[Federal Register Volume 62, Number 82 (Tuesday, April 29, 1997)]
[Rules and Regulations]
[Pages 23148-23176]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-9711]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1, 2, 74, 78, 95, and 101

[CC Docket No. 92-297: FCC 97-82]


Use of the 28 GHz and 31 GHz Bands for Local Multipoint 
Distribution Service

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Commission adopts a Second Report and Order, Order on 
Reconsideration, and Fifth Notice of Proposed Rulemaking in this 
proceeding. A summary of the Fifth Notice of Proposed Rulemaking 
portion of this decision was published in the April 7, 1997 issue of 
the Federal Register (62 FR 16514),and seeks comment on specific rules 
to be applied for the partitioning and disaggregation of LMDS licenses. 
The Second Report and Order designates an additional 300 megahertz of 
spectrum in the 31 GHz band to LMDS and adopts service rules for LMDS, 
as well as competitive bidding rules for LMDS spectrum. The Order on 
Reconsideration denies petitions for reconsideration of the 
Commission's dismissal of applications for waiver of the Commission's 
point-to-point rules governing the 28 GHz band. The Second Report and 
Order contains modified information collections subject to the 
Paperwork Reduction Act of 1995 and has been submitted to the Office of 
Management and Budget (OMB) for review under the PRA. OMB, the general 
public, and other Federal agencies are invited to comment on the 
modified information collections contained in this proceeding.

DATES: The rules in this document will become effective June 30, 1997; 
applications to modify existing 31 GHz licenses must be filed no later 
than July 14, 1997. Written comments by the public on the revised 
information collections are due by April 21, 1997.

ADDRESSES: Secretary, Federal Communications Commission, Washington, 
D.C. 20554. In addition to filing comments with the Secretary, a copy 
of any comments on the information collections contained herein should 
be submitted to Dorothy Conway, Federal Communications Commission, Room 
234, 1919 M Street, N.W., Washington, D.C. 20554, or via the Internet 
to <a href="/cdn-cgi/l/email-protection#ed898e82839a8c94ad8b8e8ec38a829b"><span class="__cf_email__" data-cfemail="f296919d9c85938bb2949191dc959d84">[email protected]</span></a>., and to Timothy Fain, OMB Desk Officer, 10236 NEOB, 
725--17th Street, N.W., Washington, D.C. 20503 or via the Internet at 
<a href="/cdn-cgi/l/email-protection#fa9c9b9394a5a58eba9b96d49f958ad49d958c"><span class="__cf_email__" data-cfemail="bcdaddd5d2e3e3c8fcddd092d9d3cc92dbd3ca">[email protected]</span></a>. For additional information regarding the 
information collections contained herein, contact Dorothy Conway at 
202-418-0217 or via the Internet at <a href="/cdn-cgi/l/email-protection#f89c9b97968f9981b89e9b9bd69f978e"><span class="__cf_email__" data-cfemail="c6a2a5a9a8b1a7bf86a0a5a5e8a1a9b0">[email protected]</span></a>.

FOR FURTHER INFORMATION CONTACT: Bob James, Private Wireless Division, 
(202)418-0680, Mark Bollinger or Jay Whaley, Auctions Division, 
(202)418-0660, or Joseph Levin or Jane Phillips, Policy Division, (202) 
418-1310.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Second Report and 
Order and Order on Reconsideration segment of the Second Report and 
Order, Order on Reconsideration and Fifth Notice of Proposed Rulemaking 
in CC Docket No. 92-297, PP-22, FCC 97-82, adopted March 11, 1997, and 
released March 13, 1997. A summary of the Fifth Notice of Proposed 
Rulemaking portion of this decision was published in the April 7, 1997 
issue of the Federal Register (62 FR 16514). The complete text of this 
decision 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 Service, (202) 857-3800, 2100 M 
Street, N.W., Suite 140, Washington, DC 20037.

Paperwork Reduction Act

    The Second Report and Order contains a modified information 
collection. The Commission, as part of its continuing effort to reduce 
paperwork burdens, invites the general public and OMB to comment on the 
information collections contained in the Second Report and Order, as 
required by the Paperwork Reduction Act of

[[Page 23149]]

1995, Public Law 104-13. Public and agency comments are due May 29, 
1997; OMB notification of action is due June 30, 1997. Comments should 
address: (a) Whether the proposed collection of information is 
necessary for the proper performance of the functions of the 
Commission, including whether the information shall have practical 
utility; (b) the accuracy of the Commission's burden estimates; (c) 
ways to enhance the quality, utility, and clarity of the information 
collected; and (d) ways to minimize the burden of the collection of 
information on the respondents, including the use of automated 
collection techniques or other forms of information technology.
    OMB Approval Number: 3060-0531.
    Title: Redesignation of 27.5 GHz Frequency Band, Establishing Rules 
and Policies for Local Multipoint Distribution (NPRM CC Docket No. 92-
297).
    Form No.: N/A.
    Type of Review: Reinstatement, with change, of a previously 
approved collection for which approval has expired.
    Respondents: Business or other for-profit entities.
    Number of Respondents: 986.
    Estimated Time Per Response: 41 hours.
    Total Annual Burden: 30,381.5 hours.
    Total Annual Cost: $2,025,400.
    Needs and Uses: The information requested will be used by FCC 
personnel to determine whether the applicant is qualified legally and 
technically to be licensed to use the radio spectrum. The original NPRM 
sought comment on rules governing a substantial number of filings that 
an estimated 10,000 applicants would make. It was estimated that an 
average of 8 hours per respondent would be required to comply with the 
proposed requirements. The Second Report and Order revised these 
requirements and burdens to three specific burdens involving frequency 
coordination, discontinuance of service, and certification of 
construction requirements/renewal expendancy for an estimated 986 
respondents that would take an average of 41 hours to comply with the 
rules.

I. Designation and Licensing of Spectrum

A. 31 GHz Band and Number of Licenses

    1. The Second Report and Order allocates an additional 300 
megahertz of spectrum in the 31 GHz band (31.0-31.3) for LMDS. It also 
adopts the use of Basic Trading Areas (BTAs) for licensing areas. Two 
licenses, of unequal size, are proposed for each BTA. The larger 
license is for 1150 megahertz, 1000 megahertz of which is located in 
the 28 GHz band (27.5-29.5) and 150 of which is located in the center 
of the 300 megahertz segment in the 31 GHz band. The smaller license is 
for a total of 150 megahertz, consisting of 75 megahertz at either end 
of the 150 megahertz segment in the 31 GHz band allocated to LMDS. 
Incumbent governmental licensees and private business users presently 
operating in the 75-megahertz segments of the band encompassed by the 
smaller, 150 megahertz LMDS license, will be accorded protection from 
interference from the LMDS operator in that band. (No interference 
protection will be accorded to incumbents operating on a temporary 
basis in the 31 GHz band.) The reverse will be the case with the 1150 
megahertz LMDS license. The 1150 megahertz LMDS licensee will be 
accorded protection from interference from all incumbents operating in 
the center 150 megahertz segment of the 31 GHz band. However, incumbent 
governmental licensees and private business users in that segment will 
be permitted to migrate to the 75-megahertz segments encompassed by the 
smaller LMDS license in order to obtain the protections offered such 
incumbents in that band, provided they file an application to modify 
their licenses no later than July 14, 1997. These applications will not 
be subject to petitions to deny. Applications for new facilities in the 
31 GHz band are frozen.

B. Eligibility

    2. LECs and cable companies are barred from owning 1150 megahertz 
LMDS licenses that are ``in-region.'' Incumbent LECs and cable 
companies may participate fully in the auction of 1150 MHz licenses, 
including the auction of in-region licenses, so long as they come into 
compliance with the restrictions within 90 days by divesting telephone 
or cable assets, or partitioning the LMDS license. An incumbent will be 
defined as in-region if its authorized service area represents 10 
percent or more of the population of the BTA; a 20 percent or greater 
ownership level will constitute an attributable interest in a license. 
These restrictions will terminate on the third anniversary of the close 
of the auction, unless extended by the Commission. Parties may seek 
waivers to shorten the restriction period.

C. Buildout and Flexibility of Use

    3. LMDS licensees will be subject to liberal construction 
requirements. LMDS licensees may disaggregate or partition a license at 
any time, with certain restrictions for licensees taking advantage of 
bidding credits or installment payments. (The Fifth Notice of Proposed 
Rulemaking portion of this decision proposes specific provisions 
regarding partitioning and disaggregation.) Licensees also have the 
flexibility to choose whether they want to offer common carrier or 
private carrier services, or both.

D. Petitions for Reconsideration and Pioneer's Preference

    4. The Commission has also deferred decision on CellularVision's 
pioneer's preference request until completion of a peer review of 
CellularVision's technology, and issues concerning the pioneer's 
preference license for the portion of the New York Basic Trading Area 
lying outside of the New York Primary Metropolitan Statistical Area 
already licensed to CellularVision are pending the outcome of such 
review process and final disposition of its preference request. 
Finally, the Order denies the petitions for reconsideration of the 
Commission's decision to dismiss waiver applications filed by entities 
seeking a license under Hye Crest Management, Inc.

II. Competitive Bidding Rules and Procedures

A. Use of Competitive Bidding

    5. The Commission concludes that auctioning LMDS licenses would 
further the Communications Act's objectives. First, based on its 
previous experience in conducting auctions for other services, the 
Commission believes that use of competitive bidding to award LMDS 
licenses, as compared with other licensing methods, would speed the 
development and deployment of this new technology, products and 
services to the public with minimal administrative or judicial delay, 
and would encourage efficient use of the spectrum as required by 
Sections 309(j)(3)(A) and 309(j)(3)(D), 47 U.S.C. Secs. 309(j)(3)(A) & 
309(j)(3)(D). Second, auctions meet the objectives of Section 
309(j)(3)(B), 47 U.S.C. Sec. 309(j)(3)(B), because the Commission is 
adopting competitive bidding rules that foster economic opportunity and 
the distribution of licenses among a wide variety of applicants, 
including small businesses.
    6. The Commission also has determined that the use of auctions to 
assign LMDS licenses will advance the goals of 47 U.S.C. 
Sec. 309(j)(3)(C) by enabling the public to recover a portion of the 
value of the public spectrum. If the Commission uses a licensing

[[Page 23150]]

methodology that ensures that licenses are assigned to those who value 
them most highly, it follows that such licensees can be expected to 
make the most efficient and intensive use of the spectrum. Because LMDS 
is eligible for competitive bidding under the statutory requirements 
set forth in 47 U.S.C. Sec. 309(j)(2)(A), the Commission is precluded 
from using lotteries to award LMDS licenses. Accordingly, the 
Commission rejects the suggestion that the Commission use lotteries to 
award LMDS licenses.
    7. The Commission also declines at this time to set aside LMDS 
spectrum for educational purposes. While the Commission is not adopting 
public interest programming obligations at this time, it reserves the 
right to do so on LMDS providers who provide video services. Licensees 
are specifically on notice that the Commission may adopt public 
interest requirements at a later date. If public interest obligations 
are found to be warranted, one option would be to adopt rules similar 
to those Congress enacted for Direct Broadcast Satellite providers, 
including a 4 percent to 7 percent set-aside of capacity for non-
commercial educational and informational programming. See 47 U.S.C. 
Sec. 335. Another option would be to hold LMDS licensees to a ``promise 
versus performance'' type standard.

B. Competitive Bidding Design for LMDS Licenses

    8. Based on the record in this proceeding and its successful 
experience conducting simultaneous multiple round auctions for other 
services, the Commission believes a simultaneous multiple round auction 
is the most appropriate competitive bidding design for LMDS. First, for 
certain bidders, the value of these licenses will be significantly 
interdependent because of the desirability of aggregation across 
geographic regions. Simultaneous multiple round bidding will generate 
more information about license values during the course of the auction, 
and provide bidders with more flexibility to pursue back-up strategies, 
than auctioning licenses separately. Simultaneous multiple round 
bidding therefore is most likely to award licenses to the bidders who 
value them the most highly and to provide bidders with the greatest 
likelihood of obtaining the license combinations that best satisfy 
their service needs. The Commission currently does not have the 
operational capability to use combinatorial bidding but will consider 
doing so in future auctions.
    9. The Commission will conduct simultaneous auctions of two 
licenses in each of 492 BTAs for LMDS, for a total of 984 licenses. 
Each BTA will have one license consisting of 1,150 megahertz: 1,000 
megahertz in the 28 GHz band (27.5-28.35 GHz and 29.1-29.25 GHz) and 
150 megahertz in the 31 GHz band (31.075 GHz-31.225 GHz); and a second 
license consisting of 150 megahertz in the 31 GHz band (31.0-31.075 GHz 
and 31.225-31.399 GHz) will be auctioned concurrently. The Commission 
will not include the New York BTA at this time in the licensing process 
because of the outstanding issues connected with the CellularVision 
pioneer preference request.
    10. The Commission will use the competitive bidding procedures of 
part 1, subpart Q, for LMDS with modifications as indicated below.
1. Bid Increments and Tie Bids
    11. As it has done for previous auctions, the Commission will 
announce by Public Notice prior to the LMDS auction the general 
guidelines for bid increments. The Commission retains the discretion to 
set and, by announcement before or during the auction, vary the minimum 
bid increments for individual licenses or groups of licenses. Where a 
tie bid occurs, the Commission will determine the high bidder by the 
order in which the Commission received the bids. The Commission retains 
the discretion to vary both absolute and percentage bid increments for 
specific licenses.
2. Stopping Rules
    12. The Commission will use a simultaneous stopping rule for LMDS. 
The auction will close after one round passes in which no new valid 
bids, proactive activity rule waivers, or bid withdrawals are 
submitted. The Commission will retain the discretion, however, to keep 
the auction open even if no new valid bids, proactive waivers, or bid 
withdrawals are submitted. In the event that this discretion is 
exercised, 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. Since it 
also imposes an activity rule, the Commission believes that allowing 
simultaneous closing for all licenses will afford bidders flexibility 
to pursue back-up strategies without running the risk that bidders will 
hold back their bidding until the final rounds. In addition, the 
Commission retains the discretion to declare after forty rounds that 
the auction will end after some specified number of additional rounds. 
If this option is used, the Commission will only accept bids on 
licenses where the high bid has increased in at least one of the last 
three rounds.
3. Duration of Bidding Rounds
    13. Because in simultaneous multiple round auctions bidders may 
need a significant amount of time to evaluate back-up strategies and 
develop their bidding plans, the Commission reserves the discretion to 
vary the duration and frequency of bidding rounds. The Commission will 
announce any changes to the duration of and intervals between bidding 
either by Public Notice prior to the auction or by announcement during 
the auction.
4. Bid Withdrawals
    14. Because the Commission is awarding two licenses of different 
size (1,150 megahertz and 150 megahertz) per geographic area, the 
Commission finds it unnecessary to address the merits of comments 
predicated on the assumption that the Commission would award two LMDS 
licenses of equal size. The Commission will not make use of a bid 
withdrawal period within each round as in previous auctions, but will 
permit a high bidder to withdraw the high bid from a previous round 
subject to the bid withdrawal payments discussed below. If a high bid 
is withdrawn (and not bid upon in the same round), the license will be 
offered in the next round at the second highest bid price. The 
Commission may at its discretion adjust the offer price in subsequent 
rounds until a valid bid is received on the license. In addition, to 
prevent a bidder from strategically delaying the close of the auction, 
the Commission retains the discretion to limit the number of times that 
a bidder may re-bid on a license from which it has withdrawn a high 
bid.
5. Activity Rules
    15. For LMDS auctions, the Commission will use the Milgrom-Wilson 
activity rule with some variations. Milgrom and Wilson divide the 
auction into three stages. The Commission will set, by announcement 
before the auction, the minimum required activity levels for each stage 
of the auction. The Commission retains the discretion to set and, by 
announcement before or during the auction, vary the required minimum 
activity levels (and associated eligibility calculations) for each 
auction stage. Retaining this flexibility will improve its ability to

[[Page 23151]]

control the pace of the auction and help ensure that the auction is 
completed within a reasonable period of time.
    16. For the LMDS auctions, the Commission will use the following 
transition guidelines: The auction will begin in Stage One and will 
generally move from Stage One to Stage Two and from Stage Two to Stage 
Three when the auction activity level is below ten percent for three 
consecutive rounds. Under no circumstances can the auction revert to an 
earlier stage. However, the Commission retains the discretion to 
determine and announce during the course of an auction when, and 
whether, to move from one auction stage to the next, based on a variety 
of measures of bidder activity, including, but not limited to, the 
auction activity level as defined above, the percentage of licenses 
(measured in terms of bidding units) on which there are new bids, the 
number of new bids, and the percentage increase in revenue.
    17. To avoid the consequences of clerical errors and to compensate 
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 above-described 
activity rule. The Commission believes that some waiver procedure is 
needed because the Commission does not wish to reduce a bidder's 
eligibility due to an accidental act or circumstances not under the 
bidder's control.
    18. The Commission will provide bidders with five activity rule 
waivers that may be used in any round during the course of the auction. 
If a bidder's activity is below the required activity level, a waiver 
will be applied automatically. That is, for example, if a bidder fails 
to submit a bid in a round, and its activity from any standing high 
bids (that is, high bids at the end of the previous round) falls below 
its required activity level, a waiver will be automatically applied. A 
waiver will preserve current eligibility in the next round. An activity 
rule waiver applies to an entire round of bidding and not to a 
particular BTA service area.
    19. Bidders will be afforded an opportunity to override the 
automatic waiver mechanism when they place a bid if they intentionally 
wish to reduce their bidding eligibility and do not want to use a 
waiver to retain their eligibility at its current level. If a bidder 
overrides the automatic waiver mechanism, its eligibility will be 
permanently reduced, and it will not be permitted to regain its bidding 
eligibility from a previous round. An automatic waiver invoked in a 
round in which there are no new valid bids will not keep the auction 
open. Bidders will have the option of entering a proactive activity 
rule waiver during any round. If a bidder submits a proactive waiver in 
a round in which no other bidding activity occurs, the auction will 
remain open.
    20. The Commission retains the discretion to issue additional 
waivers during the course of an auction for circumstances beyond a 
bidder's control. The Commission also retains the flexibility to adjust 
by Public Notice prior to an auction the number of waivers permitted, 
or to institute a rule that allows one waiver during a specified number 
of bidding rounds or during specified stages of the auction.

C. Procedural and Payment Issues

    21. The Commission will generally follow the procedural and payment 
rules established in subpart Q of part 1 of the Commission's Rules. Any 
service-specific modifications based on the particular characteristics 
of LMDS will be set forth by Public Notice by the Wireless 
Telecommunications Bureau.
1. Upfront Payments
    22. The Commission recognizes that for purposes of LMDS the formula 
of $0.02 per MHz-pop can yield very high upfront payments given the 
amount of spectrum offered in each service area. The Commission 
believes that the concerns of commenters about potentially high 
payments may be alleviated by lowering the amount per MHz-pop used to 
calculate the payment. The Commission delegates authority to the Chief, 
Wireless Telecommunications Bureau, to determine an appropriate 
calculation for the upfront payment, which the Bureau will announce by 
Public Notice. In calculating the upfront payment, the Bureau should 
take into consideration the value of similar spectrum.
2. Down Payments, Long-Form Applications, and Payment in Full
    23. The Commission will require all winning bidders in LMDS 
auctions to supplement their upfront payments with a down payment 
sufficient to bring their total deposits up to 20 percent of their 
winning bid(s). Winning bidders, except for small businesses and 
businesses with annual gross revenues between $40 million and $75 
million, will be required to submit this payment by wire transfer to 
the Commission's lock-box bank within ten business days following 
release of a public notice announcing the close of bidding and high 
bidders. Winning bidders will also be required to file a long-form 
application within ten business days of the announcement of the high 
bidders. If, pursuant to section 309(d) of the Communications Act, the 
Commission dismisses or denies any and all petitions to deny filed 
against a long-form application, or if no petitions to deny are filed, 
the Commission will issue an announcement to this effect, and the 
winning bidder will then have ten business days to submit the balance 
of its winning bid, unless it qualifies for an installment payment 
plan.
3. Bid Withdrawal, Default, and Disqualification Payments
    24. For the LMDS auctions, the Commission adopts the bid 
withdrawal, default and disqualification rules contained in sections 
1.2104(g) and 1.2109 of the Commission's Rules. If a license is re-
offered by auction, the ``winning bid'' refers to the high bid in the 
auction in which the license is re-offered. If a license is re-offered 
in the same auction, the winning bid refers to the high bid amount, 
made subsequent to the withdrawal, in that auction. 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 that 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. The 
Commission recently addressed the issue of how its bid withdrawal 
provisions apply to bids that are mistakenly placed and withdrawn in a 
decision involving the 900 MHz Specialized Mobile Radio (``SMR'') and 
broadband personal communications services (``PCS'') C block auctions. 
See Atlanta Trunking Associates, Inc. and MAP Wireless L.L.C. Request 
To Waive Bid Withdrawal Payment Provisions, FCC 96-203, Order (released 
May 3, 1996) (summarized in 61 FR 25,807 (May 23, 1996)), recon. 
pending.
    25. If a bidder has withdrawn a bid or defaulted on one or more 
licenses but the amount of the withdrawal or default payment cannot yet 
be determined, the bidder will be required to make a deposit of up to 
20 percent of the amount bid on such licenses. When it becomes possible 
to calculate and assess the withdrawal or default payment, any excess 
deposit will be refunded. Upfront payments will be applied to such 
deposits and to bid withdrawal and default payments due before being 
applied toward the bidder's down

[[Page 23152]]

payment on licenses the bidder has won and seeks to acquire.
    26. In addition, if a 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 take any other 
action the Commission deems necessary, including institution of 
proceedings to revoke any existing licenses held by the applicant.

D. Regulatory Safeguards

1. Transfer Disclosure
    27. The Communications Act directs the Commission to ``require such 
transfer disclosures and anti-trafficking restrictions and payment 
schedules as may be necessary to prevent unjust enrichment as a result 
of the methods employed to issue licenses and permits.'' 47 U.S.C. 
Sec. (j)(4)(E). The Commission will adopt the transfer disclosure 
requirements contained in Section 1.2111(a) of the Commission's Rules, 
47 CFR Sec. 1.2111(a), for all LMDS licenses obtained through the 
competitive bidding process.
2. Anti-Collusion Rules
    28. The Commission will apply the anti-collusion rules set forth in 
Sections 1.2105 and 1.2107 of the Commission's Rules, 47 CFR 
Secs. 1.2105 & 1.2107, to LMDS auctions. In addition, where specific 
instances of collusion in the competitive bidding process are alleged 
in petitions to deny, the Commission may conduct an investigation or 
refer such complaints to the United States Department of Justice for 
investigation. Bidders who are found to have violated the antitrust 
laws or the Commission's rules in connection with participation in the 
auction process may be subject to forfeiture of their down payment or 
their full bid amount and revocation of their license(s), and they may 
be prohibited from participating in future auctions.

E. Treatment of Designated Entities

1. Overview
    29. The Commission is committed to meeting the objectives of 47 
U.S.C. Sec. 309(j) of promoting economic opportunity and competition, 
of avoiding excessive concentration of licenses, and of ensuring access 
to new and innovative technologies by disseminating licenses among a 
wide variety of applicants, including small businesses, rural telephone 
companies, and businesses owned by members of minority groups and 
women. In Adarand Constructors v. Pena, 115 S. Ct. 2097 (1995), the 
Supreme Court held that federal race-based measures are subject to 
strict scrutiny. Gender-based measures, on the other hand, are required 
to meet an intermediate standard of review. United States v. 
Commonwealth of Virginia, 116 S. Ct. 2264 (1996). Because commenters 
have submitted no evidence or data to support LMDS race- or gender-
based auction provisions, the Commission concludes that it does not 
have a sufficient record to support such special provisions at this 
time. The Commission therefore adopts installment payments and bidding 
credits for small businesses in LMDS auctions as detailed below. The 
Commission believes that these special provisions will provide small 
businesses with a meaningful opportunity to obtain LMDS licenses. 
Moreover, many minority- and women-owned entities are small businesses 
and will therefore qualify for these same special provisions.
2. Installment Payments, Upfront Payments, Down Payments, and Unjust 
Enrichment
    30. In order to promote the innovation that small businesses can 
bring to the development of LMDS, the Commission adopts installment 
payments for small businesses bidding for LMDS licenses. The Commission 
will define small businesses as entities that, together with affiliates 
and controlling principals, have average gross revenues not exceeding 
$40 million for the three preceding years. Because considerable capital 
will be needed to bring LMDS to the public, the Commission also makes 
provision for entities with gross revenues exceeding $40 million and 
will provide for installment payments for entities with $75 million or 
less in average gross revenues for the three preceding years. The 
Commission believes that the high cost of LMDS and the presence of very 
large companies in the markets for various LMDS services make this 
option fully consistent with Congress's intent in enacting 47 U.S.C. 
Sec. 309(j)(4)(A) to avoid a competitive bidding program that has the 
effect of favoring communications providers with established revenue 
streams over smaller entities.
    31. Under the rules adopted, installment payments will be available 
to applicants that, together with affiliates and controlling 
principals, have average gross revenues for the three preceding years 
of more than $40 million but not more than $75 million. Interest on 
their installment payments will be equal to the rate for U.S. Treasury 
obligations of maturity equal to the license term, fixed at the time of 
licensing, plus 2.5 percent. Payments of interest and principal shall 
be amortized over the ten years of the license term. Small businesses--
i.e., applicants that, together with affiliates and controlling 
principals, have average gross revenues for the three preceding years 
not exceeding $40 million--will be eligible for installment payments at 
an interest rate based on the rate for U.S. Treasury obligations of 
maturity equal to the license term, fixed at the time of licensing, 
plus 2.5 percent (the same rate as that imposed on entities with $40 
million to $75 million in average gross revenues). Payments for small 
businesses shall include interest only for the first two years and 
payments of interest and principal amortized over the remaining eight 
years of the license term. The rate of interest on the ten-year U.S. 
Treasury obligations will be determined by taking the coupon rate of 
interest on the ten-year U.S. Treasury notes most recently auctioned by 
the Treasury Department before licenses are conditionally granted.
    32. The Commission believes it is appropriate to also adopt the 
unjust enrichment provisions of its broadband PCS rules in order to 
prevent large companies from becoming the unintended beneficiaries of 
these installment payment plans. The Commission believes that these 
rules are preferable to its current general unjust enrichment rules set 
forth at 47 CFR Sec. 1.2111(c) because they provide greater specificity 
about funds due at the time of transfer or assignment and specifically 
address changes in ownership that would result in loss of eligibility 
for installment payments, which the general rules do not address. These 
rules specify that applicants seeking to assign or transfer control of 
a license to an entity not meeting the eligibility standards for 
installment payments must pay not only unpaid principal as a condition 
of Commission approval but also any unpaid interest accrued through the 
date of assignment or transfer.
    33. Additionally, these rules provide that if a licensee utilizing 
installment payment financing seeks to change its ownership structure 
in such a way that would result in a loss of eligibility for 
installment payments, it must pay the unpaid principal and accrued 
interest as a condition of Commission approval of the change. Finally, 
in recognition of the tiered installment payment plans offered to 
broadband PCS licensees, the rule provides that if a licensee seeks to 
make any change in ownership that would result in the licensee 
qualifying for a less favorable installment plan, it must seek 
Commission approval of such

[[Page 23153]]

a change and adjust its payment plan to reflect its new eligibility 
status. A licensee, under this rule, may not switch its payment plan to 
a more favorable plan.
    34. For purposes of determining small business status, or status as 
a business with average gross revenues of more than $40 million but not 
more than $75 million, the Commission will attribute the gross revenues 
of all controlling principals and affiliates of the small business 
applicant. The Commission chooses not to impose specific equity 
requirements on controlling principals. The Commission will still 
require, however, that in order for an applicant to qualify as a small 
business, qualifying small business principals must maintain control of 
the applicant. The term ``control'' includes both de facto and de jure 
control of the applicant. Typically, de jure control is evidenced by 
ownership of 50.1 percent of an entity's voting stock. De facto control 
is determined on a case-by-case basis. An entity must demonstrate at 
least the following indicia of control to establish that it retains de 
facto control of the applicant: (1) The entity constitutes or appoints 
more than 50 percent of the board of directors or partnership 
management committee; (2) the entity has authority to appoint, promote, 
demote and fire senior executives that control the day-to-day 
activities of the licensees; and (3) the entity plays an integral role 
in all major management decisions. The Commission cautions that while 
it is not imposing specific equity requirements on small business 
principals, the absence of significant equity could raise questions 
about whether the applicant qualifies as a bona fide small business.
    35. The Commission adopts a uniform upfront payment for all 
bidders. Its experience in previous auctions indicates that the 
Commission has underestimated the value of spectrum and that upfront 
payments have not created a barrier to small business participation in 
its auctions. The Commission believes that this action is consistent 
with its policy reason for requiring upfront payments--to deter 
insincere and speculative bidding and to ensure that bidders have the 
financial capacity to build out their systems.
    36. With regard to reduced down payments for small businesses, its 
experience in previous auctions leads the Commission to adopt a uniform 
20 percent down payment provision for all bidders. The Commission 
believes that this sizeable down payment will discourage insincere 
bidding and increase the likelihood that licenses are awarded to 
parties who are best able to serve the public. A 20 percent down 
payment should also provide a strong assurance against default and 
sufficient funds to cover default payments in the unlikely event of 
default. Small businesses and entities with average gross revenues for 
the preceding three years of between $40 million and $75 million will 
be required to supplement their upfront payments to bring their total 
payment to 10 percent of their winning bids within 10 business days of 
a public notice announcing the close of the auction. Prior to 
licensing, they will be required to pay an additional 10 percent. The 
government will then finance the remaining 80 percent of the purchase 
price.
3. Bidding Credits and Unjust Enrichment
    37. Based on the record before it, the Commission adopts a 25 
percent bidding credit for small businesses in LMDS auctions, and a 15 
percent bidding credit for entities with average gross revenues of more 
than $40 million but not exceeding $75 million. Commenters who 
advocated higher credits offered no data upon which to base such 
credits. The Commission declines to adopt a bidding credit for 
commercial entities that set aside part of their capacity for 
educational institutions at preferential rates. At this time, the 
Commission does not believe that it has an adequate record regarding 
the legal and policy implications of such bidding credits.
    38. The Commission believes it is appropriate to align its unjust 
enrichment rules for LMDS with its narrowband PCS and 900 MHz SMR 
unjust enrichment rules as they relate to bidding credits. These rules 
provide that, during the initial license term, licensees utilizing 
bidding credits and seeking to assign or transfer control of a license 
to an entity that does not meet the eligibility criteria for bidding 
credits will be required to reimburse the government for the total 
value of the benefit conferred by the government, that is, the amount 
of the bidding credit, plus interest at the rate imposed for 
installment financing at the time the license was awarded, before the 
transfer will be permitted.
    39. The rules which the Commission now adopts additionally provide 
that, if, within the original term, a licensee applies to assign or 
transfer control of a license to an entity that is eligible for a lower 
bidding credit, the difference between the bidding credit obtained by 
the assigning party and the bidding credit for which the acquiring 
party would qualify, plus interest at the rate imposed for installment 
financing at the time the license was awarded, must be paid to the 
United States Treasury as a condition of approval of the assignment or 
transfer. If a licensee that utilizes bidding credits seeks to make any 
change in ownership structure that would render the licensee ineligible 
for bidding credits, or eligible only for a lower bidding credit, the 
licensee must first seek Commission approval and reimburse the 
government for the amount of the bidding credit, or the difference 
between its original bidding credit and the bidding credit for which it 
is eligible after the ownership change, plus interest at the rate 
imposed for installment financing at the time the license was awarded. 
Additionally, if an investor subsequently purchases an interest in the 
business and, as a result, the gross revenues of the business exceed 
the applicable financial caps, this unjust enrichment provision will 
apply.
    40. The amount of this payment will be reduced over time as 
follows: (1) A transfer in the first two years of the license term will 
result in a forfeiture of 100 percent of the value of the bidding 
credit (or, in the case of small businesses transferring to businesses 
having average gross revenues between $40 million and $75 million, 100 
percent of the difference between the bidding credit received by the 
former and the bidding credit for which the latter is eligible); (2) in 
year three of the license term the payment will be 75 percent; (3) in 
year four the payment will be 50 percent; and (4) in year five the 
payment will be 25 percent, after which there will be no required 
payment. These assessments will have to be paid to the U.S. Treasury as 
a condition of approval of the assignment, transfer, or ownership 
change.
4. Rural Telephone Companies
    41. The Commission does not believe that special provisions are 
needed to ensure adequate participation by rural telephone companies in 
the provision of LMDS services for the same reasons stated in the Third 
Notice of Proposed Rulemaking (Third NPRM) (60 FR 43740, August 23, 
1995). Further, because the Commission is providing installment 
payments for entities with average annual gross revenues as high as $75 
million, the Commission believes that many rural telephone companies 
may qualify for installment payments. Also, the degree of flexibility 
the Commission will afford in the use of this spectrum, including 
provisions for partitioning or disaggregating spectrum, should assist 
in satisfying the spectrum needs of rural telephone companies at low 
cost. Therefore, the Commission

[[Page 23154]]

concludes that the interests of rural telephone companies are 
adequately addressed by its LMDS rules.

Final Regulatory Flexibility Analysis

    42. As required by the Regulatory Flexibility Act of 1980, Public 
Law 96-354, 94 Stat. 1164, as amended by the Contract with America 
Advancement Act of 1996, Public Law 104-121, 110 Stat. 847, 5 U.S.C. 
Sec. 601 et seq., the Commission has prepared a Final Regulatory 
Flexibility Analysis of the expected impact of the rule changes adopted 
in this proceeding on small entities. The Secretary shall send a copy 
of this Second Report and Order, Order on Reconsideration, and Fifth 
Notice of Proposed Rulemaking, including the Final Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the SBA, in 
accordance with paragraph 603(a) of the Regulatory Flexibility Act.

Final Regulatory Flexibility Analysis

Table of Contents

I. Need for and Objectives of Action
II. Summary of Issues Raised by Public Comments in Response to 
Initial Regulatory Flexibility Analysis
    A. IRFA Issues
    B. Other Service Issues
    C. Competitive Bidding Issues
III. Description and Estimate of Small Entities Subject to Rules
    A. Estimates of Potential Applicants of LMDS
    B. Estimates of LECs and Cable Companies Ineligible Under the 
Temporary, In-Region Eligibility Restriction
    1. Local Exchange Carriers
    2. Cable Services or Systems
    C. Estimates of Incumbent Services in 31 GHz Band
IV. Summary of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements
V. Significant Alternatives to Proposed Rules Which Minimize 
Significant Economic Impact on Small Entities and Accomplish Stated 
Objectives
    A. Alternatives To Minimize Impact of Redesignation of 31 GHz 
for LMDS
    B. Alternatives To Minimize Impact of LMDS Service Rules
    C. Alternatives To Minimize Impact of LMDS Auction Rules
VI. Report to Congress

    43. As required by the Regulatory Flexibility Act, 5 U.S.C. 
Sec. 603 (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated in the First Notice of Proposed Rulemaking (First NPRM) 
(58 FR 06400, January 28, 1993), the Third Notice of Proposed 
Rulemaking (Third NPRM) (60 FR 43740, August 23, 1995), and the Fourth 
Notice of Proposed Rulemaking (Fourth NPRM) (61 FR 39425, July 29, 
1996) in this proceeding. The Commission sought written public comments 
on the proposals in each of the Notices, including on the IRFA. The 
Commission's Final Regulatory Flexibility Analysis (FRFA) in this 
Second Report and Order (hereinafter in this Appendix referred to as 
the ``Order'') conforms to the RFA, as amended by the Contract with 
America Advancement Act of 1996 (CWAAA), Public Law No. 104-121, 110 
Stat. 847 (1996). (Title II of the Contract with America Act is ``The 
Small Business Regulatory Enforcement Fairness Act of 1996'' (SBREFA), 
codified at 5 U.S.C. Secs. 601 et seq.)

I. Need for and Objectives of Action

    44. We adopt licensing and service rules to establish a flexible 
regulatory framework for the implementation of Local Multipoint 
Distribution Service (LMDS), a new broadband wireless communications 
service. We designate spectrum in the 31.0-31.3 GHz (31 GHz) band for 
LMDS, in addition to the 28 GHz designated in the First Report and 
Order (61 FR 44177, August 28, 1996), to ensure adequate spectrum 
needed for the broad array of video programming and one-way or two-way 
telecommunications and data services that may be offered by LMDS 
providers and to promote competition with incumbent cable and local 
exchange telephone service (LEC) providers.
    45. We provide for licenses based on broad geographic areas known 
as BTAs and issued in two sizes for each area, 1,150 megahertz and 150 
megahertz. The larger size service areas may offer economies of scale, 
while the smaller service areas may encourage new entrants and 
technological experiments to meet local or special needs. We limit the 
eligibility of incumbent LECs and cable companies from being issued the 
larger license in their areas of operation for three years, in order to 
promote the development of LMDS and ensure a meaningful increase in 
competition in the local telephone and cable markets.
    46. The adoption of competitive bidding rules promotes the 
expedited delivery of this technology to the public and permits 
recovery for the public of a portion of the value of the public 
spectrum resource made available for commercial use. Additional 
objectives in adopting these rules are to assure that the spectrum is 
used efficiently, to provide entities of any size a meaningful 
opportunity to bid on this spectrum despite limited capital resources, 
and to avoid unjust enrichment through the methods used to award uses 
of this resource.
    47. We deny petitions for reconsideration of our dismissal in the 
First NPRM of applications for waiver which sought to allow petitioners 
to provide LMDS in the 28 GHz band under the existing point-to-point 
rules. We defer consideration of the comments filed in response to our 
tentative decision in the Third NPRM to grant CellularVision a Pioneer 
Preference, until the record is supplemented upon conclusion of a peer 
review process that we require in the Order.

II. Summary of Issues Raised by Public Comments in Response to Initial 
Regulatory Flexibility Analysis

A. IRFA Issues

    48. We received one comment in direct response to the IRFA in the 
Fourth NPRM based on our request for comment on our proposal to 
designate, on a primary protected basis, the 31.0-31.3 GHz (31 GHz) 
band to LMDS. SBA opposes our proposed designation because it contends 
that the Fourth NPRM fails to consider the impact on existing users of 
the spectrum, which it argues are largely small governmental entities 
and small businesses. SBA contends that, in Section IV of the IRFA, the 
description and estimate of the number of small entities to which the 
proposed rule will apply misconstrues and underestimates the small 
entities that are incumbent licensees. It asserts that rather than 25 
or 26 licensees, as we estimated, the comments of Sunnyvale indicate 
there are more than 40 incumbent local governments holding licenses. 
SBA contends that Sierra asserts there are as many as 100 incumbent 
licensees and there are over a dozen marketers or resellers of its 
equipment that are small businesses. We consider in the Order the 
comments of SBA and other commenters on the number of licensees in the 
31 GHz service, as discussed fully in paragraphs 44-51 of the Order, 
and later in this FRFA.
    49. SBA further argues that, in Section VI of the IRFA, we failed 
to consider significant alternatives to redesignating the entire 31 GHz 
band to LMDS that might minimize the impact on the incumbent licensees 
that are small entities. It argues that the only alternative to the 
proposed 31 GHz designation that we considered in the IRFA involved 
alternative spectrum bands for LMDS to use, rather than any 
alternatives for the incumbent licensees.
    50. We consider in the Order the comments of SBA and other 
commenters on numerous alternatives to accommodate existing licensees 
in the 31 GHz services, as discussed fully in paragraphs 69-103 of the 
Order, and later in this FRFA. The IRFA itself did not identify any 
alternatives to our

[[Page 23155]]

proposed designation of 31 GHz for LMDS in order to reduce the impact 
on incumbent licensees. However, the text of the Fourth NPRM, in 
paragraphs 100-104, specifically identified several alternative methods 
by which incumbent operations could be accommodated if LMDS were 
authorized on a primary protected basis in the 31 GHz band. We 
requested comments on those alternatives and any other options we 
should consider that would not impose undue economic burdens on the new 
LMDS operations. We modify our proposal and adopt a band-sharing plan 
that provides non-LTTS incumbent licensees with protection from LMDS on 
a portion of the 31 GHz band, while designating the entire band for 
LMDS.

B. Other Service Issues

    51. We also consider significant issues raised in comments to our 
proposals in the First NPRM, Third NPRM, and Fourth NPRM that may have 
a significant economic impact on a substantial number of small 
entities. In response to the Fourth NPRM, several comments were filed 
in response to our proposal to designate, on a primary protected basis, 
the 31 GHz band for LMDS and our request for comments on various 
alternatives for accommodating the incumbent 31 GHz licensees. Several 
comments were received from proponents of LMDS, including 
CellularVision, in favor of designating 31 GHz for LMDS, while several 
comments were received from proponents of the existing 31 GHz services 
that oppose changes to the services and their being relegated to 
secondary status to LMDS.
    52. We received several comments in response to the accommodation 
proposals. All of the comments opposing our proposal, including IMSA 
and ITE on behalf of their members, argue that permitting LMDS to 
operate in the entire 300 megahertz on a primary basis essentially 
would eliminate their operations and that co-existence under these 
circumstances would not be possible. Palm Springs argues that it would 
be forced to disband its 31 GHz traffic communication system, creating 
undue hardship. On the other hand, CellularVision and Endgate assert 
that, as LMDS licensees, they would offer leasing options to 
incumbents, if available. Several comments argue against our suggestion 
that current 31 GHz services could move to another frequency band where 
protection for such operations is provided under our rules, such as 23 
GHz. Sierra, as the primary manufacturer of the 31 GHz equipment, 
asserts that the cost of modifying equipment for other bands would be 
more than replacement costs and also would require the development of 
new equipment. Topeka argues that moving to the 21 GHz band would cause 
financial hardship that would require allocating funds through local 
tax dollars and it seeks to avoid the costs of converting or replacing 
equipment that may be required by a move.
    53. In response to our request for cooperation among the LMDS 
providers and existing licensees to explore methods for allowing the 
services to coexist, CellularVision and Sierra submit two different 
band-sharing plans. In CellularVision's plan for 25 megahertz at each 
end of band for incumbent services, Sierra argues that the equipment 
for 31 GHz would not function in the narrow bandwidth and important 
traffic signal services could not be provided. It argues that the 75 
megahertz at each end that it proposes in its plan would not require 
expensive modifications and would accommodate existing services. Sierra 
argues that its plan is supported by current 31 GHz licensees. SBA and 
USDOT, as Federal Government entities, support the Sierra plan and 
argue that incumbent services should be maintained to assist in meeting 
national goals of reducing traffic congestion and air pollution.
    54. The governmental entities, manufacturers, and organizations in 
support of incumbent services argue that we should accept new 
applications, modifications, and renewal applications in the band for 
traffic control systems. For example, Palm Springs asserts that it 
plans to build out its 31 GHz microwave system from the current 35 
signals to a total of 70 signals over the next three years. It requests 
that we maintain their ability to use the band for their systems. 
Topeka argues that, if we adopt our proposal, we at least grandfather 
existing licensees in the LMDS rules to permit renewals and 
modifications and to ensure their protection from LMDS interference.
    55. Of the remaining issues, some commenters oppose our proposal in 
the Fourth NPRM that both the 28 GHz band and the 31 GHz band be 
assigned as a single block in an LMDS license. For example, the Ad Hoc 
RTC and others request that the 31 GHz block be licensed as a separate 
unit in each LMDS service area. Emc \3\ argues that as little as 150 
megahertz of spectrum could be used to provide a viable service using 
digital technology. WCA argues for three licenses per geographic area, 
the smallest being 150 megahertz. These commenters argue that 
additional licenses of smaller bandwidth would provide for smaller 
operators, encourage the development of niche markets, and promote 
economical services similar to those in narrower bandwidth licenses, 
particularly in rural areas.
    56. Some commenters, including M3ITC, oppose our proposal in the 
Third NPRM to license LMDS on broad geographic areas based on the Rand 
McNally Commercial and Marketing Guide Basic Trading Areas (BTAs). They 
argue that use of the smaller designations of Metropolitan Statistical 
Areas (MSAs) and Rural Service Areas (RSAs) would provide more 
manageable territories within which to initiate service and be more 
affordable for entrepreneurs.
    57. CellularVision and other commenters support our proposal to 
permit the disaggregation of spectrum by LMDS licensees and to permit 
the geographic partitioning of any part of an LMDS license.
    58. Many comments support our request for comments in the Fourth 
NPRM on whether to temporarily restrict eligibility of incumbent LECs 
and cable companies that seek to obtain LMDS licenses in their 
geographic service areas. CVTT and SkyOptics argue that LECs and cable 
companies should be permanently ineligible in order to ensure that 
smaller companies enter the new market. Other comments, including 
WebCel, advocate restrictions limited to those areas in which LECs and 
cable companies currently operate. Other parties, including 
CellularVision, argue that we should impose restrictions on the largest 
LECs and cable companies or allow incumbents to hold only one LMDS 
license. Some parties oppose our proposal to define in-region incumbent 
LECs or cable companies based on a 20 percent population threshold and 
to define an attributable interest to be an ownership interest of 10 
percent. Some parties, including RioVision and other small entities, 
agree that the restrictions could end when competition is sufficient, 
either after a five-year period or under a test established by the 
Commission.
    59. Virtually all the comments support our proposal in the First 
NPRM to designate a new LMDS service from the existing point-to-point 
microwave common carrier service to a local multipoint distribution 
service that allows non-common carrier service as well as common 
carrier service. CellularVision, M3ITC, and other small entities seek a 
broad service definition that allows the LMDS provider to choose any 
common or non-common carrier service within the technical rules. 
CellularVision and other commenters oppose our proposal to

[[Page 23156]]

apply a presumption that a service is common carriage. They argue that 
the licensing framework should be sufficiently open and flexible to 
allow the business judgments of licensees to shape the nature of the 
services to be offered.
    60. Some comments, including M3ITC, oppose our proposal in the 
Third NPRM to impose construction requirements on licensees and require 
service to be available to a minimum of one-third of the population of 
their geographic areas within five years from the date of license 
grant, and to two-thirds of the population within ten years from the 
date of the grant of the license. M3ITC alternatively argues that a 
time limit such as eight years would be sufficient to claim a service 
area, after which unserved areas should be opened for licensing. 
ComTech, on the other hand, supports the requirements and requests that 
we impose a faster requirement for companies that acquire a license 
adjacent to their existing service area to ensure against anti-
competitive behavior.
    61. With respect to the technical rules proposed in the Third NPRM, 
CellularVision, Endgate, and other commenters oppose an alternative 
proposal to establish a power flux density (PFD) rather than require 
applicants to coordinate frequencies among themselves at their service 
area boundaries. They argue that LMDS development is in its infancy and 
it would be difficult to determine a PFD standard to be protective of 
all LMDS system designs. CellularVision opposes requiring LMDS 
operators to use active power control and interlock techniques in their 
systems, which it contends are unnecessary, expensive, and will 
complicate designs. Next, Endgate opposes our proposal to restrict the 
use of various signal polarizations and require orthogonally-polarized 
signals as unnecessary. Further, Endgate opposes our proposal to 
restrict the maximum equivalent isotropically radiated power (EIRP) at 
which LMDS systems operate in the 28 GHz band to a -52 dBW/Hz. It 
opposes any limit less than -18 dBW/Hz and contends that the proposed 
limit will not provide coverage to justify an LMDS systems 
economically. CellularVision offers a compromise maximum limit of -35 
dBW/Hz, which it argues is sufficient to meet the needs of LMDS 
subscribers and is conducive to frequency coordination. CellularVision 
and ComTech also argue that our proposal to adopt a frequency tolerance 
standard for subscriber transceiver equipment would be too costly.

C. Competitive Bidding Issues

    62. With respect to competitive bidding (para. 303 of the Order), 
most commenters supported the Commission's proposal to auction LMDS 
spectrum. M3ITC, however, disagreed and proposed the use of lotteries, 
expressing a concern that small businesses may lack the financial 
ability to participate in the auction, particularly in the major 
markets. It suggested the imposition of a royalty or other fee on 
lottery winners to generate revenue in lieu of auctions.
    63. The Commission's proposal to require participants in LMDS 
auctions to tender to the Commission a substantial upfront payment was 
generally supported (paras. 328-330 of the Order), but CellularVision 
and ComTech objected to establishing an upfront payment of $0.02 per 
MHz-pop for the largest combination of MHz-pops a bidder anticipates 
being active on in any single round of bidding, as this would yield an 
upfront payment of approximately $20 million for a BTA with one million 
pops and an upfront payment of approximately $5 billion for the whole 
Nation.
    64. The Commission proposed adoption of the transfer disclosure 
requirements contained in 47 CFR Sec. 1.2111(a) for all LMDS licenses 
obtained through the competitive bidding process. CellularVision agreed 
with the Commission's proposal not to limit transfers and assignments 
of LMDS licenses.
    65. The Commission sought comment on the best way to promote 
opportunities for businesses owned by minorities and women in light of 
the Supreme Court's decision in Adarand Constructors v. Pena, which 
held that federal race-based programs are subject to strict scrutiny. 
Commenters were also asked to document discrimination against such 
businesses. RioVision argued that the Commission should develop special 
provisions to provide designated entities with realistic opportunities 
to participate in the auction process, but RioVision and other 
commenters failed to supply evidence of discrimination against such 
businesses (paras. 344-346 of the Order).
    66. The Commission's proposal to establish a small business 
definition for LMDS and adopt installment payments for small businesses 
bidding for LMDS licenses met with general approval from commenters. 
However, CellularVision recommended that the Commission establish a 
higher limit on average annual gross revenues in its definition of 
small business, arguing that the proposed limit of $40 million in 
average annual gross revenues was too low to help small businesses. The 
Commission's request for comment on the related issue of reduced 
upfront payments for small businesses yielded comments from 
CellularVision and Emc\3\ in favor of reduced upfront payments for 
these entities (paras. 344-345 of the Order).
    67. The Commission's proposal to make the unjust enrichment 
provisions adopted in the Competitive Bidding Second Report and Order 
applicable to installment payments by small business applicants (paras. 
344-345 of the Order) received general support, although CellularVision 
argued against restrictions after the seventh year of the license term. 
ComTech urged the Commission to adopt transfer rules which would 
relieve the transferor of any regulatory or other burdens associated 
with the newly created license. The Commission's proposal to make 
available a bidding credit of 25 percent for small businesses and the 
corresponding imposition of a payment requirement on transfers of such 
licenses to entities that are not small businesses was supported by 
commenters M3ITC, Emc\3\, and CellularVision, the latter encouraging 
the Commission to consider other regulatory measures, including a small 
business bidding credit higher than 25 percent. (para. 355 of the 
Order).

III. Description and Estimate of Small Entities Subject to Rules

    68. The service regulations we adopt to implement LMDS would apply 
to all entities seeking an LMDS license, including small entities. In 
addition, the in-region, temporary eligibility restrictions we adopt 
would apply to qualifying LECs and cable companies. Finally, the rules 
we adopt to designate additional spectrum for LMDS in the 31.0-31.3 GHz 
band would apply to all entities providing incumbent services under 
existing rules for 31 GHz services. We consider these three groups of 
affected entities separately below.

A. Estimates of Potential Applicants of LMDS

    69. SBA has developed definitions applicable to radiotelephone 
companies and to pay television services. We are using these 
definitions that SBA has developed because these categories approximate 
most closely the services that may be provided by LMDS licensees. The 
definition of radiotelephone companies provides that a small entity is 
a radiotelephone company employing fewer than 1,500 persons. (13 CFR 
Sec. 121.201, Standard

[[Page 23157]]

Industrial Classification (SIC) 4812.) The definition of a pay 
television service is one which has annual receipts of $11 million or 
less. (SIC 4841)
    70. The size data provided by SBA do not enable us to make an 
accurate estimate of the number of telecommunications providers which 
are small entities because it combines all radiotelephone companies 
with 500 or more employees. We therefore use the 1992 Census of 
Transportation, Communications, and Utilities, conducted by the Bureau 
of the Census, which is the most recent information available. This 
document shows that only 12 radiotelephone firms out of a total of 
1,178 such firms which operated during 1992 had 1,000 or more 
employees. Likewise, the size data provided by SBA do not enable us to 
make a meaningful estimate of the number of cable and pay television 
providers which are small entities because it combines all such 
providers with revenues of $11 million or less. We therefore use the 
1992 Census of Transportation, Communications, and Utilities (Table 
2D), conducted by the Bureau of the Census, which is the most recent 
information available. This document shows that only 36 of 1,788 firms 
providing cable and pay television service have a revenue of greater 
than $10 million. Therefore, the majority of LMDS entities to provide 
video distribution and telecommunications services may be small 
businesses under SBA's definition.
    71. The Commission has not developed a definition of small entities 
applicable to LMDS licensees, which is a new service being licensed in 
the Order. The RFA amendments were not in effect until shortly before 
the Fourth NPRM was released, and no data has been received 
establishing the number of small businesses associated with LMDS. 
However, in the Third NPRM we proposed to auction the spectrum for 
assignment and requested information regarding the potential number of 
small businesses interested in obtaining LMDS spectrum, in order to 
determine their eligibility for special provisions such as bidding 
credits and installment payments to facilitate participation of small 
entities in the auction process. In the Order we adopt criteria for 
defining small businesses for purposes of determining such eligibility. 
We will use this definition for estimating the potential number of 
entities applying for auctionable spectrum that are small businesses.
    72. As discussed in Section II.D.2.e. of the Order, we adopt 
criteria for defining small businesses and other eligible entities for 
purposes of defining eligibility for bidding credits and installment 
payments. We define a small business as an entity that, together with 
affiliates and controlling principals, has average gross revenues not 
exceeding $40 million for the three preceding years (paras. 345 and 348 
of the Order). Additionally, bidding credits and installment payments 
are available to applicants that, together with affiliates and 
controlling principals, have average gross revenues for the three 
preceding years of more than $40 million but not more than $75 million 
(paras. 349 and 358 of the Order).
    73. SBREFA was not in effect until the record in the Third NPRM 
closed, and we did not seek comment on the potential number of 
prospective applicants for LMDS that might qualify as small businesses. 
Therefore, we are unable to predict accurately the number of applicants 
for LMDS that would fit the definition of a small business for 
competitive bidding purposes. However, using the definition of small 
business we adopted for auction eligibility, we can estimate the number 
of applicants that are small businesses by examining the number of 
applicants in similar services that qualified as small businesses. For 
example, MDS authorizes non-common carrier services similar to what may 
be developed through LMDS. The MDS rules provide a similar definition 
of a small business as an entity that, together with its affiliates, 
has annual gross revenues for the three preceding years not in excess 
of $40 million. A total of 154 applications were received in the MDS 
auction, of which 141, or 92 percent, qualified as small businesses.
    74. We plan to issue 2 licenses for each of the 492 BTAs, excluding 
New York, that are the geographic basis for licensing LMDS. Thus, 984 
licenses will be made available for authorization in the LMDS auction. 
Inasmuch as 92 percent of the applications were received in the MDS 
auction were from entities qualifying as small businesses, we 
anticipate receiving at least the same from LMDS applicants interested 
in providing non-common carrier services.
    75. There is only one company, CellularVision, that is currently 
providing LMDS video services. Although the Commission does not collect 
data on annual receipts, we assume that CellularVision is a small 
business under both the SBA definition and our proposed auction rules.

B. Estimates of LECs and Cable Companies Ineligible Under the 
Temporary, In-Region Eligibility Restriction

1. Local Exchange Carriers
    76. Neither the Commission nor the SBA has developed a definition 
for small providers of local exchange services (LECs). The closest 
applicable definition under the SBA rules is for telephone 
communications companies other than radiotelephone (wireless) 
companies. (13 CFR Sec. 121.201, SIC 4813) The most reliable source of 
information regarding the number of LECs nationwide of which we are 
aware appears to be the data that we collect annually in connection 
with the TRS Worksheet. According to our most recent data, 1,347 
companies reported that they were engaged in the provision of local 
exchange services. Although it seems certain that some of these 
carriers are not independently owned and operated, or have more than 
1,500 employees, we are unable at this time to estimate with greater 
precision the number of LECs that would qualify as small business 
concerns under SBA's definition. Consequently, we estimate that there 
are fewer than 1,347 small incumbent LECs.
    77. Because the small incumbent LECs subject to these rules are 
either dominant in their field of operations or are not independently 
owned and operated, consistent with our prior practice, they are 
excluded from the definition of ``small entity'' and ``small business 
concerns.'' Accordingly, our use of the terms ``small entities'' and 
``small businesses'' does not encompass small incumbent LECs. Out of an 
abundance of caution, however, for regulatory flexibility analysis 
purposes, we will consider small incumbent LECs within this analysis 
and use the term ``small incumbent LECs'' to refer to any incumbent 
LECs that arguably might be defined by SBA as ``small business 
concerns.''
2. Cable Services or Systems
    78. The SBA has developed a definition of small entities for cable 
and other pay television services, which includes all such companies 
generating $11 million or less in revenue annually. (13 CFR 
Sec. 121.201, SIC 4841) This definition includes cable systems 
operators, closed circuit television services, direct broadcast 
satellite services, multipoint distribution systems, satellite master 
antenna systems and subscription television services. According to the 
Census Bureau, there were 1,788 total cable and

[[Page 23158]]

other pay television services and 1,423 have $11 million or less in 
revenue.
    79. The Commission has developed its own definition of a small 
cable system operator for the purposes of rate regulation. Under the 
Commission's Rules, a ``small cable company,'' is one serving fewer 
than 400,000 subscribers nationwide. (47 CFR Sec. 76.901(e)) Based on 
our most recent information, we estimate that there were 1,439 cable 
operators that qualified as small cable system operators at the end of 
1995. Since then, some of those companies may have grown to serve over 
400,000 subscribers, and others may have been involved in transactions 
that caused them to be combined with other cable operators. 
Consequently, we estimate that there are fewer than 1,439 small entity 
cable system operators.
    80. The Communications Act also contains a definition of a small 
cable system operator, which is ``a cable operator that, directly or 
through an affiliate, serves in the aggregate fewer than 1 percent of 
all subscribers in the United States and is not affiliated with any 
entity or entities whose gross annual revenues in the aggregate exceed 
$250,000,000.'' The Commission has determined that there are 61,700,000 
subscribers in the United States. Therefore, we found that an operator 
serving fewer than 617,000 subscribers shall be deemed a small 
operator, if its annual revenues, when combined with the total annual 
revenues of all of its affiliates, do not exceed $250 million in the 
aggregate. Based on available data, we find that the number of cable 
operators serving 617,000 subscribers or less totals 1,450. We do not 
request nor do we collect information concerning whether cable system 
operators are affiliated with entities whose gross annual revenues 
exceed $250,000,000, and thus are unable at this time to estimate with 
greater precision the number of cable system operators that would 
qualify as small cable operators under the definition in the 
Communications Act.
    81. We find that the definition of small entities developed by SBA 
includes categories of services that are not included in LMDS, such as 
satellite master antenna systems. Thus, the estimated figure that 1,423 
cable systems are small businesses that would be affected by our rule 
would be an overstatement. There is no other definition for us to use, 
since none has been developed for cable systems limited to LMDS-type 
services. Moreover, there is no harm in relying on the SBA number, 
which overestimates rather than underestimates potential cable systems 
that might be affected.

C. Estimates of Incumbent Services in 31 GHz Band

    82. We proposed in the Fourth NPRM to designate the 31 GHz band for 
LMDS, on a primary protected basis, and requested comment on how to 
accommodate incumbent licensees, which are not protected from harmful 
interference under their licenses. In the IRFA, we estimated the number 
of small entities to which the proposed rule would apply based on the 
number of incumbent licensees in the 31 GHz band that are governmental 
entities. We stated there are 27 incumbent licensees and that a total 
of 25 or 26 are small entities. Our adjustment was based on the 
requirement that we estimate the number of governmental entities with 
populations of less than 50,000 that would be affected by our new 
rules. (See 5 U.S.C. Sec. 601(5).) We then applied the Census Bureau 
ratio that 96 percent of all counties, cities, and towns in the Nation 
have populations of fewer than 50,000. We requested comment in the IRFA 
on the number of small entities significantly impacted by our proposed 
designation of 31 GHz for LMDS.
    83. We address SBA's comments in paras. 44-46 of the Order, where 
we agree that we did not reflect the correct number of total licensees 
in the 31 GHz band. We consider the lists of licensees and users 
submitted by Sunnyvale and Sierra, which we find include duplicates and 
several users that are not licensed. Based on a review of our database, 
we found there are a total of 86 licensees for 31 GHz services under 
the current rules. We found that licensees fall into three categories 
of services, as follows: (1) Governmental entities using the band 
primarily for traffic control systems; (2) cellular and other 
communications companies providing LTTS; and (3) private business 
users.
    84. Of the total licensees, 59 licensees are LTTS licensees, 8 are 
private business users, and 19 are governmental entities. Of the 19 
governmental entities, 14 are municipalities and the remainder are 
counties or states. The cities appear small in size, except for the 
Cities of Charlotte, San Diego, and Topeka. Thus, the correct number of 
small governmental entities that are licensees in the 31 GHz services 
should be 11 or less, rather than the 26 or 27 we stated in the IRFA. 
As for the entire number of licensees that qualify as small entities, 
we cannot determine from the remaining 59 LTTS licensees or 8 private 
business licensees which are small. Many of the LTTS licensees are not 
small, such as MCI or Bell Atlantic New Jersey, Inc. Nevertheless, to 
ensure that no small interests are overlooked, we will assume that most 
of these are small licensees and, together with the 11 small 
governmental entities, will consider at least 50 of all 86 licensees to 
be small entities.

IV. Summary of Projected Reporting, Recordkeeping, and Other Compliance 
Requirements

    85. The Order adopts a number of rules that will entail reporting, 
recordkeeping, and third party consultation. We find that these 
requirements are the minimum needed to ensure the integrity and 
efficiency of LMDS licensing and serve the public interest, as 
reflected in this record.
    86. In designating the 31 GHz band for LMDS, we adopt in the Order 
a band-sharing plan that designates the two outer 75 megahertz segments 
for non-LTTS incumbent licensees to be protected from harmful 
interference from LMDS. We adopt technical rules that require LMDS 
licensees to coordinate frequencies with incumbent licensees. We adopt 
a procedure to allow non-LTTS incumbent licensees in the middle 150 
megahertz segment that is not protected to relocate to the outer 
segments within 15 days after the effective date of the Order and to 
file an application to modify their licenses to reflect the new 
frequencies (paras. 91-92 of the Order). Relocation and protection are 
accorded to all incumbents except LTTS, which are temporary services 
that operate on a secondary basis and in any band, so that the 
protections would not benefit them. Many of the non-LTTS incumbent 
licensees are small entities. We find that the relocation and 
coordination process we have established does not impose undue cost 
burdens and we believe it is administratively manageable. Moreover, we 
have found that while relocation of such incumbents to adjacent bands 
will involve some costs for adjusting equipment, we do not expect at 
this time that such costs will impose an undue burden on small 
incumbents.
    87. We limit the eligibility of incumbent LECs and cable companies 
to hold the larger license of 1,150 megahertz in each BTA for LMDS. 
They are barred (for a period of three years from the effective date of 
LMDS rules) from holding an attributable interest is such a license in 
the service area in which they operate. We adopt rules similar to the 
CMRS spectrum cap that defines in-region if 10 percent or more of the 
population of the BTA is within the applicant's service area. We adopt 
attribution rules that apply when an ownership interest is at least 20 
percent. However, we permit incumbent LECs

[[Page 23159]]

and cable companies to participate fully in the auction of any in-
region license, so long as they come into compliance after conclusion 
of the auction. We require such LMDS licensees to divest overlapping 
ownership interests by selling their existing system or by partitioning 
within 90 days after the grant of their license. We find that these 
requirements should not affect many small entities, which are not 
likely to be incumbents LECs or cable companies. These requirements may 
also create opportunities for small businesses who wish to bid for LMDS 
licenses and compete in the LMDS market.
    88. We adopt a number of service rules to initiate LMDS under 
procedures for licensing and filing applications, conducting 
operations, and establishing technical parameters. Applicants are 
required to submit a completed FCC Form 175. Auction winners are 
required to file a completed FCC Form 600. All applications are 
submitted for 30-day public notice and applicants are required to keep 
FCC Form 600 up-to-date concerning all of the foreign ownership 
information requested on the form. Licensees may change status between 
common carriage and non-common carriage or add an additional status to 
conduct both operations upon notification to the Commission that does 
not require prior approval. However, common carriers discontinuing or 
reducing operations must adhere to statutory notification requirements 
imposed in Part 63 of the Commission's Rules.
    89. We adopt limited technical regulations. We impose a 
coordination process on each LMDS licensee prior to initiating service 
in the 27.5-28.35 GHz band in which each adjacent LMDS licensee and 
each potentially-affected, adjacent-channel FSS licensee must provide 
values for the appropriate operational parameters. Coordinating parties 
must supply information related to their channelization and frequency 
plan, receiver parameters, and system geometry. Coordination between 
adjacent LMDS systems need only encompass hubs located within 20 
kilometers of BTA boundaries. We would resolve any conflicts between 
licensees. LMDS licensees in the two outer segments of the 31 GHz band 
also must coordinate with non-LTTS incumbent licensees to protect those 
licensees from harmful interference. In some cases, the services of 
persons with technical or engineering expertise may be required to 
assist with the coordination information.
    90. We are directed by Section 309(j)(4)(E) of the Communications 
Act to ``require such transfer disclosures and anti-trafficking 
restrictions and payment schedules as may be necessary to prevent 
unjust enrichment as a result of the methods employed to issue licenses 
and permits.'' The Commission adopted safeguards designed to ensure 
that the requirements of this section are satisfied, including a 
transfer disclosure requirements for licenses obtained through the 
competitive bidding process for LMDS. An applicant seeking approval for 
a transfer of control or assignment of a license within three years of 
receiving a new license through competitive bidding procedures must, 
together with its application for transfer of control or assignment, 
file with the Commission a statement indicating that its license was 
obtained through competitive bidding. Such applicant must also file 
with the Commission the associated contracts for sale, option 
agreements, management agreements, or other documents disclosing the 
total consideration that the applicant would receive in return for the 
transfer or assignment of its license.
    91. With respect to small businesses, we have adopted unjust 
enrichment provisions to deter speculation and participation in the 
licensing process by those who do not intend to offer service to the 
public, or who intend to use the competitive bidding process to obtain 
a license at a lower cost than they would otherwise have to pay and to 
later sell it at a profit, and to ensure that large businesses do not 
become the unintended beneficiaries of measures meant to help small 
firms. Small business licensees seeking to transfer their licenses to 
entities which do not qualify as small businesses, or entities with 
more than $40 million but not more than $75 million in average gross 
revenues for the three preceding years that seek to transfer their 
licenses to larger entities, as a condition of approval of the 
transfer, must remit to the government a payment equal to a portion of 
the total value of the benefit conferred by the government.

V. Significant Alternatives to Proposed Rules Which Minimize 
Significant Economic Impact on Small Entities and Accomplish Stated 
Objectives

    92. We modify a number of our proposals in the Third NPRM and 
Fourth NPRM to minimize any significant economic impact on small 
entities consistent with the objectives of the Order based on the 
comments we have received in this proceeding.

A. Alternatives To Minimize Impact of Redesignation of 31 GHz for LMDS

    93. Specifically, we decided that LMDS needed the additional 300 
megahertz of spectrum at 31 GHz in order to obtain the 1 gigahertz of 
unencumbered spectrum for broadband services and sufficient spectrum to 
experiment with services and technology that competes with telephone 
and cable operators. We deny requests from CellularVision and other 
commenters to consider an alternative allocation to spectrum below 27.5 
GHz or the request from ICE-G to consider allocation to the 40 GHz 
band. We considered these matters in the First Report and Order and 
their availability has not changed since then.
    94. Among the alternatives, we decide that co-existence of 
incumbent 31 GHz licensees with LMDS would not be possible because 
incumbents would be reduced to a secondary status if LMDS were accorded 
primary protected status and the interference from LMDS would render 
such services useless. We agree with CellularVision that incumbents 
could lease or otherwise arrange to continue to use redesignated 
spectrum, but find that incumbents cannot rely on these arrangements as 
a reasonable alternative to minimize the impact. We also decide that 
movement to another band such as 23 GHz that provides protection for 
incumbent services is not feasible because of the major costs to 
incumbents to modify or replace equipment.
    95. We decide that the plans submitted by CellularVision and Sierra 
to share the 31 GHz band establish a framework for us to reach a 
compromise based on the needs of both LMDS and 31 GHz proponents and 
adopt an outcome that is more equitable and balanced. We decide to 
segment the 300 megahertz for establishing protections based on the 
enumerations used by Sierra. Under this plan, the middle 150 megahertz 
is designated for LMDS on a primary protected basis and incumbent 
licensees are not granted protection from harmful interference. At each 
end of the band, a segment of 75 megahertz each is designated for 
protection of non-LTTS incumbent licensees from LMDS to enable them to 
continue existing operations. We decide that the plan of CellularVision 
to increase the middle segment to 250 megahertz on a primary protected 
basis and leave incumbents protected in only 25 megahertz at each end 
would not accommodate traffic signal technology at intersections and 
would be too costly. We decide that LMDS requires no more than 150 
megahertz of unencumbered spectrum in the middle.
    96. We do not adopt Sierra's limitations on LMDS use or access of 
the entire 31 GHz band. We agree with CellularVision and other comments 
that

[[Page 23160]]

the benefits to according LMDS access to the entire band and to 
allowing the full array of LMDS services can be achieved while 
according the protections that non-LTTS incumbent licensees need to 
continue their operations. Thus, we accord LMDS a protected status 
throughout the band, but require LMDS in return to protect non-LTTS 
existing services in the outer segments. We do not agree with 
CellularVision that incumbents should be excluded altogether from the 
middle segment, inasmuch as LMDS has primary status there and is 
protected from harmful interference there.
    97. To accommodate incumbents, we permit them to relocate to the 
outer segments and adopt a procedure that requires them to file an 
application to modify their licenses within 15 days after the rules 
adopted in the Order take effect, if they choose to relocate. Under our 
current rules, any 31 GHz licensee filing a modification application in 
accordance with the Order will be able to implement license changes any 
time during the 18-month period after the Commission grants the 
modification. Moreover, because the incumbents are not authorized to 
provide service on a common carriage basis, their modification 
applications are not subject to the public notice and petition to deny 
requirements of section 101.37 of the Commission's Rules. Thus, 
applications for modification of an incumbent's license under the 
relocation procedure would be expedited.
    98. We find that relocation within the band gives existing 31 GHz 
licensees a reasonable opportunity to continue their operations with a 
minimum of expense and disruption. We decide not to include LTTS 
licensees for protection in the outer segments nor permit them to 
relocate, but to leave their status unchanged because of the nature of 
their services. These decisions are discussed more fully at paras. 85-
93 of the Order.
    99. We decide to limit the band-sharing plan to achieve protections 
for existing 31 GHz non-LTTS licensees in order to minimize the impact 
of our objective of implementing LMDS in 31 GHz on existing traffic 
control systems provided by small municipalities and other governmental 
entities. Commenters, including Palm Springs, demonstrate that public 
funds have been expended that would be wasted if incumbents were not 
protected and that these systems help control traffic and air pollution 
in furtherance of Federal goals. However, we decide not to allow future 
licensing under the existing rules and to limit incumbent licensees to 
their existing operations. We carefully consider the advantages and 
disadvantages of future growth under such rules, and conclude that it 
would be inconsistent with our objective to permit the licensing of 
LMDS on 31 GHz in order to meet the consumer demand for those 
telecommunications and video services it will provide.
    100. We decide to permit incumbent licensees to renew and to modify 
their licenses to the extent they are not expanding service. As a 
result, the plans of Palm Springs and other licensees to expand 
existing operations under current rules cannot be achieved. The impact 
on small entities would not be extensive, inasmuch as we have shown 
that all incumbents are few in number and engaged in short-range 
services, as compared with the potential harm to LMDS development if 
the entire 31 GHz spectrum were not available and was encumbered by 
changing, incompatible, localized services.
    101. Because we do not permit the licensing of new 31 GHz services, 
we find the dismissal of all pending applications to be consistent with 
our objectives. As we noted in para. 100 of the Order, we have 
concluded that it is in the public interest to dismiss the pending 
applications. Moreover, a review of our database indicates that all 
pending applications were filed after the release date of the Fourth 
NPRM and by new applicants not currently licensed. Thus, these 
applicants were on notice that we were considering a change in our 
rules for the 31 GHz band. To the extent any of these applicants are 
small entities, the impact would not be considerable because they have 
not invested fully in such new systems and alternative spectrum or 
options to gain access to 31 GHz is available, such as leasing from 
LMDS licensees.

B. Alternatives To Minimize Impact of LMDS Service Rules

    102. To accommodate concerns expressed by Ad Hoc RTG and others 
about our proposal to license LMDS as a single block of the 28 GHz and 
31 GHz spectrum, we decided to auction two licensees of different sizes 
for each BTA. We considered the band-segmentation plan we adopted for 
protecting non-LTTS incumbent licensees in 31 GHz and the comments of 
LMDS proponents that 150 megahertz is viable for certain LMDS services. 
We decide to issue one license for 1,150 megahertz, consisting of 1,000 
megahertz located in the 28 GHz band and 150 megahertz in the middle of 
the 300 megahertz located in the 31 GHz band. We also will issue a 
smaller license for 150 megahertz consisting of the two 75 megahertz 
segments located at each end of the 300 megahertz block in 31 GHz. The 
small license can be acquired by LMDS to achieve the objectives of the 
broadest spectrum for its experimentation, or may be used by incumbent 
licensees to accommodate their needs to continue using the 31 GHz band 
on a protected basis or by small entities such as rural interests to 
develop niche markets or provide more economical narrower bandwidth 
services. We have decided to establish a 1,150 megahertz license 
because we believe that a large block of unencumbered spectrum will 
provide LMDS providers with an opportunity to compete with broadband 
services and develop two-way services.
    103. We decide that our proposal to license LMDS based on BTA 
geographic service areas is the most logical area for LMDS. We decline 
to use the smaller MSAs and RSAs requested by M3ITC and other 
commenters because their areas are smaller than existing video 
programming and telephony service areas and their use might result in 
unnecessary fragmentation of natural markets. BTAs ensure that the wide 
array of LMDS services can be provided, afford greater economies of 
scale, and vary in size to afford building blocks for establishing an 
LMDS system. We do not restrict the number of BTAs a licensee may 
acquire at auction, but also point out that the varying sizes provide 
more opportunities for smaller businesses to enter the market.
    104. We decide that our proposal for disaggregating spectrum and 
allowing the geographic partitioning of an LMDS licensed area would 
benefit small business and allow some areas, such as rural areas, to be 
served more readily (para. 145 of the Order).
    105. We agree with WebCel and other small entities to adopt our 
proposal to restrict eligibility of incumbent LECs and cable companies 
and decide that they may not acquire the larger LMDS license of 1,150 
megahertz in their geographic service areas for three years. We find 
that such firms would not need the small license for unencumbered 
service and thus would not have the incentive to hobble competition. We 
do not adopt the request of SkyOptics and CVTT for permanent 
ineligibility to protect smaller entities, because they can bid for the 
smaller license and the 3-year period may be sufficient to allow new 
entrants to become established. We do not agree with commenters from 
the rural telephone community that argue against any restrictions on 
LEC ownership of LMDS licenses. We find our restrictions should not 
hinder LMDS in rural areas, because they do not have the overlap that 
triggers our restriction and they can acquire

[[Page 23161]]

spectrum from an LMDS licensee through contract or partitioning and 
disaggregation. We modify our proposal to define in-region incumbent 
LECs or cable companies to reflect the same provisions in the CMRS 
spectrum cap. This ensures consistency in our rules for wireless 
services for ease of compliance and efficiency.
    106. In adopting application procedures for LMDS, we agree with 
CellularVision and other small entities to adopt a broad service 
definition that allows the LMDS provider to provide any fixed microwave 
service, whether common or non-common carrier. We expand our proposal 
to allow an applicant or licensee to apply for both common and non-
common authorization in the same license, depending on the services it 
seeks to provide. We clarify the effect of the Telecommunications Act 
of 1996 on the nature of the video programming and telecommunications 
services that we originally identified as potential services in LMDS to 
assist applicants and licensees in determining the regulatory status to 
govern their operations. We agree with commenters to not apply the 
presumption we proposed to treat LMDS as common carriage.
    107. By authorizing both common and non-common carrier service in a 
single license, we eliminate the burden in our proposed procedures that 
would require a licensee to submit an application whenever it sought to 
change its services between common and non-common carrier services. We 
decide this achieves economies in the licensing process, ensures the 
flexibility licensees need to provide the full array of LMDS offerings, 
and promotes the development of the services that may compete with 
existing telecommunications and video programming services. To ensure 
that applicants or licensees are in compliance with the statutory 
requirements imposed on common carriers and reflected in the Part 101 
rules that govern LMDS, we decide to subject all LMDS applications to 
the 30-day public notice provisions and require all applicants to 
submit information in response to all the alien ownership eligibility 
restrictions. Consequently, we can rely on a simplified procedure for 
licensees to notify us of any change in their regulatory status, either 
by changing or adding common carrier or non-common carrier status, 
through notification by application after the change is implemented, 
unless the change results in the impairment of a common carrier service 
that requires prior approval under the discontinuance rules. These 
procedures are adopted to ensure implementation of LMDS under a 
simplified format.
    108. For the technical rules, we agree with commenters to use the 
prior frequency coordination procedures rather than a service area 
boundary PFD limit, which could stifle technology and inhibit 
flexibility in system design. We decide to adopt uniform polarization 
to achieve greater system efficiency. We disagree with CellularVision 
and ComTech that adopting a frequency stability standard would be 
costly, but find that it aids in coordinating usage to assist the rapid 
development of service.

C. Alternatives To Minimize Impact of LMDS Auction Rules

    109. We decline to adopt the use of lotteries in lieu of auctions. 
We conclude that auctioning LMDS licenses would further the 
Communications Act's objectives: first, by speeding the development and 
deployment of this new technology, products and services to the public 
with minimal administrative or judicial delay, and encouraging 
efficient use of the spectrum; second, by fostering economic 
opportunity and the distribution of licenses among a wide variety of 
applicants, including small businesses; and, third, by enabling the 
public to recover a portion of the value of the public spectrum. 
Concerns regarding small businesses having the financial ability to 
participate in LMDS auctions are addressed by the special provisions 
adopted for small businesses. We also decline to adopt Public 
Television's suggestion of a set-aside of spectrum for educational 
purposes.
    110. We adopt a uniform upfront payment for all applicants for LMDS 
auctions, and decide not to adopt a reduced down payment for small 
businesses, because we believe that this action is consistent with our 
reason for requiring upfront payments, i.e., to deter insincere and 
speculative bidding and to ensure that bidders have the financial 
capacity to build out their system. We delegate authority to the 
Wireless Telecommunications Bureau to determine an appropriate 
calculation for the upfront payment, which the Bureau will announce by 
Public Notice. The Bureau will take into consideration CellularVision's 
and ComTech's objection to the proposed formula of $0.02 per MHz-pop 
for the largest combination of MHz-pops a bidder anticipates being 
active on in any single round of bidding.
    111. Because we believe the record with regard to past 
discrimination, continuing discrimination, and other significant 
barriers experienced by minorities and women is insufficient to support 
race- and gender-based competitive bidding provisions under the 
standards of judicial review applicable to such provisions, we do not 
adopt such provisions. Instead, we adopt race- and gender-neutral 
provisions such as installment payments and bidding credits for small 
businesses in order to provide small businesses with an opportunity to 
obtain LMDS licenses. Many minority-and women-owned entities are small 
businesses and will therefore qualify for these same special 
provisions.
    112. CellularVision recommended a definition of small business with 
a ceiling of $100 million in annual gross revenues. We choose, for the 
purposes of LMDS auctions, to define a small business as an entity 
that, together with affiliates and controlling principals, has average 
gross revenues not exceeding $40 million for the three preceding years. 
To address CellularVision's concerns, we also adopt bidding credits and 
installment payments for LMDS applicants that, together with affiliates 
and controlling principals, have average gross revenues for the three 
preceding years of more than $40 million but not more than $75 million, 
as elaborated in paras. 346-348 of the Order.
    113. Emc<SUP>3</SUP> and CellularVision proposed a small business 
bidding credit of 25 percent or more. The rules adopted in the Order 
provide a 25 percent bidding credit for small business applicants in 
the LMDS auctions, and a 15 percent bidding credit for entities with 
average gross revenues of more than $40 million but not exceeding $75 
million. Commenters who advocated higher credits offered no data upon 
which to base such credits. We also decline to offer a bidding credit 
to commercial entities that set aside part of their capacity for 
educational institutions at preferential rates. We do not believe that 
we have an adequate record regarding the legal and policy implications 
of such credits.

VI. Report to Congress

    114. We will submit a copy of this Final Regulatory Flexibility 
Analysis, along with the Order, in a report to Congress pursuant to 5 
U.S.C. Sec. 801(a)(1)(A). A copy of this FRFA will also be published in 
the Federal Register.

Ordering Clauses

    115. It is ordered that the actions of the Commission herein are 
taken pursuant to sections 4(i), 257, 303(r), and 309(j) of the 
Communications Act of 1934, 47 U.S.C. Secs. 154(i), 257, 303(r), 
309(j).

[[Page 23162]]

    116. It is further ordered that the Commission's Rules are amended 
as set forth in Appendix A, effective June 30, 1997.
    117. It is further ordered that the Petitions for Reconsideration 
of the Memorandum Opinion and Order in Application of Hye Crest 
Management, Inc., for License Authorization in the Point-to-Point 
Microwave Radio Service in 27.5-29.5 GHz Band and Request for Waiver of 
the Rules, File No. 10380-CF-P-88, filed by the University of Texas-Pan 
American, RioVision of Texas, Inc., the City of Gustine, California, 
Video/Phone Systems, Inc., Northeast Wireless, High Band Broadcasting 
Corporation, FM Video Broadcasters, Western Sierra Bancorp, M3 Illinois 
Telecommunications Corporation, Perry W. Haddon as President of GHz 
Equipment Company; Connecticut Home Theater Corporation, Alliance 
Associates, Stevan A. Birnbaum, BMW Associates, Joseph B. Buchwald, 
Celltel Communications Corporation, Linda Chester, Thomas F. Clark, the 
Committee to Promote Competition in the Cable Industry, Arnold 
Cornblatt, CT Communications Corporation, Evanston Transmission 
Company, Judy Feinberg, Lawrence Fraiberg, Freedom Technologies, Inc., 
Rosalie Y. Goldberg, Harry A. Hall, Lloyd Hascoe, L.D.H. International, 
Inc., Paul R. Likins, William Lonergan, Herbert S. Meeker, James L. 
Melcher, Frederick Myers, Frederick M. Peyser, PMJ Securities, Inc., 
Robert E. La Blanc Associates, Inc., Jeanne P. Robertson, Sanford 
Robertson, Robert Rosenkranz, R&R Telecommunications Partners, SCNY 
Communications, Inc., Seaview Telesystems Partners, Lewis W. Siegel, 
Michael S. Siegel, Kim Sloan, SMC Associates, Charles D. Snelling, 
Telecom Investment Corp., Telecommunications/Haddock Investors, Video 
Communications Corporation, Diane Wechsler, and Ivan Wolff are denied.
    118. It is further ordered that Local Multipoint Distribution 
Service licensees shall attach appropriate labels to every subscriber 
transceiver antenna and provide notice to users regarding the potential 
hazard of remaining within the Maximum Permissible Exposure separation 
distance of these high gain antennas, as indicated herein.
    119. It is further ordered that, effective upon adoption of this 
Order, applications will not be accepted for filing under Part 101 of 
the Commission's Rules either for new services or for license 
modifications in the 31 GHz band, except those filed by incumbent city 
licensees and private business users pursuant to the terms of this 
Order, and that all such applications for license modifications shall 
be filed no later than 15 days following the effective date of this 
Order.
    120. It is further ordered that the applications filed for 
authorization to operate under the existing licensing rules for the 
31,000-33,000 MHz band and pending review under the existing rules 
shall be dismissed, and applicants that submitted filing fees with the 
applications shall be refunded.
    121. It is further ordered that, pursuant to section 1.402(h) of 
the Commission's Rules, the Chief, Office of Engineering and 
Technology, shall select a panel of experts to review the specific 
technologies set forth in the pioneer preference request that was filed 
by the Suite 12 Group, on September 23, 1991, as amended on November 
19, 1991, and that was accepted and placed on Public Notice on December 
16, 1991.
    122. It is further ordered that, pursuant to Section 5(c) of the 
Communications Act of 1934, the Chief, Wireless Telecommunications 
Bureau, is granted delegated authority to implement and modify auction 
procedures in the Local Multipoint Distribution Service, including the 
general design and timing of the auction; the number and grouping of 
authorizations to be offered in a particular auction; the manner of 
submitting bids; the amount of bid increments; activity and stopping 
rules; and application and payment requirements, including the amount 
of upfront payments; and to announce such procedures by Public Notice.

List of Subjects

47 CFR Part 1

    Administrative practice and procedure, Environmental impact 
statements, Radio, Reporting and recordkeeping requirements, 
Telecommunications.

47 CFR Part 2

    Radio.

47 CFR Part 74

    Radio.

47 CFR Part 78

    Radio.

47 CFR Part 95

    Radio.

47 CFR Part 101

    Communications common carriers, Radio, Reporting and recordkeeping 
requirements.

Federal Communications Commission
William F. Caton,
Acting Secretary

Rule Changes

    Parts 1, 2, 74, 78, 95, and 101 of Title 47 of the Code of Federal 
Regulations are amended as follows:

PART 1--PRACTICE AND PROCEDURE

    1. The authority citation for Part 1 continues to read as follows:

    Authority: 47 U.S.C. Secs. 151, 154, 303 and 309(j), unless 
otherwise noted.

    2. Section 1.1307 is amended by revising the section heading and 
adding a new entry at the end of Table 1 in paragraph (b)(1) as 
follows:


Sec. 1.1307  Actions that may have a significant environmental effect, 
for which Environmental Assessments (EAs) must be prepared.

    (1) * * *
* * * * *
    (b) * * *

  Table 1.--Transmitters, Facilities, and Operations Subject to Routine 
                        Environmental Evaluation                        
------------------------------------------------------------------------
    Service (Title 47 CFR Rule Part)         Evaluation required if:    
------------------------------------------------------------------------
                                                                        
                  *        *        *        *        *                 
Local Multipoint Distribution Service    Non-rooftop antennas: Height   
 (subpart L of part 101).                 above ground level to         
                                          radiation center <10 m and    
                                          power >1640 W EIRP.           
                                         Rooftop antennas: Power > 1640 
                                          W EIRP.                       
                                         LMDS licensees are required to 
                                          attach a label to subscriber  
                                          transceiver antennas that (1) 
                                          provides adequate notice      
                                          regarding potential radio     
                                          frequency safety hazards,     
                                          e.g., information regarding   
                                          the safe minimum separation   
                                          distance required between     
                                          users and transceiver         
                                          antennas; and (2) references  
                                          the applicable FCC radio      
                                          frequency emission guidelines 
                                          contained in FCC OST Bulletin 
                                          65, 2d Edition.               
------------------------------------------------------------------------

    3. Section 1.77 is amended by revising paragraph (i) to read as 
follows:


Sec. 1.77  Detailed application procedures, cross references.

* * * * *
    (i) Rules governing applications for authorizations in the Common 
Carrier and Private Radio terrestrial microwave services and Local 
Multipoint

[[Page 23163]]

Distribution Services are set out in part 101 of this chapter.
    4. Section 1.2102 is amended by adding paragraph (a)(9) as follows:


Sec. 1.2102  Eligibility of applications for competitive bidding.

    (a) * * *
    (9) Local Multipoint Distribution Service (LMDS) (see 47 CFR part 
101).

PART 2--FREQUENCY ALLOCATIONS AND RADIO TREATY MATTERS; GENERAL 
RULES AND REGULATIONS

    5. The authority citation for Part 2 continues to read as follows:

    Authority: Sec 4, 302, 303, and 307 of the Communications Act of 
1934, as amended, 47 U.S.C. Sections 154, 302, 303 and 307, unless 
otherwise noted.

    6. Section 2.106 is amended by revising the entries for 27.5-29.5 
GHz and 31.0-31.3 GHz to read as follows:


Sec. 2.106  Table of Frequency Allocations.

                                                                                                                
                 International table                       United States table           FCC use designators    
----------------------------------------------------------------------------------------------------------------
                                                        Government        Non-                                  
   Region 1--        Region 2--        Region 3--    ---------------   Government                               
 allocation GHz    allocation GHz    allocation GHz                 ---------------     Rule       Special-use  
                                                        Allocation     Allocation     part(s)      frequencies. 
                                                           GHz            GHz                                   
(1)               (2)               (3)               (4)            (5)            (6)          (7)            
----------------------------------------------------------------------------------------------------------------
        *                 *                 *               *              *             *              *       
----------------------------------------------------------------------------------------------------------------
27.5-29.5         27.5-29.5         ................  27.5-29.5      27.5-29.5                                  
                  FIXED             ................  .............  FIXED          SATELLITE                   
                  FIXED-SATELLITE                                    FIXED-          COMMUNICAT                 
                   (Earth-to-                                         SATELLITE      IONS (25)                  
                   space)                                             (Earth-to-    FIXED                       
                  MOBILE                                              space)         MICROWAVE                  
                                                                     MOBILE          (101)                      
----------------------------------------------------------------------------------------------------------------
        *                 *                 *               *        .............       *              *       
----------------------------------------------------------------------------------------------------------------
31.0-31.3         31.0-31.3         ................  31.0-31.3      31.0-31.3                                  
                  FIXED             ................  Standard       FIXED MOBILE   FIXED                       
                  MOBILE                               Frequency     Standard        MICROWAVE                  
                  Standard                             and Time       Frequency      (101)                      
                   Frequency and                       Signal-        and Time                                  
                   Time Signal-                        Satellite      Signal-                                   
                   Satellite                           (space-to-     Satellite                                 
                   (space-to-                          Earth)         (space-to-                                
                   Earth)                                             Earth)                                    
                  Space Research                                                                                
                  884 885 886       ................  886 US211      884 886 US211                              
----------------------------------------------------------------------------------------------------------------
        *                 *                 *               *              *             *              *       
----------------------------------------------------------------------------------------------------------------

* * * * *

PART 74--EXPERIMENTAL RADIO, AUXILIARY, SPECIAL BROADCAST AND OTHER 
PROGRAM DISTRIBUTIONAL SERVICES

    7. The authority citation for Part 74 continues to read as follows:

    Authority: Secs. 4, 303, 48 Stat. 1066, as amended, 1082, as 
amended; 47 U.S.C. Secs. 154, 303, 554.


Sec. 74.602  [Amended]

    8. In Sec. 74.602, paragraph (h) is removed and paragraphs (i) and 
(j) are redesignated as paragraphs (h) and (i).

PART 78--CABLE TELEVISION RELAY SERVICE

    9. The authority citation for Part 78 continues to read as follows:

    Authority: Secs. 2, 3, 4, 301, 303, 307, 308, 309, 48 Stat., as 
amended, 1064, 1065, 1066, 1081, 1082, 1083, 1084, 1085; 47 U.S.C. 
152, 153, 154, 301, 303, 307, 308, 309.


Sec. 78.18  [Amended]

    10. In Sec. 78.18, paragraph (a)(5) is removed and paragraphs 
(a)(6) through (a)(8) are redesignated as paragraphs (a)(5) through 
(a)(7).

PART 95--PERSONAL RADIO SERVICES

    11. The authority citation for Part 95 continues to read as 
follows:

    Authority: Secs. 4 , 303, 48 Stat. 1066, 1082, as amended; 47 
U.S.C. 154, 303.


Sec. 95.1  [Amended]

    12. In Sec. 95.1, paragraph (b) is removed and paragraph (c) is 
redesignated as (b).

PART 101--FIXED MICROWAVE SERVICE

    13. The authority citation for Part 101 continues to read as 
follows:

    Authority: 47 U.S.C. Secs. 154, 303, 309(j), unless otherwise 
noted.

    14. Section 101.1 is amended by revising paragraph (a) to read as 
follows:


Sec. 101.1  Scope and authority.

    (a) The purpose of the rules in this part is to prescribe the 
manner in which portions of the radio spectrum may be made available 
for private operational, common carrier, and Local Multipoint 
Distribution Service fixed, microwave operations that require 
transmitting facilities on land or in specified offshore coastal areas 
within the continental shelf.
* * * * *
    15. Section 101.3 is amended by revising the two definitions in 
alphabetical order to read as follows:
* * * * *
    Local Multipoint Distribution Service Hub Station. A fixed point-
to-point or point-to-multipoint radio station in a Local Multipoint 
Distribution Service System that provides one-way or two-way 
communication with Local Multipoint Distribution Service Subscriber 
Stations.
* * * * *
    Local Multipoint Distribution Service System. A fixed point-to-
point or point-to-multipoint radio system consisting of Local 
Multipoint Distribution Service Hub Stations and their associated Local 
Multipoint Distribution Service Subscriber Stations.
* * * * *

[[Page 23164]]

    16. Section 101.5 is amended by revising paragraph (d) to read as 
follows:


Sec. 101.5  Station authorization required.

* * * * *
    (d) For stations authorized under subpart H (Private Operational 
Fixed Point-to-Point Microwave Service), subpart I (Common Carrier 
Fixed Point-to-Point Microwave Service), and subpart L of this part 
(Local Multipoint Distribution Service), construction of new or 
modified stations may be initiated prior to grant of an authorization. 
As a condition to commencing construction under this paragraph (d), the 
Commission may, at any time and without hearing or notice, prohibit 
such construction for any reason. Any construction conducted under this 
paragraph is at the applicant's sole risk.
    17. Section 101.11 is amended by revising paragraph (a) to read as 
follows:


Sec. 101.11  Filing of applications, fees, and number of copies.

    (a) Part 1 of this chapter contains information on application 
filing procedures and requirements for all services authorized under 
this part. All filings, unless they are filed electronically, must 
include the original application plus one copy. Instructions for 
electronic filing will be provided by public notice.
* * * * *
    18. Section 101.15 is amended by revising paragraph (a) to read as 
follows:


Sec. 101.15  Application forms for common carrier fixed stations.

    (a) New or modified facilities. Except for Local Multipoint 
Distribution Service in subpart L of this part, FCC Form 415 must be 
submitted and a license granted for each station. FCC Form 415 also 
must be submitted to amend any license application, to modify any 
license pursuant to Secs. 101.57(a) and 101.59, and to notify the 
Commission of modifications made pursuant to Sec. 101.61. Cancellation 
of a license may be made by letter.
* * * * *
    19. Section 101.19 is amended by revising paragraph (a)(5) to read 
as follows:


Sec. 101.19  General application requirements.

    (a) * * *
    (5) Show compliance with the special requirements applicable to 
each radio service and make all special showings that may be applicable 
(e.g., those required by Secs. 101.103(d), 101.701, and 101.1001 
through 101.1015).
* * * * *
    20. Section 101.21 is amended by revising the introductory 
paragraph and adding a new paragraph (g) as follows:


Sec. 101.21  Technical content of applications.

    Applications, except FCC Form 175, must contain all technical 
information required by the application form and any additional 
information necessary to fully describe the proposed facilities and to 
demonstrate compliance with all technical requirements of the rules 
governing the radio service involved (see subparts C, F, G, I, J, and L 
of this part, as appropriate). The following paragraphs describe a 
number of technical requirements.
* * * * *
    (g) Each application in the Local Multipoint Distribution Service 
must contain all technical information required by FCC Form 600 and any 
other applicable form or associated Public Notices and by any 
applicable rules in this part.
    21. Section 101.29 is amended by revising paragraph (a) to read as 
follows:


Sec. 101.29  Amendment of pending applications.

    (a) Any pending application may be amended as a matter of right if 
the application has not been designated for hearing, or for comparative 
evaluation pursuant to Sec. 101.51, or for the random selection 
process, or is not subject to the competitive bidding process, 
provided, however, that the amendments must comply with the provisions 
of Sec. 101.41 as appropriate.
* * * * *
    22. Section 101.35 is amended by adding new paragraph (e) as 
follows:


Sec. 101.35  Preliminary processing of applications.

* * * * *
    (e) Competitive bidding applications will be processed pursuant to 
part 1, subpart Q, of this chapter and subpart M of this part.
    23. Section 101.37 is amended by revising paragraphs (a)(1), 
(a)(3), and (a)(5) and adding new paragraph (e) to read as follows:


Sec. 101.37  Public notice period.

    (a) * * *
    (1) The acceptance for filing of common carrier applications, Local 
Multipoint Distribution Service applications, and major amendments 
thereto;
* * * * *
    (3) The receipt of common carrier applications and Local Multipoint 
Distribution Service applications for minor modifications made pursuant 
to Sec. 101.59;
* * * * *
    (5) Special environmental considerations as required by part 1 of 
this chapter.
* * * * *
    (e) Paragraphs (a) through (c) of this section shall not apply to 
FCC Form 175.
    24. Section 101.45 is amended by revising introductory paragraph 
(b) as follows:


Sec. 101.45  Mutually exclusive applications.

* * * * *
    (b) A common carrier application, except in the Local Multipoint 
Distribution Service, will be entitled to be included in a random 
selection process or to comparative consideration with one or more 
conflicting applications only if:
* * * * *
    25. Section 101.47 is amended by revising introductory paragraph 
(f) to read as follows:


Sec. 101.47  Consideration of applications.

* * * * *
    (f) Except with respect to applications subject to subpart L of 
this part, whenever the public interest would be served thereby, the 
Commission may grant one or more mutually exclusive applications 
expressly conditioned upon final action on the applications, and then 
either conduct a random selection process (in specified services under 
this part), designate all of the mutually exclusive applications for a 
formal evidentiary hearing or (whenever so requested) follow the 
comparative evaluation procedures of Sec. 101.51, as appropriate, if it 
appears:
* * * * *
    26. Section 101.57 is amended by revising paragraph (a) to read as 
follows:


Sec. 101.57  Modification of station license.

    (a)(1) Except as provided in Sec. 101.59, and except in the case of 
licenses authorized for operation in the 31,000-31,300 MHz band prior 
to March 11, 1997, and except in the Local Multipoint Distribution 
Service as provided in Sec. 101.61(c)(10), no modification of a license 
issued pursuant to this part (or the facilities described thereunder) 
may be made except upon application to the Commission.
    (2) Notwithstanding the provisions of subparagraph (1) of this 
paragraph, licensees (other than licensees in the Local Television 
Transmission Service) authorized to operate in the 31,000-31,300 MHz 
band prior to March 11,

[[Page 23165]]

1997, may submit applications to the Commission for modification of 
such licenses not later than the end of the 15-day period following 
June 30, 1997.
* * * * *
    27. Section 101.59 is amended by revising paragraphs (a) and (b)(1) 
to read as follows:


Sec. 101.59  Processing of applications for facility minor 
modifications.

    (a) Except in the Local Multipoint Distribution Service as provided 
in Sec. 101.61(c)(10), unless an applicant is notified to the contrary 
by the Commission, as of the twenty-first day following the date of 
public notice, any application that meets the requirements of paragraph 
(b) of this section and proposes only the change specified in paragraph 
(c) of this section will be deemed to have been authorized by the 
Commission.
    (b) * * *
    (1) It is in the Private Operational Fixed Point-to-Point 
Microwave, Common Carrier Fixed Point-to-Point Microwave, Local 
Television Transmission, Digital Electronic Message Services, and Local 
Multipoint Distribution Services;
* * * * *
    28. Section 101.61 is amended by revising introductory paragraph 
(b), and paragraph (b)(3), adding new paragraphs (c)(9) and (c)(10), 
and revising paragraph (d) to read as follows:


Sec. 101.61  Certain modifications not requiring prior authorization.

* * * * *
    (b) Licensees of fixed stations in the Private Operational Fixed 
Point-to-Point Microwave, Common Carrier Fixed Point-to-Point 
Microwave, Local Television Transmission, Digital Electronic Message 
Services, and Local Multipoint Distribution Services may make the 
facility changes listed in paragraph (c) of this section without 
obtaining prior Commission authorization, if:
* * * * *
    (3) The Commission is notified of changes made to facilities by the 
submission of a completed FCC Form 415 within 30 days after the changes 
are made, except that licensees in the Local Multipoint Distribution 
Service must notify the Commission by the submission of a completed FCC 
Form 600 within 30 days or, if the change is subject to Sec. 101.305(b) 
or 101.305(c), within the time periods required in those sections.
* * * * *
    (c) * * *
    (9) In the Local Multipoint Distribution Service, changes in 
regulatory status from common carrier to non-common carrier status or 
non-common carrier to common carrier status, or from the addition of 
common carrier or non-common carrier status to an existing license in 
order to be authorized to provide both common carrier and non-common 
carrier services; except that changes that result in the 
discontinuance, reduction, or impairment of the existing service are 
subject to the requirements of Sec. 101.305 (b) and (c).
    (10) In the Local Multipoint Distribution Service, the addition, 
removal, or relocation of facilities within the area authorized by the 
license, except as provided in Sec. 101.1009.
    (d) Licensees may notify the Commission of permissible changes or 
correct erroneous information on a license not involving a major change 
(i.e., a change that would be classified as a major amendment as 
defined by Sec. 101.29) without obtaining prior commission approval by 
filing FCC Form 415, except in Local Multipoint Distribution Service by 
filing FCC Form 600.
    29. Section 101.63 is amended by revising paragraph (a) to read as 
follows:


Sec. 101.63  Period of construction; certification of completion of 
construction.

    (a) Each station, except in the Local Multipoint Distribution 
Services, authorized under this part must be in operation within 18 
months from the initial date of grant. Modification of an operational 
station must be completed within 18 months of the date of grant of the 
applicable modification request.
* * * * *
    30. Section 101.101 is amended by removing the entry for ``27,500-
29,500'' MHz and adding entries for ``27,500-28,350,'' and ``29,100-
29,250'' and revising the entry for ``31,000-31,300'' MHz and adding 
LMDS in alphabetical order following the table to read as follows:


Sec. 101.101  Frequency availability.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                        Radio service                                                   
                                   ---------------------------------------------------------------------------------------------------------------------
       Frequency band (MHz)          Common carrier  (Part   Private radio  (Part     Broadcast auxiliary   Other  (Parts 15, 21,                       
                                             101)                    101)                  (Part 74)        24, 25, 74, 78 & 100)          Notes        
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                                        
                   *                  *                  *                  *                  *                  *                  *                  
27,500-28,350.....................  LMDS                                                                                                                
29,100-29,250.....................  LMDS                    ......................  ......................  SAT                                         
31,000-31,300.....................  CC-LMDS                 OFS                     ......................  .....................  F/M/TF               
                                    LTTS                                                                                                                
                                                                                                                                                        
                   *                  *                  *                  *                  *                  *                  *                  
--------------------------------------------------------------------------------------------------------------------------------------------------------
*                  *                  *                  *                  *                  *                  *                                     
LMDS: Local Multipoint Distribution Service (including non-common carrier and common carrier services)--(Part 101, Subpart L).                          

* * * * *
    31. Section 101.103 is amended by revising paragraph (b) and adding 
new paragraphs (g) and (h) to read as follows:


Sec. 101.103  Frequency coordination procedures.

* * * * *
    (b)(1) Operations in the bands 31,000-31,075 MHz and 31,225-31,300 
MHz licensed prior to March 11, 1997, were licensed on an unprotected 
basis and are subject to harmful interference from similarly licensed 
operations in that band.
    (i) Operations licensed in the Local Mulitpoint Distribution 
Service and those operations licensed prior to March 11, 1997, except 
in the Local Television Transmission Service, operating in these bands 
are equally protected against harmful interference from each other.

[[Page 23166]]

    (ii) In the case of operations licensed prior to March 11, 1997, 
except in the Local Television Transmission Service, that are licensed 
on a point-to-radius basis, LMDS licensees shall be subject to the 
protection requirement established in this section in the case of 
existing links operated by such licensees, and in the case of links 
added by such licensees in the future in accordance with the terms of 
their point-to-radius licenses.
    (iii) An LMDS licensee may not initiate operations within the 
point-to-radius area licensed to an operator (other than an operator in 
the Local Television Transmission Service) prior to March 11, 1997, 
even if such operator has not initiated operations to the fullest 
extent of the license. An LMDS licensee, however, may initiate 
operations at the border of such operator's license area without prior 
coordination if the LMDS licensee's operations would not cause harmful 
interference to the other operator's existing operations.
    (iv) An operator (other than an operator in the Local Television 
Transmission Service) licensed on a point-to-radius basis prior to 
March 11, 1997, may add additional stations within its license area. 
Such operator shall coordinate with any affected LMDS licensee if its 
new operations might cause harmful interference to the existing 
operations of such LMDS licensee.
    (v) Operations licensed prior to March 11, 1997, on a point-to-
point basis may not be extended or otherwise modified through the 
addition of point-to-point links. Such operations shall be limited to 
the use of frequency pairs licensed as of March 11, 1997. Operations 
licensed in the Local Television Transmission Service as of March 11, 
1997, may continue to operate, but such operators may not expand 
existing operations nor initiate new operations.
    (2) Operations in the 31,075-31,225 MHz band licensed prior to 
March 11, 1997, shall receive no protection against harmful 
interference from authorized operations in the Local Multipoint 
Distribution Service in that band.
* * * * *
    (g) Licensees operating in Basic Trading Areas authorized in the 
Local Multipoint Distribution Service. (1) When the transmitting 
facilities in a Basic Trading Area (BTA) are to be operated in the 
bands 27,500-28,350 MHz; 29,100-29,250 MHz; and 31,000-31,300 MHz and 
the facilities are located within 20 kilometers of the boundaries of a 
BTA, each licensee must complete the frequency coordination process of 
paragraph (d)(2) of this section with respect to neighboring BTA 
licensees that may be affected by its operations prior to initiating 
service. In addition, all licensed transmitting facilities operating in 
the bands 31,000-31,075 MHz and 31,225-31,300 MHz and located within 20 
kilometers of neighboring facilities must complete the frequency 
coordination process of paragraph (d)(2) of this section with respect 
to such authorized operations before initiating service.
    (2) Response to notification should be made as quickly as possible, 
even if no technical problems are anticipated. Any response to 
notification indicating potential interference must specify the 
technical details and must be provided to the applicant, either 
electronically or in writing, within the 30-day notification period. 
Every reasonable effort should be made by all licensees to eliminate 
all problems and conflicts. If no response to notification is received 
within 30 days, the licensee will be deemed to have made reasonable 
efforts to coordinate and commence operation without a response. The 
beginning of the 30-day period is determined pursuant to paragraph 
(d)(2)(v) of this section.
    (h) Special requirements for operations in the band 29,100-29,250 
MHz. (1)(i) Local Multipoint Distribution Service (LMDS) receive 
stations operating on frequencies in the 29,100-29,250 MHz band within 
a radius of 75 nautical miles of the geographic coordinates provided by 
a non-GSO-MSS licensee pursuant to Sec. 101.113(c)(2) or (c)(3)(i) (the 
``feeder link earth station complex protection zone'') shall accept any 
interference caused to them by such earth station complexes and shall 
not claim protection from such earth station complexes.
    (ii) LMDS licensees operating on frequencies in the 29,100-29,250 
MHz band outside a feeder link earth station complex protection zone 
shall cooperate fully and make reasonable efforts to resolve technical 
problems with the non-GSO MSS licensee to the extent that transmissions 
from the non-GSO MSS operator's feeder link earth station complex 
interfere with an LMDS receive station.
    (2) No more than 15 days after the release of a public notice 
announcing the commencement of LMDS auctions, feeder link earth station 
complexes to be licensed pursuant to Sec. 25.257 of this chapter shall 
be specified by a set of geographic coordinates in accordance with the 
following requirements: no feeder link earth station complex may be 
located in the top eight (8) metropolitan statistical areas (MSAs), 
ranked by population, as defined by the Office of Management and Budget 
as of June 1993, using estimated populations as of December 1992; two 
(2) complexes may be located in MSAs 9 through 25, one of which must be 
Phoenix, AZ (for a complex at Chandler, AZ); two (2) complexes may be 
located in MSAs 26 to 50; three (3) complexes may be located in MSAs 51 
to 100, one of which must be Honolulu, Hawaii (for a complex at 
Waimea); and the three (3) remaining complexes must be located at least 
75 nautical miles from the borders of the 100 largest MSAs or in any 
MSA not included in the 100 largest MSAs. Any location allotted for one 
range of MSAs may be taken from an MSA below that range.
    (3)(i) Any non-GSO MSS licensee may at any time specify sets of 
geographic coordinates for feeder link earth station complexes with 
each earth station contained therein to be located at least 75 nautical 
miles from the border of the 100 largest MSAs.
    (ii) For purposes of paragraph (h)(3)(i) of this section, non-GSO 
MSS feeder link earth station complexes shall be entitled to 
accommodation only if the affected non-GSO MSS licensee preapplies to 
the Commission for a feeder link earth station complex or certifies to 
the Commission within sixty days of receiving a copy of an LMDS 
application that it intends to file an application for a feeder link 
earth station complex within six months of the date of receipt of the 
LMDS application.
    (iii) If said non-GSO MSS licensee application is filed later than 
six months after certification of the Commission, the LMDS and non-GSO 
MSS entities shall still cooperate fully and make reasonable efforts to 
resolve technical problems, but the LMDS licensee shall not be 
obligated to re-engineer its proposal or make changes to its system.
    (4) LMDS licensees or applicants proposing to operate hub stations 
on frequencies in the 29,100-29,250 MHz band at locations outside of 
the 100 largest MSAs or within a distance of 150 nautical miles from a 
set of geographic coordinates specified under paragraphs (h)(2) or 
(h)(3)(i) of this section shall serve copies of their applications on 
all non-GSO MSS applicants, permittees or licensees meeting the 
criteria specified in Sec. 25.257(a). Non-GSO MSS licensees or 
applicants shall serve copies of their feeder link earth station 
applications, after the LMDS auction, on any LMDS applicant or licensee 
within a distance of 150 nautical miles from the geographic coordinates 
that it specified under Sec. 101.113(c)(2) or (c)(3)(i). Any necessary 
coordination shall commence

[[Page 23167]]

upon notification by the party receiving an application to the party 
who filed the application. The results of any such coordination shall 
be reported to the Commission within sixty days. The non-GSO MSS earth 
station licensee shall also provide all such LMDS licensees with a copy 
of its channel plan.
    32. Section 101.107 is amended by removing the entry for ``19,700 
to 40,000'' MHz, adding the entries for ``19,700 to 27,500, 27,500 to 
28,350, 29,100 to 29,250, 31,000 to 31,075, 31,075 to 31,225, 31,225 to 
31,300 and 31,300 to 40,000'' and adding a footnote 8 to read as 
follows:


Sec. 101.107  Frequency tolerance.

* * * * *

----------------------------------------------------------------------------------------------------------------
                                                                           Frequency tolerance (percent)        
----------------------------------------------------------------------------------------------------------------
                                                                                      Mobile          Mobile    
                         Frequency (MHz)                           All fixed and   stations over    stations 3  
                                                                   Base stations      3 Watts      Watts or less
----------------------------------------------------------------------------------------------------------------
                                                                                                                
*                  *                  *                  *                  *                  *                
                                                        *                                                       
19,700 to 27,500 \6\............................................           0.03   ..............  ..............
27,500 to 28,350................................................           0.001  ..............  ..............
29,100 to 29,250................................................           0.001  ..............  ..............
31,000 to 31,075 \8\............................................           0.001  ..............  ..............
31,075 to 31,225 \8\............................................           0.001  ..............  ..............
31,225 to 31,300 \8\............................................           0.001  ..............  ..............
31,300 to 40,000 \6\............................................           0.03   ..............  ..............
----------------------------------------------------------------------------------------------------------------
*                *                *                *                *                *                *         
\8\ For stations authorized prior to March 11, 1997, transmitter frequency tolerance shall not exceed 0.03      
  percent.                                                                                                      

    33. Section 101.109(c) is amended by removing the entry ``31,000 to 
31,300'' and adding the entries for ``31,000 to 31,075, 31,075 to 
31,225, and 31,225 to 31,300'' in numerical order to read as follows:


Sec. 101.109  Bandwidth.

*                  *                  *                  *          
        *                  *                  *
    (c) * * *

------------------------------------------------------------------------
                                                  Maximum authorized    
            Frequency band  (MHz)                      bandwidth        
------------------------------------------------------------------------
                                                                        
*                  *                  *                  *              
                  *                  *                  *               
31,000 to 31,075............................  75 MHz                    
31,075 to 31,225............................  150 MHz                   
31,225 to 31,300............................  75 MHz                    
                                                                        
*                  *                  *                  *              
                  *                  *                  *               
------------------------------------------------------------------------

    34. Section 101.113(a) is amended by removing the entry ``31,000 to 
31,300'' MHz and adding entries for ``31,000 to 31,075, 31,075-31,225, 
and 31,225 to 31,300,'' removing the first footnote 7, revising the 
second footnote 7, revising footnote 8 and adding footnote 9 to read as 
follows:


Sec. 101.113  Transmitter power limitations.

    (a) * * *

------------------------------------------------------------------------
                                     Maximum allowable EIRP \1\, \2\    
      Frequency band (MHz)      ----------------------------------------
                                     Fixed  (dBW)        Mobile  (dBW)  
------------------------------------------------------------------------
                                                                        
*                  *                  *                  *              
                  *                  *                  *               
                                 +30 dBW/MHz                            
27,500 to 28,350 \9\                                                    
29,100 to 29,250...............  (\7\)                                  
31,000 to 31,075 \8\, \9\......  30 dBW/MHz           30 dBW/MHz        
31,075 to 31,225 \8\, \9\......  30 dBW/MHz           30 dBW/MHz        
31,225 to 31,300 \8\, \9\......  30 dBW/MHz           30 dBW/MHz        
                                                                        
*                  *                  *                  *              
                  *                  *                  *               
------------------------------------------------------------------------
        *                *                *                *            
     *                *                *                                
\7\ See Sec.  101.113(c).                                               
\8\ For stations authorized prior to March 11, 1997, transmitter output 
  power shall not exceed 0.05 watt.                                     
\9\ For subscriber transceivers authorized in these bands, the EIRP     
  shall not exceed 55dBW or 42 dBW/MHz.                                 


[[Page 23168]]

* * * * *
    35. Section 101.147 is amended by revising paragraph (a), removing 
the entries for ``27,500-29,500 MHz''and adding entries for 27,500-
28,350 MHz (16) and 29,100-29,250 MHz (16), revising the entry for 
``31,000-31,300 MHz'' (16), revising note 16 in paragraph (a), removing 
paragraph (x), redesignating paragraphs (t) through (w) as paragraphs 
(u) through (x), adding a new paragraph (t), and revising newly 
designated paragraph (u), to read as follows:


Sec. 101.147  Frequency assignments

    (a) Frequencies in the following bands are available for assignment 
for fixed microwave services.
* * * * *
27,500-28,350 MHz (16)
29,100-29,250 MHz (5), (16)
31,000-31,300 MHz (16)
* * * * *
    (5) Frequencies in this band are shared with stations in the 
fixed-satellite service.
* * * * *
    (16) As of June 30, 1997, frequencies in these bands are 
available for assignment only to LMDS radio stations. Stations 
initially authorized prior to that date may continue to operate 
within the existing terms of the outstanding licenses.
* * * * *
    (t) 27,500-28,350; 29,100-29,250; 31,000-31,300 MHz. These 
frequencies are available for LMDS systems. Each assignment will be 
made on a BTA service area basis, and the assigned spectrum may be 
subdivided as desired by the licensee.
    (u) 31,000-31,300 MHz. Stations licensed in this band prior to 
March 11, 1997, may continue their authorized operations, subject to 
license renewal, on the condition that harmful interference will not be 
caused to LMDS operations licensed in this band after June 30, 1997. In 
the sub-bands 31,000-31,075 and 31,225-31,300 MHz, stations initially 
licensed prior to March 11, 1997, except in LTTS, and LMDS operations 
authorized after June 30, 1997, are equally protected against harmful 
interference from each other in accordance with the provisions of 
Sec. 101.103(b). For stations, except in LTTS, permitted to relocate to 
these sub-bands, the following paired frequencies are available:

------------------------------------------------------------------------
                                                               Receive  
                  Transmit (receive) (MHz)                    (transmit)
                                                                (MHz)   
------------------------------------------------------------------------
                (1) 25 MHz Authorized Bandwidth Channels                
                                                                        
31,012.5...................................................     31,237.5
31,037.5...................................................     31,262.5
31,062.5...................................................     31,287.5
                                                                        
                (2) 75 MHz Authorized Bandwidth Channel                 
                                                                        
31,037.5...................................................     31,275.0
------------------------------------------------------------------------

* * * * *
    36. Section 101.305 is amended by revising paragraphs (a) through 
(c) to read as follows:


Sec. 101.305  Discontinuance, reduction, or impairment of service.

    (a) If the public communication service provided by a station in 
the Common Carrier Radio Services and the Local Multipoint Distribution 
Service is involuntarily discontinued, reduced or impaired for a period 
exceeding 48 hours, the station licensee must promptly notify the 
Commission, in writing, at Federal Communications Commission, Common 
Carrier Radio Services, 1270 Fairfield Road, Gettysburg, Pennsylvania 
17325. In every such case, the licensee must furnish full particulars 
as to the reasons for such discontinuance, reduction or impairment of 
service, including a statement as to when normal service is expected to 
be resumed. When normal service is resumed, prompt notification thereof 
must be given in writing to the Federal Communications Commission, 
Common Carrier Radio Services, 1270 Fairfield Road, Gettysburg, 
Pennsylvania, 17325.
    (b) No station licensee subject to title II of the Communications 
Act of 1934, as amended, may voluntarily discontinue, reduce or impair 
public communication service to a community or part of a community 
without obtaining prior authorization from the Commission pursuant to 
the procedures set forth in part 63 of this chapter. In the event that 
permanent discontinuance of service is authorized by the Commission, 
the station licensee must promptly send the station license to the 
Federal Communications Commission, Common Carrier Radio Services, 1270 
Fairfield Road, Gettysburg, Pennsylvania 17325 for cancellation; except 
that station licensees in the Local Multipoint Distribution Service 
need not surrender the license for cancellation if the discontinuance 
is a result of a change of status by the licensee from common carrier 
to non-common carrier pursuant to Sec. 101.61.
    (c) Any licensee not subject to title II of the Communications Act 
of 1934, as amended, who voluntarily discontinues, reduces or impairs 
public communication service to a community or a part of a community 
must give written notification to the Commission within 7 days thereof. 
In the event of permanent discontinuance of service, the station 
licensee must promptly send the station license to the Federal 
Communications Commission, Common Carrier Radio Services, 1270 
Fairfield Road, Gettysburg, Pennsylvania 17325 for cancellation; except 
that station licensees in the Local Multipoint Distribution Service 
need not surrender the license for cancellation if the discontinuance 
is a result of a change of status by the licensee from non-common 
carrier to common carrier pursuant to Sec. 101.61.
* * * * *
    37. Section 101.311 is revised to read as follows:


Sec. 101.311  Equal employment opportunities.

    Equal opportunities in employment must be afforded by all common 
carrier licensees and all Local Multipoint Distribution Service 
licensees in accordance with the provisions of Sec. 21.307.
    38. Section 101.803 is amended by revising note (7) of paragraph 
(a), revising note (9) of paragraph (d), removing paragraph (e), and 
redesignating paragraphs (f), (g), and (h) as (e), (f), and (g), to 
read as follows:


Sec. 101.803  Frequencies.

    (a) * * *

    <SUP>(7)</SUP> As of June 30, 1997, frequencies in these band 
only are available for assignment to LMDS radio stations. Stations 
authorized prior to that date may continue to operate within the 
existing terms of the outstanding licenses, subject to renewal.

* * * * *
    (d) * * *

    <SUP>(9)</SUP> As of June 30, 1997, frequencies in these band 
only are available for assignment to LMDS radio stations. Stations 
authorized prior to that date may continue to operate within the 
existing terms of the outstanding licenses, subject to renewal.

* * * * *
    39. Subpart K is added and reserved in part 101 and Subpart L is 
added, reading as follows:

Subpart L--Local Multipoint Distribution Service

Sec.
101.1001  Eligibility.
101.1003  LMDS eligibility restrictions for incumbent LECs and cable 
companies.
101.1005  Frequencies available.
101.1007  Geographic service areas and number of licenses.
101.1009  System operations.
101.1011  Construction requirements and criteria for renewal 
expectancy.

[[Page 23169]]

101.1013  Permissible communications services.
101.1015  Application form and contents.
101.1017  Requesting regulatory status.


Sec. 101.1001  Eligibility.

    Any entity, other than one precluded by Sec. 101.7 and by 
Sec. 101.1003, is eligible for authorization to provide Local 
Multipoint Distribution Service (LMDS) under this subpart. 
Authorization will be granted upon proper application filed under the 
rules in this part.


Sec. 101.1003  LMDS eligibility restrictions for incumbent LECs and 
cable companies.

    (a) Eligibility for LMDS license. Except as provided in paragraph 
(b) of this section, no incumbent LEC or incumbent cable company, as 
defined in paragraph (c) of this section, nor any entity owning an 
attributable interest in an incumbent LEC or incumbent cable company, 
shall have an attributable interest in an LMDS license whose geographic 
service area significantly overlaps such incumbent's authorized or 
franchised service area.
    (1) Termination of restriction. This restriction shall terminate 
three years following June 30, 1997 unless the Commission extends its 
applicability based on a determination that incumbent LECs or incumbent 
cable companies continue to have substantial market power in the 
provision of local telephony or cable television services.
    (2) Waiver of restriction. Upon completion of the initial award of 
LMDS licenses, an incumbent LEC or incumbent cable company may petition 
for a waiver of the restriction on eligibility based upon a showing 
that the petitioner no longer has market power in its authorized or 
franchised service area as the result of the entry of new competitors, 
other than an LMDS licensee, into such service area.
    (b) Exception to eligibility restriction. The restriction set forth 
in paragraph (a) of this section shall not apply to any license for the 
31,000-31,075 megahertz and 31,225-31,300 megahertz bands of LMDS 
spectrum.
    (c) Incumbent LECs and cable companies defined. The terms incumbent 
LEC and incumbent cable company shall be defined as follows:
    (1) Incumbent LEC. The term incumbent local exchange carrier or 
incumbent LEC shall be defined, in accordance with section 251(h) of 
the Communications Act, to mean, with respect to an area, that:
    (i) On February 8, 1996, the LEC provided telephone exchange 
service in such area and was deemed to be a member of the exchange 
carrier association pursuant to Sec. 69.601(b) of this chapter; or
    (ii) Is a person or entity that, on or after February 8, 1996, 
became a successor or assign of a member described in paragraph 
(c)(1)(i) of this section; or
    (iii) Is an entity, or a member of a class or category of entities, 
that the Commission has determined under section 251(h)(2) of the 
Communications Act to treat as a local exchange carrier.
    (2) Incumbent cable company. The term incumbent cable company means 
a company that is franchised to provide cable service and is not 
subject to effective competition under the following definition of 
effective competition in section 623(l) of the Communications Act:
    (i) Fewer than 30 percent of the households in the franchise area 
subscribe to the cable service of a cable system; or
    (ii) The franchise area is:
    (A) Served by at least two unaffiliated multichannel video 
programming distributors each of which offers comparable video 
programming to at least 50 percent of the households in the franchise 
area; and
    (B) The number of households subscribing to programming services 
offered by multichannel video programming distributors other than the 
largest multichannel video programming distributor exceeds 15 percent 
of the households in the franchise area; or
    (iii) A multichannel video programming distributor operated by the 
franchising authority for that franchise area offers video programming 
to at least 50 percent of the households of that franchise area; or
    (iv) A local exchange carrier or its affiliate (or any multichannel 
video programming distributor using the facilities of such carrier or 
its affiliate) offers video programming services directly to 
subscribers by any means (other than direct-to-home satellite services) 
in the franchise area of an unaffiliated cable operator which is 
providing cable service in that franchise area, but only if the video 
programming services so offered in that area are comparable to the 
video programming services provided by the unaffiliated cable operator 
in that area.
    (d) Significant overlap with authorized or franchised service area. 
For purposes of paragraph (a) of this section, a significant overlap of 
an incumbent LEC's or incumbent cable company's authorized or 
franchised service area occurs when at least 10 percent of the 
population of the LMDS licensed service area, as determined by the 1990 
census figures for the counties contained in such service area, is 
within the authorized or franchised service area.
    (e) Definition of attributable interest. For purposes of paragraph 
(a) of this section, an entity shall be considered to have an 
attributable interest in an incumbent LEC, incumbent cable company, or 
LMDS licensee pursuant to the following criteria:
    (1) A controlling interest shall constitute an attributable 
interest. Controlling interest means majority voting equity ownership, 
any general partnership interest, or any means of actual working 
control (including negative control) over the operation of the entity, 
in whatever manner exercised.
    (2) Partnership and similar ownership interests and any stock 
interest amounting to 20 percent or more of the equity, or outstanding 
stock or outstanding voting stock of an entity.
    (3) Stock interests held in trust that exceed the limit set forth 
in paragraph (e)(2) of this section shall constitute an attributable 
interest of any person who holds or shares the power to vote such 
stock, of any person who has the sole power to sell such stock, and, in 
the case of stock held in trust, of any person who has the right to 
revoke the trust at will or to replace the trustee at will. If the 
trustee has a familial, personal, or extra-trust business relationship 
to the grantor or the beneficiary, the stock interests held in trust 
shall constitute an attributable interest of such grantor or 
beneficiary, as appropriate.
    (4) Non-voting stock shall constitute an attributable interest in 
the issuing entity if it exceeds the limit set forth in paragraph 
(e)(2) of this section.
    (5) Debt and interests such as warrants and convertible debentures, 
options, or other interests (except non-voting stock) with rights of 
conversion to voting interests shall not constitute attributable 
interests unless and until conversion is effected.
    (6) Limited partnership interests amounting to 20 percent or more, 
calculated according to both the percentage of equity paid in and the 
percentage of distribution of profits and losses, shall constitute an 
attributable interest of each such limited partner.
    (7) Officers and directors of an incumbent LEC or incumbent cable 
company, an LMDS licensee, or an entity that controls such incumbent 
LEC, incumbent cable company, or LMDS licensee, shall be considered to 
have an attributable interest in such incumbent LEC, incumbent cable 
company, or LMDS licensee.
    (8) Ownership interests that are held indirectly by any party 
through one or

[[Page 23170]]

more intervening corporations or other entities shall be determined by 
successive multiplication of the ownership percentages for each link in 
the vertical ownership chain and application of the relevant 
attribution benchmark to the resulting product, except that, if the 
ownership for any interest in any link in the chain exceeds 50 percent 
or represents actual control, it shall be treated as if it were a 100 
percent interest.
    (9) Any person who manages the operations of an incumbent LEC or 
incumbent cable company or an LMDS licensee pursuant to a management 
agreement shall be considered to have an attributable interest in such 
incumbent LEC, incumbent cable company or LMDS licensee, if such person 
or its affiliate has authority to make decisions or otherwise engage in 
practices or activities that determine, or significantly influence:
    (i) The nature or types of services offered by such entity;
    (ii) The terms upon which such services are offered; or
    (iii) The prices charged for such services.
    (10) Any person or its affiliate who enters into a joint marketing 
arrangement with an incumbent LEC, an incumbent cable company, an LMDS 
licensee, or an affiliate of such entity, shall be considered to have 
an attributable interest in such incumbent LEC, incumbent cable 
company, LMDS licensee, or affiliate, if such person or its affiliate 
has authority to make decisions or otherwise engage in practices or 
activities that determine:
    (i) The nature or types of services offered by such entity;
    (ii) The terms upon which such services are offered; or
    (iii) The prices charged for such services.
    (f) Divestiture. Any incumbent LEC or incumbent cable company, or 
any entity owning an attributable interest in an incumbent LEC or 
incumbent cable company, that would otherwise be barred from 
participating in an LMDS auction by the eligibility restriction in 
paragraph (a) of this section, may be a party to an LMDS application 
(i.e., have an attributable interest in the applicant), and such 
applicant will be eligible for an LMDS license, pursuant to the 
divestiture procedures set forth in paragraphs (f)(1) through (f)(6) of 
this section.
    (1) Divestiture shall be limited to the following prescribed means:
    (i) An LMDS applicant holding an attributable interest in an 
incumbent LEC or incumbent cable company may divest such interest in 
the incumbent LEC or cable company.
    (ii) Other LMDS applicants disqualified under paragraph (a) of this 
section, will be permitted to:
    (A) Partition and divest that portion of the existing authorized or 
franchised service area that causes it to exceed the overlap 
restriction in paragraph (d) of this section, subject to applicable 
regulations of state and local governments; or
    (B) Partition and divest that portion of the LMDS geographic 
service area that exceeds the overlap restriction in paragraph (d) of 
this section.
    (iii) Divestiture may be to an interim trustee if a buyer has not 
been secured in the required period of time, as long as the LMDS 
applicant has no interest in or control of the trustee and the trustee 
may dispose of the license as it sees fit.
    (2) The LMDS applicant shall certify as an exhibit to its short 
form application that it and all parties to the application will come 
into compliance with paragraph (a) of this section.
    (3) If such LMDS applicant is a successful bidder in an auction, it 
must submit with its long-form application a signed statement 
describing its efforts to date and future plans to come into compliance 
with the eligibility restrictions in paragraph (a) of this section.
    (4) If such an LMDS applicant is otherwise qualified, its 
application will be granted subject to a condition that the applicant 
shall come into compliance with the eligibility restrictions in 
paragraph (a) of this section, within ninety (90) days of final grant 
of such LMDS license.
    (5) An LMDS applicant will be considered to have come into 
compliance with paragraph (a) of this section if:
    (i) In the case of the divestiture of a portion of an LMDS license, 
it has submitted to the Commission an application for license 
assignment or transfer of control of the requisite portion of the LMDS 
geographic service area.
    (ii) In all other cases, it has submitted to the Commission a 
signed certification that it has come into compliance with paragraph 
(a) of this section by the following means, identified in such 
certification:
    (A) By divestiture of a disqualifying interest in an incumbent LEC 
or incumbent cable company, identified in terms of the interest owned, 
the owner of such interest (and, if such owner is not the applicant 
itself, the relationship of the owner to the applicant), the name of 
the party to whom such interest has been divested, and the date such 
divestiture was executed; or
    (B) By divestiture of the requisite portion of the incumbent LEC's 
or incumbent cable company's existing authorized or franchised service 
area, identified in terms of the name of the party to whom such 
interest has been divested, the date such divestiture was executed, the 
name of any regulatory agency that must approve such divestiture, and 
the date on which an application was filed for this purpose with the 
regulatory agency.
    (6) If no such certification or application is tendered to the 
Commission within ninety (90) days of final grant of the initial 
license, the Commission may consider the short form certification and 
the long form divestiture statement to be material, bad faith 
misrepresentations and shall invoke the condition on the initial 
license, cancelling or rescinding it automatically, shall retain all 
monies paid to the Commission, and, based on the facts presented, shall 
take any other action it may deem appropriate.

    Note to Sec. 101.1003: Waivers of Sec. 101.1003(e) may be 
granted upon an affirmative showing:
    1. That the interest holder has less than a 50 percent voting 
interest in the licensee and there is an unaffiliated single holder 
of a 50 percent or greater voting interest;
    2. That the interest holder is not likely to affect the local 
market in an anticompetitive manner;
    3. That the interest holder is not involved in the operations of 
the licensee and does not have the ability to influence the licensee 
on a regular basis; and
    4. That grant of a waiver is in the public interest because the 
benefits to the public of common ownership outweigh any potential 
anticompetitive harm to the market.


Sec. 101.1005  Frequencies available.

    (a) The following frequencies are available for assignment to LMDS 
in two license blocks:

Block A of 1,150 MHz

27,500-28,350 MHz
29,100-29,250 MHz
31,075-31,225 MHz

Block B of 150 MHz

31,000-31,075 MHz
31,225-31,300 MHz

    (b) In Block A licenses, the frequencies are authorized as follows:
    (1) 27,500-28,350 MHz is authorized on a primary protected basis 
and is shared with Fixed Satellite Service (FSS) systems.
    (2) 29,100-29,250 MHz is shared on a co-primary basis with feeder 
links for non-geostationary orbit Mobile Satellite Service (NGSO/MSS) 
systems in the band and is limited to LMDS hub-to-

[[Page 23171]]

subscriber transmissions, as provided in Sec. 25.257 and 
Sec. 101.103(h).
    (3) 31,075-31,225 MHz is authorized on a primary protected basis 
and is shared with private microwave point-to-point systems licensed 
prior to March 11, 1997, as provided in Sec. 101.103(b).
    (c) In Block B licenses, the frequencies are authorized as follows:
    (1) On a primary protected basis if LMDS shares the frequencies 
with systems licensed as Local Television Transmission Service (LTTS) 
licensed prior to March 11, 1997, as provided in Sec. 101.103(b).
    (2) On a co-equal basis with systems not licensed as LTTS prior to 
March 11, 1997, as provided in Sec. 101.103(g).


Sec. 101.1007  Geographic service areas and number of licenses.

    LMDS service areas are Basic Trading Areas (BTAs) as defined in the 
Rand McNally 1992 Commercial Atlas & Marketing Guide, 123rd Edition, at 
pages 38-39, that identifies 487 BTAs based on the 50 States and as 
defined to include the BTA-like areas of the United States Virgin 
Islands, American Samoa, Guam, Mayaguez/Aguadilla-Ponce, Puerto Rico, 
San Juan, Puerto Rico, and the Commonwealth of Northern Marinas, for a 
total of 493 BTAs.


Sec. 101.1009  System operations.

    (a) The licensee may construct and operate any number of fixed 
stations anywhere within the area authorized by the license without 
prior authorization, except as follows:
    (1) A station would be required to be individually licensed if:
    (i) International agreements require coordination;
    (ii) Submission of an Environmental Assessment is required under 
Sec. 1.1307 of this chapter.
    (iii) The station would affect the radio quiet zones under 
Sec. 101.123.
    (2) Any antenna structure that requires notification to the Federal 
Aviation Administration (FAA) must be registered with the Commission 
prior to construction under Sec. 17.4 of this chapter.
    (b) Whenever a licensee constructs or makes system changes as 
described in paragraph (a) of this section, the licensee is required to 
notify the Commission within 30 days of the change under Sec. 101.61 
and include a statement of the technical parameters of the changed 
station.


Sec. 101.1011  Construction requirements and criteria for renewal 
expectancy.

    (a) LMDS licensees must make a showing of ``substantial service'' 
in their license area within ten years of being licensed. 
``Substantial'' service is defined as service which is sound, 
favorable, and substantially above a level of mediocre service which 
might minimally warrant renewal. Failure by any licensee to meet this 
requirement will result in forfeiture of the license and the licensee 
will be ineligible to regain it.
    (b) A renewal applicant involved in a comparative renewal 
proceeding shall receive a preference, commonly referred to as a 
renewal expectancy, that is the most important comparative factor to be 
considered in the proceeding as long as the applicant's past record for 
the relevant license period demonstrates that:
    (1) The renewal applicant has provided ``substantial'' service 
during its past license term; and
    (2) The renewal applicant has substantially complied with 
applicable FCC rules, policies, and the Communications Act of 1934, as 
amended.
    (c) In order to establish its right to a renewal expectancy, an 
LMDS renewal applicant involved in a comparative renewal proceeding 
must submit a showing explaining why it should receive a renewal 
expectancy. At a minimum, this showing must include:
    (1) A description of its current service in terms of geographic 
coverage and population served:
    (2) An explanation of its record of expansion, including a 
timetable of new construction to meet changes in demand for service:
    (3) A description of its investments in its LMDS system; and
    (4) Copies of all FCC orders finding the licensee to have violated 
the Communications Act or any FCC rule or policy; and a list of any 
pending proceedings that relate to any matter described in this 
paragraph.
    (d) In making its showing of entitlement to a renewal expectancy, a 
renewal applicant may claim credit for any system modification 
applications that were pending on the date it filed its renewal 
application. Such credit will not be allowed if the modification 
application is dismissed or denied.


Sec. 101.1013  Permissible communications services.

    (a) Authorizations for stations in the Local Multipoint 
Distribution Service will be granted to provide services on a common 
carrier basis or a non-common carrier basis or on both a common carrier 
and non-common carrier basis in a single authorization.
    (b) Stations may render any kind of communications service 
consistent with the Commission's rules and the regulatory status of the 
station to provide services on a common carrier or non-common carrier 
basis.
    (c) An applicant or licensee may submit a petition at any time 
requesting clarification of the regulatory status required to provide a 
specific communications service.


Sec. 101.1015  Application form and contents.

    (a) Applications for initial authorization are filed on FCC Form 
175 in accordance with Subpart M of this part, and part 1 of this 
chapter, subpart Q. FCC Form 600 is submitted subsequently either by 
the winning bidder, if an auction is held to decide among two or more 
mutually exclusive applications, or, in cases of no mutual exclusivity, 
by the sole applicant. Applications to amend pending applications and 
to modify licenses are filed on FCC Form 600.
    (b) Foreign ownership information. All LMDS applicants will provide 
the information requested on FCC Form 600 to address all of the 
eligibility requirements in Sec. 101.7. All licensees will keep the 
information updated.


Sec. 101.1017  Requesting regulatory status.

    (a) Initial applications. An applicant will specify on FCC Form 600 
if it is requesting authorization to provide services on a common 
carrier basis, a non-common carrier basis, or on both a common carrier 
and non-common carrier basis.
    (b) Amendment of pending applications. (1) Any pending application 
may be amended to:
    (i) Change the carrier status requested, or
    (ii) Add to the pending request in order to obtain both common 
carrier and non-common carrier status in a single license.
    (2) Amendments to change, or add to, the carrier status in a 
pending application are minor amendments filed under Sec. 101.29.
    (c) Modification of license. (1) A licensee may modify a license 
to:
    (i) Change the carrier status authorized, or
    (ii) Add to the status authorized in order to obtain both common 
carrier and non-common carrier status in a single license.
    (2) Applications to change, or add to, the carrier status in a 
license are modifications not requiring prior Commission authorization 
filed under Sec. 101.61. If the change results in the discontinuance, 
reduction, or impairment of an existing service, the licensee is also 
governed by Sec. 101.305(b) or (c) and submits the application under 
Sec. 101.61 in conformance with the time

[[Page 23172]]

frames and requirements of Sec. 101.305(b) or (c).
    40. Subpart M consisting of Secs. 101.1101 through 101.1112 is 
added to part 101 to read as follows:

Subpart M--Competitive Bidding Procedures for LMDS

Sec.
101.1101  LMDS service subject to competitive bidding.
101.1102  Competitive bidding design for LMDS.
101.1103  Competitive bidding mechanisms.
101.1104  Bidding application (FCC Forms 175 and 175-S).
101.1105  Submission of payments.
101.1106  Long-form application (FCC Form 600).
101.1107  Bidding credits for small businesses and entities with 
average gross revenues of not more than $75 million.
101.1108  Installment payments for licenses won by small businesses 
and entities with average gross revenues of not more than $75 
million.
101.1109  Certifications, disclosures, records maintenance and 
audits.
101.1110  Petitions to deny.
101.1111  Procedures for partitioned licenses.
101.1112  Definitions.


Sec. 101.1101  LMDS service subject to competitive bidding.

    Mutually exclusive initial applications for LMDS licenses are 
subject to competitive bidding procedures. The procedures set forth in 
part 1, subpart Q, of this chapter will apply unless otherwise provided 
in this part.


Sec. 101.1102  Competitive bidding design for LMDS.

    The Commission will employ a simultaneous multiple round auction 
design when choosing from among mutually exclusive initial applications 
to provide LMDS, unless otherwise specified by the Wireless 
Telecommunications Bureau before the auction.


Sec. 101.1103  Competitive bidding mechanisms.

    (a) Sequencing. The Commission will establish and may vary the 
sequence in which LMDS licenses are auctioned.
    (b) Grouping. The Commission will determine which licenses will be 
auctioned simultaneously or in combination based on interdependency and 
administrative circumstances.
    (c) Minimum bid increments. The Commission may, by public 
announcement before or during an auction, require minimum bid 
increments in dollar or percentage terms.
    (d) Stopping rules. The Commission may establish stopping rules 
before or during an auction in order to terminate the auction within a 
reasonable time.
    (e) Activity rules. The Commission may establish activity rules 
which require a minimum amount of bidding activity. In the event that 
the Commission establishes an activity rule in connection with a 
simultaneous multiple round auction, each bidder may request waivers of 
such rule during the auction. The Commission may, by public 
announcement either before or during the auction, specify or vary the 
number of waivers available to each bidder.
    (f) Bid withdrawal, default and disqualification payments. The 
Commission will impose payments on bidders who withdraw high bids 
during the course of an auction, who default on payments due after an 
auction terminates, or who are disqualified. Payments will be 
calculated as set forth in Secs. 1.2104(g) and 1.2109 of this chapter. 
When the amount of such a payment cannot be determined, a deposit of up 
to 20 percent of the amount bid on the license will be required.
    (g) 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.


Sec. 101.1104  Bidding application (FCC Forms 175 and 175-S).

    Each applicant to participate in competitive bidding for LMDS 
licenses must submit an application (FCC Forms 175 and 175-S) pursuant 
to the provisions of Sec. 1.2105 of this chapter.


Sec. 101.1105  Submission of payments.

    (a) Each applicant to participate in an LMDS auction will be 
required to submit an upfront payment in accordance with Sec. 1.2106 of 
this chapter as announced by the Wireless Telecommunications Bureau by 
Public Notice.
    (b) Winning bidders in LMDS auctions, except those businesses 
meeting the definition of small business or qualifying as a business 
with average gross revenues for the preceding three years of not more 
than $75 million under Sec. 101.1112, must submit a down payment to the 
Commission in an amount sufficient to bring their total deposits up to 
20 percent of their winning bids within ten business days following the 
release of a Public Notice announcing the close of the auction. Winning 
bidders, except those qualifying for installment payments, must pay the 
full balance of their winning bids within ten business days following 
the release of a Public Notice that the Commission is prepared to award 
the licenses.
    (c) Winning bidders in LMDS auctions that meet the definition of 
small business or businesses with average gross revenues for the 
preceding three years of not more than $75 million under Sec. 101.1112 
must submit a down payment to the Commission in an amount sufficient to 
bring their total deposits up to 10 percent of their winning bids 
within ten business days following the release of a Public Notice 
announcing the close of the auction, and up to 20 percent of their 
winning bids within ten business days of the release of a Public Notice 
that the Commission is prepared to award the licenses. The remaining 80 
percent of the purchase price will then be subject to the installment 
financing provisions of Sec. 101.1108.


Sec. 101.1106  Long-form application (FCC Form 600).

    Each successful bidder for an LMDS license must submit a long-form 
application (FCC Form 600) within ten business days after being 
notified by Public Notice that it is the winning bidder. Applications 
for LMDS on FCC Form 600 must be submitted in accordance with 
Sec. 1.2107 of this chapter, all applicable procedures set forth in the 
rules in this part, and any applicable Public Notices that the 
Commission may issue in connection with an auction. After an auction, 
the Commission will not accept long-form applications for LMDS licenses 
from anyone other than the auction winners and parties seeking 
partitioned licenses pursuant to agreements with auction winners under 
Sec. 101.1111 of this chapter.


Sec. 101.1107  Bidding credits for small businesses and entities with 
average gross revenues of not more than $75 million.

    (a) A winning bidder that qualifies as a small business pursuant to 
Sec. 101.1112 may use a bidding credit of 25 percent to lower the cost 
of its winning bid.
    (b) A winning bidder that has average gross revenues for the 
preceding three years of more than $40 million but not more than $75 
million pursuant to Sec. 101.1112 may use a bidding credit of 15 
percent to lower the cost of its winning bid.
    (c) The bidding credits referenced in paragraphs (a) and (b) of 
this section are not cumulative.
    (d) Unjust enrichment. (1) A licensee that utilizes a bidding 
credit, and that during the initial license term seeks to assign or 
transfer control of a license to an entity that does not meet the

[[Page 23173]]

eligibility criteria for a bidding credit, will be required to 
reimburse the U.S government for the amount of the bidding credit plus 
interest at the rate imposed for installment financing at the time the 
license was awarded, as a condition of Commission approval of the 
assignment or transfer. If, within the initial term of the license, a 
licensee that utilizes a bidding credit seeks to assign or transfer 
control of a license to an entity that is eligible for a lower bidding 
credit, the difference between the bidding credit obtained by the 
assigning party and the bidding credit for which the acquiring party 
would qualify, plus interest at the rate imposed for installment 
financing at the time the license was awarded, must be paid to the U.S. 
government as a condition of Commission approval of the assignment or 
transfer. If, within the initial license term, a licensee that utilizes 
a bidding credit seeks to make any ownership change that would result 
in the licensee losing eligibility for a bidding credit (or qualifying 
for a lower bidding credit), the amount of the bidding credit (or the 
difference between the bidding credit originally obtained and the 
bidding credit for which the restructured licensee would qualify), plus 
interest at the rate imposed for installment financing at the time the 
license was awarded, must be paid to the U.S. government as a condition 
of Commission approval of the ownership change.
    (2) The amount of payments made pursuant to paragraph (d)(1) of 
this section will be reduced over time as follows:
    (i) A transfer in the first two years of the license term will 
result in a forfeiture of 100 percent of the value of the bidding 
credit (or, in the case of small businesses transferring to businesses 
having average gross revenues of more than $40 million but not more 
than $75 million, 100 percent of the difference between the bidding 
credit received by the former and the bidding credit for which the 
latter is eligible);
    (ii) In year three of the license term the payment will be 75 
percent;
    (iii) In year four the payment will be 50 percent; and
    (iv) In year five the payment will be 25 percent, after which there 
will be no required payment.


Sec. 101.1108  Installment payments for licenses won by small 
businesses and entities with average gross revenues of not more than 
$75 million.

    (a) A winning bidder that qualifies as a small business pursuant to 
Sec. 101.1112 must submit to the Commission a down payment of 20 
percent of the net auction price for the license pursuant to 
Sec. 101.1105(c) and may pay the remaining 80 percent of the net 
auction price for the license in installment payments over the term of 
the license. Interest shall be imposed based on the rate for ten-year 
U.S. Treasury obligations applicable on the date the license is 
granted, plus 2.5 percent. Payments shall include interest only for the 
first two years and payments of interest and principal amortized over 
the remaining eight years of the license term.
    (b) A winning bidder that has average gross revenues for the three 
preceding years of more than $40 million but not more than $75 million 
pursuant to Sec. 101.1112 must submit to the Commission a down payment 
of 20 percent of the net auction price for the license pursuant to 
Sec. 101.1105(c) and may pay the remaining 80 percent of the net 
auction price for the license in installment payments. Interest shall 
be imposed based on the rate for ten-year U.S. Treasury obligations 
applicable on the date the license is granted, plus 2.5 percent. 
Payment of interest and principal shall be amortized over the ten years 
of the license term.
    (c) Unjust enrichment. A licensee that utilizes installment 
financing and that seeks to assign or transfer control of a license to 
an entity not meeting the eligibility standards for installment 
payments must pay not only unpaid principal but also any unpaid 
interest accrued through the date of assignment or transfer as a 
condition of Commission approval. If a licensee that utilizes 
installment financing seeks to assign or transfer control of a license 
to an entity qualifying for a less favorable installment plan, its 
payment plan will be adjusted to reflect the assignee's or transferee's 
eligibility status as a condition of Commission approval of the 
assignment or transfer. If a licensee that utilizes installment 
financing seeks to change its ownership structure in such a way that 
would result in a loss of eligibility for installment payments, it must 
pay the unpaid principal and accrued interest as a condition of 
Commission approval of the change. If such a change in ownership would 
result in the licensee qualifying for a less favorable installment 
plan, it must adjust its payment plan to reflect its new eligibility 
status as a condition of Commission approval. A licensee may not change 
its payment plan to a more favorable plan.
    (d) Late installment payment. Any licensee that submits a scheduled 
installment payment more than fifteen days late will be charged a late 
payment fee equal to five percent of the amount of the past due 
payment.
    (e) Payments will be applied in the following order: late charges, 
interest charges, principal payments.


Sec. 101.1109  Certifications, disclosures, records maintenance and 
audits.

    (a) Short-form applications: certifications and disclosure. In 
addition to certifications and disclosures required in part 1, subpart 
Q, of this chapter, each applicant for an LMDS license which qualifies 
as a small business or a business with average gross revenues for the 
three preceding years of more than $40 million but not more than $75 
million shall append the following information as an exhibit to its FCC 
Form 175:
    (1) The identity of the applicant's affiliates and controlling 
principals; and
    (2) The applicant's gross revenues, computed in accordance with 
Sec. 101.1112.
    (b) Long-form applications: certifications and disclosure. In 
addition to the requirements in Sec. 1.2107 of this chapter, each 
applicant submitting a long-form application for an LMDS license and 
qualifying as a small business or a business with average gross 
revenues for the three preceding years of more than $40 million but not 
more than $75 million shall, in an exhibit to its long-form 
application:
    (1) Disclose separately and in the aggregate the gross revenues, 
computed in accordance with Sec. 101.1112, for each of the following: 
the applicant, the applicant's affiliates, the applicant's controlling 
principals, and, if a consortium of small businesses or businesses with 
average gross revenues for the three preceding years of more than $40 
million but not more than $75 million, the members of the joint 
venture;
    (2) List and summarize all agreements or other instruments (with 
appropriate references to specific provisions in the text of such 
agreements and instruments) that support the applicant's eligibility as 
a small business or a business with average gross revenues for the 
three preceding years of more than $40 million but not more than $75 
million, including the establishment of de facto and de jure control; 
such agreements and instruments include, but are not limited to, 
articles of incorporation and bylaws, shareholder agreements, voting or 
other trust agreements, franchise agreements, and any other relevant 
agreements including letters of intent, oral or written; and
    (3) List and summarize any investor protection agreements, 
including rights

[[Page 23174]]

of first refusal, supermajority clauses, options, veto rights, and 
rights to hire and fire employees and to appoint members to boards of 
directors or management committees.
    (c) Records maintenance. All winning bidders qualifying as small 
businesses or businesses with average gross revenues for the three 
preceding years of more than $40 million but not more than $75 million 
shall maintain at their principal place of business an updated file of 
ownership, revenue, and asset information, including any document 
necessary to establish eligibility as a small business or business with 
average gross revenues for the three preceding years of more than $40 
million but not more than $75 million. Licensees (and their successors-
in-interest) shall maintain such files for the term of the license. 
Applicants that do not obtain the license(s) for which they applied 
shall maintain such files until the grant of such license(s) is final, 
or one year from the date of the filing of their short-form application 
(FCC Form 175), whichever is earlier.
    (d) Audits. (1) Applicants and licensees claiming eligibility as a 
small business or business with average gross revenues for the three 
preceding years of more than $40 million but not more than $75 million 
shall be subject to audits by the Commission. Selection for audit may 
be random, on information, or on the basis of other factors.
    (2) Consent to such audits is part of the certification included in 
the short-form application (FCC Form 175). Such consent shall include 
consent to the audit of the applicant's or licensee's books, documents 
and other material (including accounting procedures and practices) 
regardless of form or type, sufficient to confirm that such applicant's 
or licensee's representations are, and remain, accurate. Such consent 
shall include inspection at all reasonable times of the facilities, or 
parts thereof, engaged in providing and transacting business, or 
keeping records regarding licensed LMDS service, and shall also include 
consent to the interview of principals, employees, customers and 
suppliers of the applicant or licensee.


Sec. 101.1110  Petitions to deny.

    Procedures regarding petitions to deny long-form applications in 
the LMDS service will be governed by Sec. 1.2108 (b) through (d) of 
this chapter.


Sec. 101.1111  Procedures for partitioned licenses.

    (a) LMDS licensees may apply to partition their licensed geographic 
service area or disaggregate their licensed spectrum.
    (b) If partitioned licenses or disaggregated licenses are being 
applied for in conjunction with a license(s) to be awarded through 
competitive bidding procedures--
    (1) The applicable procedures for filing short-form applications 
and for submitting upfront payments and down payments contained in this 
chapter shall be followed by the applicant, which must disclose as part 
of its short-form application all parties to agreement(s) with or among 
entities to partition or disaggregate the license pursuant to this 
section, if won at auction. See Sec. 1.2105(a)(2)(viii).
    (2) Each entity that is a party to an agreement to partition the 
license shall file a long-form application for its respective, mutually 
agreed-upon geographic area or spectrum together with the application 
for the remainder of the BTA or spectrum filed by the auction winner.
    (c) If the partitioned or disaggregated license is being applied 
for as a partial assignment of the license following grant of the 
initial license, request for authorization for partial assignment of a 
license shall be made pursuant to Sec. 101.115(f).


Sec. 101.1112  Definitions.

    (a) Scope. The definitions in this section apply to Secs. 101.1101 
through 101.1112, unless otherwise specified in those sections.
    (b) Small business; consortium. (1) A small business is an entity 
that, together with its affiliates and controlling principals, has 
average gross revenues for the three preceding years of not more than 
$40 million.
    (2) For purposes of determining whether an entity meets the 
definition of small business or qualifies as a business with average 
gross revenues for the three preceding years of more than $40 million 
but not more than $75 million, the gross revenues of the applicant, its 
affiliates and controlling principals shall be considered on a 
cumulative basis and aggregated.
    (3) Consortium. A consortium of small businesses, or a consortium 
of businesses with average gross revenues for the three preceding years 
of more than $40 million but not more than $75 million, is a 
conglomerate organization formed as a joint venture between or among 
mutually independent business firms, each of which individually 
satisfies the definition of a small business or business with average 
gross revenues for the three preceding years of more than $40 million 
but not more than $75 million. Each individual member must establish 
its eligibility as a small business or business with average gross 
revenues for the three preceding years of more than $40 million but not 
more than $75 million. Where an applicant (or licensee) is a consortium 
of small businesses or a consortium of businesses with average gross 
revenues for the three preceding years of more than $40 million but not 
more than $75 million, the gross revenues of each business shall not be 
aggregated.
    (c) Gross revenues. Gross revenues shall mean all income received 
by an entity, whether earned or passive, before any deductions are made 
for costs of doing business (e.g., cost of goods sold), as evidenced by 
audited financial statements for the relevant number of most recently 
completed calendar years, or, if audited financial statements were not 
prepared on a calendar-year basis, for the most recently completed 
fiscal years preceding the filing of the applicant's short-form 
application (FCC Form 175). If an entity was not in existence for all 
or part of the relevant period, gross revenues shall be evidenced by 
the audited financial statements of the entity's predecessor-in-
interest or, if there is no identifiable predecessor-in-interest, 
unaudited financial statements certified by the applicant as accurate. 
When an applicant does not otherwise use audited financial statements, 
its gross revenues may be certified by its chief financial officer or 
its equivalent.
    (d) Affiliate--(1) Basis for affiliation. An individual or entity 
is an affiliate of an applicant if such individual or entity:
    (i) Directly or indirectly controls or has the power to control the 
applicant, or
    (ii) Is directly or indirectly controlled by the applicant, or
    (iii) Is directly or indirectly controlled by a third party or 
parties who also control or have the power to control the applicant, or
    (iv) Has an ``identity of interest'' with the applicant.
    (2) Nature of control in determining affiliation. (i) Every 
business concern is considered to have one or more parties who directly 
or indirectly control or have the power to control it. Control may be 
affirmative or negative and it is immaterial whether it is exercised so 
long as the power to control exists.

    Example for paragraph (d)(2)(i). An applicant owning 50 percent 
of the voting stock of another concern would have negative power to 
control such concern since such party can block any action of the 
other stockholders. Also, the bylaws of a corporation may permit a 
stockholder with less than 50 percent of the voting stock to

[[Page 23175]]

block any actions taken by the other stockholders in the other 
entity. Affiliation exists when the applicant has the power to 
control a concern while at the same time another person, or persons, 
are in control of the concern at the will of the party or parties 
with the power of control.

    (ii) Control can arise through stock ownership; occupancy of 
director, officer, or key employee positions; contractual or other 
business relations; or combinations of these and other factors. A key 
employee is an employee who, because of her position in the concern, 
has a critical influence in or substantive control over the operations 
or management of the concern.

    (iii) Control can arise through management positions if the voting 
stock is so widely distributed that no effective control can be 
established.

    Example for paragraph (d)(2)(iii). In a corporation where the 
officers and directors own various size blocks of stock totaling 40 
percent of the corporation's voting stock, but no officer or 
director has a block sufficient to give him control or the power to 
control and the remaining 60 percent is widely distributed with no 
individual stockholder having a stock interest greater than 10 
percent, management has the power to control. If persons with such 
management control of the other entity are controlling principals of 
the applicant, the other entity will be deemed an affiliate of the 
applicant.

    (3) Identity of interest between and among persons. Affiliation can 
arise between or among two or more persons with an identity of 
interest, such as members of the same family or persons with common 
investments. In determining if the applicant controls or is controlled 
by a concern, persons with an identity of interest will be treated as 
though they were one person.
    (i) Spousal affiliation. Both spouses are deemed to own or control 
or have the power to control interests owned or controlled by either of 
them, unless they are subject to a legal separation recognized by a 
court of competent jurisdiction in the United States.
    (ii) Kinship affiliation. Immediate family members will be presumed 
to own or control or have the power to control interests owned or 
controlled by other immediate family members. In this context 
``immediate family member'' means father, mother, husband, wife, son, 
daughter, brother, sister, father-or mother-in-law, son-or daughter-in-
law, brother-or sister-in-law, step-father or -mother, step-brother or 
-sister, step-son or -daughter, half-brother or -sister. This 
presumption may be rebutted by showing that:
    (A) The family members are estranged,
    (B) The family ties are remote, or
    (C) The family members are not closely involved with each other in 
business matters.

    Example for paragraph (d)(3)(ii). A owns a controlling interest 
in Corporation X. A's sister-in-law, B, has a controlling interest 
in an LMDS license application. Because A and B have a presumptive 
kinship affiliation, A's interest in Corporation X is attributable 
to B, and thus to the applicant, unless B rebuts the presumption 
with the necessary showing.

    (4) Affiliation through stock ownership. (i) An applicant is 
presumed to control or have the power to control a concern if she owns 
or controls or has the power to control 50 percent or more of its 
voting stock.
    (ii) An applicant is presumed to control or have the power to 
control a concern even though he owns, controls, or has the power to 
control less than 50 percent of the concern's voting stock, if the 
block of stock she owns, controls, or has the power to control is large 
as compared with any other outstanding block of stock.
    (iii) If two or more persons each owns, controls or has the power 
to control less than 50 percent of the voting stock of a concern, such 
minority holdings are equal or approximately equal in size, and the 
aggregate of these minority holdings is large as compared with any 
other stock holding, the presumption arises that each one of these 
persons individually controls or has the power to control the concern; 
however, such presumption may be rebutted by a showing that such 
control or power to control, in fact, does not exist.
    (5) Affiliation arising under stock options, convertible 
debentures, and agreements to merge. Stock options, convertible 
debentures, and agreements to merge (including agreements in principle) 
are generally considered to have a present effect on the power to 
control the concern. Therefore, in making a size determination, such 
options, debentures, and agreements will generally be treated as though 
the rights held thereunder had been exercised. However, neither an 
affiliate nor an applicant can use such options and debentures to 
appear to terminate its control over another concern before it actually 
does so.

    Example 1 for paragraph (d)(5). If company B holds an option to 
purchase a controlling interest in company A, who holds a 
controlling interest in an LMDS application, the situation is 
treated as though company B had exercised its rights and had become 
owner of a controlling interest in company A. The gross revenues of 
company B must be taken into account in determining the size of the 
applicant.
    Example 2 for paragraph (d)(5). If a large company, BigCo, holds 
70 percent (70 of 100 outstanding shares) of the voting stock of 
company A, who holds a controlling interest in an LMDS license 
application, and gives a third party, SmallCo, an option to purchase 
50 of the 70 shares owned by BigCo, BigCo will be deemed to be an 
affiliate of company A, and thus the applicant, until SmallCo 
actually exercises its options to purchase such shares. In order to 
prevent BigCo from circumventing the intent of the rule, which 
requires such options to be considered on a fully diluted basis, the 
option is not considered to have present effect in this case.
    Example 3 for paragraph (d)(5). If company A has entered into an 
agreement to merge with company B in the future, the situation is 
treated as though the merger has taken place.

    (6) Affiliation under voting trusts. (i) Stock interests held in 
trust shall be deemed controlled by any person who holds or shares the 
power to vote such stock, to any person who has the sole power to sell 
such stock, and to any person who has the right to revoke the trust at 
will or to replace the trustee at will.
    (ii) If a trustee has a familial, personal or extra-trust business 
relationship to the grantor or the beneficiary, the stock interests 
held in trust will be deemed controlled by the grantor or beneficiary, 
as appropriate.
    (iii) If the primary purpose of a voting trust, or similar 
agreement, is to separate voting power from beneficial ownership of 
voting stock for the purpose of shifting control of or the power to 
control a concern in order that such concern or another concern may 
meet the Commission's size standards, such voting trust shall not be 
considered valid for this purpose regardless of whether it is or is not 
recognized within the appropriate jurisdiction.
    (7) Affiliation through common management. Affiliation generally 
arises where officers, directors, or key employees serve as the 
majority or otherwise as the controlling element of the board of 
directors or the management (or both) of another entity.
    (8) Affiliation through common facilities. Affiliation generally 
arises where one concern shares office space, employees, or other 
facilities (or any combination of the foregoing) with another concern, 
particularly where such concerns are in the same or related industry or 
field of operations, or where such concerns were formerly affiliated, 
and through these sharing arrangements one concern has control, or 
potential control, of the other concern.
    (9) Affiliation through contractual relationships. Affiliation 
generally arises where one concern is dependent upon another concern 
for contracts and business to such a degree that one

[[Page 23176]]

concern has control, or potential control, of the other concern.
    (10) Affiliation under joint venture arrangements. (i) A joint 
venture for size determination purposes is an association of concerns 
or individuals (or both), with interests in any degree or proportion, 
formed by contract, express or implied, to engage in and carry out a 
single, specific business venture for joint profit for which purpose 
they combine their efforts, property, money, skill and knowledge, but 
not on a continuing or permanent basis for conducting business 
generally. The determination whether an entity is a joint venture is 
based upon the facts of the business operation, regardless of how the 
business operation may be designated by the parties involved. An 
agreement to share profits/losses proportionate to each party's 
contribution to the business operation is a significant factor in 
determining whether the business operation is a joint venture.
    (ii) The parties to a joint venture are considered to be affiliated 
with each other.

[FR Doc. 97-9711 Filed 4-28-97; 8:45 am]
BILLING CODE 6712-01-P


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