Federal Register / Vol. 65, No. 109 / Tuesday, June 6, 2000 / Rules and Regulations 35843

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 24

[GEN Docket No. 90–314, ET Docket No.

92–100, PP Docket No. 93–253; FCC 00–

159]

Narrowband Personal

Communications Services;

Competitive Bidding

AGENCY: Federal Communications

Commission.

ACTION: Final rule.

SUMMARY: This document adopts a

number of modifications to the

Commission’s existing narrowband

Personal Communications Services

(PCS) rules. These include the use of

Major Trading Areas for future

licensing, the establishment of a

‘‘substantial service’’ alternative to the

current construction benchmarks, and

modifications to certain provisions of

the narrowband PCS competitive

bidding rules. The Commission also

eliminates the narrowband PCS

spectrum aggregation limit and adopts

partitioning and disaggregation rules.

The Commission believes that the rule

modifications it adopts will improve the

efficiency of spectrum use, reduce the

regulatory burden on spectrum users,

encourage competition, and promote

service to the largest feasible number of

users.

DATES: Effective August 7, 2000, except

for § 24.104, which contains information

collection requirement that has not been

approved by the Office of Management

and Budget. The FCC will publish a

document in the Federal Register

announcing the effective date for this

section. Public and agency comments on

the information collection are due on or

before July 6, 2000.

FOR FURTHER INFORMATION CONTACT:

Alice Elder, Auctions and Industry

Analysis Division, Wireless

Telecommunications Bureau, at (202)

418–0660.

SUPPLEMENTARY INFORMATION: This is a

summary of a Second Report and Order

(Second R&O) in the Commission’s

narrowband PCS proceeding adopted

May 5, 2000, and released May 18, 2000.

The complete text of this Second R&O

is available for inspection and copying

during normal business hours in the

FCC Reference Center (Room CY–A257),

445 12th Street, SW, Washington, DC. It

may also be purchased from the

Commission’s copy contractor,

International Transcription Services,

Inc. (ITS, Inc.), 1231 20th Street, NW,

Washington, DC 20036, (202) 857–3800.

It is also available on the Commission’s

web site at http://www.fcc.gov/wtb/

auctions.

Synopsis of the Second Report and

Order

1. The Commission adopts a Second

Report and Order (Second R&O) in its

narrowband PCS proceeding, amending

certain rules governing this service. The

Commission provided for the operation

of narrowband PCS in the 900 MHz

band, adopting a spectrum allocation

and channelization plan, licensing

rules, and technical standards for the

service, in 1993. See Amendment of the

Commission’s Rules to Establish New

Narrowband Personal Communications

Services, First Report and Order, 58 FR

42681 (August 11, 1993). See also

Amendment of the Commission’s Rules

to Establish New Narrowband Personal

Communications Services,

Memorandum Opinion and Order, 59

FR 14115 (March 25 1994). In

Implementation of Section 309(j) of the

Communications Act—Competitive

Bidding, Second Report and Order, 59

FR 22980 (May 4, 1994), the

Commission determined that, pursuant

to section 309(j) of the Communications

Act of 1934, as amended, PCS is subject

to competitive bidding in the case of

mutually exclusive applications, and

the Commission adopted general

competitive bidding rules for

auctionable services. In Implementation

of Section 309(j) of the Communications

Act—Competitive Bidding, Third Report

and Order, 59 FR 26741 (May 24, 1994),

the Commission established competitive

bidding rules specifically for

narrowband PCS. Currently, of the three

megahertz of 900 MHz spectrum

allocated for narrowband PCS, two onemegahertz blocks have been divided

into specific channels for licensing. The

remaining one megahertz of narrowband

PCS spectrum has been reserved to

accommodate future development of

narrowband PCS. Thus far, nationwide

and regional licenses have been

awarded through two auctions, which

were held in 1994.

2. This Second R&O resolves issues

raised in Amendment of the

Commission’s Rules to Establish New

Personal Communications Services,

Narrowband PCS, Report and Order and

Further Notice of Proposed Rulemaking

(Narrowband PCS R&O/Further Notice),

62 FR 27507 (May 20, 1997). In response

to the Narrowband PCS R&O/Further

Notice, the Commission received 15

comments and 16 reply comments.

3. Service Area Reallocation. In this

Second R&O, the Commission amends

its current allocation of narrowband

PCS spectrum to eliminate Basic

Trading Areas (BTAs) and license the

remaining spectrum, including the

response channels, based on Major

Trading Areas (MTAs). The Commission

finds that MTAs are the most

appropriate geographic area for

licensing the remaining narrowband

PCS spectrum because they will serve

the needs of a wide range of entities,

including both large and small service

providers. The Commission does not

believe that using MTAs will

compromise the goal of ensuring entry

for small businesses or undermine the

confidence of either incumbent and

potential licensees or the investment

community.

4. Finally, the Commission notes that

the use of MTAs will avoid any

potential problems that might arise from

inconsistencies between the boundaries

of Major Economic Areas (MEAs) and

existing regional licenses based on

MTAs. Moreover, Rand McNally &

Company, which owns the copyright to

MTAs, has granted a blanket license to

parties with an interest in this

proceeding to use MTAs, and there is

therefore no impediment to their use for

narrowband PCS.

5. Spectrum Aggregation Limit. In this

Second R&O, the Commission

eliminates the narrowband PCS

spectrum aggregation limit. Adopted in

1993, this rule provided that a single

licensee was permitted to hold licenses

for no more than three channels, either

paired or unpaired, in any geographic

area. The limit was adopted to ensure

that narrowband PCS services would be

offered on a competitive basis.

6. The Commission recently has

concluded that the paging/messaging

industry is highly competitive.

Moreover, narrowband PCS licensees

increasingly compete with other sectors

of the wireless industry, including

broadband PCS and Specialized Mobile

Radio (SMR) that offer the same or

similar services. Thus, the Commission

finds that the aggregation limit is not

needed to prevent an undue

concentration of licenses, either through

the auctioning of additional narrowband

PCS spectrum or post-auction mergers.

Moreover, in order to compete with

other providers of paging and messaging

services, narrowband PCS licensees may

need to consolidate and should not be

prevented from doing so by the

narrowband PCS spectrum aggregation

limit.

7. Further, the Commission does not

believe that large companies will

attempt to acquire licenses merely to

foreclose entry by smaller entities,

because it is clear that such a strategy

would not be successful in limiting

competition. Acquiring spectrum for

35844 Federal Register / Vol. 65, No. 109 / Tuesday, June 6, 2000 / Rules and Regulations

purposes of withholding its use would

be very expensive. In addition, such

efforts would be difficult, given the

large number of licensees already

competing in this market and the fact

that narrowband PCS licensees face

competition from other wireless sectors.

Although the Commission has found

that a Commercial Mobile Radio

Services (CMRS) spectrum cap is

necessary to ensure that the mobile

voice market is competitive, the risk of

excessive concentration through

mergers is far lower in the paging/

messaging context. Paging carriers face

growing competition from short

messaging services and other digital

service features offered by an increasing

number of mobile voice carriers. In

addition, the recent auction of spectrum

in the 929 and 931 MHz bands should

facilitate further entry or capacity

expansion. The Commission notes that

it retains the ability to evaluate

individual transfer and assignment

applications on a case-by-case basis

through its review of such applications.

8. Eligibility for Response Channels.

In order to provide an opportunity for

incumbent paging licensees to upgrade

their operations, the Commission set

aside 100 kilohertz (eight unpaired

frequencies) of the three megahertz

allocated for narrowband PCS as paging

response channels, i.e., channels to be

used in paired communications with

existing one-way paging frequencies to

provide mobile-to-base station

communications. The Commission’s

intent in establishing these channels

was to provide a means for one-way

(single frequency) paging licensees to

obtain a second frequency for the

purpose of delivering signals back from

their customers’ mobile devices.

9. In this Second R&O, the

Commission lifts all eligibility

restrictions on applying for paging

response channels, finding that such

restrictions unnecessarily exclude

potential users of the response channels

that are not paging licensees, e.g.,

narrowband PCS licensees. Thus,

eligibility for acquiring narrowband PCS

response channels will no longer be

limited to existing paging licensees, i.e.,

those licensed to operate conventional

one-way paging base stations under part

22 or part 90 of the Commission’s rules

as of the application filing deadline for

the paging response channels. The

Commission finds that lifting the

eligibility restrictions will encourage

entry of new narrowband PCS providers

by providing greater flexibility to new

licensees to use these channels in

conjunction with other spectrum to

provide new services. In keeping with

its decision to abolish the limit on

aggregation of narrowband PCS

spectrum, as well as its decision to

eliminate eligibility restrictions for

paging response channels, the

Commission also concludes that there

should be no limit on the number of

response channels a licensee may hold.

10. The Commission will retain the

current rule restricting use of the

response channels to mobile-to-base

transmissions. Several commenters

argue that allowing these channels to be

used for other purposes would cause

harmful interference with current

narrowband PCS licensees. The

Commission agrees with these

commenters and will retain the current

rule restricting use of the response

channels to mobile-to-base

transmissions.

11. Construction and Coverage

Requirements for Narrowband PCS

Licensees. The Commission will

maintain its current coverage

requirements for narrowband PCS and

adopts a substantial service requirement

as an alternative. The Commission finds

that coverage requirements, including a

substantial service standard, encourage

the provision of service to areas that

would not necessarily receive service

expeditiously solely through the

operation of market forces. The

Commission recognizes that

narrowband PCS is a developing service

and that there has been a delay in

equipment availability. It therefore

believes that it would not be appropriate

at this time to establish three- and fiveyear benchmarks for this service, as it

has done for the paging services, in lieu

of the current benchmarks. The

Commission also believes, however, that

its five- and ten-year construction

benchmarks provide sufficient time for

narrowband PCS licensees to construct

their systems and that there is no need

to alter the current benchmarks. Any

problems that individual licensees may

have because of difficulties with

financing or equipment availability may

be addressed by evaluating requests for

waiver on a case-by-case basis.

12. The Commission further finds that

a substantial service option may be very

useful in allowing licensees to use

spectrum flexibly to provide new and

innovative services uninhibited by a

requirement that they meet a specific

coverage benchmark or lose their

license. In addition, rural areas may be

more difficult to serve than urban areas.

Permitting licensees to make a

substantial service showing may

encourage them to build out in rural

areas because it would give them the

option of satisfying the Commission’s

construction requirements by serving

rural areas without necessarily having to

meet either population or composite

area benchmarks. The Commission finds

that these advantages outweigh any

concerns commenters have regarding

potential speculation or anticompetitive

conduct.

13. In the past the Commission has

offered guidance to licensees in other

services with regard to factors that it

would consider in evaluating whether

the substantial service requirement has

been met. The Commission will apply

these same factors to evaluations of

substantial service showings made by

narrowband PCS licensees. Thus, the

Commission may consider such factors

as whether the licensee is offering a

specialized or technologically

sophisticated service that does not

require a high level of coverage to be of

benefit to customers, and whether the

licensee’s operations serve niche

markets. A licensee may also

demonstrate that it is providing service

to unserved or underserved areas

without covering a specific composite

area or percentage of the population.

Because the substantial service

requirement can be met in a variety of

ways, the Wireless Telecommunications

Bureau (Bureau) will review licensees’

showings on a case-by-case basis.

14. Just as it believes that the addition

of a substantial service alternative to its

rules will be helpful to entities seeking

to provide innovative services, the

Commission also recognizes that there

may be instances in which a flexible

approach to its narrowband PCS

operational or technical rules would be

helpful to such entities and would

promote the development of new

services. Although the Commission has

crafted these rules to generally provide

for a wide range of technologies and

business plans, there may be instances

where particular circumstances render

the rules unreasonable or overly

burdensome, to the extent the public

interest would be harmed by their strict

application. The Commission therefore

will give expedited treatment to

requests for waivers of these operational

and technical rules, and, to the extent it

finds that such waivers will not harm

other licensees and will be in the public

interest, it will consider them favorably.

15. Construction and Coverage

Requirements for Nationwide Paging

Licensees. In Revision of Part 22 and

Part 90 of the Commission’s Rules to

Facilitate Future Development of Paging

Systems, Memorandum Opinion and

Order on Reconsideration and Third

Report and Order (Paging MO&O/Third

Report and Order), 64 FR 33762 (June

24, 1999), the Commission considered

the issue of coverage requirements for

nationwide geographic area paging

Federal Register / Vol. 65, No. 109 / Tuesday, June 6, 2000 / Rules and Regulations 35845

licensees and deferred any decision on

the issue until it resolved similar

matters in the instant narrowband PCS

rulemaking proceeding. In this Second

R&O, the Commission declines to adopt

coverage requirements for nationwide

paging licensees that would be in

addition to the build-out requirements

they have already met.

16. Nationwide paging licensees have

already met pre-existing build-out rules,

which were imposed in connection with

nationwide exclusivity rules prior to the

advent of geographic area licensing.

Having carefully examined its databases

reflecting the extent of construction by

nationwide paging licensees, the

Commission finds that all of these

licensees are already providing

sufficient coverage to meet the five-year

benchmark applicable to nationwide

narrowband PCS licensees, and some of

them have met the ten-year benchmark.

Thus, while the Commission expects

nationwide paging licensees to build out

their systems to the same extent as

nationwide narrowband PCS licensees,

it concludes that the build-out

requirements set forth in its previous

rules were adequate to promote

coverage by nationwide paging licensees

that is equivalent to that of nationwide

narrowband PCS licensees, which have

recently reached their five-year

benchmark. In addition, while the

Commission anticipates that nationwide

paging licensees’ build-out in rural areas

should increase in the future given that

licensees appear to have already

constructed in most urban areas, it has

no evidence that nationwide paging

licensees’ build-out in rural areas is

deficient. The Commission therefore

concludes that it is unnecessary to

impose a new layer of regulations on

nationwide paging licensees by

adopting additional coverage

requirements for them. However, if the

Commission is presented with evidence

that there is a need to impose a

requirement equivalent to the ten-year

nationwide narrowband PCS

benchmark, it will consider revisiting

this issue in the future.

17. Applicability of the Part 1 General

Competitive Bidding Rules. Following

the release of the Narrowband PCS

R&O/Further Notice in April 1997, the

Commission adopted an order

establishing uniform competitive

bidding provisions for all auctionable

services. See Amendment of Part 1 of

the Commission’s Rules—Competitive

Bidding Procedures, Third Report and

Order and Second Further Notice of

Proposed Rule Making (Part 1 Third

Report and Order), 63 FR 770 (January

7, 1998). Thus, the general competitive

bidding rules found in subpart Q of part

1 of the Commission’s rules, including

provisions adopted in the Part 1 Third

Report and Order, will serve as the

general competitive bidding rules for all

future auctions, regardless of whether

service-specific rules have previously

been adopted. Subpart Q of part 1 of the

Commission’s rules will apply to

narrowband PCS, unless the

Commission determines that, with

regard to particular matters, the

adoption of service-specific rules is

warranted. The Balanced Budget Act of

1997 provides that, before the issuance

of bidding rules, the Commission must

provide adequate time for parties to

comment on proposed auction

procedures. In response to this statutory

requirement, the Commission has

directed the Bureau, under its existing

delegated authority, to seek comment

prior to the commencement of each

auction on a variety of auction-specific

operational issues. See Part 1 Third

Report and Order (citing Balanced

Budget Act of 1997, section

3002(a)(1)(B)(iv)). Under part 1 and

consistent with this approach, matters

such as auction design, license

grouping, activity rules, minimum

opening bids, and reserve prices will be

determined by the Bureau pursuant to

its delegated authority.

18. The Commission declines to adopt

the suggestion that it require applicants

to identify each frequency in each

market on which they wish to bid and

submit upfront payments for each

individual license. The Commission

believes that its current rules, which

require an upfront payment to cover

only those licenses on which an

applicant intends to bid in any one

round, are appropriate because they

allow bidders the flexibility to pursue

backup strategies during the course of

an auction in the event they are unable

to obtain their first choice of licenses.

Such flexibility is crucial to an efficient

auction and optimal license assignment.

The Commission also declines to

modify its anti-collusion rule to provide

a safe harbor for carriers engaged in

negotiations regarding mergers or

intercarrier agreements. It has declined

to create such a safe harbor in the past,

and it has not been presented with an

adequate justification for departing from

that decision with respect to

narrowband PCS. Finally, certain

commenters urge the Commission to

provide auction participants with the

identity of all competing bidders. It has

generally been the Commission’s

practice to disclose the identity of all

bidders in Commission auctions. If,

however, in the case of particular

auctions a limit on such information

appears warranted, the Bureau will,

consistent with the Balanced Budget Act

of 1997 and current practice, seek

comment on the issue in a public notice

prior to the auction.

19. Treatment of Designated Entities.

The term ‘‘designated entity’’ refers to

small businesses, rural telephone

companies, and businesses own by

minorities and/or women. In this

Second R&O, the Commission declines

to offer race- and gender-based

designated entity provisions for

narrowband PCS at this time.

Commenters in this proceeding have

submitted no evidence or data on the

issue of race- or gender-based auction

provisions, and the Commission

concludes that it does not have a

sufficient record to support such special

provisions at this time under current

standards of judicial review. See

Adarand Constructors, Inc. v. Pen ̃a, 515

U.S. 200 (1995) (requiring a strict

scrutiny standard of review for

Congressionally mandated raceconscious measures) and United States

v. Virginia, 518 U.S. 515 (1996)

(applying an intermediate scrutiny

standard of review to a state program

containing gender classification).

20. The Commission remains

committed to meeting the statutory

objectives of promoting economic

opportunity and competition, avoiding

excessive concentration of licenses, and

ensuring access to new and innovative

technologies by disseminating licenses

among a wide variety of applicants,

including small businesses, rural

telephone companies, and businesses

owned by members of minority groups

and women. It believes the bidding

credits it adopts for small businesses

will assist in meeting these objectives

because many minority- and womenowned entities are small businesses and

will therefore qualify for these special

provisions. The Commission also

believes that its standardization of the

rules regarding definitions of eligible

entities, unjust enrichment, and bidding

credits in the Part 1 Third Report and

Order will assist small and minorityand women-owned businesses because

the resulting predictability will facilitate

effective business planning and capital

accumulation. The Commission’s Office

of Communications Business

Opportunities has initiated several

studies to gather information regarding

barriers to entry faced by minority- and

women-owned firms that wish to

participate, or have participated, in

Commission auctions. Further, the

Commission has recently commenced

several new studies to explore

additional entry barriers and to seek

further evidence of racial and gender

35846 Federal Register / Vol. 65, No. 109 / Tuesday, June 6, 2000 / Rules and Regulations

discrimination against potential

licensees. In addition, it will continue to

track the rate of participation in its

auctions by minority- and womenowned firms and evaluate this

information with other data gathered to

determine whether provisions to

promote participation by minorities and

women can satisfy judicial scrutiny. If a

sufficient record can be adduced, the

Commission may consider race- and

gender-based auction provisions in the

future.

21. The Commission declines to adopt

financial preferences designed

specifically for rural telephone

companies. The Commission is not

persuaded by the argument that it

should provide special bidding credits

for rural telephone companies in order

to meet its obligation to ensure that

rural telephone companies have the

opportunity to participate in spectrumbased services. The Commission has no

evidence that large rural telephone

companies encounter barriers to capital

formation comparable to those faced by

other designated entities. Moreover, the

vast majority of rural telephone

companies that have participated in the

Commission’s auctions to date have

identified themselves as small

businesses and have qualified for

bidding credits on that basis. Thus, the

Commission finds that small business

bidding credits are sufficient to ensure

that rural telephone companies have

opportunities to participate in

spectrum-based services.

22. For purposes of narrowband PCS,

the Commission will define a small

business as an entity with average

annual gross revenues not to exceed $40

million for the preceding three years

and a very small business as an entity

with average annual gross revenues not

to exceed $15 million for the preceding

three years. The Commission declines to

adopt different definitions and

thresholds for different channel blocks.

23. In the Part 1 Third Report and

Order, the Commission established a

standard schedule of bidding credits for

small businesses. While these bidding

credits are higher than some previously

adopted for specific services, the

Commission concluded in the Part 1

Third Report and Order that, based on

its auction experience and the fact that

it had decided to suspend the use of

installment payments, the schedule

adopted would provide adequate

opportunities for small businesses to

participate in spectrum auctions. The

Commission believes that the levels of

bidding credits in this schedule, which

are higher than those proposed in the

Narrowband PCS R&O/Further Notice,

are sufficient to promote the

participation of small businesses in the

provision of narrowband PCS. The

Commission therefore sees no reason to

deviate from them here, and declines to

adopt higher levels as recommended by

certain commenters. Thus, as provided

in § 1.2110(e)(2) of the Commission’s

rules, small and very small businesses

will be eligible for bidding credits as

follows: Small businesses, i.e., those

entities with average annual gross

revenues for the preceding three years

not exceeding $40 million, will receive

a 15 percent bidding credit. Very small

businesses, i.e., those entities with

average annual gross revenues for the

preceding three years not exceeding $15

million, will receive a 25 percent

bidding credit. These bidding credits

will be available on all channels for

which licenses are auctioned. Thus,

bidding credits will not be restricted to

certain channels.

24. The Commission will attribute the

gross revenues of the applicant, the

applicant’s controlling interests, and its

affiliates in making determinations

regarding small business status. This

approach is consistent with the standard

proposed in Amendment of Part 1 of the

Commission’s Rules—Competitive

Bidding Procedures, Memorandum

Opinion and Order and Notice of

Proposed Rule Making, 62 FR 13540

(March 21, 1997), wherein the

Commission proposed a ‘‘controlling

interest’’ standard as the general

attribution rule for all future auctions.

Under this standard, eligibility for small

business provisions will be determined

by attributing the gross revenues of the

applicant, its controlling interests,

which are defined to include those that

exercise either de jure or de facto

control, and its affiliates. Typically,

de jure control is evidenced by

holdings of greater than 50 percent of

the voting stock of a corporation or, in

the case of a partnership, general

partnership interests. De facto control

is determined on a case-by-case basis,

and includes the criteria set forth in a

Notice of Hearing Designation Order

(Ellis Thompson Corp.), 60 FR 1776

(January 5, 1995).

25. The ‘‘controlling interest’’

definition also provides specific

guidance on calculation of various types

of ownership interests. For purposes of

calculating equity held in an applicant,

the definition provides for full dilution

of certain stock interests, warrants, and

convertible debentures. In addition, the

definition provides for attribution of

partnership and other ownership

interests, including stock interests held

in trust, non-voting stock, and indirect

ownership through intervening

corporations. When an applicant cannot

identify controlling interests under the

definition, the revenues of all interest

holders in the applicant and their

affiliates will be counted. For example,

if a company is owned by four entities,

each of which has 25 percent voting

equity and no shareholders’ agreement

or voting trust gives any one of them

control of the company, the revenues of

all four entities and their affiliates must

be counted. Treating such a corporation

in this way is similar to the

Commission’s treatment of a general

partnership—all general partners are

considered to have a controlling

interest. This rule looks to substance

over form in assessing eligibility for

small business status.

26. The Commission’s intent is to

provide flexibility that will enable

legitimate small businesses to attract

passive financing in a highly

competitive and evolving

telecommunications marketplace. At the

same time, the Commission believes

that this controlling interest threshold

will function effectively to ensure that

only those entities truly meriting small

business status are eligible for small

business provisions. In particular, the

Commission believes that the de jure

and de facto concepts of control used to

determine controlling interests in an

applicant and the application of its

affiliation rules will effectively prevent

larger firms from illegitimately seeking

status as a small business. The

Commission also finds that the

controlling interest standard it adopts,

along with the definition of ‘‘affiliate’’

set forth in part 1 of its rules (see 47 CFR

1.2110(b)(4)), adequately addresses

commenters’ concerns regarding new

business structures and widely held

companies.

27. The Commission continues to

believe that the obstacles faced by small

businesses, including women- and

minority-owned small businesses, in

raising capital are not necessarily

confined to small business principals

and affiliates with limited personal net

worth. Moreover, personal net worth

limits are difficult to apply and enforce.

The Commission therefore eliminates

the $40 million individual net worth

limitation in its narrowband PCS rules.

28. With respect to payment matters,

the Commission declines to adopt

installment payment plans for small

businesses participating in narrowband

PCS auctions in the future. The

Commission’s experience has

demonstrated that installment payments

may not be necessary to ensure a

meaningful opportunity for small

businesses to participate successfully in

its auction program. The Commission

continues to believe that bidding

Federal Register / Vol. 65, No. 109 / Tuesday, June 6, 2000 / Rules and Regulations 35847

credits, coupled with its partitioning

and disaggregation policies, are

sufficient to overcome barriers faced by

small businesses seeking to participate

in the narrowband PCS marketplace. As

a result of the Commission’s decision to

suspend installment payments, and its

adoption of rules governing late

payments and defaults in part 1, subpart

Q, issues related to installment

payments regarding interest, late

payment fees, and payment schedules

raised in the Narrowband PCS R&O/

Further Notice are now moot. Current

licensees paying for their licenses in

installments are subject to the late

payment and default provisions in part

1.

29. The Commission believes that

when a small business entity applies to

transfer or partition its license or

disaggregate spectrum, unjust

enrichment rules are necessary in order

to ensure that non-small business

entities cannot take indirect advantage

of the Commission’s small business

incentives. However, the Commission

does not need to establish a separate

unjust enrichment requirement for

narrowband PCS because it has adopted

a uniform requirement in part 1, subpart

Q, of its rules for all services.

Accordingly, the unjust enrichment

provisions set forth at 47 CFR 1.2111

will apply to narrowband PCS. These

provisions address assignments and

transfers between entities qualifying for

different tiers of bidding credits.

Because the Commission will now offer

bidding credits only to small businesses,

its unjust enrichment rules will apply to

any case where a licensee that qualified

for a bidding credit seeks to transfer or

partition to an entity that is not a small

business. In addition, the Commission’s

revised attribution rules will apply in

determining small business status.

Finally, the Commission declines to

adopt a holding period or transfer

restrictions for narrowband PCS licenses

that would be in addition to its unjust

enrichment rules.

30. Partitioning and Disaggregation.

The Commission will permit all

narrowband PCS licensees, including

incumbents, to partition their

geographic license area at any time to

any entity eligible for a narrowband PCS

license. Small businesses and others

may face certain barriers to entry into

the provision of spectrum-based

services, which may be addressed by

allowing qualifying entities to acquire a

partitioned license. The Commission

also believes that the partitioning policy

it adopts will allow licensees to use

spectrum more efficiently, speed service

to underserved areas, and stimulate

competition.

31. Partitioning will be permitted

based on any geographic area defined by

the parties to a partitioning

arrangement. Partitionees will hold their

licenses for the remainder of the

partitioner’s ten-year license term. This

term is appropriate because a licensee,

through partitioning, should not be able

to confer greater rights than it was

awarded under the terms of its license

grant.

32. Parties to a partitioning

arrangement will have two options for

meeting the applicable narrowband PCS

construction requirements. Under the

first option, the partitionee may certify

that it will satisfy the same construction

requirements as the original licensee,

with the partitionee meeting the

requirements in its partitioned area and

the partitioner responsible for satisfying

the requirements in the area it has

retained. Under the second option, the

original licensee may certify that it has

already met or will meet its five-year

construction requirement and that it

will meet the 10-year requirement for

the entire market involved. All parties

should understand that, under the first

option, both the partitioner and

partitionee are individually responsible

for meeting the coverage requirements

for their respective areas. Failure by

either party to meet its coverage

requirements will result in the

automatic cancellation of its license

without further Commission action.

Under the second option, only the

partitioner’s license will be cancelled if

it fails to meet the coverage

requirements for the entire geographic

area. The partitionee will not be subject

to coverage requirements except for

those necessary to obtain license

renewal.

33. Partitioning applicants will be

required to submit, as separate

attachments to the partial assignment

application, a description of the

partitioned service area and a

calculation of the population of the

partitioned service area. The partitioned

service area must be defined using

counties, FCC-defined service areas (e.g.,

Economic Areas), or the boundaries of

the area described in terms of latitude

and longitude. When partitioning

counties or FCC-defined service areas,

the applicant need only supply the

county and state, or market number.

When describing the boundary of an

area, however, the applicant must

supply sets of coordinates (latitude and

longitude referenced to the North

American Datum of 1983—NAD83)

along the boundary sufficient to

describe the area. An applicant may use

as few as three sets of coordinates, up

to a maximum of 120 sets of coordinates

in order to describe an area. Applicants

are free to aggregate several areas

described by coordinates in order to

accurately describe the boundary of the

partitioned area.

34. The Commission will also permit

all narrowband PCS licensees, including

nationwide licensees to disaggregate

portions of their spectrum in the same

general manner as it has for licensees in

other CMRS services where it has

adopted disaggregation. The

Commission concludes that marketplace

forces should determine whether it is

technically feasible to disaggregate

narrowband spectrum. Allowing

narrowband PCS spectrum

disaggregation could potentially

expedite the introduction of service to

underserved areas and provide

increased flexibility to licensees. The

Commission also believes that

disaggregation combined with bidding

credits and geographic partitioning will

facilitate the acquisition of narrowband

PCS spectrum by small businesses.

35. The Commission finds that it is

unnecessary to require a party that

wishes to disaggregate to retain a

minimum amount of spectrum. Thus,

the Commission will allow

disaggregating parties to negotiate

channelization plans among themselves

as a part of their disaggregation

agreements. Parties will be permitted to

disaggregate spectrum in any

increments as long as such

disaggregation is otherwise consistent

with the Commission’s rules.

Disaggregatees will be authorized to

hold licenses for the remainder of the

disaggregator’s original ten-year term.

As the Commission concluded with

respect to partitioners, the disaggregator

should not be entitled to confer greater

rights than it was awarded under the

initial license grant.

36. With respect to meeting

construction requirements,

disaggregating parties will be permitted

to choose between two options: Under

the first option, the parties may agree

that either the disaggregator or the

disaggregatee will be responsible for

meeting the coverage requirements for

the geographic service area. Under the

second option, the disaggregator and

disaggregatee may certify that they will

share the responsibility for meeting the

coverage requirements for the entire

geographic area. Under the first option,

if the certifying party fails to meet the

coverage requirements for the entire

geographic area, that party’s license will

be subject to cancellation, but the noncertifying party’s license will not be

affected. However, if the parties to a

disaggregation agreement select the

second option and jointly fail to satisfy

35848 Federal Register / Vol. 65, No. 109 / Tuesday, June 6, 2000 / Rules and Regulations

the coverage requirements for the entire

geographic area, both parties’ licenses

will be subject to cancellation. Parties

seeking Commission approval of a

disaggregation agreement will be

required to include a certification as to

which party or parties will be

responsible for meeting the construction

requirements.

37. Combined partitioning and

disaggregation will be permitted. This

will allow narrowband PCS licensees

the flexibility to design the types of

agreements they desire, and will

advance the goals of providing

competitive service offerings and

encouraging new market entrants. In the

event that there is a conflict in the

application of the partitioning and

disaggregation rules, the partitioning

rules will prevail. When a combination

of partitioning and disaggregation is

proposed, the Commission will use both

the population of the partitioned area

and the amount of spectrum

disaggregated to calculate unjust

enrichment payments.

38. The Commission has adopted a

general rule that determines the amount

of unjust enrichment payments assessed

for all current and future licensees that

engage in partitioning and

disaggregation. Specifically, the rules

adopted in the Part 1 Third Report and

Order indicate that if a licensee seeks to

partition any portion of its geographic

area, the amount of the unjust

enrichment payment will be calculated

based on the ratio of the population in

the partitioned area to the overall

population of the license area. In the

event of disaggregation, the amount of

the unjust enrichment payment will be

based upon the ratio of the amount of

spectrum disaggregated to the amount of

spectrum held by the disaggregating

licensee. See 47 CFR 1.2111(e). The

unjust enrichment provisions adopted

in the Part 1 Third Report and Order

will apply to any narrowband PCS

licensee that receives a bidding credit

and later elects to partition or

disaggregate its license. When combined

partitioning and disaggregation is

proposed, the Commission will use a

combination of both population of the

partitioned area and amount of

spectrum disaggregated to make these

pro rata calculations.

39. Installment payments have been

suspended as a means of financing

small businesses and other designated

entities seeking to secure spectrum

licenses. Nonetheless, there are a small

number of current narrowband licensees

that qualified as small businesses for

installment payment plans. If such a

licensee sought to partition or

disaggregate its license to another small

business, the partitionee or

disaggregatee would be permitted to pay

its portion of the remaining obligation

on the license in installments. If,

however, such a licensee sought to

partition or disaggregate its license to a

non-small business, the Commission’s

part 1 unjust enrichment rules would

apply.

40. Because the Commission has

suspended its installment payment

program, the issue of default obligations

for parties entering into partitioning and

disaggregation agreements is moot with

respect to future licensees. With respect

to current small business licensees that

may partition or disaggregate to other

small businesses, the Commission

concludes that a default on one party’s

payment obligation should not affect the

other party’s license.

41. Ownership Disclosure

Requirements. The Commission believes

that requiring detailed ownership

information is necessary to ensure that

all applicants claiming small business

status qualify for such status. Disclosure

of ownership information also aids

bidders by providing them with

information about their auction

competitors and alerting them to entities

subject to the Commission’s anticollusion rules. The Commission has

adopted uniform ownership disclosure

requirements in part 1, subpart Q, of its

rules for all services. See 47 CFR 1.2112.

These rules require all auction

applicants to disclose the real party or

parties in interest by including as an

exhibit to their short-form applications

detailed ownership information.

Moreover, they require that applicants

list controlling interests as well as all

parties holding a 10 percent or greater

interest in the applicant and any

affiliates of these interest holders. These

rules, combined with the controlling

interest standard the Commission

adopts in this Second R&O and its

definition of ‘‘affiliate,’’ will help to

ensure that only qualifying applicants

obtain the benefits of the Commission’s

small business provisions, without

being unduly burdensome.

42. Construction Prior to Grant of

Licenses for Narrowband and

Broadband PCS. The Commission will

apply its part 1 rules, which permit

applicants for all licenses awarded by

competitive bidding to begin

construction of facilities prior to the

grant of their applications. Sees 47 CFR

1.2113. The Commission believes that

allowing pre-grant construction furthers

the statutory objective of rapidly

deploying new technologies, products,

and services for the benefit of the

public. Pre-grant construction will be

subject to any narrowband PCS service

restrictions, including but not limited to

antenna restrictions, environmental

requirements, and international

coordination. Any applicant engaging in

pre-grant construction does so entirely

at its own risk, and the Commission will

not take such activity into account in

ruling on any petition to deny.

Procedural Matters

A. Regulatory Flexibility Analysis

43. A Final Regulatory Flexibility

Analysis, pursuant to the Regulatory

Flexibility Act, 5 U.S.C. 604, is

incorporated in this document.

B. Paperwork Reduction Act Analysis

44. This Second R&O contains a

modified information collection. As part

of its continuing effort to reduce

paperwork burdens, the Commission

invites the general public and the Office

of Management and Budget (OMB) to

take this opportunity to comment on the

information collection contained in this

Second R&O, as required by the

Paperwork Reduction Act of 1995,

Public Law 104–13. Public and agency

comments are due on or before July 6,

2000. Written comments must be

submitted by OMB on the modified

information collection on or before

August 7, 2000. Comments should

address: (a) Whether the proposed

collection of information is necessary

for the proper performance of the

functions of the Commission, including

whether the information shall have

practical utility; (b) the accuracy of the

Commission’s burden estimates; (c)

ways to enhance the quality, utility, and

clarity of the information collected; and

(d) ways to minimize the burden of the

collection of information on the

respondents, including the use of

automated collection techniques or

other forms of information technology.

OMB Control Number: 3060–0625.

Title: Amendment of the

Commission’s Rules to Establish New

Personal Communications Services,

Narrowband PCS.

Form Number: N/A.

Type of Review: Revision of existing

collection.

Respondents: Business or other forprofit; Individuals or households; Notfor-profit institutions; Federal

Government; and State, Local or Tribal

Government.

Number of Respondents: 1,500.

Estimate Time Per Response: 3.5 hrs.

(avg.).

Frequency of Response: On occasion.

Total Annual Burden: 5,250 hours.

Total Annual Costs: $1,050,000.

Needs and Uses: The amendments to

the Commission’s narrowband Personal

Federal Register / Vol. 65, No. 109 / Tuesday, June 6, 2000 / Rules and Regulations 35849

Communications Services rules adopted

in this proceeding will improve the

efficiency of spectrum use, reduce the

regulatory burden on spectrum users,

encourage competition, and promote

service to the largest feasible number of

users.

45. In addition to filing comments

with the Secretary, a copy of any

comments on the information

collection(s) contained herein should be

submitted to Judy Boley, Federal

Communications Commission, Room 1–

C804, 445 12th Street, SW., Washington,

DC 20554, or via the Internet to

jboley@fcc.gov and to Edward Springer,

OMB Desk Officer, 10236 NEOB, 725

17th Street, NW., Washington, DC 20503

or via the Internet to

edward.springer@omb.eop.gov.

E. Ordering Clauses

46. Authority for issuance of this

Second R&O is contained in sections

4(i), 257, 303(r), and 309(j) of the

Communications Act of 1934, as

amended, 47 U.S.C. 154(i), 257, 303(r),

and 309(j).

47. Accordingly, it is ordered that part

24 of the Commission’s rules is

amended as specified, effective August

7, 2000, except § 24.104, which shall be

effective upon OMB approval.

48. It is further ordered that the

Commission’s Consumer Information

Bureau, Reference Information Center,

shall send a copy of this Second R&O,

including the Final Regulatory

Flexibility Analysis, to the Chief

Counsel for Advocacy of the Small

Business Administration.

Final Regulatory Flexibility Analysis

49. As required by the Regulatory

Flexibility Act (RFA), an Initial

Regulatory Flexibility Analysis (IRFA)

was incorporated in the Narrowband

PCS R&O/Further Notice in this

proceeding. The Commission sought

written public comment on the

proposals in the Narrowband PCS R&O/

Further Notice, including comment on

the IRFA. No commenter raised an issue

concerning the IRFA. The Commission’s

Final Regulatory Flexibility Analysis

(FRFA) in this Second R&O conforms to

the RFA.

i. Need for and Purpose of this Action

50. This Second R&O amends the

Commission’s rules for narrowband

PCS. The amendments adopted promote

efficient licensing of narrowband PCS

and enhance the service’s competitive

potential in the Commercial Mobile

Radio Service marketplace. The Second

R&O also makes the competitive

bidding rules for narrowband PCS,

which previously provided preferences

for minority- and women-owned

businesses, race- and gender-neutral.

The Commission deems the latter

changes necessary in light of the

Supreme Court’s decisions in Adarand

Constructors, Inc. v. Pen ̃a, 515 U.S. 200

(1995) (requiring a strict scrutiny

standard of review for Congressionally

mandated race-conscious measures) and

United States v. Virginia, 518 U.S. 515

(1996) (applying an intermediate

scrutiny standard of review to a state

program containing gender

classification). By applying the

Commission’s standardized part 1

competitive bidding rules to

narrowband PCS and eliminating most

of the service-specific competitive

bidding rules previously applied, the

Second R&O also simplifies and reduces

the regulatory burden on applicants and

licensees.

ii. Summary of Issues Raised by the

Public in Response to the IRFA

51. No party filed comments

responding to the IRFA. The

Commission has, however, taken small

business concerns into account in the

Second R&O, as discussed in Sections v

and vi of this FRFA.

iii. Description and Estimate of the

Number of Small Entities to Which the

Rules Will Apply

52. The rules adopted in the Second

R&O will affect small businesses that

hold or seek to acquire narrowband PCS

licenses. These entities include small

businesses that obtain nationwide,

regional or MTA geographic area

licenses through auction, assignment, or

transfer and small businesses that

acquire partitioned and/or disaggregated

MTA, regional, or nationwide

geographic area licenses.

53. To date, two auctions of

narrowband PCS licenses have been

conducted. Through these auctions, the

Commission has awarded a total of 41

licenses, out of which 11 were obtained

by small businesses. For purposes of the

two auctions that have already been

held, small businesses were defined as

entities with average gross revenues for

the prior three calendar years of $40

million or less. To ensure meaningful

participation of small business entities

in the auctions, the Commission adopts

a two-tiered definition of small

businesses in the Second R&O. 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. In December

1998, the Small Business

Administration approved this two-tiered

definition, which had been proposed in

the Narrowband PCS R&O/Further

Notice. Letter of December 2, 1998, to

Amy J. Zoslov, Chief, Auctions and

Industry Analysis Division, Wireless

Telecommunications Bureau, from Aida

Alvarez, Administrator Small Business

Administration.

54. Without this definition, the

Commission would utilize the SBA

definition applicable to radiotelephone

companies, i.e., an entity employing

fewer than 1,500 persons. See 13 CFR

121.201, Standard Industrial

Classification Code 4812. Nearly all

radiotelephone companies have fewer

than 1,000 employees. The 1992 Census

of Transportation, Communications, and

Utilities, conducted by the Bureau of the

Census, shows that only 12

radiotelephone firms out of a total of

1,178 such firms that operated during

1992 had 1,000 or more employees. U.S.

Bureau of the Census, U.S. Department

of Commerce, 1992 Census of

Transportation, Communications, and

Utilities, UC92–S–1, Subject Series,

Establishment and Firm Size, Table 5,

Employment Size of Firms: 1992, SIC

Code 4812 (issued May 1995).

55. In the future, the Commission will

auction 459 licenses to serve MTAs and

408 response channel licenses. There is

also one megahertz of narrowband PCS

spectrum that has been held in reserve

and that the Commission has not yet

decided to release for licensing. The

Commission cannot predict accurately

the number of licenses that will be

awarded to small entities in future

auctions. However, 4 of the 16 winning

bidders in the two previous narrowband

PCS auctions were small businesses, as

that term was defined under the

Commission’s rules. The Commission

assumes, for purposes of the evaluations

and conclusions in this FRFA, that a

large portion of the remaining

narrowband PCS licenses will be

awarded to small entities. The

Commission also assumes that at least

some small businesses will acquire

narrowband PCS licenses by means of

the Commission’s partitioning and

disaggregation rules.

iv. Summary of Projected Reporting,

Recordkeeping, and Other Compliance

Requirements

56. The rules adopted in the Second

R&O impose reporting and

recordkeeping requirements on small

businesses, as well as others, seeking to

obtain or transfer licenses through

partitioning and disaggregation. The

information requirements will be used

35850 Federal Register / Vol. 65, No. 109 / Tuesday, June 6, 2000 / Rules and Regulations

to determine whether the proposed

partitionee or disaggregatee is an entity

qualified to obtain a partitioned license

or disaggregated spectrum. The

information will be a one-time filing by

an applicant requesting such a license.

The information can be submitted on

FCC Form 603 for part 24 narrowband

PCS services. The Commission

estimates that the average burden on the

applicant is three hours for the

information necessary to complete these

forms. The Commission estimates that

75 percent of the respondents, which

may include small businesses, will

contract out the burden of responding.

The Commission estimates that it will

take approximately 30 minutes to

coordinate information with those

contractors. The remaining 25 percent of

respondents, which may include small

businesses, are estimated to employ inhouse staff to provide the information.

Applicants filing electronically,

including small businesses will not

incur any per minute on-line charge.

The Commission estimates that

applicants contracting out the

information would use an attorney or

engineer (average of $200 per hour) to

prepare the information.

57. Narrowband PCS applicants and

licensees, including small businesses,

will be subject to the reporting and

recordkeeping requirements already

contained in the Commission’s part 1

competitive bidding rules, which apply

to all auctionable services. These part 1

rules include the unjust enrichment rule

set forth at 47 CFR 1.2111, which

includes a reporting requirement for

applicants seeking approval of a transfer

of control or assignment of license

within three years of receiving a new

license through competitive bidding.

The part 1 rules also include the

uniform ownership disclosure

requirements of 47 CFR 1.2112, which

require all auction applicants to disclose

the real party or parties in interest by

including as an exhibit to their shortform applications detailed ownership

information. The Commission finds that

these rules, combined with its

controlling interest standard and

definition of ‘‘affiliate,’’ will help to

ensure that only qualifying applicants

obtain the benefits of its small business

provisions, without being unduly

burdensome. In addition, narrowband

PCS licensees that qualify as designated

entities will be required to maintain at

their facilities or by a designated agent,

for the term of the license, information

relevant to their eligibility for

designated entity status. This

requirement will further help to ensure

that only qualifying applicants obtain

the benefits of the Commission’s small

business provisions.

v. Steps Taken To Minimize Burdens on

Small Entities

58. The rules adopted in the Second

R&O are designed to implement

Congress’ goal of giving small

businesses, as well as other entities, the

opportunity to participate in the

provision of spectrum-based services.

The rules are also consistent with the

Communications Act’s mandate to

identify and eliminate market entry

barriers for entrepreneurs and small

businesses in the provision and

ownership of telecommunications

services. See generally 47 U.S.C. 257,

309(j).

59. Service Areas. The Commission

finds that MTAs, rather than nationwide

and regional geographic areas, are the

most appropriate geographic area for

licensing the remaining narrowband

PCS spectrum because they will serve

the needs of a wide range of entities,

including both large and small service

providers. Certain commenters argued

that any additional nationwide or

regional licenses would be too costly for

small businesses to acquire and build

out. MTAs, however, are not too large to

preclude the entry of small businesses,

and those interested in service areas

larger than MTAs will be able to create

such areas by aggregating licenses.

60. Bidding Credits. To ensure

meaningful participation of small

business entities in the auctions, the

Commission adopts a two-tiered

definition of small businesses in the

Second R&O. 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. Small businesses are eligible for

a 15 percent bidding credit. Very small

businesses are eligible for a 25 percent

bidding credit. In contrast to the

Commission’s previous rules, bidding

credits will now be applicable to

narrowband PCS licenses on all

channels.

61. Partitioning and Disaggregation.

The Second R&O adopts rules

permitting narrowband PCS licensees to

partition portions of their geographic

areas, or disaggregate portions of the

spectrum for which they hold a license,

to other entities qualified to be

licensees. Such partitioning and

disaggregation will facilitate market

entry by parties that may lack the

financial resources to participate in

auctions, including small businesses.

Partitioning and disaggregation are

expected to enable small businesses to

obtain licenses for areas smaller than

nationwide, regional or MTA areas, or

smaller amounts of spectrum, at costs

they will be able to afford. The

Commission’s decision to allow parties

to partitioning or disaggregation

agreements to choose between two

options to meet their coverage

requirements will provide small

businesses with more flexibility in

managing their resources.

62. Substantial Service Option. The

Second R&O allows narrowband PCS

licensees to demonstrate ‘‘substantial

service’’ as an alternative to meeting the

coverage requirements set forth in the

existing rules. The Commission finds

that a substantial service option may be

very useful in allowing licensees,

including small businesses, to use

spectrum flexibly to provide new and

innovative services uninhibited by a

requirement that they meet a specific

coverage benchmark or lose their

license.

63. Application of Part 1

Standardized Rules. The Commission

believes that its application of the part

1 standardized rules regarding eligible

entities, unjust enrichment, and bidding

credits will assist small businesses

because the resulting predictability will

facilitate the business planning and

capital fundraising process.

vi. Significant Alternatives Considered

64. The Commission considered and

rejected the following alternative

proposals concerning service areas,

spectrum aggregation, response

channels, coverage requirements,

nationwide paging licensees,

competitive bidding rules, installment

payments, and disaggregation.

65. Service Areas. The Commission

declined to adopt Metrocall’s, Celpage’s

and Benbow’s recommendation that it

use a combination of regional and MTA

service areas for future licensing of

narrowband PCS. Similarly, the

Commission declined to adopt Arch’s

proposal that it allocate one of the two

remaining 50 kHz paired channels as a

nationwide license. Taking into

consideration other commenters’

argument that it would be too costly for

small businesses to acquire and build

out nationwide and regional licenses,

the Commission decided to use MTAs

for future licensing. The Commission

also declined to adopt several

commenters’ recommendation that it

use BTA-based licenses to license

narrowband PCS spectrum. The

Commission concluded that using

MTAs rather than BTAs would not

Federal Register / Vol. 65, No. 109 / Tuesday, June 6, 2000 / Rules and Regulations 35851

compromise the goal of ensuring entry

for small businesses.

66. Spectrum Aggregation. In the

Second R&O, the Commission

considered the argument that it should

maintain the narrowband PCS spectrum

aggregation limit, which was originally

adopted to ensure that narrowband PCS

services would be offered on a

competitive basis. The Commission

decided to eliminate the narrowband

PCS aggregation limit, finding that the

aggregation limit is not needed to

prevent an undue concentration of

licenses and that it may be harmful if it

disadvantages narrowband PCS

licensees in competing against other

services.

67. Response Channels. In the Second

R&O, the Commission considered and

rejected its tentative conclusion that the

response channels should not be

restricted to mobile-to-base

transmissions, provided that licensees

comply with the relevant rules

regarding maximum transmitter power

and interference. The Commission

agreed with commenters Arch, Benbow,

and PCIA that allowing these channels

to be used for other purposes would

cause harmful interference with current

narrowband PCS licensees and

determined that it would retain the

current rule restricting use of the

response channels to mobile-to-base

transmissions.

68. Construction and Coverage

Requirements. The Commission

declined to adopt recommendations by

certain commenters that it modify its

current construction benchmarks. It

declined, for example, to adopt Arch’s

and Benbow’s suggestion that it

eliminate the five-year construction

requirement and allow both existing and

new narrowband PCS licensees to meet

a 37.5 percent population benchmark by

the tenth year of their license terms. The

Commission found that its five- and tenyear construction benchmarks provide

sufficient time for narrowband PCS

licensees to construct their systems. The

nationwide narrowband PCS licensees

that have reached their five-year

buildout benchmarks have all

represented that they met the

requirement, and none requested a

waiver. The Commission found that

there is no need to alter the current

benchmarks, and that it is best to

address any problems that individual

licensees may have because of

difficulties with financing or equipment

availability by evaluating requests for

waiver on a case-by-case basis.

69. Several commenters opposed the

adoption of a ‘‘substantial service’’

requirement on the grounds that

replacing the existing coverage

requirements with a substantial service

test would encourage speculation, fraud,

and anticompetitive behavior. In

considering and rejecting this argument,

the Commission concluded that

coverage requirements, including a

substantial service standard, encourage

the provision of service to areas that

would not necessarily receive service

expeditiously solely through the

operation of market forces. The

Commission found that the substantial

service option may be very useful in

allowing licensees to use spectrum

flexibly to provide new and innovative

services uninhibited by a requirement

that they meet a specific coverage

benchmark or lose their license. The

Commission also concluded that

permitting licensees to make a

substantial service showing may

encourage them to build out in rural

areas. The Commission also declined to

adopt Ameritech’s recommendation that

substantial service be defined as

‘‘service that is sound, favorable, and

reasonably capable of meeting an

appropriate portion of the public

demand for one or more of the

communications services of which the

system is capable under the

Commission’s rules.’’ In the past the

Commission has offered guidance to

licensees in other services with regard

to factors that it would consider in

evaluating whether the substantial

service requirement has been met, and

it will maintain this practice with

respect to narrowband PCS.

70. Nationwide Paging Licenses. In

the Paging MO&O/Third Report and

Order, the Commission considered the

issue of coverage requirements for

nationwide geographic area paging

licensees and deferred any decision on

the issue until it resolved similar

matters in the instant narrowband PCS

rulemaking proceeding. In the Second

R&O, the Commission found that all

nationwide paging licensees are already

providing sufficient coverage to meet

the five-year benchmark applicable to

nationwide narrowband PCS licenseees,

and some of them have met the ten-year

benchmark. Thus, the Commission

concluded that the build-out

requirements imposed on nationwide

paging licensees under its previous

rules were adequate to promote

coverage equivalent to that of

nationwide narrowband PCS licensees,

and therefore it is not necessary to adopt

coverage requirements for nationwide

paging licensees that would be in

addition to the build-out requirements

they have already met.

71. Competitive Bidding Rules. The

Commission declined to adopt certain

commenters’ recommendation that it

require applicants to identify each

frequency in each market on which they

wish to bid and submit upfront

payments for each individual license.

The Commission found that its current

rules, which require an upfront payment

to cover only those licenses on which an

applicant intends to bid in any one

round, are appropriate because they

allow bidders the flexibility to pursue

backup strategies during the course of

an auction in the event they are unable

to obtain their first choice of licenses.

The Commission also declined to

modify its anti-collusion rule to provide

a safe harbor for carriers engaged in

negotiations regarding mergers or

intercarrier agreements, as requested by

PCIA. The Commission has declined to

create such a safe harbor in the past, and

it has not been presented with an

adequate justification for departing from

that decision here. Finally, several

commenters requested that the

Commission provide auction

participants with the identity of all

competing bidders. It has generally been

the Commission’s practice to disclose

the identity of all bidders in

Commission auctions. If, in the case of

particular auctions, a limit on such

information appears warranted, the

Wireless Telecommunications Bureau

will, consistent with the Balanced

Budget Act of 1997 and current practice,

seek comment on the issue in a public

notice prior to the auction.

72. Installment Payments. The

Commission declined to adopt

installment payment plans for small

businesses participating in narrowband

PCS auctions. This action is consistent

with the Commission’s policy set forth

in the Part 1 Third Report and Order,

where the Commission noted that its

experience has demonstrated that

installment payments may not be

necessary to ensure a meaningful

opportunity for small businesses to

participate successfully in its auction

program.

73. Bidding Credits. The Commission

decided to adopt a 15 percent bidding

credit for small businesses and a 25

percent bidding credit for very small

businesses. A small business is an entity

with average annual gross revenues not

to exceed $40 million for the preceding

three years, and a very small business is

an entity with average annual gross

revenues not to exceed $15 million for

the preceding three years. The

Commission declined to adopt higher

bidding credits, as Merlin and RTG

recommend. The bidding credits

adopted are those provided for in the

Commission’s part 1 standardized

competitive bidding rules. The

Commission believes that these levels of

35852 Federal Register / Vol. 65, No. 109 / Tuesday, June 6, 2000 / Rules and Regulations

bidding credits, which are higher than

those proposed in the Narrowband PCS

R&O/Further Notice, are sufficient to

promote the participation of small

businesses in the provision of

narrowband PCS, and that there is no

reason to deviate from the standard

schedule of bidding credits here.

74. Bidding Credits for Rural

Telephone Companies. The Commission

declined to adopt RTG’s and NTCA’s

recommendation that it provide special

bidding credits for rural telephone

companies in order to meet its

obligation to ensure that rural telephone

companies have the opportunity to

participate in spectrum-based services.

The Commission has no evidence that

large rural telephone companies

encounter barriers to capital formation

comparable to those faced by other

designated entities. In addition, the vast

majority of rural telephone companies

that have participated in the

Commission’s auctions to date have

identified themselves as small

businesses and have qualified for

bidding credits on that basis. Thus, the

Commission believes that small

business bidding credits are sufficient to

ensure that rural telephone companies

have the ability to participate in

spectrum-based services, and it does not

believe that rural telephone companies

will be unable to compete in

narrowband PCS auctions or the

messaging marketplace without special

financial preferences.

75. Attribution. The Commission

declined to adopt Merlin’s

recommendations regarding amending

its rules to adapt to various business

structures. Merlin suggests, for example,

that, for purposes of defining whether a

company is widely held, whatever its

form of business organization, the

Commission should formulate its rules

to state that a widely held company is

one in which no single equity holder

has 15 percent or more of the equity of

the applicant. The Commission found

that the controlling interest standard

adopted in the Second R&O, along with

the definition of ‘‘affiliate’’ set forth in

part 1 of the Commission’s rules,

adequately addresses Merlin’s concerns.

76. Disaggregation. Some commenters

stated that disaggregation is not

technically feasible and therefore it is

unnecessary for the Commission to

address the issue at this time. In

considering and rejecting such

arguments, the Commission concluded

that marketplace forces should

determine whether it is technically

feasible to disaggregate narrowband

spectrum. The Commission also

concluded that allowing narrowband

PCS spectrum disaggregation could

potentially expedite the introduction of

service to underserved areas and

provide increased flexibility to

licensees. Finally, the Commission

found that disaggregation combined

with bidding credits and geographic

partitioning will facilitate the

acquisition of narrowband PCS

spectrum by small businesses.

77. Report to Congress. The

Commission will send a copy of the

Second R&O, including this FRFA, in a

report to be sent to Congress pursuant

to the Small Business Regulatory

Enforcement Fairness Act of 1996. See

5 U.S.C. 801(a)(1)(A). In addition, the

Commission will send a copy of the

Second R&O, including FRFA, to the

Chief Counsel for Advocacy of the Small

Business Administration.

List of Subjects in 47 CFR Part 24

Communications common carriers,

Personal communications services,

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 part 24 as

follows:

PART 24—PERSONAL

COMMUNICATIONS SERVICES

1. The authority citation for part 24

continues to read as follows:

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

309 and 332.

§ 24.101 [Removed and Reserved]

2. Remove and reserve § 24.101.

3. Section 24.102 is amended by

removing paragraph (d) and by revising

the introductory text to read as follows:

§ 24.102 Service areas.

Narrowband PCS service areas are

nationwide, regional, and Major Trading

Areas (MTAs), as defined in this

section. MTAs are based on the Rand

McNally 1992 Commercial Atlas &

Marketing Guide, 123rd Edition, at

pages 38–39 (MTA Map). Rand McNally

organizes the 50 States and the District

of Columbia into 47 MTAs. The MTA

Map is available for public inspection in

the FCC’s Library, Room TW–B505, 445

12th Street SW, Washington, D.C.

* * * * *

4. Section 24.103 is amended by

removing the Note and by revising

paragraph (a), (b), (c), (d), introductory

text of paragraph (e), and (f) to read as

follows:

§ 24.103 Construction requirements.

(a) Nationwide narrowband PCS

licensees shall construct base stations

that provide coverage to a composite

area of 750,000 square kilometers or

serve 37.5 percent of the U.S.

population within five years of initial

license grant date; and, shall construct

base stations that provide coverage to a

composite area of 1,500,000 square

kilometers or serve 75 percent of the

U.S. population within ten years of

initial license grant date. Licensees may,

in the alternative, provide substantial

service to the licensed area as provided

in paragraph (d) of this section.

(b) Regional narrowband PCS

licensees shall construct base stations

that provide coverage to a composite

area of 150,000 square kilometers or

serve 37.5 percent of the population of

the service area within five years of

initial license grant date; and, shall

construct base stations that provide

coverage to a composite area of 300,000

square kilometers or serve 75 percent of

the service area population within ten

years of initial license grant date.

Licensees may, in the alternative,

provide substantial service to the

licensed area as provided in paragraph

(d) of this section.

(c) MTA narrowband PCS licensees

shall construct base stations that

provide coverage to a composite area of

75,000 square kilometers or 25 percent

of the geographic area, or serve 37.5

percent of the population of the service

area within five years of initial license

grant date; and, shall construct base

stations that provide coverage to a

composite area of 150,000 square

kilometers or 50 percent of the

geographic area, or serve 75 percent of

the population of the service area within

ten years of initial license grant date.

Licensees may, in the alternative,

provide substantial service to the

licensed area as provided in paragraph

(d) of this section.

(d) As an alternative to the

requirements of paragraphs (a), (b), and

(c) of this section, narrowband PCS

licensees may demonstrate that, no later

than ten years after the initial grant of

their license, they provide substantial

service to their licensed area. Licensees

choosing this option must notify the

FCC by filing FCC Form 601, no later

than 15 days after the end of the five

year period following the initial grant of

their license, that they plan to satisfy

the alternative requirement to provide

substantial service. ‘‘Substantial

service’’ is defined as service that is

sound, favorable, and substantially

above a level of mediocre service that

would barely warrant renewal.

Federal Register / Vol. 65, No. 109 / Tuesday, June 6, 2000 / Rules and Regulations 35853

(e) In demonstrating compliance with

the construction requirements set forth

in this section, licensees must base their

calculations on signal field strengths

that ensure reliable service for the

technology utilized. Licensees may

determine the population of geographic

areas included within their service

contours using either the 1990 census or

the 2000 census, but not both.

* * * * *

(f) Upon meeting the five and ten year

benchmarks in paragraphs (a), (b), and

(c) of this section, or upon meeting the

substantial service alternative in

paragraph (d), licensees shall notify the

Commission by filing FCC Form 601

and including a map and other

supporting documentation that

demonstrate the required geographic

area coverage, population coverage, or

substantial service to the licensed area.

The notification must be filed with the

Commission within 15 days of the

expiration of the relevant period.

* * * * *

5. Section 24.104 is added to read as

follows:

§ 24.104 Partitioning and disaggregation.

Nationwide, regional, and MTA

licensees may apply to partition their

authorized geographic service area or

disaggregate their authorized spectrum

at any time following grant of their

geographic area authorizations.

(a) Application required. Parties

seeking approval for partitioning and/or

disaggregation shall apply for partial

assignment of a license pursuant to

§ 1.948 of this chapter.

(b) Partitioning. In the case of

partitioning, applicants and licensees

must file FCC Form 603 pursuant to

§ 1.948 of this chapter and describe the

partitioned service area on a schedule to

the application. The partitioned service

area shall be defined by up to 120 sets

of geographic coordinates at points at

every 3 degrees azimuth from a point

within the partitioned service area along

the partitioned service area boundary

unless either an FCC-recognized service

area is used (e.g., MEA or EA) or county

lines are followed. The geographical

coordinates must be specified in

degrees, minutes, and seconds to the

nearest second latitude and longitude,

and must be based upon the 1983 North

American Datum (NAD83). In the case

where FCC-recognized service areas or

county lines are used, applicants need

only list the specific area(s) through use

of FCC designations or county names

that constitute the partitioned area.

(c) Disaggregation. Spectrum may be

disaggregated in any amount.

(d) Combined partitioning and

disaggregation. Licensees may apply for

partial assignment of authorizations that

propose combinations of partitioning

and disaggregation.

(e) License term. The license term for

a partitioned license area and for

disaggregated spectrum shall be the

remainder of the original licensee’s

license term as provided for in § 1.955

of this chapter.

(f) Coverage requirements for

partitioning. (1) Parties to a partitioning

agreement must satisfy at least one of

the following requirements:

(i) The partitionee must satisfy the

applicable coverage requirements set

forth in § 24.103 for the partitioned

license area; or

(ii) The original licensee must meet

the coverage requirements set forth in

§ 24.103 for the entire geographic area.

In this case, the partitionee must meet

only the requirements for renewal of its

authorization for the partitioned license

area.

(2) Parties seeking authority to

partition must submit with their partial

assignment application a certification

signed by both parties stating which of

the options they select.

(3) Partitionees must submit

supporting documents showing

compliance with their coverage

requirements as set forth in § 24.103.

(4) Failure by any partitionee to meet

its coverage requirements will result in

automatic cancellation of the

partitioned authorization without

further Commission action.

(g) Coverage requirements for

disaggregation. (1) Parties to a

disaggregation agreement must satisfy at

least one of the following requirements:

(i) Either the disaggregator or

disaggregatee must satisfy the coverage

requirements set forth in § 24.103 for the

entire license area; or

(ii) Parties must agree to share

responsibility for meeting the coverage

requirements set forth in § 24.103 for the

entire license area.

(2) Parties seeking authority to

disaggregate must submit with their

partial assignment application a

certification signed by both parties

stating which of the requirements they

select.

(3) Disaggregatees must submit

supporting documents showing

compliance with their coverage

requirements as set forth in § 24.103.

(4) Parties that accept responsibility

for meeting the coverage requirements

and later fail to do so will be subject to

automatic license cancellation without

further Commission action.

6. Section 24.129 is amended by

revising the introductory text and

paragraph (c), removing paragraph (d)

and removing the ‘‘*’’ whenever it

appears to read as follows:

§ 24.129 Frequencies.

The following frequencies are

available for narrowband PCS.

* * * * *

(c) Nine frequencies are available for

assignment on an MTA basis as follows:

(1) Two 50 kHz channels paired with

50 kHz channels:

Channel 18: 940.35–940.40 and 901.35–

901.40 MHz; and,

Channel 19: 940.40–940.45 and 901.40–

901.45 MHz.

(2) Five 50 kHz channels paired with

12.5 kHz channels:

Channel 20: 930.75–930.80 and 901.8375–

901.8500 MHz;

Channel 21: 930.80–930.85 and 901.8500–

901.8625 MHz;

Channel 22: 930.85–930.90 and 901.8625–

901.8750 MHz;

Channel 25: 930.90–930.95 and 901.8750–

901.8875 MHz; and,

Channel 26: 930.95–931.00 and 901.8875–

901.9000 MHz.

(3) Two 50 kHz unpaired channels:

Channel 23: 940.90–940.95 MHz; and

Channel 24: 940.95–941.00 MHz.

* * * * *

7. Section 24.130 is revised to read as

follows:

§ 24.130 Paging response channels.

The following eight 12.5 kHz

unpaired channels are available for

assignment on an MTA basis and shall

be used only to provide mobile-to-base

station communications:

A: 901.9000–901.9125 MHz;

B: 901.9125–901.9250 MHz;

C: 901.9250–901.9375 MHz;

D: 901.9375–901.9500 MHz;

E: 901.9500–901.9625 MHz;

F: 901.9625–901.9750 MHz;

G: 901.9750–901.9875 MHz; and

H: 901.9875–902.0000 MHz.

8. Section 24.132 is amended by

revising paragraph (e) to read as follows:

§ 24.132 Power and antenna height limits.

* * * * *

(e) MTA and regional base stations

located less than 80 kilometers (50

miles) from the licensed service area

border must limit their effective

radiated power in accordance with the

following formula:

PW = 0.0175 x dkm* * 6.6666 x hm* *

¥3.1997

PW is effective radiated power in watts

dkm is distance in kilometers

hm is antenna HAAT in meters; see § 24.53

for HAAT calculation method

* * * * *

35854 Federal Register / Vol. 65, No. 109 / Tuesday, June 6, 2000 / Rules and Regulations

§§ 24.302 through 24.309 [Removed and

Reserved]

9. Remove and reserve §§ 24.302

through 24.309.

§ 24.320 [Removed and Reserved]

10. Section 24.320 is removed and

reserved.

11. Section 24.321 is added to read as

follows:

§ 24.321 Designated entities.

(a) Eligibility for small business

provisions. (1) A small business is an

entity that, together with its controlling

interests and affiliates, has average gross

revenues not exceeding $40 million for

the preceding three years.

(2) A very small business is an entity

that, together with its controlling

interests and affiliates, has average gross

revenues not exceeding $15 million for

the preceding three years.

(3) For purposes of determining

whether an entity meets either of the

definitions set forth in paragraphs (a)(1)

and (a)(2) of this section, the gross

revenues of the entity, its controlling

interests and affiliates shall be

considered on a cumulative basis and

aggregated. An applicant seeking status

as a small business or very small

business under this section must

disclose on its short- and long-form

applications, separately and in the

aggregate, the gross revenues of the

applicant (or licensee), its controlling

interests and affiliates for each of the

previous three years.

(4) Persons or entities that hold

interests in an applicant (or licensee)

that are affiliates of each other or have

an identity of interests identified in

§ 1.2110(b)(4)(iii) of this chapter will be

treated as though they were one person

or entity and their ownership interests

aggregated for purposes of determining

an applicant’s (or licensee’s) compliance

with the requirements of this section.

(5) Where an applicant (or licensee)

cannot identify controlling interests

under the standards set forth in this

section, the gross revenues of all interest

holders in the applicant, and their

affiliates, will be attributable.

(6) A consortium of small businesses

(or a consortium of very small

businesses) is a conglomerate

organization formed as a joint venture

between or among mutually

independent business firms, each of

which individually satisfies the

definition in paragraph (a)(1) of this

section (or each of which individually

satisfies the definition in paragraph

(a)(2) of this section). Where an

applicant or licensee is a consortium of

small businesses (or very small

businesses), the gross revenues of each

small business (or very small business)

shall not be aggregated.

(7) Designated entities must describe

on their long-form applications how

they satisfy the requirements for

eligibility for designated entity status,

and must list and summarize on their

long-form applications all agreements

that affect designated entity status such

as partnership agreements, shareholder

agreements, management agreements

and other agreements, including oral

agreements, establishing, as applicable,

de facto or de jure control of the entity.

Such information must be maintained at

the licensee’s facilities or by its

designated agent for the term of the

license in order to enable the

Commission to audit designated entity

eligibility on an ongoing basis.

(b) Controlling interest. (1) For

purposes of this section, a controlling

interest includes individuals or entities

with either de jure or de facto control

of the applicant. De jure control is

evidenced by holdings of greater than 50

percent of the voting stock of a

corporation, or in the case of a

partnership, general partnership

interests. De facto control is determined

on a case-by-case basis. An entity must

disclose its equity interest and

demonstrate at least the following

indicia of control to establish that it

retains de facto control of the applicant:

(i) The entity constitutes or appoints

more than 50 percent of the board of

directors or management committee;

(ii) The entity has authority to

appoint, promote, demote, and fire

senior executives that control the dayto-day activities of the licensee; and

(iii) The entity plays an integral role

in management decisions.

(2) The following rules apply for the

calculation of certain interests.

(i) Ownership interests shall be

calculated on a fully diluted basis; all

agreements such as warrants, stock

options, and convertible debentures will

generally be treated as if the rights

thereunder already have been fully

exercised.

(ii) Partnership and other ownership

interests and any stock interest equity,

or outstanding stock, or outstanding

voting stock shall be attributed as

specified in this paragraph (b).

(iii) Stock interests held in trust shall

be attributed to any person who holds

or shares the power to vote such stock,

to any person who has the sole power

to sell such stock, and to any person

who has the right to revoke the trust at

will or to replace the trustee at will. If

the trustee has a familial, personal, or

extra-trust business relationship to the

grantor or the beneficiary, the stock

interests held in trust will be attributed

to the grantor or beneficiary, as

appropriate.

(iv) Non-voting stock shall be

attributed as an interest in the issuing

entity.

(v) 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.

(vi) Officers and directors of an entity

shall be considered to have a controlling

interest in the entity. The officers and

directors of an entity that controls a

licensee or applicant shall be

considered to have a controlling interest

in the licensee or applicant.

(vii) 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.

(viii) Any person who manages the

operations of an applicant or licensee

pursuant to a management agreement

shall be considered to have a controlling

interest in such applicant or licensee if

such person, or its affiliate, has

authority to make decisions or

otherwise engage in practices or

activities that determine, or significantly

influence:

(A) The nature or types of services

offered by such an applicant or licensee;

(B) The terms upon which such

services are offered; or

(C) The prices charged for such

services.

(ix) Any licensee or its affiliate who

enters into a joint marketing

arrangement with an applicant or

licensee, or its affiliate, shall be

considered to have a controlling

interest, if such applicant or licensee, or

its affiliate, has authority to make

decisions or otherwise engage in

practices or activities that determine, or

significantly influence:

(A) The nature or types of services

offered by such an applicant or licensee;

(B) The terms upon which such

services are offered; or

(C) The prices charged for such

services.

(c) Bidding credits. (1) After August 7,

2000, a winning bidder that qualifies as

a small business or a consortium of

small businesses as defined in this

section may use the bidding credit

specified in § 1.2110(e)(2)(iii) of this

Federal Register / Vol. 65, No. 109 / Tuesday, June 6, 2000 / Rules and Regulations 35855

chapter. A winning bidder that qualifies

as a very small business or a consortium

of very small businesses as defined in

this section may use the bidding credit

specified in § 1.2110(e)(2)(ii) of this

chapter. (2)(i) Businesses owned by members

of minority groups and women,

including small businesses owned by

members of minority groups and

women, that are winning bidders on

nationwide licenses on Channel 5,

Channel 8, and Channel 11 prior to

[effective date of rules] will be eligible

for a twenty-five (25) percent bidding

credit.

(ii) Businesses owned by members of

minority groups and women, including

small businesses owned by members of

minority groups and women, that are

winning bidders on regional licenses on

Channel 13 and Channel 17 prior to

August 7, 2000 will be eligible for a

forty (40) percent bidding credit. (d) Installment payments. Small

businesses, including small businesses

owned by members of minority groups

and women, that are winning bidders on

any regional license prior to August 7,

2000 will be eligible to pay the full

amount of their winning bids in

installments over the term of the license

pursuant to the terms set forth in

§ 1.2110(f) of this chapter.

12. Section 24.404 is amended by

revising paragraph (a)(1) to read as

follows:

§ 24.404 Eligibility.

(a) * * *

(1) The applicant is qualified under

the applicable laws and the regulations,

policies and decisions issued under the

laws, including § 24.12;

* * * * *

§ 24.430 [Amended]

13. Section 24.430 is amended by

removing paragraph (a)(4), redesignating

paragraph (a)(5) as paragraph (a)(4) and

adding the word ‘‘and’’ at the end of

paragraph (a)(3).’’

[FR Doc. 00–13961 Filed 6–2–00; 8:45 am]

BILLING CODE 6712–01–P

DEPARTMENT OF COMMERCE

National Oceanic and Atmospheric

Administration

50 CFR Part 635

I.D. 052500B

Atlantic Highly Migratory Species

(HMS) Fisheries; Large Coastal Shark,

Small Coastal Shark, and Pelagic

Shark Species

AGENCY: National Marine Fisheries

Service (NMFS), National Oceanic and

Atmospheric Administration (NOAA),

Commerce.

ACTION: Quota adjustment and fishing

season notification.

SUMMARY: NMFS announces that the

landings of large coastal sharks (LCS) in

the Atlantic Ocean, Gulf of Mexico, and

Caribbean Sea totaled 742.7 metric tons

(mt) dressed weight (dw) during the first

semiannual 2000 season. Because this

constitutes an overharvest of 100 mt dw,

the second semiannual 2000 LCS quota

is reduced accordingly. NMFS also

notifies eligible participants of the

opening and closing of fishing seasons

for Atlantic LCS, small coastal sharks

(SCS), and pelagic sharks.

DATES: The fishery opening for LCS is

effective July 1, 2000; the LCS closure

is effective from 11:30 p.m. local time

August 7, 2000, through December 31,

2000. The fishery opening for SCS and

pelagic sharks are July 1, 2000; no

closure dates for these fisheries are

included in this document.

FOR FURTHER INFORMATION CONTACT:

Margo Schulze-Haugen, Karyl BrewsterGeisz or Steve Meyers, 301–713–2347;

fax 301–713–1917.

SUPPLEMENTARY INFORMATION: The

Atlantic shark fishery is managed under

the Fishery Management Plan for

Atlantic Tunas, Swordfish, and Sharks

(HMS FMP), and its implementing

regulations found at 50 CFR part 635

issued under authority of the

Magnuson-Stevens Fishery

Conservation and Management Act (16

U.S.C. 1801 et seq.).

On June 30, 1999, NMFS received a

Court Order from Judge Steven D.

Merryday relative to the May 1997

lawsuit challenging commercial harvest

quotas for Atlantic sharks. Specifically,

the order states: ‘‘. . . the Court hereby

preliminarily, and until further order of

the Court, expressly ENJOINS the

defendant and his designees from

enforcing the 1999 regulations, 64 FR

29090 (May, 28, 1999) with respect to

Atlantic shark commercial catch quotas

and fish-counting methods (including

the counting of dead discards and state

commercial landings after federal

closures) that are different from the

quotas and fish counting methods

prescribed by the 1997 Atlantic shark

regulations, 62 FR 16648 (April 7,

1997).’’

As such, the annual 2000 LCS quota

continues at the 1997 level of 1,285 mt

dw for all species of LCS, (Table 1 of

appendix A to part 635), with no

minimum size on ridgeback LCS. The

SCS and pelagic shark quotas also revert

to their annual 1997 levels, of 1,760 and

580 mt dw, respectively. The 1997

prohibited species list includes only

five prohibited species: white, basking,

whale, sand tiger and bigeye sand tiger.

The limited access provisions for

commercial harvests still apply,

including trip limits for directed and

incidental shark permit holders.

A motion to clarify the terms of the

court injunction is pending before the

court. If granted, the 1999 prohibited

species list would be in effect for the

Atlantic commercial shark fishery.

NMFS will announce the court’s

decision with specific details in the

Federal Register once the court rules on

the motion.

Under the terms of the Court

injunction, the Assistant Administrator

for Fisheries, NOAA (AA), is authorized

to adjust the semiannual quota to reflect

actual catches during the preceding

semiannual period. Harvest data

submitted to NMFS indicate that the

landings of LCS from January through

March 31, 2000, totaled 742.7 mt dw,

which is 100.7 mt dw more than the

available semiannual quota of 642.5 mt

dw. Therefore, the adjusted quota for

LCS for the second 2000 semiannual

period is decreased from 642.5 mt dw to

542 mt dw. The adjusted quota of 542

mt dw is available for the period July 1

through December 31, 2000.

The second semiannual fishing season

of the 2000 fishing year for the

commercial fishery for LCS in the

Western North Atlantic Ocean,

including the Gulf of Mexico and the

Caribbean Sea, will open July 1, 2000.

Catch rate data from the second

semiannual fishing seasons from 1997,

1998, and 1999 for LCS species indicate

that the available LCS quota of 542.5 mt

dw will be attained within 38 days.

Accordingly, the AA has determined,

based on these projected catch rates and

the adjusted quota, that the quota for the

2000 second semiannual season for LCS

in or from the Western North Atlantic

Ocean, including the Gulf of Mexico

and Caribbean Sea, will be attained as

of August 7, 2000. The LCS fishery will

close August 7, 2000, at 11:30 p.m. local

time.

During a closure, retention of, fishing

for, possessing or selling LCS are

prohibited for persons fishing aboard

vessels issued a limited access permit

under § 635.4. The sale, purchase, trade,

or barter of carcasses and/or fins of LCS

harvested by a person aboard a vessel

that has been issued a permit under

§ 635.4 are prohibited, except for those

that were harvested, offloaded, and sold,

traded, or bartered prior to the closure

and were held in storage by a dealer or

processor.

The second semiannual quota for SCS

is 880 mt dw. The second semiannual