75144 Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 

FEDERAL COMMUNICATIONS 

COMMISSION 

47 CFR Parts 1, 22, 24, 27, and 90

[WT Docket Nos. 02–381, 01–14, and 03–

202; FCC 04–166] 

Facilitating the Provision of SpectrumBased Services to Rural Areas and 

Promoting Opportunities for Rural 

Telephone Companies To Provide 

Spectrum-Based Services

AGENCY: Federal Communications 

Commission.

ACTION: Final rule.

SUMMARY: In this document, the Federal 

Communications Commission 

(‘‘Commission’’) modifies certain 

regulations and policies to facilitate the 

deployment of wireless services in rural 

areas. The Commission establishes the 

definition for ‘‘rural areas’’ in the 

context of specific policies or 

regulations governing wireless 

communications services. The 

Commission also evaluates its policies 

governing the licensing of spectrum, 

both with respect to initial geographic 

area licensing as well as subsequent relicensing. The Commission also takes 

steps to facilitate increased access to 

capital for rural licensees, such as the 

elimination of the remaining 

components of the cellular cross-interest 

rule, as well as the revision of 

Commission policies governing security 

interests in wireless licenses. Further, 

the Commission takes several actions 

designed to increase licensee flexibility 

and permit more cost-effective coverage 

of rural areas; for example, the 

Commission increases the permissible 

power levels for certain wireless 

services that are located in rural areas, 

permits certain geographic-area 

licensees to provide substantial service 

as a means of complying with their 

construction requirements, and clarifies 

its policies governing infrastructure 

sharing arrangements.

DATES: Effective February 14, 2005, 

except for § 1.919(c) which contains an 

information collection requirement 

under the Paperwork Reduction Act that 

has not been approved by the Office of 

Management and Budget (OMB). The 

Commission will publish a document in 

the Federal Register announcing the 

effective date of § 1.919(c).

FOR FURTHER INFORMATION CONTACT:

Allen A. Barna, Wireless 

Telecommunications Bureau, at (202) 

418–0620.

SUPPLEMENTARY INFORMATION: This is a 

summary of the Commission’s Report 

and Order portion (Report and Order) of 

the Commission’s Report and Order and 

Further Notice of Proposed Rulemaking,

FCC 04–166, in WT Docket Nos. 02–381, 

01–14, and 03–202, adopted July 8, 

2004, and released September 27, 2004. 

Contemporaneous with this document, 

the Commission publishes a Further 

Notice of Proposed Rulemaking 

(FNPRM) (summarized elsewhere in this 

publication). The full text of this 

document is available for public 

inspection during regular business 

hours at the FCC Reference Information 

Center, 445 12th St., SW., Room CYA257, Washington, DC 20554. The 

complete text may be purchased from 

the Commission’s duplicating 

contractor: Best Copy & Printing, Inc., 

445 12th Street, SW, Room CY-B402, 

Washington, DC 20554, telephone 800–

378–3160, facsimile 202–488–5563, or 

via e-mail at fcc@bcpiweb.com.

Paperwork Reduction Act 

The Report and Order contains 

modified information collection 

requirements subject to the Paperwork 

Reduction Act of 1995 (PRA), Public 

Law 104–13. They will be submitted to 

the Office of Management and Budget 

(OMB) for review under Section 3507(d) 

of the PRA. OMB, the general public, 

and other Federal agencies are invited to 

comment on the modified information 

collection requirements contained in 

this proceeding. Public and agency 

comments are due on or before February 

14, 2005. Comments should address: (a) 

Whether these modified collections of 

information are 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. Below, the 

Commission continues to assess the 

additional information collection 

burden that changes to its regulations 

and policies might have on small 

entities including businesses with fewer 

than 25 employees. 

Synopsis of the Report and Order 

I. Introduction 

1. In this Report and Order, the 

Commission adopts several measures 

intended to increase the ability of 

wireless service providers to use 

licensed spectrum resources flexibly 

and efficiently to offer a variety of 

services in a cost-effective manner. By 

our actions today, we take steps to 

promote access to spectrum and 

facilitate capital formation for entities 

seeking to serve rural areas or improve 

service in rural areas. This Report and 

Order takes action affecting the 

provision of commercial and private 

terrestrial wireless services. While the 

policies and regulations discussed 

herein are targeted to promote wireless 

services in rural areas, we note that 

certain of our actions will likely have 

broader application to non-rural areas as 

well. Accordingly, we expect these 

decisions will facilitate the deployment 

of new and advanced wireless services, 

including broadband services, and 

thereby foster much-needed economic 

development. The actions we adopt in 

our Report and Order are derived from 

those proposed in both the Notice of 

Inquiry (Rural NOI), 68 FR 723 (January 

7, 2003), and the Rural NPRM, 68 FR 

64050 (November 12, 2003). 

2. In this Report and Order, we 

modify certain regulations and policies 

in order to facilitate the deployment of 

wireless services in rural areas. 

Specifically, we take the following 

actions. As an initial matter, we 

examine the various definitions that are 

used to describe ‘‘rural areas’’ and 

establish the presumption that, on a 

going-forward basis, and unless 

otherwise specified in the context of 

specific policies or regulations 

governing wireless communications 

services, counties with a population 

density of 100 persons per square mile 

or less constitute ‘‘rural areas’’ for 

purposes of our wireless spectrum 

policies. 

3. Second, we take a close look at 

some of our policies affecting access to 

spectrum and the provision of service in 

rural areas. In particular, we consider 

our policies governing the licensing of 

spectrum, both with respect to initial 

licensing through the competitive 

bidding process as well as subsequent 

re-licensing after an authorization is 

returned to the Commission. We affirm 

that we will continue to establish 

licensing areas on a service-by-service 

(or band-by-band) basis as appropriate, 

based upon the flexibility that such an 

approach provides and our past 

experience in determining the initial 

size of service areas. We also reaffirm 

that when developing rules for licensing 

individual services, we will consider 

using smaller service areas in some 

spectrum blocks in order to encourage 

deployment in rural areas for the service 

in question. 

4. Third, we take steps to facilitate 

increased access to capital for rural 

licensees. We eliminate the remaining 

components of the cellular cross-interest 

Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 75145

rule that currently apply only in rural 

service areas and transition to case-bycase review for cellular transactions, 

while closely examining those that 

present a significant likelihood of 

substantial competitive harm in a 

market. We also revise our policies 

governing security interests in wireless 

licenses and permit licensees, at their 

option, to grant such interests to the 

Department of Agriculture’s Rural 

Utilities Service (RUS), subject to the 

Commission’s prior approval of any 

transfer of control. 

5. Fourth, we take several actions to 

increase licensee flexibility and permit 

more cost-effective coverage of rural 

areas. We amend our regulations to 

increase permissible power levels for 

base stations in certain wireless services 

that are located in rural areas or that 

provide coverage to otherwise unserved 

areas. By this action, we anticipate that 

coverage of such areas will be more 

economical, as licensees may provide 

increased coverage of rural areas using 

fewer base stations and less associated 

infrastructure. We also amend our 

regulations to permit certain geographicarea licensees to provide substantial 

service as a means of complying with 

their construction requirements, thus 

countering existing disincentives to 

build out less densely populated areas. 

Finally, we clarify our policies 

governing infrastructure sharing and 

discuss the various types of 

infrastructure arrangements that parties 

generally may enter into without the 

need for Commission review.

II. Background 

6. One of the Commission’s primary 

statutory obligations, as well as one of 

its principal public policy objectives, is 

to facilitate the widespread deployment 

of facilities-based communications 

services to all Americans, including 

those doing business in, residing in, or 

visiting rural areas. In December 2002, 

the Commission released a Rural NOI

that sought comment on the 

effectiveness of its existing regulatory 

tools in promoting service to rural areas 

and asked how we could modify our 

policies to further encourage the 

provision of wireless services in rural 

areas. In a follow-up Rural NPRM, 

released in October 2003, the 

Commission sought to build upon the 

record developed in response to the 

Rural NOI and sought comment 

regarding a variety of proposals to 

eliminate unnecessary regulatory 

barriers and encourage the deployment 

of spectrum-based services in rural 

areas. The Rural NPRM focused on 

measures that would increase flexibility, 

reduce regulatory costs of providing 

service to rural areas, and promote 

access to both spectrum and capital 

resources for entities seeking to provide 

wireless services in rural areas. Among 

other issues, the Rural NPRM sought 

comment on the following policies and 

proposals: (1) Determining an 

appropriate definition for ‘‘rural area’’

for purposes of implementing 

Commission policies; (2) promoting 

access to ‘‘unused’’ spectrum; (3) 

extending a ‘‘substantial service’’

construction option to all geographicarea licensees; (4) determining whether 

geographic-area licensees should satisfy 

additional construction requirements 

after their initial license term; (5) 

increasing power limits in rural areas 

for licensed services; (6) evaluating the 

appropriate initial size of licensing areas 

for geographic-area licenses; (7) 

fostering our partnership with RUS and 

determining whether additional 

measures should be taken to 

complement the RUS loan programs; (8) 

considering whether to modify longheld restrictive policies on security 

interests in licenses by permitting 

licensees to offer RUS security interests 

in their licenses; (9) considering 

modification or elimination of the 

cellular cross-interest rule in Rural 

Service Areas (RSAs); (10) clarifying our 

policies with respect to infrastructure 

sharing; and (11) updating and 

amending our rules governing the Rural 

Radiotelephone Service (RRS) and Basic 

Exchange Telephone Radio Systems 

(BETRS). 

7. As discussed below, the 

Commission’s market-oriented policies 

largely have been successful in 

promoting facilities-based competition 

in the rural marketplace, especially with 

respect to CMRS. These market-oriented 

policies, acting in concert with more 

historical licensing policies, such as the 

cellular unserved area process, have 

resulted in the widespread provision of 

wireless services, including in rural 

areas. As the Commission noted in a 

recent report, 95 percent of the total 

U.S. population live in counties with 

access to three or more different mobile 

telephony providers. See 

Implementation of Section 6002(b) of 

the Omnibus Budget Reconciliation Act 

of 1993, Annual Report and Analysis of 

Competitive Market Conditions with 

Respect to Commercial Mobile Services, 

Eighth Report, 18 FCC Rcd 14783, 

14793–94 paragraph 18 (2003) (Eighth 

Competition Report). Moreover, we are 

optimistic that recent Commission 

initiatives will encourage the further 

deployment of new and advanced 

wireless services in rural areas, 

including broadband services. These 

initiatives complement existing 

programs and regulations that, in our 

estimation, already are working to 

promote wireless service in rural areas. 

These existing measures include small 

business bidding credits and 

partitioning and disaggregation. As the 

Commission noted in the Rural NPRM, 

available data indicates that wireless 

service providers have taken advantage 

of these existing regulatory mechanisms. 

We also note that there are explicit 

funding programs available to support 

the provision of wireless services in 

rural areas, including Universal Service 

Fund support for service in high cost 

areas and RUS funds for the deployment 

of broadband services. 

8. In light of the record developed in 

response to the Rural NPRM, we 

conclude that our market-oriented 

policies, in tandem with substantial 

capital investment by licensees, 

generally have led to the growth of 

valuable, productivity-enhancing 

wireless services to a vast majority of 

Americans, including many who reside, 

work, or travel in rural areas. 

Nevertheless, we also conclude that 

there are additional steps that we can 

take in order to promote greater 

deployment of wireless services in rural 

areas, such as eliminating disincentives 

to serve or invest in rural areas, and 

helping to reduce the costs of market 

entry, network deployment and 

continuing operations. 

III. Report and Order 

A. Definition of ‘‘Rural’’

9. Background. In the Rural NPRM, 

the Commission requested comment on 

an appropriate definition of a ‘‘rural 

area’’ for use in conjunction with each 

of the policies addressed in this 

proceeding. The Commission sought 

comment on whether a uniform 

definition of a ‘‘rural area’’ would be 

appropriate, or whether the definition of 

a ‘‘rural area’’ should differ depending 

upon the particular regulatory initiative 

at issue. The Commission discussed 

various definitions that are currently 

used by the Commission or by other 

federal agencies as proxies for ‘‘rural,’’

and sought comment on whether one or 

more of these definitions would be 

appropriate. Specifically, the 

Commission sought comment on the 

following potential definitions: (1) 

Counties with a population density of 

100 persons or fewer per square mile; 

(2) RSAs; (3) non-nodal counties within 

an Economic Area (EA) as defined by 

the Department of Commerce’s Bureau 

of Economic Analysis ; (4) the definition 

for ‘‘rural’’ used by RUS for its 

broadband loan program; (5) the 

75146 Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 

definition for ‘‘rural area’’ used by the 

Commission in connection with 

universal service support for schools, 

libraries, and rural health care 

providers; (6) the definition of ‘‘rural’’

based on census tracts as outlined by 

the Economic Research Service of the 

USDA; (7) the Census Bureau definition 

of ‘‘rural’’ counties; and (8) any census 

tract that is not within 10 miles of any 

incorporated or census-designated place 

containing more than 2,500 people, and 

is not within a county or county 

equivalent that has an overall 

population density of more than 500 

persons per square mile of land. To the 

extent that commenters believed that 

none of the eight definitions provided in 

the Rural NPRM are appropriate, the 

Commission asked commenters to 

identify specific, quantifiable factors 

that the Commission should consider 

when determining whether an area is a 

‘‘rural area.’’

10. Discussion. We conclude that it is 

appropriate to establish a baseline 

definition of ‘‘rural area’’ for purposes of 

our regulatory policies. Rather than 

discussing ‘‘rural areas’’ in abstract 

terms, we believe that a baseline 

definition will provide clarity in 

situations where the Commission does 

not otherwise specifically designate an 

alternative definition. As noted in the 

Rural NPRM, we believe that some 

clarification of the term is necessary in 

order to ensure that our policies are 

appropriately tailored to promote 

service to consumers in rural areas and 

ensure uniform understanding of how 

our regulatory proposals will be 

implemented and evaluated. In 

addition, by adopting a baseline 

definition of ‘‘rural area,’’ we can 

facilitate the evaluation of our ruraloriented policies. By providing 

continuity with respect to the meaning 

of a ‘‘rural area,’’ we can form a basis 

for comparison of the effects of our 

‘‘rural area’’ policies over time. 

11. We establish a baseline definition 

of ‘‘rural area’’ as those counties (or 

equivalent) with a population density of 

100 persons per square mile or less, 

based upon the most recently available 

Census data. The Commission first used 

this definition as a proxy definition in 

its annual CMRS Competition Report for 

purposes of analyzing the average 

number of mobile telephony 

competitors in rural versus non-rural 

counties. Our decision to adopt this 

specific definition over other possible 

definitions is based on several factors. 

In order to apply a specific definition to 

Commission policies, it is important 

that we not make the definition difficult 

to administer, or so narrowly tailored to 

only include what many refer to as the 

most rural areas. We believe this 

definition achieves an appropriate 

balance. As noted in the Rural NPRM,

definitions based on county boundaries 

are easy to administer and understand, 

population data based on county 

boundaries are widely available to the 

public, and county boundaries rarely 

change. Moreover, the total population 

of the counties that fall within this 

definition of ‘‘rural area’’ closely tracks 

the Census Bureau’s overall population 

for non-urban areas; accordingly, 

although we do not adopt the same 

definition for ‘‘rural area’’ as the Census 

Bureau, we believe that we are targeting 

the same general population. This 

definition encompasses 2,331 U.S. 

counties with a total population of 

approximately 60 million people. These 

figures, based on the 2000 Census, 

correspond to approximately 72 percent 

of all U.S. counties and 21 percent of 

the total U.S. population.

12. We recognize, however, that the 

application of a single, comprehensive 

definition for ‘‘rural area’’ may not be 

appropriate for all purposes. Indeed, the 

Commission stated in the Rural NPRM

that there may be potential drawbacks of 

adopting a definition based solely on 

county boundaries, and others 

expressed concern that a single 

definition will not suit all situations. As 

noted in the Rural NPRM, there are 

several well-established definitions for 

‘‘rural’’ utilized by federal agencies, and 

the Commission itself has employed 

different proxy definitions of ‘‘rural’’ in 

various proceedings. We realize that 

definitions of a ‘‘rural area’’ previously 

adopted were tailored to specific 

policies, and that the 100 persons per 

square mile or less definition may not 

be a suitable alternative in all cases. We 

believe, therefore, that applying a 

comprehensive definition of ‘‘rural’’ to 

all policies is not warranted and may 

instead have unintended results. Rather 

than establish the 100 persons per 

square mile or less designation as a 

uniform definition to be applied in all 

cases, we instead believe that it is more 

appropriate to treat this definition as a 

presumption that will apply for current 

or future Commission wireless radio 

service rules, policies and analyses for 

which the term ‘‘rural area’’ has not 

been expressly defined. By doing so, we 

maintain continuity with respect to 

existing definitions of ‘‘rural’’ that have 

been tailored to apply to specific 

policies, while also providing a 

practical guideline. 

B. Facilitating Access to Spectrum 

13. Entities seeking to serve rural 

areas can be prevented from doing so by 

lack of access to spectrum that has not 

yet been made available by the 

Commission or that is held by others in 

such areas. We do not believe spectrum 

is overly congested in rural areas, as 

demand for spectrum in rural areas will 

in many cases be less than demand in 

suburban or urban areas. However, we 

regularly hear from rural carriers that 

they are unable to gain access to 

spectrum in rural markets, 

notwithstanding their interest and the 

presence of unused spectrum in the 

market. We therefore review our 

policies that affect access to spectrum—

including initial licensing 

determinations, subsequent regulatory 

oversight of the secondary market, and 

our re-licensing policies—to ensure that 

our policies facilitate access to spectrum 

in rural areas. 

14. In the following paragraphs, we 

focus on facilitating opportunities for 

entities seeking to serve rural areas to 

acquire spectrum both through initial 

licensing and through secondary market 

transactions. We believe that the 

approach we take in this proceeding 

will promote service in rural areas, 

consistent with market-based policies 

that have encouraged wireless carriers 

to increase capital spending on 

equipment and other infrastructure. One 

of our key objectives is to ensure that 

carriers that seek to serve rural areas are 

not prevented from doing so either 

because they lack of access to adequate 

spectrum or because those that already 

have such spectrum lack adequate 

economic or regulatory incentives to 

share it. Moreover, we want to do what 

we can to ensure that spectrum rights 

flow to those who are willing and able 

to put the spectrum to use in rural 

markets. We recognize that this 

approach is not a panacea. Even where 

spectrum access is not a barrier to entry, 

there will be certain rural areas that are 

very difficult to serve because of high 

equipment costs, low population 

density, or other economic factors. 

Instead of attempting at this time to 

dramatically manipulate market-based 

spectrum policies that have yielded 

tremendous benefits in prices and 

services for the overwhelming majority 

of American consumers, we believe the 

better approach is to gain more 

experience with secondary markets and 

to seek additional comment in our 

FNPRM on measures to promote the 

provision of service in these high-cost 

and underserved areas by either existing 

carriers or new entrants. 

15. In the sections that follow, we 

explain how our initial definitions of 

spectrum licenses, along with our 

commitment to make substantial 

amounts of spectrum and licenses 

available, should facilitate access to 

Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 75147

spectrum in rural areas. To facilitate 

such access, we will determine the size 

of geographic service areas on a serviceby-service basis and create 

opportunities for small service areas as 

appropriate. In addition, we will 

continue our commitment to flexible 

secondary market policies that facilitate 

post-auction access to spectrum. We 

also seek comment in our FNPRM on 

additional steps that we might take to 

promote spectrum access. Our goal is to 

ensure that the highest valued use of 

spectrum is not affected significantly by 

regulatory methodologies that may 

artificially constrain the choice of the 

technology used and services provided. 

1. Size of Geographic Service Areas 

16. Background. For many wireless 

services, the Commission has adopted 

geographic-area licensing. In contrast to 

site-based licensing, geographic-area 

licensing provides licensees with 

flexibility to respond to demand within 

a geographic market without the need 

for additional licensing or authorization 

by the Commission. When determining 

the size of geographic service areas, the 

Commission, after seeking comment, 

considers a number of factors including 

the nature of the service or services to 

be provided and the likely users. The 

Commission has designated various 

sizes of geographic service areas in 

order to encourage participation in 

spectrum auctions and to facilitate 

deployment of wireless services. 

17. The Act directs the Commission to 

design competitive bidding systems to 

promote ‘‘economic opportunity and 

competition and ensuring that new and 

innovative technologies are readily 

accessible to the American people by 

avoiding excessive concentration of 

licenses and by disseminating licenses 

among a wide variety of applicants, 

including small businesses, rural 

telephone companies, and businesses 

owned by minority groups and women.’’

Thus, the determination of geographic 

area sizes becomes an integral part of a 

system designed to disseminate licenses 

for a broad array of uses. 

18. In the Rural NPRM, the 

Commission requested comments on the 

appropriate size of geographic markets 

in rural areas. The Commission 

recognized that the initial size of 

geographic service areas plays an 

important role in providing the requisite 

access to spectrum that would stimulate 

competition and result in greater 

wireless services in rural areas. The 

Commission stated that it intends to 

continue establishing geographic areas 

on a service-by-service basis, and sought 

comments on this approach. The 

Commission also emphasized the 

importance of selecting appropriate 

sized geographic service areas for 

reducing transaction costs that 

providers may incur if it becomes 

necessary to aggregate or disaggregate 

spectrum, or negotiate in secondary 

markets, in order to meet spectrum 

needs. 

19. Discussion. Based on our 

experience in past proceedings and the 

record established in this one, we 

conclude that maintaining the flexibility 

to establish geographic areas on a 

service-by-service basis and promoting 

the use of a variety of service areas, 

including small areas such as MSAs/

RSAs, are in the public interest. By 

adopting this framework, we seek to 

promote service in rural areas, 

encourage the efficient utilization of 

spectrum, and to make spectrum and 

licenses available to a wide array of 

licensees, including rural providers. 

Furthermore, we believe that this 

approach provides flexibility, while 

providing an opportunity for spectrum 

to be made available over small areas 

such as MSAs/RSAs depending on the 

record and other considerations relevant 

to the specific spectrum, thereby 

increasing the likelihood of service to 

rural markets.

20. The approach we adopt today will 

afford us with the flexibility necessary 

to tailor the size of licensed areas to 

balance the needs of the different 

prospective users of the spectrum 

together with other factors, including 

the unique characteristics of that 

spectrum. We believe that this approach 

will provide incentives for the provision 

of advanced applications and service 

offerings in rural areas. 

21. Service-by-Service Determination 

in Future Proceedings. Consistent with 

our tentative finding in the Rural 

NPRM, we intend to continue a serviceby-service approach in defining the 

initial scope of licenses in the future. 

We find that this approach is the best 

method to provide carriers adequate 

access to spectrum, including spectrum 

in rural areas, and is consistent with the 

methodologies used in prior 

proceedings. 

22. A service-by-service approach is 

consistent with our statutory mandate as 

well. For services subject to auction, the 

Commission is required to promote 

various objectives in designing a system 

of competitive bidding, including the 

development and rapid deployment of 

new technologies, products, and 

services for the benefit of the public, 

‘‘including those residing in rural 

areas,’’ and ‘‘the efficient and intensive 

use of spectrum.’’ The flexibility 

afforded by a service-by-service 

approach permits us to balance our 

various obligations. For example, 

promoting efficient and intensive use of 

the spectrum may require the use of 

large spectrum blocks or service areas to 

achieve economies of scale, which in 

turn may conflict with promoting 

opportunities for small businesses and 

rural service providers that may require 

smaller spectrum blocks. Moreover, 

parties within the same geographic areas 

may have competing interests. In this 

regard, the flexibility afforded by a 

service-by-service approach allows the 

Commission to consider the extent to 

which multiple licenses and different 

sizes of geographic areas should be 

made available to promote competition 

within the market. This approach also 

permits the Commission to consider the 

use of large service areas if necessary to 

provide for quicker build-out of 

facilities and deployment of new and 

innovative wireless services. In some 

instances, the adoption of larger areas 

may be more effective than the use of 

smaller areas where spectrum use is to 

be transitioned to new services. In these 

circumstances, the availability of 

licenses based on larger service areas 

may result in a quicker and more 

successful transition throughout the 

nation and thus enable the development 

and deployment of such new services. 

23. Another important element of a 

service-specific methodology is that it 

takes into account any technical 

considerations associated with 

particular spectrum. For example, 

questions of whether and when new 

technologies would use the spectrum, 

and how much spectrum would be 

required for any such new technologies 

may be considered in determining the 

appropriate geographic areas for a 

particular service. In addition, a serviceby-service approach would allow the 

Commission to determine whether 

propagation characteristics in a 

particular band would make it more or 

less conducive to business models that 

are built on serving customers over a 

particular size of service area. This 

approach would help us to promote 

investment in and the rapid 

development of new technologies and 

services. 

24. We also find that a service-specific 

approach allows us to consider the 

appropriate size of each future service 

area in the context of geographic 

partitioning and spectrum 

disaggregation rules. Geographic 

partitioning and spectrum 

disaggregation are available to promote 

efficient spectrum use and economic 

opportunity by a wide range of 

applicants, including rural telephone 

companies. A service-by-service 

approach permits the Commission to 

75148 Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 

structure service areas in light of 

potential costs relating to aggregation, 

partitioning and disaggregation for the 

particular spectrum. The Commission 

can consider whether potentially high 

transaction costs can be avoided by 

allowing the initial service areas to be 

sized in order to meet the needs of the 

service providers that want to use that 

spectrum. 

25. The continued use of servicespecific determinations of appropriate 

geographic area sizes corresponds with 

the opportunity for parties to take 

advantage of our secondary markets 

leasing rules. Even if the market size or 

sizes that we adopt in a particular 

proceeding are not necessarily the 

optimal size to meet the objectives of all 

potential users, small carriers are still 

afforded the opportunity to access 

appropriately sized market areas 

through spectrum leasing. In the 

Secondary Markets Report and Order, 

the Commission stated that facilitating 

the development of secondary markets 

enhances and complements several of 

the Commission’s major policy 

initiatives and public interest objectives, 

including enabling the development of 

additional and innovative services in 

rural areas. See Promoting Efficient Use 

of Spectrum Through Elimination of 

Barriers to the Development of 

Secondary Markets, WT Docket No. 00–

230, Report and Order and Further 

Notice of Proposed Rulemaking, 68 FR 

66252 (November 25, 2003) (Secondary 

Markets Report and Order). 

26. Based on the record, we find that 

the continuing development of the 

benefits associated with the secondary 

markets policies and rules complements 

a service-specific approach to 

determining the appropriate size or 

sizes of geographic service areas. We 

also note that a service-specific 

approach permits the Wireless 

Telecommunications Bureau (Bureau) to 

consider whether any particular auction 

methodology should be employed in 

light of the decisions that are made 

regarding the scope of licenses for that 

spectrum. For example, certain 

comments address the potential for use 

of package bidding. In order to maintain 

maximum flexibility with respect to 

removing barriers to spectrum, however, 

no particular form of auction design will 

be endorsed at this time, including the 

use of package bidding. Rather, 

consistent with our statutory obligations 

and with our actions in the past, the 

Bureau will seek comment on auctionrelated procedural issues, including 

auction design, prior to the start of the 

auctions for the individual spectrum. 

This will provide an opportunity to 

weigh the benefits and disadvantages of 

any particular bidding design prior to 

the start of the auction, and will permit 

the auction procedures to be structured, 

if necessary, to center on matters that 

may be of particular concern to the 

likely participants in the auction and to 

the spectrum use, including the number 

of licenses to be auctioned, the number 

of spectrum blocks, and the size of the 

geographic service areas.

27. In conclusion, we decline to adopt 

any particular size of geographic service 

area for future licensing at this time. 

Rather, as we state above, we believe 

that the existence of such a wide range 

of comments and views make it all the 

more appropriate for us to consider 

issues relating to spectrum access and 

the scope of licenses for particular 

spectrum in the context of proceedings 

to establish rules for the use of that 

spectrum. We believe that this 

methodology offers the opportunity for 

parties that would actually want to be 

involved with the use of that spectrum 

to target specific issues relating to 

adoption of the band plan that will help 

to remove barriers to entry and increase 

access to the spectrum. 

28. Multiple Licensing; Opportunities 

for Providers in Small and Rural Areas.

In our service-by-service evaluations, in 

certain circumstances we have 

determined that it is appropriate to 

license different market sizes. For 

example, for AWS in the 1.7 GHz and 

2.1 GHz bands, the Commission 

licensed the bands using a range of 

geographic licensing areas in order to 

maintain maximum flexibility. That 

band plan spreads licenses over various 

blocks of spectrum and uses EAs, 

REAGs, and a block with 734 licenses 

based on RSAs/MSAs. The Commission 

noted the competing needs of parties 

that sought large and small areas, as 

well as a combination of large and small 

geographic licensing areas, and found 

that there was sufficient spectrum to 

meet the competing need for both large 

and small areas. The Commission 

determined that using a varied selection 

of areas will foster service to rural areas 

and promote the policy goal of 

disseminating licenses among a wide 

variety of applicants. The Commission 

stated further that these smaller service 

areas ‘‘provide entry opportunities for 

smaller carriers, new entrants, and rural 

telephone companies.’’ Assignment of a 

variety of licenses will also provide 

flexibility in service offerings, for 

example, where the use of MSAs and 

RSAs in conjunction with other sized 

license areas may allow licensees to 

focus on consumers that require 

localized use without the need for 

roaming service. In future proceedings, 

where we determine the size of service 

areas on a service-by-service basis, we 

will consider licensing the spectrum 

over a range of various sized geographic 

areas, including smaller service areas 

such as MSAs/RSAs, where consistent 

with the record in that proceeding and 

with other factors that may be relevant 

to the spectrum. 

2. Re-Licensing vs. Market-Based 

Mechanisms 

29. Background. In an effort to 

increase access to assigned spectrum, 

the Commission sought comment on 

when, and under what circumstances, it 

should apply re-licensing provisions to 

prospective spectrum designations. The 

Commission did not propose to change 

the licensing provisions for current 

wireless services, but rather chose to 

evaluate whether it should use relicensing as a means to increase access 

to spectrum, and thus service, especially 

in rural areas and whether, in the event 

of such re-licensing, there are particular 

construction standards, such as 

‘‘complete forfeiture’’ or ‘‘keep what you 

use’’ that are most effective in 

promoting access and service in rural 

areas. 

30. The Commission explained that 

one reason it adopted its Secondary 

Markets Report and Order was to 

enhance economic opportunities and 

access for the provision of 

communications services in rural areas. 

In that proceeding, the Commission took 

important first steps to facilitate 

significantly broader access to valuable 

spectrum resources. These flexible 

policies extended the Commission’s 

reliance on the marketplace to expand 

the scope of available wireless services 

and devices, with the intent of 

promoting efficient and dynamic use of 

spectrum resource for the benefit of 

consumers throughout the country, 

including those in rural areas. The 

Commission also sought further 

comment on various ways in which it 

could enhance opportunities for 

spectrum access, efficiency, and 

innovation by removing unnecessary 

regulatory barriers and implementing 

more market-oriented policies that 

would facilitate moving spectrum to its 

highest valued uses. 

31. Following the policies adopted in 

the secondary markets proceeding, the 

Commission sought comment in the 

Rural NPRM on different mechanisms 

that could potentially be used to reclaim 

spectrum and increase access by others, 

including the cellular ‘‘keep what you 

use’’ approach and the PCS ‘‘complete 

forfeiture’’ approach. Currently, the 

process for reclaiming unused licensed 

spectrum differs across services. Under 

the cellular ‘‘keep what you use’’

Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 75149

approach, initial licensees must 

construct facilities five years from 

license grant and begin providing 

service within a predefined geographic 

service area, after which licensees 

relinquish their spectrum usage rights to 

all ‘‘unserved areas.’’ For the majority of 

other geographically licensed services, 

including PCS, licensees are afforded 

exclusive rights and a renewal 

expectancy for the entire authorized 

area once performance requirements are 

met, regardless of whether service is 

provided over the entire authorized 

area. Failure to meet applicable 

benchmarks results in forfeiture of the 

entire license, including the rights to 

operate any facilities already 

constructed under the authorization. 

32. The Commission explained that 

once spectrum has been reclaimed there 

are different approaches to re-licensing 

that spectrum for use by others. Under 

the cellular ‘‘keep what you use’’

approach, the unconstructed portions of 

a market become available for site-based 

licensing to other parties via the cellular 

‘‘unserved area’’ licensing process. In 

the alternative, the Commission 

explained that it could create expanded 

‘‘overlay’’ rights to unused spectrum, 

whereby usage rights are auctioned to 

new licensees. Comment was also 

sought on alternative mechanisms such 

as government defined easements to 

promote access to spectrum in rural 

areas. 

33. To assess how these potential relicensing mechanisms would work in 

the context of the Commission’s marketoriented policies based on flexible use 

of spectrum and substantial service 

performance requirements, the 

Commission inquired generally as to 

what constitutes use of spectrum by a 

licensee. In this context, it sought 

comment on whether and how to 

provide a clear definition of ‘‘use’’ for 

all parties to support policies for access 

to ‘‘unused’’ spectrum. If a definition of 

‘‘use’’ was to be adopted, the 

Commission explained that licensees 

that construct facilities or lease their 

spectrum must understand how use is 

construed in terms of construction 

requirements, re-licensing, and other 

policies that may affect them so that 

they will know what rights they will 

retain in the event they do not use their 

spectrum.

34. Discussion. We decline to adopt 

specific re-licensing rules for future 

spectrum allocations at this time. We 

believe our recently-adopted secondary 

market-based mechanisms should be 

afforded a greater opportunity to 

provide access to spectrum in a more 

efficient manner. After considering the 

record established in this proceeding, 

we agree generally with those who 

support additional time for the 

development of secondary market 

mechanisms to move ‘‘unused’’

spectrum from licensees to other entities 

that place a higher value on use of the 

spectrum. Because our secondary 

markets policies are relatively new and 

the benefits from their implementation 

have yet to be fully realized, we decline 

to adopt re-licensing rules for future 

spectrum allocations at this time. 

35. This approach will allow us to 

examine alternative approaches while 

we assess the efficacy of our secondary 

markets initiatives and underlying 

policies in rural areas. We believe that 

the flexibility that results from a 

simplified set of licensing rules gives 

licensees freedom to determine the 

choice of technologies and services the 

market demands and ultimately leads to 

more efficient spectrum use. Over the 

last decade, a large percentage of 

spectrum has been allocated under 

policies that emphasize flexible use. As 

in the past, numerous commenters in 

this proceeding cite the benefits of 

applying such policies to spectrum 

allocations where licensing rules rely on 

market-based mechanisms. These 

flexible allocation policies underlie our 

goal of creating an efficient secondary 

market that can move spectrum to its 

highest valued end use. Our steps to 

facilitate spectrum leasing in the 

secondary market, along with many 

other measures to encourage more 

efficient use of spectrum, should 

facilitate greater access to spectrum by 

better ensuring that licensees face 

significant opportunity costs when 

deciding either to use spectrum for 

themselves or to lease it to others. 

36. In addition, we will continue to 

examine various alternatives for creating 

incentives to increase the number and/

or level of wireless providers and 

services in rural areas. In particular, we 

recognize that, after the initial license 

term, it may be appropriate in some 

instances to revert to re-licensing along 

the lines of some of the proposals 

received so that another carrier has an 

opportunity to provide wireless services 

to such areas. In addition, we are 

exploring approaches that may be more 

transparent and better aligned with 

market-based mechanisms than 

proposals whose implementation might 

constrain the flexible use policies 

underlying our secondary market-based 

initiatives. We will continue to consider 

the potential use of re-licensing 

standards (e.g., ‘‘keep what you use’’) in 

our FNPRM, as well as in the context of 

future service-specific rulemakings. 

37. In the Rural NPRM, as part of the 

Commission’s consideration of relicensing versus market-based 

mechanisms for increasing licensed 

access to ‘‘exclusive use’’ spectrum, the 

Commission also sought comment on 

whether it should consider at this time 

a more general application of alternative 

mechanisms for new licensed services, 

such as government-defined spectrum 

easements. Given our current efforts to 

facilitate the development of secondary 

markets in spectrum usage rights in 

such spectrum, we believe that we 

should continue to take steps to 

facilitate spectrum leasing in secondary 

markets, and that we should evaluate 

other access mechanisms in the context 

of specific service rulemakings. Less 

than a year has elapsed since our 

spectrum leasing rules went into 

effect—a short period of time for an 

efficient secondary market to develop 

and for its impact to be seen. As such, 

any broad evaluation and comparison of 

secondary markets with the other access 

mechanisms described in the Rural 

NPRM for new licenses is premature. 

We note that commenting parties 

opposed the general imposition of 

mandatory spectrum easements, many 

contending that secondary markets have 

not yet had time to develop. We will, 

however, continue to evaluate the 

possible future use of easements in the 

FNPRM. 

38. Because we are not adopting any 

re-licensing policies at this time, we 

need not define ‘‘use’’ of spectrum. As 

a result, it follows that we also are not 

establishing any specific usage baselines 

for individual services above which 

licensees must reach in order to 

minimally comply with our substantial 

service policies. As we explain below, 

however, we are amending our rules to 

permit certain geographic-area licensees 

to provide substantial service as a 

means of complying with their existing 

construction requirements, along with 

appropriate rural ‘‘safe harbors’’ to 

increase certainty and alleviate concerns 

that the substantial service requirement 

is overly vague. Accordingly, we 

disagree with those who support strict 

reporting guidelines and we will 

continue to rely on current rules that in 

many cases permit licensees to 

determine the showings necessary to 

report their construction. To the extent 

that our rules defining protected service 

areas vary by service, we intend to 

consider harmonizing these regulations 

across services in a future rulemaking. 

39. As explained above, we generally 

believe that by maintaining our flexible, 

relatively undefined use policy for 

geographic-area licensees as applicable, 

we can increase efficient access to and 

use of spectrum under our secondary 

markets initiatives that will permit 

75150 Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 

spectrum (and access) to flow to those 

particular uses that consumers most 

demand. We note, however, that the 

definition of ‘‘use’’ will be revisited, 

should we conclude that re-licensing 

policies should be adopted as a result of 

our FNPRM. We make clear, however, 

that spectrum in rural areas that is 

leased by a licensee, and for which the 

lessee meets the performance 

requirements that are applicable to the 

licensee, will be construed as ‘‘used’’ for 

the purposes of performance criteria and 

construction requirements. 

40. This is consistent with the 

Commission’s decision in its Secondary 

Markets Report and Order. We note that 

merely leasing spectrum, where the 

lessee does not fully meet the licensee’s 

performance requirements, would not 

be considered ‘‘use’’ under this 

decision. We find the record to be 

insufficient to declare a policy of 

regulatory flexibility for system 

construction extension requests arising 

from the failure of an unrelated lessee 

to live up to its contractual obligation. 

Further, as we note in our discussion 

regarding infrastructure sharing 

arrangements that, to the extent that 

licensees are sharing spectrum usage 

rights with third parties under spectrum 

leasing arrangements, such 

arrangements will be subject to the 

policies, rules, and procedures set forth 

in the Secondary Markets proceeding. 

Thus, to the extent that parties enter 

into spectrum leasing arrangements 

pursuant to the Secondary Markets 

Report and Order, the applicable 

policies, rules, and procedures relating 

to performance, build-out, and 

discontinuance of service will apply. 

Finally, we also find it premature to 

establish a data base of available ‘‘white 

space’’ in rural areas or increase the use 

of spectrum ‘‘audits.’’

C. Facilitating Access to Capital 

41. In order to construct facilities and 

provide Americans living or traveling in 

rural areas with important, innovative 

and advanced services—including such 

services as broadband, E911, and 

medical telemetry—wireless licensees 

must have adequate access to capital 

resources. We recognize that capital 

formation issues may be particularly 

relevant for would-be rural service 

providers, who may have fewer 

consumers among whom to spread the 

costs of providing service. Although we 

have existing measures to provide 

funding for deployment in rural areas, 

such as the Universal Service Fund, we 

recognize that there are additional steps 

that we can take to facilitate access to 

capital. In the following sections, we 

discuss funding resources available 

through RUS and outline the ways in 

which we are working together with 

RUS to promote rural deployment. We 

also examine and modify our policies 

governing security interests in FCC 

licenses. As discussed below, we 

believe that relaxing our policies to 

permit licensees to grant RUS a security 

interest in FCC licenses, conditioned 

upon the prior approval of any 

assignment or transfer of control of the 

license, will permit licensees to take full 

advantage of the collateral value of their 

spectrum rights and reduce the risks of 

lending. We also examine our cellular 

cross-interest rule and transition to caseby-case review of cellular cross-interests 

in RSAs. We believe that these actions 

will facilitate investment and financing 

opportunities for licensees seeking to 

provide service in rural areas.

1. Rural Utilities Service (RUS) Loan 

Programs 

42. RUS, through its 

Telecommunications Program, assists 

the private sector in developing, 

planning, and financing the 

construction of telecommunications 

infrastructure in rural America. 

Programs administered by RUS include: 

(1) Infrastructure loans; (2) broadband 

loans and grants; (3) distance learning 

and telemedicine loans and grants; (4) 

weather radio grants; (5) local TV loan 

guarantees; and (6) digital translator 

grants. For fiscal year 2004, no less than 

$2.211 billion in loans is available for 

the Rural Broadband Access Loan and 

Loan Guarantee Program, with $2.051 

billion for direct cost-of-money loans, 

$80 million for direct 4 percent loans, 

and $80 million for loan guarantees. 

43. In order to encourage greater 

access and deployment of wireless 

services throughout rural America, the 

Commission’s WTB has partnered with 

RUS to sponsor the ‘‘Federal Rural 

Wireless Outreach Initiative’’ (FCC/RUS 

Outreach Partnership). The FCC/RUS 

Outreach Partnership was announced 

on July 2, 2003. The four key goals of 

the FCC/RUS Outreach Partnership are 

to: (1) Exchange information about 

products and services each agency offers 

to promote the expansion of wireless 

telecommunications services in rural 

America; (2) harmonize rules, 

regulations and processes whenever 

possible to maximize the benefits for 

rural America; (3) educate partners and 

other agencies about Commission, WTB 

and USDA/RUS offerings; and (4) 

expand the FCC/WTB and USDA/RUS 

partnership, to the extent that it is 

mutually beneficial, to other agencies 

and partners. 

44. The Rural NPRM sought comment 

on what, if any, further regulatory or 

policy changes should be made to 

complement RUS’s 

Telecommunications Program, and any 

other method of securing financing for 

rural build out and operations. The 

Commission requested comment on 

methods to help facilitate access to 

capital in rural areas in order to increase 

the ability of wireless 

telecommunications providers to offer 

service in rural areas. The Commission 

noted that an important part of 

accomplishing this goal is through the 

promotion of federal government 

financing programs. The Rural NPRM

requested comment on how the 

Commission can assist in making the 

RUS loan programs more effective. The 

Commission sought comment on 

whether there are any Commission 

regulations or policies that should be 

reexamined or modified to facilitate 

participation in the RUS programs by 

wireless licensees and service providers. 

45. Discussion. We believe that the 

FCC/RUS Outreach Partnership 

continues to be a useful means of 

encouraging greater access and 

deployment of wireless services 

throughout rural America. With respect 

to RUS loan program rules, we note that 

certain RUS policies are statutorily 

mandated. To the extent that we can 

adopt rules or policies that will 

facilitate the use of RUS loan programs, 

however, we will do so. For example, as 

we set out below, we are modifying our 

policy with respect to the grant of 

security interests in FCC licenses, which 

we believe will enable more prospective 

borrowers to qualify for RUS loans. We 

will continue to work with RUS and 

other federal agencies to research and 

identify rural community wireless 

telecommunications needs and strive to 

create program efficiencies that might 

assist with exploring options to meet 

those needs. Further, we will continue 

to work with RUS to develop rural 

outreach programs, materials and 

workshops, which provide technical 

and economic information on 

telecommunication technologies and 

funding options. 

2. Conditional Security Interests to RUS 

46. Background. As we noted in the 

Rural NPRM, the Commission’s policies 

with respect to commercial transactions 

involving FCC licenses have evolved 

over time. As the Commission has 

gained experience in regulating wireless 

licensees and as the wireless 

marketplace has developed, the 

Commission’s policies with respect to 

control and capital formation issues 

have matured. Particularly in the last 

decade, the Commission has modified 

its policies to address evolving licensee 

Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 75151

and consumer needs, while 

concurrently taking appropriate 

measures to safeguard its regulatory 

authority vis-a`-vis private licensees and 

to ensure compliance with its statutory 

responsibilities. Central to the evolution 

of these market-oriented policies is the 

Commission’s understanding that, in 

order for wireless licensees to construct 

facilities and deploy innovative services 

to all Americans, wireless licensees 

must have sufficient access to capital. 

47. Although the Commission has 

increasingly embraced market-based 

transactions, recognizing the 

marketplace enables licensees to put 

spectrum to its highest and best uses, 

this has not always been the case. As a 

historical matter, the Commission 

initially was restrictive in its policies 

towards market-oriented transactions. 

For example, the Commission 

prohibited the sale of bare licenses, 

basing its position on its interpretation 

of Sections 301 and 304 of the 

Communications Act. The Commission 

stated that ‘‘Section 301 and 304 

provide, inter alia, that licenses issued 

by the Commission convey no property 

interest,’’ and that ‘‘[t]o allow a permit 

to be transferred in a situation in which 

the station seller obtains a profit, prior 

to the time that programs tests have 

commenced, would appear to violate 

this prohibition.’’ The Commission 

subsequently changed its interpretation 

of these statutory provisions, however, 

and has approved the for-profit sale of 

unbuilt licenses and construction 

permits for terrestrial wireless, 

broadcasting and satellite services. In 

the context of the sale of an 

authorization of an unbuilt cellular 

telephone facility, the Commission held 

that ‘‘the plain language of sections 301 

and 304 of the Act does not address the 

sale of authorizations for stations, 

whether built or unbuilt, for-profit or 

not for-profit,’’ but ‘‘[r]ather * * * 

congressional concerns that the Federal 

Government retain ultimate control over 

radio frequencies, as against any rights, 

especially property rights, that might be 

asserted by licensees who are permitted 

to use the frequencies.’’ The 

Commission went on to conclude that 

the for-profit sale of ‘‘whatever rights a 

permittee has in its license’’ to a private 

party, subject to prior Commission 

approval, would be permissible under 

these statutory provisions. In 1991, the 

Commission received a Petition for 

Declaratory Ruling regarding the grant 

of security interests in the broadcasting 

context, and in 1992, the Commission 

initiated a proceeding in the broadcast 

context, seeking comment on whether 

we could improve access to capital by 

allowing licensees to grant security 

interests to creditors. In 1994, the 

Commission found that a ‘‘security 

interest in the proceeds of the sale of a 

license does not violate Commission 

policy.’’

48. Over time, the Commission’s 

policies for all spectrum-based services 

have evolved to expressly permit 

licensees to grant security interests in 

the stock of the licensee, in the physical 

assets used in connection with its 

licensed spectrum, and in the proceeds 

from operations associated with the 

licensed spectrum. Notably, the 

Commission itself has taken an 

exclusive security interest in licenses 

subject to the auction installment 

payment program and a senior security 

interest in the proceeds of a sale of an 

auctioned license. In such 

circumstances, and subject to the 

requirements and protections of the 

security agreements that bind the 

participants in the installment payment 

program, the Commission has allowed 

licensees to provide their lenders a 

subordinated security interest in the 

proceeds of a license sale. Furthermore, 

the Commission continues to develop 

and evaluate its policies regarding 

security interests and control of 

spectrum, in order to ensure that these 

policies afford licensees sufficient 

flexibility consistent with the 

Communications Act to develop and 

deploy innovative technology and keep 

pace with ever-changing consumer 

needs. In a 2000 policy statement, the 

Commission considered ways in which 

licensees may be able to maximize their 

efficient use of spectrum by leveraging 

‘‘the value of their retained spectrum 

usage rights to increase access to 

capital,’’ and indicated its intent to 

examine Commission policies 

prohibiting security and reversionary 

interests in licenses. 

49. The Commission noted that it had 

not yet taken a position on whether its 

policy towards prohibiting a licensee to 

give a security interest in the license 

itself ‘‘is statutorily mandated or solely 

dictated by regulatory policy.’’ In the 

Secondary Markets Report and Order,

the Commission found that licensees 

could enter into certain types of leasing 

transactions that are not deemed 

transfers of de facto control under 

section 310(d) of the Act without prior 

Commission approval, provided 

licensees continued to exercise effective 

working control over the spectrum they 

lease. The Commission indicated that it 

was updating its policy for interpreting 

de facto control in the context of 

spectrum leasing, in order ‘‘to reflect 

more recent evolutionary developments 

in the Commission’s spectrum policies, 

technological advances, and 

marketplace trends.’’

50. In the Rural NPRM, the 

Commission continued its examination 

of its security interest policies as a 

means of facilitating access to capital, 

consistent with its authority under the 

Communications Act. Specifically, the 

Commission sought comment on 

whether permitting licensees to grant 

security interests in their licenses to 

RUS would result in lower costs of and 

greater access to capital. The 

Commission noted that it would review 

and require prior Commission approval 

of an assignment to RUS, in accordance 

with the Commission’s transfer and 

assignment policies, before RUS could 

assume control of a license. The 

Commission also sought comment on 

whether modifying our policy to permit 

RUS to take a security interest in FCC 

licenses is a natural outgrowth of 

Commission and judicial developments, 

which recognize the value and ability of 

a lender obtaining a security interest in 

the licensee’s stock, proceeds and other 

assets without infringing upon the 

Commission’s statutory obligations. The 

Commission asked whether a licensee 

could grant RUS a security interest in an 

FCC license without compromising the 

Commission’s obligation to maintain 

control of spectrum in the public 

interest and completely fulfill its 

applicable mandates under the 

Communications Act of 1934, as 

amended. The Commission sought 

comment on what the consequences of 

such a policy shift might be, including 

what, if any, difference from the 

perspective of RUS, a third-party lender, 

or the licensee, there would be on a 

relaxation of the current security 

interest policies in the circumstances 

described above. Finally, the 

Commission sought comment on a 

concern that had been raised in the 

broadcasting context, regarding the 

independence of broadcast stations and 

about the ability of creditors to have 

substantial influence over a borrower 

station. The Commission asked whether 

such dangers exist in the connection 

with RUS’s attainment of security 

interests in non-broadcasting wireless 

licenses, especially as it relates to 

preserving and protecting facilitiesbased competition and innovation by 

and among wireless service providers. 

51. Discussion. After careful review of 

the record, as well as the judicial and 

regulatory developments of the past 

decade, we believe that it is appropriate 

to adjust our policy with respect to the 

grant of security interests in FCC 

licenses. We agree with RUS that 

allowing it to obtain a security interest 

in an FCC license will greatly improve 

75152 Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 

loan security and will facilitate our roles 

in fulfilling the President’s goal for the 

universal deployment of broadband 

service. We therefore modify our policy 

and permit commercial and private 

wireless, terrestrial-based licensees to 

grant security interests in their FCC 

licenses to RUS, conditioned upon the 

Commission’s prior approval of any 

assignment or transfer of de jure or de 

facto control. A licensee therefore may 

grant RUS a security interest in its FCC 

license, provided that the Commission 

approves the transaction, pursuant to its 

authority under section 310(d) of the 

Communications Act, before the secured 

party can exercise its right to foreclose 

on the license. We limit this policy 

change to wireless, terrestrial-based 

licensees that are within the scope of 

this proceeding. Further, any security 

interest granted to RUS must be 

expressly conditioned, in writing as part 

of all applicable financing documents, 

on the Commission’s prior approval of 

any assignment of the license or any 

transfer of de jure or de facto control of 

the license to the secured party or other 

person or entity. We also note that, in 

the case of a licensee operating under 

the installment payment program, the 

Commission will retain its exclusive, 

senior secured position with respect to 

the license. The Commission also will 

retain its senior secured position with 

respect to the proceeds of the sale of 

such license. Accordingly, we clarify 

that RUS may not obtain a security 

interest in an FCC license in instances 

where the FCC itself is a secured 

creditor, but may obtain a subordinated 

interest in the proceeds subject to the 

requirements of the licensee’s 

installment payment obligations (e.g., 

those set forth in the security agreement 

between the licensee and the FCC). 

52. We believe that relaxing our 

security interest policy to permit 

licensees to grant RUS a conditional 

security interest in their FCC licenses 

will greatly enhance the value of a 

licensee’s available collateral by 

facilitating RUS’s ability (as a secured 

party) to keep the licensees’ assets 

together as a package. While we 

acknowledge that it may be possible for 

a licensee—primarily through careful 

corporate structuring—to cobble 

together a set of interests that it can offer 

to a lender as security that approximates 

a security package containing the 

license, we believe that rural licensees 

will be much better served if they can 

approach RUS for financing without 

having to incur the potentially 

substantial transactional and other 

administrative costs that might be 

necessary to create such a package. 

53. Our decision to relax the current 

restrictions on security interests reflects 

the Commission’s increased reliance on 

market-oriented policies to facilitate and 

encourage competition. At the same 

time, limiting this initiative to RUS, as 

was proposed in the Rural NPRM,

avoids any suggestion that the 

Commission’s recognition of a third 

party property interest in an FCC license 

itself conveys any type of ownership 

interest prohibited by the 

Communications Act. Although this 

relaxation of our security interest policy 

marks the first time that the 

Commission has recognized such an 

interest, the third party involved (RUS) 

is a federal governmental agency. Thus, 

we do not believe that anyone—

licensees, their lenders, or the courts—

would mistakenly construe our action as 

a retreat from the principle of the 

Communications Act that the spectrum 

itself is a public resource and cannot be 

‘‘owned’’ or deemed private property. 

This principle is stated most explicitly 

in sections 301 and 304 of the Act. 

Section 301 provides for the control of 

the United States over ‘‘all the channels 

of radio transmission’’ and for ‘‘the use 

of such channels, but not the ownership 

thereof, by persons for limited periods 

of time, under licenses granted by 

Federal authority.’’ Section 301 also 

states that ‘‘no such license shall be 

construed to create any right, beyond 

the terms, conditions, and periods of the 

license.’’ Section 304 provides that the 

Commission cannot grant any station 

license until ‘‘the applicant thereof shall 

have waived any claim to the use of 

* * * the electromagnetic spectrum as 

against the regulatory power of the 

United States.’’ Furthermore, pursuant 

to section 310(d), the Commission must 

review and approve license assignments 

and transfers of control, assess and 

confirm the basic qualifications of 

assignees and transferees, and, more 

generally, determine whether the 

transaction in question will serve the 

public interest, convenience and 

necessity. 

54. In view of the limitations of such 

provisions as sections 301, 304 and 

310(d), it is clear that the 

Communications Act prohibits a 

licensee from ‘‘owning’’ the spectrum it 

uses, and that the Commission cannot 

grant, with a license, any such 

ownership interests. At the same time, 

however, we recognize that a licensee 

holds certain ‘‘spectrum usage rights,’’

as defined within the terms, conditions, 

and period of the FCC license at the 

time of issuance. The Commission has 

used the security interest prohibition as 

one bright line to mark off the point at 

which a licensee’s spectrum usage rights 

end and the government’s control of 

spectrum begins. By permitting RUS—

but only RUS—to take a conditional 

security interest in an FCC license, we 

maintain the heart of this bright line: 

i.e., a prohibition on anyone other than 

the federal government holding a 

property interest in something as closely 

associated with spectrum as an FCC 

license. RUS (like the FCC) is an agency 

of the United States with a particular 

mandate from Congress. We believe that 

permitting it to obtain a security interest 

in an FCC license will further its 

mandate and is fully consistent with the 

view of spectrum as a public resource. 

Moreover, by conditioning any 

assignment or transfer of de facto or de 

jure control of the license on prior 

Commission approval pursuant to 

section 310(d), we ensure that the 

Commission retains ultimate control 

over the spectrum. Thus, the FCC’s 

approval must be obtained before RUS 

can foreclose on a security interest it 

may hold in an FCC license or before 

RUS or any other entity may otherwise 

obtain control of the license or licensee. 

This prior approval will satisfy our 

Congressional mandate, while at the 

same time encouraging capital 

formation in rural areas. 

55. We recognize that one could argue 

that a grant of a security interest in an 

FCC license does not convey any 

ownership of spectrum, but rather 

ownership of the licensee’s private 

spectrum usage rights associated with 

the FCC license. However, after 

carefully considering whether this 

argument would support extending the 

relaxation of our security interest policy 

to non-United States lenders, we have 

decided to limit our action to RUS, as 

stated in the Rural NPRM. Thus, we will 

maintain a bright line prohibition 

against private (non-government) 

lenders taking a security interest in an 

FCC license.

56. As an additional matter, we 

believe that relaxing our policy to 

permit the grant of conditional security 

interests in FCC licenses to RUS is 

unlikely to result in RUS exercising 

inappropriate influence over the 

licensee. As noted earlier, licensees may 

grant security interests in the proceeds 

of the sale of their licenses, as well as 

in their assets and stock. We have 

received no evidence, and we have no 

reason to suspect, that RUS has used 

any of these types of transactions, 

already permitted under our rules and 

policies, to exercise inappropriate 

influence over any FCC licensee. In light 

of these circumstances, we do not 

believe that permitting a licensee to 

grant RUS a conditional security interest 

Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 75153

in the license itself will increase the 

likelihood of such inappropriate 

influence. 

57. We note the concerns of some that 

modifying our policy to permit RUS to 

obtain a security interest could impede 

the ability of a wireless provider to 

obtain financing from other lenders. 

However, we note that providing 

licensees with the ability to offer their 

license as collateral would create an 

opportunity, not a requirement, and that 

the wireless provider, as in all loan 

decisions, will initially determine 

whether the business risks outweigh the 

benefits of using its license for 

collateral. Licensees have the option of 

obtaining financing through RUS; in the 

event they find RUS’s terms unsuitable, 

they may elect to work with private 

lenders. Licensees are not required to 

provide RUS with a conditional security 

interest, although this modification of 

our policy permits them to do so, at 

their option. 

3. Cellular Cross-Interest Rule 

58. Background. To facilitate 

additional access to capital by cellular 

carriers in rural areas, the Commission 

sought comment regarding whether the 

prohibition against cellular crossinterests in all RSAs remains in the 

public interest. As set forth in § 22.942 

of the Commission’s rules, the 

prohibition substantially limits the 

ability of parties to have interests in 

cellular carriers on different channel 

blocks in the same rural geographic 

area. To the extent licensees on different 

channel blocks have any degree of 

overlap between their respective 

cellular geographic service areas 

(CGSAs) in an RSA, § 22.942 prohibits 

any entity from having a direct or 

indirect ownership interest of more than 

five percent in one such licensee when 

it has an attributable interest in the 

other licensee. An attributable interest is 

defined generally to include an 

ownership interest of 20 percent or 

more or any controlling interest. An 

entity may have a non-controlling and 

otherwise non-attributable direct or 

indirect ownership interest of less than 

20 percent in licensees for different 

channel blocks in overlapping CGSAs 

within an RSA. 

59. The Commission consolidated 

into the instant proceeding two 

petitions that seek reconsideration of 

the decision in the December 2001 

Spectrum Cap Sunset Order, which, on 

the basis of the state of competition in 

CMRS markets, sunset the CMRS 

spectrum cap rule in all markets and 

eliminated the cellular cross-interest 

rule in MSAs because cellular carriers 

in urban areas no longer enjoyed firstmover, competitive advantages. See

2000 Biennial Regulatory Review 

Spectrum Aggregation Limits for 

Commercial Mobile Radio Services, WT 

Docket No. 01–14, Report and Order, 67 

FR 1626 (January 14, 2002) and Final 

rule; correction, 67 FR 4675 (January 31, 

2002) (Spectrum Cap Sunset Order). In 

March 2002, the Commission sought 

comment on petitions filed by Dobson 

Communications Corporation, Western 

Wireless Corporation, and Rural 

Cellular Corporation (Dobson/Western/

RCC) and Cingular Wireless LLC 

(Cingular) seeking reconsideration of the 

portion of the Spectrum Cap Sunset 

Order that retained the cellular crossinterest rule in RSAs. See Petitions for 

Reconsideration of Action in 

Rulemaking Proceeding, 67 FR 13183 

(March 21, 2002). While the 

Commission left the cross-interest rule 

in place in RSAs, it indicated in the 

Spectrum Cap Sunset Order that it 

would consider waiver requests and 

reassess the need for the rule at a future 

date. 

60. In the Rural NPRM, the 

Commission made clear that it sought to 

balance its efforts to remove 

unnecessary regulatory barriers to 

financing and investment of cellular 

service in rural areas with the need to 

safeguard competition in RSAs. As an 

initial matter, it sought comment on a 

tentative conclusion to retain the 

current cellular cross-interest rule in 

RSAs with three or fewer CMRS 

competitors. Assuming the Commission 

were to decide to retain a number-based 

rule, the Rural NPRM also sought 

comment on how to define a 

‘‘competitor’’ under such a proposal, 

whether a ‘‘competitor’’ might be any 

CMRS provider with significant 

geographic overlap with the cellular 

licensee, and whether a transition 

period was necessary to sunset the rule 

for those RSAs with four or more 

competitors. 

61. In the alternative, the Commission 

sought comment on a range of other 

options for modifying or eliminating the 

current rule in a way that promotes 

investment in rural areas while 

retaining adequate competitive 

safeguards. For example, the 

Commission sought comment on 

whether to eliminate the prohibition for 

all RSAs where the ownership interest 

being obtained is not a controlling 

interest (i.e., where the interest is a noncontrolling interest and where the 

transaction otherwise would not require 

prior FCC approval). It sought comment 

on the extent to which the waiver 

option has deterred or prevented 

acquisition of capital in rural markets. 

Although a specific waiver process has 

existed to address this barrier to 

investment in rural areas, the 

Commission noted that the transactions 

costs and regulatory uncertainty 

surrounding any waiver procedure may 

deter some beneficial investment in 

these areas. Finally, the Commission 

sought comment on the option of 

extending case-by-case review, as 

established in the Spectrum Cap Sunset 

Order, to promote investment and 

reduce the possibility of impeding 

transactions that are actually in the 

public interest. The Commission 

recognized the important role that the 

cellular cross-interest rule has provided 

in the past against the possibility of 

significant additional consolidation of 

cellular providers in rural areas, but it 

inquired whether the public interest 

may be better served by the benefits of 

pure case-by-case review.

62. Discussion. Based on our review 

of certain arguments raised on 

reconsideration and in the comments 

regarding the advantages of case-by-case 

review, as well as developments since 

the release of the Spectrum Cap Sunset 

Order in 2001, we find that reliance on 

a uniform case-by-case review process 

for aggregations of spectrum and 

cellular cross interests in RSAs is 

currently the better approach as 

compared to prophylactic limits. We 

believe that continued application of the 

cellular cross-interest rule in RSAs may 

impede market forces that could drive 

financing and development of new 

services in rural and underserved areas. 

Accordingly, we find that it is in public 

interest to apply a more flexible 

approach in reviewing cellular 

competition in rural areas and, as a 

result, we will extend our section 310(d) 

case-by-case review to all cellular 

markets. 

63. We therefore eliminate the cellular 

cross-interest rule in RSAs and will 

utilize our case-by-case approach to 

review transactions where a level of 

cellular cross interests arises to a 

substantial transfer or assignment under 

section 310(d) of the Act. In addition, if 

a party with a controlling or otherwise 

attributable interest in one cellular 

licensee within an RSA obtains a noncontrolling interest of more than 10 

percent in the other cellular licensee in 

an overlapping CGSA, we will require 

the licensee to notify the Commission 

within 30 days of the date of 

consummation of the transaction by 

filing updated ownership information 

(using an FCC Form 602) reflecting the 

specific level of investment. This 

notification requirement will sunset at 

the earlier of: (1) Five years after the 

release of this item, or (2) at the cellular 

licensee’s specific renewal deadline. By 

75154 Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 

employing this approach to maintain 

scrutiny over those cross interests that 

pose a particular risk to competition in 

the near term, we conclude that we have 

struck the proper balance between 

promoting investment and protecting 

consumers against potential competitive 

harms in rural areas. 

64. Although the Commission last 

determined that the level of CMRS 

economic competition was not 

meaningful enough to warrant complete 

elimination of the cellular cross-interest 

rule pursuant to section 11 of the Act, 

it did not fully consider in its Spectrum 

Cap Sunset Order whether a move to 

case-by-case review for cross interests in 

RSAs would be in the public interest 

under the broader scope of its 2000 

biennial review of spectrum 

aggregations limits. To perform 

meaningful and timely review of 

spectrum aggregation transactions 

without the CMRS spectrum cap rule, 

the Commission explained that it 

needed time to develop effective 

guidelines for this process, as well as to 

ensure that sufficient resources were 

devoted to the task. In contrast, because 

the concerns underlying the original 

purpose of the cross-interest rule had 

been achieved in MSAs, the 

Commission was able to immediately 

eliminate the rule in that context 

without having to consider to any great 

extent the rule’s necessity as compared 

to other, less burdensome tools. When 

the Commission subsequently 

determined that market conditions in 

rural areas had not changed sufficiently 

such that it should eliminate the 

cellular cross-interest rule in RSAs 

pursuant to section 11 of the Act, it 

concluded its reexamination of the rule 

and did not evaluate whether it would 

nevertheless be in the public interest to 

extend the advantages of flexible caseby-case review to aggregation and cross 

interests of cellular spectrum in rural 

areas. 

65. Notwithstanding section 11 of the 

Communications Act and the 

Commission’s past findings regarding 

the level of economic competition in 

rural markets, we decide on 

reconsideration of our Spectrum Cap 

Sunset Order and based on the 

comments filed in response to the Rural 

NPRM that it is in the public interest to 

eliminate the cellular cross-interest rule. 

Instead, parties will be permitted to file 

under our case-by-case review process 

for substantial cross interests in all 

cellular spectrum and report to the 

Commission a certain level of cellular 

cross interests in rural areas that do not 

arise to an assignment or transfer of 

control. Such a change in approach, 

supported by adequate resources and 

procedures and facilitated by collection 

of sufficient industry information along 

with appropriate enforcement 

mechanisms, is currently the better 

approach for evaluating whether 

proposed cross interests reflect 

opportunities for increased financing 

and new services or indicate potential 

risks of anticompetitive market 

conditions. The Commission indicated 

that its 2000 biennial review would 

consider whether other factors beyond 

the impact of competition made the 

cross interest rule appropriate for 

modification, and in this context, we 

find they do. 

66. Although we recognize the 

safeguard that the cellular cross-interest 

rule has provided against the possibility 

of significant additional consolidation 

of control over cellular spectrum in 

rural areas and the attendant serious 

anticompetitive effects, we find that the 

public interest is better served by the 

benefits of case-by-case review with its 

greater degree of flexibility to reach the 

appropriate decision in each case, 

reduced likelihood of prohibiting 

beneficial transactions or levels of 

investment both in urban and rural 

areas, and ability to account for the 

particular attributes of a transaction or 

market. The greater regulatory flexibility 

offered by this change in tools for 

review outweighs any ‘‘guarantees’’ to 

the competitive nature of cellular 

competition in rural areas ensured by 

the current cross-interest rule, as that 

rule may inadvertently discourage 

transactions and cross interests that 

could be found to be in the public 

interest. We believe that no cross 

interest or transaction should be 

presumptively prohibited in RSAs and 

that we should consider such proposals 

under an approach that is consistent 

with the same case-by-case analysis that 

is employed in all other CMRS contexts. 

67. In the Spectrum Cap Sunset 

Order, the Commission gave much 

consideration to the availability of less 

burdensome case-by-case review before 

it decided that the CMRS spectrum cap 

rule was no longer necessary in the 

public interest. Given the level of 

competitive market forces and the 

benefits of flexible case-by-case review, 

it determined that it had the means to 

sunset the CMRS spectrum cap rule in 

all markets, RSAs as well as MSAs. The 

Commission decided to retain the 

cellular cross-interest rule in RSAs 

based on reasoning that the likelihood 

of approving a cellular consolidation 

between two providers in a given 

market was small and that it would be 

more efficient and less costly for the 

Commission to maintain a prophylactic 

rule and to entertain waiver requests for 

the small subset of transactions in RSAs 

where competition was more robust. In 

review, given advancements in our caseby-case processing procedures and 

resources since December 2001, we 

believe that we can repeal the rule to 

better encourage transactions and levels 

of financing that are in the public 

interest while maintaining much of the 

protection afforded by the cellular crossinterest rule. We recognize that the 

current waiver approach may interfere 

with investment in rural areas by 

discouraging certain financing in the 

RSA portions of a regional market but 

not in the MSA portions. Our approach 

in essence relaxes the permitted 

threshold to 49.9 percent. However, for 

the reasons explained here, we disagree 

with the argument that there is no 

conceivable situation where the public 

interest could be served by considering 

such transactions in RSAs. Our decision 

here is to change tools for review to a 

more precise standard, and we make no 

determination that such proposed 

transactions are any more likely to be 

found to be in the public interest. 

68. Case-specific review, along with 

information resources and enforcement 

mechanisms, is a more targeted process 

to examine the actual competitive 

positions involved in a particular 

transaction or level of cross interests 

and ensure that acquisitions of and 

cross interests in spectrum do not have 

anticompetitive effects that render them 

contrary to the public interest. As the 

Commission indicated in the Spectrum 

Cap Sunset Order in the context of the 

CMRS spectrum cap rule, we can rely 

on case-by-case review of CMRS 

spectrum aggregation (including cross 

interests of cellular spectrum in rural 

areas) to fulfill our statutory mandates 

to promote competition, ensure 

diversity of license holdings, and 

manage the spectrum resource in the 

public interest. We have been increasing 

the resources available to review 

spectrum aggregation transactions and 

developing internal procedures for 

review of concentration of CMRS 

spectrum in general, and cross interests 

of cellular spectrum in rural areas in 

particular. While it at first places greater 

resource demands on parties and the 

Commission, over time, these actions 

will provide parties, including small 

businesses, with legal precedent and a 

reasonable degree of certainty and 

transparency regarding cross interests of 

cellular spectrum in rural areas and 

should minimize the administrative 

costs of case-by-case review for all 

applicants and licensees, as well as 

Commission staff. In addition, we 

believe there may be an inequity that 

Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 75155

distorts the market in any area in which 

more than just the two cellular licensees 

hold spectrum and find that the better 

approach to safeguarding competition is 

to take account of the particular 

circumstances of each market through 

case-specific review.

69. To review aggregations or cross 

interests of cellular spectrum in rural 

areas, we eliminate § 22.942 of the 

Commission’s rules, 47 CFR 22.942, 

such that applicants and parties will 

only be required to obtain prior 

Commission approval for transactions 

subject to section 310(d) of the Act. 

Although we are imposing a reporting 

requirement to collect ownership 

information on certain levels of interests 

that do not trigger section 310(d) review, 

we have adopted reporting thresholds 

that reflect a comparatively higher 10 

percent level of permitted cross interest 

by a party with a controlling interest in 

a given cellular licensee. Under 

§ 22.942, a party with a controlling 

interest in one of the cellular licensees 

may only have a 5 percent direct or 

indirect ownership interest in the other 

licensee in that CGSA. Under the new 

reporting standard, we will allow a 

party with a controlling or otherwise 

attributable interest in one of the 

cellular licensees to have a noncontrolling or otherwise nonattributable direct or indirect ownership 

of up to and including 10 percent in the 

other cellular licensee in overlapping 

CGSAs without notification. We have 

not been able to determine conclusively 

that such cross interests pose a 

significant threat to competition, and 

this new 10 percent threshold will 

afford petitioners and commenters some 

relief from restrictions on financing in 

the RSA portions of a regional market. 

Moreover, it harmonizes the reporting 

threshold with our FCC Form 602 

ownership reporting requirements 

imposed currently on all licensees. 

70. We do not make any 

determination here on the extent to 

which cellular carriers may continue to 

hold a dominant market share in rural 

areas or whether a consolidation of 

cellular licenses in RSAs would likely 

result in a significant reduction in 

competition. We note, however, that a 

concentration of interests between the 

two cellular licensees in rural areas 

would more likely result in a significant 

reduction in competition than an 

aggregation of additional CMRS 

spectrum by such licensees. In addition, 

we note that different risks to 

competition are present depending on 

whether a proposed cross interest would 

be held by a telecommunications carrier 

or by a third-party bank or other source 

of financing. By reviewing substantial 

aggregations of cellular cross-interests 

on a case-by-case basis, as discussed 

above, we retain the flexibility to 

evaluate individual transactions on their 

own merits and account for these 

different factors in determining whether 

approval of the transaction will serve 

the public interest under section 310(d). 

D. Increasing Licensee Flexibility 

1. Performance Requirements 

71. Background. Over the past decade, 

the Commission has shifted away from 

site-based licensing for wireless 

licensees and has adopted more flexible, 

geographic-area based allocations that 

provide licensees with greater freedom 

to provide different types of services. In 

making this shift, the Commission also 

has adopted performance benchmarks 

that increase licensees’ flexibility to 

offer a variety of services, including 

service that may not require ubiquitous 

geographic coverage. As a general 

matter, geographic-area licensees are not 

required to construct their entire 

geographic area in order to retain their 

authorizations. Instead, depending upon 

the specific service, the Commission’s 

rules may require coverage of a certain 

percentage of the licensed area’s 

population or a certain percentage of the 

licensed area’s geographic area. For 

many, but not all services, the 

Commission has adopted a flexible 

‘‘substantial service’’ construction 

standard that allows licensees that are 

providing a beneficial use of the 

spectrum to retain their authorizations 

without satisfying a prescribed 

population-or geographic-based 

construction requirement. The 

substantial service standard was 

intended to provide flexibility for 

services with a variety of uses for the 

spectrum (i.e., fixed or mobile, voice or 

data) or with a high level of incumbency 

that would prevent a new geographicbased licensee from meeting the 

coverage requirements. While the 

definition of ‘‘substantial service’’ is 

generally consistent among wireless 

services, the factors that the 

Commission will consider when 

determining if a licensee has met the 

standard vary among services. Once a 

licensee satisfies its construction 

requirement during its initial license 

term, the Commission’s rules currently 

do not require that the licensee satisfy 

additional construction requirements 

during subsequent renewal terms other 

than the standards necessary to achieve 

a renewal expectancy. 

72. In the Rural NPRM, the 

Commission proposed modifications to 

our construction requirements to 

promote licensee flexibility and the 

build-out of rural areas. First, the 

Commission proposed to adopt a 

‘‘substantial service’’ construction 

benchmark for all wireless geographic 

area licensees that are subject to buildout requirements but that did not have 

the option of meeting those 

requirements by providing substantial 

service. Specifically, the Commission 

proposed to amend its regulations to 

extend the substantial service 

construction benchmark to the 

following licensees: 30 MHz broadband 

PCS licensees; 800 MHz SMR licensees 

(blocks A, B, and C); certain 220 MHz 

licensees; LMS licensees; Multipoint 

Distribution Service and Instructional 

Television Fixed Service (MDS/ITFS) 

licensees; and 700 MHz public safety 

licensees. The Commission observed 

that construction benchmarks that 

mandated population-or geographicspecific coverage might hinder licensees 

from serving niche or less populated 

areas, and might unintentionally 

discourage construction in rural areas. 

Second, the Commission asked whether 

we should adopt geographic-based 

construction requirements for private 

and commercial terrestrial wireless 

services that are licensed on a 

geographic area basis and that do not 

have a geographic-based requirement. 

The Commission noted that a 

geographic benchmark would provide 

licensees who did not intend to focus 

construction efforts on population 

centers with an alternative. Third, the 

Commission asked whether we should 

adopt substantial service ‘‘safe harbors’’

that are tailored to providing coverage 

in rural areas, and proposed safe harbors 

for mobile as well as fixed services. 

Finally, the Commission also asked 

whether requiring compliance with 

additional construction requirements in 

license terms following initial renewal 

of the license might be likely to increase 

build-out in rural areas. 

73. Discussion. In large part, we adopt 

the proposal, as set forth in the Rural 

NPRM, to extend the substantial service 

construction benchmark to all wireless 

services that are licensed on a 

geographic area basis. Specifically, we 

amend our regulations to provide a 

substantial service construction 

benchmark for the following licensees: 

30 MHz broadband PCS licensees; 800 

MHz SMR licensees (blocks A, B, and 

C); certain 220 MHz licensees; LMS 

licensees; and 700 MHz public safety 

licensees. These licensees now have the 

option of satisfying their construction 

requirements by providing substantial 

service or by complying with other 

service-specific construction 

benchmarks already available to them 

75156 Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 

under the Commission’s rules. We 

decline to take any action with respect 

to the MDS/ITFS and the 71–76 GHz, 

81–86 GHz and 92–95 GHz (70/80/90 

GHz) bands, because construction rules 

for these bands recently have been or 

will be addressed in service-specific 

proceedings. 

74. Based on the record before us, we 

believe that modifying our rules to 

permit these additional licensees to 

satisfy their construction requirements 

by providing substantial service will 

increase their flexibility to develop 

rural-focused business plans and deploy 

spectrum-based services in more 

sparsely populated areas without being 

bound to concrete population or 

geographic coverage requirements. As 

the Commission noted in the Rural 

NPRM, particularly in cases where a 

licensee has a population-based 

construction requirement, licensees 

have both an economic and practical 

incentive to achieve compliance with 

the Commission’s build-out obligation 

by providing service to urban areas. 

Further, current population-specific 

benchmarks may have the unintended 

consequence of encouraging several 

licensees within a particular market to 

provide coverage to the same populous 

areas. In order to satisfy its construction 

obligations and safeguard its license, 

even a late entrant who is the fourth or 

fifth competitor in a particular area 

initially may choose to duplicate 

existing carriers’ footprints while other, 

more sparsely populated areas may be 

without such competition or even 

service at all. With the additional 

flexibility afforded by a substantial 

service option, however, licensees will 

be free to develop construction plans 

that tailor the deployment of services to 

needs that are otherwise unmet, such as 

the provision of service to rural or niche 

markets. While a substantial service 

alternative, by itself, does not guarantee 

that all licensees will serve rural areas, 

the additional flexibility of this 

alternative undoubtedly improves the 

likelihood of rural deployment and 

provides licensees with the opportunity 

to target unserved rural areas. Moreover, 

providing these licensees with the 

option of satisfying their construction 

requirements by providing substantial 

service in their licensed areas will 

increase parity among geographic area 

licensees. This action promotes more 

equal regulatory footing with respect to 

construction obligations.

75. We disagree with those who urge 

the adoption of a substantial service 

standard only for those licensees with 

‘‘small geographic territories.’’ Our 

intent in providing licensees with a 

substantial service option is not to 

mandate, but to encourage and facilitate 

construction in less populated areas by 

providing licensees with sufficient 

flexibility to develop unique business 

plans that do not require ubiquitous 

coverage or coverage of densely 

populated areas. In keeping with our 

market-oriented policies, we do not 

propose to require licensees to deploy 

services where their market studies or 

other analyses indicate that service 

would be economically unsustainable. 

As we stated earlier, the adoption of the 

substantial service standard provides 

licensees with the flexibility to provide 

coverage to other, less populated areas 

and still satisfy its coverage requirement 

without necessarily focusing on more 

urban population centers. 

76. We also decline at this time to 

abandon our substantial service 

performance benchmark in favor of 

stricter, more specific build-out 

obligations, and a ‘keep what you use’

approach similar to the ‘unserved area’

licensing regime established for cellular 

service. As demonstrated by our trend 

towards licensing services on a 

geographic-area basis, we believe that 

licensees can provide a meaningful and 

socially beneficial service without 

providing ubiquitous service and that 

providing licensees with sufficient 

flexibility to respond to market 

fluctuations will promote the public 

interest. However, we recognize that, for 

example because they can be used 

sequentially, market-based mechanisms 

and re-licensing approaches (such as 

‘‘keep what you use’’) are not 

necessarily mutually exclusive. 

Accordingly, our FNPRM will continue 

this discussion of the appropriate relicensing, and construction obligations 

for current and future licensees who 

hold licenses beyond their first term. 

77. As an additional matter, we adopt 

safe harbors for providing substantial 

service to rural areas. As we state 

earlier, we adopt a default definition of 

‘‘rural area’’ as a county with a 

population density of 100 persons per 

square mile or less, based upon the most 

recent Census data. We apply this 

definition for purposes of these ruralfocused substantial service safe harbors. 

In light of the fact that the geographic 

area licenses are comprised of counties, 

we believe it is sensible and 

administratively efficient to adopt safe 

harbors for geographic area licenses that 

also are based upon counties. With 

respect to mobile wireless services, a 

licensee will be deemed to have met the 

substantial service requirement if it 

provides coverage to at least 75 percent 

of the geographic area of at least 20 

percent of the ‘‘rural areas’’ within its 

licensed area. With respect to fixed 

wireless services, the substantial service 

requirement is met if a licensee 

constructs at least one end of a 

permanent link in at least 20 percent of 

the number of ‘‘rural areas’’ within its 

licensed area. Licensees may satisfy 

these construction requirements through 

lease agreements, provided these 

arrangements satisfy the conditions set 

forth in the Secondary Markets Report 

and Order. As we stated in the Rural 

NPRM, the use of a population density 

of 100 persons or fewer per square mile 

is derived from our finding in the Eighth 

Competition Report, which indicates 

that counties with population densities 

of 100 persons per square mile or less 

‘‘have an average of 3.3 mobile 

competitors, while the more densely 

populated counties have an average of 

5.6 competitors.’’ We believe that this 

population density-based definition 

provides a workable and reasonable 

point of differentiation between rural 

and non-rural areas, as we noted earlier. 

78. We believe it is beneficial to adopt 

these safe harbors because they provide 

licensees with concrete examples of 

how they can provide substantial 

service through specific types of 

deployment in rural areas, thereby 

increasing certainty and alleviating 

concerns that the substantial service 

requirement is overly vague. We 

emphasize, however, that these safe 

harbors do not constitute the only 

means by which a licensee may provide 

substantial service. A licensee is 

therefore free to meet the substantial 

service test by satisfying one of the safe 

harbors or providing some alternative 

coverage to its licensed area, depending 

upon the individual needs of their 

consumers or their own unique business 

plans. We also note that the Rural 

NPRM provided licensees with 

additional guidance by setting forth a 

list of factors that we will consider in 

the context of determining whether a 

licensee is providing substantial service 

to rural areas. We affirm that we will 

consider these factors in evaluating 

substantial service showings. 

Specifically, we will look at the 

following factors: (1) Coverage of 

counties or geographic areas where 

population density is less than or equal 

to 100 persons per square mile; (2) 

significant geographic coverage; (3) 

coverage of unique or isolated 

communities or business parks; and (4) 

expanding the provision of E911 

services into areas that have limited or 

no access to such services. While this 

list is not intended to be exhaustive or 

exclusive, we believe it illustrates the 

sorts of material factors we will consider 

in any rural substantial service analysis. 

Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 75157

By adopting substantial service ‘‘safe 

harbors,’’ as well as by providing 

examples of the sorts of factors we will 

consider in evaluating substantial 

service showings, we believe we 

satisfactorily balance the competing 

interests of maximizing licensee 

flexibility while providing some 

measure of certainty. 

79. We decline at this time to 

introduce a ‘‘very rural area’’ safe harbor 

or modify our safe harbors to include a 

population component. As we stated 

above, the safe harbors are not intended 

to be the only means of providing 

substantial service. We will take into 

consideration if a licensee is serving a 

‘‘very rural area’’ or a very large 

geographic area.

80. We also decline to adopt a 

geographic-based benchmark for all 

wireless geographic area services that 

are subject to construction requirements 

but that otherwise do not have a 

geographic-specific construction 

requirement. We believe that licensees 

who wish to provide coverage to a 

particular geographic portion of their 

licensed area have the flexibility to do 

so pursuant to the ‘‘substantial service’’

standard. We conclude, based upon the 

record in this proceeding, that there is 

no demonstrated need to modify our 

regulations in this regard. 

81. We also decline to adopt 

performance requirements for renewed 

licenses at this time. While we 

recognize the concerns of existing 

licensees regarding future construction 

requirements, we believe that relicensing approaches such as ‘‘keep 

what you use’’ and market-based 

mechanisms are not necessarily 

mutually exclusive. While we do not 

make any such changes at this time, we 

initiate a FNPRM to continue our 

discussion of various re-licensing 

approaches and the merits, if any, of 

construction requirements for current 

and future licensees holding licensees 

beyond their first term. 

82. We note that although we refrain 

from adopting renewal term 

performance requirements at this time, 

we will continue to examine the state of 

competition in rural areas and will 

revisit this decision in the event we 

observe that licensees cease deploying 

new services in rural areas and/or that 

secondary markets are not facilitating 

sufficient access to spectrum for wouldbe service rural service providers. We 

emphasize that, contrary to the 

assertions of some, the Commission 

retains the right to modify the terms and 

conditions of FCC licenses. The 

Commission’s licensing system has 

never provided any vested right to 

specific license terms. Rather, it is well 

established that the Commission always 

retains the power to alter the terms of 

existing licenses by rule making. 

Further, at the time Congress introduced 

auctions into the licensing process, it 

made clear that this mechanism for 

assigning licenses was not intended to 

change the Commission’s basic 

regulatory role or otherwise provide 

additional rights to auction-winning 

licensees. Thus, no auction bidder could 

have assumed that it was buying a 

license containing terms that the 

Commission could not modify. 

2. Increasing Power Limits for Certain 

Services 

83. Background. In the Rural NPRM, 

the Commission observed that 

‘‘[i]ncreasing the range of radio systems 

is one means of making it more 

economical to provide spectrum-based 

radio services in rural areas by 

potentially lowering infrastructure 

costs,’’ and that ‘‘[o]ne way to increase 

the range of radio systems is by 

increasing power levels.’’ The 

Commission accordingly sought 

comment regarding whether we should 

modify our regulations governing power 

limits for operations in rural areas, as a 

means of encouraging service to these 

areas. Specifically, the Commission 

asked whether current power limits 

should be increased for stations located 

in rural areas and licensed under parts 

22, 24, 27, 80, 87, 90, and 101 of our 

rules. The Commission also sought 

comment regarding the implementation 

of higher power limits, such as how to 

define ‘‘rural area’’ for purposes of 

increased power limits and whether, in 

the case of base/mobile systems, both 

the base and mobile stations must be 

located within a rural area. The 

Commission further acknowledged that 

there may be certain challenges in 

implementing increased power levels in 

rural areas and sought comment on how 

increased power might increase the 

potential for harmful interference to 

neighboring systems or otherwise limit 

the number of paths in a given area. 

84. Discussion. Based on the record in 

this proceeding, we believe that, in 

principle, increasing power limits in 

rural areas can benefit consumers in 

rural areas by reducing the costs of 

infrastructure and otherwise making the 

provision of spectrum-based services to 

rural areas more economic. When we 

balance this potential benefit, however, 

against the potential costs of harmful 

interference, we recognize that we must 

act carefully to ensure that increased 

power limits do not cause harmful 

interference for other licensees. After 

reviewing the record and evaluating the 

technical and operational rules for the 

various services at issue in this 

proceeding, we conclude that increasing 

cellular, PCS, and AWS power limits 

may provide measurable benefits 

without creating harmful interference 

for co-channel or adjacent licensees. As 

we discuss in the following paragraphs, 

we find that the current cellular, PCS, 

and AWS technical and coordination 

rules (with some modifications) will be 

sufficient to ensure that licensees are 

able to utilize increased power levels at 

certain base stations without causing 

harmful interference. 

85. Cellular. We amend our 

regulations governing the Cellular 

Radiotelephone Service and authorize 

increased power limits for cellular base 

stations that either: (1) Are located in 

counties with population densities of 

100 persons or fewer per square mile, 

based upon the most recently available 

population statistics from the Bureau of 

the Census; or (2) extend coverage into 

cellular unserved areas, as those areas 

are defined in § 22.949 of the 

Commission’s rules. Specifically, we 

amend § 22.913(a) of our rules to 

provide that the Effective Radiated 

Power (ERP) of such base transmitters 

must not exceed 1000 Watts. This power 

increase doubles permissible ERP for 

selected cellular base stations; prior to 

this amendment, § 22.913(a) provided 

that the ERP of base transmitters and 

cellular repeaters must not exceed 500 

Watts. We recognize that a ‘‘one size fits 

all’’ approach to spectrum management 

is unlikely to yield optimal spectral 

efficiency and that, particularly in areas 

where there is less congestion or where 

other unique factors are present, it is 

appropriate to amend our operating 

parameters to afford licensees greater 

flexibility. As the Spectrum Policy Task 

Force noted, ‘‘spectrum policy must 

evolve towards more flexible and 

market-oriented regulatory models,’’ in 

order ‘‘[t]o increase opportunities for 

technologically innovative and 

economically efficient spectrum use.’’

Our action today is consistent with the 

recommendations of the Spectrum 

Policy Task Force, which advised that 

the Commission explore ways of 

promoting spectrum access and 

flexibility in rural areas, and stated that 

the Commission’s interference and other 

technical rules should ‘‘afford spectrum 

users the flexibility to operate at higher 

power in less congested areas, which are 

typically rural, so long as such higher 

power operations do not cause 

interference and do not receive 

additional interference protection.’’

86. We believe that this amendment of 

our regulations governing cellular 

power limits will promote coverage to 

rural areas by making it more 

75158 Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 

economical to provide service to these 

areas. As a result of this power increase, 

cellular licensees may be able to extend 

their coverage area and use fewer base 

stations, thereby lowering their 

infrastructure costs. Relaxed limits for 

licensed operations will provide muchneeded relief to rural operators by 

substantially reducing the costs 

associated with construction of such 

systems.’’ We estimate that increasing 

authorized base station power limits to 

1,000 Watts ERP may increase the 

distance to the licensee’s Service Area 

Boundary (SAB) by as much as 12.5 

percent and may increase overall 

coverage area by as much as 26.6 

percent. Consequently, we estimate that, 

as a result of this power increase, 

licensees may require up to 21 percent 

fewer cell sites to provide the same 

coverage with 1,000 Watts ERP as 

previously provided with 500 Watts 

ERP. 

87. We limit this power increase to 

cellular base stations that are located in 

rural areas or that are providing 

coverage to unserved areas. We define 

‘‘rural areas’’ for purposes of increased 

power limits as counties with a 

population density of 100 persons per 

square mile or less. Specifically, 

permitting power increases in areas 

where the population density is 100 

persons or less captures much of the 

geographic area where service is not 

provided by both the A- and B-block 

cellular carriers (or, in some instances, 

by either cellular carrier). After 

conducting an analysis of current 

cellular licenses in the United States, 

we have determined that there are 625 

counties that have some area that is not 

covered by the license of an A-block 

and/or B-block cellular provider. Of 

these 625 counties, 577 of these 

counties have a population density of 

100 persons per square mile or less. As 

an additional matter, in order to 

promote cellular coverage to areas that 

lack cellular service but otherwise are 

not captured by this definition of ‘‘rural 

area,’’ we amend our rules to permit 

carriers to use higher power at base 

stations located in counties with a 

greater population density, provided 

those base stations are providing 

coverage to unserved areas, as defined 

by our rules. We also limit this power 

increase to cellular base stations more 

than 72 kilometers (45 miles) from the 

Mexican and Canadian borders, 

consistent with our current agreements 

with those countries. 

88. We note that some expressed 

concern that higher power limits might 

result in harmful interference to other 

licensees. We have carefully considered 

the concerns raised by commenters and 

believe that this limited amendment of 

our cellular rules will increase licensee 

flexibility without increasing the 

likelihood of harmful interference. Our 

regulations governing the provision of 

cellular service already contain specific 

safeguards that are designed to 

minimize the likelihood of harmful 

interference by clearly defining 

protected service areas for each cell site, 

and requiring licensee coordination near 

system boundaries. We find that 

applying these same requirements to 

higher power base stations will 

minimize the potential for harmful 

interference. Specifically, the Service 

Area Boundary (SAB) of each cellular 

base station is defined by a formula 

based on antenna height and transmitter 

power, and the formula’s underlying 

assumptions are still valid for power 

levels up to 1000 Watts. Using the 

existing formula, the SAB distance for a 

particular base station will increase as 

the power level increases. However, 

because the rules prevent a base station 

SAB from overlapping other licensees’

CGSAs, such power increases will only 

be permitted so long as they do not 

infringe upon other licensees’ systems. 

89. As an additional safeguard, the 

Commission’s rules currently provide 

that licensees must coordinate channel 

usage at each transmitter location 

within 75 miles of any transmitter 

locations authorized to other licensees 

or proposed by tentative selectees or 

other applicants. This requirement 

recognizes that the SAB/CGSA overlap 

restriction described above permits 

licensees to provide service quality 

signal levels up to the edge of another 

licensee’s system boundary. While this 

approach facilitates seamless coverage 

for consumers, it requires careful 

coordination among neighboring 

licensees in order to avoid interference. 

For years licensees have been 

coordinating system frequency plans 

with one another in order to ensure high 

levels of service quality and seamless 

roaming along system boundaries. Going 

forward, we believe this coordination 

requirement will perform equally well 

in coordinating high power operations. 

90. Our decision here to authorize 

higher power levels for cellular 

licensees, subject to certain safeguards 

to protect other cellular services does 

not diminish in any way the obligations 

we impose today on cellular licensees in 

the 800 MHz Order to protect public 

safety and other non-cellular operations 

in the adjacent 800 MHz band from 

interference. See Improving Public 

Safety Communications in the 800 MHz 

Band Consolidating the 900 MHz 

Industrial/Land Transportation and 

Business Pool Channels, WT Docket No. 

02–55, Report and Order, Fifth Report 

and Order, Fourth Memorandum 

Opinion and Order, and Order, FCC 04–

168 (rel. August 6, 2004) (800 MHz 

Order) published at 69 FR 67823 

(November 22, 2004). As explained in 

detail in the 800 MHz Order, we adopt 

a specific standard defining 

‘‘unacceptable interference’’ to such 

operations in that band and require 

other licensees, including cellular 

licensees, to immediately take all steps 

necessary, including the 

implementation of Enhanced Best 

Practices, to abate such interference. 

Cellular licensees wishing to utilize the 

increased power levels authorized in 

this Order can do so only to the extent 

that they also remain in compliance 

with their 800 MHz Order obligations. 

91. Some have stated that increased 

power limits would not necessarily 

facilitate increased coverage due to 

handset limitations or other technical 

constraints. Although increasing the 

power of the handset might address this 

issue by increasing the mobile unit’s 

ability to ‘‘talk’’ to the base station, we 

note that increasing such power could 

be problematic, in light of the fact that 

a handset is likely to be used in urban 

as well as rural areas and might 

introduce interference concerns if used 

in an urban setting. Accordingly, we 

find that there is no need to increase 

handset power limits at this time. We do 

not believe that increasing handset 

power is necessary, however, in order 

for cellular licensees to benefit from 

increased power limits. First, nearly all 

cellular phones on the market today 

operate at power levels well under the 

maximum permitted under our rules, 

which suggests that our regulations 

already permit sufficient handset power. 

Today’s handsets generally utilize low 

power in order to comply with our RF 

safety rules and to extend battery life. 

Second, cellular licensees may 

overcome handset constraints by 

employing an external means of 

boosting the handset’s signal, or by 

adding amplifiers at the base station to 

boost the received signal. For example, 

a cellular carrier may use an external 

amplifier or otherwise use a tower top 

amplifier at the base station. In any case, 

cellular technology continues to 

develop and we expect that technical 

limitations may diminish over time as 

technology evolves. Further, our action 

affords licensees with additional 

flexibility to take advantage of new 

technological advancements without 

being unduly constrained by 

Commission requirements. 

92. In addition, we note that some 

wireless carriers are considering the use 

of directional antennas to improve 

Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 75159

network performance, and that such 

antennas have the potential to help 

improve communications in rural areas 

by achieving higher gain, mitigating the 

effects of multipath, improving 

frequency bandwidth performance, and 

providing better directional control over 

emissions. As such, directional handset 

antennas would provide improved 

reception quality at the cellular tower 

receiver, significant improvement of 

voice quality near the edge of a cell, 

potentially larger cell sites with fewer 

base stations, and lower power 

consumption in handsets, improving 

battery life. Although handsets that 

employ directional antennas may need 

to be slightly reoriented when used in 

certain locations, techniques such as 

antenna diversity are being considered 

to combat large-scale fading effects 

caused by shadowing from large 

obstacles (e.g., buildings or other terrain 

features). Because directional handset 

antennas have the potential to 

significantly increase the strength of 

signals transmitted from handsets, as 

well as provide efficiency benefits both 

to the wireless network and to battery 

life, there are several benefits that could 

be gained from their increased use in 

handsets. Importantly, directional 

handset antennas, coupled with an 

increase in base stations’ transmitted 

power, have the potential to 

significantly improve wireless 

communications in many rural areas.

93. Broadband PCS. Similar to our 

treatment of cellular above, we will 

provide for increased power limits for 

broadband PCS. Specifically, we 

increase power levels by 100 percent for 

broadband PCS base stations located in 

rural areas, in parity with the cellular 

power levels adopted in this 

proceeding. We note that broadband 

PCS power levels are tied to antenna 

heights, so that the authorized power for 

a given broadband PCS base station 

would vary, depending upon the 

accompanying antenna height. For 

example, a base station with an antenna 

with a height above average terrain 

(HAAT) of 300 meters or less may 

operate at a maximum of 1640 watts 

peak equivalent isotropically radiated 

power (EIRP). Thus, for base stations of 

300 meters or less in rural areas, we will 

allow an increase from 1640 to 3280 

watts EIRP. 

94. As with the modification of our 

cellular regulations, we believe that this 

modification of our PCS regulations will 

allow licensees to increase their 

coverage while using fewer base 

stations, thereby reducing the costs of 

providing service to rural areas. We 

estimate that permitting broadband PCS 

licensees to increase their power by 100 

percent will increase the distance from 

the base station to the edge of their 

coverage area by 17 percent and will 

increase the overall coverage area by 36 

percent. As a result, we estimate that a 

broadband PCS licensee using increased 

power will require 27 percent fewer 

sites in order to provide the same 

coverage provided using current power 

limits. 

95. We find that the current marketboundary signal strength limit, in 

conjunction with a coordination 

requirement, will minimize the 

potential for harmful interference 

among licensees. Currently, broadband 

PCS licensees cannot exceed a signal 

strength of 47 dBμV/m at their 

geographic market-boundary unless 

neighboring licensees agree to a higher 

level. This means that, regardless of the 

location, height, or power level of 

broadband PCS base stations, the signal 

level at the market-boundary may not 

exceed this maximum level without 

mutual agreement. Therefore, we find 

that permitting a 100 percent increase in 

power levels at broadband PCS base 

stations will not increase the potential 

for harmful interference beyond what 

exists today. At the same time, we note 

that the 47 dBμV/m limit is a ‘‘service 

quality’’ signal level that promotes 

coverage up to the edge of the market 

boundary, and seamless roaming across 

market boundaries in certain instances. 

In other words, although there is no 

formal coordination requirement, 

neighboring licensees must as a 

practical matter coordinate frequency 

plans and site locations along market 

boundaries in order to avoid 

interference. As a cautionary measure, 

we will require that licensees using 

higher power levels coordinate 

operations with all licensees within 75 

miles of the relevant base station. This 

requirement will supplement the 

existing signal strength limit and 

underscore our intention that licensees 

must coordinate spectrum usage along 

common boundaries. We note that this 

power increase applies only to 

broadband PCS base stations, and not to 

mobile units. For the reasons stated 

above for the 800 MHz cellular service, 

we find that there is not reason to 

increase mobile power levels at this 

time. 

96. We also note that the Commission 

is taking steps to address interference 

concerns more generally and that these 

additional measures might protect other 

licensees from harmful interference. We 

are optimistic that these initiatives 

might effectively address interference 

concerns in a flexible manner and 

alleviate the need to impose detailed, 

service-specific coordination 

requirements. 

97. Finally, as we did with 800 MHz 

cellular, we limit this power increase to 

broadband PCS base stations located in 

counties with population densities of 

less than 100 persons per square mile 

and those located more than 75 miles 

from the Mexican and Canadian 

borders. As stated above, we find that a 

majority of areas likely to be unserved 

or underserved are located in such 

counties. Further, because our existing 

agreements with Mexico and Canada are 

based on the prior maximum power 

limits, we retain those limits for border 

areas. 

98. AWS. In 2003, the Commission 

adopted the PCS power limit of 1640 

watt EIRP for AWS base stations. See

Service Rules for Advanced Wireless 

Services in the 1.7 GHz and 2.1 GHz 

Bands, WT Docket No. 02–353, Report 

and Order, 69 FR 5711 (February 6, 

2004) (AWS Report and Order). The 

Commission noted, however, that the 

Rural NPRM had proposed an increase 

in the power limit for PCS operations in 

rural areas and indicated that, in the 

event we adopted higher power limits 

for PCS services, we would ‘‘explore the 

possibility of similar power increases 

for AWS.’’ Thus, similar to our 

treatment of cellular and broadband PCS 

above, we will provide for increased 

power limits for AWS. Specifically, we 

increase power levels for AWS base 

stations located in rural areas by 100 

percent, or up to 3280 watts EIRP in 

parity with the cellular and broadband 

PCS power levels adopted in this 

proceeding. 

99. As with the modification of our 

cellular and broadband PCS regulations, 

we believe that this modification of our 

AWS regulations will allow licensees to 

increase their coverage while using 

fewer base stations, thereby reducing 

the costs of providing service to rural 

areas. We estimate that increasing 

authorized base station power limits to 

3280 Watts EIRP may increase the 

distance to the licensee’s edge of 

coverage by as much as 17 percent and 

may increase overall coverage area by as 

much as 36 percent. Consequently, we 

estimate that, as a result of this power 

increase, licensees may require up to 27 

percent fewer cell sites to provide the 

same coverage with 3,280 Watts EIRP as 

previously provided with 1640 Watts 

EIRP. We estimate that permitting AWS 

licensees to increase their power by 100 

percent will increase the distance from 

the base station to the edge of their 

coverage area in an amount similar to 

broadband PCS, thereby requiring fewer 

sites in order to provide the same 

75160 Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 

coverage provided using current power 

limits. 

100. As with broadband PCS, we find 

that the current market-boundary signal 

strength limit, in conjunction with a 

coordination requirement, will 

minimize the potential for harmful 

interference among AWS licensees, and 

licensees in neighboring bands. 

Therefore, as a cautionary measure, we 

will require that licensees using higher 

power levels coordinate operations with 

all affected licensees within 75 miles of 

the relevant base station and with 

certain satellite entities. As with 

broadband PCS, this requirement will 

supplement the existing signal strength 

limit and underscore our intention that 

licensees must coordinate spectrum 

usage along common boundaries. At 

present, AWS licensees already must 

coordinate with nearby, incumbent cochannel and adjacent channel Part 101 

and MDS licensees. Due to concern 

about the possibility of both out-of-band 

emission (OOBE) and receiver overload 

interference from AWS base stations to 

BAS and CARS operations, the 

Commission also has decided that AWS 

licensees must coordinate their 

operations with affected BAS and CARS 

licensees. In addition to these existing 

coordination requirements, higher 

power AWS operations must also be 

coordinated with adjacent channel AWS 

licensees, Part 21 MDS licensees 

operating above 2155 MHz, as well as 

all Government and non-Government 

satellite entities operating in the 2025–

2110 MHz band. 

101. We note that this power increase 

applies only to AWS base stations, and 

not to mobile units. For the reasons 

stated above for the 800 MHz cellular 

service, we find that there is not reason 

to increase mobile power levels at this 

time. Finally, as we did with broadband 

PCS, we limit this power increase to 

AWS base stations located in counties 

with population densities of less than 

100 persons per square mile. As stated 

above, we find that a majority of areas 

likely to be unserved or underserved are 

located in such counties. 

102. Other Radio Services. At this 

time we will not adopt increased power 

levels in other radio services. We also 

decline to modify power levels for: (1) 

2.3 GHz WCS facilities; or (2) licensed 

terrestrial services that operate in 

frequency bands that are shared by 

satellite services. 

103. We also decline the request of 

one commenter that the Commission 

adopt higher power limits and increased 

operating parameters for the 

Multichannel Video Distribution and 

Data Service (MVDDS). First, the 

Commission expressly excluded 

MVDDS stations licensed under Part 

101 from the scope of its power limits 

inquiry, noting that the Commission 

recently increased power levels for all 

MVDDS stations in a separate 

proceeding. Second, that commenter’s 

request constitutes a late-filed petition 

for reconsideration of this prior 

Commission action. Furthermore, we 

decline to take any action with respect 

to unlicensed services in this 

proceeding. We will incorporate 

comments addressing power limits for 

unlicensed services into the record of 

the Cognitive Radio NPRM and will 

respond to these comments in the 

context of that proceeding.

104. In conclusion, we decline to 

adopt increased power limits for any of 

the other radio services for which we 

sought comment in the Rural NPRM,

due to lack of support in the record. We 

note, however, that licensees in these 

services may file a request for waiver of 

these power limits. We will entertain 

waiver requests on a case-by-case basis. 

Any such waiver request should 

demonstrate how a waiver of our power 

limits will promote the public interest. 

In addition, licensees seeking to obtain 

a waiver of our power limits must 

adequately address any potential 

interference concerns that may arise as 

a result of such increased power. 

3. Infrastructure Sharing 

105. Background. The Rural NPRM

sought comment on whether clarifying 

the Commission’s policy on 

infrastructure sharing may promote 

service in rural markets. The 

Commission also stated that certain 

carriers in the United States have 

entered into sharing arrangements, and 

sought comment on the extent to which 

infrastructure sharing would promote 

service in rural areas and on the costs 

and benefits associated with such 

arrangements in the context of 

competition. Infrastructure sharing 

offers the potential for wireless service 

providers to share facilities and other 

infrastructure in order to provide 

spectrum-based services on a more costeffective basis, including service to rural 

areas. A key objective underlying such 

arrangements is the possible reduction 

in costs of capital construction in rural 

areas, and the creation of opportunities 

for enhanced and expanded coverage. A 

number of infrastructure sharing 

arrangements have been entered into in 

the United States, and some of the 

parties to such transactions have 

claimed that these lead to lower costs 

associated with expanded geographic 

coverage. Generally, because there are 

fewer providers in rural areas than in 

more populated areas, infrastructure 

sharing may permit more providers to 

operate in rural areas and thus 

encourage more competitors to enter 

those markets. 

106. As noted in the Rural NPRM,

infrastructure sharing includes sharing 

of infrastructure-related equipment, 

including antennas, towers, and 

network elements such as switches and 

nodes. Commission rules and policies, 

including our environmental rules, have 

enabled the sharing of towers and other 

antenna support structures for the 

provision of spectrum based services by 

multiple service providers. Moreover, 

the Commission has both facilitated and 

encouraged the collocation of antennas 

on existing towers. Existing operators 

have taken advantage of these policies 

to enter into tower sharing 

arrangements. Indeed, some companies 

have made a business of constructing 

and maintaining towers on which 

multiple licensees can locate their 

transmitters and receivers. 

107. In addition to these 

infrastructure sharing arrangements, 

parties may also be able to expand or 

improve service to rural areas through 

spectrum leasing arrangements—

whereby licensees in effect share the use 

of their licensed spectrum with 

spectrum lessees—under the policies, 

rules, and procedures established in the 

Secondary Markets proceeding. In the 

Secondary Markets Report and Order,

the Commission established policies 

and rules to enable spectrum users in 

most wireless radio services to gain 

access to licensed spectrum by entering 

into different types of spectrum leasing 

arrangements with licensees, and 

streamlined its approval procedures for 

license assignments and transfers of 

control. Also, in the Secondary Markets 

Second Report and Order, we clarified 

that spectrum leasing parties may enter 

into a variety of dynamic leasing 

arrangements in which licensees and 

spectrum lessees share the use of the 

same licensed spectrum. 

108. Depending on their structure, 

infrastructure sharing arrangements may 

raise transfer of control considerations 

under section 310(d) of the 

Communications Act, as amended. 

Under that statute, prior Commission 

approval is required to transfer control 

of or assign licenses (or parts of licenses, 

where permitted) to third parties. For 

many licensees in the wireless radio 

services, the Commission has 

interpreted section 310(d) de facto

control requirements pursuant to its 

Intermountain Microwave decision, 

which focuses on whether the licensee, 

as opposed to an unlicensed third party, 

exercises close working control over 

different aspects of the operation of the 

Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 75161

station facilities that use the spectrum. 

See Nonbroadcast and General Action 

Report No. 1142, (Intermountain 

Microwave Public Notice), 12 FCC 2d 

559 (February 6, 1963). Specifically, the 

Commission applied six factors for 

determining who has de facto control by 

examining whether a licensee: (1) Has 

unfettered use of all station facilities 

and equipment; (2) controls daily 

operations; (3) determines and carries 

out the policy decisions (including 

preparation and filing of applications 

with the Commission); (4) is in charge 

of employment, supervision and 

dismissal of personnel operating the 

facilities; (5) is in charge of the payment 

of financial obligations, including 

expenses arising out of operations; and 

(6) receives the monies and profits from 

the operation of the facilities. Under 

Intermountain Microwave, the 

Commission has interpreted section 

310(d) de facto control to require that 

the licensees exercise close working 

control of both the actual facilities/

equipment operating the radiofrequency 

(RF) energy and the policy decisions, 

e.g., business decisions, regarding use of 

the spectrum. 

109. In its Secondary Markets Report 

and Order, the Commission determined 

that, in the context of spectrum leasing, 

it would replace the Intermountain 

Microwave standard with a more 

flexible standard for determining 

whether there has been a transfer of de 

facto control under section 310(d). 

Under the new de facto control standard 

adopted in that proceeding, we no 

longer require that, when leasing 

spectrum, licensees exercise close 

working control over station facilities, 

determine the services that are 

provided, or set the policies affecting 

the station(s) operating with the 

spectrum licensed to them under their 

authorizations. Instead, the Commission 

determined that licensees in applicable 

wireless services may lease spectrum 

usage rights to spectrum lessees, 

without the need for prior Commission 

approval, so long as the licensee 

continues to exercise effective working 

control over the use of the spectrum it 

leases. 

110. The Rural NPRM stated that, 

where infrastructure sharing 

arrangements do not involve a transfer 

of control of licensed spectrum usage 

rights under section 310(d), Commission 

review is not required, but that 

infrastructure sharing arrangements that 

involve a transfer of control under 

section 310(d) require Commission 

review. The Commission noted that in 

the Secondary Markets proceeding it has 

streamlined the transfer of control and 

assignment process, and sought 

comment in the Rural NPRM on 

whether other steps may be taken that 

could further streamline this process. 

Comment was sought on the factors to 

consider in evaluating infrastructure 

sharing arrangements that require 

section 310(d) approval in order to 

effectively balance competition among 

providers and expanded coverage in 

rural areas. 

111. Discussion. We believe that 

infrastructure sharing offers the 

potential for benefits to both providers 

and consumers. Infrastructure sharing 

should be encouraged because of the 

potential for savings in capital costs for 

construction of facilities necessary to 

deploy wireless services, and for the 

improved or enhanced coverage in rural 

and other areas that otherwise may not 

be economical for providers to offer 

without some form of sharing. As we 

observed in the Rural NPRM,

infrastructure sharing arrangements 

have been considered in both the United 

States and in Europe, with apparently 

favorable results. The actions we take 

today seek to further encourage 

beneficial infrastructure sharing 

arrangements. 

112. We determine in this Report and 

Order that a revised de facto control 

standard, different from the de facto

control standard under Intermountain 

Microwave, should be extended to 

infrastructure sharing arrangements that 

only involve the sharing of facilities 

such as physical structures and 

equipment. Specifically, the revised de 

facto control standard for spectrum 

leasing in Secondary Markets shall 

apply for interpreting whether a 

licensee retains de facto control for 

purposes of section 310(d) when it is 

engaged in an infrastructure sharing 

arrangement. We believe that this policy 

will encourage the development of 

arrangements that potentially reduce 

costs for providers and improve 

coverage in rural areas. We note, 

however, that to the extent that 

licensees are sharing spectrum usage 

rights with third parties under spectrum 

leasing arrangements, such 

arrangements will be subject to the 

policies, rules, and procedures set forth 

in the Commission’s Secondary Markets

proceeding in WT Docket No. 00–230.

113. The Commission stated in the 

Secondary Markets Report and Order

that revision of the de facto transfer of 

control test ‘‘may be warranted as the 

public’s interests and needs change and 

the nature of a service evolves.’’ The 

Commission further stated that 

‘‘continuing to focus on one type of 

control (e.g., control over facilities) may 

no longer constitute the best way to 

further the complex and sometimes 

competing public interest goals of 

today.’’ The ‘‘sea change’’ that has taken 

place in the regulatory and 

technological environment for wireless 

services was addressed by the 

Commission, which identified some of 

the actions it has taken to promote 

innovative policies that seek to increase 

communications capacity and efficiency 

of spectrum use, and to make spectrum 

available for new uses and users. 

114. There have been significant 

changes in the communications 

industry since the Intermountain 

Microwave de facto standard was 

established over 40 years ago, including 

the rise of new technologies for the 

industry and the Commission’s 

increasing efforts to afford quick and 

effective means for parties to adapt to 

markets and to the needs of consumers. 

Under these circumstances, we no 

longer believe that it is necessary to 

continue to require that a licensee 

exercise immediate direct control over 

every facility that may be operating in 

connection with the provision of 

services using its spectrum. 

Accordingly, we will apply the more 

flexible de facto control standard set 

forth in the Secondary Markets Report 

and Order when interpreting whether a 

licensee (or spectrum lessee) retains de 

facto control for purposes of section 

310(d) when it is engaged in an 

infrastructure sharing arrangement 

involving facilities only. Under this 

standard, the licensee (or spectrum 

lessee) remains responsible for ensuring 

compliance with the Communications 

Act and all applicable policies and 

rules. This responsibility includes 

maintaining reasonable operational 

oversight with respect to any activities 

relating to the infrastructure sharing 

arrangement so as to ensure that the 

operator of the facilities complies with 

all applicable technical and service 

rules, including safety guidelines 

relating to radiofrequency radiation. In 

addition, the licensee must retain 

responsibility for meeting all applicable 

frequency coordination obligations and 

resolving interference-related matters, 

and must retain the right to inspect the 

facility operations and to terminate the 

infrastructure sharing arrangement to 

ensure compliance. 

115. The Commission retains the 

ability to investigate and terminate any 

infrastructure sharing arrangement to 

the extent it determines that the 

arrangement constitutes an 

unauthorized transfer of de facto control 

under our new standard. 

116. Our elimination of the 

Intermountain Microwave de facto

control standard with respect to 

infrastructure sharing arrangements 

75162 Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 

generally, however, in no way affects 

the application of our rules to determine 

eligibility for designated entity and 

entrepreneur licensee status. A 

designated entity or entrepreneur 

licensee will be permitted to enter into 

an infrastructure sharing arrangement, 

without application of our unjust 

enrichment rules and transfer 

restrictions, only so long as the 

arrangement does not result in another 

entity’s becoming a controlling interest 

or affiliate of the licensee, such that the 

licensee would no longer meet our 

eligibility requirements for designated 

entity or entrepreneur benefits. For 

these determinations, our existing 

attribution rules, including our 

definitions of controlling interest and 

affiliation (which incorporate the 

Intermountain Microwave principles of 

de facto control), will continue to 

control. However, in determinations 

involving infrastructure sharing 

arrangements, our attribution rules will 

be applied in the same manner in 

which, as we clarified in the Secondary 

Markets Report and Order, they are to 

be applied in determinations involving 

spectrum manager leasing arrangements. 

We expect each designated entity or 

entrepreneur licensee contemplating 

entering into an infrastructure sharing 

arrangement to analyze in advance 

whether such an arrangement would 

adversely affect the licensee’s ongoing 

eligibility for size-based benefits. 

117. The assessment of potential 

competitive effects of transactions, 

whether they are transfers of control, 

license assignments, or infrastructure 

sharing arrangements, remains an 

important element of our policies to 

promote facilities-based competition 

and guard against the harmful effects of 

anticompetitive conduct. We believe 

that our encouragement of infrastructure 

sharing arrangements as potentially 

effective means to promote the 

provision of spectrum based services to 

rural areas is consistent with our 

consideration of competitive effects and 

potential competitive harm. Providers 

and consumers may be in a position to 

benefit from the potential for lower 

capital costs for facilities and improved 

coverage. 

118. One commenter expressed 

concern that interference issues similar 

to those that have been raised in other 

proceedings may result from 

infrastructure sharing arrangements, 

particularly with respect to the potential 

for interference that may result from the 

collocation of antennas. Licensees that 

are parties to infrastructure sharing 

arrangements will be responsible for 

resolving all interference-related matters 

that may result from such arrangements 

in a manner consistent with the 

Commission’s interference-based service 

rules. Our notification requirement that 

we adopt here also helps us to ensure 

that licensees and non-licensee parties 

to an arrangement are complying with 

our interference and non-interference 

related policies and rules. 

119. Potential Barriers to 

Infrastructure Sharing. A number of 

comments request that the Commission 

act to remove impediments to 

infrastructure sharing at the state and 

local level, particularly as they relate to 

tower siting. The Commission is asked 

to form a national policy that would 

seek to remove these barriers and 

establish direction for state and local 

authorities to establish clear and 

consistent siting policies. Some 

comments ask generally that the 

Commission preempt state and local 

regulations that block the deployment of 

services in rural areas. 

120. Section 332(c)(7) of the Act 

preserves state and local authority over 

zoning and land use decisions for 

personal wireless service facilities, but 

also limits that authority. The 

limitations include that state or local 

governments may not unreasonably 

discriminate among providers of 

functionally equivalent services, and 

may not regulate in a manner that 

prohibits or has the effect of prohibiting 

the provision of personal wireless 

services. A state or local government 

also must act on applications within a 

reasonable period of time, and must 

make any denial of an application in 

writing supported by substantial 

evidence in a written record. The statute 

also preempts state and local decisions 

to regulate the placement, construction, 

and modification of personal wireless 

service facilities on the basis of the 

environmental effects of radio frequency 

(RF) emissions to the extent the 

facilities comply with the Commission’s 

RF rules. 

121. We encourage state and local 

authorities, when considering requests 

to deploy wireless facilities and when 

establishing facilities siting policies, to 

consider the impacts of their decisions 

on the availability of competitive 

wireless service. We note some 

localities have imposed tower siting 

requirements that make both initial 

construction and subsequent sharing of 

facilities difficult. We believe that state 

and local governments should consider 

measures that would reduce regulatory 

burdens for those projects that are least 

likely to implicate local land use 

concerns, while retaining reasonable 

review processes for proposals that are 

more likely to have significant effects. In 

this regard, the Commission and its 

former Local and State Government 

Advisory Committee (LSGAC) have 

provided guidance to state and local 

authorities to assist them in devising 

efficient procedures for verifying that 

antenna facilities comply with the 

Commission’s RF exposure guidelines. 

We will consider offering similar 

guidance in the future in response to 

specific needs. 

122. With respect to preemption, as 

discussed above, section 332(c)(7) of the 

Communications Act of 1934 as 

amended, generally preserves local 

authority over land use decisions, and 

limits the Commission’s authority in 

this area. In appropriate cases, the 

Commission or its Bureaus have 

considered petitions alleging that 

particular regulations impinge on areas 

within the Commission’s exclusive 

jurisdiction. We will continue to 

address such issues in the future where 

supported by law.

123. Finally, we note that we have 

taken action to improve our own rules 

and procedures respecting other tower 

siting issues, including those relating to 

our environmental review, in order to 

facilitate the timely deployment of 

wireless services. We will continue to 

consider further improvements in the 

future where necessary. 

4. Rural Radiotelephone Service/Basic 

Exchange Telecommunications Radio 

Service 

124. Background. In the Rural NPRM,

the Commission sought comment on 

several issues related to the current use 

and demand for service in the Rural 

Radiotelephone Service (RRS) and the 

Basic Exchange Telecommunications 

Radio Service (BETRS). Additionally, 

the Commission sought comment on 

whether its current rules and policies 

for RRS and BETRS are limiting factors 

towards a more expansive use of these 

services. As indicated in the Rural 

NPRM, RRS was established to provide, 

in most instances, basic telephone 

service to subscribers in locations 

deemed so remote that traditional 

wireline service or service by other 

means is not feasible. BETRS is a digital 

counterpart to the traditional, analog 

RRS, and can be characterized as more 

spectrally efficient than RRS, provides 

private calling, and has a much lower 

call blocking rate than RRS. All RRS and 

BETRS authorizations are issued on a 

secondary, non-interfering basis. 

125. Specifically, in the Rural NPRM, 

the Commission sought comment on the 

current level of demand for RRS and 

BETRS and noted that according to its 

licensing records, a relatively low 

number of licenses have been issued for 

the spectrum. In addition, the 

Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 75163

Commission sought comment on the 

demand for basic communications 

services, other than wireline, and 

inquired about how the demand is being 

met if it is not through the use of RRS 

and BETRS spectrum. Furthermore, the 

Commission sought comment on 

whether access to RRS and BETRS 

spectrum is an impediment to the 

provision of these services, if a demand 

exists. 

126. With respect to current policies 

and rules, the Commission sought 

comment on the proposal to remove the 

eligibility restriction for BETRS that 

restricts the issuance of a license to only 

those entities that receive state approval 

to provide a basic exchange telephone 

service. The Commission also sought 

comment on whether expanding the 

secondary status of RRS and BETRS to 

other spectrum bands would facilitate 

and encourage construction in rural 

areas. Finally, the Commission sought 

comment on whether additional 

spectrum, issued on a primary basis, is 

needed at this time for RRS and BETRS. 

127. Discussion. We conclude that it 

is appropriate to remove the eligibility 

restrictions contained within § 22.702 of 

our rules regarding state approval prior 

to the issuance of a BETRS license. 

Although no comments were received 

regarding this specific proposal, we 

believe the removal of this restriction is 

in the public interest. As it stands now, 

a potential BETRS licensee must 

demonstrate that it has received state 

approval to provide basic exchange 

telephone service prior to applying for 

a BETRS license. We believe by 

eliminating this restriction, a potential 

regulatory barrier is removed and the 

process for gaining access to BETRS 

spectrum is simplified and expedited. 

Nonetheless, we retain the current 

requirement that a BETRS station must 

be constructed within 12 months of the 

issuance of a license, therefore 

minimizing the potential for 

warehousing spectrum in those 

instances where a BETRS licensee does 

not receive state approval, where 

required, to provide basic exchange 

telephone service. 

128. The Commission consolidated 

into the instant proceeding two 

petitions that seek reconsideration of its 

decision in the Spectrum Cap Sunset 

Order. In March 2002, the Commission 

sought comment on petitions filed by 

Dobson Communications Corporation, 

Western Wireless Corporation, and 

Rural Cellular Corporation (Dobson/

Western/RCC) and Cingular Wireless 

LLC (Cingular) seeking reconsideration 

of the portion of the Spectrum Cap 

Sunset Order that retained the cellular 

cross-interest rule in RSAs. See 

Petitions for Reconsideration of Action 

in Rulemaking Proceeding, 67 FR 13183 

(March 21, 2002). For the Commission’s 

discussion and disposition of those two 

petitions see paragraphs 58 through 70 

above and paragraph 182 below. 

IV. Procedural Matters 

129. As required by the Regulatory 

Flexibility Act (RFA), an Initial 

Regulatory Flexibility Analysis (IRFA) 

was incorporated in the Notice of 

Proposed Rulemaking in WT Docket 

Nos. 02–381, 01–14, and 03–202, 

released October 6, 2003. The 

Commission sought written public 

comment on the proposals in the Rural 

NPRM, including comment on the IRFA. 

This Final Regulatory Flexibility 

Analysis (FRFA) conforms to the RFA. 

A. Need for, and Objectives of, the 

Report and Order 

130. We adopt several measures, as 

indicated below, intended to increase 

the ability of wireless service providers 

to use licensed spectrum resources 

flexibly and efficiently to offer a variety 

of services in a cost-effective manner. 

The Commission takes steps to promote 

access to spectrum and facilitate capital 

formation for entities seeking to serve 

rural areas or improve service in rural 

areas. We expect that these decisions 

will facilitate the deployment of new 

and advanced wireless services, 

including broadband services, and 

thereby foster much-needed economic 

development. 

131. Definition of ‘‘rural area’’. We 

establish the presumption that, unless 

otherwise specified in the context of 

specific policies or regulations 

governing wireless communications 

services, counties with a population 

density of 100 persons or less per square 

mile constitute ‘‘rural areas’’ for 

purposes of the Commission’s wireless 

spectrum policies. 

132. Size of geographic service areas 

and re-licensing issues. We examine 

Commission policies affecting access to 

spectrum and the provision of service in 

rural areas. In particular, the 

Commission considers its policies 

governing the licensing of spectrum, 

both with respect to initial licensing 

through the competitive bidding 

process, as well as subsequent relicensing after an authorization is 

returned to the Commission. 

Specifically, the Report and Order

affirms that the Commission will 

continue to establish licensing areas on 

a service-by-service (or band-by-band) 

basis as appropriate, based upon the 

flexibility that such an approach 

provides and our past experience in 

determining the initial size of service 

areas. The Commission also reaffirms 

that when developing rules for licensing 

individual services in the future, it will 

consider using smaller service areas in 

some spectrum blocks to encourage 

deployment in rural areas for the service 

in question. 

133. Cellular cross-interest rule and 

conditional security interests to RUS.

We also take the following steps to 

facilitate increased access to capital for 

rural licensees, and eliminate the 

remaining components of the cellular 

cross-interest rule that currently apply 

only in Rural Service Area (RSA) 

markets and transitions to case-by-case 

review for cellular transactions, while 

closely examining those that present a 

significant likelihood of substantial 

competitive harm in a market. The 

Commission also revises the policies 

governing security interests in wireless 

licenses by permitting licensees, at their 

discretion, to grant such interests to the 

Department of Agriculture’s Rural 

Utilities Service (RUS).

134. Increase of power limits for 

certain services. We amend the 

Commission’s regulations to increase 

permissible power levels for base 

stations in certain wireless services that 

are located in rural areas or that provide 

coverage to otherwise unserved areas. In 

doing so, the Commission anticipates 

that coverage of such areas will be more 

economical, as licensees may provide 

increased coverage of rural areas using 

fewer base stations and less associated 

infrastructure. The Commission believes 

these actions will increase licensee 

flexibility and permit more costeffective coverage of rural areas. 

135. Substantial service construction 

requirement. We also amend regulations 

to permit certain geographic-area 

licensees to provide substantial service 

as a means of complying with their 

construction requirements, thus 

countering existing disincentives to 

build out less densely populated areas. 

136. Infrastructure sharing. Finally, 

we conclude that the revised de facto

control standard for spectrum leasing 

adopted in the Commission’s Secondary 

Markets proceeding generally shall 

apply for interpreting whether a 

licensee retains de facto control for 

purposes of section 310(d) of the 

Communications Act when it is engaged 

in an infrastructure sharing 

arrangement. 

B. Summary of Significant Issues Raised 

by Public Comments in Response to the 

IRFA 

137. We received no comments in 

response to the IRFA. However, as 

described below, we have nonetheless 

considered potential significant 

75164 Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 

economic impacts of our actions on 

small entities. 

C. Description and Estimate of the 

Number of Small Entities to Which the 

Rules Will Apply 

138. The RFA directs agencies to 

provide a description of, and where 

feasible, an estimate of the number of 

small entities that may be affected by 

the proposed rules, if adopted. The RFA 

generally defines the term ‘‘small 

entity’’ as having the same meaning as 

the terms ‘‘small business,’’ ‘‘small 

organization,’’ and ‘‘small governmental 

jurisdiction.’’ In addition, the term 

‘‘small business’’ has the same meaning 

as the term ‘‘small business concern’’

under the Small Business Act. A ‘‘small 

business concern’’ is one which: (1) Is 

independently owned and operated; (2) 

is not dominant in its field of operation; 

and (3) satisfies any additional criteria 

established by the Small Business 

Administration (SBA). 

139. Cellular Licensees. The SBA has 

developed a small business size 

standard for small businesses in the 

category ‘‘Cellular and Other Wireless 

Telecommunications.’’ Under that SBA 

category, a business is small if it has 

1,500 or fewer employees. According to 

the Bureau of the Census, only twelve 

firms out of a total of 1,238 cellular and 

other wireless telecommunications 

firms operating during 1997 had 1,000 

or more employees. Therefore, even if 

all 12 of these firms were cellular 

telephone companies, nearly all cellular 

carriers are small businesses under the 

SBA’s definition. 

140. 220 MHz Radio Service—Phase I 

Licensees. The 220 MHz service has 

both Phase I and Phase II licenses. Phase 

I licensing was conducted by lotteries in 

1992 and 1993. There are approximately 

1,515 such non-nationwide licensees 

and four nationwide licensees currently 

authorized to operate in the 220 MHz 

band. The Commission has not 

developed a definition of small entities 

specifically applicable to such 

incumbent 220 MHz Phase I licensees. 

To estimate the number of such 

licensees that are small businesses, we 

apply the small business size standard 

under the SBA rules applicable to 

‘‘Cellular and Other Wireless 

Telecommunications’’ companies. This 

category provides that a small business 

is a wireless company employing no 

more than 1,500 persons. According to 

the Census Bureau data for 1997, only 

12 firms out of a total of 1,238 such 

firms that operated for the entire year, 

had 1,000 or more employees. If this 

general ratio continues in the context of 

Phase I 220 MHz licensees, the 

Commission estimates that nearly all 

such licensees are small businesses 

under the SBA’s small business 

standard. 

141. 220 MHz Radio Service—Phase II 

Licensees. The 220 MHz service has 

both Phase I and Phase II licenses. The 

Phase II 220 MHz service is subject to 

spectrum auctions. For this service in 

1997, we adopted a small business size 

standard for defining ‘‘small’’ and ‘‘very 

small’’ businesses for purposes of 

determining their eligibility for special 

provisions such as bidding credits and 

installment payments. This small 

business standard indicates that a 

‘‘small business’’ is an entity that, 

together with its affiliates and 

controlling principals, has average gross 

revenues not exceeding $15 million for 

the preceding three years. A ‘‘very small 

business’’ is defined as an entity that, 

together with its affiliates and 

controlling principals, has average gross 

revenues that do not exceed $3 million 

for the preceding three years. The SBA 

has approved these small size standards. 

Auctions of Phase II licenses 

commenced on September 15, 1998, and 

closed on October 22, 1998. In the first 

auction, 908 licenses were auctioned in 

three different-sized geographic areas: 

Three nationwide licenses, 30 Regional 

Economic Area Group (EAG) Licenses, 

and 875 Economic Area (EA) Licenses. 

Of the 908 licenses auctioned, 693 were 

sold. Thirty-nine small businesses won 

373 licenses in the first 220 MHz 

auction. A second auction included 225 

licenses: 216 EA licenses and 9 EAG 

licenses. Fourteen companies claiming 

small business status won 158 licenses. 

A third auction included four licenses: 

2 BEA licenses and 2 EAG licenses in 

the 220 MHz Service. No small or very 

small business won any of these 

licenses. 

142. Lower 700 MHz Band Licenses.

We adopted criteria for defining three 

groups of small businesses for purposes 

of determining their eligibility for 

special provisions such as bidding 

credits. We have defined a small 

business as an entity that, together with 

its affiliates and controlling principals, 

has average gross revenues not 

exceeding $40 million for the preceding 

three years. A very small business is 

defined as an entity that, together with 

its affiliates and controlling principals, 

has average gross revenues that are not 

more than $15 million for the preceding 

three years. Additionally, the lower 700 

MHz Service has a third category of 

small business status that may be 

claimed for Metropolitan/Rural Service 

Area (MSA/RSA) licenses. The third 

category is entrepreneur, which is 

defined as an entity that, together with 

its affiliates and controlling principals, 

has average gross revenues that are not 

more than $3 million for the preceding 

three years. The SBA has approved 

these small size standards. An auction 

of 740 licenses (one license in each of 

the 734 MSAs/RSAs and one license in 

each of the six EAGs) commenced on 

August 27, 2002, and closed on 

September 18, 2002. Of the 740 licenses 

available for auction, 484 licenses were 

sold to 102 winning bidders. Seventytwo of the winning bidders claimed 

small business, very small business or 

entrepreneur status and won a total of 

329 licenses. A second auction 

commenced on May 28, 2003, and 

closed on June 13, 2003, and included 

256 licenses: 5 EAG licenses and 476 

CMA licenses. Seventeen winning 

bidders claimed small or very small 

business status and won sixty licenses, 

and nine winning bidders claimed 

entrepreneur status and won 154 

licenses. 

143. Upper 700 MHz Band Licenses.

In 2001, the Commission authorized 

service in the upper 700 MHz band. The 

related auction, previously scheduled 

for January 13, 2003, has been 

postponed. 

144. Paging. In 1997, we adopted a 

size standard for ‘‘small businesses’’ for 

purposes of determining their eligibility 

for special provisions such as bidding 

credits and installment payments. A 

small business is an entity that, together 

with its affiliates and controlling 

principals, has average gross revenues 

not exceeding $15 million for the 

preceding three years. The SBA has 

approved this definition. An auction of 

Metropolitan Economic Area (MEA) 

licenses commenced on February 24, 

2000, and closed on March 2, 2000. Of 

the 2,499 licenses auctioned, 985 were 

sold. Fifty-seven companies claiming 

small business status won 440 licenses. 

An auction of Metropolitan Economic 

Area (MEA) and EA licenses 

commenced on October 30, 2001, and 

closed on December 5, 2001. Of the 

15,514 licenses auctioned, 5,323 were 

sold. One-hundred thirty-two 

companies claiming small business 

status purchased 3,724 licenses. A third 

auction, consisting of 8,874 licenses in 

each of 175 EAs and 1,328 licenses in 

all but three of the 51 MEAs 

commenced on May 13, 2003, and 

closed on May 28, 2003. Seventy-seven 

bidders claiming small or very small 

business status won 2,093 licenses. 

Currently, there are approximately 

24,000 Private Paging site-specific 

licenses and 74,000 Common Carrier 

Paging licenses. According to the most 

recent Trends in Telephone Service, 608 

private and common carriers reported 

that they were engaged in the provision 

Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 75165

of either paging or ‘‘other mobile’’

services. Of these, we estimate that 589 

are small, under the SBA-approved 

small business size standard. We 

estimate that the majority of private and 

common carrier paging providers would 

qualify as small entities under the SBA 

definition.

145. Broadband Personal 

Communications Service (PCS). The 

broadband PCS spectrum is divided into 

six frequency blocks designated A 

through F, and the Commission has held 

auctions for each block. The 

Commission has created a small 

business size standard for Blocks C and 

F as an entity that has average gross 

revenues of less than $40 million in the 

three previous calendar years. For Block 

F, an additional small business size 

standard for ‘‘very small business’’ was 

added and is defined as an entity that, 

together with its affiliates, has average 

gross revenues of not more than $15 

million for the preceding three calendar 

years. These small business size 

standards, in the context of broadband 

PCS auctions, have been approved by 

the SBA. No small businesses within the 

SBA-approved small business size 

standards bid successfully for licenses 

in Blocks A and B. There were 90 

winning bidders that qualified as small 

entities in the Block C auctions. A total 

of 93 ‘‘small’’ and ‘‘very small’’ business 

bidders won approximately 40 percent 

of the 1,479 licenses for Blocks D, E, and 

F. On March 23, 1999, the Commission 

reauctioned 155 C, D, E, and F Block 

licenses; there were 113 small business 

winning bidders. 

146. Narrowband PCS. The 

Commission held an auction for 

Narrowband PCS licenses that 

commenced on July 25, 1994, and 

closed on July 29, 1994. A second 

commenced on October 26, 1994 and 

closed on November 8, 1994. For 

purposes of the first two Narrowband 

PCS auctions, ‘‘small businesses’’ were 

entities with average gross revenues for 

the prior three calendar years of $40 

million or less. Through these auctions, 

the Commission awarded a total of 41 

licenses, 11 of which were obtained by 

four small businesses. To ensure 

meaningful participation by small 

business entities in future auctions, the 

Commission in 2000 for this service 

adopted a two-tiered small business size 

standard. A ‘‘small business’’ is an 

entity that, together with affiliates and 

controlling interests, has average gross 

revenues for the three preceding years of 

not more than $40 million. A ‘‘very 

small business’’ is an entity that, 

together with affiliates and controlling 

interests, has average gross revenues for 

the three preceding years of not more 

than $15 million. The SBA has 

approved these small business size 

standards. A third auction commenced 

on October 3, 2001 and closed on 

October 16, 2001. Here, five bidders 

won 317 (MTA and nationwide) 

licenses. Three of these claimed status 

as a small or very small entity and won 

311 licenses. A fourth auction 

commenced on September 24, 2003 and 

closed on September 29, 2003. Here, 

four bidders won 48 licenses. Four of 

these claimed status as a very small 

entity and won 48 licenses. Finally, a 

fifth auction commenced on September 

24, 2003 and closed on September 25, 

2003. Here, one bidder won five 

licenses. That bidder claimed status as 

a very small entity. 

147. Specialized Mobile Radio (SMR). 

The Commission awards ‘‘small entity’’

bidding credits in auctions for SMR 

geographic area licenses in the 800 MHz 

and 900 MHz bands to firms that had 

revenues of no more than $15 million in 

each of the three previous calendar 

years. The Commission awards ‘‘very 

small entity’’ bidding credits to firms 

that had revenues of no more than $3 

million in each of the three previous 

calendar years. The SBA has approved 

these small business size standards for 

the 900 MHz Service. The Commission 

has held auctions for geographic area 

licenses in the 800 MHz and 900 MHz 

bands. The 900 MHz SMR auction began 

on December 5, 1995, and closed on 

April 15, 1996. Sixty bidders claiming 

that they qualified as small businesses 

under the $15 million size standard won 

263 geographic area licenses in the 900 

MHz SMR band. The 800 MHz SMR 

auction for the upper 200 channels 

began on October 28, 1997, and was 

completed on December 8, 1997. Ten 

bidders claiming that they qualified as 

small businesses under the $15 million 

size standard won 38 geographic area 

licenses for the upper 200 channels in 

the 800 MHz SMR band. A second 

auction for the 800 MHz band was held 

on January 10, 2002 and closed on 

January 17, 2002 and included 23 BEA 

licenses. One bidder claiming small 

business status won five licenses. 

148. The auction of the 1,050 800 

MHz SMR geographic area licenses for 

the General Category channels began on 

August 16, 2000, and was completed on 

September 1, 2000. Eleven bidders won 

108 geographic area licenses for the 

General Category channels in the 800 

MHz SMR band qualified as small 

businesses under the $15 million size 

standard. In an auction completed on 

December 5, 2000, a total of 2,800 

Economic Area licenses in the lower 80 

channels of the 800 MHz SMR service 

were sold. Of the 22 winning bidders, 

19 claimed ‘‘small business’’ status and 

won 129 licenses. Thus, combining all 

three auctions, 40 winning bidders for 

geographic licenses in the 800 MHz 

SMR band claimed status as small 

business. 

149. In addition, there are numerous 

incumbent site-by-site SMR licensees 

and licensees with extended 

implementation authorizations in the 

800 and 900 MHz bands. We do not 

know how many firms provide 800 MHz 

or 900 MHz geographic area SMR 

pursuant to extended implementation 

authorizations, nor how many of these 

providers have annual revenues of no 

more than $15 million. One firm has 

over $15 million in revenues. We 

assume, for purposes of this analysis, 

that all of the remaining existing 

extended implementation 

authorizations are held by small 

entities, as that small business size 

standard is established by the SBA. 

150. Private Land Mobile Radio

(PLMR). PLMR systems serve an 

essential role in a range of industrial, 

business, land transportation, and 

public safety activities. These radios are 

used by companies of all sizes operating 

in all U.S. business categories, and are 

often used in support of the licensee’s 

primary (non-telecommunications) 

business operations. For the purpose of 

determining whether a licensee of a 

PLMR system is a small business as 

defined by the SBA, we could use the 

definition for ‘‘Cellular and Other 

Wireless Telecommunications.’’ This 

definition provides that a small entity is 

any such entity employing no more than 

1,500 persons. The Commission does 

not require PLMR licensees to disclose 

information about number of 

employees, so the Commission does not 

have information that could be used to 

determine how many PLMR licensees 

constitute small entities under this 

definition. Moreover, because PLMR 

licensees generally are not in the 

business of providing cellular or other 

wireless telecommunications services 

but instead use the licensed facilities in 

support of other business activities, we 

are not certain that the Cellular and 

Other Wireless Telecommunications 

category is appropriate for determining 

how many PLMR licensees are small 

entities for this analysis. Rather, it may 

be more appropriate to assess PLMR 

licensees under the standards applied to 

the particular industry subsector to 

which the licensee belongs. 

151. The Commission’s 1994 Annual 

Report on PLMRs indicates that at the 

end of fiscal year 1994, there were 

1,087,267 licensees operating 

12,481,989 transmitters in the PLMR 

bands below 512 MHz. Because any 

75166 Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 

entity engaged in a commercial activity 

is eligible to hold a PLMR license, the 

revised rules in this context could 

potentially impact every small business 

in the United States. 

152. Fixed Microwave Services. Fixed 

microwave services include common 

carrier, private-operational fixed, and 

broadcast auxiliary radio services. 

Currently, there are approximately 

22,015 common carrier fixed licensees 

and 61,670 private operational-fixed 

licensees and broadcast auxiliary radio 

licensees in the microwave services. 

The Commission has not yet defined a 

small business with respect to 

microwave services. For purposes of 

this FRFA, we will use the SBA’s 

definition applicable to ‘‘Cellular and 

Other Wireless Telecommunications’’

companies—that is, an entity with no 

more than 1,500 persons. The 

Commission does not have data 

specifying the number of these licensees 

that have more than 1,500 employees, 

and thus is unable at this time to 

estimate with greater precision the 

number of fixed microwave service 

licensees that would qualify as small 

business concerns under the SBA’s 

small business size standard. 

Consequently, the Commission 

estimates that there are 22,015 or fewer 

small common carrier fixed licensees 

and 61,670 or fewer small private 

operational-fixed licensees and small 

broadcast auxiliary radio licensees in 

the microwave services that may be 

affected by the rules and policies 

adopted herein. The Commission notes, 

however, that the common carrier 

microwave fixed licensee category 

includes some large entities. 

153. Wireless Communications 

Services. This service can be used for 

fixed, mobile, radiolocation, and digital 

audio broadcasting satellite uses. The 

Commission defined ‘‘small business’’

for the wireless communications 

services (WCS) auction as an entity with 

average gross revenues of $40 million 

for each of the three preceding years, 

and a ‘‘very small business’’ as an entity 

with average gross revenues of $15 

million for each of the three preceding 

years. The SBA has approved these 

definitions. The FCC auctioned 

geographic area licenses in the WCS 

service. In the auction, which 

commenced on April 15, 1997 and 

closed on April 25, 1997, there were 

seven bidders that won 31 licenses that 

qualified as very small business entities, 

and one bidder that won one license 

that qualified as a small business entity. 

An auction for one license in the 1670–

1674 MHz band commenced on April 

30, 2003 and closed the same day. One 

license was awarded. The winning 

bidder was not a small entity. 

154. 39 GHz Service. The Commission 

defines ‘‘small entity’’ for 39 GHz 

licenses as an entity that has average 

gross revenues of less than $40 million 

in the three previous calendar years. 

‘‘Very small business’’ is defined as an 

entity that, together with its affiliates, 

has average gross revenues of not more 

than $15 million for the preceding three 

calendar years. The SBA has approved 

these definitions. The auction of the 

2,173 39 GHz licenses began on April 

12, 2000, and closed on May 8, 2000. 

The 18 bidders who claimed small 

business status won 849 licenses. 

155. Local Multipoint Distribution 

Service. An auction of the 986 Local 

Multipoint Distribution Service (LMDS) 

licenses began on February 18, 1998, 

and closed on March 25, 1998. The 

Commission defined ‘‘small entity’’ for 

LMDS licenses as an entity that has 

average gross revenues of less than $40 

million in the three previous calendar 

years. An additional classification for 

‘‘very small business’’ was added and is 

defined as an entity that, together with 

its affiliates, has average gross revenues 

of not more than $15 million for the 

preceding three calendar years. These 

regulations defining ‘‘small entity’’ in 

the context of LMDS auctions have been 

approved by the SBA. There were 93 

winning bidders that qualified as small 

entities in the LMDS auctions. A total of 

93 small and very small business 

bidders won approximately 277 A Block 

licenses and 387 B Block licenses. On 

March 27, 1999, the Commission reauctioned 161 licenses; there were 32 

small and very small business winning 

bidders that won 119 licenses.

156. 218–219 MHz Service. The first 

auction of 218–219 MHz (previously 

referred to as the Interactive and Video 

Data Service or IVDS) spectrum resulted 

in 178 entities winning licenses for 594 

Metropolitan Statistical Areas (MSAs). 

Of the 594 licenses, 567 were won by 

167 entities qualifying as a small 

business. For that auction, we defined a 

small business as an entity that, together 

with its affiliates, has no more than a $6 

million net worth and, after federal 

income taxes (excluding any carry over 

losses), has no more than $2 million in 

annual profits each year for the previous 

two years. For this service in 1999, we 

defined a small business as an entity 

that, together with its affiliates and 

persons or entities that hold interests in 

such an entity and their affiliates, has 

average annual gross revenues not 

exceeding $15 million for the preceding 

three years. A very small business is 

defined as an entity that, together with 

its affiliates and persons or entities that 

hold interests in such an entity and its 

affiliates, has average annual gross 

revenues not exceeding $3 million for 

the preceding three years. The SBA has 

approved of these definitions. At this 

time, we cannot estimate the number of 

licenses that will be won by entities 

qualifying as small or very small 

businesses under our rules in future 

auctions of 218–219 MHz spectrum. 

Given the success of small businesses in 

the previous auction, and the 

prevalence of small businesses in the 

subscription television services and 

message communications industries, we 

assume for purposes of this FRFA that 

in future auctions, many, and perhaps 

all, of the licenses may be awarded to 

small businesses. 

157. Location and Monitoring Service

(LMS). Multilateration LMS systems use 

non-voice radio techniques to determine 

the location and status of mobile radio 

units. For purposes of auctioning LMS 

licenses, the Commission has defined 

‘‘small business’’ as an entity that, 

together with controlling interests and 

affiliates, has average annual gross 

revenues for the preceding three years 

not exceeding $15 million. A ‘‘very 

small business’’ is defined as an entity 

that, together with controlling interests 

and affiliates, has average annual gross 

revenues for the preceding three years 

not exceeding $3 million. These 

definitions have been approved by the 

SBA. An auction for LMS licenses 

commenced on February 23, 1999, and 

closed on March 5, 1999. Of the 528 

licenses auctioned, 289 licenses were 

sold to four small businesses. We cannot 

accurately predict the number of 

remaining licenses that could be 

awarded to small entities in future LMS 

auctions. 

158. Rural Radiotelephone Service.

We use the SBA definition applicable to 

cellular and other wireless 

telecommunication companies, i.e., an 

entity employing no more than 1,500 

persons. There are approximately 1,000 

licensees in the Rural Radiotelephone 

Service, and the Commission estimates 

that there are 1,000 or fewer small entity 

licensees in the Rural Radiotelephone 

Service that may be affected by the rules 

and policies adopted herein. 

159. Air-Ground Radiotelephone 

Service. We use the SBA definition 

applicable to cellular and other wireless 

telecommunication companies, i.e., an 

entity employing no more than 1,500 

persons. There are approximately 10 

licensees in the Air-Ground 

Radiotelephone Service, and the 

Commission estimates that almost all of 

them qualify as small entities under the 

SBA definition. 

Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 75167

160. Offshore Radiotelephone Service.

This service operates on several ultra 

high frequency (UHF) TV broadcast 

channels that are not used for TV 

broadcasting in the coastal area of the 

states bordering the Gulf of Mexico. At 

present, there are approximately 55 

licensees in this service. We use the 

SBA definition applicable to cellular 

and other wireless telecommunication 

companies, i.e., an entity employing no 

more than 1,500 persons. The 

Commission is unable at this time to 

estimate the number of licensees that 

would qualify as small entities under 

the SBA definition. The Commission 

assumes, for purposes of this FRFA, that 

all of the 55 licensees are small entities, 

as that term is defined by the SBA. 

161. Multiple Address Systems

(MAS). Entities using MAS spectrum, in 

general, fall into two categories: (1) 

Those using the spectrum for profitbased uses, and (2) those using the 

spectrum for private internal uses. With 

respect to the first category, the 

Commission defines ‘‘small entity’’ for 

MAS licenses as an entity that has 

average gross revenues of less than $15 

million in the three previous calendar 

years. ‘‘Very small business’’ is defined 

as an entity that, together with its 

affiliates, has average gross revenues of 

not more than $3 million for the 

preceding three calendar years. The 

SBA has approved of these definitions. 

The majority of these entities will most 

likely be licensed in bands where the 

Commission has implemented a 

geographic area licensing approach that 

would require the use of competitive 

bidding procedures to resolve mutually 

exclusive applications. The 

Commission’s licensing database 

indicates that, as of January 20, 1999, 

there were a total of 8,670 MAS station 

authorizations. Of these, 260 

authorizations were associated with 

common carrier service. In addition, an 

auction for 5,104 MAS licenses in 176 

EAs began November 14, 2001, and 

closed on November 27, 2001. Seven 

winning bidders claimed status as small 

or very small businesses and won 611 

licenses. 

162. With respect to the second 

category, which consists of entities that 

use, or seek to use, MAS spectrum to 

accommodate their own internal 

communications needs, we note that 

MAS serves an essential role in a range 

of industrial, safety, business, and land 

transportation activities. MAS radios are 

used by companies of all sizes, 

operating in virtually all U.S. business 

categories, and by all types of public 

safety entities. For the majority of 

private internal users, the definitions 

developed by the SBA would be more 

appropriate. The applicable definition 

of small entity in this instance appears 

to be the ‘‘Cellular and Other Wireless 

Telecommunications’’ definition under 

the SBA rules. This definition provides 

that a small entity is any entity 

employing no more than 1,500 persons. 

The Commission’s licensing database 

indicates that, as of January 20, 1999, of 

the 8,670 total MAS station 

authorizations, 8,410 authorizations 

were for private radio service, and of 

these, 1,433 were for private land 

mobile radio service. 

163. Incumbent 24 GHz Licensees.

The rules that we adopt could affect 

incumbent licensees who were relocated 

to the 24 GHz band from the 18 GHz 

band, and applicants who wish to 

provide services in the 24 GHz band. 

The Commission did not develop a 

definition of small entities applicable to 

existing licensees in the 24 GHz band. 

Therefore, the applicable definition of 

small entity is the definition under the 

SBA rules for ‘‘Cellular and Other 

Wireless Telecommunications.’’ This 

definition provides that a small entity is 

any entity employing no more than 

1,500 persons. The 1992 Census of 

Transportation, Communications and 

Utilities, conducted by the Bureau of the 

Census, which is the most recent 

information available, shows that only 

12 radiotelephone (now Wireless) firms 

out of a total of 1,178 such firms that 

operated during 1992 had 1,000 or more 

employees. This information 

notwithstanding, we believe that there 

are only two licensees in the 24 GHz 

band that were relocated from the 18 

GHz band: Teligent and TRW, Inc. It is 

our understanding that Teligent and its 

related companies have less than 1,500 

employees, though this may change in 

the future. TRW is not a small entity. 

Thus, only one incumbent licensee in 

the 24 GHz band is a small business 

entity. 

164. Future 24 GHz Licensees. With 

respect to new applicants in the 24 GHz 

band, we have defined ‘‘small business’’

as an entity that, together with 

controlling interests and affiliates, has 

average annual gross revenues for the 

three preceding years not exceeding $15 

million. ‘‘Very small business’’ in the 24 

GHz band is defined as an entity that, 

together with controlling interests and 

affiliates, has average gross revenues not 

exceeding $3 million for the preceding 

three years. The SBA has approved 

these definitions. The Commission will 

not know how many licensees will be 

small or very small businesses until the 

auction, if required, is held. 

165. 700 MHz Guard Band Licenses.

For this service in 2000, we adopted a 

small business size standard for ‘‘small 

businesses’’ and ‘‘very small 

businesses’’ for purposes of determining 

their eligibility for special provisions 

such as bidding credits and installment 

payments. A ‘‘small business’’ is an 

entity that, together with its affiliates 

and controlling principals, has average 

gross revenues not exceeding $15 

million for the preceding three years. 

Additionally, a ‘‘very small business’’ is 

an entity that, together with its affiliates 

and controlling principals, has average 

gross revenues that are not more than $3 

million for the preceding three years. 

An auction of 52 MEA licenses 

commenced on September 6, 2000, and 

closed on September 21, 2000. Of the 

104 licenses auctioned, 96 licenses were 

sold to nine bidders. Five of these 

bidders were small businesses that won 

a total of 26 licenses. A second auction 

of 700 MHz Guard Band licenses 

commenced on February 13, 2001 and 

closed on February 21, 2001. All eight 

of the licenses auctioned were sold to 

three bidders. One of these bidders was 

a small business that won a total of two 

licenses.

166. In addition, the SBA has 

developed a small business size 

standard for Cable and Other Program 

Distribution, which includes all such 

companies generating $12.5 million or 

less in annual receipts. According to 

Census Bureau data for 1997, there were 

a total of 1,311 firms in this category, 

total, that had operated for the entire 

year. Of this total, 1,180 firms had 

annual receipts of under $10 million, 

and an additional 52 firms had receipts 

of $10 million or more but less than $25 

million. Consequently, we estimate that 

the majority of providers in this service 

category are small businesses that may 

be affected by the rules and policies 

proposed in the Rural NPRM. 

C. Description of Projected Reporting, 

Recordkeeping and Other Compliance 

Requirements 

167. With respect to the cellular crossinterest rule, in the event that a party 

with a controlling or otherwise 

attributable interest in one cellular 

licensee within an RSA obtains a noncontrolling interest of more than 10 

percent in the other cellular carrier, the 

Commission will require that the 

cellular licensee file a notification with 

the Commission that will include 

updated ownership information (FCC 

Form 602) to reflect this investment. 

This notification requirement will 

sunset at the earlier of: (1) Five years 

after the effective date of this item, or (2) 

at the cellular licensee’s specific 

renewal deadline. 

75168 Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 

D. Steps Taken To Minimize Significant 

Economic Impact on Small Entities, and 

Significant Alternatives Considered 

168. The RFA requires an agency to 

describe any significant alternatives that 

it has considered in reaching its 

proposed approach, which may include 

the following four alternatives (among 

others): (1) The establishment of 

differing compliance or reporting 

requirements or timetables that take into 

account the resources available to small 

entities; (2) the clarification, 

consolidation, or simplification of 

compliance or reporting requirements 

under the rule for small entities; (3) the 

use of performance, rather than design, 

standards; and (4) an exemption from 

coverage of the rule, or any part thereof, 

for small entities. 

169. We adopt several measures 

intended to increase the ability of 

wireless service providers to use 

licensed spectrum resources flexibly 

and efficiently to offer a variety of 

services in a cost-effective manner. The 

Commission also takes steps to promote 

access to spectrum and facilitate capital 

formation for entities, including small 

entities, seeking to serve rural areas or 

improve service in rural areas. As 

explained infra, the actions set forth in 

this Report and Order are consistent 

with the RFA. Given that many carriers 

serving or seeking to serve rural areas 

may be considered small entities for 

FRFA purposes, the steps taken in this 

Report and Order will aid such entities. 

170. Definition of ‘‘rural area’’. We 

establish a baseline definition of ‘‘rural 

area’’ that includes those counties (or 

the equivalent) with a population 

density of 100 persons or less per square 

mile. While some supported alternative 

plans such as defining ‘‘rural areas’’ as 

any area within an RSA or refraining 

from adopting new definitions at all, we 

rejected these alternatives because it 

believes its county- and populationbased definition provides an 

appropriate practical guideline for 

carriers, including carriers qualifying as 

small entities, which serve or seek to 

serve rural areas. We believe the ‘‘100 

persons or less’’ definition best serves 

the Commission’s goals both in ease of 

the definition’s administration and its 

foundation in widely available 

population data. Further, by treating the 

designation not as a uniform definition 

but rather as a presumption that will 

apply only to Commission proceedings 

for which the term ‘‘rural area’’ has not 

been expressly defined, the Commission 

can maintain continuity and avoid 

confusion with respect to definitions of 

‘‘rural’’ already in existence for specific 

policies. 

171. Size of geographic service areas.

We conclude that maintaining the 

flexibility to establish geographic areas 

on a service-by-service basis and 

promoting the use of a variety of service 

areas, including small areas such as 

MSAs/RSAs, are in the public interest. 

Some commenters made an alternative 

proposal that the Commission should 

mandate that small markets such as 

RSAs are available in every future 

auction in order to ensure that small 

carriers are able to acquire licenses at 

auction. We also received a variety of 

suggestions on the appropriate size of 

geographic areas, ranging from a belief 

that all licenses should be based on 

MSAs/RSAs to the recommendation of 

even smaller areas based on counties. 

We rejects those alternatives, 

concluding that service area size should 

not be determined by a bright-line rule 

as some suggest but rather on serviceby-service basis so that the Commission 

can evaluate all factors relevant to the 

types of spectrum being licensed. 

172. When determining the scope of 

geographic licenses, we generally 

consider a number of factors, including 

the size for each area or areas that will 

be licensed; the amount of spectrum to 

be available under each license and 

whether there should be paired 

spectrum blocks available for auction. 

We have designated various sizes of 

geographic service areas, including 

smaller market sizes, in order to 

encourage participation in spectrum 

auctions and to facilitate deployment of 

wireless services. Our service-specific 

approach ensures flexibility while 

providing an opportunity for spectrum 

to be made available over small areas 

such as MSAs or RSAs depending on 

the record and other considerations 

relevant to the specific spectrum. This 

in turn increases the likelihood of 

service to rural markets by all carriers, 

including small entities. 

173. Re-licensing issues. In this 

document, we conclude that because 

secondary markets rules and policies are 

aimed at improving access to spectrum 

in an efficient manner for all carriers, 

including small entities, and we 

therefore would not revise any of its 

specific re-licensing policies at this 

time. Before reaching this conclusion, 

we sought comment on when, and 

under what circumstances, we should 

apply re-licensing provisions to 

prospective spectrum designations in 

order to evaluate mechanisms that it 

could employ in the future that would 

potentially increase service by making 

spectrum available to those seeking to 

serve a given area, particularly if the 

area is rural in nature. We sought 

comment on a number of different relicensing mechanisms that could result 

in increased access to spectrum, 

including a ‘‘keep what you use’’

approach, a ‘‘complete forfeiture’’

approach, and geographic overlays. In 

reaching our decision, we fully 

considered but rejected, at this time, the 

‘‘keep what you use’’ re-licensing 

approach in the context of future band 

designations. We indicated that, after 

being given time to mature and take 

effect, if the secondary markets rules 

and policies do not provide sufficient 

incentives to increase spectrum access 

in rural areas, we would support future 

consideration of ‘‘keep what you use’’

approaches in the context of specific 

service rulemakings for new licensed 

services. 

174. Cellular cross-interest rule. We 

eliminate the remaining components of 

the cellular cross-interest rule that 

currently apply only in RSAs and 

transitions to case-by-case review for 

cellular transactions. To facilitate 

additional access to capital by cellular 

carriers in rural areas, the Commission, 

before adopting this new rule, sought 

comment regarding whether the 

prohibition against cellular crossinterests in all RSAs remains in the 

public interest and whether the current 

cross-interest rule should be retained in 

RSAs with three or fewer CMRS 

competitors. Alternatively, we sought 

comment on whether to eliminate the 

prohibition for all RSAs where the 

ownership interest being obtained is not 

a controlling interest (i.e., where the 

interest is a non-controlling interest and 

where the transaction otherwise would 

not require prior FCC approval). We, 

however, rejected these alternatives and 

found that elimination of the cellular 

cross-interest rule and reliance on a 

uniform case-by-case review process for 

all aggregations of spectrum and 

potentially anticompetitive cellular 

cross-interests in RSAs is currently the 

better approach as compared to the old, 

prophylactic limits. We believe that 

modification of the rule is necessary to 

better encourage more transactions and 

levels of financing that are in the public 

interest while still maintaining much of 

the protection afforded by the cellular 

cross-interest rule. We recognize that 

the approach limiting cross-interests in 

RSAs, as well as the proposal to 

eliminate the rule only in counties with 

more than three competitors, may 

interfere with investment in rural areas 

by discouraging certain financing in the 

RSA portions of a regional market but 

not in the MSA portions. We believe 

that elimination of the cellular crossinterest rule will provide greater 

Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 75169

flexibility to all carriers, including small 

entities. 

175. Conditional security interests to 

RUS. We relax our security interest 

policy to permit commercial and private 

wireless, terrestrial-based licensees to 

grant RUS a conditional security interest 

in their FCC licenses. We believe this 

action will significantly increase the 

financing opportunities for all licensees, 

including those classified as small 

entities, by increasing the value of their 

available collateral. Although one 

commenter suggested in the alternative 

that permitting RUS to obtain a security 

interest in an FCC license would make 

the RUS lending process more onerous, 

the Commission rejected this idea and 

believes that its new policy will 

enhance RUS loan opportunities. We 

believe that allowing FCC licenses to be 

used as collateral will serve the public 

interest by facilitating licensees’ access 

to capital. In doing so, the policy will 

provide increased flexibility for all 

licensees, including small entities, 

seeking to expand into rural areas.

176. Increase of power limits for 

certain services. We amend our 

regulations to increase cellular, PCS, 

and AWS power limits in rural areas as 

a means of encouraging service to these 

areas. In doing so, the Commission 

evaluated the technical and operations 

rules for the various services at issue 

and found that increasing power limits 

may provide measurable benefits 

without creating harmful interference. 

Although it considered and alternative 

proposal to adopt such flexibility for 

other services in addition to cellular, 

PCS, and AWS, we rejected this 

alternative due to lack of support in the 

record. However, licensees in other 

services may file a request for waiver of 

service-specific power limits. 

177. Substantial service construction 

requirement. We amend our regulations 

to provide a substantial service 

construction benchmark for the 

following licensees: 30 MHz broadband 

PCS licensees; 800 MHz SMR licensees 

(blocks A, B, and C); certain 220 MHz 

licensees; LMS licensees; and 700 MHz 

public safety licensees. These licensees 

now have the option of satisfying their 

construction requirements by providing 

substantial service or by complying with 

other service-specific construction 

benchmarks already available to them 

under the Commission’s rules. As part 

of the amendments and in order to 

provide licensees with guidance, we 

adopt safe harbors for providing 

substantial service to rural areas: A 

licensee will be deemed to have met the 

substantial service requirement if it 

provides coverage to at least 75 percent 

of the geographic area of at least 20 

percent of the ‘‘rural areas’’ within its 

licensed area. With respect to fixed 

wireless services, the substantial service 

requirement is met if a licensee 

constructs at least one end of a 

permanent link in at least 20 percent of 

the number of ‘‘rural areas’’ within its 

licensed area. 

178. We implement this rule change 

in order to increase licensees’ flexibility 

to develop rural-focused business plans 

and to allow all licensees, including 

small entities, to deploy spectrum-based 

services in more sparsely populated 

areas without being bound to concrete 

population or geographic coverage 

requirements. Certain commenters 

urged the adoption of a substantial 

service standard only for those licensees 

with ‘‘small geographic territories.’’ We 

rejected this alternative, stating that it 

would only result in focused coverage of 

populated areas instead of more rural 

areas. We also rejected proposals for a 

‘‘very rural area’’ safe harbor or to 

modify safe harbors to include a 

population component. We noted that 

several commenters proposed as an 

alternative that a population component 

be included to make the safe harbor 

more meaningful for licensees whose 

licensed areas include counties with 

large land areas. These commenters 

argued that in such circumstances, it 

may be easier for a licensee to satisfy 

population requirements instead of the 

substantial service safe harbor. In 

rejecting these alternatives, we’ve stated 

that the safe harbors are not intended to 

be the only means of providing 

substantial service, and that we will 

take into consideration a situation in 

which a licensee is serving a ‘‘very rural 

area’’ or a very large geographic area. 

179. Infrastructure sharing. We adopt 

a more flexible de facto control standard 

when interpreting whether a licensee (or 

spectrum lessee) retains de facto control 

for purposes of section 310(d) when 

engaging in an infrastructure sharing 

arrangement involving facilities only. 

Although the Secondary Markets Report 

and Order initially set out this policy 

for the purposes of spectrum sharing 

only, the Commission believes that 

extending this policy to infrastructure 

sharing arrangements will provide the 

potential for savings in both capital 

costs for the construction of facilities 

and for improved coverage in rural 

areas. The Commission noted that most 

commenters supported the adoption of 

this more flexible standard, which they 

believe will help to alleviate the 

significant financial barriers small 

regional entities face when constructing 

wireless networks. Some commenters, 

on the other hand, stated their concern 

with the potential for interference that 

may result from the collocation of 

antennas. In rejecting this concern as 

needless, the Commission pointed out 

that all parties to infrastructure sharing 

arrangements, including small entities, 

must continue to comply with the 

Commission’s interference and noninterference related rules and policies. 

F. Reports to Congress and SBA 

180. The Commission will send a 

copy of this Report and Order, 

including the FRFA, in a report to be 

sent to Congress pursuant to the 

Congressional Review Act. In addition, 

the Commission will send a copy of the 

Report and Order, including this FRFA, 

to the Chief Counsel for Advocacy of the 

Small Business Administration. In 

addition, the Commission’s Consumer 

and Governmental Affairs Bureau, 

Reference Information Center, will send 

a copy of this Report and Order, 

including the Final Regulatory 

Flexibility Analysis, to the Chief 

Counsel for Advocacy of the Small 

Business Administration. 

V. Ordering Clauses 

181. Pursuant to the authority 

contained in sections 4(i), 11, 303(r), 

309(j) and 706 of the Communications 

Act of 1934, as amended, 47 U.S.C. 

154(i), 157, 161, 303(r), and 309(j), the 

Report and Order is adopted. 

182. The Petition for Reconsideration 

filed by Cingular Wireless LLC, in WT 

Docket No. 01–14 on February 13, 2002, 

and the Petition for Reconsideration 

filed by Dobson Communications Corp./ 

Western Wireless Corp./Rural Cellular 

Corp. in WT Docket No. 01–14 on 

February 13, 2002 are granted, to the 

extent described above. 

183. Pursuant to sections 4(i), 7, 

303(c), 303(f), 303(g), 303(r), and 332 of 

the Communications Act of 1934, as 

amended, 47 U.S.C. 154(i), 157, 303(c), 

303(f), 303(g), 303(r), and 332, the rule 

changes specified below are adopted. 

The rules will become effective 

February 14, 2005, except for § 1.919(c), 

which contains an information 

collection requirement that is not 

effective until approved by the Office of 

Management and Budget (OMB). The 

agency will publish a document in the 

Federal Register announcing the 

effective date of § 1.919(c). 

184. The Commission’s Consumer and 

Governmental Affairs Bureau, Reference 

Information Center, shall send a copy of 

the Report and Order, including the 

Final Regulatory Flexibility Analysis, to 

the Chief Counsel for Advocacy of the 

Small Business Administration.

75170 Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 

List of Subjects 

47 CFR Part 1

Administrative practice and 

procedure, Communications common 

carriers, Radio, Reporting and 

Recordkeeping requirements, 

Telecommunications. 

47 CFR Part 22

Communications common carriers, 

Radio. 

47 CFR Part 24

Personal communications services, 

Radio. 

47 CFR Part 27

Wireless Communications Service. 

47 CFR Part 90

Business and industry, Common 

carriers, Radio, Reporting and 

recordkeeping requirements.

Federal Communications Commission. 

William F. Caton, 

Deputy Secretary.

Rule Changes

■ For the reasons discussed in the 

preamble, the Federal Communications 

Commission amends 47 CFR parts 1, 22, 

24, 27, and 90 as follows:

PART 1—PRACTICE AND 

PROCEDURE

■ 1. The authority citation for part 1 

continues to read as follows:

Authority: 47 U.S.C. 151, 154(i), 154(j), 

155, 225, 303(r), 309 and 325(e).

■ 2. Section 1.919 is amended by 

redesignating paragraphs (c), (d), and (e) 

as paragraphs (d), (e), and (f), and by 

adding a new paragraph (c) to read as 

follows:

§ 1.919 Ownership information.

* * * * *

(c) Reporting of Cellular CrossOwnership Interests. (1) A cellular 

licensee of one channel block in a 

cellular geographic service area (CGSA) 

must report current ownership 

information if the licensee, a party that 

owns a controlling or otherwise 

attributable interest in the licensee, or a 

party that actually controls the licensee, 

obtains a direct or indirect ownership 

interest of more than 10 percent in a 

cellular licensee, a party that owns a 

controlling or otherwise attributable 

interest in a cellular licensee, or a party 

that actually controls a cellular licensee, 

for the other channel block in an 

overlapping CGSA, if the overlap is 

located in whole or in part in a Rural 

Service Area (RSA), as defined in 

§ 22.909 of this chapter. The ownership 

information must be filed on a FCC 

Form 602 within 30 days of the date of 

consummation of the transaction and 

reflect the specific levels of investment. 

(2) For the purposes of paragraph (c) 

of this section, the following definitions 

and other provisions shall apply: 

(i) Non-controlling interests. A direct 

or indirect non-attributable interest in 

both systems is excluded from the 

reporting requirement set out in 

paragraph (c)(1) of this section. 

(ii) Ownership attribution. For 

purposes of paragraph (c) of this section, 

ownership and other interests in 

cellular licensees will be attributed to 

their holders pursuant to the following 

criteria: 

(A) Controlling interest shall be 

attributable. Controlling interest means 

majority voting equity ownership, any 

general partnership interest, or any 

means of actual working control 

(including negative control) over the 

operation of the licensee, in whatever 

manner exercised. 

(B) Partnership and other ownership 

interests and any stock interest 

amounting to 20 percent or more of the 

equity, or outstanding stock, or 

outstanding voting stock of a cellular 

licensee shall be attributed. 

(C) Non-voting stock shall be 

attributed as an interest in the issuing 

entity if in excess of the amounts set 

forth in paragraph (c)(2)(ii)(B) of this 

section. 

(D) Debt and instruments such as 

warrants, convertible debentures, 

options, or other interests (except nonvoting stock) with rights of conversion 

to voting interests shall not be attributed 

unless and until converted. 

(E) Limited partnership interests shall 

be attributed to limited partners and 

shall be calculated according to both the 

percentage of equity paid in and the 

percentage of distribution of profits and 

losses. 

(F) Officers and directors of a cellular 

licensee shall be considered to have an 

attributable interest in the entity with 

which they are so associated. The 

officers and directors of an entity that 

controls a cellular licensee shall be 

considered to have an attributable 

interest in the cellular licensee. 

(G) Ownership interests that are held 

indirectly by any party through one or 

more intervening corporations will be 

determined by successive multiplication 

of the ownership percentages for each 

link in the vertical ownership chain and 

application of the relevant attribution 

benchmark to the resulting product, 

except that if the ownership percentage 

for an interest in any link in the chain 

exceeds 50 percent or represents actual 

control, it shall be treated as if it were 

a 100 percent interest. (For example, if 

A owns 20 percent of B, and B owns 40 

percent of licensee C, then A’s interest 

in licensee C would be 8 percent. If A 

owns 20 percent of B, and B owns 51 

percent of licensee C, then A’s interest 

in licensee C would be 20 percent 

because B’s ownership of C exceeds 50 

percent.) 

(H) Any person who manages the 

operations of a cellular licensee 

pursuant to a management agreement 

shall be considered to have an 

attributable interest in such licensee if 

such person, or its affiliate, has 

authority to make decisions or 

otherwise engage in practices or 

activities that determine, or significantly 

influence: 

(1) The nature or types of services 

offered by such licensee; 

(2) The terms upon which such 

services are offered; or 

(3) The prices charged for such 

services. 

(I) Any licensee, or its affiliate, who 

enters into a joint marketing 

arrangements with a cellular licensee, or 

its affiliate, shall be considered to have 

an attributable interest, if such licensee 

or affiliate has authority to make 

decisions or otherwise engage in 

practices or activities that determine, or 

significantly influence: 

(1) The nature or types of services 

offered by such licensee; 

(2) The terms upon which such 

services are offered; or 

(3) The prices charged for such 

services. 

(3) Sunset Provisions. This 

notification requirement will sunset at 

the earlier of: 

(i) Five years after February 14, 2005, 

or 

(ii) At the cellular licensee’s specific 

deadline for renewal.

* * * * *

PART 22—PUBLIC MOBILE SERVICES

■ 3. The authority citation for part 22 

continues to read as follows:

Authority: 47 U.S.C. 154, 222, 303, 309 and 

332.

■ 4. Section 22.702 is revised to read as 

follows:

§ 22.702 Eligibility. 

Existing and proposed 

communications common carriers are 

eligible to hold authorizations to operate 

conventional central office, interoffice 

and rural stations in the Rural 

Radiotelephone Service. Subscribers are 

also eligible to hold authorizations to 

operate rural subscriber stations in the 

Rural Radiotelephone Service.

Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 75171

■ 5. Section 22.913 is amended by 

revising paragraph (a) to read as follows:

§ 22.913 Effective radiated power limits.

* * * * *

(a) Maximum ERP. In general, the 

effective radiated power (ERP) of base 

transmitters and cellular repeaters must 

not exceed 500 Watts. However, for 

those systems operating in areas more 

than 72 km (45 miles) from international 

borders that: 

(1) Are located in counties with 

population densities of 100 persons or 

fewer per square mile, based upon the 

most recently available population 

statistics from the Bureau of the Census; 

or, 

(2) Extend coverage on a secondary 

basis into cellular unserved areas, as 

those areas are defined in § 22.949, the 

ERP of base transmitters and cellular 

repeaters of such systems must not 

exceed 1000 Watts. The ERP of mobile 

transmitters and auxiliary test 

transmitters must not exceed 7 Watts.

* * * * *

§ 22.942 [Removed]

■ 6. Remove § 22.942.

PART 24—PERSONAL 

COMMUNICATIONS SERVICES

■ 7. The authority citation for part 24 

continues to read as follows:

Authority: 47 U.S.C. 154, 301, 302, 303, 

309 and 332.

■ 8. Section 24.203 is amended by 

revising paragraph (a) to read as follows:

§ 24.203 Construction requirements. 

(a) Licensees of 30 MHz blocks must 

serve with a signal level sufficient to 

provide adequate service to at least onethird of the population in their licensed 

area within five years of being licensed 

and two-thirds of the population in their 

licensed area within ten years of being 

licensed. Licensees may, in the 

alternative, provide substantial service 

to their licensed area within the 

appropriate five- and ten-year 

benchmarks. Licensees may choose to 

define population using the 1990 census 

or the 2000 census. Failure by any 

licensee to meet these requirements will 

result in forfeiture or non-renewal of the 

license and the licensee will be 

ineligible to regain it.

* * * * *

■ 9. Section 24.232 is revised to read as 

follows:

§ 24.232 Power and antenna height limits. 

(a) Base stations are limited to 1640 

watts peak equivalent isotropically 

radiated power (EIRP) with an antenna 

height up to 300 meters HAAT, except 

as described in paragraph (b) of this 

section. See § 24.53 for HAAT 

calculation method. Base station 

antenna heights may exceed 300 meters 

with a corresponding reduction in 

power; see Table 1 of this section. In no 

case may the peak output power of a 

base station transmitter exceed 100 

watts. The service area boundary limit 

and microwave protection criteria 

specified in § 24.236 and § 24.237 apply.

TABLE 1.—REDUCED POWER FOR

BASE STATION ANTENNA HEIGHTS

OVER 300 METERS

HAAT in meters Maximum

EIRP watts 

≤300 ...................................... 1640 

≤500 ...................................... 1070 

≤1000 .................................... 490 

≤1500 .................................... 270 

≤2000 .................................... 160 

(b) Base stations that are located in 

counties with population densities of 

100 persons or fewer per square mile, 

based upon the most recently available 

population statistics from the Bureau of 

the Census, are limited to 3280 watts 

peak equivalent isotropically radiated 

power (EIRP) with an antenna height up 

to 300 meters HAAT; See § 24.53 for 

HAAT calculation method. Base station 

antenna heights may exceed 300 meters 

with a corresponding reduction in 

power; see Table 2 of this section. In no 

case may the peak output power of a 

base station transmitter exceed 200 

watts. The service area boundary limit 

and microwave protection criteria 

specified in § 24.236 and § 24.237 apply. 

Operation under this paragraph must be 

coordinated in advance with all PCS 

licensees within 120 kilometers (75 

miles) of the base station and is limited 

to base stations located more than 120 

kilometers (75 miles) from the Canadian 

border and more than 75 kilometers (45 

miles) from the Mexican border.

TABLE 2.—REDUCED POWER FOR

BASE STATION ANTENNA HEIGHTS

OVER 300 METERS

HAAT in meters Maximum

EIRP watts 

≤300 ...................................... 3280 

≤500 ...................................... 2140 

≤1000 .................................... 980 

≤1500 .................................... 540 

≤2000 .................................... 320 

(c) Mobile/portable stations are 

limited to 2 watts EIRP peak power and 

the equipment must employ means to 

limit the power to the minimum 

necessary for successful 

communications. 

(d) Peak transmit power must be 

measured over any interval of 

continuous transmission using 

instrumentation calibrated in terms of 

an rms-equivalent voltage. The 

measurement results shall be properly 

adjusted for any instrument limitations, 

such as detector response times, limited 

resolution bandwidth capability when 

compared to the emission bandwidth, 

sensitivity, etc., so as to obtain a true 

peak measurement for the emission in 

question over the full bandwidth of the 

channel.

■ 10. Section 24.237 is amended by 

revising paragraph (d) to read as follows:

§ 24.237 Interference protection.

* * * * *

(d) The licensee must perform an 

engineering analysis to assure that the 

proposed facilities will not cause 

interference to existing OFS stations 

within the coordination distance 

specified in Table 3 of a magnitude 

greater than that specified in the criteria 

set forth in paragraphs (e) and (f) of this 

section, unless there is prior agreement 

with the affected OFS licensee. 

Interference calculations shall be based 

on the sum of the power received at the 

terminals of each microwave receiver 

from all of the applicant’s current and 

proposed PCS operations.

TABLE 3.—COORDINATION DISTANCES IN KILOMETERS

PCS Base Station Antenna HAAT in Meters 

EIRP(W) 5 10 20 50 100 150 200 250 300 500 1000 1500 2000 

0.1 .............................................. 90 93 99 110 122 131 139 146 152 173 210 239 263 

0.5 .............................................. 96 100 105 116 128 137 145 152 158 179 216 245 269 

1 ................................................. 99 103 108 119 131 140 148 155 161 182 219 248 272 

2 ................................................. 120 122 126 133 142 148 154 159 164 184 222 250 274 

5 ................................................. 154 157 161 168 177 183 189 194 198 213 241 263 282 

75172 Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 

TABLE 3.—COORDINATION DISTANCES IN KILOMETERS—Continued

PCS Base Station Antenna HAAT in Meters 

EIRP(W) 5 10 20 50 100 150 200 250 300 500 1000 1500 2000 

10 ............................................... 180 183 187 194 203 210 215 220 225 240 268 291 310 

20 ............................................... 206 209 213 221 229 236 242 247 251 267 296 318 337 

50 ............................................... 241 244 248 255 264 271 277 282 287 302 331 354 374 

100 ............................................. 267 270 274 282 291 297 303 308 313 329 358 382 401 

200 ............................................. 293 296 300 308 317 324 330 335 340 356 386 409 436 

500 ............................................. 328 331 335 343 352 359 365 370 375 391 421 440 

1000 ........................................... 354 357 361 369 378 385 391 397 402 418 

1200 ........................................... 361 364 368 376 385 392 398 404 409 425 

1640 ........................................... 372 375 379 388 397 404 410 416 421 437 

2400 ........................................... 384 387 391 399 408 415 423 427 431 

3280 ........................................... 396 399 403 412 419 427 435 439 446 

* * * * *

PART 27—MISCELLANEOUS 

WIRELESS COMMUNICATIONS 

SERVICES

■ 11. The authority citation for part 27 

continues to read as follows:

Authority: 47 U.S.C. 154, 301, 302, 303, 

307, 309, 332, 336, and 337 unless otherwise 

noted.

■ 12. Section 27.50 is amended by 

revising paragraph (d) to read as follows:

§ 27.50 Power and antenna height limits.

* * * * *

(d) The following power and antenna 

height requirements apply to stations 

transmitting in the 1710–1755 MHz and 

2110–2155 MHz bands: 

(1) The power of each fixed or base 

station transmitting in the 2110–2155 

MHz band and located in any county 

with population density of 100 or fewer 

persons per square mile, based upon the 

most recently available population 

statistics from the Bureau of the Census, 

is limited to a peak equivalent 

isotropically radiated power (EIRP) of 

3280 watts and a peak transmitter 

output power of 200 watts. The power 

of each fixed or base station transmitting 

in the 2110–2155 MHz band from any 

other location is limited to a peak EIRP 

of 1640 watts and a peak transmitter 

output power of 100 watts. A licensee 

operating a base or fixed station 

utilizing a power of more than 1640 

watts EIRP must coordinate such 

operations in advance with all 

Government and non-Government 

satellite entities in the 2025–2110 MHz 

band. Operations above 1640 watts EIRP 

must also be coordinated in advance 

with the following licensees within 120 

kilometers (75 miles) of the base or fixed 

station: all Multipoint Distribution 

Service (MDS) licensees authorized 

under Part 21 in the 2155–2160 MHz 

band and all AWS licensees in the 

2110–2155 MHz band. 

(2) Fixed, mobile, and portable (handheld) stations operating in the 1710–

1755 MHz band are limited to a peak 

EIRP of 1 watt. Fixed stations operating 

in this band are limited to a maximum 

antenna height of 10 meters above 

ground, and mobile and portable 

stations must employ a means for 

limiting power to the minimum 

necessary for successful 

communications.

* * * * *

PART 90—PRIVATE LAND MOBILE 

RADIO SERVICES

■ 13. The authority citation for part 90 

continues to read as follows:

Authority: 47 U.S.C. 4(i), 11, 303(g), 303(r), 

and 332(c)(7) of the Communications Act of 

1934, as amended.

■ 14. Section 90.155 is amended by 

revising paragraph (d) to read as follows:

§ 90.155 Time in which station must be 

placed in operation.

* * * * *

(d) Multilateration LMS EA-licensees, 

authorized in accordance with § 90.353, 

must construct and place in operation a 

sufficient number of base stations that 

utilize multilateration technology (see

paragraph (e) of this section) to provide 

multilateration location service to onethird of the EA’s population within five 

years of initial license grant, and twothirds of the population within ten 

years. Licensees may, in the alternative, 

provide substantial service to their 

licensed area within the appropriate 

five- and ten-year benchmarks. In 

demonstrating compliance with the 

construction and coverage requirements, 

the Commission will allow licensees to 

individually determine an appropriate 

field strength for reliable service, taking 

into account the technologies employed 

in their system design and other 

relevant technical factors. At the fiveand ten-year benchmarks, licensees will 

be required to file a map and FCC Form 

601 showing compliance with the 

coverage requirements (see § 1.946 of 

this chapter).

* * * * *

■ 15. Section 90.685 is amended by 

revising paragraph (b) to read as follows:

§ 90.685 Authorization, construction and 

implementation of EA licenses.

* * * * *

(b) EA licensees in the 806–821/851–

866 MHz band must, within three years 

of the grant of their initial license, 

construct and place into operation a 

sufficient number of base stations to 

provide coverage to at least one-third of 

the population of its EA-based service 

area. Further, each EA licensee must 

provide coverage to at least two-thirds 

of the population of the EA-based 

service area within five years of the 

grant of their initial license. EA-based 

licensees may, in the alternative, 

provide substantial service to their 

markets within five years of the grant of 

their initial license. Substantial service 

shall be defined as: ‘‘Service which is 

sound, favorable, and substantially 

above a level of mediocre service.’’

* * * * *

■ 16. Section 90.767 is revised to read as 

follows:

§ 90.767 Construction and implementation 

of EA and Regional licenses. 

(a) An EA or Regional licensee must 

construct a sufficient number of base 

stations (i.e., base stations for land 

mobile and/or paging operations) to 

provide coverage to at least one-third of 

the population of its EA or REAG within 

five years of the issuance of its initial 

license and at least two-thirds of the 

population of its EA or REAG within ten 

years of the issuance of its initial 

license. Licensees may, in the 

alternative, provide substantial service 

to their licensed areas at the appropriate 

five- and ten-year benchmarks. 

(b) Licensees must notify the 

Commission in accordance with § 1.946 

Federal Register / Vol. 69, No. 240 / Wednesday, December 15, 2004 / Rules and Regulations 75173

of this chapter of compliance with the 

Construction requirements of paragraph 

(a) of this section. 

(c) Failure by an EA or Regional 

licensee to meet the construction 

requirements of paragraph (a) of this 

section, as applicable, will result in 

automatic cancellation of its entire EA 

or Regional license. In such instances, 

EA or Regional licenses will not be 

converted to individual, site-by-site 

authorizations for already constructed 

stations. 

(d) EA and Regional licensees will not 

be permitted to count the resale of the 

services of other providers in their EA 

or REAG, e.g., incumbent, Phase I 

licensees, to meet the construction 

requirement of paragraph (a) of this 

section, as applicable. 

(e) EA and Regional licensees will not 

be required to construct and place in 

operation, or commence service on, all 

of their authorized channels at all of 

their base stations or fixed stations.

■ 17. Section 90.769 is revised to read as 

follows:

§ 90.769 Construction and implementation 

of Phase II nationwide licenses. 

(a) A nationwide licensee must 

construct a sufficient number of base 

stations (i.e., base stations for land 

mobile and/or paging operations) to 

provide coverage to a composite area of 

at least 750,000 square kilometers or 

37.5 percent of the United States 

population within five years of the 

issuance of its initial license and a 

composite area of at least 1,500,000 

square kilometers or 75 percent of the 

United States population within ten 

years of the issuance of its initial 

license. Licensees may, in the 

alternative, provide substantial service 

to their licensed areas at the appropriate 

five- and ten-year benchmarks. 

(b) Licensees must notify the 

Commission in accordance with § 1.946 

of this chapter of compliance with the 

Construction requirements of paragraph 

(a) of this section. 

(c) Failure by a nationwide licensee to 

meet the construction requirements of 

paragraph (a) of this section, as 

applicable, will result in automatic 

cancellation of its entire nationwide 

license. In such instances, nationwide 

licenses will not be converted to 

individual, site-by-site authorizations 

for already constructed stations. 

(d) Nationwide licensees will not be 

required to construct and place in 

operation, or commence service on, all 

of their authorized channels at all of 

their base stations or fixed stations.

[FR Doc. 04–27049 Filed 12–14–04; 8:45 am] 

BILLING CODE 6712–01–P