purpose.  Several commenters request that we
establish rules that do not have a chilling effect on publicly beneficial business acquisitions.  Under
the current rules, they contend, discussions between bidders for the same license area regarding a
business merger or acquisition may be construed as discussions of bidding or bidding strategy -- thus
violating the anti-collusion rules.  They propose that we grant a safe harbor for such situations,
permitting mergers and acquisitions to proceed during the period in which the anti-collusion rules are
applicable.  AirTouch and Arch propose a system in which respective paging company personnel
certify that they are not discussing bidding strategy or otherwise divulging bidder information to each
other in violation of the anti-collusion rules.  They contend that, absent a showing that a certification
is false, merger-acquisition discussions should be permitted during the course of the auction.  They
argue that a failure to so modify the anti-collusion rules that were used in previous auctions will
substantially injure the paging industry -- an industry that is mature and is currently experiencing a
period of consolidation.

     153.  Several commenters request that we establish a safe harbor for discussions between
adjacent paging operators, or co-channel licensees, who have entered into so-called intercarrier
arrangements.  Co-channel licensees with such cooperative arrangements, they assert, must
communicate regularly in order to provide service to the public.  They argue that the anti-collusion
rules should not prohibit discussion in connection with these agreements so that intercarrier
arrangements may continue in the ordinary course of business.

     154.  PageNet requests that the Commission clarify that the term "applicant" does not include
incumbents who are not participating in the auction.  PageNet also proposes that the anti-collusion
rules not apply to applicants once they have withdrawn from the auction.  Finally, PageNet suggests
that all consortia and all other applicants should be required to disclose on their short-form
application whether they are incumbents.

     155.  Discussion. We will require paging licensees to meet the reporting requirements and
rules prohibiting collusion embodied in Sections 1.2105 and 1.2107 of the Commission's rules. 
Thus, after the FCC Form 175 filing deadline, applicants may not discuss the substance of their bids
or bidding strategies with other applicants, other than those identified on their short-form
applications, that are bidding in the same license areas, even if they are not bidding for the same
spectrum blocks. 

     156.  We decline to amend the anti-collusion rules to create a safe harbor for discussions of
business mergers or acquisitions, or intercarrier agreements, during periods in which the anti-collusion
rules are in effect.  We do not believe that we have a sufficient record at this time to make such a
decision.  We intend to conduct a general review of our auction rules in the near future, and we will
then have an opportunity to thoroughly examine this issue.     

     157.  We continue to believe that, even when an applicant has withdrawn its application after
the short-form filing deadline, it should not be allowed to enter into a bidding agreement with another
applicant bidding on licenses in the geographic area(s) from which it withdrew.  We therefore
decline to exclude a withdrawn bidder from the definition of applicant for purposes of the anti-collusion rules as recommended by PageNet.  We believe application of the anti-collusion rules to
withdrawn applicants is necessary in order to safeguard the integrity of the auction process by
preventing the sharing of information and other collusive conduct among bidders for the same
geographic licenses.  A withdrawn bidder, as a former participant in the auction process, would
otherwise be able to share valuable insights regarding its bidding strategy, including the reason(s) for
its cessation of bidding.  
 
     158.  We further note that where specific instances of collusion in the competitive bidding
process are alleged during the petition to deny process, we may conduct an investigation or refer such
complaints to the United States Department of Justice for investigation.  Bidders who are found to
have violated the antitrust laws, in addition to any penalties they incur under the antitrust laws, or
who are found to have violated the Commission's rules in connection with their participation in the
auction process, may be subject to a variety of sanctions, including forfeiture of their down payment
or their full bid amount, revocation of their license(s), and possible prohibition from participating in
future auctions.  

     159.  Finally, we disagree with PageNet that bidders should be required to identify themselves
or members of bidding consortia as incumbents.  In our view, a bidder's status as an incumbent is
irrelevant for purposes of the auction process.  We, therefore decline to adopt PageNet's suggestion.

     b.  Transfer disclosure requirements

     160.  Background.  In Section 309(j)(4)(E) of the Communications Act, Congress directed
the Commission to "require such transfer disclosures, anti-trafficking restrictions and payment
schedules as may be necessary to prevent unjust enrichment as a result of the methods employed to
issue licenses and permits."  In the Notice, we proposed to adopt the transfer disclosure
requirements contained in Section 1.2111(a) of our rules for all paging licenses obtained through the
competitive bidding process.  

     161.  Comments.  The commenters differ on whether transfer disclosure rules should apply
to paging licenses awarded through competitive bidding.  The FTC, for example, supports application
of a transfer disclosure requirement, noting it would inhibit telemarketers from winning licenses at
auction and then "flipping" them through transfers to unsuspecting coalitions of unqualified buyers
at inflated prices.  Several commenters disagree, contending such a disclosure requirement would
chill legitimate transactions, and force incumbents that do not raise trafficking concerns to meet
burdensome disclosure requirements.  Metrocall points out that incumbents who win geographic
licenses are in the business of providing paging service, not speculating on future profits from
reselling paging licenses.

     162.  Discussion.  We will apply Section 1.2111(a) to all paging licenses obtained through the
competitive bidding process.  While we are concerned about requiring auction winners to produce
information that might increase their cost of doing business, we doubt whether any license transfer
in the marketplace would occur without the preparation of the contracts and other documents
enumerated in Section 1.2111(a) in the ordinary course of business.  Thus, we see nothing disruptive
in requiring the disclosure of this information.  Moreover, we believe these disclosure requirements
are necessary to the enforcement of our unjust enrichment provisions.  We also agree with the FTC
that speculation in connection with the acquisition of paging licenses is a major concern.  By enabling
us to monitor license transfers, we believe that the disclosure requirements of Section 1.2111(a),
which implements  309(j)(4)(E) of the Communications Act, will assist in eliminating the problem
of speculation while providing safeguards to those who might otherwise fall victim to deceptive
practices used to induce them to invest in paging licenses.     

4.  Treatment of Designated Entities

     a.  Overview and objectives

     163.  Section 309(j) of the Communications Act provides that, in developing competitive
bidding procedures, the Commission shall fulfill various statutory objectives and consider several
alternative methods for achieving them.  The statute provides that in establishing eligibility criteria
and bidding methodologies the Commission shall, inter alia, "promot[e] economic opportunity and
competition and ensur[e] 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."  Small businesses, rural telephone companies and
businesses owned by minorities and/or women are collectively referred to as "designated entities." 
Section 309(j)(4)(A) provides that in order to promote such objectives, the Commission shall
"consider alternative payment schedules and methods of calculation, including lump sums or
guaranteed installment payments, with or without royalty payments, or other schedules or methods
.  .  . and combinations of such schedules and methods."  Section 309(j)(4)(D) also requires the
Commission to "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."  Establishing opportunities for small businesses, minority- and women-owned businesses, and rural telephone companies is likewise consistent with Section 257 of the
Communications Act, which directs the Commission to take steps to identify and to eliminate market
entry barriers for entrepreneurs and other small businesses in the provision and ownership of
telecommunications services and information services.

     164.  To meet the statutory objective of providing opportunities for designated entities, we
have employed a wide range of special provisions and eligibility criteria in other spectrum-based
services.  In the 900 MHz SMR service, for example, we established a two-tier bidding credit system
-- a 15 percent bidding credit for small businesses with average annual gross revenues of not more
than $3 million and a 10 percent bidding credit for small businesses with average annual gross
revenues of not more than $15 million.  These measures have been designed to help designated
entities overcome barriers to accessing capital and increase the likelihood that designated entities who
win licenses in the auctions become strong competitors in the provision of wireless services.  In the
Notice, we sought comment on the type of designated entity provisions that should be incorporated
into our competitive bidding procedures for paging services.

     b.  Small businesses

     165.  In the Notice, we asked commenters to specifically address (1) the capital requirements
of the paging services in comparison with other wireless services, (2) the degree to which designated
entities currently provide paging service, and (3) whether designated entities and small businesses in
particular face barriers to entry into paging services based on lack of access to capital or other
factors.  We tentatively concluded that it was appropriate to establish special provisions in our
paging rules for competitive bidding by small businesses. 

     166.  Comments.  Commenters differ on whether special provisions for small businesses are
necessary to satisfy the congressional mandate of Section 309(j).  Diamond and Ameritel contend that
special provisions for small businesses, while helpful, do not sufficiently ensure that such entities will
be able to participate.  Several commenters disagree, contending that numerous designated entities
and small businesses currently participate in the paging industry and, even without such preferences,
will succeed in the auctions.  PageNet concurs with this view, adding that such provisions will only
assist application mills to "sell chances" for entry into the paging industry.  PageNet notes that there
are no regulatory barriers to entry, and thus it would be inappropriate for the Commission to adopt
designated entity provisions.  To adopt such provisions, PageNet argues, would add fuel to the
application mills' ability to sell chances to participate in the auction process and may create artificial
incentives that will encourage designated entities to bid up the prices of spectrum and harm
incumbents.

     167.  Discussion.  Congress specifically cited the needs of small businesses in enacting Section
309(j) directing the Commission to promote economic opportunities for small businesses.  Thus,
while we agree that a number of small businesses are successfully participating in the paging industry,
we conclude that it is appropriate to establish special provisions in our paging rules for competitive
bidding by small businesses.  Construction of a paging system may require a significant amount of
capital, and the barriers small businesses face in acquiring financing are often difficult to overcome. 


     168.  Congress made specific findings with regard to access to capital in the Small Business
Credit and Business Opportunity Enhancement Act of 1992, that "small business concerns which
represent higher degrees of risk in financial markets than do large businesses, are experiencing
increased difficulties in obtaining credit."  These findings are consistent with the comments
supporting small business provisions, such as those of Diamond, which asserts that many small paging
companies have difficulties raising capital.  As a result of such difficulties, Congress resolved to
consider carefully legislation and regulations "to ensure that small business concerns are not
negatively impacted" and to give priority to passage of "legislation and regulations that enhance the
viability of small business concerns."  For these reasons, we believe that small businesses applying
for paging licenses should be entitled to some type of bidding credit and should be allowed to pay
their bids in installments.  We believe that the provision of bidding credits, an installment plan, as well
as geographic area partitioning will help to eliminate market entry barriers for small businesses in the
paging industry pursuant to section 257 of the Communications Act.

     c.  Minority- and women-owned businesses

     169.  Background.  In Adarand Constructors, Inc. v. Pea, the Supreme Court held that
"all racial classifications . . . must be analyzed by a reviewing court under strict scrutiny."  As a
result of the Adarand decision, any federal program that makes distinctions on the basis of race must
serve a compelling governmental interest and must be narrowly tailored to serve that interest in order
to pass constitutional muster.  Gender-based programs must satisfy intermediate scrutiny.  Under
this standard, there must be an "exceedingly persuasive justification" for a gender-based government
provision and such a provision is constitutional if it serves an important governmental objective and
is substantially related to achievement of that objective.  In the Notice, we emphasized that we had
not concluded that race- and gender-based measures are unconstitutional or otherwise inappropriate
for spectrum auctions we will hold in the future.  At a minimum, however, we stated that we must
build a thorough factual record concerning the participation of minorities and women in spectrum-based services to support race- and gender-based measures.  We expressed our belief that a sufficient
factual record does not exist with respect to spectrum-based services generally or paging services
specifically to sustain such measures under strict scrutiny.  In light of these considerations, we
proposed to limit designated entity provisions for paging services to small businesses.  

     170.  We requested comment, however, on the possibility that in addition to small business
provisions, separate provisions for women- and minority-owned entities should be adopted for paging
services.  We asked commenters to discuss whether the capital requirements of paging pose a barrier
to entry by minorities and women and whether assisting women and minorities to overcome such a
barrier, if it exists, would constitute a compelling government interest.  In particular, we sought
comment on the actual cost of acquisition, construction and operation of paging systems and the
proportion of existing paging businesses that are owned by women or minorities.  We also sought
comment on the analytical framework for establishing a history of past discrimination in the paging
industry and urged parties to submit evidence (statistical, documentary, anecdotal or otherwise) about
patterns or actual cases of discrimination in this and related communications services.  Assuming that
a compelling governmental interest is established, we sought comment on whether separate provisions
for women and minorities are necessary to further this interest and whether such provisions can be
narrowly tailored to satisfy the strict scrutiny standard.

     171.  Comments.  Few comments were received on these issues.  SBT states that, although
the Commission is fully aware that the level of participation and the ownership of telecommunications
services by women and minorities has been historically low, the chance that any commenting party
will have the opportunity to provide a comprehensive study of the past or present circumstances
which might provide a reasoned basis for gender-based or race-based incentives for such affected
parties is so slim as to be impossible.  SBT notes that the burden for determining whether such
incentives are required is upon the Commission in meeting its mandate under 309(j) of the Act, not
on commenting parties.  SBT states that the PCS and the 900 MHz SMR auctions have
demonstrated an acute need for greater protection for designated entities in upcoming auctions. 
According to PageNet, designated entity provisions are unnecessary because there are no barriers to
entering the paging industry.    

     172.  Discussion.  In the paging service, as in other auctionable services, we are committed
to meeting the statutory objectives of promoting economic opportunity and competition, of avoiding
excessive concentration of licenses, and of ensuring access to new and innovative technologies by
disseminating licenses among a wide variety of applicants, including businesses owned by members
of minority groups and women.  Commenters failed to provide record evidence sufficient to support
special provisions for minorities under the strict scrutiny standard.  Adarand makes clear that only
a record of discrimination against a particular racial group would support remedial measures designed
to help that group.  A record of discrimination against minorities in general may not be sufficient. 
We are also concerned that our record would not support gender-based provisions under intermediate
scrutiny.  Balancing our obligation to provide opportunities for women- and minority-owned
businesses to participate in spectrum-based services against our statutory duties to facilitate the rapid
delivery of new services to the American consumer and promote efficient use of the spectrum, we
conclude that we should not delay the paging service auction for the amount of time it would take
to adduce sufficient evidence to support race- and gender-based provisions.  Moreover, we believe
that most minority- and women-owned businesses will be able to take advantage of the specific
provisions that we adopt for small businesses, as discussed infra. 

     173.  We note too that we have initiated a separate inquiry to gather information regarding
barriers to entry faced by minority- and women-owned firms as well as small businesses.  We will
also continue to track the rate of participation in our auctions by minority- and women-based firms
and evaluate this information with other data gathered with the goal of developing a record to support
race- and gender-based provisions that will satisfy judicial scrutiny.  If a sufficient record can be
adduced, we will consider race- and gender-based provisions for future auctions.  Finally, we are
looking for other ways to reduce barriers to entry for women- and minority-owned businesses, such
as allowing partitioning and disaggregation of licenses to entities that do not currently qualify, an
adjustment to our rules that may be helpful to small businesses generally. 

     d.  Bidding credits

     174.  Background.  In the Notice we proposed to establish two levels of bidding credits: a 10
percent bidding credit for all small businesses and a 15 percent credit for small businesses that meet
a more restrictive gross revenue threshold.  These two levels of bidding credits would not be
cumulative.

     175.  In conjunction with this proposal, we proposed to establish two small business
definitions -- (1) an entity with not more than $15 million in average gross revenues for the previous
three years; and (2) an entity with not more than $3 million in average gross revenues for the previous
three years.  We also sought comment on the degree to which the revenues of affiliates, major
investors, and controlling principals should be considered in determining small business eligibility. 
We also sought comment, alternatively, on which attribution threshold should be applied to paging
applicants seeking to qualify as small businesses.  We asked commenters to address whether our
proposed small business definitions were sufficiently restrictive to protect against businesses
benefiting from special provisions when in fact they do not need them.

     176.  Comments.  Commenters sharply disagree on whether the Commission should adopt
bidding credits for paging license auctions.  AirTouch and Arch contend that bidding credits offered
to only certain bidders may be pernicious, and that participants in previous auctions bid away their
discounts by paying a higher price for their licenses than did those bidders without discounts.  PCIA
opposes use of bidding credits, stating they do not advance the goals of the Commission and distort
the competitive bidding process, particularly if the recipient is the competitor of another bidder for
the market.  PCIA argues that these problems are particularly acute where the service being auctioned
is encumbered, as is the case with the paging spectrum.  PageNet likewise opposes the use of
bidding credits, contending that bidding credits and installment payments would allow designated
entities to bid up the prices of the licenses in the auction, thereby hurting incumbents.

     177.  Ameritel, however, contends that a bidding credit for small businesses, competing head
on with larger companies for the same frequency block, would be beneficial to small businesses. 
Bidding credits may not always make a meaningful difference, Ameritel contends, but denying small
businesses their use is not justified because this would put them at a further disadvantage.  SBT
also supports the use of bidding credits and other special provisions, but only if some fine-tuning
occurs because 10 or 15 percent bidding credits are far too small to make any meaningful difference
to small businesses.  SBT proposes  (1) for entities with average revenues of less than $10 million,
a 10 percent bidding credit;  (2)  for entities with average revenues of less than $5 million, a 15
percent bidding credit;  (3)  for entities with average revenues of less than $3 million, a 30 percent
bidding credit;  (4) for entities with average revenues of less than $1 million, a 60 percent bidding
credit; and (5) if the designated entity is an incumbent operator, an additional 10 percent bidding
credit.   These discounts, coupled with an installment payment plan, are necessary, SBT argues,
to offset the advantages already enjoyed by large corporations and thus avoid overconcentration of
spectrum in the hands of a few big businesses.  Diamond proposes a 25 percent discount on the
winning bid.  Diamond states that raising capital remains a problem for paging service operators
and urges us not to attribute the gross revenues and assets of investors who hold less than a 49
percent interest in the applicant.

     178.  Discussion.  We believe that bidding credits are appropriate as a special provision for
designated entities in the paging license auctions.  While bidding credits do not guarantee the success
of small businesses, we believe that they at least provide such bidders with an opportunity to
successfully compete against larger, well-financed bidders.  We also conclude that it is appropriate
to adopt tiered bidding credits for paging auction participants based on the size of the small business. 
Such an approach, we believe, furthers our mandate under Section 309(j) of the Communications Act
to disseminate licenses to a variety of applicants.  

     179.  We therefore will define a small business as either (1) an entity that, together with its
affiliates and controlling principals, has average gross revenues for the three preceding years of not
more than $3 million, or (2) an entity that, together with affiliates and controlling principals, has
average gross revenues for the three preceding years of not more than $15 million.  We will give small
businesses that, together with affiliates and controlling principals, have average gross revenues for
the three preceding years of not more than $3 million, a 15 percent bidding credit.  We will give small
businesses that, together with affiliates and controlling principals, have average gross revenues for
the three preceding years of not more than $15 million, a bidding credit of 10 percent.  These bidding
credits are the same as those offered to small businesses in the 900 MHz SMR auction.  As with
900 MHz SMR, we believe that these tiered bidding credits take into account the difficulties smaller
businesses have in accessing capital and their differing business strategies.  We also think that bidding
credits at these levels achieve a reasonable compromise between the arguments of commenters
advocating greater credits and those of commenters advocating no credits.  We believe that to
cumulate bidding credits or to create an even more graduated bidding credit structure, as proposed
by SBT, would unduly complicate the competitive bidding process both for bidders and for the
Commission.  In sum, we believe that, as was the case in the 900 MHz SMR auction, small businesses
will have a reasonable opportunity of successful participation.    

     180.  For purposes of the definitions adopted here, we will consider the gross revenues of the
small business applicant, its affiliates, and certain investors in the applicant.  Specifically, we will
attribute the gross revenues of all controlling principals in the small business applicant as well as the
gross revenues of affiliates of the applicant.  We choose not to impose specific equity requirements
on the controlling principals that meet our small business definition.  We will still require, however,
that in order for an applicant to qualify as a small business, qualifying small business principals must
maintain both de jure and de facto control of the applicant.  For this purpose, we will borrow from
certain Small Business Administration (SBA) rules that are used to determine when a firm should be
deemed an affiliate of a small business.  Typically, de jure control is evidenced by ownership of
50.1 percent of an entity's voting stock.  De facto control is determined on a case-by-case basis.  An
entity must demonstrate at least the following indicia of control to establish that it retains de facto
control of the applicant: (1) the entity constitutes or appoints more than 50 percent of the board of
directors or partnership management committee; (2) the entity has authority to appoint, promote,
demote and fire senior executives that control the day-to-day activities of the licensee; and (3) the
entity plays an integral role in all major management decisions.  We caution that while we are not
imposing specific equity requirements on small business principals, the absence of significant equity
could raise questions about whether the applicant qualifies as a bona fide small business.

     181.  As in the broadband PCS context, we will permit eligible small businesses to form
consortia and not aggregate their gross revenues.  Additionally, a small corporation that has
dispersed voting stock ownership and no controlling affiliates will not be required to aggregate with
its own revenues the revenues of each shareholder for purposes of small business status.  Thus, we
clarify that such an applicant may qualify -- even in the absence of identifiable control being held by
particular investors.

     e.  Installment payments and down payments

     182.  Background.  In the Notice, we proposed to adopt an installment payment option for
small businesses that successfully bid for paging licenses.  We proposed that licensees who qualify
for installment payments would be entitled to pay their winning bid amount in quarterly installments
over the ten-year license term, with interest charges to be fixed at the time of licensing at a rate equal
to the rate for ten-year U.S. Treasury obligations plus 2.5 percent.  Under our proposal, small
businesses with not more than $3 million in average gross revenues for the preceding three years
would make interest-only payments for the first five years of the license term, while small businesses
with not more than $15 million in average gross revenues for the preceding three years would make
interest-only payments during the first two years.  In addition, we tentatively concluded that small
businesses eligible for installment payments may pay a reduced down payment. We likewise sought
comment on the need, if any, for a reduced upfront payment for entities qualifying as a small
business.

     183.  Comments.  Commenters support the use of installment payment plans for small
businesses.  Diamond proposes a five percent down payment, with the remaining 95 percent of the
winning bid price deferred and amortized over a ten-year period at the applicable U.S. Treasury rate
plus 1 percent.  PageNet proposes a five business day window in which the winning bidder would
be required to submit its down payment for the license.
       
     184.  Discussion.  We will adopt installment payments for winners in the paging license
auctions.  We recognize that small businesses, including those owned by women and minorities, face
capital access difficulties not encountered by other firms.  Thus, they require special measures to
ensure their participation in the paging service.  Licensees who qualify as small businesses in paging
license auctions will be entitled to pay their winning bid amount in quarterly installments over the
term of the license, with interest charges to be fixed at the time of licensing at a rate equal to the rate
for ten-year U.S. Treasury obligations plus 2.5 percent.   The rate for ten-year U.S. Treasury
obligations will be determined by taking the coupon rate of interest on the ten-year U.S. Treasury
notes most recently auctioned by the Treasury Department before licenses are conditionally granted. 
These licensees will be able to make interest-only payments for the first two years of the license term. 
Timely payment of all installments will be a condition of the license grant, and failure to make such
timely payments will be grounds for revocation of the license.  As we have noted previously, allowing
installment payments reduces the amount of private financing needed by prospective small business
licensees and therefore mitigates the effect of limited access to capital by small businesses.  

     185.  We decline to adopt a second installment payment plan with a longer interest-only
period for small businesses with average gross revenues of not more than $3 million.  We believe that
the two-year interest-only period in the single plan we adopt here provides small businesses with the
appropriate level of financing to overcome difficulties in attracting capital.  Given that we are
making additional financial assistance available to very small businesses in the form of a 15 percent
bidding credit, we do not think a longer interest-only period is needed.

     186.  We also conclude that we should provide for late payment fees in connection with our
installment payment plan for paging licensees. As we stated in the Notice, timely payment of all
installments would be a condition of the award of the license.  Therefore, when licensees are more
than fifteen days late in their scheduled installment payments, we will charge a late payment fee equal
to 5 percent of the amount of the past due payment.  For example, if a $50,000 payment is due on
June 1, then on June 16 $2,500 is due in addition to the payment.  As we explained in adopting a late
payment fee provision for broadband PCS F block auction winners, without such a fee licensees may
not have adequate financial incentives to make installment payments on time and may attempt to
maximize their cash flow at the government's expense by paying late.  We note too that enhancing
the fiscal accountability of entities receiving installment payment benefits is consistent with the
purpose of the recently enacted Debt Collection Improvement Act of 1996.  The 5 percent payment
we adopt here is an approximation of late payment fees applied in typical commercial lending
transactions.  Payments will be applied in the following order:  late charges, interest charges, principal
payments.    

     187.  We believe that small businesses should be required to pay a down payment of 20
percent, as we required in our broadband PCS F block auction.  We believe that such a requirement
is consistent with ensuring that winning bidders have the financial capability of building out their
systems and will provide us with stronger assurance against default than a 10 percent down payment. 
Increasing the amount of the bidder's funds at risk in the event of default discourages insincere
bidding and therefore increases the likelihood that licenses are awarded to parties who are best able
to serve the public.  We also believe that a 20 percent down payment should cover the required
payments in the unlikely event of default.  Thus, small business licensees will be required to bring their
deposit up to ten percent of the winning bid within ten business days of the close of the auction.  Prior
to licensing, they will be required to pay an additional ten percent.  Specific procedures for payment
will be provided in a Public Notice issued by the Bureau.  Finally, we will not adopt reduced upfront
payment rules for small businesses participating in the paging license auction.  We believe a uniform
upfront payment provision for all bidders in the auction is necessary in order to deter speculation and
to ensure that only sincere bidders participate in the auction.  
 
     f.  Partitioning

     188.  Background.  In the Notice, we proposed a partitioning scheme for rural telephone
companies similar to the one that had been adopted for broadband PCS.   Partitioned areas would
be required to conform to established geopolitical boundaries and would include all portions of the
wireline service area of the rural telephone company that lie within the service area.  In addition,
we sought comment on whether we should extend geographic partitioning and channel disaggregation
to all licensees.

     189.  Comments.  Several commenters suggest permitting partitioning of market area paging
licenses by rural telephone companies, small businesses and BETRS operators in order  to expand
their geographic areas.  Nucla-Naturita, while opposing the auctioning of BETRS frequencies,
urges us to adopt mandatory partition rights at no cost for providers of BETRS.  This mandatory
right to partition would extend to the perimeters of the rural telephone company's BETRS central
office station and in no event could the partitioned area exceed the rural telephone company's
certificated local exchange area.  USTA agrees that rural telephone companies should have
partitioning rights.

     190.  Ameritel proposes permitting rural telephone companies and small businesses to
partition their geographic license areas in order to expand their paging service and improve mobile
telephone service and the BETRS.  Ameritel states that partitioning would also help to mitigate the
harmful impact of market area licensing.  Priority, Metrocall, and AirTouch propose partitioning
for incumbents, especially when more than one incumbent is located in a particular geographic area. 
Puerto Rico Telephone supports geographic partitioning, but asks us to clarify whether partitioning
will be available only to rural telephone companies or, in addition, to BETRS providers.  Arch and
ProNet support broad partitioning rights for license winners.  PCIA supports broad partitioning
rights and, when technically feasible, spectrum disaggregation.  MobileMedia also supports
partitioning by license winners.

     191.  Border questions the practical usefulness of partitioning, asserting that license winners
in the PCS auctions had little desire to negotiate geographic partitioning arrangements with small
LECs that sought to serve sparsely populated remote areas.  Ameritel, while supporting
partitioning, asserts that, because negotiations are required with the auction winner, partitioning may
not be a complete solution for problems facing rural telephone companies in paging auctions, nor will
it alleviate the disruption caused by market area licensing.  InterDigital contends that the proposal
to partition and therefore require rural telephone companies to pay for BETRS spectrum runs counter
to the objective of reducing the overall access cost of the network.

     192.  Discussion.  Based on the strong support expressed by commenters for granting broad
partitioning rights to paging licensees, we will permit all MTA and EA paging licensees to partition
to any party eligible to be a paging licensee.  We have decided to take this action with respect to
partitioning because of our conclusion that allowing holders of paging licenses to partition their
geographic service areas will facilitate the provision of services in small markets and rural areas. 
Partitioning will also furnish providers of paging service with operational flexibility that will serve to
promote the most efficient use of the spectrum and encourage participation by a wide variety of
service providers.  In the PCS Partitioning Report and Order, we decided to allow partitioning of
broadband PCS licenses along any service area defined by the parties.  We concluded that allowing
the parties to define the partitioned PCS service area would allow licensees to design flexible and
efficient partitioning agreements which would permit marketplace forces to determine the most
suitable service areas.  We also found that requiring PCS partitioning along county lines was too
restrictive and might discourage partitioning.  We believe that a similarly flexible approach to
partitioned areas is appropriate for paging.  We therefore will permit partitioning of paging licenses
awarded through competitive bidding based on any license area defined by the parties. 

     193.  However, due to the paucity of comments on the subject, and because we are uncertain
whether it is technically feasible, we will not, at this time, authorize spectrum disaggregation for the
paging services.  Instead, we will seek information regarding the technical feasibility and
appropriateness of spectrum disaggregation for the paging services in the Further Notice of Proposed
Rulemaking. 

     194.  Providers of paging service will be permitted to acquire partitioned licenses in either of
two ways: (1) by forming bidding consortia to participate in auctions, and then partitioning the
licenses won among consortium members; or (2) by acquiring partitioned licenses from other
licensees through private negotiation and agreement either before or after the auction.  Each member
of a consortium will be required to file a long-form application, following the auction, for its
respective mutually agreed-upon geographic area.  With regard to partitioning by small businesses,
we will seek comment in the Further Notice of Proposed Rulemaking regarding the treatment of
bidding credits and installment payments.  In the event we receive applications requesting FCC
consent to partitioning transfers from small businesses to non-small businesses or to small businesses
that qualify for less favorable bidding credits, action on such applications will be deferred until the
adoption of rules governing the treatment of bidding credits and installment payments.    

     g.  Unjust enrichment provisions for full transfers 

     195.  Background.  The Commission's unjust enrichment provisions are integral to the success
of the special provisions for designated entities in the various auctionable services.  In the Competitive
Bidding Second Report and Order, we outlined unjust enrichment provisions applicable specifically
to designated entities.  We established these provisions to deter speculation and participation in the
licensing process by those who do not intend to offer service to the public, or who intend to use our
provisions to obtain a license at a lower cost than they otherwise would have to pay, and later to sell
it for profit.  In the Notice, we sought comment regarding the appropriate approach in the paging
services to prevent unjust enrichment.  We asked whether an approach to unjust enrichment similar
to that adopted for narrowband PCS, in which bidding credits and installment payments immediately
become due upon transfer to an ineligible entity, or the 900 MHz SMR service, in which a holding
period was imposed, would be optimal for the paging services.  

     196.  Comments.  SBT supports restricting assignments of licenses by small businesses that
receive bidding credits or qualify for installment payments until the full price has been paid for the
spectrum.  However, SBT states that assignments to entities that are ineligible for bidding credits
should not be prohibited as long as such entities pay the Commission the value of the bidding
credits.  Metrocall and A+ Communications, while opposing anti-trafficking provisions for
incumbents, note that such provisions may be an appropriate means of deterring speculators.

     197.  Discussion.  We believe it is appropriate to align our unjust enrichment rules for paging
with our narrowband PCS and 900 MHz SMR unjust enrichment rules as they relate to bidding
credits.  These rules provide that, during the initial license term, licensees utilizing bidding credits and
seeking to assign or transfer control of a license to an entity that does not meet the eligibility criteria
for bidding credits will be required to reimburse the government for the total value of the benefit
conferred by the government, that is, the amount of the bidding credit, plus interest at the rate
imposed for installment financing at the time the license was awarded, before the transfer will be
permitted.  If a licensee that utilizes bidding credits seeks to make any change in ownership structure
that would render the licensee ineligible for bidding credits, or eligible only for a lower bidding credit,
the licensee must first seek Commission approval and reimburse the government for the amount of
the bidding credit, or the difference between its original bidding credit and the bidding credit for
which it is eligible after the ownership change, plus interest at the rate imposed for installment
financing at the time the license was awarded.  The amount of this payment will be reduced over time
as follows:  (1) a transfer in the first two years of the license term will result in a forfeiture of 100
percent of the value of the bidding credit; (2) in year three of the license term the payment will be 75
percent; (3) in year four the payment will be 50 percent, and (4) in year five the payment will be 25
percent, after which there will be no required payment.  These payments will have to be paid to the
U.S. Treasury as a condition of approval of the assignment or transfer.  

     198.  In addition, if a licensee that qualifies for installment payments seeks to assign or
transfer control of its license during its term to an entity that does not meet the small business
definition, we will require payment of the remaining principal and any interest accrued through the
date of assignment as a condition of the license assignment or transfer.  Also, if an investor
subsequently purchases an interest in the business and, as a result, the gross revenues of the business
exceed the applicable financial caps, these unjust enrichment provisions will apply.  We will apply
these payment requirements for the entire license term to ensure that small businesses look first to
other small businesses when deciding to transfer their licenses.  However, we will not impose a
holding period or other transfer restrictions on these licensees.

     h.  Spectrum set-aside

     199.  Background.  In the Competitive Bidding Fifth Report and Order, we established
broadband PCS entrepreneurs' blocks on which only qualified entrepreneurs, including designated
entities, could bid.  In the Notice, we tentatively concluded that it was not necessary to adopt an
entrepreneurs' block for paging license auctions.

     200.  Comments.  Most commenters oppose the creation of an entrepreneurs' block or other
form of spectrum set-aside for paging license auctions.  AirTouch and Arch contend that set asides
are inherently contrary to the open eligibility concepts endorsed by the Commission, and can prevent
licenses from getting into the hands of carriers who value them most highly.  PCIA and Ameritel
concur, noting that an entrepreneurs' block is not feasible for the paging frequencies because such
frequencies are highly encumbered.  They further argue that setting aside certain frequencies would
potentially preclude incumbents from bidding on frequencies they currently hold.  They also contend
that the only solution to such problems would be to relocate incumbents, which would involve
expensive system modifications and otherwise unnecessary investment.  SBT, on the other hand,
asserts that a frequency set-aside for designated entities is appropriate for the paging services. 
Because capital costs are low enough for small businesses to be able to meet construction
requirements, SBT argues, small businesses should not have to compete directly with large entities
to acquire licenses.

     201.  Discussion.  We will not adopt an entrepreneurs' block for paging licenses.  The large
number of licenses of different sizes that will be available in the paging auctions should allow for
extensive participation of small businesses without an entrepreneurs' block.  Moreover, we believe
that the special provisions for small businesses that we adopt here, including installment payments and
tiered bidding credits, will give small businesses a significant opportunity to acquire paging licenses
through our auctions.

            V.  FURTHER NOTICE OF PROPOSED RULEMAKING

A.  Coverage Requirements for Nationwide Channels

     202.  In the Second Report and Order, we concluded that the three 931 MHz nationwide
channels and twenty-three 929 MHz nationwide channels will not be subject to competitive bidding. 
We are not imposing coverage requirements based on geographic area or population for these
nationwide paging licenses.  MTA and EA licensees, who are not exempt from competitive bidding,
are required to provide coverage to one-third of the geographic area population within three years
of the license grant, and to two-thirds of the geographic area population within five years of the
license grant.  In the alternative, the MTA or EA licensee may provide substantial service to the
geographic area within five years of license grant.  We seek comment on whether we should also
impose coverage requirements for nationwide paging licenses, and the appropriate coverage area. 
For example, should the coverage be on a per MTA basis or a nationwide basis?  We also seek
comment on whether the Commission should reauction the entire nationwide license, or just a portion
of the license, if the licensee fails to meet the coverage requirements.

B.  Partitioning and Disaggregation 

1.  Partitioning

     a.  In general

     203.  In the Second Report and Order, we adopted geographic partitioning provisions for
MTA and EA geographic area paging licensees.  In this Further Notice we seek comment on whether
nationwide paging licensees should be permitted to partition their license area.  Commenters should
note that the three 931 MHz nationwide channels and twenty-three 929 MHz nationwide channels
are not subject to competitive bidding, whereas the MTA and EA geographic area licenses are subject
to competitive bidding.  

     204.  We believe that partitioning can be an effective means of providing paging licensees with
the flexibility they need to tailor their service offerings to meet market demands.  Partitioning may
be used to create smaller licenses and thus also facilitate greater participation by small businesses and
rural telephone companies.  We did not, however, seek comment in the Notice on the treatment of
MTA and EA geographic area paging licensees that receive competitive bidding benefits, the license
term of partitioned licenses, or build-out requirements.  We address these issues below with respect
to partitioning geographic area paging licenses. 

     b.  Licensees with competitive bidding benefits

     205.  Providing licensees with the flexibility to partition their geographic service areas will
create smaller areas that can be licensed to small businesses, including those entities without the
resources to participate successfully in spectrum auctions.  Our competitive bidding rules for paging
include provisions for installment payments and bidding credits for small businesses.  We also
adopted rules to prevent unjust enrichment by small businesses seeking to transfer licenses obtained
with installment payments or bidding credits.  We seek comment on how to adjust installment
payments owed by partitioning licensees.  Parties are invited to comment on whether a small business
partitioner should be required to repay, on an accelerated basis, a portion of the outstanding principal
balance owed under an installment payment plan.  We seek comment on how this payment should be
calculated.  We seek comment on whether the partitionee should be required to guarantee payment
of a portion of the partitioner's obligation.  

     206.  We tentatively conclude that partitionees that would qualify as small businesses should
be permitted to pay their pro rata share of the remaining government obligation through installment
payments.  We seek comment on this tentative conclusion.  Commenters should address the
mechanisms for apportioning the remaining government obligation between the parties.  We propose
using population as the objective measure to calculate the relative value of the partitioned area, and
we seek comment on this proposal. 

     207.  We propose applying unjust enrichment rules to small businesses that partition to non-small businesses or to small businesses qualifying for a lower bidding credit.  We seek comment on
this proposal.  These unjust enrichment provisions would include accelerated payment of bidding
credits, unpaid principal, and accrued unpaid interest.  We seek comment on how such unjust
enrichment amounts should be calculated.  Commenters should address how to calculate unjust
enrichment amounts and how to enforce unjust enrichment payments.  We seek comment on whether
we should consider the price paid by the partitionee in determining the percentage of the outstanding
principal balance to be repaid.  Commenters should address whether the unjust enrichment payments
should be calculated on a proportional basis, using population of the partitioned area as the objective
measure. 

     208.  We seek comment on whether each party to a partitioning transfer should be required
to guarantee all or a portion of the partitioner's original auctions-related obligation in the event of
default or bankruptcy by any of the parties to the partitioning transfer.  We seek comment on whether
the partitioner (the original licensee) should continue to be responsible, with respect to the auctions-related obligation, for the entire initial geographic area.

     c.  Build-out requirements

     209.  In the Second Report and Order, we adopted coverage requirements for MTA and EA
geographic area licensees.  Specifically, we require each MTA or EA geographic area licensee to
provide coverage to one-third of the geographic area population within three years of the license
grant, and to two-thirds of the geographic area population within five years of the license grant.  In
the alternative, the MTA or EA licensee may provide substantial service to the geographic area within
five years of license grant.  We tentatively conclude that both the partitioner and the partitionee
should be subject to coverage requirements that ensure that both portions of the license area will
receive service.  We propose that a partitionee will be obligated to satisfy the same build-out
requirements as the original licensee within its partitioned area, regardless of when the license was
acquired.  A partitionee of an MTA or EA would provide coverage to one-third of the population in
its partitioned area within three years of the license grant, and to two-thirds of the population within
its partitioned area within five years of the license grant.  In the alternative, the partitionee may
provide substantial service to the partitioned geographic area within five years of license grant. 
Parties are invited to comment on this proposal.  Commenters should also address build-out
requirements for partitioned nationwide licenses.  Commenters are also invited to address what build-out requirements should apply where a licensee partitions a portion of its license area after the initial
ten-year license term has expired.

     d.  License term

     210.  A geographic area paging licensee is authorized to provide service for no more than ten
years from the date of license grant.  A licensee may submit an application to renew the license for
an additional license term, and is afforded a renewal expectancy if it can demonstrate that it has
provided substantial service during the past license term and has substantially complied with the
applicable Commission rules, policies, and the Communications Act.  Substantial service is service
which is sound, favorable, and substantially above a mediocre level of service which might just
minimally warrant renewal.  
     211.  We propose that a partitionee (including a nationwide license partitionee) be authorized
to hold its license for the remainder of the partitioner's original ten-year term.  We tentatively
conclude that this approach is reasonable because a partitioner-licensee should not be able to confer
greater rights than it was awarded under the terms of its license grant.  We seek comment on this
tentative conclusion.  We also propose that a partitionee be afforded the same renewal expectancy
as a geographic area licensee.  We propose to grant a partitionee a preference at a renewal proceeding
if it can demonstrate that it has provided substantial service during its past license term and has
substantially complied with the applicable Commission rules, policies, and the Communications Act. 
We seek comment on these proposals.

2.   Disaggregation 

     a.  In general

     212.  In the Notice we asked parties to comment on whether we should allow paging
spectrum disaggregation.  We did not receive sufficient comment on this issue to adopt
disaggregation for paging services.  We seek further comment on the feasibility of spectrum
disaggregation for paging.  Commenters should provide technical justifications and other relevant
support in responding to this issue.  Commenters should address whether minimum disaggregation
standards are necessary for paging services.  Commenters should also address whether we should
permit nationwide licensees to disaggregate spectrum.

     b.  Licensees with competitive bidding benefits

     213.  We also seek comment on what the respective obligations of the participants in a
disaggregation transfer should be, and whether each party should be required to guarantee a
proportionate amount of the disaggregator's original auctions-related obligation in the event of default
or bankruptcy by any of the parties to the disaggregation transfer.  We seek comment on whether the
disaggregator (the original licensee) should have a continuing obligation with respect to the entire
initial license.  Alternatively, should the parties have available a choice of options, ranging from an
accelerated payment based on purchase price to a guarantee for a larger payment by one party in the
event another party defaults?  Parties are invited to comment on whether the disaggregating parties
should be able to determine which party has a continuing obligation with respect to the original
license area.

     214.  We propose to allow all small business licensees to disaggregate to similarly qualifying
parties as well as parties not eligible for small business provisions.  We tentatively conclude that if
we permit a qualified small business licensee to disaggregate to a non-small business entity, the
disaggregating licensee should be required to repay any benefits it received from the small business
special provisions on a proportional basis.  This would include accelerated payment of bidding credits,
unpaid principal, and accrued unpaid interest.  We seek comment on how such repayment amounts
should be calculated.  We also seek comment on whether we should consider the price paid by the
disaggregatee in determining the percentage of the outstanding principal balance to be repaid.  

     215.  We tentatively conclude that if we permit a small business licensee to disaggregate to
another qualified small business that would not qualify for the same level of bidding credit as the
disaggregating licensee, the disaggregating licensee should be required to repay a portion of the
benefit it received.  We seek comment on how that amount should be calculated.  Finally, we seek
comment on what provisions, if any, we should adopt to address the situation of a small business
licensee's disaggregation followed by default in payment of a winning bid at auction.

     c.  Build-out requirements

     216.  We require each MTA or EA geographic area licensee to provide coverage to one-third
of the geographic area population within three years of the license grant, and to two-thirds of the
geographic area population within five years of the license grant.  In the alternative, the MTA or EA
licensee may provide substantial service to the geographic area within five years of license grant.  We
propose adopting a flexible approach for construction requirements on both the disaggregator and
disaggregatee for their respective spectrum portions.  We propose that either the disaggregator or
the disaggregatee entering the geographic market should be obligated to provide coverage to one-third of the population within three years of the license grant, and to two-thirds of the population
within five years of the license grant.  In the alternative, either the disaggregator or the disaggregatee
may provide substantial service to the geographic area within five years of license grant.  We seek
comment on this proposal.  Parties should also comment on the appropriate build-out requirements
for the parties to disaggregation of nationwide paging licenses.  We propose that if a licensee fails to
meet the construction requirements, the license reverts back to the Commission.  We seek comment
on this proposal.
     
     d.  License term

     217.  We propose a similar license term for disaggregation as we have for partitioning, i.e.,
a disaggregatee would be authorized to hold its license for the remainder of the disaggregator's
original ten-year license term.  We propose that a disaggregatee would be afforded a renewal
expectancy if it can demonstrate that it has provided substantial service during the past license term
and has substantially complied with the applicable Commission rules, policies, and the
Communications Act.  We seek comment on these proposals, and on how to apply the renewal
standard in cases where the disaggregatee has acquired the disaggregated license near the end of the
license term.

3.  Combination of Partitioning and Disaggregation

     218.  We tentatively conclude that, if disaggregation is feasible, we should permit
combinations of partitioning and disaggregation, subject to the rules we have proposed for each.  We
seek comment on this proposal.  Commenters should address any conflicts in the partitioning and
disaggregation rules and whether we should implement the partitioning rules in such cases. 
Commenters should also address whether we should allow the combination of partitioning and
disaggregation for nationwide paging licenses.

C.  Shared Channels

     219.  The issue of paging license application fraud was initially raised in the comments filed
by the Federal Trade Commission (FTC).  According to the FTC, telecommunications investment
frauds are of two basic types:  (1) "application mills," where  telemarketers sell application
preparation services for wireless licenses for thousands of dollars to consumers, by claiming that
telecommunications businesses will seek to lease or sell the licenses for many times the telemarketers'
applications fees; and (2) "build-out" schemes, where telemarketers sell, again for thousands of
dollars, interests in limited liability companies or partnerships that supposedly will acquire wireless
licenses, build and operate telecommunications systems, and pay the consumers high dividends.  The
FTC argued that awarding licenses on a geographic basis through competitive bidding would likely
reduce the incidence of "application mills" for paging licenses.  The FTC explained that awarding
licenses on an unlimited, shared basis is especially prone to abuse, because the constant availability
of such licenses allows telemarketers to guarantee licenses to unsuspecting consumers.  The transition
of the exclusive paging channels to geographic area licensing might make the shared channels even
more inviting to the fraudulent application mills.  Therefore, we seek comment on how to eliminate
or reduce this problem.  

     220.  Specifically, we seek comment on how the current Form 600 application could be
revised to provide applicants with information regarding the risks of telecommunications investment
and warning signs of possible investment fraud.  In addition, we seek comment on whether
application preparation services should be required to sign the Form 600, and to certify that the
applicant has received in writing pertinent information regarding the Commission's rules and the
obligations of licensees.  Commenters are also invited to address whether PCIA should be required
to implement additional procedures in the coordination process to reduce fraudulent or speculative
applications.

                         VI.  CONCLUSION

     221.  In this Second Report and Order, we adopt geographic area licensing and competitive
bidding rules for paging services in the exclusive 929-930 MHz, 931-932 MHz, 35-36 MHz, 43-44
MHz, 152-159 MHz, and 454-460 MHz bands, to facilitate future development of paging systems
and foster competition between paging and other CMRS in general.  We are granting nationwide
geographic area licenses for 26 nationwide channels, and excluding those licenses from competitive
bidding.  We also are adopting the fixed distances in Tables E-1 and E-2 in Section 22.537 for the
exclusive 929 MHz and 931 MHz channels for determining co-channel interference protection for
incumbent licensees.  Additionally, in the Further Notice of Proposed Rulemaking, we are seeking
comment on coverage requirements for nationwide geographic area licensees, geographic
partitioning, spectrum disaggregation, and modifying the application process for the shared private
carrier paging channels.

                     VII.  PROCEDURAL MATTERS

A.  Ordering Clauses

     222.  Authority for issuance of this Further Notice of Proposed Rulemaking is contained in
Sections 4(i), 257, 303(r), and 309(j) of the Communications Act of 1934, as amended, 47 U.S.C.
 154(i), 257, 303(r), and 309(j).

     223.  Accordingly, IT IS ORDERED that, pursuant to the authority of Sections 4(i), 303(g),
303(r), and 332(a) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 303(g),
303(r), and 332(a), Part 22 of the Commission's Rules, 47 C.F.R. Part 22, IS AMENDED as set forth
in Appendix A below.

     224.  IT IS FURTHER ORDERED that, pursuant to the authority of Sections 4(i), 303(g),
303(r), and 332(a) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 303(g),
303(r), and 332(a), Part 90 of the Commission's Rules, 47 C.F.R. Part 90, IS AMENDED as set forth
in Appendix A below.

     225.  IT IS FURTHER ORDERED that the rules adopted in this Second Report and Order
and Further Notice of Proposed Rulemaking will be effective sixty days after the date of publication
in the Federal Register.

     226.  IT IS FURTHER ORDERED that, pursuant to 47 U.S.C.  155(c), the Chief, Wireless
Telecommunications Bureau, IS GRANTED DELEGATED AUTHORITY to implement and modify
auction procedures in the Part 22 and Part 90 paging services, including the general design and timing
of an auction, the number and grouping of authorizations to be offered in any particular auction, the
manner of submitting bids, the amount of minimum opening bids and bid increments, activity and
stopping rules, and application and payment requirements, including the amount of upfront payments,
and to announce such procedures by Public Notice. 

     227.  IT IS FURTHER ORDERED that, pursuant to 47 U.S.C.  155(c), the Chief, Wireless
Telecommunications Bureau, IS GRANTED DELEGATED AUTHORITY to dismiss all mutually
exclusive paging applications filed as of the adoption date of this Order and grant or dismiss all non-mutually exclusive paging applications filed as of the adoption date of this Order.

B.  Ex Parte Rules -- Non-Restricted Proceeding

     228.  This is a non-restricted notice and comment rule making proceeding.  Ex parte
presentations are permitted except during the Sunshine Agenda period, provided they are disclosed
as provided in Commission rules.  See generally 47 C.F.R.  1.1201, 1.1203, and 1.1206(a).

C.  Comment Dates

     229.  Pursuant to applicable procedures set forth in Sections 1.415 and 1.419 of the
Commission's rules, 47 C.F.R.  1.415 and 1.419, interested parties may file comments to the
Further Notice of Proposed Rulemaking on or before April 17, 1997, and reply comments on or
before May 1, 1997.  To file formally in this proceeding, you must file an original and four copies of
all comments, reply comments, and supporting comments.  If you want each Commissioner to receive
a personal copy of your comments, you must file an original plus nine copies.  You 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 FCC Reference Center of the Federal Communications
Commission, Room 239, 1919 M Street, N.W., Washington, D.C. 20554.

D.  Initial Paperwork Reduction Act of 1995 Analysis

     230.  This Further Notice of Proposed Rulemaking contains either a proposed or modified
information collection.  As part of its continuing effort to reduce paperwork burdens, we invite the
general public and the Office of Management and Budget (OMB) to take this opportunity to comment
on the information collections contained in this Further Notice of Proposed Rulemaking, as required
by the Paperwork Reduction Act of 1995, Pub. L. No. 104-13.  Public and agency comments are due
at the same time as other comments on this Further Notice of Proposed Rulemaking; OMB
comments are due 60 days after the date of publication of this Further Notice of Proposed
Rulemaking in the Federal Register.  Comments should address:  (a) whether the proposed collection
of information is necessary for the proper performance of the functions of the Commission, including
whether the information shall have practical utility; (b) the accuracy of the Commission's burden
estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d)
ways to minimize the burden of the collection of information on the respondents, including the use
of automated collection techniques or other forms of information technology.

E.  Regulatory Flexibility Act

     231.  The Final Regulatory Flexibility Analysis pursuant to the Regulatory Flexibility Act, 5
U.S.C. Section 604 is contained in Appendix C.  The Initial Regulatory Flexibility Analysis pursuant
to the Regulatory Flexibility Act, 5 U.S.C. 603, is contained in Appendix D.


                    FEDERAL COMMUNICATIONS COMMISSION


                    William F. Caton
                    Acting Secretary