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

In the Matter of
Amendments to Parts 1, 2 and 101 of the
Commission's Rules to License Fixed
Services at 24 GHz

WT Docket No. 99-327
     Comments of the Office of Advocacy, U.S. Small Business
                         Administration
                                
     The Office of Advocacy of the United States Small Business

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

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

above-captioned proceeding.(2) The Federal Communications

Commission ("Commission") is proposing rules to govern the 24 GHz

spectrum band, including plans to auction spectrum in this band

according to Economic Area ("EA").   Advocacy suggests that the

Commission use smaller geographic areas, such as Metropolitan

Statistical Areas ("MSAs") and Rural Service Areas ("RSAs").

     Advocacy recommends the use of MSAs and RSAs because these

units may permit applicants to target just those areas they wish

to serve, while EAs might be larger than the areas that many

small businesses wish to serve.  MSAs and RSAs cover specific

urban or rural areas, rather than the wider economic regions

covered by EAs, which include urban, suburban, and rural areas.

Licensing by MSAs and RSAs would permit small businesses to

compete for geographic licenses that cover precisely the

communities that they wish to serve.

     Additionally, EA licensing may discourage small business

participation in the 24 GHz auction.  By organizing the licenses

by EAs, which include both rural and urban areas, the Commission

would permit the relatively high value of urban areas to

influence bidding levels for relatively less valuable rural

areas.  Bidding levels might simply become too high for small

businesses, despite the use of bidding credits.  Inclusion of

urban areas with rural areas may raise the auction value of an EA

such that small businesses may not be able to afford to bid on

the EA.  Thus, from a cost standpoint, it may not be possible for

small businesses to compete for whole EAs, particularly if their

business plans only include a portion of the EA.  But licensing

smaller areas would tend to increase participation by small and

rural businesses, including businesses owned by women and

minorities.

     The Commission concludes that using EAs would "result in

economic opportunity" for small businesses.(3) The Commission

anticipates that this opportunity would come through post-auction

partitioning of EAs into smaller territories:

     We thus tentatively conclude that partitioning and spectrum
     disaggregation will provide a means to overcome entry
     barriers through the creation of licenses for smaller
     geographic areas that require less capital, thereby
     facilitating greater participation by, and economic
     opportunity for, smaller entities such as small businesses,
     rural telephone companies, and businesses owned by
     minorities and women, as required by Section 309(j)(4)(C) of
     the Communications Act.(4)
     
But by relying on post-auction partitioning to "overcome entry

barriers" and lower capital costs for small business, the

Commission would miss an opportunity to encourage small business

participation in the auction itself.  In its discussion of the

benefits of partitioning, the Commission itself implies that EAs

may be too large or too costly for small and minority businesses

to bid on or serve.  Thus, small businesses may be forced, from a

practical point of view, to wait until the spectrum has been

auctioned and then try to pick off rural areas from EAs.  But

once an EA has been licensed, a small business seeking to acquire

a rural portion through partition may have to pay considerably

more than if the rural area were auctioned as a discreet license

area.

     Small businesses will have a greater opportunity to obtain

licenses for the areas they wish to serve if they can compete for

these licenses at the auction stage.  Small businesses may well

find it economically preclusive to attempt to compete at auction

(with presumably higher dollar amounts) for EAs that they are not

prepared to serve.  With EAs, a small business would face the

prospect of bidding on a larger area than it wants to serve, at a

price that might be elevated by the presence in the EA of a more

profitable urban area.  But the Commission could encourage small

business auction participation, and therefore small business

provision of 24 GHz services, by offering the licenses on a

smaller geographic basis.  With smaller areas, a small business

interested in serving one rural locale could bid only on the RSA

containing that area.  Similarly, with smaller areas, any

business, small or large, interested in serving a particular town

or city, could bid on that city without also taking neighboring

rural areas it might not want.  This would reduce the need for

partitioning, along with any attendant extra costs, extra

procedural steps, and extra Commission involvement.

     Also, licensing smaller areas might reduce spectrum

warehousing and speed service to rural areas in particular.

Quite possibly, an EA licensee might not be interested in

partitioning a portion of its license area but also might not be

interested in serving all areas of the EA, only those areas it

deems profitable.  As a result, large areas of an EA could remain

unserved for an extended period of time, perhaps indefinitely.

But if such an "unserved" area had been offered as a discreet

RSA, an entity wishing to serve that area would have entered the

market at the auction stage.  And the value of that RSA license

would have been measured by bidding competition, not by post-

auction contract negotiation with another licensee/competitor.

Conclusion

     The Commission's EA proposal risks excluding small

businesses from the 24 GHz auction, and from the provision of 24

GHz services.  The Commission should adopt smaller geographic

areas, such as MSAs and RSAs.  This would permit applicants to

bid on just those areas they wish to serve.  It also would reduce

spectrum warehousing.  Most importantly, it would encourage small

business participation in the 24 GHz spectrum auction and,

ultimately, would increase the diversity and number of service

providers.


Respectfully submitted,



Jere W. Glover
Chief Counsel for Advocacy



R. Bradley Koerner
Assistant Chief Counsel for Telecommunications

December 9, 1999

ENDNOTES

1.  Congress established Advocacy in 1976 by Pub. L. No. 94-305
to represent the views and interests of small business within the
Federal government.  (Codified as amended at 15 U.S.C.  634 a-
g, 637.)  Advocacy serves as a focal point for concerns regarding
the government's policies as they affect small business, develops
proposals for changes in Federal agencies' policies, and
communicates these proposals to the agencies.  (See 15 U.S.C.
634c(1)-(4).)  Advocacy also monitors agency compliance with the
RFA and reports this to Congress.
2. Amendments to Parts 1, 2 and 101 of the Commission's Rules to
License Fixed Services at 24 GHz, Notice of Proposed Rulemaking,
WT Docket No. 99-327, FCC 99-333, released November 10, 1999.
3. See NPRM, para. 17.
4. See NPRM, para. 26.