15978 Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations

1Omnibus Budget Reconciliation Act of 1993,

Pub. L. 103–66, Title VI, sections 6002(b)(2)(A),

6002(b)(2)(B), 107 Stat. 312, 392 (1993) (Budget

Act). Section 3(n) of the Communications Act has

been redesignated as section 3(14). See section

3(c)(4) of the Telecommunications Act of 1996. The

reference to former section 3(n) in section 332 has

been changed to a reference to section 3. See section

3(d)(2) of the Telecommunications Act of 1996.

2We refer herein to licenses granted pursuant to

this new framework as Phase II licenses. Licenses

granted under the rules that existed prior to the

adoption of this Order are referred to herein as

Phase I licenses.

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Parts 2 and 90

[PR Docket No. 89–552, GN Docket No. 93–

252, PP Docket No. 93–253; FCC 97–57]

Provision for the Use of the 220–222

MHz Band by the Private Land Mobile

Radio Service

AGENCY: Federal Communications

Commission.

ACTION: Final rule.

SUMMARY: The Commission adopts a

Third Report and Order and Fifth

Notice of Proposed Rulemaking in this

proceeding. The Fifth Notice of

Proposed Rulemaking portion of this

decision is summarized elsewhere in

this issue of the Federal Register. The

Third Report and Order adopts rules to

govern the future operation and

licensing of the 220–222 MHz band.

This action is taken as part of the

Commission’s continuing

implementation of the regulatory

framework for mobile radio services

enacted by Congress in the Omnibus

Budget Reconciliation Act of 1993. This

Third Report and Order also contains

proposed and/or modified information

collections subject to the Paperwork

Reduction Act of 1995 (PRA). These will

be submitted to the Office of

Management and Budget (OMB) for

review under the PRA. The general

public and other Federal agencies are

invited to comment on the proposed or

modified information collections

contained in this proceeding.

DATES: Effective: August 21, 1997.

Written comments by the public on the

proposed and/or modified information

collections are due June 2, 1997.

ADDRESSES: 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,

NW., Washington, DC 20554, or via the

Internet to dconway@fcc.gov.

FOR FURTHER INFORMATION CONTACT:

Marty Liebman or Mary Woytek, 202–

418–1310, or Frank Stilwell, 202–418–

0660. For additional information

concerning the information collections

contained in this Third Report and

Order, contact Dorothy Conway at 202–

418–0217, or via the Internet at

dconway@fcc.gov.

SUPPLEMENTARY INFORMATION: This is a

synopsis of the Third Report and Order

portion of the Third Report and Order

and Fifth Notice of Proposed

Rulemaking in PR Docket No. 89–552,

GN Docket No. 93–252, and PP Docket

No. 93–253, FCC 97–57, adopted

February 19, 1997, and released March

12, 1997. The Fifth Notice of Proposed

Rulemaking is summarized elsewhere in

this edition of the Federal Register. The

complete text of the Third Report and

Order is available for inspection and

copying during normal business hours

in the FCC Reference Center (Room

239), 1919 M Street, NW., Washington,

DC., and also may be purchased from

the Commission’s copy contractor,

International Transcription Service, at

(202) 857–3800, 2100 M Street, NW.,

Suite 140, Washington, DC. 20037.

Paperwork Reduction Act

1. This Third Report and Order

contains either a proposed or modified

information collection. The

Commission, as part of its continuing

effort to reduce paperwork burdens,

invites the general public to comment

on the information collections

contained in this Third Report and

Order, as required by the Paperwork

Reduction Act of 1995, Public Law 104–

13. Public and agency comments are

due June 2, 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: New

Collection.

Title: Private Land Mobile Radio

Services Part 90.

Form No.: N/A.

Type of Review: New collection.

Respondents: Licensees in the 220–

222 MHz band; applicants for licenses

in the 220–222 MHz band; and

governmental entities.

Number of Respondents:

Approximately 34,200.

Estimated Time Per Response:

Approximately 5 hours.

Total Annual Burden: Approximately

176,400 hours.

Needs and Uses: The information

collected will be used by the

Commission to verify licensee

compliance with Commission rules and

regulations, to ensure the integrity of the

220 MHz service, and to ensure that

licensees continue to fulfill their

statutory responsibilities in accordance

with the Communications Act of 1934.

Synopsis of the Third Report and Order

2. This Third Report and Order

adopts rules to govern the future

operation and licensing of the 220–222

MHz band (220 MHz service). This

action is taken as part of the

Commission’s continuing

implementation of the regulatory

framework for mobile radio services

enacted by Congress in section 6002(b)

of the Omnibus Budget Reconciliation

Act of 1993, which amended sections

3(n) and 332 of the Communications Act

of 1934.1 As part of the implementation

of the Budget Act, the Commission

initiated a series of rulemaking

proceedings to provide guidelines for

the regulation of commercial and

private mobile radio services, including

the 220 MHz service, consistent with

the policy of regulatory symmetry as

reflected in the revisions to section 332

of the Act.

3. One of the Commission’s actions

resulting from these proceedings, the

CMRS Third Report and Order in GN

Docket No. 93–252, 59 FR 59945

(November 21, 1994), addressed a

variety of issues relating to the licensing

of the 220 MHz service, but deferred a

detailed examination of that service to

a separate rulemaking proceeding. That

proceeding was initiated by the

adoption of the Second Memorandum

Opinion and Order and Third Notice of

Proposed Rulemaking in PR Docket No.

89–552, 60 FR 46564 (September 7,

1995), where the Commission proposed

a new licensing plan for 220 MHz

service. The Third Report and Order

adopted today generally establishes that

proposal for the Phase II 2 licensing of

the 220–222 MHz band, with some

modifications. The Commission’s

decisions in the Third Report and Order

are summarized as follows:

4. The Commission will return the

pending, mutually exclusive

applications for the four noncommercial, Phase I nationwide licenses

and adopt a new licensing procedure for

the 30 channels associated with these

licenses. The 30 channels will be

licensed on a nationwide basis to all

applicants—i.e., applicants that intend

to use the channels to offer commercial
Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations 15979

services as well as applicants that

intend to use the channels for their

private, internal use. The channels will

be assigned, in the form of three 10-

channel authorizations, through

competitive bidding, based upon the

Commission’s conclusion that the

principal use of the spectrum will be for

the provision of for-profit, subscriberbased services. The license term will be

ten (10) years, and licensees will be

required to meet five- and ten-year

construction benchmarks.

5. The Commission will assign Phase

II, non-nationwide 220 MHz channels as

follows: Fifty channels will be assigned

in 175 geographic areas defined as

Economic Areas by the Bureau of

Economic Analysis, Department of

Commerce (‘‘EA licenses’’) and 75

channels in the geographic areas

defined by six ‘‘Regional Economic Area

Groupings’’ (‘‘Regional licenses’’). Codes

and names for the Economic Areas are

listed in Appendix D of the full text of

this decision. The Regional Economic

Area Groupings are described in

Appendix E of the full text of this

decision. The Commission will make

these channels available to all eligible

applicants, and resolve mutually

exclusive applications for these

channels through competitive bidding.

EA and Regional licensees will be

permitted to operate stations anywhere

within their geographic borders,

provided that their transmissions do not

exceed a predicted field strength of 38

dBuV/m at their border, and they

protect the base stations of Phase I

licensees in accordance with the

existing co-channel separation criteria

for 220 MHz stations. The Commission

adopts a 10-year license term for EA and

Regional licensees, and will require EA

and Regional licensees to meet five- and

ten-year construction benchmarks.

6. The Commission adopts the

following Phase II band plan for nonnationwide channels:

NON-NATIONWIDE 220 MHZ CHANNEL

ALLOCATION PLAN

Channels

EA Block

A: Channel Groups 3 2, 13 ........... 10

B: Channel Groups 3, 16 .............. 10

C: Channel Groups 5, 18 ............. 10

D: Channel Groups 8, 19 ............. 10

E: Channels 171–180 ................... 10

Total ....................................... 50

Regional Block

F: Channel Groups 1, 6, 11 .......... 15

G: Channel Groups 4, 9, 14 ......... 15

H: Channel Groups 7, 12, 17 ....... 15

I: Channel Groups 10, 15, 20 ....... 15

NON-NATIONWIDE 220 MHZ CHANNEL

ALLOCATION PLAN—Continued

Channels

J: Channels 186–200 .................... 15

Total ....................................... 75

3The Channel Groups indicated in the allocation plan are the 5-channel, non-contiguous

assignments identified as ‘‘Group Nos. 1, 2,

3,’’ etc., in § 90.721 of the Commission’s rules,

47 CFR 90.721.

7. The Commission will continue to

assign, on a single-station basis, 10

channels to applicants eligible in the

Public Safety Radio Service (PSRS) and

five channels to applicants eligible in

the Emergency Medical Radio Service

(EMRS) to meet internal

communications needs. The

Commission will assign five of the 10

PSRS channel pairs on a shared basis to

all public safety eligibles. This will

enable public safety licensees within a

particular geographic area to share these

channels and coordinate the location

and operation of base stations on these

channels, which will enable them to

communicate more effectively with each

other during emergencies. The

Commission will assign channels in the

PSRS and EMRS pools on a first-come,

first-served basis and resolve mutually

exclusive applications by random

selection procedures.

8. The Commission will allow Phase

I and Phase II, nationwide and nonnationwide 220 MHz licensees to

operate paging systems without the

requirement that such use be on an

ancillary basis to land mobile

operations. Phase I and Phase II,

nationwide and non-nationwide 220

MHz licensees, will also be allowed to

aggregate any and all of their

authorized, contiguous channels to

operate on channels wider than 5 kHz,

so long as they comply with a

prescribed spectrum efficiency

standard.

9. The Commission also modifies

existing 220 MHz rules with regard to

certain technical and operational

matters. Specifically, Phase I and Phase

II, nationwide and non-nationwide nonCMRS 220 MHz licensees will be

permitted to operate fixed stations

without the requirement that such use

be on an ancillary basis to land mobile

operations; and licensees using the 220–

222 MHz band for geophysical telemetry

operations will be permitted to operate

fixed stations on a temporary basis,

without the requirement that such use

be ancillary to land mobile operations,

and on a secondary basis to Phase I and

Phase II licensees authorized to operate

on 220 MHz channels on a primary

basis.

10. The Commission adopts

procedures and definitions for initial

applications, amended applications,

applications to modify authorizations,

and renewal of authorizations. First, the

Commission defines initial applications

for 220 MHz licenses as applications for

the nationwide, EA, and Regional

licenses to be assigned in Phase II.

Second, the Commission adopts the

same procedures for amending

applications and modifying

authorizations for Phase II 220 MHz

licenses that are established for other

Part 90 Commercial Mobile Radio

Services (CMRS). Third, the

Commission adopts the same

procedures for obtaining grants of

Special Temporary Authority for Phase

II 220 MHz licenses that are established

for other Part 90 CMRS services. Fourth,

the Commission adopts for all 220 MHz

licensees the renewal standards adopted

in the CMRS Third Report and Order for

Part 90 CMRS services.

Auction Rules

Competitive Bidding Design

11. A total of 908 licenses (3

nationwide, 30 Regional, and 875

Economic Area (‘‘EA’’) licenses) will be

awarded in the Phase II 220 MHz

service. The Commission will use a

simultaneous multiple round auction to

award these licenses. These licenses

will be significantly interdependent,

because of the desirability of aggregation

across spectrum blocks and geographic

areas. 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 if the licenses were

auctioned separately or through sealed

bidding.

License Grouping

12. Grouping interdependent licenses

and putting them up for bid at the same

time facilitates awarding licenses to

bidders who value them most highly by

providing bidders with information

about the prices of complementary and

substitutable licenses during the course

of an auction. As a result, the

Commission plans to hold a single

simultaneous multiple round auction

for all nationwide, Regional, and EA 220

MHz licenses. The Commission reserves

the discretion, however, to auction each

of these license groupings (i.e.,

nationwide, Regional, EA) separately or

in different combinations (e.g.,

nationwide and Regional) if there are

administrative reasons for doing so.
15980 Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations

Bid Increments and Tie Bids

13. The general guidelines for bid

increments will be announced by Public

Notice prior to the auction. In the case

of a tie bid, the high bidder will be

determined by the order in which the

bids were received by the Commission.

Stopping Rules

14. The Commission adopts a

simultaneous stopping rule for the 220

MHz service auction, and elects not to

employ a hybrid rule or a market-bymarket closing rule. Under a

simultaneous stopping rule, bidding

will remain open on all licenses in an

auction until bidding stops on every

license. The Commission concludes that

the substitutability between and among

licenses in different geographic areas

and the importance of preserving

bidders’ ability to pursue back-up

strategies support the use of a

simultaneous stopping rule. The Phase

II 220 MHz service auction will close

after one round passes in which no new

valid bids or proactive activity rule

waivers (as discussed below) are

submitted. The Commission retains the

discretion, however, to keep the auction

open even if no new acceptable bids and

no proactive waivers are submitted in a

single round. In the event that this

discretion is exercised, the effect will be

the same as if a bidder has submitted a

proactive waiver. The Commission also

retains the discretion to announce

market-by-market closing.

15. The Commission further retains

the discretion to declare, at any point,

that the auction will end after some

specified number of additional rounds.

If this option is exercised, bids will be

accepted only on licenses where the

high bid has increased in the last three

rounds. This will deter bidders from

continuing to bid on a few low value

licenses solely to delay the closing of

the auction. It also will enable the

Commission to end the auction when it

determines that the benefits of

terminating the auction and issuing

licenses exceed the likely benefits of

continuing to allow bidding.

Activity Rules

16. The Commission will employ the

Milgrom-Wilson activity rule in

conjunction with the simultaneous

stopping rule in a manner similar to that

employed in prior FCC auctions. In each

round of Stage I, a bidder that wishes to

maintain its current eligibility must be

active on licenses encompassing at least

sixty percent of the activity units for

which it currently is eligible. In each

round of Stage II, a bidder that wishes

to maintain its current eligibility in the

next round is required to be active on

at least eighty percent of the activity

units for which it is eligible in the

current round. In each round of Stage

III, a bidder that wishes to maintain its

current eligibility must be active on

licenses encompassing at least ninetyeight percent of the activity units for

which it is eligible in the current round.

17. The Commission believes that

initially establishing required activity at

these levels will achieve a proper

balance between allowing for bidder

flexibility and completing the auction

within a reasonable time. Requiring a

100 percent level of activity in Stage III,

as originally proposed, might inhibit

bidder flexibility and be unduly

restrictive. In addition, activity levels of

sixty, eighty and ninety-eight percent

are far easier to administer, both for

bidders and for the Commission, than

the fractional one-third, two-thirds and

100 percent activity levels initially

proposed. In addition to easing

administrative burdens, the increased

activity requirement will require

bidders to focus their bidding and will

contribute to increasing the pace of the

auction.

18. As in prior auctions, the transition

from one stage to the next in the Phase

II 220 MHz auction will be determined

based on a variety of measures of bidder

activity, including, but not limited to,

the auction activity level (i.e., the sum

of bidding units of those licenses whose

high bid increased in the current round,

as a percentage of the total bidding units

of all licenses in the auction), 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.

In no case can the auction revert to an

earlier stage. The Wireless

Telecommunications Bureau will

announce when the auction will move

from one stage to the next. To avoid the

consequences of clerical errors and to

compensate for unusual circumstances

that might delay a bidder’s bid

preparation or submission on a

particular day, bidders will be provided

with five activity rule waivers that may

be used in any round during the course

of the auction. Bidders will have the

option to proactively enter an activity

rule waiver during the bid submission

period. A proactive waiver, as

distinguished from an automatic waiver,

is one requested by the bidder. If a

bidder submits a proactive waiver in a

round in which no other bidding

activity occurs, the auction will remain

open.

Duration of Bidding Rounds

19. The Wireless Telecommunications

Bureau will announce the duration of

and intervals between bidding rounds,

either by Public Notice prior to the

auction or by announcement during the

auction.

Pre-Auction Application Procedures

20. Bidders will be able to submit bids

from remote locations using special

bidding software or by telephone. The

Commission has adopted a fee schedule

for obtaining access to the Commission’s

database and remote bidding software

packages. The remote access bidding

software package is available for

$175.00. The charge for on-line remote

access via a 900 number is $2.30 per

minute. Bidders also may bid via

telephone for no charge. There is no

charge for the first Bidder Information

Package, and a $16.00 fee for each

additional package that is subsequently

requested by the same party. Bidders

will be permitted to bid electronically

only if they have filed a short-form

application electronically. Bidders who

file their short-form applications

manually may bid only telephonically.

When submitting bids telephonically,

bidders may utilize the Internet to learn

the round-by-round results of the

auction. Bidders also may, at negligible

cost, use a computerized bulletin board

service, accessible by telephone lines,

from which auction results can be

downloaded to a personal computer.

The Commission intends to hold a

seminar for prospective bidders to

acquaint them with these bidding

procedures.

Short-Form Applications

21. Applicants for 220 MHz service

licenses will be required to file a shortform application, FCC Form 175 and

175–S, prior to the auction. If only one

application that is acceptable for filing

is received for a particular license, and

thus there is no mutual exclusivity, a

Public Notice will be issued cancelling

the auction for that license and

establishing a date for the filing of a

long-form application. Filing deadlines

will be announced by Public Notice.

Short-Form Application Amendments

and Modifications

22. Upon reviewing the short-form

applications, the Commission will issue

a Public Notice listing all defective

applications. Applicants with minor

defects in their applications will be

given an opportunity to cure them and

resubmit a corrected version.
Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations 15981

Upfront Payments

23. The Commission proposed to

require 220 MHz auction participants to

tender in advance to the Commission an

upfront payment of $2,500 or $0.02 per

MHz-pop, whichever is greater, for the

largest combination of MHz-pops

(bidding units) on which they anticipate

bidding in any round. In the

Competitive Bidding Second Report and

Order, 59 FR 22980, (May 4, 1994), the

Commission indicated that upfront

payments should equal approximately

five percent of the expected amounts of

winning bids. In general, the license

values in previous auctions have

exceeded expectations. Based upon

defaults occurring in the broadband

PCS, IVDS and MDS auctions, and to

guard against future defaults, the

Commission believes that there is a

need to obtain a higher payment upfront

than the one proposed. Authority is

delegated to the Wireless

Telecommunications Bureau to

determine an appropriate upfront

payment for each license being

auctioned, taking into account such

factors as the population in each

geographic license area and the value of

similar spectrum. In no event will the

upfront payment for any license be less

than $2,500, and the Wireless

Telecommunications Bureau will retain

the flexibility to modify this minimum

if it finds that a higher amount would

better deter speculative filings. Prior to

the 220 MHz auction, the Wireless

Telecommunications Bureau will

publish a Public Notice listing the

upfront payment amounts required for

the licenses to be auctioned. The

number of bidding units determines the

amount of upfront payment for the

license. Although a bidder may file

applications for every license being

auctioned, the total upfront payment

submitted by each applicant will

determine the combinations on which

the applicant will actually be permitted

to be active in any single round of

bidding. Upfront payments will be due

by a date specified by Public Notice, but

generally no later than 14 days before

the scheduled auction.

Down Payments and Full Payments

24. All winning bidders, including

small businesses and very small

businesses will be required to

supplement their upfront payments

with a down payment sufficient to bring

their total deposits up to 20 percent of

their winning bid(s). If the upfront

payment already tendered by a winning

bidder, after deducting any bid

withdrawal and default payments due,

amounts to 20 percent or more of its

winning bids, no additional deposit will

be required. If the upfront payment

amount on deposit is greater than 20

percent of the winning bid amount after

deducting any bid withdrawal and

default payments due, the additional

monies will be refunded.

25. Winning bidders, except small

businesses and very small businesses,

must submit the required down

payment by cashier’s check or wire

transfer to the Commission’s lock-box

bank within ten business days following

release of a Public Notice announcing

the close of bidding. All auction

winners, except those eligible for an

installment payment plan, will be

required to make full payment of the

balance of their winning bids within ten

business days following release of a

Public Notice mailed to the successful

applicant that the Commission is

prepared to award the license. The

Commission generally will grant

uncontested licenses within ten

business days after receiving full

payment.

Bid Withdrawal, Default, and

Disqualification

26. The Commission will apply the

bid withdrawal rules set forth in Part 1

of its rules in the 220 MHz auction. Any

bidder that withdraws a high bid before

the Commission declares bidding closed

will be required to reimburse the

Commission in the amount of the

difference between its high bid and the

amount of the ‘‘winning bid’’ the next

time the license is offered, if this

subsequent ‘‘winning bid’’ is lower than

the withdrawn bid.

27. 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 reoffered in the same auction, the winning

bid refers to the high bid amount made

subsequent to the withdrawal in that

auction. If a license which is the subject

of withdrawal or default is offered to the

highest losing bidders in the initial

auction, as opposed to being reauctioned, the ‘‘winning bid’’ refers to

the bid of the highest bidder who

accepts the offer.

28. After bidding closes, the

Commission will assess a defaulting

auction winner an additional payment

of three percent of the subsequent

winning bid or three percent of the

amount of the defaulting bid, whichever

is less. This additional payment is

designed to encourage bidders who

wish to withdraw their bids to do so

before bidding ceases. In the unlikely

event that there is more than one bid

withdrawal on the same license, each

withdrawing bidder will be held

responsible for the difference between

its withdrawn bid and the amount of the

winning bid the next time the license is

offered for auction.

29. If a bidder has withdrawn a bid or

defaulted, but the amount of the 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 the license. When it

becomes possible to calculate and assess

the default payment, any excess deposit

will be refunded. Upfront payments will

be applied to such deposits, and to bid

withdrawal and default assessments

due, before being applied toward the

bidder’s down payment on licenses the

bidder has won and seeks to acquire.

30. 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

Communication Service (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 25807 (May 23, 1996)), recon.

pending. If a default or disqualification

involves gross misconduct,

misrepresentation or bad faith by an

applicant, the Commission may declare

the applicant and its principals

ineligible to bid in future auctions, and

may take any other action that it deems

necessary, including institution of

proceedings to revoke any existing

licenses held by the applicant.

Long-Form Applications

31. The Commission will apply its

Part 1 long-form procedures to the 220

MHz auction. A long-form application

filed on FCC Form 600 must be filed by

a date specified by Public Notice,

generally within ten business days after

the close of bidding. After the winning

bidder’s down payment and long-form

application are received, the

Commission will review the application

to determine if it is acceptable for filing.

Upon acceptance for filing, the

Commission will issue a Public Notice

announcing this fact, triggering the

filing window for petitions to deny. If

all petitions to deny are dismissed or

denied, the license(s) will be granted to

the auction winner.

Petitions To Deny and Limitations on

Settlements

32. In the Third Notice, the

Commission proposed to adopt petition

to deny procedures based on former

§ 22.30 of its rules, which provided for
15982 Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations

procedures regarding opposition to

applications. In addition, the

Commission proposed to adopt rules

similar to former § 22.943 of its rules,

which provided for procedures

regarding the withdrawal of

applications, to prevent the filing of

speculative applications and pleadings

designed to extract money from sincere

220 MHz license applicants. The

Commission adopted these proposals.

The restrictions in § 90.162, 47 CFR

90.162 (which replaced § 22.943 for

purposes of CMRS), were established to

prevent the filing of speculative

applications and pleadings (or threats of

the same) designed to extract money

from license applicants. Thus, the

Commission will limit the consideration

that an individual or entity is permitted

to receive for agreeing to withdraw an

application or a petition to deny to the

legitimate and prudent expenses of the

applicant or petitioner.

Anti-Collusion Rules

33. The Commission will require 220

MHz licensees to comply with the

reporting requirements and rules

prohibiting collusion embodied in

§§ 1.2105 and 1.2107 of the

Commission’s rules, 47 CFR 1.2105 and

1.2107. Even where the applicant

discloses parties with whom it has

reached an agreement on the short-form

application, thereby permitting

discussions with those parties, the

applicant nevertheless is subject to

existing antitrust laws. Moreover, where

specific instances of collusion in the

competitive bidding process are alleged

during the petition to deny process, 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, in

addition to any penalties they incur

under the antitrust laws, or who are

found to have violated the

Commission’s rules in connection with

their participation in the auction

process, may be subject to a variety of

sanctions, including forfeiture of their

down payment or their full bid amount,

revocation of their license(s), and

possible prohibition from participating

in future auctions.

Transfer Disclosure Requirements

34. The Commission will apply

§ 1.2111(a) of its rules, 47 CFR

1.2111(a), to all Phase II 220 MHz

licenses obtained through the

competitive bidding process. The

Commission has also adopted specific

rules that will apply solely to small

business licensees, as discussed in

subsequent sections. The Commission

will give particular scrutiny to auction

winners who have not yet begun

commercial service and who seek

approval for a transfer of control or

assignment of their licenses within three

years after the initial license grant, so

that it may determine if any unforeseen

problems relating to unjust enrichment

have occurred.

Treatment of Designated Entities

Minority- and Women-Owned

Businesses

35. In the Phase II 220 MHz service,

as in other auctionable services, the

Commission is committed to meeting

the objectives of 47 U.S.C. 309(j) of

promoting economic opportunity and

competition, of avoiding excessive

concentrations of licenses, and of

ensuring access to new and innovative

technologies by disseminating licenses

among a wide variety of applicants,

including businesses owned by

members of minority groups and

women. Commenters did not cite any

evidence of specific discrimination for

purposes of creating a record sufficient

to support special provisions for

minorities under the strict scrutiny

standard of judicial review, which

applies to federal race-based provisions.

Adarand Constructors, Inc. v. Pen ̃ a, 115

S.Ct. 2097 (1995). The Commission is

also concerned that the record would

not support gender-based provisions

under intermediate scrutiny, the

standard of judicial review applicable to

such provisions. United States v.

Virginia, 116 S.Ct. 2263 (1996).

Balancing the Commission’s statutory

obligation to provide opportunities for

women- and minority-owned businesses

to participate in spectrum-based

services against the statutory duties to

facilitate the rapid delivery of new

services to the American consumer and

promote efficient use of the spectrum,

the Commission concludes that it

should not delay the Phase II 220 MHz

service auction for the amount of time

it would take to adduce sufficient

evidence to support race- and genderbased provisions. Moreover, the

Commission believes that most

minority- and women-owned businesses

will be able to take advantage of the

specific provisions that the Commission

is adopting for small businesses, as

discussed infra.

36. The Commission also notes that it

has initiated a separate inquiry to gather

information regarding barriers to entry

faced by minority- and women-owned

firms as well as small businesses.

Section 257 Proceeding to Identify and

Eliminate Market Entry Barriers for

Small Businesses, Notice of Inquiry, GN

Docket No. 96–113, 61 FR 33066 (June

26, 1996). The Commission will

continue to track the rate of

participation in its auctions by

minority- and women-owned firms. It

will evaluate this information, together

with other data gathered, with the goal

of developing a record to support raceand gender-based provisions that will

satisfy judicial scrutiny. If a sufficient

record can be adduced, the Commission

will consider race- and gender-based

provisions for future auctions. Finally,

the Commission will continue to look

for other ways to reduce barriers to

entry for women- and minority-owned

businesses, such as extending

partitioning and disaggregation of

licenses to entities that do not currently

qualify, an adjustment to its rules that

may be helpful to small businesses

generally.

Small Businesses

37. Congress specifically cited the

needs of small businesses in enacting

Section 309(j), directing the

Commission to promote economic

opportunities for small businesses. The

Commission believes that small

businesses applying for 220 MHz

licenses should be entitled to some type

of bidding credit and should be allowed

to pay their bids in installments. In

order to ensure the meaningful

participation of small business entities

in the 220 MHz auction the Commission

adopts a two-tiered definition of small

business with thresholds applicable

across all three categories of license.

This approach will give qualifying small

businesses flexibility to bid for a

Regional license or, on the other hand,

elect to bid for several EAs, without

having to choose which type of license

to bid for prior to the start of the

auction. For purposes of bidding on the

nationwide, Regional, and EA licenses,

therefore, the Commission will define

(1) a very small business as an entity

that, together with its affiliates and

controlling principals, has average gross

revenues that are not more than $3

million for the three preceding years;

and (2) a small business as an entity

that, together with affiliates and

controlling principals, has average gross

revenues that are not more than $15

million for the three preceding years.

Bidding credits will be determined, as

discussed infra, based upon this twotiered approach.

38. The Commission believes the cost

of building out a 220 MHz system most

closely resembles the cost of a 900 MHz

SMR system, and that it is therefore

appropriate to establish definitions of

‘‘small business’’ and ‘‘very small

business’’ for the 220 MHz service that
Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations 15983

are consistent with the definitions

adopted for the 900 MHz SMR service.

The Commission’s experience in

conducting the 900 MHz SMR auction

indicates that its definitions of eligible

small businesses in that service were

appropriate, and that it would

substantially dilute the value of the

small business preferences to increase

the size of small businesses eligible for

special bidding provisions in the 220

MHz service.

39. For purposes of the Phase II 220

MHz small business definition, the

Commission will consider the gross

revenues of the small business

applicant, its controlling principals, and

its affiliates. The Commission will not

impose specific equity requirements on

the controlling principals of entities that

meet the small business definition. The

Commission will still require, however,

that in order for an applicant to qualify

as a small business or very small

business, qualifying small business

principals must maintain control of the

applicant, including both de facto and

de jure control. For this purpose, the

Commission will borrow from certain

Small Business Administration rules

that are used to determine when a firm

should be deemed an affiliate of a small

business. 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 or very small

business.

40. Exceptions will apply for small

business consortia and publicly traded

corporations with widely dispersed

voting power. Specifically, eligible

small businesses or very small

businesses will be permitted to form

consortia and not aggregate their gross

revenues. Additionally, a small

corporation that has dispersed voting

stock ownership and no controlling

affiliates will not be required to

aggregate with its own revenues the

revenues of each shareholder for

purposes of small business or very small

business status. Thus, an applicant may

qualify, even in the absence of

identifiable control being held by

particular investors.

41. Applicants and licensees claiming

eligibility as a small business, a very

small business, a consortium of small

businesses, or a consortium of very

small businesses, are subject to audits

by the Commission. Selection for audit

may be random, on information, or on

the basis of other factors. Consent to

such audit is part of the certification

included in the short-form application

(FCC Form 175). Such consent includes

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 also includes inspection

at all reasonable times of the facilities,

or parts thereof, engaged in providing

and transacting business or keeping

records regarding licensed Phase II 220

MHz service, and will also include

consent to the interview of principals,

employees, customers, and suppliers of

the applicant or licensee.

Bidding Credits

42. The Commission adopts bidding

credits consistent with its two-tiered

definition of small business that will

apply to all three license groups. Very

small businesses that, together with

affiliates and controlling principals,

have average gross revenues that are not

more than $3 million for the three

preceding years, will receive a 25

percent bidding credit, available for all

three categories of Phase II 220 MHz

licenses. Likewise, small businesses

that, together with affiliates and

controlling principals, have average

gross revenues that are not more than

$15 million for the three preceding

years, will receive a bidding credit of

ten percent, available for all three

categories of Phase II 220 MHz licenses.

While the 25 percent bidding credit is

less than the 40 percent bidding credit

proposed for one of the nationwide

licenses and the Regional geographic

area licenses, the Commission

concludes that this bidding credit is

appropriate since the Commission is

now going to offer bidding credits

generally for all channel blocks. The

Commission also had favorable results

in previous auctions with bidding

credits at this level or lower.

Installment Payments, Upfront

Payments, and Down Payments

43. The Commission will make

installment payment plans available to

small businesses that are winners in the

220 MHz auction(s). Licensees who

qualify as small businesses or very small

businesses in the 220 MHz auction(s)

will be entitled to pay their winning bid

amount in quarterly installments over

the term of the license with interest

charges to be fixed at the time of

licensing at a rate equal to the rate for

ten-year U.S. Treasury obligations plus

2.5 percent. The rate for 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. These licensees

will be able to make interest-only

payments for the first two years of the

license term. Timely payment of all

installments will be a condition of the

license grant, and failure to make such

timely payments will be grounds for

revocation of the license.

44. The Commission will not adopt a

second installment payment plan with a

longer interest-only period for very

small businesses with average gross

revenues of not more than $3 million.

The Commission believes that the twoyear interest-only period in the single

plan it adopts will provide all small

businesses with the appropriate level of

financing to overcome difficulties in

attracting capital.

45. The Commission also concludes

that there should be a late payment fee

in connection with the installment

payment plan for Phase II 220 MHz

licensees. The Commission stated in the

Third Notice that timely payment of all

installments would be a condition of the

award of a license. Therefore, when

licensees are more than fifteen days late

in their scheduled installment

payments, the Commission will charge

a late payment fee equal to five percent

of the amount of the past due payment.

For example, if a $50,000 payment is

due on June 1, then on June 16, $2,500

is due in addition to the payment.

Without such a fee licensees may not

have adequate financial incentives to

make installment payments on time and

may attempt to maximize their cash

flow at the government’s expense by

paying late. The five percent payment is

an approximation of late payment fees

applied in typical commercial lending

transactions. Payments will be applied

in the following order: late charges,

interest charges, and principal

payments.
15984 Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations

4Pub. L. 96–354, 94 Stat. 1164, 5 U.S.C. section

601 et seq. (1980).

46. Substantial upfront payments are

necessary for both large and small

businesses to deter speculation and

ensure participation by sincere bidders

only. The Commission therefore

declines to adopt a reduced upfront

payment provision for small businesses

or very small businesses.

47. The Commission likewise

concludes that small businesses should

be required to pay a down payment of

20 percent of their winning bid(s). Such

a requirement is consistent with

ensuring that winning bidders have the

financial capability of building out their

systems, will provide the Commission

with stronger assurance against defaults

than a ten percent down payment, and

should cover the required payments in

the unlikely event of default. Thus,

small businesses will be required to

bring their deposit up to ten percent of

their winning bid within ten business

days of the close of the auction. Prior to

licensing, they will be required to pay

an additional ten percent. Specific

procedures for payment will be

provided in a Public Notice.

Partitioning

48. The Commission will permit any

holder of an EA, Regional, or

nationwide Phase II 220 MHz license to

partition portions of its authorization

and enter into contracts with eligible

parties, and will allow such parties to

file long-form applications for the

usable channels within the partitioned

area. The Commission concludes that

allowing holders of EA, Regional and

nationwide Phase II 220 MHz licenses to

partition their geographic service areas

will facilitate the provision of services

in small markets and rural areas.

Partitioning will also furnish providers

of Phase II 220 MHz service with

operational flexibility that will serve to

promote the most efficient use of the

spectrum and encourage participation

by a wide variety of service providers.

49. The Commission will not, at this

time, authorize spectrum disaggregation

for the Phase II 220 MHz service.

Instead, the Commission will seek

comment on the feasibility of spectrum

disaggregation for the 220 MHz service

in a notice of proposed rulemaking

adopted concurrently with this Third

Report and Order.

50. Providers of 220 MHz service will

be permitted to acquire partitioned

licenses in either of two ways: (1) By

forming bidding consortia to participate

in auctions, and then partitioning the

licenses won among consortium

members; and (2) by acquiring

partitioned licenses from other licensees

through private negotiation and

agreement either before or after the

auction. Each member of a consortium

will be required to file a long-form

application, following the auction, for

its respective mutually agreed-upon

geographic area. In the event the

Commission receives applications

requesting FCC consent to partitioning

transfers prior to the adoption of rules

governing such issues as whether to

permit partitioning based on any license

area defined by the parties—upon

which the Commission seeks comment

in a notice of proposed rulemaking—

action on such applications will be

deferred.

Transfer Restrictions and Unjust

Enrichment Provisions

51. To ensure that large businesses do

not become the unintended

beneficiaries of measures meant for

smaller firms, the Commission adopts

unjust enrichment provisions similar to

those adopted for narrowband PCS and

the 900 MHz SMR service. Licensees

seeking to transfer their licenses to

entities which do not qualify as small

businesses (or very small businesses

seeking to transfer their licenses to

small businesses or large companies), 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.

Thus, for example, a small business that

received a bidding credit seeking to

transfer or assign a license to an entity

that does not qualify as a small business

will be required to reimburse the

government for 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. Similarly, a

very small business that received a

bidding credit seeking to transfer or

assign a license to a small business that

qualified for a lesser bidding credit will

be required to reimburse the

government for the difference between

the amount of its bidding credit and the

lesser credit, plus interest at the rate

imposed for installment financing at the

time the license was awarded, before the

transfer will be permitted. 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 very small businesses

transferring to small businesses, 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

or transfer.

52. In addition, if a licensee that

qualifies for installment payments seeks

to assign or transfer control of its license

during its term to an entity that does not

meet the small business or very small

business definition, the Commission

will require payment of the remaining

principal and any interest accrued

through the date of assignment as a

condition of the license assignment or

transfer. Also, 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. The

Commission will apply these payment

requirements for the entire license term

to ensure that small businesses will look

first to other small businesses when

deciding to transfer their licenses.

However, the Commission will not

impose a holding period or other

transfer restrictions on these licensees.

Spectrum Set Asides

53. Because there will be both a large

number and a large variety of licenses

available in the Phase II 220 MHz

auction, the Commission will not adopt

an entrepreneurs’ block for the service.

Small businesses will have a significant

opportunity to compete for Phase II 220

MHz licenses, particularly given the

special provisions that have been

adopted for small businesses.

Procedural Matters; Ordering Clauses

Final Regulatory Flexibility Analysis

54. As required by the Regulatory

Flexibility Act of 1980, Pub. L. 96–354,

94 Stat. 1164, as amended by the

Contract with America Advancement

Act of 1996, Pub. L. 104–121, 110 Stat.

847, 5 U.S.C. 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 Third Report and Order and Fifth

Notice of Proposed Rulemaking,

including the Final Regulatory

Flexibility Analysis, to the Chief

Counsel for Advocacy of the Small

Business Administration in accordance

with paragraph 603(a) of the Regulatory

Flexibility Act.4
Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations 15985

5Third Notice, 11 FCC Rcd at 287.

6Title II of the CWAAA is the Small Business

Regulatory Enforcement Fairness Act of 1996

(SBREFA), codified at 5 U.S.C. 601 et seq.

7The Commission received comments from five

equipment manufacturers: Fairfield Industries

(Fairfield), SEA Inc. (SEA), Securicor Radiocoms,

Ltd. (Securicor), Ericsson Corporation, and E. F.

Johnson Company. Of these commenters, Fairfield,

SEA, and Securicor may be small businesses under

the definition used in this analysis. Securicor is a

corporation based in England. A sixth equipment

manufacturer, Motorola, while not submitting

formal comments, filed ex parte presentations in

this proceeding.

Final Regulatory Flexibility Analysis

55. As required by section 603 of the

Regulatory Flexibility Act, 5 U.S.C. 603

(RFA), an Initial Regulatory Flexibility

Analysis (IRFA) was incorporated in the

Third Notice of Proposed Rulemaking in

this proceeding (Third Notice).5 The

Commission sought written public

comments on the proposals in the Third

Notice, including on the IRFA. The

Commission’s Final Regulatory

Flexibility Analysis (FRFA) in this 220

MHz Third Report and Order conforms

to the RFA, as amended by the Contract

With America Advancement Act of

1996, Pub. L. 104–121, 110 Stat. 847

(1996) (CWAAA).6

I. Need for and Objective of the Rules

56. The rules adopted in this decision

will establish a flexible regulatory

scheme that will allow for efficient

licensing and use of the 220 MHz

service, eliminate unnecessary

regulatory burdens on existing and

future 220 MHz licensees, provide a

wide variety of radio services to the

public, enhance the competitive

potential of 220 MHz services in the

mobile marketplace, and continue to

provide a home for the development of

spectrally efficient technologies. By

establishing competitive bidding

procedures pursuant to section 309(j) of

the Communications Act, this decision

will promote economic opportunity and

ensure that new and innovative

technologies are readily accessible to

the American people by avoiding

excessive concentration of licenses and

by disseminating licenses among a wide

variety of applicants, including small

businesses. The adoption of competitive

bidding rules will also permit the

recovery for the public of a portion of

the value of the public spectrum

resource made available for commercial

use and avoidance of unjust enrichment

through the methods employed to award

uses of that resource.

II. Summary of Issues Raised by the

Public Comments in Response to the

Initial Regulatory Flexibility Analysis

57. No issues were raised specifically

in response to the IRFA. However, we

have considered the significant

economic impact on a substantial

number of small entities through

consideration of comments that

pertained to issues of concern to small

businesses. For example, two equipment

manufacturers, SEA and Securicor,

argued against allowing Phase I and

Phase II licensees to aggregate their

contiguous channels to create wider

bandwidth channels.7 (See para. 98 of

the full text of this decision). These

commenters, who have developed radio

equipment in the 220 MHz band using

spectrally efficient technologies, argue

that allowing aggregation of channels

would severely jeopardize their ability

to continue to develop and market their

technology. The Commission decided in

favor of allowing licensees to aggregate

their channels, agreeing with those

commenters who support allowing such

aggregation because this type of

flexibility will allow 220 MHz licensees

to offer a wider variety of

communications services and more

effectively compete in the wireless

marketplace. While allowing channel

aggregation, the Commission agreed

with SEA and Securicor that it should

also require licensees and equipment

manufacturers to meet a spectrum

efficiency standard. In adopting a

spectrum efficiency standard, the

Commission sought to ensure that the

220 MHz band would continue to be a

home for the development of spectrally

efficient technologies.

58. The Commission proposed two

classifications of non-nationwide 220

MHz licensing—i.e., Economic Area

(EA) licenses and Regional licenses.

Pagenet endorsed this proposal, noting

that such assignments would be a

‘‘complement to nationwide’’ licensing,

and would allow ‘‘participation by

small, medium and large carriers in

which local to nationwide service will

be provided by a number of different

licensees in each marketplace.’’ (See

para. 79 of the full text of this decision).

The Commission adopted this proposal.

(See para. 80 of the full text of this

decision).

59. American Mobile

Telecommunications Association

(AMTA) and Comtech asked that no

limit be placed on the number of

channels a licensee may obtain within

an EA or Region through our auction

procedures. Comtech also asked that EA

and Regional licensees not be required

to construct a minimum number of

channels at all of their base stations.

The Commission adopted both of these

proposals.

60. The Commission also adopted a

proposal by Fairfield to allow for fixed

operations on a secondary basis. In so

doing, the Commission acknowledged

the concerns of other commenters that

such operations might cause

interference to primary users of the

band. We thus required secondary

licensees to notify nearby primary users

of their secondary facilities, limited

secondary licensees’ operating

parameters beyond those initially

proposed, and restricted secondary

licensees from operating on public

safety, Emergency Medical Radio

Service (EMRS), or Federal Government

220–222 MHz channels.

61. A number of commenters asked

that we provide greater protection to

Phase I base stations than initially

proposed. We decided to adopt our

proposed co-channel protection criteria

because we concluded that, inter alia,

this decision would provide protection

to Phase I base stations consistent with

other recent Commission decisions

establishing protection criteria in other

mobile services. Commenters were also

opposed to our proposal for limiting

field strength at EA and Regional

borders. We adopted our proposal in

order to afford Phase II licensees the

maximum degree of flexibility in

designing their systems and to enable

them to provide a quality signal at the

borders of their service areas.

62. Association of Public-Safety

Communications Officials—

International (APCO) asked that we

refrain from assigning the 125 nonnationwide channels not reserved for

Public Safety or EMRS eligibles by

competitive bidding in order to give

public safety entities a realistic

opportunity to obtain authorization for

more than ten 220 MHz channels. We

decided that such channels should be

assigned through competitive bidding

because we could not conclusively

determine the demand by public safety

entities for 220 MHz channels, and

because we intend to fully explore the

spectrum needs of the public safety

community in a future rulemaking

proceeding.

63. A number of commenters urged

the Commission to maintain a noncommercial set-aside for the 220 MHz

service, arguing that there is a

continuing demand for such a set-aside

and that it is necessary for licensees’

internal communications. Other

commenters disagreed. We found that it

would not be in the public interest to

establish a non-commercial set-aside

based in part on our continuing

commitment to efficient use of the

spectrum. As discussed in para. 42 of

the full text of this Third Report and
15986 Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations

8Approval from the Small Business

Administration for this definition is pending.

9 13 CFR 121.201, Standard Industrial

Classification (SIC) Code 4812.

10U.S. Small Business Administration 1992

Economic Census Employment Report, Bureau of

the Census, U.S. Department of Commerce, Table 3,

SIC Code 4812 (radiotelephone communications

industry data adopted by the SBA Office of

Advocacy).

11U.S. Bureau of the Census, U.S. Department of

Commerce, 1992 Census of Transportation,

Communications, and Utilities, UC92–S–1, Subject

Series, Establishment and Firm Size, Table 5,

Employment Size of Firms; 1992, SIC Code 4812

(issued May 1995).

Order, we agree with those commenters

who believe that it is unnecessary to set

aside spectrum for exclusively internal

communications, given the apparent

demand for nationwide spectrum for the

provision of service to the public and

the fact that we are not precluding a

nationwide licensee from using all or

part of its spectrum for internal

communications.

64. Commenters disagreed regarding

how the Commission should treat

pending applications for nationwide

220 MHz licenses. Many commenters

urged the Commission to exercise its

discretion to award the licenses through

lotteries. Other commenters argued that

the pending applications should be

returned and the licenses should be

awarded through auctions. We found

that it would be in the public interest to

return the pending applications for the

220 MHz service without prejudice and

award the licenses through competitive

bidding. We concluded that, because the

nature of the 220 MHz service is

undergoing a substantial change, it

would be unfair to preclude new

applicants from having the opportunity

to apply for these licenses. We also

noted that awarding licenses through

auctions benefits the public by ensuring

that licenses go to those who value them

the most and to those who have an

incentive to build their systems quickly,

thereby speeding the provision of

service to the public.

III. Description and Estimate of the

Small Entities Involved

65. The Commission anticipates

receiving approximately 2,220 total

applications for the Phase II 220 MHz

service—i.e., 2,000 Public Safety

applications (including 1,000 EMRS

applications), 90 applications for

Economic Area channels, 20

applications for Regional channels, 100

applications for secondary service, and

10 applications for nationwide

channels. These applicants, many of

whom may be small businesses, as well

as approximately 3,800 Phase I 220 MHz

licensees, many of whom may be small

entities, and at least six equipment

manufacturers, three of which may be

small businesses, will be subject to the

rules adopted in the 220 MHz Third

Report and Order.

66. The Commission has not

developed a definition of small entities

applicable to 220 MHz Phase I licensees,

or equipment manufacturers for

purposes of this Final Regulatory

Flexibility Analysis, and since the

Regulatory Flexibility Act amendments

were not in effect until the record in this

proceeding was closed, the Commission

was unable to request information

regarding the number of small

businesses that are associated with the

220 MHz service. However, we have

adopted criteria for defining small

businesses and very small businesses for

purposes of determining eligibility for

auction bidding credits and installment

payments.8 We will therefore use this

definition for estimating the number of

potential Phase II entities applying for

auctionable spectrum that are small

businesses. To estimate the number of

Phase I licensees and the number of 220

MHz equipment manufacturers that are

small businesses, and the number of

Phase II entities applying for nonauctionable spectrum (i.e., public safety

and EMRS channels) we shall turn to

the relevant definitions as provided by

the Small Business Administration

(SBA).

Phase I Licensees

There are approximately 3,800 nonnationwide Phase I licensees and 4

nationwide licensees currently

authorized to operate in the 220 MHz

band. To estimate the number of such

entities that are small businesses, we

apply the definition of a small entity

under SBA rules applicable to

radiotelephone companies. This

definition provides that a small entity is

a radiotelephone company employing

fewer than 1,500 persons.9 However, the

size data provided by the SBA do not

allow us to make a meaningful estimate

of the number of 220 MHz providers

that are small entities because they

combine all radiotelephone companies

with 500 or more employees.10 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. Data from the

Bureau of the Census’ 1992 study

indicate that only 12 out of a total 1,178

radiotelephone firms which operated

during 1992 had 1,000 or more

employees—and these may or may not

be small entities, depending on whether

they employed more or less than 1,500

employees.11 But 1,166 radiotelephone

firms had fewer than 1,000 employees

and therefore, under the SBA definition,

are small entities. However, we do not

know how many of these 1,166 firms are

likely to be involved in the 220 MHz

service.

Phase II Entities Applying for

Auctionable Spectrum

The 220 MHz Third Report and Order

adopts a two-tiered definition of small

business for the purpose of competitive

bidding. The Commission defines a

‘‘very small business’’ as an entity that,

together with its affiliates and

controlling principals, has average gross

revenues for the three preceding years of

not more than $3 million; and a ‘‘small

business’’ as an entity that, together

with affiliates and controlling

principals, has average gross revenues

for the three preceding years of not more

than $15 million. For purposes of

determining small business status, the

Commission will attribute the gross

revenues of all controlling principals in

the small business applicant as well as

the gross revenues of affiliates of the

applicant. The Commission is not

imposing specific equity requirements

on the controlling principals that meet

this small business definition. In order

for an applicant to qualify as a small

business, qualifying small business

principals must maintain both de facto

and de jure control of the applicant.

67. As noted above, the SBREFA was

not in effect at the time the Third Notice

was issued, so comment was not sought

on the number of prospective Phase II

applicants in the 220 MHz service

which might qualify as small

businesses. Therefore, the Commission

cannot accurately predict the number of

applicants in the 220 MHz service who

will fit the description of a small

business. However, using the definitions

of small business and very small

business we adopted for the purpose of

determining eligibility for bidding

credits and installment payments, the

Commission can attempt to estimate the

number of applicants for 220 MHz

licenses that are small businesses by

looking at the number of applicants in

similar services that qualified as small

businesses. For example, the 900 MHz

SMR service utilized a definition of very

small business based on gross revenues

of not more than $3 million and a

definition of small business based on

gross revenues of not more than $15

million. A total of 128 applications were

received in the 900 MHz SMR auction,

and, of these applications, 71 qualified

as very small businesses and an

additional 30 qualified as small

businesses.

68. Approximately 900 licenses will

be made available for authorization in
Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations 15987

12See 5 U.S.C. 601(5) (including cities, counties,

towns, townships, villages, school districts, or

special districts).

13See 1992 Census of Governments, U.S. Bureau

of the Census, U.S. Department of Commerce.

14 13 CFR 121.201, (SIC) Code 3663.

15U.S. Dept. of Commerce, 1992 Census of

Transportation, Communications and Utilities

(issued May 1995), SIC category 3663.

the 220 MHz auction. In the 900 MHz

SMR auction, 1050 licenses were made

available. Given that 128 qualified

applications were received in the 900

MHz auction, we anticipate receiving

slightly fewer, or 120 applications in the

220 MHz auction. Given that 71

applicants qualified as very small

businesses and 30 applicants qualified

as small businesses in the 900 MHz

SMR auction, we estimate that

proportionately fewer, or 65 applicants,

will qualify as very small businesses,

and 27 applicants will qualify as small

businesses in the 220 MHz auction.

Phase II Entities Applying for NonAuctionable Spectrum

We estimate that approximately 1,000

applications will be filed for

authorization on the 220 MHz public

safety channels, and we estimate that

approximately 1,000 applications will

be filed for authorization on the 220

MHz EMRS channels. To estimate the

number of such applicants that are

small entities, we apply the definition of

a small entity under the SBA rules

applicable to small governmental

entities. The SBREFA requires that we

estimate the number of governmental

entities with populations of less than

50,000 for which our rules will apply.12

According to the Census Bureau, 96

percent of the nation’s counties, cities,

and towns have populations of fewer

than 50,000.13 The Census Bureau

estimates that this ratio is

approximately accurate for all

governmental entities. We thus estimate

that 96 percent of all governmental

entities are small; and further estimate

that, because the estimated 1,000

applications for the public safety

channels will be from governmental

entities, that 960 of these applications

may be from small governmental

entities. Some EMRS applicants will be

governmental entities, while others will

be non-governmental (e.g., hospitals,

ambulance services). Because we

assume that all such non-governmental

entities applying for EMRS licenses will

be small entities, we estimate that a

slightly higher percentage of applicants

for EMRS licenses, or 98 percent of

EMRS applicants, will be small entities.

We therefore estimate that

approximately 980 applications for the

EMRS channels will be from small

entities.

Radio Equipment Manufacturers

We anticipate that at least six radio

equipment manufacturers will be

affected by our decisions in this

proceeding. According to the SBA’s

regulations, a radio and television

broadcasting and communications

equipment manufacturer must have 750

or fewer employees in order to qualify

as a small business concern.14 Census

Bureau data indicate that there are 858

U.S. firms that manufacture radio and

television broadcasting and

communications equipment, and that

778 of these firms have fewer than 750

employees and would therefore be

classified as small entities.15 We do not

have information that indicates how

many of the six radio equipment

manufacturers associated with this

proceeding are among these 778 firms.

However, because three of these

manufacturers (Motorola, Ericsson and

E.F. Johnson) are major, nationwide

radio equipment manufacturers, we

conclude that these manufacturers

would not qualify as small businesses.

IV. Summary of the Projected Reporting,

Recordkeeping, and Other Compliance

Requirements

69. The 220 MHz Third Report and

Order adopts a number of rules that will

entail reporting, recordkeeping, and/or

third party consultation. However, the

Commission believes that these

requirements are the minimum needed

to ensure the integrity of the 220 MHz

service. The Commission considers the

effects of these requirements first on

Phase II applicants and licensees and

then on Phase I licensees.

Phase II Applicants

Applicants for the Phase II 220 MHz

auction will be required to submit a

completed FCC Form 175. Auction

winners, as well as applicants for the

220 MHz public safety and EMRS

channels, will be required to file a

completed FCC Form 600. In addition,

applicants for the 220 MHz EMRS

channels, like all other EMRS

applicants, must furnish a statement

from the governmental body having

jurisdiction over the state emergency

plan indicating that the applicant is

included in the emergency plan, or is

otherwise supporting the application.

Phase II Licensees

Phase II licensees authorized on

Channels 161–200 and Channels 1–40

will be required to coordinate among

themselves to locate their base stations

to avoid interference. Regional licensees

operating on Channels 196–200 may

operate stations at powers exceeding 2

watts ERP or at antenna heights greater

than 20 feet provided that they obtain

the written concurrence of all Phase I

and Phase II licensees operating base

stations on Channels 1–40 within 6 km

of the base stations of the Regional

licensees.

70. Phase II licensees operating

secondary, fixed stations will be

required to notify any co-channel

primary licensees authorized in the area

of their operation of the location of their

secondary facilities. Phase II licensees

implementing nationwide land mobile

or paging systems will be required to

meet construction ‘‘benchmarks’’ and

must submit maps and other supporting

documentation to demonstrate

compliance with these benchmarks five

and ten years after grant of the initial

license. Also, nationwide licensees

implementing fixed systems, in lieu of

meeting the construction benchmarks

described above, may make a showing

of ‘‘substantial service’’ within five and

ten years of the initial license grant. To

comply with these requirements, such

licensees must also submit maps and

other supporting documents five and

ten years after grant of the initial

license. Regional licensees and EA

licensees implementing land mobile,

paging, or fixed systems must also

comply with 5- and 10-year

construction or substantial service

requirements and must also provide

maps and other supporting documents

to demonstrate compliance with such

requirements. Preparation of maps and

supporting documentation may involve

engineering expertise. Failure by

nationwide, EA, or Regional licensees to

meet either the five- or ten-year

construction requirement will result in

automatic cancellation of the licensees’

nationwide authorization. Phase II

licensees will not be permitted to

construct their stations less than 120 km

from a constructed and operating Phase

I, co-channel station unless they submit

a technical analysis demonstrating that

the predicted 28 dBuV/m interfering

contour of their base station does not

overlap the predicted 38 dBuV/m

service contour of the Phase I licensee’s

station. This technical analysis will

involve engineering expertise. Phase II

licensees may also locate their stations

less than 120 km from the station of an

existing Phase I co-channel licensee or

with less 10 dB protection to such cochannel’s station’s 38 dBuV/m contour

if the Phase II licensee obtains the

written consent of the affected Phase I
15988 Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations

16 47 U.S.C. 309(j)(4)(E).

licensee. Finally, Phase II licensees

operating in adjacent EAs or Regions

may exceed the specified field strength

limit at their border if all affected, cochannel EA and Regional licensees

agree to the higher field strength.

71. Section 309(j)(4)(E) of 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.’’ 16 The Commission adopted

safeguards designed to ensure that the

requirements of this section are

satisfied, including a transfer disclosure

requirement for licenses obtained

through the competitive bidding process

for the 220 MHz service. An applicant

seeking approval for a transfer of control

or assignment of a license within three

years of receiving a new license through

a competitive bidding procedure 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.

72. 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 very

small businesses seeking to transfer

their licenses to small businesses or

large companies), 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.

73. Finally, applicants and licensees

claiming eligibility for competitive

bidding as a small business, a very small

business, or a consortium of small

businesses (or very small businesses) are

subject to audits by the Commission.

Selection for audit may be random, on

information, or on the basis of other

factors. Consent to such audit is part of

the certification included in the shortform application (FCC Form 175).

Phase I Licensees

Phase I nationwide licensees

intending to operate primary, fixed or

paging operations instead of or in

addition to their land mobile operations

must revise their 10-year schedule for

construction of their land mobile system

to describe the fixed or paging system

they intend to deploy. They must also

certify that the financial showings and

all other certifications they had

previously provided in demonstrating

their ability to construct and operate

their nationwide land mobile system

remain applicable to their planned,

primary fixed or paging system, or they

must revise their financial showings and

provide all other relevant certifications

to demonstrate their ability to construct

and operate a nationwide, primary fixed

or paging system. These certifications

and showings may involve engineering

and financial expertise. The

Commission anticipates that two Phase

I licensees will seek to deploy primary

fixed or paging operations.

74. Phase I nationwide licensees

intending to operate primary fixed

systems will be required to comply with

existing construction, recordkeeping,

and reporting requirements, but, rather

than constructing base stations (for base

and mobile operations) and placing

them in operation to meet their 4-, 6-

and 10-year construction benchmarks,

must demonstrate how their fixed

stations are providing ‘‘substantial

service’’ to the public. This

demonstration of substantial service

will be provided in the same form as

documentation currently required for

nationwide Phase I licensees providing

evidence of the construction of their

primary land mobile systems.

All 220 MHz Licensees

All 220 MHz licensees seeking

renewal of their authorizations will be

required, inter alia, to demonstrate that

they have provided substantial service

during their past license term, and

submit a showing explaining why they

should receive a renewal expectancy.

V. Significant Alternatives and Steps

Taken by Agency to Minimize the

Significant Economic Impact on a

Substantial Number of Small Entities

Consistent With Stated Objectives

75. The Commission’s chief objectives

in adopting the 220 MHz Third Report

and Order are to establish a regulatory

plan for the 220 MHz service that will

allow for the efficient licensing and use

of the service, to eliminate unnecessary

regulatory burdens, to enhance the

competitive potential of the 220 MHz

service in the mobile services

marketplace, to provide a wide variety

of radio services to the public, and to

continue to provide a home for the

development of spectrally efficient

technologies. A number of the

Commission’s original proposals were

modified in order to minimize the

significant economic impact on small

entities consistent with these objectives,

based on issues and suggestions raised

in the public comment.

76. For example, the Commission

made significant changes to the

proposed Phase II channel band plan

based on an analysis of the comments.

Most of the commenters favored the

assignment of larger numbers of

channels to individual EA and Regional

licensees than the proposed 5-channel

blocks. The Commission concurred with

the commenters’ argument that

proposed 5-channel blocks would

unjustly inhibit licensees’ revenueproducing ability and therefore decided

to authorize 10- and 15-channel EA and

Regional assignments, respectively. We

concluded that adoption of a licensing

scheme that provides for 10-channel

and 15-channel assignments should

enable Phase II licensees, many of

which are likely to be small businesses,

to establish more viable radio services.

Commenters were also generally

opposed to the Commission’s use of

contiguous channel assignments in our

proposed Phase II band plan after

having previously adopted

predominantly non-contiguous

assignments in Phase I. The

Commission found merit in the

argument of those who emphasized the

difficulties that are likely to be

encountered by both Phase I licensees

and Phase II licensees, many of which

are likely to be small businesses, if we

adopted completely inconsistent Phase

II and Phase I band plans. We therefore

adopted a Phase II band plan that

mirrored the existing Phase I plan. We

concluded that adopting a Phase II band

plan patterned after the Phase I plan

will benefit both Phase I and Phase II

licensees because Phase I licensees will

be able to more easily expand on their

existing authorized channels, and Phase

II licensees will be able to more easily

provide protection to co-channel Phase

I licensees. In addition, at the suggestion

of a commenter, we decided not to

require EA, Regional or nationwide

licensees to construct a minimum

number of channels at all of their base

stations.

77. In order to provide licensees with

maximum flexibility to employ a variety
Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations 15989

of technologies, the Commission

decided to allow them to aggregate their

contiguous channels. However, in so

doing the Commission agreed with the

views of commenters SEA and Securicor

and adopted a spectrum efficiency

standard. In adopting a spectrum

efficiency standard, we rejected other

commenters’ arguments that a standard

is not necessary because licensees

acquiring spectrum assigned on

contiguous channels through

competitive bidding will have an

incentive to use that spectrum as

efficiently as possible, and that adoption

of a particular spectrum efficiency

standard could limit the types of

services that licensees would be able to

provide. The Commission concluded

that a standard was needed to ensure

that the 220 MHz band would continue

to be a home for the development of

spectrum efficient technologies.

78. The Commission also attempted,

wherever possible, to offer licensees the

most flexibility with a minimum

regulatory burden. For example, the

Commission elected to allow Phase I

and Phase II licensees the flexibility to

conduct paging operations on a primary

basis. The commenters were divided on

this issue. Commenters opposed to

allowing paging on a primary basis

maintained that to do so would

transform the 220 MHz band into

merely an additional band for the

provision of paging services, and that

this would be unfair to existing paging

licensees in other bands. These

commenters argued that there are a

sufficient number of paging bands

already in existence and that the 220

MHz band should continue to be used

to advance the development of

narrowband technology. The

Commission, however, decided to allow

paging on a primary basis in the 220

MHz band in order to provide

additional spectrum for a rapidly

growing communications service and to

enable 220 MHz licensees to compete

more effectively in the wireless

marketplace.

79. The Commission also decided to

allow 220 MHz licensees to conduct

fixed operations on a primary basis to

provide them with the flexibility to offer

a wider array of communications

services to the public. Similarly, the

Commission decided that 220 MHz

licensees conducting geophysical

telemetry operations should be

permitted to obtain secondary

authorizations to operate their fixed

facilities on a non-interference basis to

licensees authorized to operate on a

primary basis. In making this decision,

the Commission acknowledged

concerns raised by commenters about

possible interference to primary

operations, but concluded that the risk

of interference from secondary,

geophysical telemetry operations was

minimal, and that such operations

should therefore be allowed.

80. In prescribing rules for the 220

MHz service auction, we initially

proposed to begin by auctioning the

nationwide licenses and the Regional

licenses in one simultaneous multiple

round auction. We proposed to then

auction the economic area (EA) licenses

in a subsequent auction. The SMR

Advisory Group supported this

approach. After further consideration,

however, we concluded that all three

categories of licenses are highly

interdependent. Grouping such licenses

and putting them up for bid at the same

time facilitates awarding licenses to

bidders who value them the most highly

by providing bidders, including small

businesses, with information about the

prices of complementary and

substitutable licenses during the course

of an auction. We therefore announced

our plan to hold a single, simultaneous

multiple round auction for all classes of

licenses. We did, however, reserve the

discretion to auction each of these

license groupings (nationwide,

Regional, EA) separately or in different

combinations (e.g., nationwide and

Regional together) if there are

administrative reasons for doing so.

81. In establishing bidding

procedures, the Commission proposed

the use of the Milgrom-Wilson activity

rule. We proposed a minimum activity

level requiring bidders to be active on

at least one-third of the MHz-pops for

which they are eligible in Stage I, twothirds of the MHz-pops for which they

are eligible in Stage II, and 100 percent

of the MHz-pops for which they are

eligible in Stage III. The SMR Advisory

Group and AMTA supported use of the

Milgrom-Wilson activity rule. However,

NTIA stated that requiring a 100 percent

level of activity in Stage III may inhibit

bidder flexibility and be unduly

restrictive. We agree with NTIA and

decided not to require a 100 percent

level of activity in Stage III. Moreover,

in order to enhance bidder flexibility at

the end of the auction and to make the

figures easier to administer, we

eliminated the use of fractions. Thus,

we adopted eligibility levels of 60

percent, 80 percent, and 98 percent, for

Stages I, II, and III, respectively. This

change will benefit all bidders,

including small businesses.

82. In establishing auction rules for

the 220 MHz service, the Commission

adopted a number of provisions to

support the participation of small

businesses. For example, the

Commission established bidding credits

and an installment payment plan,

designed to increase the opportunities

for small businesses to become 220 MHz

service providers. In addition, the

Commission established rules for the

partitioning of geographic area licenses,

which will increase opportunities for

small businesses to participate in the

220 MHz service. Through partitioning,

small businesses may acquire licenses

for portions of geographic areas, a less

expensive alternative to acquiring a

license for an entire area.

83. The Commission initially

proposed to define small business, for

purposes of eligibility for such

provisions as bidding credits and

installment payments as follows: For

companies wishing to bid on

nationwide and Regional licenses, we

proposed to define small businesses as

those entities with $15 million or less in

average annual gross revenues for the

preceding three years. For EA licenses,

we proposed to define small businesses

as those entities with $6 million or less

in average annual gross revenues for the

preceding three years. AMTA and the

SMR Advisory Group agreed with this

definition. We concluded, however, that

while the nationwide and Regional

Phase II 220 MHz licenses would have

higher build-out and operational costs

than would the EA licenses, it is likely

that bidders will attempt to aggregate

licenses across regions or EAs to

establish their markets. Thus, for

example, bidders may elect to aggregate

EA licenses to create a Regional market,

rather than bid for the Regional license

itself. In order to ensure the meaningful

participation of small business entities

in the auction, we adopted a two-tiered

definition of small business with gross

revenues limits applicable across all

three categories of license. This

approach will give qualifying small

businesses flexibility to bid for a

Regional license or, on the other hand,

elect to bid for several EAs, without

having to choose which type of license

to bid for prior to the start of the

auction. For purposes of bidding for the

nationwide, Regional and EA licenses,

therefore, we defined (1) a very small

business as an entity that, together with

its affiliates and controlling principals,

has average gross revenues for the three

preceding years of no more than $3

million and (2) a small business as an

entity that, together with affiliates and

controlling principals, has average gross

revenues for the preceding three years of

no more than $15 million. Defining a

‘‘very small business’’ at the $3 million

threshold, rather than at the $6 million

threshold, is consistent with the
15990 Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations

definitions successfully used in the 900

MHz SMR service, where build-out

costs are similar to those in the 220

MHz service. Bidding credits are based

upon this two-tiered approach.

84. We disagreed with the suggestion

of Metricom that we should increase the

gross revenues threshold of our small

business definition to $25 million,

because, based upon our experience in

the 900 MHz SMR auction, such an

increase would be far too inclusive. In

the 900 MHz SMR auction, we

established small business definitions of

$15 million and $3 million. Of the 128

applicants that qualified to participate

in the auction, 101 qualified for the

small business or very small business

bidding credits. Because we believe the

cost of building out a 220 MHz system

most closely resembles the cost of a 900

MHz SMR system, and because it would

substantially dilute the value of the

small business preferences for virtually

all applicants to qualify for them, we

declined to adopt the Metricom

proposal.

85. For purposes of determining small

business status, we will attribute the

gross revenues of the applicant, all

controlling principals of the applicant,

and their affiliates. This is a much

simpler approach than we utilized in

broadband PCS, because it does not

require a control group. We 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, including both de facto and

de jure control. Thus, small businesses

will have less difficulty determining

their eligibility. We declined to adopt

Comtech’s suggestion that, for

determining whether an entity qualifies

as a small business, revenues and assets

of investors holding more than 25

percent of an applicant’s voting stock

and revenues and assets of all affiliates

should be attributable to the applicant.

Our approach is a more accurate

indicator of the control of an applicant.

86. With respect to bidding credits, in

order to ensure that small businesses

have a realistic opportunity to acquire

Phase II 220 MHz nationwide and

Regional licenses, we proposed a 40

percent bidding credit for all qualified

designated entities. For Phase II 220

MHz nationwide licenses, we proposed,

inter alia, to offer this bidding credit on

only one of the available channel

blocks. For Phase II 220 MHz Regional

licenses, we proposed to offer the

bidding credit on all available channel

blocks. Because we believed that the

Phase II 220 MHz EA licenses are

similar in their number and in the level

of incumbency to the licenses offered in

the 900 MHz SMR service, we proposed

offering the same 10 percent bidding

credit to qualified small businesses

bidding on Phase II 220 MHz EA

licenses as we did in the 900 MHz SMR

auction. SMR Advisory Group

supported these proposals. AMTA, U.S.

MobilComm, Roamer, and Incom also

supported these proposals, although

they supported bidding credits solely

for regional and EA licenses. Comtech

agreed with a 40 percent bidding credit

for Regional licenses, but suggested this

credit should be extended to all

nationwide licenses as well.

87. We concluded, however, that

small businesses are in the best position

to decide which blocks of licenses to bid

on. As we have stated, based upon our

experience in prior auctions, it is very

likely that bidders will attempt to

aggregate Regional and EA licenses in

the development of their bidding

strategies, particularly if these licenses

are auctioned together. Thus, in order to

enhance bidder flexibility, we elected to

establish bidding credits consistent with

our two-tiered definition of small

business that will apply to all three

license groups. For very small

businesses that, together with affiliates

and controlling principals, have average

gross revenues for the three preceding

years of not more than $3 million, we

will give a 25 percent bidding credit,

applicable for all three categories of

licenses. Likewise, we will give small

businesses that, together with affiliates

and controlling principals, have average

gross revenues for the three preceding

years of not more than $15 million, a

bidding credit of 10 percent, available

for all three categories of licenses. While

the 25 percent bidding credit is less

than originally proposed for the

nationwide and Regional licenses, we

believe it is appropriate since we are

now going to offer bidding credits

generally for all channel blocks.

Moreover, we had favorable results—

i.e., a significant number of small

business applicants were winning

bidders—in previous auctions with

bidding credits at this level or lower.

88. We initially proposed the use of

installment payments and reduced

down payments for all small businesses

bidding for any of the Phase II 220 MHz

nationwide, Regional and EA licenses.

The SMR Advisory Group supported

these positions. We also tentatively

concluded that reduced upfront

payments for small businesses would be

unnecessary.

89. We adopted an installment

payment plan for small businesses and

very small businesses participating in

the 220 MHz auction. We declined to

provide very small businesses with a

longer interest-only period than the twoyear period provided for small

businesses. We determined that a twoyear interest-only period in the single

plan we adopted provides all small

businesses with the appropriate level of

financing to overcome difficulties in

attracting capital. Given that we are

making additional financial assistance

available to very small businesses in the

form of a 25 percent bidding credit, we

concluded that a longer interest-only

period is not needed. We also

concluded that small businesses should

not be permitted to pay a reduced down

payment. As we stated in the case of the

broadband PCS D, E and F Block

auction, we believe that a substantial

down payment is necessary to ensure

that winning bidders have the financial

capability of building out their systems,

and will provide us with stronger

assurance against defaults than a

reduced down payment. Increasing the

amount of the bidder’s funds at risk in

the event of default discourages

insincere bidding and therefore

increases the likelihood that licenses are

awarded to parties who are best able to

serve the public. We also believe that a

20 percent down payment should cover

the required payments in the unlikely

event of default.

90. Finally, we elected not to adopt a

spectrum set-aside for designated

entities, including small businesses.

Because there will be both a large

number and a large variety of licenses

available in the Phase II 220 MHz

auction, we decided not to adopt an

entrepreneur’s block for this service.

Small businesses, we concluded, will

have a significant opportunity to

compete for Phase II 220 MHz licenses,

particularly given the special provisions

adopted for small businesses.

91. In making its various decisions in

this proceeding, the Commission

considered all available alternatives. It

believes that the rules it has adopted in

this decision represent the best balance

of providing licensees, many of whom

are small businesses, with the most

flexibility and the smallest regulatory

burden, and enables them to offer a

variety of radio services to the public

and compete effectively in the mobile

communications marketplace.

VI. Report to Congress

92. The Commission shall send a copy

of this Final Regulatory Flexibility

Analysis (FRFA) along with this 220

MHz Third Report and Order, in a

report to Congress pursuant to 5 U.S.C.

801(a)(1)(A). A copy of this FRFA will

also be published in the Federal

Register.
Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations 15991

Ordering Clauses

93. Authority for issuance of this

Third Report and Order is contained in

sections 4(i), 303(r), 309(j), and 332 of

the Communications Act of 1934, 47

U.S.C. 154(i), 303(r), 309(j), 332.

94. Accordingly, it is ordered that part

90 of the Commission’s rules, 47 CFR

part 90, is amended as set forth below,

effective August 21, 1997.

95. It is further ordered that the

Petitions for Reconsideration filed by

Columbia Cellular Corporation, PLMRS

Narrowband Corp. and 360 Mobile Data

Joint Venture on August 6, 1993, are

dismissed as moot.

96. It is further ordered that, pursuant

to 47 U.S.C. 155(c), the Chief, Wireless

Telecommunications Bureau, is granted

delegated authority to implement and

modify auction procedures in the Phase

II 220 MHz service, including the

general design and timing of an auction;

the number and grouping of

authorizations to be offered in any

particular auction; the manner of

submitting bids; the amount of

minimum opening bids and 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.

97. It is further ordered that all

pending nationwide and nonnationwide 220 MHz applications,

together with the appropriate filing fees,

will be returned to applicants, without

prejudice.

98. It is further ordered that a Public

Notice will be issued announcing the

acceptance of applications for

authorizations on Channels 161–170

and Channels 181–185 after August 21,

1997.

99. It is further ordered that

applications for temporary, secondary

authorizations for geophysical telemetry

operations will be accepted beginning

August 21, 1997.

List of Subjects

47 CFR Part 2

Radio.

47 CFR Part 90

Radio.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Changes

Parts 2 and 90 of Title 47 of the Code

of Federal Regulations are amended as

follows:

PART 2—FREQUENCY ALLOCATIONS

AND RADIO TREATY MATTERS;

GENERAL RULES AND REGULATIONS

1. The authority citation for part 2

continues to read as follows:

Authority: Secs. 4, 302, 303, and 307 of the

Communications Act of 1934, as amended,

47 U.S.C. 154, 302, 303, and 307, unless

otherwise noted.

2. Section 2.106, the Table of

Frequency Allocations, is amended as

follows:

a. Revise entries for 220–222 MHz;

b. Remove international footnote 625;

and

c. Add United States footnote US335.

§ 2.106 Table of Frequency Allocations.

* * * * *

International table United States table FCC use designators

Region

1—allocation

MHz

Region

2—allocation

MHz

Region 3—allocation

MHz

Government Non-Government

Rule part(s) Special-use frequencies Allocation MHz Allocation MHz

(1) (2) (3) (4) (5) (6) (7)

* * * * * * *

220–222

BROADCASTING

220–222

AMATEUR

FIXED

MOBILE

Radiolocation

627

220–222 FIXED MOBILE BROADCASTING220–222 FIXED

LAND MOBILE

Radiolocation 627

220–222 FIXED

LAND MOBILE

PRIVATE LAND MOBILE (90)

621

623

628

629

626 G2 US335 627 US335

* * * * * * *

United States (US) Footnotes

* * * * *

US335 The primary Government and nonGovernment allocations for the various

segments of the 220–222 MHz band are

divided as follows: (1) the 220.0–220.55/

221.0–221.55, 220.6–220.8/221.6–221.8,

220.85–220.90/221.85–221.90 and 220.925–

221.0/221.925–222.0 MHz bands (Channels

1–110, 121–160, 171–180 and 186–200,

respectively) are available for exclusive nonGovernment use; (2) the 220.55–220.60/

221.55–221.60 MHz bands (Channels 111–

120) are available for exclusive Government

use; and (3) the 220.80–220.85/221.80–

221.85 and 220.900–220.925/221.900–

221.925 MHz bands (Channels 161–170 and

181–185, respectively) are available for

shared Government and non-Government

use. The exclusive non-Government band

segments are also available for temporary

fixed geophysical telemetry operations on a

secondary basis to the fixed and mobile

services.

* * * * *

PART 90—PRIVATE LAND MOBILE

RADIO SERVICES

1. The authority citation for part 90

continues to read as follows:

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

unless otherwise noted.

2. Section 90.7 is amended by revising

the definitions for ‘‘EA-based or EA

license’’ and ‘‘Economic Areas (EAs),’’

and by adding definitions for

‘‘Geophysical Telemetry,’’ ‘‘Regional

Economic Area Groupings (REAGs),’’
15992 Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations

‘‘Regional License,’’ and ‘‘220 MHz

Service’’ in alphabetical order to read as

follows:

§ 90.7 Definitions.

* * * * *

EA-based or EA license. A license

authorizing the right to use a specified

block of SMR and 220–222 MHz

spectrum within one of 175 Economic

Areas (EAs) as defined by the

Department of Commerce Bureau of

Economic Analysis. The EA Listings

and the EA Map are available for public

inspection at the Wireless

Telecommunications Bureau’s public

reference room, Room 5608, 2025 M St.

NW, Washington, DC 20554 and Office

of Operations—Gettysburg, 1270

Fairfield Road, Gettysburg, PA 17325.

Economic Areas (EAs). A total of 175

licensing regions based on the United

States Department of Commerce Bureau

of Economic Analysis Economic Areas

defined as of February 1995, with the

following exceptions:

(1) Guam and Northern Mariana

Islands are licensed as a single EA-like

area (identified as EA 173 in the 220

MHz Service);

(2) Puerto Rico and the U.S. Virgin

Islands are licensed as a single EA-like

area (identified as EA 174 in the 220

MHz Service); and

(3) American Samoa is licensed as a

single EA-like area (identified as EA 175

in the 220 MHz Service).

* * * * *

Geophysical Telemetry. Telemetry

involving the simultaneous

transmission of seismic data from

numerous locations to a central receiver

and digital recording unit.

* * * * *

Regional Economic Area Groupings

(REAGs). The six geographic areas for

Regional licensing in the 220–222 MHz

band, based on the United States

Department of Commerce Bureau of

Economic Analysis Economic Areas (see

60 FR 13114 (March 10, 1995)) defined

as of February 1995, and specified as

follows:

REAG 1 (Northeast): REAG 1 consists

of the following EAs: EA 001 (Bangor,

ME) through EA 011 (HarrisburgLebanon-Carlisle, PA); and EA 054 (Erie,

PA).

REAG 2 (Mid-Atlantic): REAG 2

consists of the following EAs: EA 012

(Philadelphia-Wilmington-Atlantic City,

PA–NJ–DE–MD) through EA 026

(Charleston-North Charleston, SC); EA

041 (Greenville-Spartanburg-Anderson,

SC–NC); EA 042 (Asheville, NC); EA

044 (Knoxville, TN) through EA 053

(Pittsburgh, PA–WV); and EA 070

(Louisville, KY–IN).

REAG 3 (Southeast): REAG 3 consists

of the following EAs: EA 027 (AugustaAiken, GA–SC) through EA 040

(Atlanta, GA–AL–NC); EA 043

(Chattanooga, TN–GA); EA 069

(Evansville–Henderson, IN–KY–IL); EA

071 (Nashville, TN–KY) through EA 086

(Lake Charles, LA); EA 088 (ShreveportBossier City, LA–AR) through EA 090

(Little Rock-North Little Rock, AR); EA

095 (Jonesboro, AR–MO); EA 096 (St.

Louis, MO–IL); and EA 174 (Puerto Rico

and the U.S. Virgin Islands).

REAG 4 (Great Lakes): REAG 4

consists of the following EAs: EA 055

Cleveland-Akron, OH–PA) through EA

068 (Champaign-Urbana, IL); EA 097

(Springfield, IL–MO); and EA 100 (Des

Moines, IA–IL–MO) through EA 109

(Duluth-Superior, MN–WI).

REAG 5 (Central/Mountain): REAG 5

consists of the following EAs: EA 087

(Beaumont-Port Arthur, TX); EA 091

(Forth Smith, AR–OK) through EA 094

(Springfield, MO); EA 098 (Columbia,

MO); EA 099 (Kansas City, MO–KS); EA

110 (Grand Forks, ND–MN) through EA

146 (Missoula, MT); EA 148 (Idaho

Falls, ID–WY); EA 149 (Twin Falls, ID);

EA 152 (Salt Lake City-Ogden, UT–ID);

and EA 154 (Flagstaff, AZ–UT) through

EA 159 (Tucson, AZ).

REAG 6 (Pacific): REAG 6 consists of

the following EAs: EA 147 (Spokane,

WA–ID); EA 150 (Boise City, ID–OR);

EA 151 (Reno, NV–CA); EA 153 (Las

Vegas, NV–AZ–UT); EA 160 (Los

Angeles-Riverside-Orange County, CA–

AZ) through EA 173 (Guam and the

Northern Mariana Islands); and EA 175

(American Samoa).

Regional License. A license

authorizing the right to use a specified

block of 220–222 MHz spectrum within

one of six Regional Economic Area

Groupings (REAGs).

* * * * *

220 MHz Service. The radio service

for the licensing of frequencies in the

220–222 MHz band.

* * * * *

3. Section 90.41(a) is revised to read

as follows:

§ 90.41 Disaster relief organizations.

(a) Eligibility. Organizations

established for disaster relief purposes

having an emergency radio

communications plan are eligible to

hold authorizations to operate radio

stations for the transmission of

communications relating to the safety of

life or property, the establishment and

maintenance of temporary relief

facilities, and the alleviation of

emergency situations during periods of

actual or impending emergency, or

disaster, and until substantially normal

conditions are restored. In addition, the

stations may be used for training

exercises, incidental to the emergency

communications plan, and for

operational communications of the

disaster relief organization or its chapter

affiliates.

* * * * *

4. Section 90.137 is amended by

revising paragraph (a)(3) to read as

follows:

§ 90.137 Applications for operation at

temporary locations.

(a) * * *

(3) Applications for operation at

temporary locations exceeding 180 days

must be accompanied by evidence of

frequency coordination, except that

applications for operation at temporary

locations exceeding 180 days by

applicants using 220–222 MHz

spectrum for geophysical telemetry

operations need not be accompanied by

evidence of frequency coordination.

* * * * *

5. Section 90.203 is amended by

adding paragraph (k) to read as follows:

§ 90.203 Type acceptance required.

* * * * *

(k)(1) For transmitters operating on

frequencies in the 220–222 MHz band,

type acceptance will only be granted for

equipment with channel bandwidths up

to 5 kHz, except that type acceptance

will be granted for equipment operating

on 220–222 MHz band Channels 1

through 160 (220.0025 through

220.7975/221.0025 through 221.7975),

171 through 180 (220.8525 through

220.8975/221.8525 through 221.8975),

and 186 through 200 (220.9275 through

220.9975/221.9275 through 221.9975)

with channel bandwidths greater than 5

kHz if the equipment meets the

following spectrum efficiency standard:

Applications for Part 90 type acceptance

of transmitters designed to operate on

frequencies in the 220–222 MHz band

must include a statement that the

equipment meets a spectrum efficiency

standard of at least one voice channel

per 5 kHz of channel bandwidth (for

voice communications), and a data rate

of at least 4,800 bits per second per 5

kHz of channel bandwidth (for data

communications). Type acceptance for

transmitters operating on 220–222 MHz

band Channels 1 through 160 (220.0025

through 220.7975/221.0025 through

221.7975), 171 through 180 (220.8525

through 220.8975/221.8525 through

221.8975), and 186 through 200

(220.9275 through 220.9975/221.9275

through 221.9975) with channel

bandwidths greater than 5 kHz will be

granted without the requirement that a

statement be included that the
Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations 15993

equipment meets the spectrum

efficiency standard if the requests for

type acceptance of such transmitters are

filed after December 31, 2001.

(2) Type acceptance may be granted

on a case-by-case basis by the

Commission’s Equipment Authorization

Division for equipment operating on

220–222 MHz band Channels 1 through

160 (220.0025 through 220.7975/

221.0025 through 221.7975), 171

through 180 (220.8525 through

220.8975/221.8525 through 221.8975),

and 186 through 200 (220.9275 through

220.9975/221.9275 through 221.9975)

with channel bandwidths greater than 5

kHz and not satisfying the spectrum

efficiency standard identified in

paragraph (k)(1) of this section, if

requests for Part 90 type acceptance of

such transmitters are accompanied by a

technical analysis that satisfactorily

demonstrates that the transmitters will

provide more spectral efficiency than

that which would be provided by use of

the spectrum efficiency standard.

6. Section 90.701 is revised to read as

follows:

§ 90.701 Scope.

(a) Frequencies in the 220–222 MHz

band are available for land mobile and

fixed use for both Government and nonGovernment operations. This subpart

sets out the regulations governing the

licensing and operation of nonGovernment systems operating in the

220–222 MHz band. It includes

eligibility requirements, application

procedures, and operational and

technical standards for stations licensed

in these bands. The rules in this subpart

are to be read in conjunction with the

applicable requirements contained

elsewhere in this part; however, in case

of conflicts, the provisions of this

subpart shall govern with respect to

licensing and operation in this

frequency band.

(b)(1) Licensees granted initial

authorizations for operations in the

220–222 MHz band from among

applications filed on or before May 24,

1991 are referred to in this subpart as

‘‘Phase I’’ licensees;

(2) Applicants that filed initial

applications for operations in the 220–

222 MHz band on or before May 24,

1991 are referred to in this subpart as

‘‘Phase I’’ applicants; and

(3) All assignments, operations,

stations, and systems of licensees

granted authorizations from among

applications filed for operations in the

220–222 MHz band on or before May 24,

1991 are referred to in this subpart as

‘‘Phase I’’ assignments, operations,

stations, and systems, respectively.

(c)(1) Licensees granted initial

authorizations for operations in the

220–222 MHz band from among

applications filed after May 24, 1991 are

referred to in this subpart as ‘‘Phase II’’

licensees;

(2) Applicants that filed initial

applications for operations in the 220–

222 MHz band after May 24, 1991 are

referred to in this subpart as ‘‘Phase II’’

applicants; and

(3) All assignments, operations,

stations, and systems of licensees

granted authorizations from among

applications filed for operations in the

220–222 MHz band after May 24, 1991

are referred to in this subpart as ‘‘Phase

II’’ assignments, operations, stations,

and systems, respectively.

(d) The rules in this subpart apply to

both Phase I and Phase II licensees,

applicants, assignments, operations,

stations, and systems, unless otherwise

specified.

7. Section 90.705 is revised to read as

follows:

§ 90.705 Forms to be used.

Phase II applications for EA, Regional,

or Nationwide radio facilities under this

subpart must be prepared in accordance

with §§ 90.1009 and 90.1013. Phase II

applications for radio facilities

operating on public safety/mutual aid

channels (Channels 161 through 170) or

Emergency Medical Radio Service

channels (Channels 181 through 185)

under this subpart must be prepared on

FCC Form 600 and submitted or filed in

accordance with § 90.127.

8. Paragraphs (a) and (c) of § 90.709

are revised and paragraph (e) is added

to read as follows:

§ 90.709 Special limitations on amendment

of applications and on assignment or

transfer of authorizations licensed under

this subpart.

(a) Except as indicated in paragraph

(b) of this section, the Commission will

not consent to the following:

(1) Any request to amend an

application so as to substitute a new

entity as the applicant;

(2) Any application to assign or

transfer a license for a Phase I, nonnationwide system prior to the

completion of construction of facilities;

or

(3) Any application to transfer or

assign a license for a Phase I nationwide

system before the licensee has

constructed at least 40 percent of the

proposed system pursuant to the

provisions of § 90.725(a) or § 90.725(h),

as applicable.

* * * * *

(c) The assignee or transferee of a

Phase I nationwide system is subject to

the construction benchmarks and

reporting requirements of § 90.725. The

assignee or transferee of a Phase I

nationwide system is not subject to the

entry criteria described in § 90.713.

* * * * *

(e) The assignee or transferee of a

Phase II system is subject to the

provisions of § 90.1017 and § 1.2111(a)

of this chapter.

9. Section 90.711 is revised to read as

follows:

§ 90.711 Processing of Phase II

applications.

(a) Phase II applications for

authorizations on Channels 166 through

170 and Channels 181 through 185 will

be processed on a first-come, firstserved basis. When multiple

applications are filed on the same day

for these frequencies in the same

geographic area, and insufficient

frequencies are available to grant all

applications (i.e., if all applications

were granted, violation of the station

separation provisions of § 90.723(i)

would result), these applications will be

considered mutually exclusive and will

be subject to random selection

procedures pursuant to § 1.972 of this

chapter.

(1) All applications will first be

considered to determine whether they

are substantially complete and

acceptable for filing. If so, they will be

assigned a file number and put in

pending status. If not, they will be

dismissed.

(2) Except as otherwise provided in

this section, all applications in pending

status will be processed in the order in

which they are received, determined by

the date on which the application was

received by the Commission in its

Gettysburg, Pennsylvania office (or the

address set forth at § 1.1102 of this

chapter for applications requiring the

fees established by part 1, subpart G of

this chapter).

(3) Each application that is accepted

for filing will then be reviewed to

determine whether it can be granted.

Frequencies will be assigned by the

Commission pursuant to the provisions

of § 90.723.

(4) An application which is dismissed

will lose its place in the processing line.

(5) If an application is returned for

correction and resubmitted and received

by the Commission within 60 days from

the date on which it was returned to the

applicant, it will retain its place in the

processing line. If it is not received

within 60 days, it will lose its place in

the processing line.

(b) All applications for Channels 161

through 165 that comply with the

applicable rules of this part shall be
15994 Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations

granted. Licensees operating on such

channels shall cooperate in the selection

and use of frequencies and resolve any

instances of interference in accordance

with the provisions of § 90.173.

(c) Phase II applications for

authorization on all non-Government

channels other than Channels 161

through 170 and 181 through 185 shall

be processed in accordance with the

provisions of subpart W of this part.

10. Section 90.713 is revised to read

as follows:

§ 90.713 Entry criteria.

(a) As set forth in § 90.717, four 5-

channel blocks are available for

nationwide, commercial use to nonGovernment, Phase I applicants.

Applicants for these nationwide

channel blocks must comply with

paragraphs (b), (c), and (d) of this

section.

(b)(1) An applicant must include

certification that, within ten years of

receiving a license, it will construct a

minimum of one base station in at least

70 different geographic areas designated

in the application; that base stations

will be located in a minimum of 28 of

the 100 urban areas listed in § 90.741;

and that each base station will have all

five assigned nationwide channels

constructed and placed in operation

(regularly interacting with mobile and/

or portable units).

(2) An applicant must include

certification that it will meet the

construction requirements set forth in

§ 90.725.

(3) An applicant must include a tenyear schedule detailing plans for

construction of the proposed system.

(4) An applicant must include an

itemized estimate of the cost of

constructing 40 percent of the system

and operating the system during the first

four years of the license term.

(5) An applicant must include proof

that the applicant has sufficient

financial resources to construct 40

percent of the system and operate the

proposed land mobile system for the

first four years of the license term; i.e.,

that the applicant has net current assets

sufficient to cover estimated costs or a

firm financial commitment sufficient to

cover estimated costs.

(c) An applicant relying on personal

or internal resources for the showing

required in paragraph (b) of this section

must submit independently audited

financial statements certified within one

year of the date of the application

showing net current assets sufficient to

meet estimated construction and

operating costs. An applicant must also

submit an unaudited balance sheet,

current within 60 days of the date of

submission, that clearly shows the

continued availability of sufficient net

current assets to construct and operate

the proposed system, and a certification

by the applicant or an officer of the

applicant organization attesting to the

validity of the balance sheet.

(d) An applicant submitting evidence

of a firm financial commitment for the

showing required in paragraph (b) of

this section must obtain the

commitment from a bona fide

commercially acceptable source, e.g., a

state or federally chartered bank or

savings and loan institution, other

recognized financial institution, the

financial arm of a capital equipment

supplier, or an investment banking

house. If the lender is not a state or

federally chartered bank or savings and

loan institution, other recognized

financial institution, the financial arm

of a capital equipment supplier, or an

investment banking house, the lender

must also demonstrate that it has funds

available to cover the total commitments

it has made. The lender’s commitment

shall contain a statement that the

lender:

(1) Has examined the financial

condition of the applicant including an

audited financial statement, and has

determined that the applicant is

creditworthy;

(2) Has examined the financial

viability of the proposed system for

which the applicant intends to use the

commitment; and

(3) Is willing, if the applicant is

seeking a Phase I, commercial

nationwide license, to provide a sum to

the applicant sufficient to cover the

realistic and prudent estimated costs of

construction of 40 percent of the system

and operation of the system for the first

four years of the license term.

(e) A Phase II applicant for

authorization in a geographic area for

Channels 166 through 170 in the public

safety/mutual aid category may not have

any interest in another pending

application in the same geographic area

for Channels 166 through 170 in the

public safety/mutual aid category, and a

Phase II applicant for authorization in a

geographic area for channels in the

Emergency Medical Radio Service

(EMRS) category may not have any

interest in another pending application

in the same geographic area for channels

in the EMRS category.

11. Section 90.717 is revised to read

as follows:

§ 90.717 Channels available for nationwide

systems in the 220–222 MHz band.

(a) Channels 51–60, 81–90, and 141–

150 are 10-channel blocks available to

non-Government applicants only for

nationwide Phase II systems.

(b) Channels 21–25, 26–30, 151–155,

and 156–160 are 5-channel blocks

available to non-Government applicants

only for nationwide, commercial Phase

I systems.

(c) Channels 111–115 and 116–120

are 5-channel blocks available for

Government nationwide use only.

12. Section 90.719 is revised to read

as follows:

§ 90.719 Individual channels available for

assignment in the 220–222 MHz band.

(a) Channels 171 through 200 are

available to both Government and nonGovernment Phase I applicants, and

may be assigned singly or in contiguous

channel groups.

(b) Channels 171 through 180 are

available for any use by Phase I

applicants consistent with this subpart.

(c) Channels 181 through 185 are set

aside for Phase II Emergency Medical

Radio Service (EMRS) use under subpart

B of this part.

(d) Channels 161 through 170 and 181

through 185 are the only 220–222 MHz

channels available to Phase II nonnationwide, Government users.

13. Section 90.720 is revised to read

as follows:

§ 90.720 Channels available for public

safety/mutual aid.

(a) Part 90 licensees whose licenses

reflect a two-letter radio service code

beginning with the letter ‘‘P’’ (except for

licensees whose licenses reflect a twoletter radio service code beginning with

the letters ‘‘PS’’ and are not eligible

under §§ 90.35, 90.37, 90.41, and 90.45)

are authorized by this rule to use mobile

and/or portable units on Channels 161–

170 throughout the United States, its

territories, and possessions to transmit:

(1) Communications relating to the

immediate safety of life;

(2) Communications to facilitate

interoperability among public safety

entities and Special Emergency Radio

Service (SERS) entities eligible under

§§ 90.35, 90.37, 90.41 and 90.45; or

(3) Communications on behalf of and

by members of organizations established

for disaster relief purposes having an

emergency radio communications plan

(i.e., licensees eligible under § 90.41) for

the transmission of communications

relating to the safety of life or property,

the establishment and maintenance of

temporary relief facilities, and the

alleviation of emergency conditions

during periods of actual or impending

emergency, or disaster, until

substantially normal conditions are

restored; for limited training exercises

incidental to an emergency radio
Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations 15995

communications plan, and for necessary

operational communications of the

disaster relief organization or its chapter

affiliates.

(b) Any Government entity and any

non-Government entity eligible to

obtain a license under subpart B of this

part or eligible to obtain a license under

§§ 90.35, 90.37, 90.41 and 90.45 is also

eligible to obtain a license for base/

mobile operations on Channels 161

through 170. Base/mobile or base/

portable communications on these

channels that do not relate to the

immediate safety of life or to

communications interoperability among

public safety entities and the abovespecified SERS entities, may only be

conducted on a secondary noninterference basis to such

communications.

14. Section 90.721 is revised to read

as follows:

§ 90.721 Other channels available for nonnationwide systems in the 220–222 MHz

band.

(a) The channel groups listed in the

following Table are available to both

Government and non-Government Phase

I applicants for trunked operations or

operations of equivalent or greater

efficiency for non-commercial or

commercial operations.

TABLE 1.—PHASE I TRUNKED

CHANNEL GROUPS

Group No. Channel Nos.

1 .................................. 1–31–61–91–121

2 .................................. 2–32–62–92–122

3 .................................. 3–33–63–93–123

4 .................................. 4–34–64–94–124

5 .................................. 5–35–65–95–125

6 .................................. 6–36–66–96–126

7 .................................. 7–37–67–97–127

8 .................................. 8–38–68–98–128

9 .................................. 9–39–69–99–129

10 ................................ 10–40–70–100–130

11 ................................ 11–41–71–101–131

12 ................................ 12–42–72–102–132

13 ................................ 13–43–73–103–133

14 ................................ 14–44–74–104–134

15 ................................ 15–45–75–105–135

16 ................................ 16–46–76–106–136

17 ................................ 17–47–77–107–137

18 ................................ 18–48–78–108–138

19 ................................ 19–49–79–109–139

20 ................................ 20–50–80–110–140

(b) The channels listed in the

following Table are available to nonGovernment applicants for Phase II

assignments in Economic Areas (EAs)

and Regional Economic Area Groupings

(REAGs) (see §§ 90.761 and 90.763).

TABLE 2.—PHASE II EA AND

REGIONAL CHANNEL ASSIGNMENTS

Assignment

Assignment

area

Group Nos.

(from table 1)

Channel

Nos.

A ...... EA 2 and 13.

B ...... EA 3 and 16.

C ...... EA 5 and 18.

D ...... EA 8 and 19.

E ...... EA ........................... 171–180

F ...... REAG 1, 6, and 11.

G ..... REAG 4, 9, and 14.

H ...... REAG 7, 12, and 17.

I ....... REAG 10, 15, and 20.

J ...... REAG ........................... 186–200

15. Section 90.723 is revised to read

as follows:

§ 90.723 Selection and assignment of

frequencies.

(a) Phase II applications for

frequencies in the 220–222 MHz band

shall specify whether their intended use

is for 10-channel nationwide systems,

10-channel EA systems, 15-channel

Regional systems, public safety/mutual

aid use, or EMRS use. Phase II

applicants for frequencies for public

safety/mutual aid use or EMRS use shall

specify the number of frequencies

requested. All frequencies in this band

will be assigned by the Commission.

(b) Phase II channels will be assigned

pursuant to §§ 90.717, 90.719, 90.720,

90.721, 90.761 and 90.763.

(c) Phase II applicants for public

safety/mutual aid and EMRS channels

will be assigned only the number of

channels justified to meet their

requirements.

(d) Phase I base or fixed station

receivers utilizing 221–222 MHz

frequencies assigned from Sub-band A

as designated in § 90.715(b) will be

geographically separated from those

Phase I base or fixed station transmitters

utilizing 220–221 MHz frequencies

removed 200 kHz or less and assigned

from Sub-band B as follows:

GEOGRAPHIC SEPARATION OF SUBBAND A; BASE OR FIXED STATION

RECEIVERS AND SUB-BAND B; BASE

OR FIXED STATION TRANSMITTERS

EFFECTIVE

Separation distance (kilometers)

Radiated

power

(watts) 1

0.0–0.3 .......................................... (2)

0.3–0.5 .......................................... 5

0.5–0.6 .......................................... 10

0.6–0.8 .......................................... 20

0.8–2.0 .......................................... 25

2.0–4.0 .......................................... 50

4.0–5.0 .......................................... 100

5.0–6.0 .......................................... 200

GEOGRAPHIC SEPARATION OF SUBBAND A; BASE OR FIXED STATION

RECEIVERS AND SUB-BAND B; BASE

OR FIXED STATION TRANSMITTERS

EFFECTIVE—Continued

Separation distance (kilometers)

Radiated

power

(watts) 1

Over 6.0 ........................................ 500

1Transmitter peak envelope power shall be

used to determine effective radiated power. 2Stations separated by 0.3 km or less shall

not be authorized. This table does not apply to

the low-power channels 196–200. See

§ 90.729(c).

(e) Phase II licensees authorized on

220–221 MHz frequencies assigned from

Sub-band B will be required to

geographically separate their base

station or fixed station transmitters from

the base station or fixed station

receivers of Phase I licensees authorized

on 221–222 MHz frequencies 200 kHz

removed or less in Sub-band A in

accordance with the Table in paragraph

(d) of this section.

(f) Phase II licensees with base or

fixed stations transmitting on 220–221

MHz frequencies assigned from Subband B and Phase II licensees with base

or fixed station stations receiving on

Sub-band A 221–222 MHz frequencies,

if such transmitting and receiving

frequencies are 200 kHz or less removed

from one another, will be required to

coordinate the location of their base

stations or fixed stations to avoid

interference and to cooperate to resolve

any instances of interference in

accordance with the provisions of

§ 90.173(b).

(g) A mobile station is authorized to

transmit on any frequency assigned to

its associated base station. Mobile units

not associated with base stations (see

§ 90.720(a)) must operate on ‘‘mobile’’

channels.

(h) A licensee’s fixed station is

authorized to transmit on any of the

licensee’s assigned base station

frequencies or mobile station

frequencies.

(i) Except for nationwide assignments,

the separation of co-channel Phase I

base stations, or fixed stations

transmitting on base station frequencies,

shall be 120 kilometers. Except for

Phase I licensees seeking license

modification in accordance with the

provisions of §§ 90.751 and 90.753,

shorter separations between such

stations will be considered by the

Commission on a case-by-case basis

upon submission of a technical analysis

indicating that at least 10 dB protection

will be provided to an existing Phase I

station’s predicted 38 dBu signal level
15996 Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations

contour. The existing Phase I station’s

predicted 38 dBu signal level contour

shall be calculated using the F(50,50)

field strength chart for Channels 7–13 in

§ 73.699 (Fig. 10) of this chapter, with

a 9 dB correction factor for antenna

height differential. The 10 dB protection

to the existing Phase I station’s

predicted 38 dBu signal level contour

shall be calculated using the F(50,10)

field strength chart for Channels 7–13 in

§ 73.699 (Fig. 10a) of this chapter, with

a 9 dB correction factor for antenna

height differential.

16. Section 90.725 is amended by

revising the section heading and

paragraphs (f) and (h) to read as follows:

§ 90.725 Construction requirements for

Phase I licensees.

* * * * *

(f) Licensees authorized Phase I nonnationwide systems, or authorized on

Channels 161 through 170 or Channels

181 through 185, must construct their

systems (i.e., have all specified base

stations constructed with all channels)

and place their systems in operation, or

commence service in accordance with

the provisions of § 90.167, within

twelve months of the initial license

grant date. Authorizations for systems

not constructed and placed in operation,

or having commenced service, within

twelve months from the date of initial

license grant cancel automatically.

* * * * *

(h) The requirements and conditions

of paragraphs (a) through (e) and

paragraph (g) of this section apply to

nationwide licensees that construct and

operate stations for fixed or paging

operations on a primary basis instead of,

or in addition to, stations for land

mobile operations on a primary basis

except that, in satisfying the base station

construction and placed in operation

requirements of paragraph (a) of this

section and the system progress report

requirements of paragraphs (d) and (e)

of this section, licensees operating

stations for fixed operation on a primary

basis instead of, or in addition to,

stations for land mobile or paging

operations on a primary basis in a given

geographic area may demonstrate how

such fixed stations are providing

substantial service to the public in those

geographic areas.

17. The section heading of § 90.727 is

revised to read as follows:

§ 90.727 Extended implementation

schedules for Phase I licensees.

* * * * *

18. Section 90.729 is revised to read

as follows:

§ 90.729 Limitations on power and antenna

height.

(a) The permissible effective radiated

power (ERP) with respect to antenna

heights for land mobile, paging, or fixed

stations transmitting on frequencies in

the 220–221 MHz band shall be

determined from the following Table.

These are maximum values and

applicants are required to justify power

levels requested.

ERP VS. ANTENNA HEIGHT TABLE 2

Antenna height above average

terrain (HAAT), meters

Effective

radiated

power,

watts 1

Up to 150 ...................................... 500

150 to 225 ..................................... 250

225 to 300 ..................................... 125

300 to 450 ..................................... 60

450 to 600 ..................................... 30

600 to 750 ..................................... 20

750 to 900 ..................................... 15

900 to 1050 ................................... 10

Above 1050 ................................... 5

1Transmitter PEP shall be used to determine ERP. 2These power levels apply to stations used

for land mobile, paging, and fixed operations.

(b) The maximum permissible ERP for

mobile units is 50 watts. Portable units

are considered as mobile units.

Licensees operating fixed stations or

paging base stations transmitting on

frequencies in the 221–222 MHz band

may not operate such fixed stations or

paging base stations at power levels

greater than 50 watts ERP, and may not

transmit from antennas that are higher

than 7 meters above ground, except that

transmissions from antennas that are

higher than 7 meters above ground will

be permitted if the effective radiated

power of such transmissions is reduced

below 50 watts ERP by 20 log10(h/7) dB,

where h is the height of the antenna

above ground, in meters.

(c) Base station and fixed station

transmissions on base station transmit

Channels 196–200 are limited to 2 watts

ERP and a maximum antenna height of

6.1 meters (20 ft) above ground.

Licensees authorized on these channels

may operate at power levels above 2

watts ERP or with a maximum antenna

height greater than 6.1 meters (20 ft)

above ground if:

(1) They obtain the concurrence of all

Phase I and Phase II licensees with base

stations or fixed stations receiving on

base station receive Channels 1–40 and

located within 6 km of their base station

or fixed station; and

(2) Their base station or fixed station

is not located in the United States/

Mexico or United States/Canada border

areas.

§ 90.731 [Removed]

19. Section 90.731 is removed.

20. Section 90.733 is amended by

removing paragraph (d), revising

paragraphs (a)(1), and (c) and adding

new paragraphs (d), (e), (f), (g), (h), and

(i) to read as follows:

§ 90.733 Permissible operations.

(a) * * *

(1)(i) For government and nongovernment land mobile operations, i.e.,

for base/mobile and mobile relay

transmissions, on a primary basis; or

(ii) For the following operations

instead of or in addition to a licensee’s

land mobile operations: One-way or

two-way paging operations on a primary

basis by all non-Government Phase II

licensees, fixed operations on a primary

basis by all non-Government Phase II

licensees and all Government licensees,

one-way or two-way paging or fixed

operations on a primary basis by all

non-Government Phase I licensees,

except that before a non-Government

Phase I licensee may operate one-way or

two-way paging or fixed systems on a

primary basis instead of or in addition

to its land mobile operations, it must

meet the following requirements:

(A) A nationwide Phase I licensee

must;

(1) Meet its two-year benchmark for

the construction of its land mobile

system base stations as prescribed in

§ 90.725(a); and

(2) Provide a new 10-year schedule, as

required in § 90.713(b)(3), for the

construction of the fixed and/or paging

system it intends to construct instead of,

or in addition to, its nationwide land

mobile system; and

(3) Certify that the financial showings

and all other certifications provided in

demonstrating its ability to construct

and operate its nationwide land mobile

system, as required in §§ 90.713 (b), (c)

and (d), remain applicable to the

nationwide system it intends to

construct consisting of fixed and/or

paging operations on a primary basis

instead of, or in addition to, its land

mobile operations; or

(4) In lieu of providing the

requirements of paragraph

(a)(1)(ii)(A)(3) of this section, provide

the financial showings and all other

certifications required in §§ 90.713 (b),

(c) and (d) to demonstrate its ability to

construct and operate a nationwide

system consisting of fixed and/or paging

operations on a primary basis instead of,

or in addition to, its land mobile

operations.

(B) A non-nationwide Phase I licensee

must first meet the requirement to

construct its land mobile base station

and place it in operation, or commence
Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations 15997

service (in accordance with § 90.167) as

prescribed in § 90.725(f) or § 90.727, as

applicable.

* * * * *

(c) For operations requiring less than

a 4 kHz bandwidth, more than a single

emission may be utilized within the

authorized bandwidth. In such cases,

the frequency stability requirements of

§ 90.213 do not apply, but the out-ofband emission limits of § 90.210(f) must

be met.

(d) Licensees, except for licensees

authorized on Channels 161 through

170 and 181 through 185, may combine

any number of their authorized,

contiguous channels to form channels

wider than 5 kHz. In so doing, licensees

must comply with the following

spectrum efficiency standard, which

will remain in effect through December

31, 2001:

(1) For voice communications,

licensees must employ equipment that

provides at least one voice channel per

5 kHz of channel bandwidth; and

(2) For data communications,

licensees must employ equipment that

operates at a data rate of at least 4,800

bits per second per 5 kHz of channel

bandwidth.

(3) Licensees authorized on channels

other than Channels 161 through 170

and 181 through 185 may combine any

number of their authorized, contiguous

channels to form channels wider than 5

kHz without complying with the

spectrum efficiency standard identified

in paragraphs (d)(1) and (d)(2) of this

section if they operate with equipment

that has been granted type acceptance in

accordance with the provisions of

§ 90.203(k)(2).

(e) In combining authorized

contiguous channels to form channels

wider than 5 kHz, the emission limits in

§ 90.210(f) must be met only at the

outermost edges of the contiguous

channels. Transmitters shall be tested to

confirm compliance with this

requirement with the transmission

located as close to the band edges as

permitted by the design of the

transmitter. The frequency stability

requirements in § 90.213 shall apply

only to the outermost of the contiguous

channels authorized to the licensee.

However, the frequency stability

employed for transmissions operating

inside the outermost contiguous

channels must be such that the emission

limits in § 90.210(f) are met over the

temperature and voltage variations

prescribed in § 2.995 of this chapter.

(f) A Phase I non-nationwide licensee

operating a paging base station, or a

fixed station transmitting on frequencies

in the 220–221 MHz band, may only

operate such stations at the coordinates

of the licensee’s authorized land mobile

base station.

(g) The transmissions of a Phase I

non-nationwide licensee’s paging base

station, or fixed station transmitting on

frequencies in the 220–221 MHz band,

must meet the requirements of §§ 90.723

(d) and (i), and 90.729, and such a

station must operate at the effective

radiated power and antenna heightabove-average-terrain prescribed in the

licensee’s land mobile base station

authorization.

(h) Licensees using 220–222 MHz

spectrum for geophysical telemetry

operations are authorized to operate

fixed stations on a secondary, noninterference basis to licensees operating

in the 220–222 MHz band on a primary

basis under the conditions that such

licensees:

(1) Provide notification of their

operations to co-channel nonnationwide Phase I licensees with an

authorized base station, or fixed station

transmitting on frequencies in the 220–

221 MHz band, located within 45 km of

the secondary licensee’s station, to cochannel, Phase II EA or Regional

licensee authorized to operate in the EA

or REAG in which the secondary

licensee’s station is located, and to cochannel Phase I or Phase II nationwide

licensees;

(2) Operate only at temporary

locations in accordance with the

provisions of Section 90.137;

(3) Not transmit at a power level

greater than one watt ERP;

(4) Not transmit from an antenna

higher than 2 meters (6.6 feet) above

ground; and

(5) Not operate on Channels 111

through 120, 161 through 170, or 181

through 185.

(i) All licensees constructing and

operating base stations or fixed stations

on frequencies in the 220–222 MHz

band must:

(1) Comply with any rules and

international agreements that restrict

use of their authorized frequencies,

including the provisions of § 90.715

relating to U.S./Mexican border areas;

(2) Comply with the provisions of

§ 17.6 of this chapter with regard to

antenna structures; and

(3) Comply with the provisions of

§§ 1.1301 through 1.1319 of this chapter

with regard to actions that may or will

have a significant impact on the quality

of the human environment.

21. Paragraph (d) of § 90.735 is

revised to read as follows:

§ 90.735 Station identification.

* * * * *

(d) Digital transmissions may also be

identified by digital transmission of the

station call sign. A licensee that

identifies its station in this manner must

provide the Commission, upon its

request, information (such as digital

codes and algorithms) sufficient to

decipher the data transmission to

ascertain the call sign transmitted.

22. The section heading of § 90.737 is

revised to read as follows:

§ 90.737 Supplemental reports required of

Phase I licensees.

* * * * *

23. Section 90.739 is revised to read

as follows:

§ 90.739 Number of systems authorized in a

geographical area.

(a) No licensee will be authorized

more than one Phase I system in the

220–222 MHz band in a single category

(i.e., one nationwide system, one 5-

channel trunked system, one data-only

local system of 1 to 5 channels, one

unrestricted non-trunked local system of

1 to 5 channels, or one public safety/

mutual aid local system of 1 to 5

channels) within 64 kilometers (40

miles) of an existing system authorized

to that licensee in the same category,

unless the licensee can demonstrate that

the additional system is justified on the

basis of its communications

requirements.

(b) There is no limit on the number

of Phase II nationwide, EA or Regional

licenses that may be authorized to a

single licensee.

24. The section heading and

introductory text of § 90.741 are revised

to read as follows:

§ 90.741 Urban areas for Phase I

nationwide systems.

Licensees of Phase I nationwide

systems must construct base stations, or

fixed stations transmitting on

frequencies in the 220–221 MHz band,

in a minimum of 28 of the urban areas

listed in the following Table within ten

years of initial license grant. A base

station, or fixed station, is considered to

be within one of the listed urban areas

if it is within 60 kilometers (37.3 miles)

of the specified coordinates.

* * * * *

25. A new § 90.743 is added to read

as follows:

§ 90.743 Renewal expectancy.

(a) All licensees seeking renewal of

their authorizations at the end of their

license term must file a renewal

application in accordance with the

provisions of § 90.149. Licensees must

demonstrate, in their application, that:

(1) They have provided ‘‘substantial’’

service during their past license term.

‘‘Substantial’’ service is defined in this

rule as service that is sound, favorable,
15998 Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations

and substantially above a level of

mediocre service that just might

minimally warrant renewal; and

(2) They have substantially complied

with applicable FCC rules, policies, and

the Communications Act of 1934, as

amended.

(b) In order to establish its right to a

renewal expectancy, a renewal

applicant 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) For an EA, Regional, or nationwide

licensee, an explanation of its record of

expansion, including a timetable of the

construction of new stations to meet

changes in demand for service;

(3) A description of its investments in

its system;

(4) Copies of all FCC orders finding

the licensee to have violated the

Communications Act or any FCC rule or

policy; and

(5) A list of any pending proceedings

that relate to any matter described in

this paragraph.

(c) Phase I non-nationwide licensees

have license terms of 5 years, and

therefore must meet these requirements

5 years from the date of initial

authorization in order to receive a

renewal expectancy. Phase I nationwide

licensees and all Phase II licensees have

license terms of 10 years, and therefore

must meet these requirements 10 years

from the date of initial authorization in

order to receive a renewal expectancy.

26. Section 90.751 is revised to read

as follows:

§ 90.751 Minor modifications of Phase I,

non-nationwide licenses.

Phase I non-nationwide licensees will

be given an opportunity to seek

modification of their license to relocate

their initially authorized base station,

i.e., locate their base station at a site

other than its initially authorized

location. The conditions under which

modifications will be granted and the

procedures for applying for license

modifications are described in

§§ 90.753, 90.755, and 90.757. For

CMRS licensees, these modifications

will be treated as minor modifications

in accordance with § 90.164.

27. A new centered heading is added

following § 90.757 to read as follows:

Policies Governing the Licensing and

Use of Phase II EA, Regional and

Nationwide Systems

28. A new § 90.761 is added to read

as follows:

§ 90.761 EA and Regional licenses.

(a) EA licenses for spectrum blocks

listed in Table 2 of § 90.721(b) are

available in 175 Economic Areas (EAs)

as defined in § 90.7.

(b) Regional licenses for spectrum

blocks listed in Table 2 of § 90.721(b)

are available in six Regional Economic

Area Groupings (REAGs) as defined in

§ 90.7.

29. A new § 90.763 is added to read

as follows:

§ 90.763 EA, Regional and Nationwide

system operations.

(a) A nationwide licensee authorized

pursuant to § 90.717(a) may construct

and operate any number of land mobile

or paging base stations, or fixed stations,

anywhere in the Nation, and transmit on

any of its authorized channels, provided

that the licensee complies with the

requirements of § 90.733(i).

(b) An EA or Regional licensee

authorized pursuant to § 90.761 may

construct and operate any number of

land mobile or paging base stations, or

fixed stations, anywhere within its

authorized EA or REAG, and transmit

on any of its authorized channels,

provided that:

(1) The licensee affords protection to

all authorized co-channel Phase I nonnationwide base stations as follows:

(i) The EA or Regional licensee must

locate its land mobile or paging base

stations, or fixed stations transmitting

on base station transmit frequencies, at

least 120 km from the land mobile or

paging base stations, or fixed stations

transmitting on base station transmit

frequencies, of co-channel Phase I

licensees, except that separations of less

than 120 km shall be considered on a

case-by-case basis upon submission by

the EA or Regional licensee of:

(A) A technical analysis

demonstrating at least 10 dB protection

to the predicted 38 dBu service contour

of the co-channel Phase I licensee, i.e.,

demonstrating that the predicted 28 dBu

interfering contour of the EA or

Regional licensee’s base station or fixed

station does not overlap the predicted

38 dBu service contour of the cochannel Phase I licensee’s base station

or fixed station; or

(B) A written letter from the cochannel Phase I licensee consenting to

a separation of less than 120 km, or to

less than 10 dB protection to the

predicted 38 dBu service contour of the

licensee’s base station or fixed station.

(ii) The Phase I licensee’s predicted

38 dBu service contour referred to in

paragraph (a)(1)(i) of this section is

calculated using the F(50,50) field

strength chart for Channels 7–13 in

§ 73.699 (Fig. 10) of this chapter, with

a 9 dB correction factor for antenna

height differential, and is based on the

licensee’s authorized effective radiated

power and antenna height-aboveaverage-terrain. The EA or Regional

licensee’s predicted 28 dBu interfering

contour referred to in paragraph (a)(1)(i)

of this section is calculated using the

F(50,10) field strength chart for

Channels 7–13 in § 73.699 (Fig. 10a) of

this chapter, with a 9 dB correction

factor for antenna height differential.

(2) The licensee complies with the

requirements of § 90.733(i).

(3) The licensee limits the field

strength of its base stations, or fixed

stations operating on base station

transmit frequencies, in accordance

with the provisions of § 90.771.

(4) The licensee notifies the

Commission within 30 days of the

completion of the addition, removal,

relocation or modification of any of its

facilities within its authorized area of

operation. Such notification must be

made by submitting an FCC Form 600,

and must include the appropriate filing

fee, if any.

(c) In the event that the authorization

for a co-channel Phase I base station, or

fixed station transmitting on base

station transmit frequencies, within an

EA or Regional licensee’s border is

terminated or revoked, the EA or

Regional licensee’s channel obligations

to such stations will cease upon

deletion of the facility from the

Commission’s official licensing records,

and the EA or Regional licensee then

will be able to construct and operate

without regard to the previous

authorization.

30. A new § 90.765 is added to read

as follows:

§ 90.765 Licenses term for Phase II

licenses.

Nationwide licenses authorized

pursuant to § 90.717(a), EA and

Regional licenses authorized pursuant

to § 90.761, and non-nationwide

licenses authorized pursuant to

§§ 90.720 and 90.719(c) will be issued

for a term not to exceed ten years.

31. A new § 90.767 is added to read

as follows:

§ 90.767 Construction and implementation

of EA and Regional licenses.

(a) An EA or Regional licensee must

construct a sufficient number of base

stations (i.e., base stations for land

mobile and/or paging operations) to

provide coverage to:

(1) At least one-third of the

population of its EA or REAG within

five years of the issuance of its initial

license; and

(2) At least two-thirds of the

population of its EA or REAG within ten
Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations 15999

years of the issuance of its initial

license.

(b) EA and Regional licensees offering

fixed services as part of their system,

and EA and Regional licensees that have

one or more incumbent, co-channel

Phase I licensees authorized within

their EA or REAG may meet the

construction requirements of paragraph

(a) of this section by demonstrating an

appropriate level of substantial service

at their five- and ten-year benchmarks.

(c) Licensees must submit maps or

other supporting documents to

demonstrate compliance with the

construction requirements of paragraphs

(a) and (b) of this section.

(d) Failure by an EA or Regional

licensee to meet the construction

requirements of paragraph (a) or (b) of

this section, as applicable, will result in

automatic cancellation of its entire EA

or Regional license. In such instances,

EA or Regional licenses will not be

converted to individual, site-by-site

authorizations for already constructed

stations.

(e) EA and Regional licensees will not

be permitted to count the resale of the

services of other providers in their EA

or REAG, e.g., incumbent, Phase I

licensees, to meet the construction

requirement of paragraph (a) or (b) of

this section, as applicable.

(f) EA and Regional licensees will not

be required to construct and place in

operation, or commence service on, all

of their authorized channels at all of

their base stations or fixed stations.

32. A new § 90.769 is added to read

as follows:

§ 90.769 Construction and implementation

of Nationwide licenses.

(a) A nationwide licensee must

construct a sufficient number of base

stations (i.e., base stations for land

mobile and/or paging operations) to

provide coverage to:

(1) A composite area of at least

750,000 square kilometers or 37.5

percent of the United States population

within five years of the issuance of its

initial license; and

(2) A composite area of at least

1,500,000 square kilometers or 75

percent of the United States population

within ten years of the issuance of its

initial license.

(b) Nationwide licensees offering

fixed services as part of their system

may meet the construction requirements

of paragraph (a) of this section by

demonstrating an appropriate level of

substantial service at their five- and tenyear benchmarks.

(c) Licensees must submit maps or

other supporting documents to

demonstrate compliance with the

construction requirements of paragraphs

(a) and (b) of this section.

(d) Failure by a nationwide licensee to

meet the construction requirements of

paragraphs (a) or (b) of this section, as

applicable, will result in automatic

cancellation of its entire nationwide

license. In such instances, nationwide

licenses will not be converted to

individual, site-by-site authorizations

for already constructed stations.

(e) Nationwide licensees will not be

required to construct and place in

operation, or commence service on, all

of their authorized channels at all of

their base stations or fixed stations.

33. A new § 90.771 is added to read

as follows:

§ 90.771 Field strength limits.

(a) The transmissions from base

stations, or fixed stations transmitting

on base station transmit frequencies, of

EA and Regional licensees may not

exceed a predicted 38 dBu field strength

at their EA or REAG border. The

predicted 38 dBu field strength is

calculated using the F(50,50) field

strength chart for Channels 7–13 in

§ 73.699 (Fig. 10) of this chapter, with

a 9 dB correction factor for antenna

height differential.

(b) Licensees will be permitted to

exceed the predicted 38 dBu field

strength required in paragraph (a) of this

section if all affected, co-channel EA

and Regional licensees agree to the

higher field strength.

(c) EA and Regional licensees must

coordinate to minimize interference at

or near their EA and REAG borders, and

must cooperate to resolve any instances

of interference in accordance with the

provisions of § 90.173(b).

34. A new subpart W consisting of

§§ 90.1001 through 90.1025 is added to

part 90 to read as follows:

Subpart W—Competitive Bidding

Procedures for the 220 MHz Service

Sec.

90.1001 220 MHz service subject to

competitive bidding.

90.1003 Competitive bidding design for the

220 MHz service.

90.1005 Competitive bidding mechanisms.

90.1007 Withdrawal, default and

disqualification payments.

90.1009 Bidding application (FCC Form 175

and 175–S Short-form).

90.1011 Submission of upfront payments

and down payments.

90.1013 Long-form application (FCC Form

600).

90.1015 License grant, denial, default, and

disqualification.

90.1017 Bidding credits, down payments,

and installment payments for small

businesses and very small businesses.

90.1019 Eligibility for partitioned licenses.

90.1021 Definitions concerning competitive

bidding process.

90.1023 Certifications, disclosures, records

maintenance and audits.

90.1025 Petitions to deny and limitations

on settlements.

Subpart W—Competitive Bidding

Procedures for the 220 MHz Service

§ 90.1001 220 MHz service subject to

competitive bidding.

Mutually exclusive initial

applications for 220 MHz geographic

area 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.

§ 90.1003 Competitive bidding design for

the 220 MHz service.

A simultaneous multiple round

auction will be used to choose from

among mutually exclusive initial

applications for 220 MHz geographic

area licenses, unless the Commission

specifies otherwise by Public Notice

prior to the competitive bidding

procedure.

§ 90.1005 Competitive bidding

mechanisms.

(a) Sequencing. The Commission will

establish and may vary the sequence in

which 220 MHz geographic area

licenses are auctioned.

(b) Grouping. The Commission will

determine which licenses will be

auctioned simultaneously or in

combination.

(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.

§ 90.1007 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
16000 Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations

disqualified. When the Commission

conducts a simultaneous multiple round

auction, payments will be calculated as

set forth in §§ 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.

§ 90.1009 Bidding application (FCC Form

175 and 175–S Short-form).

Each applicant to participate in

competitive bidding for 220 MHz

geographic area licenses must submit an

application (FCC Forms 175 and 175–S)

pursuant to the provisions of § 1.2105 of

this chapter.

§ 90.1011 Submission of upfront payments

and down payments.

(a) The Commission will require

applicants to submit an upfront

payment prior to the start of a 220 MHz

service auction. The amount of the

upfront payment for each geographic

area license auctioned and the

procedures for submitting it will be set

forth by the Wireless

Telecommunications Bureau in a Public

Notice in accordance with § 1.2106 of

this chapter.

(b) Each winning bidder in a 220 MHz

service auction, except those that

qualify as small businesses or very small

businesses pursuant to § 90.1021(b)(1)

or § 90.1021(b)(2), must submit a down

payment to the Commission in an

amount sufficient to bring its total

deposits up to 20 percent of its winning

bid within ten (10) business days

following the release of a Public Notice

announcing the close of bidding. Small

businesses and very small businesses

must submit a down payment to the

Commission in accordance with

§ 90.1017(c).

§ 90.1013 Long-form application (FCC

Form 600).

Each successful bidder for a 220 MHz

geographic area license must submit a

long-form application (FCC Form 600)

within ten (10) business days after being

notified by Public Notice that it is the

winning bidder. Applications for 220

MHz geographic area licenses on FCC

Form 600 must be submitted in

accordance with § 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 220 MHz geographic

area licenses from anyone other than the

auction winners and parties seeking

partitioned licenses pursuant to

agreements with auction winners under

§ 90.1019.

§ 90.1015 License grant, denial, default,

and disqualification.

(a) Each winning bidder, except those

eligible for installment payments, will

be required to pay the full balance of its

winning bid within ten (10) business

days following Public Notice that the

Commission is prepared to award the

license.

(b) A bidder that withdraws its bid

subsequent to the close of bidding,

defaults on a payment due, or is

disqualified, is subject to the payments

specified in § 1.2104(g), § 1.2109 of this

chapter and § 90.1007, as applicable.

§ 90.1017 Bidding credits, down payments,

and installment payments for small

businesses and very small businesses.

(a) Bidding credits. A winning bidder

that qualifies as a small business or a

consortium of small businesses as

defined in § 90.1021(b)(1) or

§ 90.1021(b)(4) may use a bidding credit

of 10 percent to lower the cost of its

winning bid. A winning bidder that

qualifies as a very small business or a

consortium of very small businesses as

defined in § 90.1021(b)(2) or

§ 90.1021(b)(4) may use a bidding credit

of 25 percent to lower the cost of its

winning bid.

(b) Unjust enrichment—bidding

credits. (1) If a small business or very

small business (as defined in

§§ 90.1021(b)(1) and 90.1021(b)(2),

respectively) that utilizes a bidding

credit under this section seeks to

transfer control or assign an

authorization to an entity that is not a

small business or a very small business,

or seeks to make any other change in

ownership that would result in the

licensee losing eligibility as a small

business or very small business, the

small business or very small business

must seek Commission approval and

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

approval of the assignment, transfer, or

other ownership change.

(2) If a very small business (as defined

in § 90.1021(b)(2)) that utilizes a bidding

credit under this section seeks to

transfer control or assign an

authorization to a small business

meeting the eligibility standards for a

lower bidding credit, or seeks to make

any other change in ownership that

would result in the licensee qualifying

for a lower bidding credit under this

section, the licensee must seek

Commission approval and reimburse the

U.S. government for the difference

between the amount of the bidding

credit obtained by the licensee and the

bidding credit for which the assignee,

transferee, or licensee is eligible under

this section, plus interest at the rate

imposed for installment financing at the

time the license was awarded, as a

condition of the approval of such

assignment, transfer, or other ownership

change.

(3) The amount of payments made

pursuant to paragraphs (b)(1) and (b)(2)

of this section will be reduced over time

as follows: 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 the difference

between the bidding credit obtained by

the original licensee and the bidding

credit for which the post-transfer

licensee is eligible); in year 3 of the

license term the payment will be 75

percent; in year 4 the payment will be

50 percent; and in year 5 the payment

will be 25 percent, after which there

will be no assessment.

(c) Down payments. Winning bidders

in a 220 MHz service auction that

qualify as small businesses under

§ 90.1021(b)(1) or very small businesses

under § 90.1021(b)(2) 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. Small businesses and

very small businesses must bring their

deposit up to 10 percent of their

winning bids within ten (10) business

days following a Public Notice

announcing the close of bidding. Prior

to licensing, by a date and time to be

specified by Public Notice, they must

pay an additional 10 percent.

(d) Installment payments. (1) Each

licensee that qualifies as a small

business under § 90.1021(b)(1) or as a

very small business under

§ 90.1021(b)(2) may pay the remaining

80 percent of the net auction price for

the license in installment payments over

the term of the geographic area license.

Interest charges shall be fixed at the

time of licensing at a rate equal to the

rate for ten-year U.S. Treasury

obligations plus 2.5 percent. An eligible

licensee may make interest-only

payments for two years. Payments of

interest and principal shall be amortized

over the remaining eight years of the

license term.

(2) 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.
Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations 16001

(3) Payments will be applied in the

following order: Late charges, interest

charges, principal payments.

(e) Unjust enrichment—installment

payments. (1) If a licensee that utilizes

installment financing under this section

seeks to assign or transfer control of its

license to an entity not meeting the

eligibility standards for installment

financing, the licensee must seek

Commission approval and make full

payment of the remaining unpaid

principal and unpaid interest accrued

through the date of assignment or

transfer as a condition of Commission

approval.

(2) If a licensee that utilizes

installment financing under this section

seeks to make any change in ownership

structure that would result in the

licensee losing eligibility for installment

payments, the licensee shall first seek

Commission approval before making

such a change in ownership structure

and must make full payment of the

remaining unpaid principal and unpaid

interest accrued through the date of

such change in ownership structure as

a condition of Commission approval.

§ 90.1019 Eligibility for partitioned

licenses.

If partitioned licenses are being

applied for in conjunction with a

license(s) to be awarded through

competitive bidding procedures—

(a) 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, who

must disclose as part of its short-form

application all parties to agreement(s)

with or among other entities to partition

the license pursuant to this section, if

won at auction (see 47 CFR

1.2105(a)(2)(viii));

(b) Each party to an agreement to

partition the license must file a longform application (FCC Form 600) for its

respective, mutually agreed-upon

geographic license area together with

the application for the remainder of the

geographic license area filed by the

auction winner.

(c) If the partitioned license is being

applied for as a partial assignment of the

geographic area license following grant

of the initial license, request for

authorization for partial assignment of a

license shall be made pursuant to

§ 90.153.

§ 90.1021 Definitions concerning

competitive bidding process.

(a) Scope. The definitions in this

section apply to §§ 90.1001 through

90.1025, unless otherwise specified in

those sections.

(b) Small business; very small

business; consortium of small

businesses or very small businesses. (1)

A small business is an entity that,

together with its affiliates and

controlling principals, has average gross

revenues that are not more than $15

million for the preceding three years.

(2) A very small business is an entity

that, together with its affiliates and

controlling principals, has average gross

revenues that are not more than $3

million for the preceding three years.

(3) For purposes of determining

whether an entity meets either of the

definitions set forth in paragraph (b)(1)

or (b)(2) of this section, the gross

revenues of the entity, its affiliates, and

controlling principals shall be

considered on a cumulative basis and

aggregated.

(4) A consortium of small businesses

(or a consortium of very small

businesses) is a conglomerate

organization formed as a joint venture

between or among mutually

independent business firms, each of

which individually satisfies the

definition in paragraph (b)(1) of this

section or each of which individually

satisfies the definition in paragraph

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

applicant (or licensee) is a consortium

of small businesses (or very small

businesses), the gross revenues of each

small business (or very small business)

shall not be aggregated.

(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).

Gross revenues are evidenced by

audited financial statements for the

relevant number of calendar or 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 predecessorin-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

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 his/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/her 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
16002 Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations

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-inlaw, step-father or -mother, step-brother

or -sister, step-son or -daughter, halfbrother 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

a 220 MHz service geographic area 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 he/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/she owns,

controls, or has the power to control less

than 50 percent of the concern’s voting

stock, if the block of stock he/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 a 220 MHz service

geographic area license 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% (70 of 100

outstanding shares) of the voting stock of

company A, who holds a controlling interest

in a 220 MHz service geographic area 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 and/or the

management of another entity.

(8) Affiliation through common

facilities. Affiliation generally arises

where one concern shares office space

and/or employees and/or other facilities

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

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 and/or

individuals, 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.

§ 90.1023 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 a

220 MHz service geographic area license

which qualifies as a small business, very

small business, consortium of small

businesses, or consortium of very small

businesses, 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, if a consortium of small businesses
Federal Register / Vol. 62, No. 64 / Thursday, April 3, 1997 / Rules and Regulations 16003

(or consortium of very small

businesses), the members of the joint

venture; and

(2) The applicant’s gross revenues,

computed in accordance with § 90.1021.

(b) Long-Form Applications:

Certifications and Disclosure. In

addition to the requirements in

§ 90.1013, each applicant submitting a

long-form application for a 220 MHz

service geographic area license and

qualifying as a small business or very

small business shall, in an exhibit to its

long-form application:

(1) Disclose separately and in the

aggregate the gross revenues, computed

in accordance with § 90.1021, for each

of the following: The applicant, the

applicant’s affiliates, the applicant’s

controlling principals, and, if a

consortium of small businesses (or

consortium of very small businesses),

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 very small business under

§§ 90.1017 through 90.1023, 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

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 very small businesses shall maintain

at their principal place of business an

updated file of ownership, revenue, and

asset information, including any

documents necessary to establish

eligibility as a small business or very

small business and/or consortium of

small businesses (or consortium of very

small businesses) under § 90.1021.

Licensees (and their successors-ininterest) 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 very small business or

consortium of small businesses (or

consortium of very small businesses)

under §§ 90.1017 through 90.1023 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 shortform 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 220 MHz service, and

shall also include consent to the

interview of principals, employees,

customers and suppliers of the

applicant or licensee.

(e) Definitions. The terms affiliate,

small business, very small business,

consortium of small businesses (or

consortium of very small businesses),

and gross revenues used in this section

are defined in § 90.1021.

§ 90.1025 Petitions to deny and limitations

on settlements.

(a) Procedures regarding petitions to

deny long-form applications in the 220

MHz service will be governed by

§§ 1.2108(b) through 1.2108(d) of this

chapter and § 90.163.

(b) The consideration that an

individual or an entity will be permitted

to receive for agreeing to withdraw an

application or a petition to deny will be

limited by the provisions set forth in

§ 90.162 and § 1.2105(c) of this chapter.

[FR Doc. 97–8014 Filed 4–2–97; 8:45 am]

BILLING CODE 6712–01–P