[Federal Register Volume 62, Number 40 (Friday, February 28, 1997)]
[Rules and Regulations]
[Pages 9103-9110]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-4870]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 22

[CC Docket No. 90-6; FCC 96-56]


Amendment of Part 22 of the Commission's Rules To Provide for 
Filing and Processing of Applications for Unserved Areas in the 
Cellular Service and To Modify Other Cellular Rules

AGENCY: Federal Communications Commission.

ACTION: Further memorandum opinion and order on reconsideration.

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SUMMARY: In this Memorandum Opinion and Order on Reconsideration, the 
Commission denies the petitions for reconsideration and petitions for 
partial reconsideration of the Commission's Third Report and Order and 
Memorandum Opinion and Order on Reconsideration 57 FR 53446, November 
10, 1992 in this Docket.

FOR FURTHER INFORMATION CONTACT: Ramona Melson, Commercial Wireless 
Division, Wireless Telecommunications Bureau, (202) 418-7240.

SUPPLEMENTARY INFORMATION: This Further Memorandum Opinion and Order on 
Reconsideration in CC Docket No. 90-6, adopted on February 13, 1996 and 
released on January 31, 1997, is available for inspection and copying 
during normal business hours in the FCC Reference Center, Room 575, 
2000 M Street N.W, Washington, D.C. The complete text may also be 
purchased from the Commission's copy contractor, International 
Transcription Service, Inc. 2100 M Street, N.W., Suite 140, Washington, 
D.C. 20037, (202) 857-3800. Synopsis of Further Memorandum Opinion and 
Order on Reconsideration

I. Introduction

    1. By these actions, we respond to petitions for reconsideration 
and partial reconsideration of the Third Report and Order on 
Reconsideration and Memorandum Opinion and Order on Reconsideration 58 
FR 27213, May 7, 1993 in this docket. Applicants Against Lottery Abuses 
(AALA) and the Committee for Effective Cellular Rules (CECR) have filed 
petitions for reconsideration of the Third Report and Order, 58 FR 
27213, May 7, 1993 and Cellular Information Systems, Inc., Debtor in 
Possession (CIS), has filed a petition for partial reconsideration (CIS 
Petition) of the Third Report and Order 58 FR 27213, May 7, 1993. In 
addition, we have before us five petitions for reconsideration and 
three petitions for partial reconsideration of our Memorandum Opinion 
and Order on Reconsideration 58 FR 11799, March 1, 1993. We also 
received a request by PetroCom and Coastel for expedited action on the 
CIS petition (PetroCom/Coastel Request). For the reasons stated below, 
we deny the requests for reconsideration and partial reconsideration of 
the Third Report and Order and the Memorandum Opinion and Order 58 FR 
27213, May 7, 1993. We dismiss the request for expedited action as 
moot.
    2. As a related matter, we note that PetroCom and Coastel 
(collectively, ``petitioners'') filed petitions for review with the 
United States Court of Appeals for the District of Columbia Circuit 
challenging Sections 22.903(a) and 22.903(d)(1) of the Commission's 
rules. Petitioners contend, inter alia, that the Commission promulgated 
a consent requirement for de minimis extensions under Section 
22.903(d)(1) without providing proper notice and opportunity for 
comment as required under the Administrative Procedure Act (APA), 5 
U.S.C. Sec. 553. On May 13, 1994, the court denied the petition with 
respect to petitioners' claim that proper notice and comment was not 
provided because another party, CIS, had already filed a petition for 
reconsideration with the Commission alleging similar violations and the 
petition had not yet been resolved. This Further Memorandum Opinion and 
Order addresses the notice and comment issues raised by the CIS 
petition and the comments filed by petitioners in support of the CIS 
petition. Other issues raised by petitioners and the court will be 
addressed in separate orders.

II. Background

    3. The first licensee of a cellular radio system authorized on a 
channel block in

[[Page 9104]]

each cellular market is afforded a five-year ``build-out'' period 
during which it has the exclusive right to construct and operate 
cellular facilities on its channel block within the market. We 
initiated this proceeding to adopt rules for the acceptance, processing 
and selection of applications for new cellular systems proposing 
service to unserved areas. In our First Report and Order and Memorandum 
Opinion and Order on Reconsideration 56 FR 58503, November 20, 1991 in 
this docket, we established rules and procedures for processing and 
granting applications to operate cellular systems in areas as yet 
unserved upon expiration of the five-year ``build-out'' period. On the 
same day that we adopted the First Report and Order 56 FR 58503, 
November 20, 1991, we also adopted a Further Notice of Proposed Rule 
Making 56 FR 58529, November 20, 1991 in this docket which proposed 
changes to various cellular rules and requested additional comments on 
a number of issues, as a result of earlier comments filed in this 
docket and not resolved by the First Report and Order 56 FR 58503, 
November 20, 1991. On April 9, 1992, we released our Second Report and 
Order 57 FR 13646, April 17, 1992 in this docket, in which we adopted 
rules to determine the boundaries of Cellular Geographic Service Areas 
(CGSAs) by the use of a mathematical formula, with the objective of 
creating boundaries that would more closely approximate actual service 
to the public. The Second Report and Order 57 FR 13646, April 17, 1992 
also modified the authorizations of existing cellular systems to 
redefine the boundaries of their CGSAs in accordance with the new 
standard. Our Third Report and Order and Memorandum Opinion and Order 
on Reconsideration 58 FR 27213, May 7, 1993 in this docket dealt with a 
variety of issues governing our licensing of cellular radio facilities, 
specifically those issues set forth in the Further Notice 56 FR 58529, 
November 20, 1991 not previously addressed in the Second Report and 
Order 57 FR 13646, April 17, 1992. The Third Report and Order 58 FR 
27213, May 7, 1993 also disposed of ten petitions for reconsideration 
of our First Report and Order 56 FR 58503, November 20, 1991. Petitions 
for reconsideration of the Second Report and Order 57 FR 13646, April 
17, 1992 were addressed in the 1993 Memorandum Opinion and Order on 
Reconsideration 58 FR 11799, March 1, 1993 in this docket.

III. Discussion

A. Petitions for Reconsideration of the Third Report and Order Lottery 
Rules

    4. In the Third Report and Order 58 FR 27213, May 7, 1993, we 
adopted Sections 22.927 and 22.928 of our rules. Under these rules, an 
applicant or a petitioner may receive only the legitimate and prudent 
expenses incurred in prosecuting its application or pleading in 
exchange for agreeing to withdraw a mutually exclusive cellular 
application or a pleading. AALA argues that with a rule limiting the 
settlement amount that can be paid to petitioners seeking denial or 
dismissal of applications, the Commission should at a minimum reinstate 
the procedure used in the Metropolitan Statistical Area cellular 
licensing process for the selection and ranking of multiple selectees 
in cellular lotteries. AALA contends that the settlement limitations 
will remove all incentive for private parties to assist in checking 
lottery abuse. As a result, according to AALA, the rules adopted ``will 
deter not just frivolous petitions, but those meritorious petitions 
that have proven helpful to the Commission in its enforcement 
functions.'' AALA argues that ranking multiple selectees is the only 
alternative which provides the necessary incentive for private parties, 
through the petition to deny process, to assist the Commission in 
policing lottery abuses. McCaw urges the Commission to reject AALA's 
proposal, because history has shown that ranking lottery winners will 
lead to the filing of frivolous applications ``submitted by entities 
that figure they have nothing to lose.'' AALA responds to McCaw, 
contending that the settlement cap imposed on a would-be filer of a 
frivolous petition would ensure that the petitioner would have nothing 
to gain because ``the very best such a petitioner could hope for is to 
break even.''
    5. Section 309(d) of the Communications Act provides that any party 
in interest may file with the Commission a petition to deny challenging 
the grant of an application. The petition must contain specific 
allegations of fact sufficient to show that the petitioner is a party 
in interest and that a grant of the application would be prima facie 
inconsistent with the public interest, convenience and necessity. 47 
U.S.C. Sec. 309(d). Our obligation under the Communications Act is to 
provide the forum and mechanism for the filing of those petitions by 
parties with standing. By establishing limitations on settlements, we 
did not intend to encourage or discourage the filing of petitions to 
deny. Notwithstanding limitations on settlements, we have no basis for 
concluding that meritorious petitions will not continue to be filed by 
those parties desiring corrective or appropriate action on defective or 
otherwise non-grantable applications. Further, our experience with 
lotteries has taught us that ranking applicants for initial cellular 
systems encourages the filing of frivolous petitions to deny. Moreover, 
in the future we intend to use competitive bidding to select from among 
mutually exclusive cellular unserved area applications filed on or 
after July 26, 1993, as well as most other applications for Part 22 
licenses. Thus, we do not plan to make much use of lottery procedures 
in the future. In light of the foregoing, we deny AALA's petition.
Standards for De Minimis Extensions
    6. Section 22.903(d)(1), as adopted in the Second Report and Order 
57 FR 13646, April 17, 1992, allowed an applicant to propose Service 
Area Boundary (SAB) extensions into adjacent Metropolitan Statistical 
Areas (MSAs) or Rural Service Areas (RSAs), if such extensions were: 
(1) de minimis; and (2) demonstrably unavoidable for technical reasons 
of sound engineering design. The Third Report and Order 58 FR 27213, 
May 7, 1993 modified Section 22.903(d)(1) to allow only those 
extensions that meet the two foregoing requirements and that do not 
extend into the CGSA of any other licensee's cellular system on the 
same channel block (unless the other licensee consents to the 
extension), or into any adjacent MSA or RSA on a channel block for 
which the five year fill-in period has expired (i.e., into areas that 
are unserved and may be applied for only pursuant to the licensing 
process described in Section 22.949 of the Commission's rules).
    7. CIS argues that the circumstances under which de minimis 
extensions are permitted under Section 22.903(d)(1) will not serve the 
public interest. CIS argues that the rule will make it more difficult 
for carriers to cover their markets and create the seamless cellular 
coverage the Commission has long encouraged. CIS claims that under the 
former version of the rule section, there was little incentive for a 
neighboring carrier to challenge a de minimis extension, unless that 
carrier had ``specific concerns'' or the extension significantly 
affected the market. CIS asserts that the new rule adds a layer of 
negotiation, and perhaps litigation, to most de minimis applications. 
Thus, CIS argues, if a licensee wants to propose a de minimis 
extension, it first must determine whether that extension

[[Page 9105]]

overlaps with the adjacent carrier's CGSA and if it does, negotiate for 
consent to that extension. CIS contends that if consent is not 
forthcoming, it is possible that the carrier requesting consent will be 
unable to build facilities with de minimis extensions in that area. 
According to CIS, the new rule essentially treats extensions as 
mutually exclusive with existing or proposed CGSAs. CIS believes our 
adoption of Section 22.903(d)(1) is not needed if the principles 
underlying our mutual exclusivity rules and original de minimis 
extension rules were followed. The net result of the new rule, CIS 
alleges, is to favor the earlier-licensed market over the later-
licensed market and to favor well-financed carriers over less 
financially secure carriers, because the well-financed carriers are 
more likely to win the ``race to the border'' created by the new rule. 
CIS also maintains that, prior to the rule revision, extensions that 
overlapped a neighbor's CGSA did not require consent during the first 
ten years of cellular licensing, whereas such consent now is required. 
CIS contends that requiring such consent will cause some licensees to 
be treated differently than others have been treated in the past, even 
though there has been no change in the justification underlying the 
Commission's published rules and policies concerning de minimis 
extensions.
    8. We find that CIS's arguments are not persuasive. The cellular 
radio industry has matured to the point where many licensees have CGSAs 
that have reached the borders of their respective MSAs or RSAs. In such 
an environment, ``border wars'' may become more common. Nevertheless, 
our rules do not favor either earlier-licensed carriers or better-
financed carriers. Rather, any licensee, regardless of when it was 
licensed or how well it is financed, is entitled to protection within 
its CGSA, and conversely, must not cause interference by extensions 
into the CGSAs of other licensees, unless the parties agree to accept 
the intrusion. It is in the interest of cellular licensees to find 
mutually beneficial ways to accommodate their respective needs in 
providing service within their respective CGSAs.
    9. Our current rule requiring consent for any SAB extensions into a 
licensee's CGSA is consistent with our previous policies protecting a 
licensee's reliable service area. Prior to the adoption of our Second 
Report and Order 57 FR 13646, April 17, 1992, de minimis contour 
extensions overlapping a neighbor's CGSA did not require prior consent 
from the neighbor. At that time, the CGSA was the area within an MSA or 
RSA that an applicant for an initial cellular system intended to serve, 
so it was possible for contours to extend into a neighbor's CGSA 
without causing interference to the neighbor's reliable service area. 
Furthermore, (as discussed infra at para. 14), all such contour 
extensions were subject to a standard authorization condition that 
required a licensee to change frequencies or ``pull back'' its service 
area boundary, if a current or future adjacent licensee encountered 
interference caused by any such extension. Pursuant to the Second 
Report and Order 57 FR 13646, April 17, 1992, the CGSA now represents 
the actual service area. Since the CGSA now is the current, rather than 
planned, service area, any extension into an adjacent CGSA would amount 
to an incursion into that licensee's actual service area. Thus, before 
and after the adoption of the Second Report and Order 57 FR 13646, 
April 17, 1992, a cellular licensee's reliable service area has been 
protected from overlap with the reliable service areas of neighboring 
cellular licensees by the standard pull back condition. The changes we 
made in the Third Report and Order 58 FR 27213, May 7, 1993 allow the 
parties to agree to have overlapping contours without imposing the pull 
back requirement.
    10. Therefore, we conclude that the standards set forth in Section 
22.903(d)(1) of the rules concerning de minimis SAB extensions into 
adjacent MSAs and RSAs serve the public interest and are consistent 
with our previous policies protecting a licensee's reliable service 
area.
Alleged Due Process Violations and Lack of Notice Under APA
    11. In its petition, CIS argues that the Commission provided no 
notice that Section 22.903(d)(1) would be amended by the Third Report 
and Order 58 FR 27213, May 7, 1993, and thus violated the notice and 
comment requirements of the Administrative Procedures Act (APA). 
Similarly, PetroCom and Coastel argue that the Initial NPRM 55 FR 4882, 
February 12, 1990 and the First Report and Order 56 FR 58503, November 
20, 1991 in this proceeding stated that the Commission was adopting no 
new requirements affecting the extension applications of existing 
cellular licensees. PetroCom and Coastel claim that no reasonable 
reader of the Commission's Initial NPRM 55 FR 4882, February 12, 1990 
could have inferred that the Commission would change the ``de minimis 
extension regulation as it applied to existing cellular licensees.''
    12. In addition, CIS, PetroCom, and Coastel contend that the only 
reference to contour extensions applicable to licensees seeking to 
expand their existing system boundaries is the proposal to codify a 
standard authorization condition that requires a licensee to change 
frequencies or ``pull back'' its service area boundary, if a current or 
future adjacent licensee encounters interference caused by a de minimis 
extension. The three petitioners conclude that the Commission provided 
no notice that it planned to change existing policy by requiring a 
licensee seeking to extend its contour into a neighboring licensee's 
CGSA to obtain the neighboring licensee's consent to that extension. 
CIS also argues that the Commission did not provide a reasoned 
explanation for the obligations adopted in the rules. CIS alleges that, 
by not providing sufficient notice or a reasonable basis for the new 
rule, we have violated due process.
    13. As CIS acknowledges, proposed rules do not have to be identical 
to the final adopted rules, but important changes must be a ``logical 
outgrowth'' of the proceeding. Thus, courts have taken the view that 
changes from the original proposals in a rule making do not require an 
additional round of notice and comments where the final rules represent 
a ``logical outgrowth'' of the proposals. We believe that the rule 
changes implemented in the Third Report and Order 58 FR 27213, May 7, 
1993 are well grounded in our previous rules and policies, and that 
these changes were an outgrowth of the issues raised at the initiation 
of this proceeding to modify the CGSAs of existing and new cellular 
systems.
    14. A cellular licensee's service area has been protected from the 
contour extensions of other licensees by a standard license condition 
utilized prior to the adoption of the First Report and Order 56 FR 
58503, November 20, 1991 in this proceeding. The condition was 
implemented as part of the Commission's longstanding policy of 
protecting a cellular licensee's actual service area. Prior to the 
adoption of the First Report and Order 56 FR 58503, November 20, 1991, 
carriers granted a de minimis extension into an adjacent MSA or RSA had 
been subject to a standard condition requiring that the extension be 
``pulled back,'' if it caused interference to the protected service 
area of the adjacent MSA or RSA. The Initial NPRM 55 FR 4882, February 
12, 1990 in this proceeding proposed to codify this standard condition 
and the First Report and Order 56 FR 58503, November 20, 1991 adopted 
this condition as Section 22.902(d)(4) of the rules. Thus, both

[[Page 9106]]

prior to and after the adoption of the Second Report and Order 57 FR 
13646, April 17, 1992, a cellular licensee's reliable service area was 
protected by the standard pull back condition. A reasonable reader of 
the Further Notice 56 FR 58529, November 20, 1991 which proposed to 
establish the CGSA in the manner ultimately adopted in the Second 
Report and Order 57 FR 13646, April 17, 1992, could have anticipated 
that the Commission would continue to protect a licensee's service area 
from interference by other licensees.
    15. We believe that the changes to Section 22.903(d)(1) reflect a 
logical and necessary step in redetermining the CGSA of each cellular 
licensee. In the Second Report and Order 57 FR 13646, April 17, 1992, 
we revised Section 22.903(a) to determine the CGSA based on a 
licensee's authorized service area, because the method proposed in the 
Initial NPRM 55 FR 4882, February 12, 1990 underestimated the service 
area boundaries. Both the Initial NPRM 55 FR 4882, February 12, 1990 
and the Further Notice 56 FR 58529, November 20, 1991 in this 
proceeding explained that a central purpose of this proceeding was to 
make a licensee's CGSA more closely approximate its authorized service 
area.
    16. The modification of a licensee's CGSA to more closely 
approximate its service area under Section 22.903(a) means that any 
non-consensual extension into a licensee's CGSA on the same channel 
block would constitute interference from which the licensee and its 
customers have a right to be protected, pursuant to Section 22.911 of 
our rules. Our modification of the text of Section 22.903(d)(1) 
regarding SAB extensions encroaching upon the CGSA of another licensee 
was necessitated by the change in methodology to determine the CGSA and 
our existing interference protection rule under Section 22.911. Thus, 
we modified Section 22.903(d)(1) to prohibit de minimis extensions into 
the CGSA of a carrier on the same channel block in an adjacent market 
without the consent of the neighboring licensee. Such changes do not 
violate due process, nor were the changes without notice, as CIS, 
Petrocom and Coastel allege.
    17. CIS, PetroCom, and Coastel also assert that the Third Report 
and Order 58 FR 27213, May 7, 1993 mislabeled the Commission's 
modification of Section 22.903(d)(1) of its Rules as a 
``clarification.'' They claim that the modification of the referenced 
rule was more than a clarification, noting that the term 
``clarification'' implies that no substantive change to the rule is 
being made.
    18. We do not dispute that our modification of Section 22.903(d)(1) 
involved a revision of that rule, and we did not intend, by the 
language we used in the Third Report and Order 58 FR 27213, May 7, 
1993, to suggest otherwise. The revision of Section 22.903(d)(1) simply 
reinforced a concept which already was stated in the introductory 
paragraph of Section 22.903, as revised by the Second Report and Order 
57 FR 13646, April 17, 1992, namely, that because the method of 
determining the CGSA is changed to reflect a licensee's authorized 
service area, the CGSA is protected from interference caused by all 
other licensees, just as cellular licensees' service areas had been 
protected from interference in the past by the standard pull back 
condition. Once we modified the CGSA to be a licensee's authorized 
protected service area, no incursions into the CGSA could be allowed 
under our standard policy against interference, unless the carrier 
causing the SAB extension received consent from the affected licensee.
    19. We also had to modify Section 22.903(d)(1) to prohibit 
extensions into an adjacent MSA or RSA for which the five-year build-
out period had expired, to be consistent with our unserved area rules. 
Sections 22.903(d)(3)(i) through 22.903(d)(3)(iii) provided that, with 
respect to cellular systems proposed for unserved areas, the service 
area boundaries (SABs) of the proposed cells must not extend into the 
CGSA of any other licensee's cellular system on the same channel block, 
except for permissible contract extensions, or into any adjacent MSA or 
RSA where the five-year build-out period had expired. The same concern 
about interference created by SAB extensions into adjacent CGSAs that 
applies to unserved area applicants also applies to proposed extensions 
into CGSAs by existing licensees. The rights of unserved area 
applicants would be compromised if we allowed a licensee in an adjacent 
MSA or RSA to extend its service contour into the unserved area of an 
MSA or RSA for which the build-out period had expired without complying 
with the unserved area licensing procedures.
    20. Therefore, we conclude that the Commission gave adequate notice 
for the changes the Third Report and Order 58 FR 27213, May 7, 1993 
made in Section 22.903(d)(1) of the rules, that those changes were well 
grounded in our previous rules and policies, and that the changes were 
a logical outgrowth of the issues raised in this proceeding.
Contour Extensions During Phase I Processing
    21. In the Third Report and Order 58 FR 27213, May 7, 1993, we 
modified our policies for allowing applicants for unserved areas to 
propose SAB extensions during Phase I of our application processing 
procedures for all markets in which the five-year build-out period has 
expired. Specifically, we determined that initial applications filed in 
Phase I would not be allowed to propose any extensions into adjacent 
MSAs or RSAs, even if those extensions were de minimis or contract 
extensions. In prohibiting contour extensions in these circumstances, 
we explained that this restriction would simplify and expedite our 
licensing process and would remove a possible source of litigation as 
to whether such extensions were permissible. We stated that 
applications proposing such extensions would be dismissed as defective. 
We added language to effectuate our policy change to Section 
22.902(b)(4)(i) of the rules and appropriately revised the language of 
Sections 22.903(d)(3)(ii) through Sections 22.903(d)(3)(iv).
    22. CECR asserts that the Commission erred in making the foregoing 
rule changes. CECR argues that the First Report and Order 56 FR 58503, 
November 20, 1991 clearly delineated the circumstances under which 
contract extensions are permissible: where a contract exists, 
extensions are valid, and if no contract exists, the extension 
application is deemed defective. Thus, claims CECR, permitting contract 
extensions cannot serve as a possible source of litigation. CECR also 
argues that former Section 22.903(d)(3)(ii) of the rules explicitly 
explained the situations in which unserved area applications can 
propose de minimis extensions, and served to eliminate any confusion 
over the validity of proposed extensions, thus greatly reducing the 
possibility for litigation.
    23. We shall not revise our rules concerning SAB extensions by 
Phase I applicants for unserved areas. As we stated earlier, our 
purpose in not permitting Phase I requests for extensions was to 
provide a simple and expeditious means of licensing unserved area 
applicants in Phase I. In addition, we believe that our Phase I 
licensing rules should be consistently applied across all markets. 
Phase I of the unserved area licensing process has ended for most of 
the MSAs and many of the RSAs. By the end of calendar year 1995, the 
five-year build-out period for most RSAs will have ended. The revisions 
suggested by CECR only would confuse the unserved area

[[Page 9107]]

licensing process by changing the rules after many of the markets have 
been subject to restricted SAB extension rules in the Phase I unserved 
licensing process.
    24. We note that the prohibition against having SAB extensions 
beyond the borders of a particular MSA or RSA only applies to initial 
Phase I applications. Once a Phase I initial unserved area application 
has been granted, the licensee can file one Phase I major modification 
application and that application may propose de minimis or contract 
extensions. The application is not subject to competing applications. 
In addition, Phase II applications may propose a CGSA covering more 
than one cellular market, which includes de minimis and contract 
extensions. Thus, the prohibition against SAB extensions beyond the 
borders of a particular MSA or RSA is narrowly defined to include only 
initial Phase I unserved area applications.
System Information Update Maps
    25. CECR asserts that the Commission erred by neglecting to 
recognize that System Information Update (SIU) maps are more than 
informational filings, because they define the rights of third parties, 
i.e., potential unserved area applicants. CECR argues, as it did in its 
petition for reconsideration of the First Report and Order 56 FR 58503, 
November 20, 1991, that the Commission should establish procedures by 
which interested parties may challenge SIU maps prior to the filing of 
unserved area applications. McCaw argues that CECR already has argued 
this issue unsuccessfully and has shown no reason why its argument 
warrants further Commission consideration. McCaw argues that this 
portion of CECR's petition should be dismissed as repetitive. CECR also 
observes that the Third Report and Order 58 FR 27213, May 7, 1993 
provided that parties aggrieved by the licensee's depiction of its CGSA 
informally may request the Commission to correct the maps under Section 
1.41 of the Commission's Rules. CECR contends that this procedure is 
illusory because the Commission has no obligation or timetable to 
resolve an informal challenge, and therefore can continue to license 
unserved areas within the challenged market during the pendency of the 
informal challenge. CECR also challenges on due process grounds the 
procedures established for challenging SIU maps, stating that they 
force unserved area applicants ``to place their own applications at 
risk in order to challenge a licensee's improper SIU map.'' Further, 
CECR claims that licensees should not be allowed to base their SIU maps 
on cell sites that violate state law.
    26. We find that CECR's arguments are not sufficiently compelling 
to warrant revision to our rules. Section 22.947(c) of our rules, 47 
CFR Sec. 22.947(c), requires a licensee of a cellular system to file 
with the Commission 60 days before the end of its five-year build out 
period a system information update (SIU) consisting of a full size map, 
a reduced map, and an exhibit showing technical data relevant to 
determining the system's CGSA. These materials must accurately depict 
the cell locations and coverage of the system at the end of the five-
year build-out period. Although SIU materials, especially the maps, are 
required so that potential applicants may know which areas within a 
particular market already are served, it is important to note, as we 
did in the Third Report and Order 58 FR 27213, May 7, 1993, that the 
SIU maps are more in the nature of pictorial aids for potential 
unserved area applicants. The SIUs are not a declaration of the 
cellular service rights of licensees. As set forth in the Second Report 
and Order 57 FR 13646, April 17, 1992, the position of the CGSA 
boundaries officially will be determined by the geographical 
coordinates of cell sites and the authorized facilities for the 
relevant cells which are contained in the Commission's station license 
files. Further, as we stated in the Third Report and Order, these maps 
will not require any Commission action, since they are not submitted 
for approval. The manner in which the SIU maps are drawn is determined 
by the new mathematical formula for determining service areas set forth 
in Section 22.911(a) of our rules. We expect that licensees will 
accurately depict their CGSAs using the prescribed formula, and that 
errors will be the exception and not the rule.
    27. It is not necessary to delay the filing, processing, and 
granting of unserved area applications in order to afford potential 
litigants the opportunity to challenge SIUs. Applicants who believe 
that reported adjacent CGSAs are in error or have been misdepicted may 
file applications, pursuant to the requirements of the unserved area 
rules, for areas they believe constitute at least 130 square kilometers 
(50 square miles), and state in their applications why they disagree 
with the depictions or representations of adjacent CGSAs. Once such an 
applicant has become a tentative selectee, if it has made a prima facie 
case that an adjacent licensee has misdepicted its CGSA, that licensee 
will have the burden of responding to any allegations concerning the 
depiction of its CGSA, and the Commission will resolve the dispute. 
Further, we have noted that interested parties may file informal 
requests for Commission action to correct SIU maps pursuant to Section 
1.41 of the Rules. As to the state law concerns raised by CECR, if a 
licensee has constructed cellular facilities that violate relevant 
state law, any member of the public can notify the appropriate state 
authority, which then can impose appropriate sanctions.
 Phase I Processing Procedures
    28. In the Third Report and Order 58 FR 27213, May 7, 1993, we 
explained that, during Phase I of our processing procedures for 
unserved area applications, an existing licensee may file an 
application to expand its existing CGSA in any manner or, in the 
alternative, apply for a new non-contiguous CGSA in an unserved portion 
of its market. Either of the applications would be considered to be a 
single unserved area application. CECR requests that we clarify that 
the Third Report and Order 58 FR 27213, May 7, 1993 allows an existing 
licensee to file either an initial Phase I unserved area application to 
expand its existing CGSA, or an application specifying a new non-
contiguous CGSA within its market, but not both. CECR's request has 
been rendered moot by the changes to Section 22.949(a)(1)(ii) of the 
rules, which became effective after the release of the Third Report and 
Order 58 FR 27213, May 7, 1993. The rule section now expressly 
prohibits applicants from filing more than one Phase I initial 
application for any cellular market.

B. Petitions for Reconsideration of the Memorandum Opinion and Order

 Alleged Lack of Notice Under APA
    29. The Memorandum Opinion and Order 58 FR 11799, March 1, 1993 in 
this proceeding established that interference occurs when subscriber 
traffic is captured in a home market by an adjacent market system, due 
to contour extensions into the home market's CGSA, and that cellular 
licensees are entitled to protection from this type of interference. A 
cellular licensee may continue to operate existing facilities that 
produce a service area boundary extension into a subsequently-
authorized portion of the CGSA of another cellular system on the same 
channel block until the licensee of that system requests that the SAB 
extension be removed from its CGSA. When such a request is received, 
the adjacent market system operator is obligated to pull back the SAB

[[Page 9108]]

extensions by reducing the transmitting power or antenna height (or 
both) at the offending cell site locations, or obtain written consent 
from the other licensee to permit the SAB extension.
    30. Five petitions for reconsideration and three petitions for 
partial reconsideration of the Memorandum Opinion and Order 58 FR 
11799, March 1, 1993 were filed. These petitions allege, inter alia, 
that our adoption of Section 22.903(f) of the rules, 47 CFR 22.903(f), 
violated the notice and comment requirements for rule making 
proceedings under Section 553 of the APA, 5 U.S.C. Sec. 553, and the 
notice and hearing provisions of Sections 309 and 316 of the 
Communications Act of 1934, 47 U.S.C. Secs. 309 and 316, and former 
Section 22.100(b)(4) of the Commission's rules.
    31. New Par, CIS and the Joint Petitioners claim that the 
Commission gave no public notice it was contemplating the rule changes 
incorporated in new Section 22.903(f), and therefore the Commission did 
not comply with Section 553 of the APA, 5 U.S.C. Sec. 553, which 
requires an agency to give adequate written notice and opportunity to 
comment on proposals in rule making proceedings. New Par claims that 
the Commission provided no notice that it even was considering a change 
to the standard by which interference and SAB extensions would be 
evaluated. CIS also argues that there is no mention of the new 
substantive obligations imposed by Section 22.903(f) on licensees 
either in the Further Notice 56 FR 58529, the First Report and Order 56 
FR 58503, November 20, 1991, or the Second Report and Order 57 FR 
13646, April 17, 1992 in this proceeding.
    32. New Par and the Joint Petitioners assert that prior to the 
adoption of Section 22.903(f), the Commission's rules concerning 
interference between cellular licensees provided that remedial action 
was required only where actual, as opposed to theoretical, electrical 
interference occurred. New Par argues that former Section 22.100(b)(ii) 
stated that the Commission ``will only consider complaints of 
interference which significantly interrupt or degrade a radio 
service,'' and former Section 22.902(a) provided that, in the event 
``harmful interference'' occurs that two or more cellular licensees 
cannot resolve themselves, the Commission may require a licensee to 
make system changes ``necessary to avoid such interference.'' In 
contrast, New Par argues, Section 22.903(f) assumes that interference 
exists where licensee SABs overlap and requires the entire removal of 
SAB extensions without regard to whether the complaining party's 
service in fact has experienced a significant degradation and without 
regard to whether the removal of such extensions might result in 
harmful effects on service to the public in either licensee's market.
    33. We reject petitioners' argument that our adoption of Section 
22.903(f) did not comport with the notice and comment requirements of 
the APA. We have reasonably and consistently placed the public on 
notice of our intention to change the standards for measuring cellular 
service areas in our continuing efforts to provide seamless cellular 
service with the least amount of interference to licensed carriers. The 
matters at issue in this docket encompassed the manner in which service 
area contours were to be calculated and the implications for existing 
systems if the defined contours changed. Section 22.903(f) reflects a 
logical outgrowth of this debate.
    34. As previously discussed (supra at para. 14), the Initial NPRM 
55 FR 4882, February 12, 1990 and Further Notice 56 FR 58529, November 
20, 1991 in this proceeding made clear that we intended to change the 
method by which a CGSA is determined. Ultimately, the Second Report and 
Order 57 FR 13646, April 17, 1992 established that the CGSA is the 
geographic area the Commission considers served by a cellular system 
and the area within which a cellular system is entitled to protection. 
A companion issue raised in evaluating the boundaries of the CGSA was 
the potential for interference caused by the extension of newly-
redefined SABs outside a licensee's MSA or RSA into the CGSA of a 
neighboring cellular system on the same channel block. Based upon the 
comments we received, we concluded that capture of subscriber traffic 
is a form of interference. Thus, we were compelled to amend our rules 
to provide protection to cellular licensees against such interference.
 Alleged Notice and Hearing Rights Under the Communications Act and the 
Commission's Rules
    35. The Joint Petitioners and New Par contend that the Commission 
cannot order (or allow an adjacent licensee to require) licensees to 
pull back authorized contour extensions (including new SABs created by 
the new formula adopted in the Second Report and Order 57 FR 13646, 
April 17, 1992) without complying with the notice and hearing 
requirements of Sections 309 and 316 of the Communications Act and 
Section 22.100(b)(4) of the Commission's rules.
    36. New Par argues that each SAB extension authorized by the 
Commission is conditioned upon the licensee not causing interference to 
adjacent licensees and that any action requiring a licensee to withdraw 
its SAB from areas where its RF signals in fact do not significantly 
degrade or disrupt other radio service is a modification of that 
licensee's authorization. According to New Par, Sections 309 and 316 of 
the Communications Act require the Commission to conduct a hearing to 
determine whether and to what extent interference exists each time it 
wishes to order an authorized contour extension to be ``pulled back.'' 
New Par also contends that Section 22.100(b)(4) of the rules codifies 
the foregoing theory by providing that the Commission may order 
cellular system modifications to eliminate alleged interference only 
after notice and opportunity for hearing.
    37. We reject the petitioners' argument that the Commission must 
comply with the notice and hearing requirements of Sections 309 and 316 
of the Communications Act each time a licensee is directed to pull back 
authorized contour extensions. Those provisions provide for a hearing 
process before Commission modification of a particular license. The 
sections do not deprive the Commission of its authority to establish 
rules of general applicability to an industry through its rule making 
authority.
    38. It is well established that licenses may be modified through 
rule making proceedings without affording parties an adjudicatory 
hearing, if the generic rules otherwise are procedurally and 
substantively valid. In WBEN Inc. v. United States, 396 F.2d 601 (2d 
Cir. 1968), cert. denied, 393 U.S. 914 (1968), the Court held that the 
Commission need not engage in evidentiary hearings required for 
modification of a particular license, explaining that,

    [W]hen, as here, a new policy is based upon the general 
characteristics of an industry, rational decision is not furthered 
by requiring an agency to lose itself in an excursion into detail 
that too often obscures fundamental issues rather than clarifies 
them.

Once a rule has been adopted, there is no need to hold a hearing each 
time that rule is applied. Our Memorandum Opinion and Order 58 FR 
11799, March 1, 1993 makes clear that Section 22.903(f)(2)(i) allows 
the Commission (or an adjacent licensee) to require a licensee to 
``pull back'' an authorized SAB extension into the adjacent licensee's 
CGSA. Thus, there is no need for a hearing each time Section 
22.903(f)(2)(i) or its replacement, Section 22.911(d), is enforced.

[[Page 9109]]

    39. We find that the hearing procedure under Section 22.100(b)(4) 
of our rules is inapplicable to rule changes made through our rule 
making authority. Section 22.100(b)(4) requires that interference 
between base stations that have been properly authorized shall be 
``resolved'' by the licensees. The rule section also states that if the 
licensees cannot resolve the interference, the Commission, ``after 
notice and opportunity for hearing,'' may order whatever changes in 
equipment or operation it deems necessary. Hearings under Section 
22.100(b)(4) would be involved only if the carriers could not comply 
with the directive of the rule section to resolve interference 
problems. Such hearings would not be required between cellular 
licensees because cellular licensees have always been licensed on the 
condition that licensees must ``pull back'' any contour that interferes 
with a neighboring cellular system and Section 22.911(d) provides a 
specific remedy for resolving the interference problem at hand. We also 
observe that the Commission has been given the power recently to make 
changes in the frequencies, authorized power, and the times of 
operation of any station without conducting a hearing.
Standards for Determining Permissible SAB Extensions
    40. The Joint Petitioners, New Par, Sussex, and CIS argue that the 
adoption of Section 22.903(f)(1) of the rules regarding capture is 
inconsistent with the Commission's goal of achieving nationwide 
seamless cellular service. New Par, Sussex, and CIS note that the 
Memorandum Opinion and Order 58 FR 11799, March 1, 1993 states that 
overlapping SAB contours actually promote a seamless environment and 
that SAB extension ``pullbacks'' should be used only as a last resort. 
CIS and Sussex argue that the new rule is contrary to basic principles 
of cellular system design and will restrict the ability of licensees to 
provide adequate coverage within their markets, thus undermining the 
original purpose of the Commission's de minimis extension policy. CIS 
claims that the rule will discourage the development of seamless 
cellular coverage at the borders between markets.
    41. Joint Petitioners argue that Section 22.903(f) undermines the 
Commission's stated goals of creating a ``level playing field'' for all 
cellular licensees and devising rules and policies to encourage 
informal agreements between licensees to resolve boundary disputes. New 
Par, McCaw, and the Joint Petitioners claim that Section 22.903(f) 
neither requires good faith negotiations among adjacent licensees nor 
enables an extending licensee to rebut the presumption of interference 
in the form of capture of subscriber traffic. McCaw and New Par assert 
that the rule appears to conflict with the Memorandum Opinion and 
Order, 58 FR 11799, March 1, 1993 which states that progress toward 
achieving the Commission's goal of establishing ``rules and policies 
that will lead to the efficient provision of nationwide seamless 
cellular service to the public'' will depend in large part upon the 
success of informal negotiations between cellular licensees on 
``mutually agreeable arrangements of facilities that provide an 
efficient juncture between adjacent systems.'' New Par argues that 
later-licensed carriers will have the ability and incentive to force 
neighboring licensees to consent to otherwise unwarranted extensions, 
because of the earlier-licensed carrier's inability to suffer the loss 
of service that would result from an SAB pull-back. Joint Petitioners 
similarly conclude that existing operators may be forced to curtail 
service from previously authorized facilities ``largely at the whim'' 
of subsequent licensees.
    42. New Par argues that the institution of the presumption that 
subscriber capture occurs in every case where an SAB overlaps with a 
CGSA is arbitrary and capricious and results in removing from the 
Commission its statutory obligation to resolve service issues 
consistent with the public interest. McCaw opposes the rule because it 
has the practical effect of precluding SAB extensions where no 
subscriber traffic capture actually occurs. Sussex argues that an 
administrative agency cannot create a presumption which operates to 
deny a fair opportunity to rebut it without violating the due process 
clauses of the Fifth and Fourteenth Amendments. Consequently, Sussex 
argues that the U.S. Constitution will not allow the Commission to 
impose an automatic requirement to remove SAB overlap without first 
granting the encroaching carrier the opportunity to show: (1) that 
there is no subscriber capture, or (2) that the capture does not result 
from SAB overlap.
    43. McCaw and New Par recommend modifications to Section 22.903(f) 
as follows: (1) require licensees protesting SAB extensions to 
demonstrate that these extensions cause actual interference, prior to 
mandating system modification; and (2) continue to promote good faith 
negotiations of such boundary disputes on an informal basis prior to 
having to ``pull back'' authorized SAB extensions. Sprint agrees with 
McCaw and New Par that boundary questions should be settled with good 
faith negotiations on an informal basis. The Joint Petitioners also 
urge that Section 22.903(f)(2)(i) be modified to make rebuttable the 
presumption of subscriber capture, where an SAB extension has been 
authorized into an adjacent licensee's CGSA during the latter 
licensee's five-year fill-in period.
    44. CIS also recommends that former Section 22.903(d)(1) of the 
rules, setting forth de minimis extension criteria, be modified to 
allow a contour extension when the extension is necessary to compensate 
for an existing extension from another cellular system. Sussex 
recommends that the Commission allow carriers to install cells with 
contour overlaps into adjacent carriers' CGSAs so long as the overlaps 
are de minimis and are necessary to provide service within the 
overlapping carrier's market area, regardless of whether the carrier 
consents to the extension. Further, Sussex argues that any conflicts 
arising from such overlaps be resolved through the frequency 
coordination process and the requirement of inter-carrier cooperation. 
In essence, Sussex asks that the Commission return to the means of 
handling contour overlap which existed before the adoption of Section 
22.903(f). Radiofone opposes Sussex's solution, fearing that 
elimination of protection of CGSAs against intrusions from neighboring 
carriers would lead to ``rampant interference, endless litigation and 
disservice to the public.''
    45. Before addressing the petitioners' arguments, we emphasize that 
a cellular licensee has an obligation to serve the public wherever 
demand exists within its market, and that cellular licensees therefore 
have a duty to negotiate with each other in good faith regarding 
agreements for SAB overlaps. Successful negotiations of such contracts 
or agreements could be offered as evidence of performance in the public 
interest when cellular licenses are considered for renewal, pursuant to 
new Section 22.940 of our Rules. Conversely, failure to serve the 
public due to failure to negotiate reasonable solutions to SAB overlap 
problems with adjoining carriers could reflect negatively on a licensee 
seeking renewal.
    46. The language of former Section 22.903(f)(2)(i) was somewhat 
ambiguous, because the first sentence stated that it is ``presumed'' 
that subscriber traffic is captured if a service area boundary (SAB) of 
one cellular system extends into the CGSA of another operating cellular 
system. Nevertheless, New Par and Sussex's arguments concerning the 
creation of a

[[Page 9110]]

rebuttable presumption have been rendered moot by the removal of the 
presumption language in rule Section 22.903(f). The Part 22 Rewrite 
Order 59 FR 59502, November 17, 1992 transferred most of the language 
of former Section 22.903(f) to current rule Section 22.911(d) and 
changed some of the introductory language in the new rule. Section 
22.911(d)(2)(i) expressly prohibits non-consensual contour extensions 
from one cellular system into the CGSA of another cellular system. The 
first sentence of Section 22.911(d)(2)(i) states: ``Subscriber traffic 
is captured if an SAB of one cellular system overlaps the CGSA of 
another operating cellular system''--(emphasis added). The new rule 
removes any suggestion of a presumption created by the prior rule.
    47. We observe that current Section 22.911(d)(2)(i) of our rules is 
based upon predicted service areas as defined by an expert agency and 
is designed to avoid litigation over the exact location of actual 
interference. The idea of ``interference free'' service areas is a 
constant in Part 22 of our rules. See, e.g., Sections 22.351, 22.537, 
22.567, and 22.912(a) of our rules. 47 CFR 22.351, 22.537, 22.567 and 
22.912(a). In order to ensure uniformity and simplicity in 
administering our rules, and to prevent potentially endless litigation, 
we must rely on objective, rather than subjective standards for the 
protection of services. Section 22.911(d)(2)(i) provides a simple, 
objective standard to determine when capture occurs, and encourages 
parties to reach agreement on the resulting effects of SAB overlap.
    48. We also reject CIS's request that Section 22.903(d)(1) [now 
22.912(a)] of the rules be modified to allow a cellular licensee to 
extend service contour into an adjoining market to compensate for the 
adjoining licensee's extension into the licensee's market. Absent 
agreement between the affected parties, licensees are entitled to 
operate in their service areas free from co-channel and first adjacent 
channel interference and from capture of subscriber traffic by adjacent 
systems on the same channel block. 47 CFR 22.911(d) (formerly 
22.903(f)).
    49. Our goal is to provide nationwide seamless cellular service to 
the public. As we indicated in the Memorandum Opinion and Order, 58 FR 
11799, March 1, 1993 rather than require the total elimination of SAB 
extensions, or mandate reciprocal SAB extensions as suggested by CIS, a 
better result in most cases is some degree of SAB overlap between 
systems with the location of balanced signal strengths negotiated 
informally between the adjacent licensees on the same channel block. We 
believe informal negotiations between parties in determining mutually 
agreeable arrangements between adjacent systems will achieve the most 
expeditious and effective resolution of service boundary issues. Thus, 
promoting negotiation between parties eliminates possible protracted 
administrative and court proceedings, and provides incentives for 
cellular providers to come to agreement on boundary issues arising from 
the convergence of expanding systems. In sum, permitting market forces 
to drive resolution of these issues will effectuate seamless cellular 
service nationwide more quickly than the proposals offered by 
petitioners.

IV. Ordering Clause

    50. Accordingly, pursuant to Sections 4(i), 303(r) and 405(a) of 
the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 303(r), 
and 405(a), It is ordered that the petitions for reconsideration and 
partial reconsideration of the Third Report and Order and Memorandum 
Opinion and Order on Reconsideration 58 FR 27213, May 7, 1993 in this 
docket, and the Memorandum Opinion and Order on Reconsideration, 58 FR 
11799, March 1, 1993 Are denied, and the ``Request to Expedite Action 
and Comments in Support of Cellular Information Systems, Inc.'' Is 
dismissed as moot.

List of Subjects in 47 CFR Part 22

    Communications common carriers, Radio.

Federal Communications Commission.
William F. Caton,
Acting Secretary.
[FR Doc. 97-4870 Filed 2-27-97; 8:45 am]
BILLING CODE 6712-01-P