Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations 11083

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Parts 25 and 87

[IB Docket No. 95–91; GEN Docket No. 90–

357; FCC 97–70]

Digital Audio Radio Service in the

2310–2360 MHZ Frequency Band

AGENCY: Federal Communications

Commission.

ACTION: Final Rule.

SUMMARY: After carefully reviewing the

comments and information the

Commission received following

issuance of the Notice of Proposed

Rulemaking, concerning service and

licensing rules for the Digital Audio

Radio Service (DARS) in the 2310–2360

MHZ frequency bands, the Commission

reached the following conclusions. The

Commission will license satellite DARS.

Opponents of the new service have not

shown that its potential adverse impact

on local radio service outweighs its

potential benefits. Based on the record,

the Commission finds that an

economically viable satellite DARS

system will require at least 12.5 MHz of

spectrum. Although the Commission

has allocated 50 MHz of spectrum for

satellite DARS in the S-band (2310–

2360 MHz), recently enacted legislation

directs the Commission to reallocate 25

MHz of that spectrum for any services

consistent with the international

allocation and to assign licenses for that

25 MHz by auction. Accordingly, in this

proceeding the Commission will

designate only two licenses for satellite

DARS in the 25 MHz that remains in the

part of the S-band allocated for satellite

DARS. The Commission will award both

satellite DARS licenses using

competitive bidding, as it proposed in

the NPRM, to resolve mutual exclusivity

among the current applicants, under the

auction rules they adopt today. The

Commission also adopts service rules

for satellite DARS licensees, including

milestone requirements. Three of the

four DARS applicants applied for

pioneer’s preferences. However,

following unanimous recommendations

from a panel of satellite experts that no

pioneer’s preferences be granted for

satellite DARS all three applicants have

withdrawn their applications. The

intended effect of this action is to

establish rules and policies for the

DARS service in the 2310–2360 MHz

frequency band.

EFFECTIVE DATE: The new and amended

rules in Sections 25.144, 25.201, 25.202,

25.214 and 87.303 shall become

effective April 10, 1997; the new rules

in Sections 25.401, 25.402, 25.403,

25.404, 25.405, and 25.406 shall become

effective March 11, 1997.

FOR FURTHER INFORMATION CONTACT:

Rosalee Chiara at (202) 418–0754 or Ron

Repasi at (202) 418–0768 with the

International Bureau or Amy Zoslov or

Christina Eads Clearwater at (202) 418–

0660 with the Wireless

Telecommunications Bureau.

SUPPLEMENTARY INFORMATION: This is a

summary of the Report and Order and

Memorandum Opinion and Order and

Further Notice of Proposed Rulemaking

in IB Docket No. 95–91; GEN Docket No.

90–357; RM No. 8610; PP–24; PP–86;

and PP–87, FCC No. 97–70 (adopted and

released March 3, 1997). The complete

text of the Report and Order and

Memorandum Opinion and Order and

Further Notice of Proposed Rulemaking

is available for inspection and copying

during normal business hours in the

FCC Reference Center (Room 239), 1919

M Street, N.W., Washington, D.C. and

also may be purchased from the

Commission’s copy contractor,

International Transcription Services

(202) 857–3800, 2100 M Street, N.W.,

Suite 140, Washington, D.C. 20037.

Synopsis of the Report and Order and

Memorandum Opinion and Order and

Further Notice of Proposed Rulemaking

1. The Commission will summarize

the background in this proceeding,

which is described in greater detail in

the NPRM, 60 FR 35166, (July 6, 1995)

and in prior orders. Satellite CD Radio,

Inc. (CD Radio) initiated this proceeding

in 1990 by filing a petition to allocate

spectrum for satellite DARS and an

application to provide the service. In

February 1992, the World

Administrative Radio Conference

(WARC–92) adopted international

frequency allocations for Broadcasting

Satellite Service (BSS) (sound)(the

international term for satellite DARS).

Internationally, this band is also

allocated on a primary basis to

radiolocation services and fixed and

mobile terrestrial services. In November

1992, the Commission established a

proceeding to allocate satellite DARS

spectrum domestically and announced a

December 15, 1992 cut-off date for

satellite DARS license applications to be

considered with CD Radio’s. Of the six

license applicants that filed before the

cut-off; four remain: CD Radio,

Primosphere Limited Partnership

(Primosphere), Digital Satellite

Broadcasting Corporation (DSBC) and

American Mobile Radio Corporation

(AMRC). In January 1995, the

Commission allocated the 2310–2360

MHz band for satellite DARS on a

primary basis.

2. In the June 1995 NPRM, the

Commission posed many questions

about satellite DARS. The Commission

requested detailed information on the

new service’s potential economic

impact on terrestrial broadcasters. The

NPRM asked about the most appropriate

service design and regulatory

classification. The Commission sought

comment on what public interest

obligations to impose and queried

whether providers should be permitted

to offer ancillary services. The NPRM

proposed three possible licensing

options and rules to allow expeditious

licensing after an option was chosen.

After the NPRM was released, the

Appropriations Act directed the

Commission to reallocate spectrum at

2305–2320 MHz and 2345–2360 MHz

for all services consistent with

international allocations and to award

licenses in that portion of the band

using competitive bidding. As a

consequence, the licenses designated

pursuant to this order will be in the

spectrum between 2320 and 2345 MHz.

3. In the NPRM and in prior orders,

the Commission discussed the benefits

of satellite DARS proffered by the

proponents. These include introduction

of a new radio service to the public, a

national distribution of radio

programming to all areas, including

underserved and unserved areas and

population groups, the creation of jobs

and the promotion of technological

development in the satellite and

receiver industries, and the

improvement of U.S. competitiveness in

the international economy. The

Commission sought comment on its

tentative conclusion that satellite DARS

offers substantial public benefits.

4. The Commission also invited

detailed comment and information on

the economic impact of satellite DARS

on existing radio broadcasters. It

acknowledged the high level of concern

that terrestrial broadcasters have

expressed about satellite DARS. In

addition to three associations of

broadcasters, more than one hundred

terrestrial radio station owners or

operators have submitted individual

letters opposing satellite DARS.

5. Recognizing the significant public

value of terrestrial radio service, the

Commission must weigh the potential

public interest benefits of satellite DARS

against its potential adverse impact on

terrestrial radio. This impact is relevant

‘‘to the extent that [it] would predictably

lead to serious loss of important services

to consumers, taking into account the

potential for future enhancements of

terrestrial broadcasting by the

introduction of new technologies.’’ In

the NPRM, the Commission emphasized
11084 Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations

that, pursuant to Section 7 of the

Communications Act, opponents of a

new technology, such as satellite DARS,

bear the burden of demonstrating that it

is inconsistent with the public interest.

The Commission has previously noted

that, ‘‘[t]he public interest in this regard

is the provision of services of value to

the listening public and includes the

protection of competition, not

competitors.’’

6. Satellite DARS can offer highquality radio signals to listeners who

currently receive few terrestrial radio

signals. Commenters disagree

concerning how many people are

underserved by local radio. One

respondent submitted a county-based

analysis of listening diaries contending

that only 6,100 people in the U.S. aged

12 and over receive less than six radio

signals. However, that study defined a

station as ‘‘covering’’ a U.S. county if

even one diary recorded having received

its signal. Given that AM signals travel

long distances at night and that such

skywave signals fluctuate significantly

even when usable, the Commission

believes that such diary evidence may

not accurately indicate the size of the

population that receives radio signals.

7. One study indicates that 722,102

persons (0.3% of the U.S. population)

are covered by no FM stations, 2.4

million persons (1.0% of the U.S.

population) are covered by one or fewer

FM stations, and 22 million persons

(8.9% of the U.S. population) are

covered by five or fewer FM stations.

The NAB criticized this study, however,

because it does not include AM radio

stations, even though more than 40% of

all radio stations are AM stations and

even though AM signals often travel

much further than FM signals at night.

AM signals, due to limited bandwidth

and greater susceptibility to noise and

interference, do not provide as high

fidelity sound as FM signals. Thus, FM

signal quality may be closer to the

quality of that satellite DARS would

provide. While the Commission is

unable to estimate an exact figure for the

number of potential radio listeners who

are currently underserved, it finds that

the record is sufficient to indicate that

a significant number of persons in the

U.S. receive few high-quality audio

signals. Satellite DARS offers the

substantial benefit of providing these

persons with many additional highquality audio signals.

8. It is the Commission’s view that

satellite DARS will particularly benefit

communities where terrestrial broadcast

service is less abundant. The record

shows that counties with smaller

populations have fewer radio stations

and that smaller markets have fewer

radio formats. The 33.2% of the U.S.

population living in the top ten radio

markets have access to an average of 26

formats, while the 18% of the U.S.

population living in radio markets

ranked 100–261 have access to an

average of only 14.9 formats. Persons

living outside these 261 ranked markets

are likely to have still fewer radio

formats available. Given that each

satellite DARS applicant proposes to

provide 20 or more channels

nationwide, satellite DARS would

significantly reduce the proportional

discrepancy in the geographic

distribution of radio service.

9. Moreover, satellite DARS can

provide new services that local radio

inherently cannot provide. With its

national reach, satellite DARS could

provide continuous radio service to the

long-distance motoring public, persons

living in remote areas, and may offer

new forms of emergency services.

10. Satellite DARS may also be able to

foster niche programming because it can

aggregate small, nationally dispersed

listener groups that local radio could

not profitably serve. Commenters

suggest that satellite DARS could fulfill

a need for more educational

programming, rural programming,

ethnic programming, religious

programming, and specialized musical

programming. One nationally

representative survey found that 10–

27% of the respondents indicated a

strong interest in accessing

programming formats that are not

widely available. Evidence from a

survey by the National Endowment for

the Arts suggests that niche marketing

opportunities exist for some of the less

popular radio formats.

11. The Commission believes that

licensees will have an incentive to

diversify program formats and thereby

provide valuable niche programming.

The Commission recognizes that

satellite DARS licensees are likely to

provide the programming that is most

profitable. Nonetheless, given that the

Commission anticipates each satellite

DARS licensee will control more than

20 channels, each licensee will have an

incentive to diversify programming so

that one channel will not directly

compete with another channel that the

licensee itself controls. The Commission

has noted the importance of this

incentive, particularly with respect to

entertainment programming, in other

proceedings.

12. In the NPRM, the Commission

tentatively concluded that

implementation of satellite DARS would

foster the development of new

technology. NAB has argued that U.S.

implementation of satellite DARS is not

necessary to advance satellite DARS

technology. While this may be true, the

Commission nevertheless believes that

U.S. implementation, by providing

large-scale market-based consumer

feedback and increased economic

incentives for further technological

advances, would foster faster and more

customer oriented development.

13. The Commission concludes that

licensing operators to provide satellite

DARS will yield substantial benefits to

consumers. The Commission now

evaluates whether opponents have met

their burden of showing that these

benefits are outweighed by the potential

harm to listeners from potential loss of

terrestrial service resulting from

increased competition from satellite

DARS.

14. In the NPRM, the Commission

sought comment on the effect of satellite

DARS on terrestrial radio listenership.

The Commission explicitly requested

commenters to consider the

characteristics of satellite DARS that

distinguish it from terrestrial radio.

Commenters often failed to do so.

Instead, several commenters implicitly

assumed that satellite DARS’ effect on

local radio would be similar to the effect

from competition generated by new

local radio stations. Given the

distinguishing features of satellite

DARS—it is a national service, it will

require new and relatively costly

equipment, and it may be offered via

paid subscription—the Commission

finds that the effect of satellite DARS on

terrestrial radio is likely to be

significantly smaller than the effect of

additional terrestrial radio stations.

15. For example, one commenter

includes a consumer survey which

suggests that satellite DARS would

cause a decline of 11.6% in terrestrial

radio listenership. The appropriate

interpretation of this figure is not clear,

however, because the survey did not

take into account the potential cost to

the consumer of satellite DARS

equipment, and the subscription fee

included in the survey was only half of

what one satellite DARS applicant (CD

Radio) has proposed. Moreover, the

survey failed to consider the possible

introduction of terrestrial DARS in

assessing consumer interest in satellite

DARS. For these reasons the

Commission believes that this survey

may overestimate the likely decline in

terrestrial radio listenership. And yet

even in this survey 80% of respondents

indicated that they would not reduce

the time they spend listening to

terrestrial radio if satellite DARS was

available. However, the Commission

realizes that surveys of predicted
Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations 11085

consumer response to a new and untried

service may be somewhat unreliable.

16. By analogy, the diffusion of other

new services and technologies may

provide valuable perspective on the

time period in which satellite DARS’

may affect terrestrial radio listenership.

In 1994, six years after their

introduction, CD players were in just 3.2

percent of all automobiles. This

experience is recent, involves highquality audio service and roughly

comparable equipment costs, and relates

to automobiles, perhaps the most likely

market for satellite DARS receivers. On

the other hand, for the first few years

after CD players’ introduction there

were significant technical problems

with their operation in automobiles, and

CD players are less convenient to

operate than radios. These factors may

have reduced the rate at which CD

players were installed in cars.

Nonetheless, CD players offer a useful

example by which to evaluate the

penetration profile for satellite DARS

receivers. Given anticipated satellite

launch dates for satellite DARS

applicants (1998–1999) and the example

of the diffusion of CD players, the

Commission believes it is reasonable to

project that by about 2005 the over-all

penetration rate of satellite DARS

receivers in radio listening

environments may not be significantly

greater than 4%.

17. Estimating listening time

diversion depends on the share of

listening time allocated to satellite

DARS when the listener has a choice

between satellite DARS and terrestrial

radio. Drawing an analogy with the

diffusion of cable services indicates that

established programming loses audience

share relatively slowly. In 1984, about a

decade after the introduction of

premium cable services and the

development of 24 to 36 channel cable

TV systems, cable channels attracted

14% of television viewing time. After

another decade, the share of cable

channels in television viewing time rose

to 30%. An important weakness in this

analogy is that the difference between

cable programming and network

programming during this period is

probably significantly greater than will

be the difference between satellite

DARS programming and terrestrial radio

programming. Nonetheless, the

Commission believes that owners of

satellite DARS receivers will continue to

allocate a significant share of their

listening time to terrestrial radio in

order to hear music or news of local

interest. Even with rapid, further

penetration of satellite DARS receivers,

the Commission expects that satellite

DARS’ share of radio listening time will

grow relatively slowly over decades.

18. In the NPRM, the Commission

asked parties to consider advertising

revenues that terrestrial radio might lose

because of satellite DARS. The record

indicates two possible causes of

terrestrial radio revenue loss:

competition with satellite DARS for

advertising dollars and competition

with satellite DARS for listeners’

attention.

19. While the Commission recognizes

that satellite DARS has significant

competitive advantages in offering

advertising to a national audience with

satellite DARS receivers, several factors

may limit the possible significance to

terrestrial radio of such additional

competition. First, at this time, only one

out of the four satellite DARS applicants

has indicated an intention to implement

its system on a non-subscription,

advertiser-supported basis. Second, a

large share of the national radio

audience is not likely to have satellite

DARS receivers, at least for a significant

period of time. Third, national

advertising revenue amounts to only

18% of terrestrial radio advertising

revenue and is on average less

important for small-market stations than

for large-market stations. Local

advertising revenue is much more

important than national advertising

revenue for terrestrial radio’s viability

and prevalence, and, at this time, the

Commission has no evidence that

satellite DARS would be able to

compete for local advertising revenue.

20. More important to terrestrial radio

is possible competition with satellite

DARS for listener attention because this

new offering could reduce the size of

the local listening audience available for

terrestrial radio stations to sell. The

Commission recognizes that a decrease

in the audience size could lead to some

reduction in terrestrial station revenues.

As discussed above, however, the

Commission believes the reduction

would be modest, although the record

leaves room for significant uncertainty.

21. Commenters have not fully

analyzed the relationship between

reductions in listenership and

reductions in revenue. The Commission

does not necessarily agree with those

commenters who assert that terrestrial

radio station revenue will fall one-forone with any fall in listenership.

Because the price of local radio

advertising may rise, the effect on local

radio revenue may be smaller than the

effect on listenership. However,

regardless of the precise relationship,

the Commission does assume that a

decrease in listenership will lead to a

decrease in advertising revenues, if

other variables are held constant.

22. In the NPRM, the Commission

asked questions about the impact of

satellite DARS on the financial viability

of local broadcast stations. In general,

the Commission encourages competition

for the provision of telecommunications

services wherever possible and removes

barriers for new competitors.

Commenters differ sharply on the effect

of satellite DARS on the profitability of

terrestrial stations, with estimates of the

reduction in terrestrial stations’

profitability spanning 2.1–3.5% to

52%–122%. The wide range of these

estimates do not allow the Commission

to judge the effect of satellite DARS on

terrestrial stations’ profitability. The

Kagan Study, by focusing on historical

indicators of revenue and profitability

and not considering the time path for

satellite DARS diffusion, likely

overestimates the potential impact of

satellite DARS on terrestrial stations

profitability. The MTA Study’s audience

diversion figures are lower than what

the Commission believes, and the

Commission questions the relevance of

their use of the ratio of satellite DARS

receiver owners to the total U.S.

population, given that segments of the

population, such as infants, are not

potential satellite DARS owners. The

Commission also finds their revenue

loss projections to be unsubstantiated

and unconvincing.

23. The record supports a finding that

the impact of satellite DARS would

likely be greater on small-market

terrestrial stations than large-market

terrestrial stations. This result is not

surprising because it is likely that the

introduction of a 30-channel satellite

DARS system could divert a larger share

of the audience in a market with only

6 stations than in a market with 60

stations. Nonetheless, the record does

not establish that any predicted

reduction in station profitability would

harm overall station viability.

24. In fact, the record suggests that

profitability figures may be a weak

indicator of radio station viability. The

wide range in the audience size

distribution for existing radio stations

suggests that most radio stations could

remain viable given plausible audience

reductions due to satellite DARS.

Despite evidence that a large percentage

of radio stations are experiencing losses,

there is also evidence that overall the

industry is very healthy. The value of

radio station purchases in 1996 was

315% higher than in 1995 and radio

station values as a multiple of cash flow

also rose sharply. Factors such as debt

financing and start-up costs may explain
11086 Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations

why radio stations would stay in

business while reporting losses.

25. The concern about licensing

satellite DARS focuses on its impact on

the provision of locally oriented radio

service. Satellite DARS proponents

argue that the ability to offer local

content will give terrestrial broadcasters

a competitive advantage. Terrestrial

broadcasters argue that providing local

content is a public service that depends,

in effect, on cross-subsidization from

more profitable programming.

26. The Commission concludes that

the record lacks systematically sampled,

quantitative evidence about the

listening time, revenue base, and

profitability of local content.

Nonetheless, if local content were

relatively unprofitable for every station,

one would expect competition among

terrestrial stations to result in minimal

local programming on most stations. Yet

the record indicates that such analysis

is not necessarily accurate; despite

vigorous competition among stations,

some stations provide much local

programming, while others provide

relatively little. Competition from

satellite DARS may create incentives for

at least some terrestrial stations to

increase their emphasis on local

programming in order to attempt to

differentiate their service from satellite

DARS. It is unclear the degree to which

that might affect overall station profits.

27. In sum, although healthy satellite

DARS systems are likely to have some

adverse impact on terrestrial radio

audience size, revenues, and profits, the

record does not demonstrate that

licensing satellite DARS would have

such a strong adverse impact that it

threatens the provision of local radio

service.

28. The Commission also notes that

revenue of terrestrial radio is projected

to grow at a real (inflation adjusted) rate

of about 4% per year. Such projected

revenue should mitigate, at least to

some extent, the eventual impact on

terrestrial stations of satellite DARS.

The Commission also notes that

recently, it implemented provisions of

the Telecommunications Act of 1996

and repealed all terrestrial radio

national ownership limits and

significantly relaxed local ownership

limits. These changes should lead to

reduced operating costs and increased

profits for terrestrial station owners that

take advantage of the new rules. The

Commission expects any possible

impact of satellite DARS on terrestrial

radio’s revenue to be relatively small

and to occur over a long period of time.

The Commission rejects as unnecessary

a proposed phase-in and evaluation

period for satellite DARS. The

Commission concludes that opponents

of satellite DARS have not shown that

its potentially adverse impact on local

radio outweighs its potential benefits to

the American radio listener.

29. There is uncertainty inherent in

any attempt to predict the impact of

satellite DARS on the terrestrial radio

industry. The technologies, structure,

and regulation of the communications

industry are changing dramatically.

Developments in the next decade may

significantly change the market for both

satellite DARS and terrestrial

broadcasting. Although opponents of

satellite DARS have not shown that it

will have a sudden and dramatic

adverse impact on terrestrial

broadcasting, the Commission cannot

entirely rule out the possibility of a

major adverse impact. The Commission

emphasizes that it remains committed to

supporting a vibrant and vital terrestrial

radio service for the public.

Accordingly, the Commission will

continue to monitor and evaluate the

potential and actual impact of satellite

DARS, particularly in small radio

markets, so that it will be able to take

any necessary action to safeguard the

important service that terrestrial radio

provides.

30. In addition, the Commission

continues to support the efforts of

industry committees studying technical

standards that would allow terrestrial

radio broadcasters to convert to digital

transmissions. When it appears that a

viable system has been designed, the

Commission will act expeditiously to

consider changes to its rules to allow

AM and FM licensees to offer digital

sound. The Commission also remains

open to considering other ways to

encourage the continued viability of

terrestrial radio if the adverse impact of

satellite DARS on terrestrial radio

proves to be substantially greater than

expected.

31. On February 17, 1995, Underripe

National Radio Sales, Inc. (Underripe)

filed a petition for reconsideration of the

Commission’s domestic Report and

Order, 10 FCC Rcd 2310 (1995), 60 FR

8309 (February 14, 1995) (‘‘Allocation

Order’’). Underripe claims that satellite

DARS could have an adverse impact on

existing radio services and that,

therefore, the Commission should not

allow satellite DARS operations until

terrestrial DARS is licensed. Underripe

also suggests a number of guidelines it

believes the Commission should adopt

with respect to licensing and service

rules for satellite DARS. The

Commission denies the petition for the

reasons given above. That is, the record

evidence indicates that the public

interest would be served by permitting

an innovative new technology and

service, satellite DARS, to become

available as a competitive choice for

consumers. The Commission notes that

the petition does not contain any

analysis which would undermine those

reasons.

32. The Consumer Electronics

Manufacturers Association (CEMA)

argues in an ex parte submission, based

on its preliminary draft report on

various digital audio radio technology

test results, that satellite DARS cannot

be successfully provided at 2.3 GHz.

Specifically, CEMA argues that ‘‘S-band

operations suffer from a significant and

startling level of signal blockage,’’ that

to provide satellite DARS using S-band

frequencies will require hundreds or

thousands of gap fillers and that satellite

DARS in the S-Band has ‘‘no likelihood

for nationwide commercial acceptance.’’

33. The Commission has decided

nevertheless to license DARS in the SBand. CEMA’s testing of signal

propagation focused on terrestrial

technologies; CEMA tested only one

generic satellite technology and did not

test any of the system designs of the four

satellite DARS applicants. Nor does

CEMA comment on any of the specific

proposals submitted by the four DARS

applicants. In addition, CEMA offers no

new relevant information. It has been

widely known and discussed in the

record that DARS providers will need to

rely on terrestrial repeaters and gap

fillers. As with all new services, the FCC

cannot prove or disprove viability. Only

the market place can make this

determination. CEMA’s assertion that

satellite DARS is not commercially

viable in the S-Band is belied by the

interest of many DARS investors who

apparently have concluded that a viable

satellite DARS service can be offered in

the S-Band.

34. Moreover, CEMA’s

recommendation that the FCC consider

other spectrum options for satellite

DARS, such as the L-Band, is beyond

the scope of this proceeding. The 2310–

2360 MHz band [S-Band] was allocated

for satellite DARS internationally at

WARC–92 and domestically in 1995.

Frequencies in the L-Band, 1452–1492

MHz were considered and rejected. In

the domestic Allocation Order the

Commission noted that ‘‘commenters

strongly favored [S-Band] over, for

example, the 1.5 GHz band [L-Band]’’ in

part because the U.S. Government and

U.S. commercial mobile aeronautical

telemetry (MAT) already operates in the

L-Band and it would be very difficult for

them to relocate entire operations to the

S-band. Satellite DARS cannot share

with MAT systems in the same

frequency band in the same coverage
Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations 11087

area. And even if L-Band had been

available, no persuasive evidence

suggests that it is significantly better

spectrum in which to receive satellite

DARS signals. For the reasons stated

above, the Commission finds CEMA’s

argument against proceeding to license

satellite DARS applicants in the S-Band

unpersuasive.

35. In the NPRM, the Commission

proposed three options for licensing

satellite DARS systems. Under Option

One, the Commission would have

assigned the entire 50 MHz of spectrum

allocated for satellite DARS to the four

pending applicants, giving each 12.5

MHz, or 10 MHz, if the Commission

determined that the lower 10 MHz of

the band should not be assigned at the

time of its Order due to international

coordination constraints. Option Two

was to designate less than the full

amount of useable spectrum for satellite

DARS and to award the remaining

spectrum to new applicants. Option

Two proposed licensing the four

applicants and assigning them each a

band segment of less than 10 MHz of

spectrum. If either of the two band

segments (one for pre-cut off applicants

and one for new applicants) could not

accommodate all applicants, the

Commission would resolve mutual

exclusivity via competitive bidding.

Option Three was to reopen the cut-off

for satellite DARS applications and

allow additional applicants to file

proposals for all of the useable DARS

spectrum.

36. In light of the recent legislation

directing the Commission to conduct an

auction for use of 25 MHz of the S-band

spectrum previously allocated solely to

DARS, the Commission cannot adopt

any of the three licensing options

exactly as proposed in the NPRM. After

enactment of that legislation and the

ensuing WCS Order, only 25 MHz

remains exclusively for DARS. The

licensing plan the Commission adopts

today for that remaining spectrum is a

logical outgrowth of Option Two,

modified in light of the comments

received in this proceeding and the

recent legislation. In determining how

many licenses may be awarded for use

of the remaining DARS spectrum and

how those licenses should be assigned,

the Commission must first determine

how much spectrum each satellite

DARS licensee will require to operate an

economically viable satellite DARS

system.

37. In the Allocation Order, the

Commission found that, based on the

information available at that time,

satellite DARS was the best use of all of

the 50 MHz of spectrum assigned to U.S.

satellite DARS by WARC–92. The

Commission requested comment on a

number of issues in the NPRM to help

it determine the best way to make

individual satellite DARS frequency

assignments. Specifically, the

Commission sought comment on the

following: the amount of spectrum and

number of channels required for a

satellite DARS system to be

economically viable; the number of

competitors that are necessary to ensure

sufficient competition in satellite DARS;

the possible number of channels per

MHz capable of being delivered via

satellite to a mobile user; alternative

band plans that could be adopted for

satellite DARS; possible uses for

spectrum that is not licensed for

satellite DARS, and, whether the

proposal to license less than 50 MHz of

spectrum would create a mutually

exclusive situation among the four

current applicants. Based on comments

the Commission received on these

specific issues, it concludes that 12.5

MHz of spectrum is necessary to offer

enough channels for an economically

viable satellite DARS system. In

addition, in light of the recent

legislation opening 25 MHz of spectrum

for use by additional services, the

Commission concludes that two licenses

can be awarded.

38. While the Commission is not sure

of the optimal amount of spectrum

necessary for satellite DARS, its goal is

to try to determine spectrum block sizes

and geographic areas that are most

closely suited to provide for efficient

provision of the most likely expected

use. In this case, because this is a

satellite service, the license areas should

be nationwide and the Commission has

evaluated the evidence about the

minimum spectrum block sizes

necessary to economically provide

satellite DARS. The Commission begins

its analysis of determining how much

spectrum a single satellite DARS

provider will require by considering

what the record reveals about how many

channels are necessary to operate an

economically viable satellite DARS

system. Because satellite DARS is a new

service, there is an inevitable

uncertainty about what precise

configuration of channels will best

satisfy consumer demand. The record

contains no conclusive evidence

establishing a specific minimum

number of channels needed for a viable

DARS system. The Commission will

rely on the representations of the

applicants which are based on their own

market research. The record indicates

that a range of channels from 19 to 44

is needed for a viable service.

39. The applicants appear to base

their estimated channel requirements on

a cable television model in which

operators bundle large and diverse

packages of channels. The conclusion

drawn from the cable television model

is that no single channel attracts a large

viewing audience, but subscribers value

the service because they watch a few

channels regularly and occasionally

enjoy sampling a wider range of

available programming. While the

record does not show exactly how many

channels a satellite DARS operator must

offer to be economically viable, the

cable television analogy demonstrates

that some critical mass of channels is

needed to provide sufficient

programming diversity for consumers

with diverse tastes.

40. More direct support for the

satellite DARS applicants’ projections

can be found by examining digital audio

services packaged with video services

and delivered via cable or satellite. Two

such nationwide subscription services

are Digital Music Express (DMX),

offered via cable, and the Primestar

direct-to-home video satellite service, a

DBS service. Those services each began

with roughly 30 channels, but have

chosen to increase the number of

channels to 60. According to CD Radio,

both are now expanding again to offer

up to 120 channels. The Commission

presumes that the satellite DARS

applicants would not undertake the risk

and expense of implementing satellite

systems if the number of channels they

propose were not enough to provide a

viable service.

41. The satellite DARS applicants

calculate that 12.5 MHz of spectrum

would be necessary to offer a range of

19 to 44 CD quality audio channels.

They contend that 12.5 MHz of

spectrum is necessary to support a

single viable satellite DARS system.

Others commenters disagree. NAB, for

instance, proposes that the satellite

DARS spectrum be divided into 5 MHz

band segments. DSBC and Primosphere

counter that NAB’s proposed spectrum

plan would support a viable satellite

DARS system only if at least three or

more 5 MHz blocks can be aggregated.

AMRC adds that it would be impossible

to deliver enough high quality channels

in 5 MHz of spectrum to attract a viable

audience.

42. A band plan introduced by

Cracker Barrel in its reply comments

maintains that by using Time Division

Multiplexing (TDM) technology, 30

channels of CD quality audio can be

accommodated in 8.32 MHz, or 32

channels of CD quality audio could be

provided in 8.32 MHz using Code

Division Multiplicity (CDM) technology,

and thus six operators (presumably six

economically viable systems) could be
11088 Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations

accommodated in the 50 MHz initially

allocated for satellite DARS. Cracker

Barrel also contends that if all satellite

DARS providers use the same error

correction rates, then as many as eight

satellite DARS licensees could be

accommodated in the 50 MHz (i.e., each

with a 6.25 MHz assignment) and each

could offer at least 30 channels of CD

quality audio. Cracker Barrel contends

that its band plan does not require use

of regional spot beams or a higher order

modulation constellation to gain

additional channels per MHz of

spectrum. It asserts that by using 1⁄3 rate

or 1⁄2 rate FEC as opposed to 1⁄4 rate as

originally proposed by CD Radio and

Primosphere, the bandwidth

requirement for a 32 or 30 channel CD

quality system could be reduced from

12.5 MHz to 8.32 MHz and 6.25 MHz

respectively.

43. Satellite DARS applicants assert

that Cracker Barrel’s assumptions used

to derive spectrum requirements do not

include techniques to overcome

multipath fading present in a mobile

environment and do not adequately

address the associated limitations on

satellite power, weight, launcher

capacity, international coordination, or

system cost. CD Radio asserts that 12.5

MHz of bandwidth is necessary for its

satellite DARS system to provide 33

channels of CD quality audio using a

spatially diverse architecture, CDM, and

1⁄2 rate FEC, which is capable of

operating at power flux-density levels

that will make coordination with

adjacent countries feasible. CD Radio

indicates that it has changed to CDM to

provide increased resilience to fading

and noise. It concedes that, if it did not

employ spatial diversity and instead

used a single satellite, it would be

possible to transmit approximately

twice as many channels in a given

amount of spectrum. However, CD

Radio maintains that spatial diversity is

key to providing high quality audio in

a mobile environment. CD Radio

contends that abandoning the use of

spatial diversity would reduce sound

quality, increase fading and blockage,

and prove commercially unacceptable to

its consumers. While the company notes

that these problems could be addressed

by increasing satellite power

significantly, it points out that any such

increase would only add to existing

coordination difficulties with adjacent

countries.

44. Primosphere maintains that, in the

case of CDM technology, even though a

signal is coded so that it can be selected

from the other signals simultaneously

sharing the channel, simultaneous

channels can interfere with each other

when orthogonality is lost. This sets an

effective limit on the number of CDM

channels that can occupy a given

channel. DSBC asserts that reducing the

bandwidth from 12.5 MHz to 10 MHz,

or to 8.32 MHz as proposed by Cracker

Barrel, while maintaining channel

capacity would require greater received

signal power (at least 40% more) since

the primary coding for a 10 MHz system

is much less robust in correcting errors

than that found in a 12.5 MHz system.

An increase in signal power would

increase coordination difficulties with

adjacent countries and add cost to

satellite DARS receivers and space

stations.

45. The Commission concludes, based

on the current record, that each DARS

licensee will require at least 12.5 MHz

to successfully implement an

economically viable satellite DARS

system. The Commission believes that

licensing less than 12.5 MHz would be

insufficient to provide a critical mass of

channels required for economic viability

and could lead to significant power and

cost constraints. The Commission does

not find the contrary assertions by NAB

and Cracker Barrel persuasive.

Moreover, the applicants’ successful

efforts to increase the spectrum

efficiency of their proposals supports

their estimate of 12.5 MHz as the

minimum amount of spectrum needed.

Comparing the channel and associated

spectrum requirements of the

applicants’ original proposals with their

existing comments, the Commission

calculates that, on average, the

applicants have increased the number of

channels they propose to provide by

seven, despite an average decrease in

proposed spectrum use of 14 MHz. The

applicants’ efforts to improve their

spectrum efficiency should not be

treated as a detriment. DARS applicants

may participate in the WCS auction to

acquire additional spectrum if they

desire it.

46. While the Commission recognizes

that further technological advances may

result in even greater increases in

spectrum efficiency, none of the

commenters addressing this issue have

demonstrated that they can provide a

more spectrum efficient, economically

viable, high quality DARS system in less

than 12.5 MHz and using current stateof-the-art in satellite technology. The

above discussion is indicative of the

trade-offs between bandwidth and

power that satellite DARS applicants

have weighed in their choice of

transmission schemes and technology.

Because each satellite DARS licensee

will be limited to a bandwidth of 12.5

MHz, the trade-offs between increased

power and channel capacity is

particularly critical to overall satellite

system design. The Commission will not

attempt to impose its judgments in this

regard on the satellite DARS licensees

and will allow licensees to use the

technology, channeling plans,

modulation schemes, and multiple entry

techniques of their choice within their

12.5 MHz band segment.

47. Based on the recent legislation

passed by Congress directing the

Commission to reallocate and auction

the 2305–2320 MHz and 2345–2360

MHz bands, the Commission is

licensing only the 2320–2345 MHz

portion of the 2310–2360 satellite DARS

band exclusively for satellite DARS.

However, before satellite DARS service

can be offered to the public, the

Commission will require satellite DARS

licensees to complete detailed frequency

coordination with existing operations in

adjacent countries to prevent the

potential for unacceptable interference.

The goal of the coordination process is

to reach agreement with affected users

on an operating arrangement which

harmonizes the use of the radio

frequency spectrum.

48. In the NPRM, the Commission

discussed potential issues that might

arise during coordination of U.S.

satellite DARS systems with existing

operations in adjacent countries. Based

on that the Commission knew then

about the relatively large number of

fixed Canadian terrestrial stations

licensed in the 2310–2320 MHz band

and tentatively concluded that the

lowest 10 MHz in the 2310–2360 MHz

band would be difficult to coordinate

for satellite DARS. Indeed, one option in

the NPRM proposed to license only

spectrum above 2320 MHz for satellite

DARS ‘‘[t]o alleviate the potentially

difficult and lengthy coordination’’

posed by the presence of the nearly 200

Canadian terrestrial stations between

2310 and 2320 MHz. This option would

seek to avoid requiring one satellite

DARS licensee to be subject to

coordination with a greater number of

fixed terrestrial systems than other

licensees. The Commission requested

comment on its tentative conclusion.

49. In the NPRM the Commission also

observed that the upper portion of the

2310–2360 MHz band would likely

present other potential obstacles to

coordination with adjacent countries.

For example, it cited a CD Radio study

showing that Canada generally licenses

its Mobile Aeronautical Telemetry

(MAT) operations between 2350 and

2360 MHz. Despite the operation of

MAT above 2350 MHz, however, certain

of the satellite DARS applicants

maintained that the uppermost

spectrum in the DARS band should be

assigned to the first licensee that met its
Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations 11089

milestone requirements. Based on this

proposal, it appeared to the Commission

that the satellite DARS applicants did

not expect sharing with MAT operations

of adjacent countries to be an

insurmountable hurdle. The

Commission requested specific

comment on whether its different

assessment was correct. Although the

question of whether to reserve the entire

S-band (2310–2360 MHz) exclusively

for satellite DARS has been determined

by the recent Congressional legislation,

discussed above, the Commission

discusses below terrestrial operations in

the S-band that may affect future

satellite DARS coordination.

50. The Commission initiated formal

negotiations with the Canadian

Administration after release of the

NPRM. The Commission used the

information from these recent meetings

to re-assess the current operating

environment in the 2310–2360 MHz

band. In meetings with Canada

following release of the NPRM,

International Bureau staff learned that

the number of fixed terrestrial systems

in the lower portion of the band has not

changed significantly since the

Commission accepted satellite DARS

applications for filing. However, Canada

informed the Commission’s staff that

Canadian MAT systems are currently

licensed and operating at frequencies

throughout the S-band from 2329.25–

2390 MHz. Upon receipt of this new

information from Canada, the

Commission forwarded it to the

applicants and entered it into the public

record so that the applicants’ technical

experts and others could provide

comment.

51. The Fixed Service. The applicants

recognize that detailed coordination

with foreign systems is unavoidable.

Coordination between satellite DARS

and Fixed Service systems (FS) is

required because the power levels at

which the applicants propose to operate

their systems to achieve sufficient

quality service in a mobile environment

are higher than the thresholds levels

which have triggered on-going bilateral

coordination with adjacent countries.

Detailed coordination would therefore

be necessary with every FS station that

is within the satellite DARS transmitting

antenna gain contour unless the power

levels of the proposed satellite DARS

systems is reduced or measures are

taken by the fixed terrestrial service to

mitigate unacceptable interference from

satellite DARS (e.g., re-pointing the

receive antenna sufficiently away from

the geostationary satellite orbit or

upgrading receiver equipment).

52. According to the international

allocation, adjacent countries are free to

license additional fixed and mobile

terrestrial systems on frequencies

between 2300–2483.5 MHz. The

Commission has confirmed that Canada,

alone, has licensed and will continue to

license FS systems throughout the

2310–2360 MHz band. Currently,

approximately 20% of the total number

of systems licensed in Canada are above

2320 MHz.

53. Mobile Aeronautical Telemetry.

The threshold power levels necessary to

protect foreign MAT systems are

expected to be similar to the levels

which the U.S. has established in the

1435–1525 MHz band (L-band) to

safeguard its MAT systems. The U.S.

quantified its need to protect its MAT

systems from interference in the L-band

in detailed studies which it presented to

numerous International

Telecommunication UnionRadiocommunication Sector Study

Groups. These studies show that it

would not be feasible for a satellite

service to share with MAT on a cocoverage, co-frequency basis. Indeed,

the U.S. has taken necessary steps to

relocate its own S-band MAT operations

to frequencies above 2360 MHz,

recognizing that co-frequency, cocoverage operation of satellite DARS

and MAT is not practical. Many of these

U.S. MAT operations were relocated

entirely from S-band to L-band.

54. The Commission now knows that

some of the MAT assignments in

Canada are used to control remotely

piloted vehicles (RPVs) which require

reception at the aircraft as well as at

land based stations. In addition, some

Canadian MAT systems are operating

within a hundred miles of the U.S./

Canada border, making them even more

susceptible to interference from U.S.

satellite DARS. Although five of the 12

MAT frequency assignments in Canada

lie below 2345 MHz, at least three of

those assignments are repeated on

center frequencies above 2345 MHz.

This may indicate that there is some

flexibility in the MAT operations that

will help the coordination efforts in the

2320–2345 MHz band.

55. In the NPRM, the Commission

solicited comment on three pending

requests for pioneer’s preferences filed

by CD Radio, DSBC, and Primosphere.

No comments were filed on any of the

satellite DARS pioneer’s preference

requests. On September 20, 1995, in

compliance with new pioneer’s

preference rules, CD Radio, DSBC, and

Primosphere each filed a supplement to

their respective requests.

56. By letter dated August 30, 1996,

the Commission’s Office of Engineering

and Technology and the International

Bureau requested that a specially

convened panel of four satellite

technology experts (‘‘Panel’’) review the

three satellite DARS pioneer’s

preference requests and recommend to

the Commission whether each of the

requests should be granted. In a report

dated November 18, 1996, the Panel

unanimously recommended that no

pioneer’s preference be awarded. The

Panel concluded that none of the

applicants had demonstrated a seamless

satellite DARS service and found that no

award of a pioneer’s preference could be

justified on technical design grounds.

On November 19, 1996, the Commission

issued a Public Notice, Report No. SPB–

67, Mimeo No. 70798 requesting

comments on the Panel report by

December 3, 1996.

57. Following the release of the

Panel’s report, all three pioneer’s

preference applicants withdrew their

requests. Accordingly, the Commission

does not consider whether to award any

pioneer’s preferences for satellite DARS.

While the Commission does not need to

discuss the Panel’s recommendations

and report, the Commission commends

the members of the Panel for their

remarkable dedication and hard work

during the several weeks in which they

volunteered their expertise.

58. In light of the withdrawal of each

request for pioneer’s preference, and

having determined that each DARS

licensee will require 12.5 MHz, the

Commission must now determine

whether to reopen the 25 MHz of

spectrum that remains allocated

primarily for satellite DARS to new

applicants or allow only the existing

applicants to resolve their mutually

exclusive applications. Commenters

urging reopening the cutoff for satellite

DARS applications contend that it is

necessary to ensure true competition

and greater program diversity. Cracker

Barrel, for example, asserts that it would

be interested in filing an application

advocating a different transmission

technology that it claims will allow

more operators in less spectrum. It

states that because the cut-off was three

years ago, the Commission cannot be

sure it has the best proposals before it.

It also claims that the satellite DARS

proceeding was ‘‘out of order’’ because

applications were accepted before

service rules were established. Because

of this situation, Cracker Barrel

complains it did not learn of the

licensing process until the June 1995

NPRM and thus it missed the 1992 cutoff. Cracker Barrel argues that the

Commission has discretion under the

public interest standard to reopen a cutoff in a given proceeding.

59. Similarly, NAB asserts that

technology has changed since the
11090 Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations

Commission opened and closed the

application window for DARS. It states

that licensing multiple applicants will

bring more program diversity and more

business capabilities to the service. It

also argues that any equities favoring

the current applicants do not justify

preserving the cut-off. NAB, like Cracker

Barrel, argues that the available

spectrum can support additional

operators.

60. Others, particularly the four

current applicants, argue that the cut-off

should stand. CD Radio asserts that

reopening would be unlawful,

inequitable, and unwise. It argues that

cutoffs are reopened only in

extraordinary circumstances that are

absent here. CD Radio and AMRC also

stress that reopening would ignore the

equities favoring the current applicants,

including the significant time and

money invested to establish satellite

DARS. Citizens for a Sound economy, a

non-applicant, added that reopening the

cut-off could discourage future research

and development of new services by

allowing new applicants a ‘‘free ride’’

on the current applicants’ investments.

61. Primosphere argues that cut-offs

are key to a successful satellite policy.

They bring finality and certainty to

satellite proceedings by limiting the

universe of applicants, allowing them to

prepare their cases against a limited set

of opponents and expediting inherently

complex and costly development of new

services. Similarly, DSBC argues that

reopening the cutoff would contravene

decades of satellite procedure. It states:

Unlike its process in other services, the

Commission invites applicants for new

satellite services to submit their applications

prior to the adoption of the technical and

operational rules and often prior to a final

decision on the threshold question of

whether proceeding to authorize any one in

the service is in the public interest. The

Commission repeatedly has concluded that

the technical complexity and the

extraordinary lead time required uniquely in

the satellite services requires this previously

unprecedented approach.

The purpose of this approach, DSBC

explains, is to guarantee long-term

industry involvement in identifying the

best use of spectrum and most efficient

technology, thereby expediting new

services. DSBC argues that satellite

companies invest enormous amounts of

time and money to develop new

technologies and services, in reliance on

the finality and certainty afforded by

cutoffs and licensing rounds. Absent

cutoffs, these parties would lack the

incentive to risk the substantial

resources required to develop and offer

new satellite services to the public.

62. The Commission agrees with those

commenters that assert that the

Commission has authority to reopen

cut-offs and that doing so in some

circumstances has several important

advantages, including allowing for new

competitors to emerge. But the

Commission concludes that in this case,

compelling policy reasons unique to

satellite services militate against

reopening the cut-off for satellite DARS

license applications for the two licenses

available.

63. Sound satellite licensing policy

and precedent, and the equities of this

particular proceeding support the use of

cut-offs in here. In this satellite

proceeding, as in others, applicants

require some measure of certainty to

justify the inherently long-term

investment of resources required by

complex and lengthy international

allocation and coordination procedures

that must be completed prior to

inauguration of service. This unique

feature of satellite services, combined

with the need to most expeditiously

provide new services to the public,

outweigh any benefits that would accrue

from accepting additional applications.

Cut-off procedures provide a greater

measure of certainty. Given these

unique factors in licensing satellite

services, the Commission regularly

establishes cut-offs, accepts applications

and creates processing groups before

service rules are adopted or even before

specific operating frequencies are

established. The Commission then relies

heavily on the applicants to help

develop service rules that allow them to

share spectrum and expeditiously

develop and deliver their new services

to the public. The Commission relies

heavily on applicants to assist the U.S.

in international fora to obtain spectrum

allocations and expects them to

participate in the time consuming

process of ITU notification and

coordination. All of this activity

requires significant expenditure of time

and money by the applicants. Once the

Commission adopts rules, it will permit

applicants to amend their proposals to

reflect compromises. This process

expedites a complex and inherently

risky venture, allowing license

applicants to begin construction of their

facilities immediately upon the grant of

a license. The assertion by those

opposing cut-offs that the Commission

does not accept applications before

adopting service rules in other, very

different types of services, does not

justify reopening the cut-off in this

satellite proceeding.

64. Reopening the cut-off in this case

will not necessarily advance DARS

technology. There is no reason to

assume that applicants will implement

outmoded technology or spend

hundreds of millions of dollars to

construct inefficient satellite systems.

Furthermore, in any satellite service

rulemaking proceeding, the Commission

always gives pending applicants the

opportunity to amend their applications

to conform to the final rules. In

reviewing applications for space station

facilities, the Commission requires that

proposals reflect ‘‘state-of-the-art’’

technology at the time of license grant.

In fact, CD Radio had amended its

application substantially since 1990 and

will have the opportunity to do so again

to reflect the adopted rules. Although

Cracker Barrel claims that its proposal

could use less spectrum than that

proposed by CD Radio, the Commission

concludes, as discussed previously, that

its proposal would not accommodate

certain innovations such as spatial

diversity.

65. Since CD Radio filed its original

application in 1990, steps to implement

the service have been well publicized.

Both the government and the private

sector worked to identify appropriate

spectrum for satellite DARS at WARC–

92. Shortly after WARC–92, the

Commission announced its intention to

allocate spectrum domestically and to

accept applications for operations in the

S-band to be considered in conjunction

with CD Radio’s. Since 1992, only one

entity, Cracker Barrel, has indicated

interest in filing an application to

provide satellite DARS.

66. Neither Cracker Barrel nor other

commenters have presented compelling

arguments to justify reopening the

previously established cut-off for

satellite DARS license applications. No

commenter advocating reopening has

shown any persuasive reason to depart

from the satellite cut-off policy and

precedent.

67. Consistent with the conclusion

not to reopen the cut-off in this

proceeding, the Commission notes that

existing Commission rules preclude

satellite DARS applicants from effecting

a substantial change in beneficial

ownership if they want to maintain their

pre-cut-off status. Section 25.116 of the

rules provides that any amended

application substantially changing an

applicant’s ownership will be

considered a newly filed application

and thus would not fall within cut-off

protection unless the applicant requests

and is granted an exemption by the

Commission.

68. The Commission proposed in its

NPRM to authorize specific satellite

DARS frequency assignments upon

grant of satellite DARS authorizations to

begin construction. There were mixed
Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations 11091

reactions to its approach. Primosphere,

asserts that the Commission should

initiate international coordination in

conjunction with all licensed satellite

DARS systems and should assign

specific frequency blocks following the

conclusion of this coordination. DSBC

proposes to permit licensees to select

the frequency band it would like to

employ at the time it certifies it has met

the first milestone. This is similar to CD

Radio’s initial proposal that each

licensee notify the Commission of the

specific frequency assignment it is using

at the same time it certifies to the

Commission it has met the milestone

and launched its first spacecraft. These

alternative methods have one

commonality; the exclusive frequency

assignment for each satellite DARS

licensee will not be known before and

during the early stages of the

coordination process. Indeed, it was

necessary to initiate the coordination

process with the ITU for each current

satellite DARS system as though each

system would operate over the entire

2310–2360 MHz band. Until specific

frequency assignments are issued,

coordination with adjacent countries for

each satellite DARS system is

burdensome for both the Commission

and the licensees.

69. As discussed above, there is

sufficient spectrum in the S-band to

license only two satellite DARS systems.

Dividing the available 25 MHz of

spectrum into four equal segments

among the four applicants would result

in exclusive frequency assignments of

only 6.25 MHz for each satellite DARS

applicant. Because the Commission has

found that a viable and competitive

satellite DARS service will require 12.5

MHz, it can license only two systems.

The 2320–2345 MHz band that will

remain allocated for satellite DARS will

be divided into two equal 12.5 MHz

segments (2320–2332.5 MHz and

2332.5–2345 MHz). We will award the

two licenses for satellite DARS by using

competitive bidding to resolve mutual

exclusivity. Satellite DARS applicants

that are winning bidders will have 30

days following the conclusion of the

auction in which to amend their

applications to conform with the

satellite DARS service rules adopted

today.

70. Using the calculation methods

provided in the comments, the satellite

DARS licensees will be able to provide

19 to 44 channels of CD quality audio

per system in the authorized 12.5 MHz

of spectrum. Sufficient spectrum is

available for two spatially diverse

systems. Although the Commission

decides not to reopen the processing

round for satellite DARS, the

Commission is not by its action today

excluding all other potential DARS

providers. Indeed, it may be possible to

lease channels or purchase advertising

time from the licensed satellite DARS

providers.

71. CD Radio had proposed that

satellite DARS system operators be

permitted temporarily to occupy

frequency assignments other than their

own, provided that their transmissions

can be reconfigured to return to and

thereafter use only their own frequency

assignment upon launch of the satellite

operated by the licensee assigned to the

temporary frequency. DSBC objected to

this proposal, arguing that while

temporary use by the first operator(s)

might avoid having frequencies lie

fallow for a short time, prescribing

temporary use may be disruptive and

contrary to the public interest. It

asserted that the temporary operator

could be faced with reducing its

services, discontinuing its service to its

customers, or seeking to utilize

frequencies that are rightfully assigned

to another licensee once the temporary

spectrum is no longer available for use.

Primosphere, supports CD Radio’s

original proposal to authorize interim

frequency assignments.

72. Upon review of the record, the

Commission has decided not to

authorize interim operations. The

Commission has concluded that 12.5

MHz is necessary to implement a viable

satellite DARS service. Nothing in the

comments indicates that additional

spectrum, or an interim assignment, is

necessary to implement a viable system.

Conversely, the Commission finds that

an interim assignment could be

disruptive and contrary to public

interest because of possible service

interruption or reduction. The

Commission therefore adopts its original

proposal not to authorize interim

frequency assignments.

73. Although spectrum constraints

limit the Commission to licensing just

two satellite DARS systems at this time,

its licensing approach nonetheless

provides the opportunity for a

competitive DARS service. The

Commission’s goal is to create as

competitive a market structure as

possible, while permitting each DARS

provider to offer sufficient channels for

a viable service. In the NPRM, the

Commission pointed out that ‘‘satellite

DARS will face competition from

terrestrial radio services, CD players in

automobiles and homes, and audio

services delivered as part of cable and

satellite services,’’ and asked whether

these delivery media, coupled with

fewer than four DARS providers, could

ensure an effectively competitive audio

services market.

74. Other audio delivery media are

not, of course, perfect substitutes for

satellite DARS. These media and

satellite DARS all differ with respect to

the programming menu (terrestrial radio

can provide local programming and

satellite DARS cannot), the sound

quality, the cost of equipment, and the

presence or absence of a subscription

fee, but they all can provide music. The

availability of these media, terrestrial

radio in particular, varies across

populated areas. Given the conclusion

that satellite DARS can provide new and

valuable service to the public, and given

the overall competitive environment

within which it will operate, the

Commission is satisfied that licensing

two satellite DARS providers will serve

the public interest. The Commission

agrees with commenters, that there

should be more than one satellite DARS

license awarded. Licensing at least two

service providers will help ensure that

subscription rates are competitive as

well as provide for a diversity of

programming voices. The two DARS

licensees will compete against each

other for satellite DARS customers and

will face additional competitive

pressure from the other aural delivery

media mentioned above. Accordingly,

eligible auction participants may

acquire only one of the two licenses

being auctioned. One license will be for

the use of spectrum between 2320 and

2332.5 MHz and the other for 2332.5

though 2345 MHz.

75. Satellite DARS licensees’

authority to operate will be conditioned

upon completion of their international

coordination obligations. As discussed

above, and as the Commission indicated

in the NPRM, both Canada and Mexico

have allocated the 1452–1492 MHz

frequency band (L-band) for DARS.

Since U.S. satellite DARS systems will

operate exclusively in the 2320–2345

MHz frequency band (S-band),

coordination between U.S. satellite

DARS and Digital Audio Broadcasting

systems of adjacent countries is not

necessary. The Commission indicated in

the NPRM that the L-band is used

extensively for U.S. Government and

commercial mobile aeronautical

telemetry operations. Coordination

between Canadian terrestrial DARS and

U.S. mobile aeronautical telemetry

systems at L-band has proven to be

challenging.

76. Adjacent countries do, as

discussed above, operate terrestrial

fixed point-to-point, fixed point-tomultipoint, and mobile aeronautical

telemetry systems throughout the Sband. U.S. satellite DARS systems will
11092 Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations

be required to coordinate with these

terrestrial systems currently operating in

the 2320–2345 MHz band. Satellite

DARS licensees must submit

appropriate Appendix 3 material

according to the International Radio

Regulations to formally complete the

international coordination process. This

Appendix 3 material will contain the

final configurations of the satellite

DARS systems.

77. In the NPRM, the Commission

sought comment on whether satellite

DARS licensees should have the

flexibility to determine their own

regulatory classification depending on

the service they are providing or

whether there are reasons to justify

mandating a particular type of service.

The Commission tentatively concluded

that there was no reason to require that

satellite DARS providers be licensed as

common carriers or as broadcasters. The

Commission raised a related question,

pursuant to a suggestion by the NAB,

whether the Commission should require

that all licensees offer subscription

service and asked for comment on the

legal, policy and practical implications

of such a requirement.

78. Commenters addressing these

questions fall into two general groups.

Those supporting implementation of

satellite DARS, including the incumbent

applicants, advocate that licensees be

permitted to determine their own

regulatory classification in order to

tailor services to meet customer

requirements and to respond to market

demands. These commenters also

emphasize the extremely high costs of

constructing and launching a satellite

system and state that licensees cannot

afford to be restricted to purely

subscription service. They state that

they must be allowed to choose their

own mix of subscription and

advertising. One commenter suggests

that satellite DARS licensees be limited

to national advertising and be

prohibited from accepting local or

regional ads. Media Access Project

argues that satellite DARS should be

classified as broadcasting because the

providers use public spectrum and thus

should be subject to public interest

requirements.

79. Commenters opposing satellite

DARS argue that the service should be

required to operate on a subscription

only basis. NAB, for example, states that

although satellite DARS would not be

common carriage or broadcasting,

providers should be required to restrict

their service to subscription offerings in

order to lessen the potential adverse

impact on terrestrial broadcasters. NAB

recognizes that DBS operators have been

given the option to offer service as a

broadcaster or by subscription but

argues that treating satellite DARS like

DBS in this regard is not warranted

because the services operate in different

competitive markets, with DBS subject

to much more competition and not able

to affect broadcasters as significantly as

DARS.

80. The record supports a conclusion

that satellite DARS licensees should be

able to tailor their services to meet

customer needs and that mandating a

particular regulatory classification is

unwarranted. There is no compelling

evidence in the record that would

militate in favor of requiring a broadcast

classification and in fact it appears that

the current applicants favor

subscription service. Nor does satellite

DARS appear to be a common carrier

service because much of the

programming offered would be subject

to the editorial control of the provider.

The services proposed by three of the

applicants will be neither broadcast or

common carrier. Flexibility for licensees

to meet market demands is crucial and

it may be that the viability of a satellite

DARS service will depend on offering a

mix of advertiser supported and

subscription service. The Commission

finds that a requirement that satellite

DARS be entirely subscription is

unwarranted. Mandating that providers

charge for their services is not in the

public interest and raises significant

legal questions if done for the purpose

of economic protectionism as advocated

by several commenters.

81. The Commission’s NPRM

requested comment on a wide variety of

questions regarding the advisability of

public interest obligations in the context

of this service. The Commission asked,

for example, if all satellite DARS

providers, including those not operating

as broadcasters, should be subject to

similar requirements. The Commission

solicited comment on the Commission’s

authority to impose such obligations on

non-broadcasters. The Commission

requested information on the cost of

complying with public interest

obligations, and on whether the costs

could be so significant as to hamper

implementation of the service. Finally,

the Commission asked about the types

of obligations that apply to terrestrial

broadcasters, which offerings would not

be included by service providers in an

unregulated environment, and whether

these requirements increased or

decreased profitability.

82. Commenters were divided on

whether the Commission should adopt

public interest programming obligations

for satellite DARS providers. In general,

pending satellite DARS applicants

proposing non-broadcast service

cautioned against imposing obligations.

For example, DSBC states that public

interest programming obligations are not

necessary to ensure diverse public

oriented programming. It asserts that the

economic and distribution structure of

satellite DARS makes it good business to

offer programming that regular

broadcasters would not offer absent

incentives. AMRC also expresses

concern that many of the suggested

service rules would not result in better

service to the public but instead would

make service impossible. Primosphere,

the only applicant clearly proposing to

operate as a broadcaster, states the

Commission should strike a balance

between ensuring that the public

interest is served and assuring that

timely introduction of service is not

impeded. A non-applicant states that

the Commission is not in a position to

determine which services should be

offered in light of rapidly changing

technology and potential consumer

services. Although arguing against

mandatory offerings, many of the

current applicants state that they plan to

include public interest programming in

their services.

83. Media Access Project (‘‘MAP’’)

urges that the Commission classify

satellite DARS as broadcasting to trigger

defined statutory public service

obligations. In the absence of such a

classification, MAP argues that

broadcasters’ obligations are

appropriate. NAB states that imposing

public interest obligations on DARS

providers will, to some extent,

compensate for the loss in local

programming that it claims will

inevitably result from implementing the

service. Individual broadcasters assert

that DARS providers will not keep their

promises to provide niche programming

but instead will offer mainstream

services that will compete directly with

terrestrial offerings.

84. In response to the request for

proposals for possible public service

rules, NAB suggested that satellite

DARS licensees be held to a ‘‘promises

v. performance’’ standard, similar to

that formerly required of terrestrial

broadcasters. Under this concept,

operators would provide the

Commission with a list of programming

they propose to offer and to specifically

describe ethnic or niche offerings

included. They would then be subject to

a periodic public interest review to

determine if they have made good on

their promises and to justify any

substantial variations from their

proposals.

85. Bonneville International Corp., a

company holding broadcast licenses,

advocates requiring that music
Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations 11093

programmed channels carry news,

information, public service

announcements and public service

programming. Several commenters urge

that satellite DARS providers be

required to comply with Equal

Employment Opportunity requirements.

National Public Radio advocates either

a specific reservation of channel

capacity for noncommercial or

educational programming or a

commitment to provide a minimum

amount of educational cultural, and

informational programming to unserved

or underserved areas. The suggestion is

supported by the Minority Media and

Telecommunications Council which

states that satellite DARS licensees

should be required to set aside channels

for noncommercial public access and for

minority entrepreneurial access. One

commenter, a terrestrial radio station

operator advocated that satellite DARS

meet certain requirements for each

different programming signal offered

and for each different community

served. NAB points out that there are

certain types of local public interest

programming that a national service like

satellite DARS can neither provide nor

replace. Entertainment Communications

advocates a requirement that satellite

DARS licensees serve ‘‘niche’’

audiences.

86. As explained above, in allocating

spectrum and adopting service rules for

the satellite DARS service, the

Commission has relied on the

representations of satellite DARS

applicants that they will provide audio

programming to audiences that may be

unserved or underserved by currently

available audio programming. Thus,

applicants have proposed new choices

in audio programming which may be

beneficial for the mobile public and for

unserved and underserved

communities, particularly in rural or

remote areas. The Commission also has

considered whether it is appropriate to

apply to DARS public interest

requirements similar or analogous to

those that govern terrestrial radio

broadcasters.

87. With regard to non-programming

obligations, the Commission concludes

that satellite DARS licensees must

comply with the Commission’s equal

employment opportunity requirements.

The rationale behind these requirements

is a belief that a licensee can better

fulfill the needs of the community,

whether local or national, if it makes an

effort to hire a diverse staff, including

minorities and women. This rationale

applies with equal force to satellite

DARS. The Commission notes that no

commenters opposed the imposition of

EEO requirements. The Commission has

a pending rulemaking proposing

revision to its EEO rules. Licensees in

this service will be required to comply

with the current rule and with any

changes adopted when the rulemaking

is completed.

88. With regard to programming

obligations, the Commission agrees with

some of the commenters that satellite

DARS service is likely to provide a new

forum for political debate in this

country. To ensure that there is fair

treatment of federal political candidates

that may seek to use this new forum, the

Commission believes that satellite

DARS licensees, whether they operate

on a broadcast or subscription basis,

should comply with the same

substantive political debate provisions

as broadcasters. These provisions are

the federal candidate access provision,

Section 312(a)(7), and the equal

opportunities provision, Section 315. As

the Supreme Court stated in upholding

Section 312(a)(7) against constitutional

attack, these political broadcast

provisions ‘‘make a significant

contribution to freedom of expression

by enhancing the ability of candidates to

present, and the public to receive,

information necessary for the effective

operation of the democratic process.’’

89. While the Commission is not

adopting additional public interest

programming obligations at this time, it

reserves the right to do so. Licensees are

specifically on notice that the

Commission may adopt public interest

requirements at a later date. If

additional public interest obligations are

found to be warranted, one option

would be to adopt rules similar to those

Congress enacted for DBS providers,

including a 4–7% set-aside of capacity

for noncommercial educational and

informational programming. Another

option would be to hold satellite DARS

licensees to a ‘promise vs. performance’

standard.

90. In the NPRM, the Commission

discussed the possibility of satellite

DARS providers offering non-DARS, or

ancillary, services. The Commission

sought comment on what restrictions, if

any, should apply to such services and

on how to monitor compliance with any

restrictions. In response, commenters

favored allowing provision of ancillary

services. Current satellite DARS

applicants urged that the Commission

allow flexibility to provide such

services. Other commenters stated that

allowing ancillary services will promote

full and efficient use of the spectrum

and could lower the price of DARS

service, particularly in the early stages

as satellite DARS is established.

91. Some commenters suggested

particular services that would be

complementary. For example, Ford

Motor Co. suggested allowing data

services. Radio Order Corp. urges the

Commission to allow song related voice

messaging that would permit the

listener to access information on a

particular song during the uninterrupted

music. The USDA/Forest Service

National Weather Program suggests that

satellite DARS providers could dedicate

a channel to broadcasting potentially

life-saving forest fire and emergency

information.

92. The applicants have proposed a

mix of ancillary services. The

Commission agrees with the

commenters who argue that allowing

flexibility consistent with the allocation

will allow providers to tailor service

offerings to meet consumer needs.

Because the United States successfully

obtained an international allocation for

satellite DARS at WARC–92, the

Commission would be concerned about

any use of the spectrum that is

inconsistent with the international

allocation.

93. The NPRM contained no specific

proposal for satellite DARS service area

requirements. It did, however, ask

whether to require satellite DARS

systems to provide 50-state coverage or

50-state plus Puerto Rico/Virgin Islands

coverage, as the Commission does in the

fixed-satellite service. The Commission

noted that two satellite DARS

applications propose service solely to

the 48 contiguous states of the United

States (CONUS). Two other applicants

propose coverage of the CONUS, Alaska,

Hawaii, Puerto Rico and the Virgin

Islands.

94. CD Radio and Primosphere assert

that the Commission should not

mandate that first generation satellite

DARS systems provide service beyond

the CONUS. Primosphere adds that

requiring full 50-state coverage would

require the use of satellite spot beams

and additional spacecraft power.

Primosphere also noted that most 12–14

GHz (Ku-band) and DBS licensees

provide CONUS only coverage. CD

Radio asserted that the service area is

market-driven and that other applicants

propose to serve Alaska, Hawaii, Puerto

Rico, and the Virgin Islands CD Radio

indicates also that its second generation

design will include an expanded service

area.

95. One benefit of a satellite system is

its ability to provide nation-wide

service. The Commission recognizes

that 50-state coverage is not mandatory

for all satellite services and a service

area requirement beyond full CONUS

coverage may not be practical for first

generation satellite DARS systems. All

of the pending applications for satellite
11094 Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations

DARS propose at least full CONUS

coverage, however, and there appears to

be support for such a minimum

requirement. Accordingly, the

Commission concludes that satellite

DARS licensees’ systems must provide,

at a minimum, full CONUS coverage.

The Commission strongly encourages

coverage to other areas or territories of

the United States where practical to do

so for first generation systems.

96. A concern identified in the NPRM

was that satellite DARS signals be

available to listeners, especially mobile

ones, at every location nationwide. The

Commission noted the service link

margin is related to the percentage of

service availability. The Commission

also noted that there was significant

comment on the pending satellite DARS

applications which questioned the

appropriate service link margin

necessary for reception in a mobile

environment. The Commission therefore

proposed in the NPRM that satellite

DARS applicants be required to identify

the service link margin for their systems

and demonstrate that their systems are

capable of providing that service link

margin in a mobile environment, under

clear sky conditions, to the geographic

areas they will serve. The Commission

also sought comment on whether a

specific value should be used to define

an adequate service link margin for the

specified service areas in urban and

suburban environments and, if so, what

that value is and analysis to support that

value. Technical analyses were not

included in initial comments to

demonstrate that a particular service

link margin would be necessary for

mobile reception in urban and suburban

environments.

97. Pending applicants assert that

satellite DARS operators will have an

incentive to provide sufficient margin to

deliver the highest quality audio and

still permit low-cost manufacture of

receiver equipment. Noting also that the

amount of service link margin chosen by

satellite operators is affected by a

variety of factors, such as use of

modulation and access techniques,

satellite diversity, transmission

schemes, intended audience, and use of

terrestrial repeaters, it would be difficult

for satellite operators to define one

specific value that should be used. The

Commission therefore will not require

that satellite DARS licensees be capable

of providing a specific value of service

link margin for a given geographic area

and withdraws its proposal regarding

service link margin. The Commission

will only require satellite DARS

applicants to provide the information on

their service link budgets that is already

required by Section 25.114(c)(9) of its

rules.

98. In general, it is the Commission’s

policy to avoid mandating the use of

one form of technology. The

Commission concludes it is appropriate

to follow that policy here because it will

allow flexibility for satellite DARS

licensees in designing their satellite

DARS systems, and will promote

innovative system designs. Indeed, in

the NPRM, the Commission proposed to

allow licensees to use the channelling

plans, modulation schemes and

multiple entry techniques of their

choice. One of the underlying reasons

for proposing a band segment approach

to licensing the satellite DARS spectrum

was to avoid imposing complex sharing

arrangements among satellite DARS

licensees that may result due to the

diversity in the proposed satellite DARS

designs. The diverse modulation and

channelling techniques proposed in the

pending satellite DARS applications,

however, led it to seek comment in the

NPRM on the issue of receiver interoperability and standards for satellite

and terrestrial DARS.

99. The Commission indicated its

concern that licensing diverse satellite

DARS systems could increase the cost of

manufacturing a receiver that is

compatible with all competing satellite

DARS technologies and terrestrial

formats. The Commission therefore

proposed that each applicant

demonstrate that its satellite DARS

system is capable of remotely tuning its

individual mobile, fixed, and/or

portable receivers across the allocated

bandwidth 2310–2360 MHz. This rule

would have been necessary if the

Commission were to license more than

one band segment to a particular

satellite DARS licensee, (whether as an

interim assignment or in the event that

a license is dismissed and the spectrum

is re-divided pro-rata) but in view of its

conclusion to license only two satellite

DARS systems through competitive

bidding, and not to permit interim

frequency assignments, such a provision

is no longer required. The Commission

adopts, however, the principle behind

the proposed rule that satellite DARS

licensees are required to design a

receiver which would accommodate all

satellite DARS providers. By promoting

receiver inter-operability for satellite

DARS, the Commission is encouraging

consumer investment in satellite DARS

equipment and creating the economies

of scale necessary to make satellite

DARS receiving equipment affordable.

This rule also will promote competition

by reducing transaction costs and

enhancing consumers’ ability to switch

between competing DARS providers.

The Commission declines to adopt a

specific standard for satellite DARS

receiver designs, though. This will

allow licensees the flexibility to

determine the most cost effective way to

meet the receiver-interoperability

requirements. The Commission does not

mandate that satellite DARS receivers be

capable of receiving terrestrial

broadcasting formats. Terrestrial and

satellite DARS are at different

developmental stages and the

Commission does not want to impede

implementation of either service.

100. Parties contend that Commission

adoption of a single, industry-developed

transmission standard for satellite DARS

will keep receiver costs down, minimize

design complexity, and encourage

competition in the marketing of

receivers. The Electronic Industry

Association (EIA) maintains further that

satellite DARS receivers should be

designed so that consumers can

seamlessly switch between satellite and

terrestrial based DARS systems.

101. Satellite DARS applicants share

different views regarding the

Commission’s role in the process of

receiver development. CD Radio asserts

that receiver inter-operability is in the

clear economic interests of all satellite

DARS providers and it expects that its

receiver will be fully tunable in the

sense that the consumer can select the

service provider of their choice. AMRC

contends that creation of a common

receiver capable of tuning in the entire

DARS band is important in promoting

consumer acceptance of the technology.

Given the market incentive for receiver

compatibility, DSBC asserts that it is

likely that a compatible receiver

standard for satellite DARS will be

developed without regulatory

intervention. Primosphere adds that it is

committed to working with the

appropriate industry organizations to

develop a common receiver standard

and therefore Commission action is not

necessary. In a related matter, CD Radio

seeks confirmation from the

Commission that consumers may rely

on the authorization of a satellite DARS

provider and need not obtain any

additional license or registration for

receive-only earth stations used to

obtain the service.

102. As an alternative to this

Commission mandating standards the

Commission will require that a satellite

DARS applicant, in its application,

certify that its satellite DARS system

will include a receiver design that will

permit users to access all licensed DARS

systems that are operational or under

construction. Satellite DARS licensees,

during the construction of their satellite

systems, will have an opportunity to
Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations 11095

work among themselves toward a final

receiver design. The Commission agrees

with commenters that it is in the

interest of the satellite DARS licensees,

and consumers, for the licensees to

come to agreement on a single DARS

receiver design. The Commission also

agrees with commenters that,

alternatively, a single transmission

standard would be in the interest of the

satellite DARS providers and

consumers, independent of whether it is

developed by the Commission or by

industry, but it will not mandate use of

a certain technology. If satellite DARS

licensees redesign their systems to use

conforming transmission technology,

receiver complexity would be

minimized and receiver costs would be

lowered correspondingly. The

Commission believes that, at the very

least, consumers should be able to

access the services from all licensed

satellite DARS systems and the rule on

receiver inter-operability accomplishes

this. The Commission also agrees with

CD Radio that it is unnecessary for

satellite DARS consumers to file for a

license for their receive-only terminals.

Indeed, the Commission has not

licensed receive-only earth stations for

years in an effort to deregulate such

operations.

103. Terrestrial broadcast and satellite

DARS services are at different stages of

development, however, and the

Commission does not intend to add

delay to the progress of the satellite

service with further regulatory

intervention by requiring that receivers

be tunable to terrestrial broadcast

signals. Testing and evaluation of

proposed digital audio radio

technologies has been on-going since

1991. The Commission urges satellite

DARS licensees to take this information

into account before they finalize their

system and receiver designs. The

comments indicate that satellite DARS

licensees will continue to participate in

the industry groups related to their

service and the Commission has good

reason to believe that this is sufficient

to facilitate the design of a state-of-theart satellite DARS receiver.

104. The applicants propose various

coding rates to produce near compact

disc (CD) quality audio. Some

applicants propose to use variable data

rates to transmit a mix of audio formats

where the bandwidth necessary to

produce one CD quality channel, for

example, would be used to provide

several high quality channels at data

rates which are lower than those

necessary to produce CD quality. The

Commission tentatively concluded that

the use of variable data rates would

promote efficient use of the spectrum

and that satellite DARS licensees should

be permitted to implement a mix of

programming formats at variable data

rates. The Commission reflected this in

its proposal to require satellite DARS

licensees to identify which coding

scheme and coding rate(s) they plan to

implement on their satellite DARS

systems and require those satellite

DARS systems which intend to offer

audio formats other than CD quality to

be capable of transmitting lower quality

audio at lower data rates. The

Commission proposed to refrain from

requiring a particular level of audio

quality or other quality for satellite

DARS and sought comment on its

tentative conclusions. The Commission

adopts, today, a rule that is consistent

with its proposal for variable data rates.

105. Comments generally support the

Commission proposal to allow use of

variable data rates depending on the

programming being offered and not to

define a particular level of quality for

DARS based on data rates. CD Radio

asserts that satellite DARS licensees

should be permitted to rely on market

preferences to determine the data rates

to use for particular formats and to

determine the quality of the service.

AMRC agrees with the Commission

proposal because it intends to include

some non-CD quality channels in its

system. In this respect, CD Radio

proposed a modification to the original

proposal that would require a satellite

DARS applicant to identify the

compression rate it will use to transmit

audio programming whether CD or other

quality. The Commission adopts this

proposal and extend it to require

licensees to identify the compression

rates used for non-audio formats.

106. In the NPRM, the Commission

proposed to adopt financial

qualifications and milestone

requirements for satellite DARS

licensees. Because of the decision to

auction licenses, financial qualifications

are unnecessary. However, the

Commission believes that strict

adherence to satellite construction and

operational milestones will assure that

licensees are proceeding with their

proposals and spectrum is used

efficiently. Because of the long lead time

necessary for satellite construction, the

Commission proposed that satellite

DARS licensees begin construction of

their space stations within one year,

launch and begin operating their first

satellite within four years, and begin

operating their entire system within six

years. The Commission also proposed

that licensees file annual reports on the

status of their systems. The current

applicants support the rules proposed in

the NPRM. Accordingly, the

Commission adopts the requirements as

proposed.

107. In the NPRM, the Commission

proposed that licenses for satellite

DARS space segment facilities would be

issued for ten years. The Commission

also noted that licensees choosing to

operate as broadcasters would be

limited by statute to a shorter term.

Adoption of the original proposal would

place DARS licensees that choose to be

broadcasters at a disadvantage by giving

them a shorter term. In addition, two

different terms could cause confusion if

an operator decided to change the mix

of services it offered and might hamper

the flexibility the Commission intended

that licensees should have in choosing

formats. Accordingly, because the

Communications Act limits broadcast

license terms to eight years, the

Commission has determined that all

satellite DARS license terms should be

eight years. The license term will

commence when each satellite is

launched and put into operation. In

addition, as proposed in the NPRM,

individual satellite DARS receivers will

not be licensed.

108. As one of the pending satellite

DARS applicants indicates, satellite

systems are a collection of technical

trade-offs between satellite power,

number of channels, data rates, service

link margin and bandwidth. Therefore,

the greater the flexibility in the

Commission’s technical rules, the

greater the flexibility satellite DARS

licensees will have in designing their

systems in such a way as to meet their

business plans and marketing goals. The

technical rules adopted today will offer

satellite DARS licensees sufficient

flexibility to make necessary trade-offs

and to implement systems that are

viable and competitive.

109. The Commission proposed in the

NPRM not to apply power flux-density

(pfd) limits on satellite DARS networks

and it believes the record supports its

tentative decision. While initially CD

Radio maintained that coordination of

satellite DARS systems with adjacent

countries would be facilitated if all

systems were required to meet a pfd

level at the Earth’s surface of ¥139

dB(W/m2/4 kHz), CD Radio now

contends that it is not necessary for the

Commission to re-open the issue of

required pfd limits since it will be part

of the coordination process. Others

agree. DSBC, for instance, maintains

that experience has shown that the

flexibility in the international

coordination process is far superior to

the rigidity of pfd limits. Accordingly,

Satellite DARS licenses will be

conditioned on the completion of
11096 Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations

international coordination with adjacent

countries.

110. It is clear that each satellite

DARS licensee will need to operate its

satellite(s) at a pfd level that is high

enough to provide sufficient service

availability and yet low enough to

coordinate with terrestrial services in

adjacent countries. Coordination with

adjacent countries becomes an

important issue because the pfd values

characteristic of proposed satellite

DARS systems exceed the threshold

levels that have been identified by

foreign administrations to protect their

existing terrestrial services. The

discussion of coordination, above,

provides satellite DARS applicants with

a detailed understanding of the

coordination issues in the 2320–2345

MHz band. The applicants are in a

better position than the Commission to

make necessary power trade-offs to

implement their satellite DARS systems.

Moreover, since the Commission is

licensing satellite DARS providers in

two separate frequency assignments, the

failure of one licensee to complete

coordination with adjacent countries in

a timely fashion will not delay the

coordination of the other licensee’s

system. In light of the above, adoption

of a specific pfd limit is unnecessary.

Satellite DARS applicants are reminded,

however, that they are required to

identify in their modified satellite DARS

system applications the pfd at the

Earth’s surface from their spacecraft

according to Section 25.114(c)(11) of the

Commission’s rules.

111. Satellite licensees are required to

suppress out-of-band and spurious

emissions from their space stations to

the levels specified in Section 25.202(f)

of the Commission’s Rules. The

Commission indicated in the NPRM that

techniques such as spectral shaping,

coding, offset quadraphase modulation

and filtering, would be useful in

mitigating out-of-band emissions. The

Commission sought comment, however,

on whether the out-of-band emission

limits in Section 25.202(f) would be

sufficient to protect

radiocommunication services in bands

adjacent to the 2310–2360 MHz band,

particularly deep space operations

below 2310 MHz and U.S. MAT

operations above 2360 MHz.

112. Cornell University asserts in its

comments that the Arecibo Observatory

in Puerto Rico, which it operates for the

National Science Foundation in the

2370–2390 MHz band, would require

greater protection from satellite DARS

than that which is currently required by

Section 25.202(f). Specifically, Cornell

requests that, as a minimum, the

Commission require the out-of-band

emission limits of Section 25.202(f)(3)

for satellite DARS emissions beyond the

2370 MHz band edge. It requests that a

rule for spurious emissions, consistent

with those being considered by ITU–R

Task Group 1/3 be applied to satellite

DARS as well. This would require an

additional 9 dB of attenuation below the

out-of-band emission limits required by

Section 25.202(f).

113. Cornell’s calculations assume

that a satellite DARS licensee will be

authorized to operate at a center

frequency of 2355 MHz with a

bandwidth of 8 MHz. Considering that

satellite DARS systems will be licensed

below 2345 MHz, and that the

Commission is not requiring the

provision of satellite DARS to Puerto

Rico and the Virgin Islands, which

offers further protection to the Arecibo

Observatory, attenuation of out-of-band

emissions beyond the limits already

required by Section 25.202(f) may not be

necessary. It would be premature for the

Commission to require satellite DARS

licensees to meet the spurious emission

limits which are currently in place as

‘‘design guidelines’’ and which may be

reviewed again by ITU-R Study Groups.

The TG 1/3 Recommendation that

Cornell cites in its comments is a draft

Recommendation and the issue of

spurious emissions will not be finalized

until the 1999 international

Radiocommunication Assembly.

114. The Commission therefore will

only require satellite DARS licensees to

meet out-of-band and spurious emission

limits which are contained in Section

25.202(f) of the Commission’s Rules.

Satellite DARS licensees should,

however, take cognizance of the TG 1/

3 ‘‘design guidelines’’ and the Arecibo

deep space operations in the 2370–2390

MHz when designing, constructing and

operating their space stations. In a

related matter, the pending satellite

DARS applicants assert that they can

each operate without causing harmful

interference to one another. Since the

pending satellite DARS applicants

propose a band segment licensing

approach, the Commission presumes

that the out-of-band emission limits of

Section 25.202(f) would provide for

interference-free, intra-service satellite

DARS operation. The issue of out-ofband emission limits to protect satellite

DARS receivers is addressed in the

Wireless Communication Services

proceeding.

115. The Commission sought

comment in the NPRM on a suitable

location for satellite DARS telemetry

beacons. The Commission proposed in

the NPRM that each system operator

reduce its bandwidth occupancy by 0.1

MHz to create two 0.2 MHz assignments

adjacent to the edges of the satellite

DARS band for location of telemetry

beacons. The Commission also proposed

an alternative location for all satellite

DARS telemetry beacons at the lower

edge of the 2310–2360 MHz band,

considering the tentative conclusion not

to immediately license the lower 10

MHz for satellite DARS. The alternative

proposal would put fewer constraints on

the satellite DARS licensees (i.e., they

would no longer have to reduce their

bandwidth occupancy to accommodate

telemetry beacons), but the Commission

indicated that further constraints would

be placed on any future licensee of the

lower portion of the band. The

Commission requested comment on its

proposals for satellite DARS telemetry

beacons and it requested comment on

alternative locations.

116. In its comments, DSBC suggests

that, alternatively, the 3697–3699 MHz

band would be suitable for satellite

DARS telemetry beacons. It contends

that the 3697–3699 MHz band could

readily be coordinated for satellite

DARS telemetry beacons thereby

retaining the total DARS band for

service links. CD Radio, in its

comments, proposes a modification to

the satellite DARS telemetry beacon

proposal in the NPRM. According to CD

Radio’s proposal, satellite DARS

licensees may reduce their assigned

bandwidth occupancy to provide

telemetry beacons. No other alternatives

were identified for the location of

satellite DARS telemetry beacons.

117. The Commission adopts its

original proposal to locate telemetry

beacons for satellite DARS in the

satellite DARS band, with minor

modification. No parties supported the

proposal made by DSBC. Further, DSBC

provided no supporting information in

its comments to assess the impact of

satellite DARS telemetry beacons in the

3697–3699 MHz band on the

Radiolocation and Aeronautical

Radionavigation users of the band.

DSBC indicates that Intelsat and

Inmarsat and numerous other non-U.S.

satellite systems make use of all or large

portions of this band. These satellite

systems, however, are not located in the

geostationary orbit between 80° and

110’’ W.L., where the satellite DARS

applicants propose to locate their

satellites. CD Radio, on the other hand,

supports the operation of satellite DARS

telemetry beacons within the satellite

DARS service link spectrum. CD Radio’s

proposal is more flexible than the

proposal in the NPRM because it does

not mandate an amount of spectrum by

which each satellite DARS licensee

must reduce its bandwidth to

accommodate telemetry beacons (i.e.,
Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations 11097

0.1 MHz). The Commission therefore

modifies its original proposal to require

satellite DARS licensees to

accommodate telemetry beacons for

their systems within their exclusively

licensed bandwidth but allow each

licensee the flexibility to determine the

appropriate amount of spectrum

necessary for its telemetry beacons.

118. Cross polarized signals are

orthogonal signals as seen by the

receiver. This technique is used

extensively in the fixed-satellite service

because it facilitates reuse of

frequencies to accommodate multiple

signals, thereby promoting efficient use

of the spectrum. In the NPRM the

Commission indicated that the record

was insufficient for it to analyze the

benefits of potential capacity increases,

if any, that may result from use of crosspolarized transmissions for satellite

DARS. The Commission proposed,

however, that satellite DARS licensees

be permitted to reach agreement with

other satellite DARS licensees to

transmit on cross-polarized frequencies

in frequency assignments of other

licensees. The parties who reach such

agreements would be required to apply

to the Commission for approval of the

agreement. Commission approval would

be conditioned on the outcome of

coordination with other

administrations.

119. The satellite DARS applicants

generally support this proposal. CD

Radio asserts that a licensee should at

least be permitted to transmit crosspolarized signals within its own

frequency assignment. AMRC contends

that the use of cross polarization

techniques is still untested in the Sband and the availability of such

techniques for DARS licensees should

not be assumed. However, to the extent

that cross polarization techniques

become feasible, the Commission

should allow its use to expand program

offerings. The Commission believes that

its proposed rule for cross polarization

leaves open the possibility for satellite

DARS operators to use this technique,

when proven feasible, to meet future

market demands for their service. The

Commission received no comment in

opposition to its proposal for use of

cross-polarized frequencies and it

adopts its original proposal, without

modification.

120. In the NPRM the Commission

indicated that modification to Part 87 of

its rules (Aviation Services) would be

consequential to the licensing of

satellite DARS systems in the 2310–

2360 MHz band. The Commission

recognized that the mobile and

radiolocation services are currently

allocated on a primary basis in the

2310–2360 MHz band until January 1,

1997 or until the first broadcastingsatellite (sound) system is operating and

affecting or be affected by the mobile

and radiolocation services in those

service areas, whichever date is later.

Further, its Allocation Order warned

that the BSS(sound) and complementary

terrestrial broadcasting service, during

their implementation, should take

cognizance of the expendable and

reusable launch vehicle frequencies

2312.5, 2332.5 and 2352.5 MHz to

minimize the impact on this mobile

service use to the extent possible.

121. The Commission proposed

modification of Section 87.303, in

Appendix II of the NPRM, to align Part

87 with Parts 2 and 25 of its Rules. The

Commission recommended

authorization of new primary

assignments for mobile telemetry and

telecommand operations, pursuant to

Section 87.303, above 2360 MHz. The

NPRM indicated that there was support

from the aeronautical community to

reaccommodate existing aeronautical

telemetry users of the 2310–2390 MHz

band to the 2360–2390 MHz band. The

Commission proposed modification to

Section 87.303 to assign telemetry and

associated telecommand operations in

fully operational or expendable and reusable launch vehicles above 2360 MHz.

Moreover, the Commission suggested

that any other telemetry use of the band

2310–2390 MHz would be secondary to

launch vehicle use.

122. As discussed, supra, cofrequency, co-coverage operation of

satellite DARS and MAT is not possible

and it would not be practical to license

MAT systems in the satellite DARS

band on a co-primary basis. There was

no opposition to the proposal to modify

Section 87.303. Only DSBC and

AFTRCC commented with

modifications to the proposal to clarify

the status of telemetry use of the 2310–

2390 MHz band. Consistent with its

original proposal, footnote US328 to

Part 2 of the Rules, and the

developments in the remainder of the

2310–2360 MHz band, the Commission

modifies Section 87.303 as it pertains to

the 2320–2345 MHz band. The

Commission therefore adopts the

modified Section 87.303 contained

below.

123. In addition to satellite DARS

space stations providing service

downlinks in the 2320–2345 MHz band,

feeder link earth stations for each

satellite DARS system will be required

to uplink programming information to

the space station(s). The Commission

recognized in the NPRM that feeder link

networks are essential to deliver service

to the end user and that ample

contiguous spectrum is necessary to

implement a viable satellite DARS

system. The Commission also

recognized that satellite DARS feeder

link earth stations will be few in

number (i.e. one, or possibly two for

redundancy, per licensee) and will

operate at fixed locations. Therefore, the

Commission will authorize satellite

DARS feeder link networks in fixedsatellite service (FSS) frequency

allocations.

124. The Commission indicated,

however, that it would not authorize

satellite DARS feeder link networks in

the conventional FSS 4/6 GHz (C-band)

and 12/14 GHz (Ku-band) frequency

bands which are already congested with

U.S. fixed-satellite service networks.

The Commission tentatively concluded

that this would not be an efficient use

of the FSS spectrum or the geostationary

orbit. Additionally, the Commission

recognized in the NPRM that the

pending satellite DARS applicants

propose feeder link operations in FSS

bands other than the conventional 4/6

and 12/14 GHz bands. This is consistent

with its tentative conclusion. Moreover,

the Commission understands that feeder

link requirements for each satellite

DARS system may increase or decrease

depending on the amount of satellite

DARS service link spectrum that is

exclusively licensed to each applicant,

and on the final configuration of the

satellite DARS systems. For these

reasons the Commission sought

comment on possible alternative noncongested FSS frequency bands that

would be suitable for satellite DARS

feeder link operations in the event that

the frequency bands originally proposed

by the applicants are not available.

125. Licensing service link spectrum

in the 2320–2345 MHz band without

designating spectrum for feeder link

networks would result in the

Commission licensing an incomplete

satellite DARS system. The satellite

DARS systems cannot operate without

sufficient feeder link spectrum. The

Commission therefore will permit

satellite DARS feeder link networks in

the FSS frequency bands 7025–7075

MHz and 6725–7025 MHz (101° W.L.

orbital location only), consistent with

the requirements identified in the

current applications. The Commission

will license satellite DARS feeder link

Earth stations according to existing

regulations for FSS Earth stations.

126. According to the proposals in the

pending applications, the feeder link

spectrum requirements for three of the

four applicants can be accommodated in

the 7025–7075 MHz band. Since

satellite DARS systems will be operating

space stations in the geostationary orbit,
11098 Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations

this 50 MHz of spectrum can be reused

by satellite DARS licensees in the

uplink direction, given sufficient orbital

separation between the space stations.

The Commission believes that an orbital

separation of at least two degrees

between satellite DARS space stations is

obtainable. Primosphere and CD Radio

propose in their applications to use the

7025–7075 MHz band. Though AMRC

proposes to use the 6530–6545 MHz

band for its feeder links, it proposed no

alternative bands. The Commission

believes that AMRC’s feeder link

spectrum requirements, too, can be

accommodated in the 7025–7075 MHz

band.

127. The fourth applicant, DSBC,

proposes in its application to use the

6500–6855 MHz band for its feeder

links. DSBC has a greater spectrum

requirement than the other applicants

because it proposes a system which uses

multiple spot beams. Spot beams allow

for greater frequency reuse of the service

link spectrum but the amount of feeder

link spectrum required is

proportionately greater. The

Commission notes also that DSBC has

requested the 101° W.L. orbital position

which is allocated to the U.S. in

accordance with the international FSS

allotment plan. The spectrum in the

6725–7025 MHz allotment band is

contiguous with the 7025–7075 MHz

band. By combining the 300 MHz of

spectrum from the allotment plan with

the 50 MHz between 7025–7075 MHz,

350 MHz of spectrum could be available

to implement a satellite DARS system at

101° W.L. which uses a multiple spot

beam configuration. Moreover, this

proposal would be a more efficient use

of the FSS allotment plan by using it to

its fullest.

128. The 6725–7025 MHz allotment

and 7025–7075 MHz bands are currently

lightly used in the U.S. by the fixedsatellite service, in contrast to the

conventional 4/6 GHz and 12/14 GHz

bands. Indeed, the WRC–95 designated

these frequency bands for NGSO MSS

feeder link use because, globally, they

are currently lightly used by the FSS.

Though NGSO MSS feeder link

networks are planned to operate in these

frequency bands and these bands are

used in the U.S. for broadcast auxiliary

and Electronic News Gathering (ENG),

the Commission believes, for the

reasons stated herein, that satellite

DARS feeder links can share the 6725–

7025 MHz allotment and 7025–7075

MHz bands with existing and planned

co-primary users.

129. Regarding the sharing situation

in the U.S. with broadcast auxiliary and

ENG use of the bands, the Commission

identified in the NPRM the sharing

issues that satellite DARS operators

would have to address. Initially,

commenters maintained that bands

allocated for broadcast auxiliary are

heavily used for ENG, inter-city relays

and studio-to-transmitter links, and that

use of the 7 GHz band for satellite DARS

feeder link operations would not be

feasible. Joint Comments from

broadcasters assert, however, that

satellite DARS feeder links could share

the 7 GHz band with broadcast

operations under certain conditions.

The National Association of

Broadcasters (NAB) maintains that

satellite DARS feeder link use of the 7

GHz band would be possible only in

small markets, noting that ENG may

move from the 2 GHz band to the 7 GHz

band thereby crowding the 7 GHz band.

CD Radio contends that, even in light of

the mobile nature of ENG operations in

the 7 GHz band, a carefully engineered

and coordinated satellite DARS uplink

may well be able to co-exist with these

broadcast facilities.

130. Most of the conditions for

sharing the 7 GHz band identified by the

broadcasters in their Joint Comments are

typically negotiated during the domestic

licensing process between satellite

licensees and broadcasters. The results

of this domestic coordination would be

reflected in the satellite DARS earth

station application to demonstrate that

Earth station operations would not

affect other co-primary users of the

band. Satellite DARS feeder link

networks will be authorized as a fixedsatellite service in the 6725–7025 MHz

allotment and 7025–7075 MHz bands on

a co-primary basis, but Earth station

operations are expected to be

coordinated with pre-existing users of

the spectrum before they will be

licensed to operate. The Commission

will authorize satellite DARS feeder link

Earth stations only after the applicant

demonstrates that coordination with

potentially affected users in the band,

including co-primary broadcast users,

has been successfully completed.

131. Certain of the conditions

proposed by the broadcasters would not

be imposed on satellite DARS operators

after the earth station licensing process

is completed. For instance, satellite

DARS feeder links would not be

required to accept interference received

from existing and planned TV broadcast

auxiliary stations once the earth stations

are licensed. Moreover it would be

premature for the Commission to

identify and adopt ‘‘keep out zones’’ for

satellite DARS earth stations, for

example in areas near major sporting

arenas and around existing 7 GHz

television broadcast auxiliary receive

sites, as proposed by broadcasters in

their comments. This detailed frequency

coordination exercise will be conducted

between the satellite DARS licensees

and broadcasters during the domestic

licensing process and in parallel with

the construction and deployment of the

satellite DARS systems. Nevertheless,

the fact that the Joint Commenters

identified conditions that would

facilitate sharing in the 7 GHz band is

an indication that a workable solution

can be realized for satellite DARS feeder

link networks to operate in the bands

shared with broadcast facilities.

132. The Commission also identified

the sharing issues regarding satellite

DARS feeder links and planned feeder

link networks for NGSO MSS systems in

the NPRM. NGSO MSS feeder link

networks will be transmitting in the

downlink direction in the 7 GHz band

while satellite DARS feeder links will be

transmitting in the uplink direction in

the same band (i.e., NGSO MSS feeder

links will be operating ‘‘reverse band’’).

Coordination between the transmitting

satellite DARS earth stations and

receiving NGSO MSS feeder link earth

stations, and between receiving DARS

space stations and transmitting NGSO

MSS space stations is therefore

required. Primosphere asserts that

because satellite DARS feeder link earth

stations do not have significant

geographic limitations on where they

can be located, it is not expected that

coordinated use of the 7 GHz band with

NGSO MSS feeder link earth stations

will be difficult. DSBC adds that there

are no apparent problems with satellite

DARS feeder link band proposals even

in light of WRC–95 proposals for NGSO

MSS feeder links.

133. Loral Qualcomm Partnership

(LQP) asserts that any satellite DARS

feeder link assignment in the 7 GHz

band should be required to operate

within the sharing criteria adopted at

WRC–95 for sharing between GSO FSS

and NGSO MSS feeder link networks.

The Commission expects satellite DARS

feeder link networks, and NGSO MSS

feeder link networks, to operate

according to WRC–95 decisions. The

Commission believes that, based on

WRC–95 decisions, geostationary

satellite DARS feeder links and NGSO

MSS feeder links can co-exist in the 7

GHz band. There will be relatively few

feeder link earth stations for both

services and sufficient distance can be

maintained between the transmitting

feeder link earth stations for satellite

DARS and the receiving earth stations of

NGSO MSS feeder links networks.

Additionally, according to WRC–95

decisions, transmitting NGSO MSS

feeder link space stations must meet

power flux density limits at the
Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations 11099

geostationary orbit to protect receiving

space stations in the 7 GHz band. The

domestic coordination process, in

accordance with Section 25.130 of the

Rules, will facilitate feeder link Earth

station licensing of both satellite DARS

and NGSO MSS systems.

134. Two 12.5 MHz DARS licenses

will be granted for use of the spectrum

at 2320–2332.5 MHz, and 2332.5–2345

MHz, respectively. As discussed above,

since the Commission is not opening the

filing cut-off, the four applicants are the

only eligible parties for these licenses.

Accordingly, as all four applicants’

proposals cannot be accommodated, it

adopts rules to assign the licenses to

two of these applicants through use of

competitive bidding.

135. The Commission has authority

under Section 309(j) of the

Communications Act of 1934, as

amended (‘‘Communications Act’’), to

employ auctions to choose among

mutually exclusive applications for

initial licenses where the principal use

of the spectrum is likely to involve the

licensee receiving compensation from

subscribers. Specifically, the

Communications Act permits auctions

where: (1) mutually exclusive

applications for initial license or

construction permits are accepted for

filing by the Commission; (2) the

principal use of the spectrum will

involve, or is reasonably likely to

involve, the receipt by the licensee of

compensation from subscribers in return

for enabling those subscribers to receive

or transmit communication signals

utilizing the licensed frequencies; and

(3) the public interest objectives of

Section 309(j) would be served by

subjecting mutually exclusive

applications in the service to

competitive bidding.

136. In the NPRM, the Commission

recognized that mutual exclusivity

could arise if it decided not to make the

entire 50 MHz of allocated spectrum

available for satellite DARS licensing.

The Commission also tentatively

concluded that the principal use of the

spectrum will be to provide

subscription-based services. The

Commission further concluded that

using competitive bidding to assign

DARS licenses would fulfill the public

interest obligations mandated by statute.

137. Some commenters contend that

the Commission is not authorized to

auction DARS licenses because they

believe the applications on file are not

mutually exclusive. The pending

applicants argue that the Commission

has a statutory obligation to avoid

mutual exclusivity, citing Section

309(j)(6)(E) of the Communications Act.

CD Radio and American Mobile Radio

Corporation (AMRC) also allege that the

use of auctions to resolve applications

filed before the Commission was

granted competitive bidding authority is

not warranted.

138. Based upon a review of the

record in this proceeding, the

Commission disagree with these

commenters. As the Commission stated

in the NPRM, with respect to the

‘‘principal use’’ requirement of Section

309(j), auctions are authorized if at least

a majority of the use of the spectrum is

likely to be for subscription-based

services. In making this determination,

the Commission looks to classes of

licenses and permits rather than

individual licenses. Given that three of

the four current applicants propose to

provide subscription-based service, the

Commission concludes that the

principal use of the satellite DARS

spectrum is likely to involve the

licensee receiving compensation from

subscribers. The Commission notes,

however, that its ‘‘principal use’’

determination does not in any way

preclude satellite DARS licensees from

providing any amount of nonsubscription service, and they are not

precluded from recovering auction

costs, as well as the costs of

construction, launch, and operation

from sources other than subscribers,

such as advertising.

139. The Commission also expects

that the amended applications to be

filed for the satellite DARS licenses will

raise mutual exclusivity. While

eligibility for this license is limited to

the four existing applicants, the

Commission expects that each of these

applicants will file amended

applications to participate in the

auction for the two licenses in view of

their continued interest, as expressed in

this proceeding, in providing satellite

DARS. In the event the Commission

receives only one acceptable amended

application for each of the licenses, the

Wireless Telecommunications Bureau

will issue a public notice cancelling the

auction and establishing a date for the

filing of an amended long-form

application that complies with the

service and technical rules adopted

herein.

140. The Commission turns now to

the issue of whether using competitive

bidding to assign the satellite DARS

licenses will promote the public interest

objectives set forth in Section 309(j)(3)

of the Communications Act. These

objectives are:

(A) The development and rapid

deployment of new technologies,

products, and services for the benefit of

the public, including those residing in

rural areas, without administrative or

judicial delays;

(B) Promoting economic opportunity

and competition and ensuring that new

and innovative technologies are readily

accessible to the American people by

avoiding excessive concentration of

licenses and by disseminating licenses

among a wide variety of applicants,

including small businesses, rural

telephone companies, and businesses

owned by members of minority groups

and women;

(C) Recovery for the public of a

portion of the value of the public

spectrum made available for commercial

use and avoidance of unjust enrichment

through the methods employed to award

uses of that resource; and

(D) Efficient and intensive use of the

electromagnetic spectrum.

The Commission concludes that using

competitive bidding procedures to

award the DARS licenses will further

these objectives. Using competitive

bidding for satellite DARS, a new

national satellite service, does not

present the same complexities and

difficulties inherent in any

consideration of using auctions for

transnational systems. The complex and

difficult issues involved in using

competitive bidding to award licenses

for global systems are described in the

Commission’s recent Little LEO NPRM

61 FR 69062 (December 31,1996).

Satellite DARS is a domestic service. In

fact, other countries will use different

frequency bands for satellite DARS

service. This unique situation offers the

Commission the opportunity to provide

the public with the advantages of

competitive bidding without the

significant disadvantages involved in

using auctions to license transnational

services.

141. In general, paying for spectrum

provides incentives for the licensee to

construct quickly in order to obtain a

return on its investment. The

Commission therefore concludes that, in

this particular set of circumstances, an

auction for the satellite DARS licenses

is likely to promote the rapid

deployment of service because the party

that is in the best position to deploy

satellite DARS technologies and services

is also likely to be the highest bidder.

The Commission further believes that

adopting competitive bidding

procedures to award satellite DARS

licenses is the most efficient mechanism

for ensuring that satellite DARS is

offered to the public in the most

expeditious manner possible. Use of

competitive bidding, as compared to

other licensing methods, will speed the

development and deployment of

satellite DARS service to the public with
11100 Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations

minimal administrative or judicial

delays, and encourage efficient use of

the spectrum as required by Section

309(j)(3)(A) and (D) of the

Communications Act. Based on its

experience with DBS, for example, the

Commission believes that the satellite

DARS auction could be concluded in a

matter of days and it could move

forward expeditiously with licensing.

Additionally, competitive bidding will

recover a portion of the value of the

spectrum, as envisioned in Section

309(j)(3)(C).

142. As discussed infra, the

Commission has not adopted special

provisions for small businesses and

other designated entities because of the

extremely high implementation costs

associated with satellite-based services

and the lack of sufficient evidence in

the current record to support the

adoption of designated entity

provisions. However, this does not

mean either that the Commission has

ignored Congress’ mandate to offer

designated entities the opportunity to

participate in competitive bidding, that

designated entities will be unable to

participate in the DARS industry or that

auctions of DARS spectrum will not

promote many of the objectives of

Section 309(j). Based upon prior

experience with respect to other

satellite-based services, it is likely that

a wide variety of businesses, including

designated entities, will be involved in

various sectors of this industry as nonlicensed operators, programmers, and

equipment suppliers.

143. Moreover, the Commission

disagrees with commenters’ arguments

that it is inappropriate to use

competitive bidding procedures to

select from mutually exclusive

applications that were filed before the

Commission was granted competitive

bidding authority. The Commission

observes that Section 6002 of the

Omnibus Budget Reconciliation Act of

1993 (‘‘1993 Budget Act’’) specifically

grants the Commission the discretion to

decide whether to employ either

lotteries or auctions to choose between

mutually exclusive applications filed

before July 26, 1993. In this regard, the

Commission believes that, in balancing

the advantages and disadvantages of

using a lottery or an auction to award

the DARS licenses, the public interest is

best served by its use of competitive

bidding. As discussed supra, the

Commission believes that an auction

will ensure that the licenses are

awarded to the party that values it most

highly, thereby maximizing efficient use

of the spectrum and facilitating the

expeditious delivery of service to the

public. This is especially true with

regard to nationwide licenses because

the winning bidders at the auction will

likely be the parties that have made the

greatest commitment to satellite DARS

and are best prepared to begin

construction of a nationwide system.

Finally, use of auctions to assign the

DARS licenses will advance the goals of

Section 309(j)(3)(C) of the

Communications Act by enabling the

Commission to recover for the public a

portion of the value of the spectrum and

avoid unjust enrichment to license

winners.

144. In sum, the Commission

concludes that it has the authority to

award DARS licenses by means of

competitive bidding. The Commission

further concludes that the use of

competitive bidding to assign DARS

spectrum will promote the rapid

deployment of DARS and the efficient

use of DARS spectrum most effectively.

The Commission will therefore award

two 12.5 MHz DARS licenses by means

of competitive bidding.

145. In the NPRM, the Commission

proposed that a simultaneous multiple

round auction be used to award DARS

licenses if the Commission determined

that competitive bidding procedures

should be implemented. In a

simultaneous multiple round auction, in

every round, a bidder may bid on any

of the licenses for which it is eligible.

The auction does not close until bidding

has ceased on all licenses. In the

Competitive Bidding Second Report and

Order, 59 FR 24947 (May 13, 1994), the

Commission concluded that this method

ensures that interdependent licenses

will be awarded to the bidders who

value them most highly by generating

the most information about license

values and providing bidders with the

greatest degree of flexibility to pursue

back-up strategies. In the NPRM, the

Commission said that if it employs

competitive bidding for DARS licensing,

it would conduct it ‘‘pursuant to the

general framework adopted in the

Second Report and Order, the

Commission’s rules, and consistent with

other Commission proceedings where

auctions have been employed.’’ There

were no comments on the Commission’s

proposed auction design or bidding

procedures for DARS.

146. In view of the fact that the two

DARS licenses are substitutable and

these licenses will be significantly

interdependent, the Commission

concludes that a simultaneous multiple

round auction design is the appropriate

auction methodology. This auction

methodology will generate valuable

information about the licenses during

the course of the auction. In addition, as

noted below, consistent with the rules

for other auctionable services, the

Commission adopts bidding procedures

to ensure that the auction proceeds at a

rapid pace.

147. The Commission observes that a

multiple round electronic auction

generally will provide bidders useful

information about other bidders’

valuations. Bidders will be able to

observe who is willing to bid on a

license at each announced price.

Providing this information may enable

bidders to refine their estimates of the

license value, thereby reducing the

tendency of bidders for licenses with

uncertain value to shade down their

bids to avoid the ‘‘winner’s curse.’’

Because of the Commission’s discretion

to adjust the length of bidding rounds in

an electronic auction and the other

auction design features described below,

the Commission expects the auction to

proceed rapidly. The Commission will

provide for on-site electronic bidding

because of the limited number of

eligible participants and the anticipated

rapid auction pace. The Commission

reserves the option, however, to offer

remote bidding where bidders can place

their bids by computer from any

location.

148. Consistent with the rules

adopted in other services, the

Commission concludes that the Wireless

Telecommunications Bureau should

have discretion to establish, raise and

lower minimum bid increments during

the course of the DARS auction. The

Commission believes that this discretion

over minimum bid increments is

necessary to ensure that it can

efficiently control the pace of the

auction. The Commission anticipates

using larger percentage minimum bid

increments early in the auction and

reducing the minimum increment

percentage as bidding activity falls. The

Commission also believes that the

efficiency of the auction may be

enhanced by limiting jump bidding, i.e.,

bidding above the minimum accepted

bids. Therefore, the Wireless

Telecommunications Bureau will

announce by Public Notice prior to

auction the specific bid increment that

generally will be used, and will also

retain the discretion to establish and

change maximum bid increments during

the course of the auction. Where a tie

bid occurs, the high bidder will be

determined by the order in which the

bids were received by the Commission.

149. To maximize the amount of

information generated during the course

of an auction and to ensure that the

auction closes in a reasonable amount of

time, the Commission will require a

bidder to be active on one license in

each round of the auction or use an
Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations 11101

activity rule waiver, as defined below.

To be active in the current round, a

bidder must submit an acceptable bid in

the current round or have the high bid

from the previous round. A bidder who

is not active in a round and has no

remaining activity rule waivers will no

longer be eligible to bid on the license

being auctioned. Bidders will not be

permitted to be active on more than one

license in a single round. The

Commission sees no efficiencyenhancing reason to permit such

bidding because the service rules allow

only one license to be acquired per

bidder. Moreover, experience in

previous auctions has raised concerns

that such bidding could be used to

signal or engage in other forms of

anticompetitive strategic bidding. The

Commission delegates to the Wireless

Telecommunications Bureau the

authority to determine and announce by

Public Notice bid withdrawal

procedures for the DARS auction.

150. The Commission concludes that

a minimum opening bid would help

ensure that the auction proceeds quickly

and would increase the likelihood that

the public receives fair market value for

the spectrum. The Commission will

therefore establish a minimum opening

bid for this spectrum, the amount of

which will be announced by the

Wireless Telecommunications Bureau

by Public Notice. The Commission

observes that this approach is consistent

with its approach in the DBS context.

The Wireless Telecommunications

Bureau will determine the amount of

the minimum opening bid using all

available information and taking into

consideration the uncertainty as to the

value of the spectrum.

151. To make allowance for unusual

circumstances that might delay a

bidder’s bid preparation or submission

in a particular round, the Commission

will provide bidders with a limited

number of waivers of the abovedescribed activity rule. The Commission

believes that some waiver procedure is

needed because the Commission does

not wish to end a bidder’s participation

due to an accidental act or

circumstances not under the bidder’s

control. The Commission will provide

bidders with three activity rule waivers

that may be used in any round during

the course of the auction. A waiver will

preserve eligibility in the next round.

Waivers may be applied automatically

by the Commission or invoked

proactively by bidders. If a bidder is not

active in a round, a waiver will be

applied automatically. An automatic

waiver applied in a round in which

there are no new valid bids will not

keep the auction open. A proactive

activity rule waiver is a waiver invoked

by a bidder during the bid submission

period. If a bidder submits a proactive

waiver in a round in which no other

bidding activity occurs, the auction will

remain open.

152. The Commission will retain the

discretion to issue additional waivers

during the course of an auction for

circumstances beyond a bidder’s control

or in the event of a bid withdrawal, as

discussed below. The Commission will

also retain the flexibility to adjust, by

Public Notice prior to an auction, the

number of waivers permitted.

153. A stopping rule specifies when

an auction is over. The auction will

close after one round passes in which

no new valid bids or proactive activity

rule waivers are submitted. The

Commission retains the discretion,

however, to keep the auction open even

if no new valid bids and no proactive

waivers are submitted. In the event that

the Commission exercises this

discretion, the effect will be the same as

if a bidder had submitted a proactive

waiver. This will help ensure that the

auction is completed within a

reasonable period of time, because it

will enable the Commission to utilize

larger bid increments, which speed the

pace of the auction, without risking

premature closing of the auction.

154. In the NPRM, the Commission

proposed to adopt the short-form

application procedures, upfront

payment requirements, public notice

procedures, and default and

disqualification provisions set forth in

Subpart Q of Part 1 of the Commission’s

rules.

155. The Commission received no

comments addressing these proposals.

Because there only are four applicants

eligible in this auction, all of whom

previously filed applications for DARS

licenses, the Commission will not use

its short-form application requirement

(FCC Form 175) and adopts a new rule

for the DARS auction. Specifically, it

will require these applicants to

supplement their previously-filed

applications within five days of the

publication of this Report & Order in the

Federal Register. The supplemental

information must be certified and

include the following: 1. Applicant’s

name; 2. Mailing Address (no Post

Office boxes); 3. City; 4. State; 5. ZIP

Code; 6. Auction Number 15; 7. FCC

Account Number; 8. Person(s)

authorized to make or withdraw a bid

(list up to three individuals); 9.

Certifications and name and title of

person certifying the information

provided; 10. Applicant’s contact

person and such person’s telephone

number, E-mail address and FAX

number; 11. Signature and date. In

keeping with previous practice, the

Commission also retains discretion to

implement or modify certain other

procedures prior to the DARS auction,

including rules governing the payment

requirements.

156. As discussed below, the

Commission will require applicants to

submit to the Commission an upfront

payment prior to commencement of the

DARS auction. In addition, each auction

winner will be required to submit an

amount sufficient to bring its total

deposit up to 20 percent of its winning

bid within ten (10) business days of the

announcement of the winning bidder.

The winning bidder also will be

required to supplement its application

in accordance with Part 25 of the

Commission’s Rules. This procedure

will constitute the ‘‘long-form

application’’ process referred to in the

general auction rules. The winning

bidder will be required to file such

information by a date specified by

Public Notice, generally within 30

business days after the close of bidding.

After receiving the winning bidder’s

long-form application and verifying

receipt of the bidder’s 20 percent down

payment, the Commission will

announce the application’s acceptance

for filing, thus triggering the filing

window for petitions to deny. If,

pursuant to Section 309(d) of the

Communications Act, the Commission

dismisses or denies any and all petitions

to deny, the Commission will issue an

announcement to this effect, and the

winning bidder will then have ten (10)

business days to submit the balance of

its winning bid. If the bidder fails to

submit the balance of the winning bid

or the license is otherwise denied, the

Commission will assess a default

payment as set forth below and reauction the license among the other

existing applicants. If no petitions to

deny are filed, the Commission will

issue a public notice conditionally

granting the licenses pending final

payment.

157. In the NPRM the Commission

proposed an upfront payment

requirement of $0.02 per MHz-pop to

ensure that only serious, qualified

bidders participate at auction. Initially,

the commenters did not address the

proposed upfront payment provisions.

In various recent ex parte filings,

however, the eligible applicants claim

that an upfront payment based on $0.02

per MHz-pop is too high and is not

needed to ensure that only serious,

qualified bidders participate at auction.

The Commission concludes that its

proposed up-front payment of $0.02 per

MHz-pop may be too high here. The
11102 Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations

Commission observes that the eligible

applicants in this auction have

demonstrated a continued interest in

providing DARS and have already

expended significant resources towards

this end. Accordingly, the Commission

believes a more modest upfront

payment for the auction of the DARS

licenses is appropriate. The Commission

believes that a payment that takes into

consideration the valuation of similarly

auctioned satellite spectrum (such as

DBS) would be appropriate. The

Commission therefore delegates

authority to the Wireless

Telecommunications Bureau and the

International Bureau to determine an

appropriate calculation for the upfront

payment and announce it by Public

Notice.

158. In the Competitive Bidding

Second Report and Order, the

Commission determined that bid

withdrawal, default and disqualification

provisions were needed to discourage

insincere bidding. The Commission

observed that insincere bidding,

whether frivolous or strategic, distorts

the price information generated by the

auction process and reduces its

efficiency. Accordingly, the

Commission adopts the bid withdrawal,

default and disqualification provisions

as set forth in Sections 1.2104(g) and

1.2109 of the Commission’s rules.

Pursuant to these rules, any bidder who

withdraws a high bid during an auction

before the Commission declares bidding

closed will be required to reimburse the

Commission in the amount of the

difference between its high bid and the

amount of the winning bid the next time

the license is offered by the

Commission, if this subsequent winning

bid is lower than the withdrawn bid. If

a license is reoffered by auction, the

‘‘winning bid’’ refers to the high bid in

the auction in which the license is

reoffered. If a license is reoffered in the

same auction, the winning bid refers to

the high bid amount in that auction,

made subsequent to the withdrawal. If

the subsequent high bidder also

withdraws its bid, that bidder will be

required to pay an amount equal to the

difference between its withdrawn bid

and the amount of the subsequent

winning bid the next time the license is

offered by the Commission. If a license

which is the subject of withdrawal or

default is not re-auctioned, but is

instead offered to the highest losing

bidders in the initial auction, the

‘‘winning bid’’ refers to the bid of the

highest bidder who accepts the offer.

Losing bidders would not be required to

accept the offer, i.e., they may decline

without additional payment. The

Commission wishes to encourage losing

bidders in simultaneous multiple round

auctions to bid on other licenses, and

therefore the Commission will not hold

them to their losing bids on license for

which another bidder has withdrawn a

bid or on which another bidder has

defaulted.

159. After bidding closes, a defaulting

auction winner (i.e., a winner who fails

to remit the required down payment

within the prescribed time, fails to pay

for a license, or is otherwise

disqualified) will be assessed the

difference between its high bid and the

amount of the winning bid the next time

the license is offered by the

Commission, if this subsequent winning

bid is lower than the high bid, plus an

additional payment of three percent of

the subsequent winning bid or three

percent of the amount of the defaulting

bid, if the defaulting bid was less. The

additional three percent payment is

designed to encourage bidders who

wish to withdraw their bids to do so

before bidding ceases. The Commission

believes that these additional payments

will adequately discourage default and

ensure that bidders have adequate

financing and that they meet all

eligibility and qualification

requirements.

160. In addition, if withdrawal,

default or disqualification involves

gross misconduct, misrepresentation or

bad faith by an applicant, the

Commission retains the option to

declare the applicant and its principals

ineligible to bid in future auctions, or to

take any other action it deems

necessary, including institution of

proceedings to revoke any existing

licenses held by the applicant.

161. The Commission notes that

DARS licensees, like other satellite

licensees, will be subject to rule 25.118,

which prohibits transfers or assignments

of licenses except upon application to

the Commission and upon a finding by

the Commission that the public interest

would be served thereby. Even after

DARS licenses are granted, one licensee

will not be permitted to acquire control

of the other remaining satellite DARS

license. This prohibition on transfer of

control will help assure sufficient

continuing competition in the provision

of satellite DARS service.

162. As it stated in the NPRM, the

Commission believes that it is necessary

to adopt a rule prohibiting collusive

conduct in connection with the satellite

DARS auction. However, the

Commission believes that a modified

rule is warranted because there are a

limited number of identified eligible

participants for the satellite DARS

action and thus the additional

safeguards associated with an auction

with many more bidders are absent

here. Specifically, the Commission will

not adopt any exceptions to the general

anti-collusion rule. As noted above, in

lieu of short-form applications, the

eligible DARS applicants will be

required to supplement their pending

applications with certain information

within five days of the publication date

of this Order. At that time, all applicants

will be prohibited from cooperating,

collaborating, discussing or disclosing

in any manner the substance of their

bids or bidding strategies, or discussing

or negotiating settlement agreements

with other bidders.

163. Due to the fact that this is a

closed auction with a fixed number of

eligible applicants, the Commission has

determined that none of the three

exceptions to its general collusion rules

prohibiting discussions with other

applicants will apply. Therefore, the

applicants will not be permitted to enter

into consortia or any type of joint

bidding arrangement at any time since

cooperation and collaboration are

prohibited under the anti-collusion rule.

Nor will they be able to enter into

settlement arrangements following the

filing of their supplemental information.

Given the limited number of applicants

(four) and available licenses (two), this

is not the type of situation the

Commission contemplated when it

expressed its desire to preserve

‘‘efficiency enhancing bidding

consortia’’ so as to possibly reduce entry

barriers for smaller firms. The universe

of bidders here is already established

and very small. In this situation, the

Commission believes that allowing any

joint bidding arrangements among this

limited group will merely serve to

undercut the competitiveness of the

auction process and limit the number of

bidders for each license. In this vein, the

Commission also concludes that the

other exceptions to the collusion rule

designed to allow bidders to combine or

obtain additional capital from one

another during an auction are

inapplicable or unnecessary here. These

applicants have been preparing and

developing this service for years, and

this will be a very short auction. Thus,

any additional capitalization

requirements are likely to already have

been met or should be after the auction.

The Commission believes that the fiveday window is sufficient to enable the

applicants to conclude any settlement

discussions, given the fact that the

parties have had significant time prior

to the adoption of this Order to reach a

settlement. After this five-day period, all

negotiations (if any) must cease. This
Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations 11103

rule is both fair to the four applicants,

who had time to negotiate settlements

and raise capital, while helping to

ensure the competitiveness of the

auction and the post-auction market. All

applicants will be prohibited from

cooperating, collaborating, discussing or

disclosing in any manner the substance

of their bids or bidding strategies with

other bidders five days after publication

of this report and order in the Federal

Register.

164. Finally, in adopting these rules

for the DARS auction, the Commission

also reminds the eligible bidders that

allegations of collusion may be

investigated by the Commission or

referred to the U.S. Department of

Justice for investigation. Bidders who

are found to have violated the antitrust

laws or the Commission’s Rules while

participating in an auction may be

subject to forfeiture of their down

payment or their full bid amount, as

well as revocation of their license, and

may be prohibited from participating in

future auctions.

165. In the NPRM, the Commission

asked commenters to discuss whether

special provisions should be adopted to

enable small businesses, businesses

owned by minorities and women, and

rural telephone companies (rural telcos)

(collectively referred to as ‘‘designated

entities’’) to participate at auction and

in the provision of DARS.

166. The Commission received no

comments addressing this issue. In an

ex parte filing, CD Radio proposes that

entrepreneurs and small businesses (as

defined in the rules for broadband PCS

C and F blocks) be afforded an

installment payment plan. CD Radio

claims, among other things, that failure

to adopt such financing incentives

would put pressure on the small

business applicants to sell their ‘‘place

in line’’ to large companies and

encourage transfers and possible unjust

enrichment of speculative applicants.

The Commission first notes that the

legislative history of the designated

entity provisions shows that Congress

did not necessarily intend for special

measures in services such as DARS, as

demonstrated by the following

reference: ‘‘[t]he characteristics of some

services are inherently national in

scope, and are therefore ill-suited for

small businesses.’’ Moreover, the

Commission previously concluded that,

because of the extremely high

implementation costs associated with

satellite-based services, no special

provisions for designated entities would

be made. In part, this conclusion was

reached because it was unclear whether

small businesses could attract the

capital necessary to implement and

provide satellite-based services. Second,

pursuant to Section 309(j), the purpose

of such provisions is to attract the

participation of a wide variety of small

business applicants. In view of the fact

that this is a closed auction with a fixed

number of eligible applicants, this

purpose of attracting a wide-array of

applicants will not be served here.

Third, the record is lacking in support

for what the appropriate small business

threshold is in the DARS context and

whether any of the four applicants,

including CD Radio, would qualify as a

small business. In the DBS context, the

Commission did not provide for

designated entity provisions, primarily

due to the high implementation costs

and the lack of interest expressed by the

potential beneficiaries, i.e., small

businesses, businesses owned by

minorities and women, and rural

telecos. In this connection, the

Commission notes that CD Radio’s

proposal is not supported by the ex

parte filings of other potential

applicants who arguably would fall

within the definitions of entrepreneur

and small business proposed by CD

Radio. In contrast to CD Radio’s

proposal, in its ex parte filing, DSBC

states that, ‘‘[s]o long as the auction is

limited to the four pending applicants,

the Commission need not employ

bidding credits or installment payments,

or identify designated entities, to level

the playing field among this group of

potential licensees.’’ Likewise, in its ex

parte filing, Primosphere similarly

states that ‘‘[t]here should be no bidding

preferences’’ and ‘‘[a]ll four applicants

should be treated equally.’’

167. The Commission is, therefore,

not convinced that in order to promote

the objectives of Section 309(j)(3)(B)

ensuring that new and innovative

technologies are readily accessible to

the American people and the

dissemination of licenses among a wide

variety of applicants, including small

businesses, it needs to provide

designated entity provisions, such as the

financial incentives requested by CD

Radio. Moreover, it concludes that the

present record is insufficient to support

either race-based rules under the strict

scrutiny standard, or to support genderbased rules under the intermediate

scrutiny standard that currently applies

to those rules. Accordingly, the

Commission is not adopting designated

entity provisions for DARS.

168. The Commission believes that

the foregoing decision and licensing

plan best serves the public interest in

assuring that the spectrum in question

is most efficiently utilized while

allowing the implementation of new,

innovative services.

169. Accordingly, it is ordered that

Part 25 of the Commissions rules are

hereby amended as set forth below.

170. Accordingly, it is ordered that

Parts 25 and 87 of the Commissions

rules are hereby amended as set forth

below, and the new and amended rules

in Sections 25.144, 25.201, 25.202,

25.214 and 87.303 shall become

effective April 10, 1997, except that the

new rules in Sections 25.401, 25.402,

25.403, 25.404, 25.405, and 25.406 shall

become effective March 11, 1997. The

Commission finds good cause to make

the auction rules for satellite DARS

(Subpart F of Part 25) effective

immediately upon publication in the

Federal Register. These rules will allow

the four pending applicants to amend

their applications, which have been

pending for more than four years, and

to participate in the auction for this new

service, for which spectrum was

allocated two years ago. Immediate

application of the rules governing the

auction procedures will therefore

expedite the DARS auction and the

introduction of service to the public,

including those residing in rural areas,

in accordance with Section 309(j)(3)(A)

of the Communications Act. In addition,

the Commission notes that the pending

applicants have made substantial

financial investment in anticipation of

the licensing of DARS. Finally, it is

important that the DARS auction take

place prior to the Wireless

Communications Service (‘‘WCS’’)

auction, which Congress had mandated

begin no later than April 15, 1997.

According to the applicants, their

several years of planning and financial

investment would be undermined if a

WCS auction winner were to enter the

DARS market first. The DARS

applicants also contend that they may

need WCS spectrum for auxiliary

support of DARS operations, that they

need time to assess these auxiliary

needs, but that their efforts will be

frustrated if WCS is auctioned first.

Accordingly, the Commission finds that

further deferral of the DARS auction and

licensing procedures by a delay in the

effective date, for purposes of providing

adequate notice to the affected parties,

would be impracticable, unnecessary

and contrary to the public interest.

171. The Final Regulatory Flexibility

analysis is included as follows:

Final Regulatory Flexibility Analysis of

Report and Order and Memorandum

Opinion and Order and Further Notice

of Proposed Rulemaking

As required by Section 603 of the

Regulatory Flexibility Act (RFA), 5

U.S.C. § 603, the Commission

incorporated and sought comment on an
11104 Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations

Initial Regulatory Flexibility Analysis

(IRFA) in Establishment of Rules and

Policies for the Digital Audio Radio

Satellite Service in the 2310–2360 MHz

Frequency Band, 11 FCC Rcd 1 (1995)

(NPRM). The Commission’s Final

Regulatory Flexibility Analysis (FRFA)

in this Report and Order and

Memorandum Opinion and Order and

Further Notice of Proposed Rulemaking

(Order) conforms to the RFA, as

amended by the Small Business

Regulatory Enforcement and Fairness

Act of 1996 (SBREFA).

A. Need for and Purpose of This Action

In this Order, the Commission

promulgates rules and assigns licenses

for satellite Digital Audio Radio Service

(DARS). The objective in this

proceeding is to help establish a new

service to provide continuous

nationwide radio programming with

compact disc quality sound. This new

service has the potential to increase the

variety of programming available to the

listening public by offering new niche

channels. Satellite DARS also promises

to serve listeners in areas of the country

that have been underserved by

terrestrial radio.

B. Summary of Issues Raised by the

Public Comments in Response to the

Initial Regulatory Flexibility Analysis

No comments were filed in direct

response to the IRFA. The Commission

received numerous comments on the

wide variety of licensing and other

issues raised by the NPRM, none of

which were directly related to the

treatment of small entities. Although not

directed to the IRFA, three entities

proposing to provide satellite DARS

have filed ex parte comments

concerning the issue of whether the

Commission should employ special

auction provisions to aid small

businesses. These comments are

addressed in Section V of this analysis.

C. Description and Estimate of the Small

Entities Subject to the Rules

The Commission has not developed

its own definition of ‘‘small entity’’ for

purposes of licensing satellite delivered

services. Accordingly, the Commission

relies on the definition of ‘‘small entity’’

provided under the Small Business

Administration (SBA) rules applicable

to Communications Services, Not

Elsewhere Classified. A ‘‘small entity’’

under these SBA rules is defined as an

entity with $11.0 million or less in

annual receipts. Based on the record in

this proceeding, the Commission finds

that the four current satellite DARS

applicants are all ‘‘small entities’’ under

the SBA definition. Because of spectrum

limitations, the Commission does not

foresee that there will be capacity for

additional systems in the frequency

band exclusively allocated for satellite

DARS.

D. Summary of Projected Reporting,

Record Keeping and Other Compliance

Requirements

Satellite DARS licensees will be

required to begin construction of their

space stations within one year of license

grant, launch and begin operating their

first satellite within four years, and

begin operating their entire system

within six years. They will be required

to file annual reports on the status of

their progress. Entities will require

knowledge of satellite operations in

order to prepare these reports.

E. Significant Alternatives and Steps

Taken By Agency To Minimize

Significant Economic Impact on a

Substantial Number of Small Entities

Consistent With Stated Objectives

The NPRM proposed three possible

licensing options for satellite DARS: (1)

to license the available spectrum to the

current four applicants; (2) to license

less that the total available spectrum to

the four applicants and auction the

remainder; or, (3) to accept new

applications and auction all licenses.

After the NPRM was released, the

Omnibus Consolidated Appropriations

Act, 1997, Pub. L. 104–208, 110 Stat.

3009 (1996) (Appropriations Act)

directed the Commission to reallocate

spectrum at 2305–2320 MHz and 2345–

2360 MHz for all services consistent

with international allocations and to

award licenses in that portion of the

band using competitive bidding. As a

consequence, the licenses designated

pursuant to this Order will authorize

satellite DARS operation in the

spectrum between 2320 and 2345 MHz.

Because the record indicates that 12.5

MHz is necessary for a licensee to

provide a viable satellite DARS service

and because only 25 MHz remains as an

exclusive DARS allocation, the

Commission will award two licenses

and use competitive bidding to resolve

mutual exclusivity among the four

current applicants. These applicants are

CD Radio, Inc., Digital Satellite

Broadcasting Corp., Primosphere

Limited Partnership, and American

Mobile Radio Corp.

In deciding how to proceed, the

Commission had two alternatives—

either to reopen the filing window and

accept additional applications or to

limit eligibility to the four applicants

that filed before the 1993 cut-off date.

Because the Commission is not

permitting additional applications, the

four applicants who filed applications

in 1990 and 1993, all of which are small

entities, are the only parties eligible to

participate in the satellite DARS

auction, and only two of these

applicants will receive operating

licenses. No other entities, including

any small entities, will be able to

participate in the subsequent auctions,

or ultimately receive operating licenses.

The decision to not reopen the filing

cut-off is based on sound satellite

licensing policy and precedent and the

equities of this particular proceeding. In

this satellite proceeding, as in others,

applicants require some measure of

certainty to justify the inherently longterm investment of resources required

by complex and lengthy international

allocation and coordination procedures

that must be completed prior to

inauguration of service. This unique

feature of satellite services, combined

with the need to most expeditiously

provide new services to the public,

outweighs any benefits that would

accrue from accepting additional

applications.

Although one current applicant

argues that special auction provisions

are necessary, two others state that as

long as the auction is limited to the four

applicants, the Commission should not

employ bidding credits or installment

payments. As it has explained, the

Commission has not adopted special

auction provisions for small businesses.

The Commission notes, however, that

the proposal adopted herein will

promote the principal objectives of

Section 309(j) because all those

participating in the bidding for these

licenses are small businesses under the

SBA definition.

172. The Paperwork Reduction Act

does not apply to the rules adopted

herein as such rules apply to less than

ten persons.

173. This is a non-restricted notice

and comment rulemaking proceeding.

Ex parte presentations are permitted,

except during the Sunshine Agenda

period, provided they are disclosed as

provided in Commission rules. See

generally 47 CFR Sections 1.202, 1.203,

and 1.1206(a).

174. Pursuant to applicable

procedures set forth in sections 1.415

and 1.419 of the Commission’s rules, 47

CFR Sections 1.415 and 1.419,

interested parties may file comments on

or before May 2, 1997 and reply

comments on or before May 23, 1997.

To file formally in this proceeding, you

must file an original and five copies of

all comments, reply comments, and

supporting comments. If you want each

Commissioner to receive a personal

copy of your comments, you must file
Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations 11105

an original plus nine copies. You should

send comments and reply comments to

Office of the Secretary, Federal

Communications Commission,

Washington, D.C. 20554. Comments and

reply comments will be available for

public inspection during regular

business hours in the FCC Reference

Center of the Federal Communications

Commission, Room 239,1919 M Street,

N.W., Washington, D.C. 20554.

175. It is further ordered that,

pursuant to 47 U.S.C. 155(c), the Chiefs,

Wireless Telecommunications Bureau

and International Bureau, are delegated

authority to implement and modify

auction procedures in the DARS service,

including the general design and timing

of an auction, the manner of submitting

bids, minimum opening bids and bid

increments, activity and stopping rules,

and application and payment

requirements.

176. It is further ordered that the

requests for pioneer’s preference filed

by Satellite CD Radio, Inc., Digital

Satellite Broadcasting Corporation, and

Primosphere Limited Partnership—PP–

24, PP–86 and PP–87, respectively, in

GEN Docket No. 90–357—are dismissed.

177. It is further ordered that the

petition for reconsideration filed on

February 17, 1995 by Underripe

National Radio Sales, Inc. is denied.

178. This action is taken pursuant to

Sections 1, 4(i), 4(j), 7, 303(r) and 309(j)

of the Communications Act of 1934, as

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

157, 303(r) and 309(j).

List of Subjects

47 CFR Part 25

Communications common carriers,

Communications equipment, Radio,

Reporting and recordkeeping

requirements, Satellites.

47 CFR Part 87

Air Transportation, Communications

equipment, Defense communications,

Radio, Reporting and recordkeeping

requirements.

Federal Communications Commission

William F. Caton,

Acting Secretary.

Rule Changes

Parts 25 and 87 of Title 47 of this

chapter are amended as follows:

PART 25—SATELLITE

COMMUNICATIONS

1. The authority citation for Part 25 is

revised to read as follows:

Authority: 47 U.S.C. 701–744. Interprets or

applies sec. 303, 47 U.S.C. 303. 47 U.S.C.

sections 154, 301, 302, 303, 307, 309 and 332,

unless otherwise noted.

2. A new Section 25.144 is added

under the heading ‘‘Space Stations’’ to

read as follows:

§ 25.144 Licensing provisions for the 2.3

GHz satellite digital audio radio service.

(a) Qualification Requirements:

(1) Satellite CD Radio, Primosphere

Limited Partnership, Digital Satellite

Broadcasting Corporation, and

American Mobile Radio Corporation are

the applicants eligible for licensing in

the satellite digital audio radio service.

(2) General Requirements: Each

application for a system authorization in

the satellite digital audio radio service

in the 2310–2360 MHz band shall

describe in detail the proposed satellite

digital audio radio system, setting forth

all pertinent technical and operational

aspects of the system, and the technical,

legal, and financial qualifications of the

applicant. In particular, applicants must

file information demonstrating

compliance with § 25.114 and all of the

requirements of this section.

(3) Technical Qualifications: In

addition to the information specified in

paragraph (a)(1) of this section, each

applicant shall:

(i) Demonstrate that its system will, at

a minimum, service the 48 contiguous

states of the United States (full CONUS);

(ii) Certify that its satellite DARS

system includes a receiver that will

permit end users to access all licensed

satellite DARS systems that are

operational or under construction; and

(iii) Identify the compression rate it

will use to transmit audio programming.

If applicable, the applicant shall

identify the compression rate it will use

to transmit services that are ancillary to

satellite DARS.

(b) Milestone Requirements. Each

applicant for system authorization in

the satellite digital audio radio service

must demonstrate within 10 days after

a required implementation milestone as

specified in the system authorization,

and on the basis of the documentation

contained in its application, certify to

the Commission by affidavit that the

milestone has been met or notify the

Commission by letter that it has not

been met. At its discretion, the

Commission may require the

submission of additional information

(supported by affidavit of a person or

persons with knowledge thereof) to

demonstrate that the milestone has been

met. This showing shall include all

information described in § 25.140 (c),

(d) and (e). The satellite DARS

milestones are as follows, based on the

date of authorization:

(1) One year: Complete contracting for

construction of first space station or

begin space station construction;

(2) Two years: If applied for, complete

contracting for construction of second

space station or begin second space

station construction;

(3) Four years: In orbit operation of at

least one space station; and

(4) Six years: Full operation of the

satellite system.

(c) Reporting requirements. All

licensees of satellite digital audio radio

service systems shall, on June 30 of each

year, file a report with the International

Bureau and the Commission’s Laurel,

Maryland field office containing the

following information:

(1) Status of space station

construction and anticipated launch

date, including any major problems or

delay encountered;

(2) A listing of any non-scheduled

space station outages for more than

thirty minutes and the cause(s) of such

outages; and

(3) Identification of any space

station(s) not available for service or

otherwise not performing to

specifications, the cause(s) of these

difficulties, and the date any space

station was taken out of service or the

malfunction identified.

(d) The license term for each digital

audio radio service satellite shall

commence when the satellite is

launched and put into operation and the

term will run for eight years.

3. Section 25.201 is amended by

adding the definition of ‘‘Satellite

Digital Audio Radio Service’’ in

alphabetical order to read as follows:

§ 25.201 Definitions

* * * * *

Satellite Digital Audio Radio Service

(‘‘DARS’’). A radiocommunication

service in which audio programming is

digitally transmitted by one or more

space stations directly to fixed, mobile,

and/or portable stations, and which may

involve complementary repeating

terrestrial transmitters, telemetry,

tracking and control facilities.

* * * * *

4. Section 25.202 is amended by

adding a new paragraph (a)(6) to read as

follows:

§ 25.202. Frequencies, frequency tolerance

and emission limitations.

(a) * * *

(6) The following spectrum is

available for exclusive use by the

satellite digital audio radio service:

2320–2345 MHz: space-to-Earth (primary).

* * * * *

5. A new § 25.214 is added to read as

follows:
11106 Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations

§ 25.214 Technical requirements for space

stations in the satellite digital audio radio

service.

(a) Definitions.

(1) Allocated bandwidth. The term

‘‘allocated bandwidth’’ refers to the

entry in the Table of Frequency

Allocations of a given frequency band

for the purpose of its use by one or more

terrestrial or space radiocommunication

services under specified conditions.

This term shall be applied to the 2310–

2360 MHz band for satellite DARS.

(2) Frequency Assignment. The term

‘‘frequency assignment’’ refers to the

authorization given by the Commission

for a radio station to use a radio

frequency or radio frequency channel

under specified conditions. This term

shall be applied to the two frequency

bands (A) 2320.0–2332.5 MHz and (B)

2332.5–2340.0 MHz for satellite DARS.

(b) Each system authorized under this

section will be conditioned upon

construction, launch and operation

milestones as outlined in § 25.144(b).

The failure to meet any of the

milestones contained in an

authorization will result in its

cancellation, unless such failure is due

to circumstances beyond the licensee’s

control or unless otherwise determined

by the Commission upon proper

showing by the licensee in any

particular case.

(c) Frequency assignments will be

made for each satellite DARS system as

follows:

(1) Exclusive satellite DARS licenses

are limited to the 2320–2345 MHz band

segment of the allocated bandwidth for

satellite DARS;

(2) Two, 12.5 MHz frequency

assignments are available for satellite

DARS: 2320.0–2332.5 MHz and 2332.5–

2345.0 MHz;

(3) Satellite DARS licensees may

reduce their assigned bandwidth

occupancy to provide telemetry beacons

in their exclusive frequency

assignments;

(4) Each licensee may employ cross

polarization within its exclusive

frequency assignment and/or may

employ cross polarized transmissions in

frequency assignments of other satellite

DARS licensees under mutual

agreement with those licensees.

Licensees who come to mutual

agreement to use cross-polarized

transmissions shall apply to the

Commission for approval of the

agreement before coordination is

initiated with other administrations by

the licensee of the exclusive frequency

assignment; and

(5) Feeder uplink networks are

permitted in the following FixedSatellite Service frequency bands: 7025–

7075 MHz and 6725–7025 MHz (101°

W.L. orbital location only).

6. A new subpart F consisting of

sections 25.401 through 25.406 is added

to Part 25 to read as follows:

Subpart F—Competitive Bidding

Procedures for DARS

Sec.

25.401 Satellite DARS applications subject

to competitive bidding.

25.402 Competitive bidding mechanisms.

25.403 Bidding application and

certification procedures.

25.404 Submission of downpayment and

filing of long-form applications.

25.405 Prohibition of collusion.

25.406 License grant, denial, default, and

disqualification.

Subpart F—Competitive Bidding

Procedures for DARS

§ 25.401 Satellite DARS applications

subject to competitive bidding.

Mutually exclusive initial

applications filed by Satellite CD Radio,

Primosphere Limited Partnership,

Digital Satellite Broadcasting

Corporation, and American Mobile

Radio Corporation, to provide DARS

service are subject to competitive

bidding procedures. The procedures set

forth in Part 1, Subpart Q of this chapter

will apply unless otherwise specified in

this subpart.

§ 25.402 Competitive bidding mechanisms.

(a) Tie bids. Where a tie bid occurs,

the high bidder will be determined by

the order in which the bids were

received by the Commission.

(b) Maximum bid increments. The

Commission may, by announcement

before or during the auction, establish

maximum bid increments in dollar or

percentage terms.

(c) Minimum opening bid. The

Commission will establish a minimum

opening bid for the DARS spectrum, and

the amount of which will be announced

by Public Notice prior to the auction.

(d) Activity rules. The Commission

will establish activity rules which

require a minimum amount of bidding

activity. Bidders will be entitled to

request and be granted waivers of such

rule. The Commission will specify the

number of waivers permitted in an

auction, the frequency with which they

may be exercised, and the method of

operation of waivers by Public Notice

prior to the auction.

§ 25.403 Bidding application and

certification procedures.

Submission of Supplemental

Application Information. In order to be

eligible to bid, each pending applicant

must timely submit certain

supplemental information. All

supplemental information shall be filed

by the applicant five days after

publication of these rules in the Federal

Register. The supplemental information

must be certified and include the

following:

(a) Applicant’s name;

(b) Mailing Address (no Post Office

boxes);

(c) City;

(d) State;

(e) ZIP Code;

(f) Auction Number 15;

(g) FCC Account Number;

(h) Person(s) authorized to make or

withdraw a bid (list up to three

individuals);

(i) Certifications and name and title of

person certifying the information

provided;

(j) Applicant’s contact person and

such person’s telephone number, E-mail

address and FAX number; and

(k) Signature and date.

§ 25.404 Submission of down payment and

filing of long-form applications.

(a) After bidding has ended, the

Commission will identify and notify the

high bidder and declare the bidding

closed.

(b) Within ten (10) business days of a

Public Notice announcing the high

bidder on a particular license(s), a high

bidder must submit to the Commission’s

lockbox bank such additional funds (the

‘‘down payment’’) as are necessary to

bring its total deposits (not including

upfront payments applied to satisfy bid

withdrawal or default payments) up to

twenty (20) percent of its high bid(s).

This down payment must be made by

wire transfer or cashier’s check drawn

in U.S. dollars from a financial

institution whose deposits are insured

by the Federal Deposit Insurance

Corporation and must be made payable

to the Federal Communications

Commission. Down payments will be

held by the Commission until the high

bidder has been awarded the license

and has paid the remaining balance due

on the license, in which case it will not

be returned, or until the winning bidder

is found unqualified to be a licensee or

has defaulted, in which case it will be

returned, less applicable payments. No

interest on any down payment will be

paid to a bidder.

(c) A high bidder that meets its down

payment obligations in a timely manner

must, within thirty (30) business days

after being notified that it is a high

bidder, submit an amendment to its

pending application to provide the

information required by § 25.144.
Federal Register / Vol. 62, No. 47 / Tuesday, March 11, 1997 / Rules and Regulations 11107

§ 25.405 Prohibition of collusion.

Upon the deadline for filing the

supplemental information required by

§ 25.403, all applicants are prohibited

from cooperating, collaborating,

discussing or disclosing in any manner

the substance of their bids or bidding

strategies, or discussing or negotiating

settlement agreements, with other

applicants until after the high bidder

makes the required down payment.

§ 25.406 License Grant, Denial, Default,

and Disqualification.

(a) Unless otherwise specified in these

rules, auction winners are required to

pay the balance of their winning bids in

a lump sum within ten (10) business

days following public notice by the

Commission that it is prepared to award

the licenses. Grant of the license will be

conditioned on full and timely payment

of the winning bid.

(b) If a winning bidder withdraws its

bid after the Commission has declared

competitive bidding closed or fails to

remit the required down payment

within ten (10) business days after the

Commission has declared competitive

bidding closed, the bidder will be

deemed to have defaulted, its

application will be dismissed, and it

will be liable for the default payment

specified in § 1.2104(g)(2). In such

event, the Commission may either reauction the license to existing or new

applicants or offer it to the other highest

bidders (in descending order) at their

final bids. The down payment

obligations set forth in § 25.404(b) will

apply.

(c) A winning bidder who is found

unqualified to be a licensee, fails to

remit the balance of its winning bid in

a timely manner, or defaults or is

disqualified for any reason after having

made the required down payment, will

be deemed to have defaulted and will be

liable for the penalty set forth in

§ 1.2104(g)(2). In such event, the

Commission will conduct another

auction for the license, affording new

parties an opportunity to file an

application for the license.

(d) Bidders who are found to have

violated the antitrust laws or the

Commission’s rules in connection with

their participation in the competitive

bidding process may be subject, in

addition to any other applicable

sanctions, to forfeiture their up front

payment, down payment or full bid

amount, and may be prohibited from

participating in future auctions.

PART 87—AVIATION SERVICES

1. The authority citation in Part 87

continues to read as follows:

Authority: 48 Stat. 1066, 1082, as

amended; 47 U.S.C. 154, 303, unless

otherwise noted. Interpret or apply 48 Stat.

1064–1068, 1081–1105, as amended; 47

U.S.C. 151–156, 301–609.

2. Paragraph (d)(1) of § 87.303 is

revised to read as follows:

§ 87.303 Frequencies.

* * * * *

(d)(1) Frequencies in the bands 1435–

1525 MHz and 2360–2390 MHz are

assigned primarily for telemetry and

telecommand operations associated

with the flight testing of manned or

unmanned aircraft and missiles, or their

major components. The band 1525–1535

MHz is also available for these purposes

on a secondary basis. In the band 2320–

2345 MHz, the mobile and radiolocation

services are allocated on a primary basis

until a Broadcast-Satellite (sound)

service has been brought into use in

such a manner as to affect or be affected

by the mobile and radiolocation services

in those service areas. Permissible uses

of these bands include telemetry and

telecommand transmissions associated

with the launching and reentry into the

earth’s atmosphere as well as any

incidental orbiting prior to reentry of

manned or unmanned objects

undergoing flight tests. In the 1435–

1530 MHz band, the following

frequencies are shared with flight

telemetry mobile stations: 1444.5,

1453.5, 1501.5, 1515.5, 1524.5 and

1525.5 MHz. In the 2320–2345 MHz and

2360–2390 MHz bands, the following

frequencies may be assigned on a coequal basis for telemetry and associated

telecommand operations in fully

operational or expendable and re-usable

launch vehicles whether or not such

operations involve flight testing: 2332.5,

2364.5, 2370.5 and 2382.5 MHz. In the

2360–2390 MHz band, all other

telemetry and telecommand uses are

secondary to the above stated launch

vehicle uses.

* * * * *

[FR Doc. 97–6064 Filed 3–10–97; 8:45 am]

BILLING CODE 6712–01–P

NATIONAL AERONAUTICS AND

SPACE ADMINISTRATION

48 CFR Part 1833 and 1852

NASA FAR Supplement; Protests to

the agency

AGENCY: Office of Procurement, Contract

Management Division, National

Aeronautics and Space Administration

(NASA).

ACTION: Interim rule; request for

comments.

SUMMARY: The Federal Acquisition

Regulation (FAR) was amended to revise

procedures for submission of protests to

Federal agencies. In order to implement

the changes made to the FAR, this rule

provides for a solicitation provision that

informs offerors to whom protests may

be submitted as an alternative to

submission to the NASA contracting

officer. The effect of the changes is to

give prospective NASA contractors an

additional means for submitting protests

in order to resolve their concerns about

a contract or solicitation.

DATES: This interim rule is effective

March 11, 1997. NASA will accept

written comments until May 12, 1997.

ADDRESSES: Comments regarding this

rule should be addressed as follows:

National Aeronautics and Space

Administration, Contract Management

Division (Code HK/Beck), Washington,

DC 20546.

FOR FURTHER INFORMATION CONTACT:

Dave Beck, (202) 358–0482.

SUPPLEMENTARY INFORMATION: .

Availability of NASA FAR Supplement

The NASA FAR Supplement, of

which this rule is a part, is available in

its entirety on a subscription basis from

the Superintendent of Documents,

Government Printing Office,

Washington, DC 20402, telephone

number (202) 512–1800. Cite GPO

Subscription Stock Number 933–003–

00000–1. It is not distributed to the

public, either in whole or in part,

directly by NASA.

Background

Section 33.103 of the Federal

Acquisition Regulation (FAR), 48 CFR

33.103, was amended to revise

procedures for submission of protests to

Federal agencies (62 FR 270, January 2,

1997). In order to implement the

changes made to the FAR, this rule

provides for a solicitation provision that

informs offerors to whom protests may

be submitted as an alternative to

submission to the contracting officer.

Regulatory Flexibility Act

The interim rule is not expected to

have a significant economic impact on

a substantial number of small entities

within the meaning of the Regulatory

Flexibility Act, 5 U.S.C. 601, et seq.,

because this rule implements previously

adopted Federal-wide regulations by

simply providing for a solicitation

provision that informs offerors to whom

protests may be submitted as an

alternative to submission to the

contracting officer. An Initial Regulatory

Flexibility Analysis has, therefore, not

been performed. Comments from small