[Federal Register Volume 65, Number 114 (Tuesday, June 13, 2000)]
[Rules and Regulations]
[Pages 37055-37057]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-14872]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 22

[WT Docket No. 96-148; GN Docket No. 96-113; FCC 00-141]


Geographic Partitioning and Spectrum Disaggregation by Commercial 
Mobile Radio Services Licensees

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: This document modifies the Commission's rules governing 
Cellular Radiotelephone Service (cellular service) to permit spectrum 
disaggregation by cellular licensees. In addition, the Commission 
maintains its existing geographic partitioning rules for initial 
cellular licensees, and extends partitioning rules to unserved area 
licensees. This document also resolves several related issues relevant 
to cellular partitioning and disaggregation.

DATES: Effective July 13, 2000.

FOR FURTHER INFORMATION CONTACT: Jeffrey Steinberg, Wireless 
Telecommunications Bureau, Commercial Wireless Division, at (202) 418-
0896.

SUPPLEMENTARY INFORMATION: Synopsis of the Second Report and Order. 
``Partitioning'' is the assignment of geographic portions of a radio 
license along geopolitical or other boundaries. ``Disaggregation'' is 
the assignment of discrete portions or ``blocks'' of spectrum licensed 
to a geographic licensee or other qualifying entity. The Commission has 
previously examined partitioning and disaggregation for many Commercial 
Mobile Radio Services (CMRS) on a service-by-service basis, and has 
adopted geographic partitioning and spectrum disaggregation rules for 
several services. In the Further Notice of Proposed Rulemaking in this 
proceeding, 62 FR 696 (January 6, 1997), the Commission tentatively 
concluded that it is now appropriate to consider permitting full 
partitioning and disaggregation in the cellular service.
    2. The Commission concludes that modifying its cellular rules to 
allow disaggregation will promote competition and further regulatory 
symmetry between cellular and other CMRS licensees. Extending flexible 
disaggregation rules to cellular will increase carriers' flexibility to 
tailor their service offerings to meet market demands, thus increasing 
competition and enhancing the efficient use of spectrum. The Commission 
further finds that there are no technical or other constraints unique 
to the cellular service that would make disaggregation either 
impractical or administratively burdensome. The Commission therefore 
modifies its rules to permit cellular licensees to disaggregate 
portions of their spectrum to other eligible entities. In addition, the 
Commission declines to adopt minimum standards regarding the amount of 
spectrum that cellular licensees may disaggregate.
    3. With regard to partitioning, the Commission decides to retain 
its existing partitioning rules for initial cellular licensees, and to 
provide for partitioning by unserved area licensees. The Commission 
recognizes that the current cellular partitioning rules are different 
from the rules for geographically licensed services because the rules 
restrict cellular partitioning outside the licensee's Cellular 
Geographic Service Area (CGSA) after the initial five-year buildout 
period. However, this restriction ensures that the cellular 
partitioning rules do not conflict with the unserved area rules, and 
the Commission finds that the rules are sufficiently flexible so as not 
to place cellular licensees at a competitive disadvantage compared to 
other CMRS. The Commission also believes that cellular unserved area 
licensees should have the ability to partition their service areas. As 
in the case of initial cellular licensees, the Commission will allow 
cellular unserved area licensees to partition within their designated 
licensing areas during the initial buildout period of the license. 
After the expiration of the 12-month buildout period, an unserved area 
licensee may not partition outside of the licensing area established as 
a result of the buildout process.
    4. The Commission retains its existing cellular construction rules 
as they apply to partitioning. These rules provide sufficient 
flexibility for cellular licensees to build out their markets and to 
respond to demands for service. Thus, where a cellular licensee 
partitions its license prior to the expiration of the relevant buildout 
period, each partitionee will be responsible for completing the 
buildout in its partitioned area within the remainder of the original 
buildout period. Any area that remains unbuilt at the conclusion of the 
buildout period will revert to the Commission and be available for 
unserved area licensing. With respect to disaggregation, the parties 
will be required to certify in their disaggregation application which 
party will be responsible for building out the licensed area.
    5. The Commission adopts its proposal to permit combined 
partitioning and disaggregation for cellular. The Commission also 
determines that the license terms for partitioned and disaggregated 
cellular licenses will be limited to the remaining term of the 
underlying licenses, and that partitionees and disaggregatees may 
obtain renewal expectancy on the same basis as initial cellular 
licensees and other CMRS licensees. Finally, the Commission declines to 
change its current procedures for reviewing and licensing cellular 
partitioning transactions, and adopts these procedures for reviewing 
and licensing disaggregation transactions.

Final Regulatory Flexibility Analysis

    6. As required by section 603 of the Regulatory Flexibility Act 
(RFA), 5 U.S.C. 603, an Initial Regulatory Flexibility Analysis (IRFA) 
was incorporated in the Further Notice of Proposed Rulemaking (Further 
Notice) in WT Docket No. 96-148.\1\ The Commission sought written 
public comment on the proposals in the Further Notice, including the 
IRFA. The Commission's Final Regulatory Flexibility Analysis (FRFA) in 
this Second Report and Order conforms to the RFA, as amended by the 
Contract With America Advancement Act of 1996.\2\
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    \1\ Geographic Partitioning and Spectrum Disaggregation by 
Commericial Mobile Radio Services Licensees, WT Docket No. 96-148, 
FCC 96-287, Notice of Proposed Rulemaking, 11 FCC Rcd. 10187 (1996).
    \2\ Public Law 104-121, 110 Stat. 847 (1996) (CWAA, Subtitle II 
of the Small Business Regulatory Enforcement Fairness Act of 1996 
(SBREFA) codified at 5 U.S.C. 601, et seq.)
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A. Need for and Purpose of This Action

    7. In this document, we modify our rules for the Cellular 
Radiotelephone Service (cellular) to permit partitioning and 
disaggregation for all licensees in these services. The rules adopted 
herein also implement Congress' goal of giving small businesses the 
opportunity to participate in the provision of spectrum-based services 
in accordance with 47 U.S.C. 309(j)(4)(D) and reduce entry barriers for 
small businesses in accordance with 47 U.S.C. 257. With flexible 
partitioning and disaggregation, additional entities, including small 
businesses, may participate in the

[[Page 37056]]

provision of cellular service without needing to acquire wholesale an 
existing license (with all of the bundle of rights currently associated 
with the existing license). Acquiring ``less'' than the current license 
will presumably be a flexible and less expensive alternative for 
entities desiring to provide these services.

B. Description and Number of Small Entities Involved

    8. The RFA directs agencies to provide a description of and, where 
feasible, an estimate of the number of small entities that will be 
affected by our rules.\3\ The RFA generally defines the term ``small 
entity'' as having the same meaning as the terms ``small business,'' 
``small organization,'' and ``small governmental jurisdiction.'' \4\ A 
small organization is generally ``any not-for-profit enterprise which 
is independently owned and operated and is not dominant in its field.'' 
\5\ Nationwide, there are 275,801 small organizations.\6\ In addition, 
the term ``small business'' has the same meaning as the term ``small 
business concern'' under section 3 of the Small Business Act.\7\ Under 
the Small Business Act, a ``small business concern'' is one which: (1) 
Is independently owned and operated; (2) is not dominant in its field 
of operation; and (3) meets any additional criteria established by the 
Small Business Administration (SBA).\8\
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    \3\ 5 U.S.C. 603(b)(3), 604(a)(3).
    \4\ 5 U.S.C. 601(6).
    \5\ 5 U.S.C. 601(4).
    \6\ 1992 Economic Census, U.S. Bureau of the Census, Table 6 
(special tabulation of data under contract to Office of Advocacy of 
the U.S. Small Business Administration).
    \7\ 5 U.S.C. 601(3) (incorporating by reference the definition 
of ``small business concern'' in 15 U.S.C. 632).
    \8\ 15 U.S.C. 632.
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    9. The rules adopted in this document will affect all small 
businesses which avail themselves of these rule changes, including 
small businesses currently holding cellular licenses who choose to 
partition and/or disaggregate, and small businesses that may acquire 
licenses through partitioning and/or disaggregation. We have not 
developed a definition of small entities applicable to cellular 
licensees.
    Therefore, the applicable definition of small entity is the 
definition under the SBA rules applicable to radiotelephone companies. 
This definition provides that a small entity is a radiotelephone 
company employing fewer than 1,500 persons.\9\ The size data provided 
by the SBA does not enable us to make a meaningful estimate of the 
number of cellular providers which are small entities because it 
combines all radiotelephone companies with 500 or more employees.\10\
    10. The 1992 Census of Transportation, Communications, and 
Utilities, conducted by the Bureau of the Census, is the most recent 
information available. This document shows that only twelve 
radiotelephone firms out of a total of 1,178 such firms that operated 
during 1992 had 1,000 or more employees.\11\ Therefore, even if all 
twelve of these large firms were cellular telephone companies, nearly 
all of the cellular carriers were small businesses under the SBA's 
definition. We assume, for purposes of this FRFA, that all of the 
current cellular licensees are small entities, as that term is defined 
by the SBA. In addition, we note that there are 1,758 cellular 
licenses; however, a cellular licensee may own several licenses. The 
most reliable source of information regarding the number of cellular 
service providers nationwide appears to be data that we publish 
annually in our Telecommunications Industry Revenue report, regarding 
the Telecommunications Relay Service (TRS). The report places cellular 
licensees and Personal Communications Services (PCS) licensees in one 
group. According to the data released in November 1997, there are 804 
companies reporting that they engage in cellular or PCS service.\12\ It 
seems certain that some of these carriers are not independently owned 
and operated, or have more than 1,500 employees; however, we are unable 
at this time to estimate with greater precision the number of cellular 
service carriers qualifying as small business concerns under the SBA's 
definition. For purposes of this FRFA, we estimate that there are fewer 
than 804 small cellular service carriers.
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    \9\ 13 CFR 121.201, Standard Industrial Classification (SIC) 
Code 4812.
    \10\ U.S. Small Business Administration 1992 Economic Census 
Employment Report, Bureau of the Census, U.S. Department of 
Commerce, SIC Code 4812 (radiotelephone communications industry data 
adopted by the SBA Office of Advocacy).
    \11\ 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).
    \12\ FCC, Telecommunications Industry Revenue: TRS Fund 
Worksheet Data, Figure 2 (Number of Carriers Paying Into the TRS 
Fund by Type of Carrier) (Nov. 1997).
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C. Summary of Projected Reporting, Recordkeeping and Other Compliance 
Requirements

    11. The rules adopted in this document will impose reporting and 
recordkeeping requirements on small businesses seeking licenses through 
partitioning and disaggregation. The information requirements will be 
used to determine whether the licensee is a qualifying entity to obtain 
a partitioned license or disaggregated spectrum. Any applicant 
requesting such a license, will provide this information in a one-time 
filing. The applicant will submit this information on a FCC Form 490 
Application for Assignment of Authorization or Consent to Transfer of 
Control of License. The applicant will also submit an FCC Form 430 
Licensee Qualification Report if one is not already on file with us, 
and an FCC Form 600 Application for Mobile Radio Service Authorization. 
These forms are currently in use and have already received Office of 
Management and Budget clearance. We estimate that the average burden on 
the applicant is three hours for the information necessary to complete 
these forms. We further estimate that seventy-five percent of the 
respondents (which may include small businesses) will contract out the 
burden of responding. Finally, we estimate that it will take 
approximately thirty minutes to coordinate information with those 
contractors. The remaining twenty-five percent of respondents (which 
may include small businesses) are estimated to employ in-house staff to 
provide the information.

D. Steps Taken To Minimize Burdens on Small Entities

    12. The rules adopted in this document 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 and are 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.
    13. Allowing non-restricted partitioning of licenses will 
facilitate market entry by parties who may lack the financial resources 
for participation in auctions, including small businesses. Some small 
businesses may have been unable to obtain cellular licenses through 
sale due to high asking prices. By eliminating this restriction and 
allowing flexible partitioning, small businesses will be able to obtain 
partitioned licenses for smaller service areas at presumably reduced 
costs, thereby providing a method for small businesses to enter the 
cellular marketplace.
    14. Similarly, allowing immediate disaggregation of cellular 
licenses will

[[Page 37057]]

facilitate the entry of new competitors to the provision of these 
services, many of whom will be small businesses seeking to acquire a 
smaller amount of spectrum at a reduced cost. Additionally, allowing 
disaggregation of spectrum in any amount will also promote 
participation by small businesses who may seek to acquire a smaller 
amount of cellular spectrum tailored to meet the needs of their 
proposed service.

E. Significant Alternatives Considered and Rejected

    15. We considered and rejected several alternative proposals 
concerning partitioning and disaggregation:
    <bullet> We considered and rejected the option of continuing to 
disallow disaggregation of cellular spectrum. We concluded that 
permitting disaggregation would promote competition and further 
regulatory symmetry, and that there were no technical or other 
constraints that would make cellular disaggregation either impractical 
or administratively burdensome.
    <bullet> We declined to establish any minimum amount of spectrum 
that can be disaggregated. We concluded that allowing flexibility in 
disaggregation would promote more efficient use of spectrum and permit 
deployment of a wider array of services.
    <bullet> We declined to allow additional flexibility in our 
cellular partitioning rules. We concluded that our existing rules are 
sufficiently flexible so as not to place cellular licensees at a 
competitive disadvantage compared to other CMRS, and that additional 
flexibility would be inconsistent with our cellular unserved area 
rules.
    <bullet> We declined to apply a new license term to partitioned 
license areas or disaggregated spectrum. We found that allowing parties 
to ``re-start'' their license term would effectively allow a licensee 
to extend its license term and could lead to circumvention of our 
license term rules.

F. Report to Congress

    16. We shall include a copy of this Final Regulatory Flexibility 
Analysis, along with this Second Report and Order, in a report to be 
sent to Congress pursuant to the Small Business Regulatory Enforcement 
Fairness Act of 1996, 5 U.S.C. 801(a)(1)(A). A copy of this Final 
Regulatory Flexibility Analysis will also be published in the Federal 
Register.

G. Ordering Clauses

    17. Accordingly, pursuant to the authority of sections 4(i), 257, 
303(g), 303(r), and 332(a) of the Communications Act of 1934, as 
amended, 47 U.S.C. 154(i), 257, 303(g), 303(r), and 332(a), part 22 of 
the Commission's Rules, 47 CFR 22.1, et seq., Is Amended as set forth 
in the rule changes.
    18. The rules adopted herein will become effective July 13, 2000. 
This action is taken pursuant to sections 4(i), 303(r), and 309(j) of 
the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 303(r), 
309(j).

List of Subjects in 47 CFR Part 22

    Radio.

    Federal Communications Commission.
Magalie Roman Salas,
Secretary.

Rule Changes

    For the reasons set forth in the preamble, the Federal 
Communications Commission amends 47 CFR part 22 as follows:

PART 22--PUBLIC MOBILE SERVICES

    1. The authority citation for part 22 continues to read:

    Authority: 47 U.S.C. 154, 222, 303, 309 and 332.


    2. Add Sec. 22.948 to read as follows:


Sec. 22.948  Partitioning and Disaggregation.

    (a) Eligibility. (1) Generally. Parties seeking approval for 
partitioning and disaggregation shall request an authorization for 
partial assignment of a license pursuant to Sec. 1.948 of this chapter. 
Cellular licensees may partition or disaggregate their spectrum to 
other qualified entities.
    (2) Partitioning. During the five year build-out period, as defined 
in Sec. 22.947, cellular licensees may partition any portion of their 
cellular market to other qualified entities. After the five year build-
out period, cellular licensees and unserved area licensees may 
partition any portion of their Cellular Geographic Service Area (CGSA), 
as defined by Sec. 22.911, to other qualified entities but may not 
partition unserved portions of their cellular market.
    (3) Disaggregation. After the five year build-out period, as 
defined in Sec. 22.947, parties obtaining disaggregated spectrum may 
only use such spectrum in that portion of the cellular market 
encompassed by the original licensee's CGSA and may not use such 
spectrum to provide service to unserved portions of the cellular 
market.
    (b) Disaggregation. Cellular licensees and unserved area licensees 
may disaggregate spectrum in any amount.
    (c) Combined partitioning and disaggregation. The Commission will 
consider requests for partial assignment of cellular licenses that 
propose combinations of partitioning and disaggregation.
    (d) License Term. The license term for the partitioned license area 
and for disaggregated spectrum shall be the remainder of the original 
cellular licensee's or the unserved area licensee's license term 
provided for in Sec. 22.144(a).

[FR Doc. 00-14872 Filed 6-12-00; 8:45 am]
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