Federal Register / Vol. 62, No. 3 / Monday, January 6, 1997 / Rules and Regulations 653

plan meet the redesignation

requirements in section 107(d)(3)(E) of

the Act as amended in 1990. The

redesignation meets the Federal

requirements of section 182(a)(1) of the

Clean Air Act as a revision to the

Louisiana ozone State Implementation

Plan for Pointe Coupee Parish. The EPA

therefore approved the request for

redesignation to attainment with respect

to ozone for Pointe Coupee Parish on

December 20, 1996.

PART 81—[AMENDED]

1. The authority citation for part 81

continues to read as follows:

Authority: 42 U.S.C. 7401–7671q.

2. In § 81.319, the ozone table is

amended by revising the entry for the

Baton Rouge area and by adding an

entry for the Pointe Coupee area to read

as follows:

§ 81.319 Louisiana.

* * * * *

LOUISIANA—OZONE

Designated area

Designation Classification

Date 1 Type Date 1 Type

Baton Rouge Area:

Ascension Parish .................................................................... ................................ Nonattainment ....... ................................ Serious.

East Baton Rouge Parish ....................................................... ................................ Nonattainment ....... ................................ Serious.

Iberville Parish ........................................................................ ................................ Nonattainment ....... ................................ Serious.

Livingston Parish .................................................................... ................................ Nonattainment ....... ................................ Serious.

West Baton Rouge Parish ...................................................... ................................ Nonattainment ....... ................................ Serious.

* * * * * * *

Pointe Coupee Area:

Pointe Coupee Parish ............................................................. Dec. 20, 1996 ........ ................................ ................................

1This date is November 15, 1990, unless otherwise noted.

* * * * *

[FR Doc. 97–42 Filed 1–3–97; 8:45 am]

BILLING CODE 6560–50–P

FEDERAL COMMUNICATIONS

COMMISSION

47 CFR Part 24

[WT Docket No. 96–148; GN Docket No. 96–

113; FCC 96–474]

Geographic Partitioning and Spectrum

Disaggregation by Commercial Mobile

Radio Services Licensees; and

Implementation of Section 257 of the

Communications Act; Elimination of

Market Entry Barriers

AGENCY: Federal Communications

Commission.

ACTION: Final rule.

SUMMARY: In this Report and Order in

WT Docket No. 96–148, the Commission

adopts rules concerning geographic

partitioning and spectrum

disaggregation by broadband personal

communications service (PCS)

licensees. The rules adopted for

broadband PCS will permit partitioning

and disaggregation by all broadband

PCS licensees. This will provide

broadband PCS licensees with desirable

flexibility to determine the amount of

spectrum they will occupy and the

geographic area they will serve. Such

flexibility will: facilitate the efficient

use of spectrum by providing licensees

with the flexibility to make offerings

directly responsive to market demands

for particular types of service; increase

competition by allowing market entry

by new entrants; and expedite the

provision of service to areas that

otherwise may not receive broadband

PCS service in the near term.

EFFECTIVE DATE: March 7, 1997.

FOR FURTHER INFORMATION CONTACT:

Shaun A. Maher, Commercial Wireless

Division, Wireless Telecommunications

Bureau at (202) 418–0620.

SUPPLEMENTARY INFORMATION: This

Report and Order in WT Docket No. 96–

148 and GN Docket No. 96–113, adopted

on December 13, 1996, and released

December 20, 1996, is available for

inspection and copying during normal

business hours in the FCC Reference

Center, Room 234, 1919 M Street, N.W.,

Washington, D.C. The complete text

may also be purchased from the

Commission’s copy contractor,

International Transcription Service,

Inc., 2100 M Street, N.W., Suite 140,

Washington, D.C. 20037, (202) 857–

3800. Synopsis of Report and Order.

I. Background

1. The Commission’s initial

regulations and policies for broadband

PCS were adopted in the Broadband

PCS Second Report and Order,

Amendment of the Commission’s Rules

to Establish New Personal

Communications Services, GEN Docket

No. 90–314, Second Report and Order,

58 FR 59174 (November 8, 1993)

(Broadband PCS Second Report and

Order), and amended in the Broadband

PCS Memorandum Opinion and Order,

Amendment of the Commission’s Rules

to Establish New Personal

Communications Services, GEN Docket

No. 90–314, Memorandum Opinion and

Order, 59 FR 32830 (June 24, 1994)

(Broadband PCS Memorandum Opinion

and Order). In the Broadband PCS

Memorandum Opinion and Order, the

Commission declined to adopt

unrestricted geographic partitioning for

broadband PCS based on its concern

that licensees might use partitioning as

a means of circumventing construction

requirements. However, the

Commission stated that it would

consider the issue of geographic

partitioning for rural telephone

companies (rural telcos) and other

designated entities in a future

proceeding to establish competitive

bidding rules for broadband PCS. The

Commission then permitted broadband

PCS geographic partitioning for rural

telcos in the Competitive Bidding Fifth

Report and Order, Implementation of

Section 309(j) of the Communications

Act—Competitive Bidding, PP Docket

No. 93–253, Fifth Report and Order, 59

FR 37566 (July 22, 1995) (Competitive

Bidding Fifth Report and Order). The

Commission observed that partitioning

was one method to satisfy Congress’

mandate to provide an opportunity for

rural telcos to participate in the

provision of broadband PCS. The

Commission also found that rural telcos

could take advantage of their existing

infrastructure to provide broadband PCS

services, thereby speeding service to

rural areas. In the Competitive Bidding

Further Notice of Proposed Rule

Making, Implementation of Section
654 Federal Register / Vol. 62, No. 3 / Monday, January 6, 1997 / Rules and Regulations

309(j) of the Communications Act—

Competitive Bidding, PP Docket No. 93–

253, Further Notice of Proposed Rule

Making, 59 FR 41426 (August 12, 1994)

(Competitive Bidding Further Notice of

Proposed Rule Making), the

Commission sought comment on

whether to extend post-auction

geographic partitioning of broadband

PCS licenses to women- and minorityowned businesses.

2. Section 24.229(c) of the

Commission’s rules permits a

broadband PCS licensee that has met its

five-year construction requirement to

disaggregate its licensed PCS spectrum

after January 1, 2000. In the Broadband

PCS Memorandum Opinion and Order,

the Commission reasoned that this limit

on spectrum disaggregation for

broadband PCS would allow the PCS

market to develop and prevent anticompetitive practices with regard to

disaggregation.

3. The Commission believes that it is

appropriate at this time to liberalize its

rules to allow partitioning and

disaggregation for broadband PCS. The

rules adopted in the Report and Order

will provide licensees with the

flexibility to use their spectrum more

efficiently, will increase opportunities

for small businesses and other entities

to enter into the broadband PCS market,

and will speed service to underserved or

unserved areas.

II. Discussion

A. Partitioning

1. License Eligibility

4. The Commission concludes that

relaxing its PCS geographic partitioning

rules, as discussed herein, will help to

(1) remove potential barriers to entry

thereby increasing competition in the

PCS marketplace; (2) encourage parties

to use PCS spectrum more efficiently;

and (3) speed service to unserved and

underserved areas. Parties that were

unsuccessful bidders or that did not

participate in the PCS auctions will be

able to use partitioning as a method to

acquire PCS licenses after the auctions.

Smaller or newly-formed entities, for

example, may enter the PCS market for

the first time through partitioning.

Under the prior rules, such entities

would have been unable to qualify for

partitioning because of the

Commission’s rural telco restriction. By

eliminating that restriction, these

entities will be able to negotiate for

licenses for portions of the original

service area at a cost that is

proportionately less than that of the full

geographic market.

5. The Commission also finds that

increasing the number of parties that

may obtain partitioned PCS licenses

will lead to more efficient use of PCS

spectrum and will speed service to

underserved or rural areas. PCS

licensees will be able to partition

portions of their markets to entities

more willing to serve niche markets

instead of postponing service to those

areas. The Commission believes that

retaining the existing partitioning

restrictions, as recommended by the

rural telco commenters, would prevent

additional small businesses and other

entities from using partitioning to enter

the broadband PCS market. In addition,

restricting the number of parties that are

eligible for partitioned PCS licenses

only serves to unreasonably reduce the

number of potential entrants into the

PCS marketplace without any

corresponding public interest benefit.

6. The rural telco commenters claim

that changing the current partitioning

rules would be inconsistent with the

mandate set forth in Section 309(j)(3)(B)

of the Communications Act of 1934, as

amended (Communications Act), 47

U.S.C. 309(j)(3)(B), to ensure that

licenses are disseminated among a wide

variety of applicants including rural

telcos. They contend that partitioning

was the sole means by which the

Commission sought to fulfill the

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

Communications Act, 47 U.S.C.

309(j)(3)(B) for rural telcos. The

Commission disagrees. Rural telcos are

able to take advantage of the special

provision for small businesses the

Commission designed in its auction

rules to obtain licenses in the

entrepreneur block auctions.

Furthermore, Sections 309(j)(3)(A), (B),

and (D) of the Communications Act, 47

U.S.C. 309(j)(A), (B) & (D), direct the

Commission to further the rapid

deployment of new technologies for the

benefit of the public including those

residing in rural areas, to promote

economic opportunity and competition,

and to ensure the efficient use of

spectrum. While encouraging rural telco

participation in PCS service offerings is

an important element in meeting these

goals, Congress did not dictate that this

should be the sole method of ensuring

the rapid deployment of service in rural

areas. The Commission concludes that

allowing open partitioning will further

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

Communications Act, 47 U.S.C.

309(j)(3), by allowing PCS licensees to

partition to multiple entities within

their markets rather than limiting

partitioning to a small number of rural

telcos.

7. The rural telcos argue further that

they will not be able to compete for

partitioned PCS licenses unless the

Commission retains its current

restriction because PCS licensees will be

unwilling to partition their licenses to

rural telcos and will choose to partition

to Commercial Mobile Radio Service

(CMRS) providers with greater financial

resources. The rural telco commenters

also argue that they relied to their

detriment upon the current partitioning

restrictions when devising their

business plans and that many of them

chose not to participate in the

broadband PCS auctions because they

believed that they would be the only

parties that could obtain partitioned

PCS licenses. The Commission is

unpersuaded that its action herein will

harm the rural telcos’ business plans.

Under the new rules adopted herein,

rural telcos will be fully able to obtain

partitioned PCS licenses, as they were

previously. Moreover, in many

instances, rural telcos are likely to be in

a superior position to obtain partitioned

licenses.

8. The Commission declines to adopt

the rural telcos’ proposal to require a

right of first refusal. Granting the rural

telcos a right of first refusal would limit

the number of parties that could obtain

partitioned PCS licenses which would

be at odds with the Commission’s goals

of encouraging participation in the PCS

marketplace by as many parties as

possible and reducing barriers to entry

for small businesses. The Commission

finds that increasing the number of

potential entities that can acquire

partitioned PCS licenses will result in

better service and increased competition

which may result in lower prices for

PCS service.

9. The Commission also finds that the

right of first refusal would be difficult

to administer and could discourage

partitioning. The area proposed in a

partitioning agreement may not coincide

exactly with the area for which a rural

telco would have a right of first refusal

or a single partitioning transaction may

encompass more than one rural telcos’

service area. In those cases, the consent

of multiple rural telcos would be

required before a partitioning

transaction could be consummated.

Additionally, a partitioning agreement

may be part of a larger assignment

transaction. If a rural telco were to

exercise its right of first refusal to

acquire the partitioned area, it may not

be possible to separate out the

partitioning agreement to stand on its

own and the entire assignment

transaction could not be consummated.
Federal Register / Vol. 62, No. 3 / Monday, January 6, 1997 / Rules and Regulations 655

2. Available License Area, Restrictions

on Timing of Partitioning, and Matters

Related to Entrepreneur Block Licensees

a. License Area. 10. The Commission

is persuaded by the commenters’

arguments that limiting geographic

partitioning of PCS licenses to those

areas defined by county lines may not

be reflective of market realities and may

otherwise inhibit partitioning. As the

commenters note, parties seeking a

partitioned license may not desire to

serve an entire county but rather a

smaller niche market. The Commission

believes that permitting partitioning

along any service area defined by the

partitioner and partitionee is the most

logical approach, provided they submit

sufficient information to the

Commission to maintain its licensing

records. This will be the rule for all

parties, including rural telcos.

11. Partitioning applicants will be

required to submit, as separate

attachments to the partial assignment

application, a description of the

partitioned service area and a

calculation of the population of the

partitioned service area and licensed

market. The partitioned service area

must be defined by coordinate points at

every 3 seconds along the partitioned

service area agreed to by both parties,

unless either (1) an FCC-recognized

service area is utilized (i.e., Major

Trading Area, Basic Trading Area,

Metropolitan Service Area, Rural

Service or Economic Area) or (2) county

lines are followed. These geographical

coordinates must be specified in

degrees, minutes and seconds to the

nearest second of latitude and

longitude, and must be based upon the

1927 North American Datum (NAD27).

Applicants may also supply

geographical coordinates based on 1983

North American Datum (NAD83) in

addition to those required based on

NAD27. This coordinate data should be

supplied as an attachment to the partial

assignment application, and maps need

not be supplied. In cases where an FCC

recognized service area or county lines

are being utilized, applicants need only

list the specific area(s) (through use of

FCC designations) or counties that make

up the newly partitioned area. Allowing

partitioning along any agreed-upon

service area will provide an opportunity

for PCS licensees to design flexible and

efficient partitioning agreements. By

providing such flexibility to licensees

for determining partitioned areas, the

Commission will permit the market to

decide the most suitable service areas.

b. Non-entrepreneur block licenses.

12. The Commission concludes that the

public interest will be served by

allowing non-entrepreneur block

licensees to freely partition their

licenses to any other qualifying entity

following the issuance of the license.

Since non-entrepreneur block licensees

are permitted to assign their entire

license after grant, the Commission

finds they should be able to assign a

portion of their license following the

issuance of their license. PCS licensees

will be permitted to partition their

licensed market areas without limitation

on the overall size of the partitioned

areas consistent with the Commission’s

rules.

c. Entrepreneur block licenses. 13.

The Commission will permit

entrepreneur block PCS licensees to

partition at any time to other parties that

would be eligible for licenses in those

blocks. Partitioning of entrepreneur

block license areas to non-entrepreneurs

will not be permitted for the first five

years of an entrepreneur block license

term. This restriction is necessary in

order to ensure that entrepreneurs do

not circumvent the Commission’s

restrictions on full license transfers by

attempting to immediately partition a

portion of their licenses to nonentrepreneurs.

14. The Commission finds that its

unjust enrichment requirements should

be applied if an entrepreneur block

licensee partitions a portion of its

license area to a non-entrepreneur, after

the initial five-year license term. The

Commission will apply its unjust

enrichment rules to transactions where

entrepreneurs obtain partitioned

licenses from other entrepreneurs and

subsequently seek to assign their

partitioned license to a nonentrepreneur. The Commission will also

apply the unjust enrichment provisions

to an entrepreneur block licensee that

qualifies as a small business who

partitions to an entity that satisfies the

entrepreneur block eligibility criteria

but is not a small business that would

be eligible for bidding credits or

installment payments.

15. The Commission will use

population as the objective measure to

calculate the relative value of the

partitioned area for determining all of

its unjust enrichment obligations.

Population will be calculated based

upon the latest census data.

16. In partitioning cases involving

installment payments, the Commission

finds that separating the payment

obligations and default provisions of the

original licensee and partitionee is the

best approach because it reduces each

party’s risk and creates payment

obligations that can be enforced

separately against the defaulting party

without adversely affecting the other

licensee. The Commission adopts the

following rules to address the various

combinations of parties and the relative

obligations for each in the event an

entrepreneur seeks to partition its

license:

(a) No Continued Installment

Payments. When an entrepreneur block

licensee with installment payments

partitions its license after the five-year

holding period to a party that would not

qualify for installment payments under

our rules or to an entity that does not

desire to pay for its share of the license

with installment payments, the

Commission will first apportion the

percentage of the remaining government

obligation (including accrued and

unpaid interest calculated on the date

the partial assignment application is

filed) between the partitionee and

original licensee based upon the ratio of

the population of the partitioned area to

the population of the entire original

licensed area. Under this procedure,

both parties will be responsible to the

U.S. Treasury for their proportionate

share of the balance due including

accrued and unpaid interest calculated

on the date the partial assignment

application is filed. The Commission

will require, as a condition of grant of

the partial assignment application, that

the partitionee pay its entire pro rata

amount within 30 days of Public Notice

conditionally granting the partial

assignment application. Failure to meet

this condition will result in the

automatic cancellation of the grant of

the partial assignment application. The

partitioner will receive new financing

documents (promissory note and

security agreement) with a revised

payment obligation, based on the

remaining amount of time on the

original installment payment schedule.

These financing documents will replace

the partitioner’s existing financing

documents which will be marked

‘‘superseded’’ and returned to the

licensee upon receipt of the new

financing documents. The original

interest rate, established at the time of

the issuance of the initial license in the

market, will continue to be applied to

the partitioner’s portion of the

remaining government obligation. The

Commission will require, as a further

condition to approval of the partial

assignment application, that the

partitioner execute and return to the

U.S. Treasury the new financing

documents within 30 days of the Public

Notice conditionally granting the partial

assignment application. Failure to meet

this condition will result in the

automatic cancellation of the grant of

the partial assignment application. A
656 Federal Register / Vol. 62, No. 3 / Monday, January 6, 1997 / Rules and Regulations

default on an obligation will only affect

that portion of the market area held by

the defaulting party. The payments to

the U.S. Treasury are required

notwithstanding any additional terms

and conditions agreed to between or

among the parties.

(b) Partitioning With Continued

Installment Payments. Where both

parties to the partitioning arrangement

qualify for installment payments under

§ 24.720(b)(1), 47 CFR 24.720(b)(1), the

Commission will permit the partitionee

to make installment payments on its

portion of the remaining government

obligation. Partitionees are free,

however, to make a lump sum payment

of their pro rata portion of the

remaining government obligation within

30 days of the Public Notice

conditionally granting the partial

assignment application. Should a

partitionee choose to make installment

payments, the Commission will require,

as a condition to approval of the partial

assignment application, that both

parties execute financing documents

(promissory note and security

agreement) agreeing to pay the U.S.

Treasury their pro rata portion of the

balance due (including accrued and

unpaid interest on the date the partial

assignment application is filed) based

upon the installment payment terms for

which they would qualify. These

documents must be executed and

returned to the U.S. Treasury within 30

days of the Public Notice conditionally

granting the partial assignment

application. Either party’s failure to

meet this condition will result in the

automatic cancellation of the grant of

the partial assignment application. The

original interest rate, established at the

time of the issuance of the initial license

in the market, will apply to both parties’

portion of the remaining government

obligation. Each party will receive a

license for its portion of the market area

and each party’s financing documents

will provide that a default on its

obligation would only affect their

portion of the market area. These

payments to the U.S. Treasury are

required notwithstanding any additional

terms and conditions agreed to between

or among the parties.

3. Construction Requirements

17. The Commission will adopt two

alternative construction options for

broadband PCS partitioning. Under the

first option, the partitionee certifies that

it will satisfy the same construction

requirements as the original licensee.

The partitionee then must meet the

same five- and ten-year service

requirements as the original 10 MHz or

30 MHz licensee in its partitioned area,

while the partitioner remains

responsible for meeting those

requirements in the area it has retained.

Under the second option, the partitioner

certifies that it has already met or will

meet its five-year construction

requirement and that it will meet the

ten-year construction requirement for

the entire market. Because the

partitioner retains the responsibility for

meeting the construction requirements

for the entire market, the partitionee

will only be required to meet the

substantial service requirement for its

partitioned area at the end of the tenyear license term. The definition of

substantial service will be that

definition found at § 24.16(a) of the

rules, 47 CFR 24.16(a). If a partitionee

fails to meet its construction

requirements, the license for the

partitioned area will automatically

cancel without further Commission

action.

18. At the five- and ten-year

benchmarks, partitionees are required to

file supporting documentation showing

compliance with the construction

requirements. Licensees failing to meet

the coverage requirements will be

subject to forfeiture, license

cancellation, or other penalties.

B. Disaggregation

1. Timing of Disaggregation

19. The Commission concludes that

disaggregation of broadband PCS

spectrum should be allowed prior to

January 1, 2000, and that the condition

that the licensee must first satisfy the

five-year build out requirement before

disaggregating should be eliminated. To

the extent that disaggregation would

enable other entities to provide

broadband PCS within geographic

market areas, the Commission finds that

allowing immediate disaggregation

would encourage rather than impede

competition by enabling the entry of

new competitors. Moreover, the current

prohibition on disaggregation may

constitute a barrier to entry for small

businesses that lacked the resources to

participate successfully at auction for 30

MHz and 10 MHz spectrum blocks. In

furtherance of the mandate prescribed

by Section 257 of the Communications

Act, the Commission is eliminating such

market entry barriers by permitting nonentrepreneur block (A, B, D, and E

block) PCS licensees to disaggregate

spectrum at any time to other entities

with minimum eligibility qualifications.

Entrepreneur block (C and F block)

licensees may disaggregate at any time

to other entrepreneurs, or to nonentrepreneurs after a five-year holding

period. While the Commission

concludes that disaggregation should

generally be allowed, it emphasizes that

all proposed disaggregation agreements,

like partitioning agreements, will be

subject to Commission review and

approval under the public interest

standard of Section 310 of the Act. In

addition, as discussed below,

disaggregatees will be subject to the

CMRS spectrum cap to ensure that

disaggregation is not used to accumulate

large amounts of spectrum in order to

preclude entry by other competitors.

2. Amount of Spectrum to Disaggregate

20. The Commission concludes that

there should be no restriction on the

amount of broadband PCS spectrum that

can be disaggregated. Providing the

flexibility to allow parties to decide the

exact amount of spectrum to be

disaggregated is preferable because it

will encourage more efficient use of

spectrum and will permit the

deployment of a broader mix of service

offerings, leading to a more competitive

wireless marketplace. The Commission

finds that requiring parties to obtain

disaggregated spectrum in a

predetermined amount, such as a block

of 1 MHz, may result in parties

obtaining more spectrum they need,

leaving some spectrum unused, and

may foreclose some parties from using

disaggregation as a means of obtaining

the spectrum they need to provide their

service offerings. Therefore, the

Commission will not restrict the amount

of broadband PCS spectrum that can be

disaggregated. Similarly, it will not

require the disaggregator to retain a

minimum amount of spectrum.

21. The Commission is not adopting

a limit on the maximum amount of

spectrum that licensees may

disaggregate, provided that the

disaggregatee complies with the CMRS

spectrum cap. The Commission finds no

evidence at this time that a maximum

limitation for disaggregation is

necessary. PCS licensees shall be

permitted to disaggregate spectrum

without limitation on the overall size of

the disaggregation as long as such

disaggregation is otherwise consistent

with the rules.

3. Matters Relating to Entrepreneur

Block Licensees

22. In keeping with the proposals the

Commission is adopting for partitioning,

it will permit entrepreneur block

licensees to disaggregate at any time to

other parties that qualify as

entrepreneurs. Disaggregation to entities

that do not qualify as entrepreneurs is

not permitted for the first five years of

a license term. Allowing unrestricted

entrepreneur block disaggregation
Federal Register / Vol. 62, No. 3 / Monday, January 6, 1997 / Rules and Regulations 657

would be inconsistent with the five-year

restriction on full license transfers to

non-entrepreneurs which was designed

to ensure that entrepreneurs do not take

advantage of special entrepreneur block

provisions by immediately seeking to

transfer their licenses to nonentrepreneurs. The Commission

believes the same rationale would apply

to entrepreneur block disaggregation, as

licensees who have benefited from such

provisions could immediately

disaggregate spectrum to parties that

would not qualify for such benefits.

23. The Commission declines to

permit entrepreneur block licensees to

swap equivalent blocks of entrepreneur

spectrum with non-entrepreneurs

within the same market area. The

administrative burden of keeping track

of such arrangements would far

outweigh any benefit to the public.

24. The Commission will follow the

approach outlined for partitioning and

apply unjust enrichment payments to

entrepreneur block licensees that

disaggregate to non-entrepreneurs after

the five-year holding period and to

entrepreneur block licensees that

qualified for bidding credits and

installment payments and that

disaggregate to other entrepreneurs that

would not have qualified for such

benefits. All such unjust enrichment

payments will be calculated based upon

the ratio of the amount of spectrum

disaggregated to the amount of spectrum

retained by the original licensee. With

respect to disaggregation from an

entrepreneur block licensee to another

entrepreneur that would also qualify for

installment payments, the Commission

adopts an approach similar to the one it

adopted for partitioning. The

Commission will apportion the payment

obligations between the disaggregator

and disaggregatee based upon the

amount of spectrum disaggregated and

require separate payment obligations,

promissory notes and default liabilities

for each party.

4. Construction Requirements

25. The Commission concludes that

the proposed construction requirements

for disaggregation set forth in the NRPM

would be inconsistent with the

approach adopted in its partitioning

rules, and that a more flexible approach

is appropriate. Because the rules do not

dictate a minimum level of spectrum

usage by the original PCS licensee, the

Commission believes it would be

inconsistent to impose separate

construction requirements on both

disaggregator and disaggregatee for their

respective spectrum portions. At the

same time, the Commission wishes to

ensure that the parties do not use

disaggregation to circumvent its

underlying construction requirements.

Therefore, the Commission adopts a

flexible approach analogous to its

approach in the partitioning context: to

retain the underlying five- and ten-year

construction requirements for the

spectrum block as a whole, but allow

either party to meet the requirements on

its disaggregated portion. Thus, a PCS

licensee who disaggregates a portion of

its spectrum may elect to retain

responsibility for meeting the five- and

ten-year coverage requirements, or it

may negotiate a transfer of this

obligation to the disaggregatee. In either

case, the rules ensure that the spectrum

will be developed to at least the same

degree that was required prior to

disaggregation.

26. To ensure compliance with the

rules, the Commission will require that

parties seeking Commission approval of

a disaggregation agreement include a

certification as to which party will be

responsible for meeting the applicable

five- and ten-year construction

requirements. Parties may also propose

to share the responsibility for meeting

the construction requirements. The

specific requirements to be met will

depend on whether the spectrum being

disaggregated was originally licensed as

a 30 MHz block or a 10 MHz block. In

the event that only one party agrees to

take responsibility for meeting the

construction requirement and later fails

to do so, that party’s license will be

subject to forfeiture, but the other

party’s license will not be affected.

Should both parties agree to share the

responsibility for meeting the

construction requirements and either

party later fails to do so, both parties’

licenses will be subject to forfeiture. So

that the CMRS rules remain consistent

and competitively neutral,

disaggregatees that already hold a

broadband PCS license or other CMRS

license in the same geographic market

will be subject to the same coverage

requirements as disaggregatees who do

not hold other licenses for disaggregated

spectrum.

C. Related Matters

1. Combination of Partitioning and

Disaggregation

27. To allow parties flexibility to

design the types of agreements they

desire, the Commission will permit

combined partitioning and

disaggregation. For example, this will

allow a party to obtain a license for a

single county of an A block market with

only 15 MHz of spectrum. In the event

that there is a conflict in the application

of the partitioning and disaggregation

rules, the partitioning rules should

prevail. For the purpose of applying the

unjust enrichment requirements and/or

for calculating obligations under

installment payment plans, when a

combined partitioning and

disaggregation is proposed, the

Commission will use a combination of

both population of the partitioned area

and amount of spectrum disaggregated

to make these pro rata calculations.

2. Licensing

28. The Commission will follow

existing partial assignment procedures

for broadband PCS licenses in reviewing

requests for geographic partitioning,

disaggregation, or a combination of

both. Such applications will be placed

on Public Notice and will be subject to

petitions to deny. A licensee will be

required to file an FCC Form 490 that

is signed by both the licensee and the

qualifying entity. With respect to

partitioning, the FCC Form 490 must

include the attachment defining the

partitioned license area and an

attachment demonstrating the

population of the partitioned license

area. Partial assignment applications

that are filed seeking partitioning or

disaggregation in the entrepreneur

blocks must include an attachment

demonstrating compliance with the five

year entrepreneur block holding period.

The qualifying entity will also be

required to file an FCC Form 430 unless

a current FCC Form 430 is already on

file with the Commission. An FCC Form

600 must be filed by the qualifying

entity to receive authorization to operate

in the market area being partitioned or

to operate the disaggregated spectrum or

to modify an existing license of the

qualifying entity to include the new/

additional market area being partitioned

or the spectrum that is disaggregated.

Any requests for a partitioned license or

disaggregated spectrum must contain

the FCC Forms 490, 430, and 600 and

be filed as one package under cover of

the FCC Form 490.

29. The 45 MHz CMRS spectrum cap

contained in Section 20.6 of the rules

applies to partitioned license areas and

disaggregated spectrum.

3. License Term

30. The Commission will allow

partitionees and disaggregatees to hold

their licenses for the remainder of the

original licensee’s ten-year license term.

Partitionees and disaggregatees may also

earn a renewal expectancy on the same

basis as other PCS licensees.

31. The Commission will not permit

an existing broadband PCS licensee

acquiring a partitioned license or

disaggregated spectrum in a market in
658 Federal Register / Vol. 62, No. 3 / Monday, January 6, 1997 / Rules and Regulations

which it is already a licensee to apply

its original license term to the

partitioned license or spectrum. Such a

proposal would be burdensome to

administer because the processing staff

would be required to determine the

licensee’s other licenses in the market

and calculate the correct expiration date

for the partitioned or disaggregated

license. The Commission finds that such

an administrative burden would

outweigh the benefit that may result

from such a proposal.

4. Technical Rules

32. The Commission finds that its

existing technical rules are sufficient for

application in the partitioning and

disaggregation contexts and that no

additional technical rules are required

at this time. Should technical

difficulties arise, however, the

Commission will take whatever action is

necessary to alleviate any technical or

interference problems that result from

partitioning or disaggregation, including

appropriate modifications to its

technical rules.

5. Microwave Relocation

33. The Commission concludes that

partitionees and disaggregatees should

be treated the same as all other PCS

licensees with respect to microwave

relocation issues. In particular,

partitionees will have the same rights

and obligations as other broadband PCS

licensees under the cost-sharing plan

adopted in Amendment of the

Commission’s Rules Regarding a Plan

for Sharing the Costs of Microwave

Relocation, WT Docket No. 95–157,

Report and Order and Further Notice of

Proposed Rulemaking, 61 FR 24470

(May 15, 1996). Thus, partitionees and

disaggregatees may seek reimbursement

under the plan if they relocate

incumbents and they will be required to

pay their share of microwave relocation

costs if they benefit from the spectrumclearing efforts of another party,

according to the cost-sharing formula

adopted by the Commission.

34. The Commission declines to

require that the original PCS licensee

guarantee payments under the costsharing plan by the partitionee or

disaggregatee. To require licensees to

guarantee such payments would be

unfair because the original licensees

would have no control over the actions

of the partitionees and disaggregatees.

6. Clearinghouse for Spectrum

35. The Commission declines to

create a Commission-based resource of

information, but will continue to make

available, in a user-friendly manner,

information contained in its existing

databases, concerning geographic areas

open to partitioning and spectrum that

would be available through

disaggregation. Although a few entities

offered to serve as commercial

clearinghouses of PCS spectrum

information, the Commission declines

to establish an official Commission

clearinghouse.

VI. Conclusion

36. The partitioning and

disaggregation proposals the

Commission has adopted are consistent

with a pro-competitive policy

framework. These rules will eliminate

barriers to entry for small businesses

seeking to enter the PCS marketplace

and will promote the rapid creation of

a competitive market for the provision

of PCS services. These rules also meet

the Congressional objectives to further

the rapid development of new

technologies for the benefit of the public

including those residing in rural areas,

without administrative delay, to

promote economic opportunity and

competition, and to ensure that new

technologies are available by avoiding

excessive concentration of licenses.

VII. Procedural Matters and Ordering

Clauses

A. Regulatory Flexibility Act

Summary

As required by Section 603 of the

Regulatory Flexibility Act (RFA), 5

U.S.C. 603 (RFA), an Initial Regulatory

Flexibility Analysis (IRFA) was

incorporated in the Notice of Proposed

Rulemaking (NRPM) in WT Docket No.

96–148. The Commission sought written

public comment on the proposals in the

NPRM, including the IRFA. The

Commission’s Final Regulatory

Flexibility Analysis in this Report and

Order conforms to the RFA, as amended

by the Contract With America

Advancement Act of 1996.

Need for and Purpose of this Action

In this Report and Order the

Commission modifies the broadband

PCS rules to permit partitioning and

disaggregation for all Part 24 licenses.

The proposals adopted herein also

implement Congress’ goal of giving

small businesses the opportunity to

participate in the provision of spectrumbased services in accordance with 47

U.S.C. 309(j)(4)(D) and to reduce entry

barriers for small businesses in

accordance with 47 U.S.C. 257. With

more open partitioning and

disaggregation, additional entities,

including small businesses, may

participate in the provision of

broadband PCS service without needing

to acquire wholesale an existing license

(with all of the bundle of rights

currently associated with the existing

license). Acquiring less than the current

license will presumably be a more

flexible and less expensive alternative

for entities desiring to enter these

services.

Summary of Issues Raised in Response

to the Initial Regulatory Flexibility

Analysis

Only one commenter, National

Telephone Cooperative Association

(NTCA), submitted comments that were

specifically in response to the IRFA.

NTCA argues that the Commission is

required under the RFA to identify

significant alternatives to the proposed

rules in order to accomplish the stated

objectives of Sections 309(j) and 257 of

the Communications Act of 1934, as

amended (Communications Act).

Specifically, NTCA argues that the

Commission must consider the right of

first refusal approach suggested by some

commenters as an alternative to

allowing open partitioning of PCS

licenses and how it might minimize

significant economic impacts on rural

telcos. NTCA contends that, for the

purposes of determining which

businesses are to be included in an RFA

analysis, the Commission should adopt

the U.S. Small Business

Administration’s (SBA) definition of

small business, which is any company

with fewer than 1,500 employees.

In the Report and Order, significant

alternatives were identified and

considered in order to further the

mandates of Sections 309(j) and 257 of

the Communications Act. In addition,

significant consideration was given to

the rural telcos’ right of first refusal

approach for partitioning; however, the

Commission concluded that such an

approach was unworkable and would

actually discourage partitioning.

Finally, the Commission declined to

adopt NTCA’s suggestion to utilize the

SBA definition of small business

(businesses with fewer than 1,500

employees). As noted below, the

existing definition of small business

(firms with revenues of less than $40

million in each of the last three years)

was used in the PCS C-Block auction

and was approved by the SBA. The

Commission also notes that it has found

incumbent LECs to be ‘‘dominant in

their field of operation’’ since the early

1980’s, and it has consistently certified

under the RFA that incumbent LECs are

not subject to regulatory flexibility

analyses because they are not small

businesses. The Commission has made

similar determinations in other areas.
Federal Register / Vol. 62, No. 3 / Monday, January 6, 1997 / Rules and Regulations 659

Description and Number of Small

Entities Involved

The rules adopted in the Report and

Order will affect all small businesses

which avail themselves of these rule

changes, including small businesses

currently holding broadband PCS

licenses who choose to partition and/or

disaggregate, and small businesses who

may acquire licenses through

partitioning and/or disaggregation. The

rules will also affect rural telephone

companies which, under the current

rules, have the exclusive right to obtain

partitioned broadband PCS licenses.

Small businesses will be defined for

these purposes as firms that have

revenues of less than $40 million in

each of the last three calendar years.

This definition was used in the PCS CBlock auction and approved by the SBA.

The definition of rural telephone

company shall be that definition found

at § 24.720(e) of the rules, 47 CFR

24.720(e).

The broadband PCS spectrum is

divided into six frequency blocks

designated A through F. The

Commission has auctioned broadband

PCS licenses in blocks A, B, and C. The

Commission does not have sufficient

information to determine whether any

small businesses within the SBAapproved definition bid successfully for

licenses in the A or B block PCS

auctions. There were 89 winning

bidders that qualified as small

businesses in the C block PCS auctions.

Based upon this information, the

Commission concludes that the number

of broadband PCS licensees affected by

the rules adopted herein includes the 89

winning bidders that qualified as small

entities in the block C broadband PCS

auctions.

The Commission anticipates that a

total of 10,370 PCS licensees or

potential licensees could take the

opportunity to partition or disaggregate

a license or obtain a license through

partitioning and/or disaggregation. This

estimate is based on the total number of

broadband PCS licenses auctions and

subject to auction, 2,074, and the

Commission’s estimate that each license

would probably not be partitioned and/

or disaggregated to more than five

parties. Currently, the C and F block

licensees and potential licensees

(holding a total of 986 licenses) must be

small businesses or entrepreneurs with

average gross revenues over the past

three years of less than $125 million.

Under the rules adopted in the Report

and Order, they will be permitted to

partition and/or disaggregate to other

qualified entrepreneurs at any time and

to non-entrepreneurs after the first five

years of their license term. The A, B, D,

and E block licensees and potential

licensees (holding a total of 1,088

licenses) will also be permitted under

the proposed rules to partition and/or

disaggregate to small businesses.

The Commission is presently

conducting auctions for the D, E, and F

blocks of broadband PCS spectrum. The

Commission anticipates that a total of

1,479 licenses will be awarded in the D,

E, and F block PCS auctions. Eligibility

for the F block licenses is limited to

entrepreneurs with average revenues of

less than $125 million. It is not possible

to estimate the number of licenses that

will be awarded to small businesses in

the F block nor is it possible to estimate

how many small businesses will win the

D or E block licenses. The Commission

believes that it is possible that small

businesses will constitute a significant

number of the up to 10,370 PCS

licensees or potential licensees who

could take the opportunity to partition

and/or disaggregate or who could obtain

a license through partitioning and/or

disaggregation.

Summary of Projected Reporting,

Recordkeeping and Other Compliance

Requirements

The rules adopted in the Report and

Order will impose reporting and

recordkeeping requirements on small

businesses seeking licenses through

partitioning and disaggregation. The

information requirements will be used

to determine whether the licensee is a

qualifying entity to obtain a partitioned

license or disaggregated spectrum. This

information will be given in a one-time

filing by any applicant requesting such

a license. The information will be

submitted on the FCC Form 490 (or 430

and/or 600 filed as one package under

cover of the Form 490) which are

currently in use and have already

received OMB clearance. The

Commission estimates that the average

burden on the applicant is three hours

for the information necessary to

complete these forms. The Commission

estimates that 75 percent of the

respondents (which may include small

businesses) will contract out the burden

of responding. The Commission

estimates that it will take approximately

30 minutes to coordinate information

with those contractors. The remaining

25 percent of respondents (which may

include small businesses) are estimated

to employ in-house staff to provide the

information.

Steps Taken To Minimize Burdens on

Small Entities

The rules adopted in the Report and

Order are designed to implement

Congress’ goal of giving small

businesses, as well as other entities, the

opportunity to participate in the

provision of spectrum-based services

and are consistent with the

Communications Act’s mandate to

identify and eliminate market entry

barriers for entrepreneurs and small

businesses in the provision and

ownership of telecommunications

services.

Allowing non-restricted partitioning

of PCS licenses will facilitate market

entry by parties who may lack the

financial resources for participation in

PCS auctions, including small

businesses. Some small businesses may

have been unable to be winning bidders

at the PCS auctions due to high bidding

and would have been unable to qualify

for partitioning because of our current

restriction which permits partitioning of

PCS licenses to only rural telephone

companies (rural telcos). By eliminating

this restriction, small businesses will be

able to obtain partitioned PCS licenses

for smaller service areas at presumably

reduced costs, thereby providing a

method for small businesses to enter the

PCS marketplace.

Similarly, allowing immediate

disaggregation of PCS licenses will

facilitate the entry of new competitors to

the provision of PCS services, many of

whom will be small businesses seeking

to acquire a smaller amount of PCS

spectrum at a reduced cost.

Allowing geographic partitioning of

PCS licenses by services areas defined

by the parties rather than only by

county lines will provide an

opportunity for small businesses to

obtain partitioned PCS license areas

designed to serve smaller, niche

markets. This will permit small

businesses to enter the PCS marketplace

by reducing the overall cost of acquiring

a partitioned PCS license.

Allowing disaggregation of spectrum

in any amount will also promote

participation by small businesses who

may seek to acquire a smaller amount of

PCS spectrum tailored to meet the needs

of their proposed service.

The Commission’s proposals to allow

non-entrepreneur block licensees to

partition or disaggregate to any party

and to allow entrepreneurs to partition

or disaggregate to other entrepreneurs at

any time and to non-entrepreneurs after

a five year holding period will

significantly increase the opportunities

for small businesses to enter the PCS

marketplace. Allowing entrepreneur

partitionees and disaggregatees to pay

their proportionate share of the

remaining government obligation

through installment payments will

provide a further opportunity for small
660 Federal Register / Vol. 62, No. 3 / Monday, January 6, 1997 / Rules and Regulations

businesses to participate in the

provision of PCS services.

The Commission’s decision to allow

partitioning parties to choose between

two construction requirements will

provide small businesses with more

flexibility to construct their systems at

a rate that is determined by market

forces, thus allowing them to conserve

their resources.

Significant Alternatives Considered and

Rejected

The Commission considered and

rejected a number of alternative

proposals concerning partitioning and

disaggregation.

The rural telephone companies (rural

telcos) argued that the Commission

should either retain the current

partitioning restriction or adopt a right

of first refusal approach that would

require partitioning parties to notify the

rural telco and offer it the partitioned

license area under similar terms and

conditions. The Commission found that

retaining the current partitioning

restriction would prevent small

businesses from using partitioning to

enter the broadband PCS market. Since

retaining the partitioning restriction

would constitute a significant barrier to

entry for small businesses, the

Commission declined to continue to

limit partitioning to rural telcos.

The Commission found that the right

of first refusal would be difficult to

implement and could discourage

partitioning. Areas proposed in

partitioning agreements may not

coincide exactly with areas for which a

rural telco may have a right of first

refusal. A single partitioning transaction

may encompass more than one rural

telco’s service area, or a partitioning

agreement may be part of a larger

assignment transaction. Parties would

be unwilling to enter into partitioning

agreements not knowing how much of

an area would ultimately be partitioned

or whether they could consummate the

transaction. This determination will

make it easier for non-rural-telcos,

including some small business entities,

to enter partitioning agreements.

The Commission declined to adopt

the proposal set forth in the NPRM to

limit partitioning to areas defined by

county lines. The Commission was

convinced by the majority of

commenters that geographic partitioning

along county lines is too restrictive. The

Commission found that parties seeking

a partitioned license may not desire to

serve an entire county but rather a

smaller niche market. Therefore, the

Commission found that allowing

partitioning along service areas defined

by the parties would allow the parties

to design flexible partitioning

agreements.

The Commission rejected proposals to

permit partitioning and disaggregation

during the first five years of an

entrepreneur’s license term. While

allowing entrepreneurs to immediately

partition or disaggregate to nonentrepreneurs may have resulted in

additional entities participating in the

provision of PCS services, the

Commission concluded that the five

year holding period restriction is

necessary in order to ensure that

entrepreneurs do not take advantage of

the special entrepreneur block benefits

by immediately partitioning a portion of

their licenses or disaggregating a portion

of their spectrum to parties that would

not have qualified at auction, on their

own merits, for such benefits.

Furthermore, limiting partitioning and

disaggregation during the first five years

of an entrepreneur’s license term will

increase the possibility that small

businesses will be able to acquire PCS

licenses.

The Commission declined to adopt

proposals to apply a new license term

to partitioned license areas and

disaggregated spectrum. Under this

approach, entities obtaining partitioned

licenses or disaggregated spectrum

would receive a new ten-year license

term beginning from the date the

Commission approved the partitioning

or disaggregation. The Commission

found that permitting parties to ‘‘restart’’ their license term would

effectively allow a licensee to extend its

license term and could lead to

circumvention of our license term rules.

The Commission rejected the proposal

to require disaggregation of broadband

PCS spectrum in blocks of 1 MHz of

paired frequencies (500 kHz plus 500

kHz). The Commission found that

requiring parties to obtain that large a

block of spectrum could act as a barrier

to entry for entities that do not require

that much spectrum to provide service.

Finally, the Commission declined the

proposal put forth by some commenters

that PCS licensees be required to

assume the obligations and

responsibilities for microwave

relocation costs for their entire license

area and spectrum block even if they

partition a portion of their license area

or disaggregate a portion of their

spectrum to another party. The

Commission found that requiring

licensees to guarantee the payments of

partitionees and disaggregatees would

be unfair because licensees would not

have control over the actions of

partitionees and disaggregatees and

because there was no reason to treat

those parties differently than other lateentrant PCS licensees with respect to

microwave relocation costs.

Report to Congress:

The Commission shall include a copy

of this Final Regulatory Flexibility

Analysis, along with this Report and

Order, in a report to be sent to Congress

pursuant to the Small Business

Regulatory Enforcement Fairness Act of

1996, 5 U.S.C. 801(a)(1)(A). A copy of

this Final Regulatory Flexibility

Analysis will also be published in the

Federal Register.

B. Ordering Clauses

Accordingly, it is ordered That,

pursuant to the authority of Sections

4(i), 257, 303(g), 303(r) and 332(a) of the

Communications Act of 1934, as

amended, 47 U.S.C. 154(i), 257, 303(g),

303(r), and 332(a), Part 24 of the

Commission’s Rules, 47 CFR 24, is

amended as set forth below.

It is further ordered That the rules

adopted herein will become effective

March 7, 1997. This action is taken

pursuant to 4(i), 303(r) and 332(a) of the

Communications Act of 1934, as

amended, 47 U.S.C. 154(i), 303(r), and

332(a).

List of Subjects in 47 CFR Part 24

Communications common carriers,

Reporting and recordkeeping

requirements.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Changes

Part 24 of Chapter I of Title 47 of the

Code of Federal Regulations is amended

as follows:

PART 24—PERSONAL

COMMUNICATIONS SERVICES

1. The authority citation for Part 24

continues to read as follows:

Authority: 47 U.S.C. 154, 301, 302, 303,

309, and 332, unless otherwise noted.

§ 24.229 [Amended]

2. Section 24.229 is amended by

removing paragraph (c).

§ 24.707 [Amended]

3. Section 24.707 is amended by

removing the phrase from the third

sentence: ‘‘(and applicants seeking

partitioned licenses pursuant to

agreements with auction winners under

§ 24.714).’’

4. Section 24.714 is revised to read as

follows:
Federal Register / Vol. 62, No. 3 / Monday, January 6, 1997 / Rules and Regulations 661

§ 24.714 Partitioned licenses and

disaggregated spectrum.

(a) Eligibility. (1) Parties seeking

approval for partitioning and

disaggregation shall request an

authorization for partial assignment of a

license pursuant to § 24.839.

(2) Broadband PCS licensees in

spectrum blocks A, B, D, and E may

apply to partition their licensed

geographic service area or disaggregate

their licensed spectrum at any time

following the grant of their licenses.

(3) Broadband PCS licensees in

spectrum blocks C and F may not

partition their licensed geographic

service area or disaggregate their

licensed spectrum for the first five years

of the license term unless it is to an

entity that meets the eligibility criteria

set forth in § 24.709 at the time the

request for partial assignment of license

is filed or to an entity that holds

license(s) for frequency blocks C and F

that met the eligibility criteria set forth

in § 24.709 at the time of receipt of such

license(s). Partial assignment

applications seeking partitioning or

disaggregation of broadband PCS

licenses in spectrum blocks C and F

must include an attachment

demonstrating compliance with this

section.

(b) Technical standards—(1)

Partitioning. In the case of partitioning,

requests for authorization for partial

assignment of a license must include, as

attachments, a description of the

partitioned service area and a

calculation of the population of the

partitioned service area and the licensed

geographic service area. The partitioned

service area shall be defined by

coordinate points at every 3 seconds

along the partitioned service area unless

an FCC recognized service area is

utilized (i.e., Major Trading Area, Basic

Trading Area, Metropolitan Service

Area, Rural Service Area or Economic

Area) or county lines are followed. The

geographic coordinates must be

specified in degrees, minutes, and

seconds to the nearest second of latitude

and longitude and must be based upon

the 1927 North American Datum

(NAD27). Applicants may supply

geographical coordinates based on 1983

North American Datum (NAD83) in

addition to those required (NAD27). In

the case where an FCC recognized

service area or county lines are utilized,

applicants need only list the specific

area(s) (through use of FCC designations

or county names) that constitute the

partitioned area.

(2) Disaggregation. Spectrum may be

disaggregated in any amount.

(3) Combined partitioning and

disaggregation. The Commission will

consider requests for partial assignment

of licenses that propose combinations of

partitioning and disaggregation.

(c) Unjust enrichment—(1)

Installment payments. Licensees in

frequency Blocks C and F making

installment payments that partition

their licenses or disaggregate their

spectrum to entities not meeting the

eligibility standards for installment

payments, will be subject to the

provisions concerning unjust

enrichment as set forth in §§ 1.2111 of

this chapter and 24.716(d).

(2) Bidding credits. Licensees in

frequency Blocks C and F that received

a bidding credit and partition their

licenses or disaggregate their spectrum

to entities not meeting the eligibility

standards for such a bidding credit, will

be subject to the provisions concerning

unjust enrichment as set forth in

§§ 1.2110(f) of this chapter and

24.717(c).

(3) Apportioning unjust enrichment

payments. Unjust enrichment payments

for partitioned license areas shall be

calculated based upon the ratio of the

population of the partitioned license

area to the overall population of the

license area and by utilizing the most

recent census data. Unjust enrichment

payments for disaggregated spectrum

shall be calculated based upon the ratio

of the amount of spectrum disaggregated

to the amount of spectrum held by the

licensee.

(d) Installment payments—(1)

Apportioning the balance on

installment payment plans. When a

winning bidder elects to pay for its

license through an installment payment

plan pursuant to §§ 1.2110(e) of this

chapter or 24.716, and partitions its

licensed area or disaggregates spectrum

to another party, the outstanding

balance owed by the licensee on its

installment payment plan (including

accrued and unpaid interest) shall be

apportioned between the licensee and

partitionee or disaggregatee. Both

parties will be responsible for paying

their proportionate share of the

outstanding balance to the U.S.

Treasury. In the case of partitioning, the

balance shall be apportioned based

upon the ratio of the population of the

partitioned area to the population of the

entire original license area calculated

based upon the most recent census data.

In the case of disaggregation, the

balance shall be apportioned based

upon the ratio of the amount of

spectrum disaggregated to the amount of

spectrum allocated to the licensed area.

(2) Parties not qualified for

installment payment plans. (i) When a

winning bidder elects to pay for its

license through an installment payment

plan, and partitions its license or

disaggregates spectrum to another party

that would not qualify for an

installment payment plan or elects not

to pay for its share of the license

through installment payments, the

outstanding balance owed by the

licensee (including accrued and unpaid

interest) shall be apportioned according

to § 24.714(d)(1).

(ii) The partitionee or disaggregatee

shall, as a condition of the approval of

the partial assignment application, pay

its entire pro rata amount within 30

days of Public Notice conditionally

granting the partial assignment

application. Failure to meet this

condition will result in a rescission of

the grant of the partial assignment

application.

(iii) The licensee shall be permitted to

continue to pay its pro rata share of the

outstanding balance and shall receive

new financing documents (promissory

note, security agreement) with a revised

payment obligation, based on the

remaining amount of time on the

original installment payment schedule.

These financing documents will replace

the licensee’s existing financing

documents which shall be marked

‘‘superseded’’ and returned to the

licensee upon receipt of the new

financing documents. The original

interest rate, established pursuant to

§ 1.2110(e)(3)(i) of this chapter at the

time of the grant of the initial license in

the market, shall continue to be applied

to the licensee’s portion of the

remaining government obligation. We

will require, as a further condition to

approval of the partial assignment

application, that the licensee execute

and return to the U.S. Treasury the new

financing documents within 30 days of

the Public Notice conditionally granting

the partial assignment application.

Failure to meet this condition will result

in the automatic cancellation of the

grant of the partial assignment

application.

(iv) A default on the licensee’s

payment obligation will only affect the

licensee’s portion of the market.

(3) Parties qualified for installment

payment plans. (i) Where both parties to

a partitioning or disaggregation

agreement qualify for installment

payments, the partitionee or

disaggregatee will be permitted to make

installment payments on its portion of

the remaining government obligation, as

calculated according to § 24.714(d)(1).

(ii) Each party will be required, as a

condition to approval of the partial

assignment application, to execute

separate financing documents

(promissory note, security agreement)

agreeing to pay their pro rata portion of
662 Federal Register / Vol. 62, No. 3 / Monday, January 6, 1997 / Rules and Regulations

the balance due (including accrued and

unpaid interest) based upon the

installment payment terms for which

they qualify under the rules. The

financing documents must be returned

to the U.S. Treasury within thirty (30)

days of the Public Notice conditionally

granting the partial assignment

application. Failure by either party to

meet this condition will result in the

automatic cancellation of the grant of

the partial assignment application. The

interest rate, established pursuant to

§ 1.2110(e)(3)(i) of this chapter at the

time of the grant of the initial license in

the market, shall continue to be applied

to both parties’ portion of the balance

due. Each party will receive a license for

their portion of the partitioned market

or disaggregated spectrum. (iii) A default on an obligation will

only affect that portion of the market

area held by the defaulting party. (iv) Partitionees and disaggregatees

that qualify for installment payment

plans may elect to pay some of their pro

rata portion of the balance due in a

lump sum payment to the U.S. Treasury

and to pay the remaining portion of the

balance due pursuant to an installment

payment plan. (e) License term. The license term for

a partitioned license area and for

disaggregated spectrum shall be the

remainder of the original licensee’s

license term as provided for in § 24.15.

(f) Construction requirements—(1)

Requirements for partitioning. Parties

seeking authority to partition must meet

one of the following construction

requirements: (i) The partitionee may certify that it

will satisfy the applicable construction

requirements set forth in § 24.203 for the

partitioned license area; or (ii) The original licensee may certify

that it has or will meet its five-year

construction requirement and will meet

the ten-year construction requirement,

as set forth in § 24.203, for the entire

license area. In that case, the partitionee

must only satisfy the requirements for

‘‘substantial service,’’ as set forth in

§ 24.16(a), for the partitioned license

area by the end of the original ten-year

license term of the licensee.

(iii) Applications requesting partial

assignments of license for partitioning

must include a certification by each

party as to which of the above

construction options they select. (iv) Partitionees must submit

supporting documents showing

compliance with the respective

construction requirements within the

appropriate five- and ten-year

construction benchmarks set forth in

§ 24.203.

(v) Failure by any partitionee to meet

its respective construction requirements

will result in the automatic cancellation

of the partitioned or disaggregated

license without further Commission

action.

(2) Requirements for disaggregation.

Parties seeking authority to disaggregate

must submit with their partial

assignment application a certification

signed by both parties stating which of

the parties will be responsible for

meeting the five- and ten-year

construction requirements for the PCS

market as set forth in § 24.203. Parties

may agree to share responsibility for

meeting the construction requirements.

Parties that accept responsibility for

meeting the construction requirements

and later fail to do so will be subject to

license forfeiture without further

Commission action.

[FR Doc. 97–98 Filed 1–3–97; 8:45 am]

BILLING CODE 6712–01–P

47 CFR Part 51

[CC Docket No. 96–98; FCC 96–483]

Implementation of the Local

Competition Provisions in the

Telecommunications Act of 1996

AGENCY: Federal Communications

Commission.

ACTION: Final rule; motion for stay and

notification of court stay.

SUMMARY: The Order released December

18, 1996 dismisses the motion for stay

of three rules adopted in the First Report

and Order, (August 29, 1996), filed by

the Rural Telephone Coalition (RTC) to

the extent that RTC seeks a stay of 47

CFR 51.809, and otherwise denies the

motion for stay. Denial of the motion for

stay allows the rules relating to local

competition which have not been stayed

by the United States Court of Appeals

for the Eighth Circuit (Iowa Utilities

Board v. Federal Communications

Commission, No. 96–3321 et al., 1996

WL 589284 (8th Cir. 1996 Oct. 15,

1996)) to go into effect without delay.

EFFECTIVE DATE: Sections 51.501–51.515

(inclusive), 51.601–51.611 (inclusive),

51.705–51.715 (inclusive), and 51.809

are stayed effective October 15, 1996

pursuant to court order. Motion for stay

by the Rural Telephone Coalition is

dismissed effective January 6, 1997.

FOR FURTHER INFORMATION CONTACT: Lisa

Gelb, Attorney, Common Carrier

Bureau, Policy and Program Planning

Division, (202) 418–1580.

SUPPLEMENTARY INFORMATION: This is a

summary of the Commission’s Order

adopted December 18, 1996, and

released December 18, 1996. The full

text of this Order is available for

inspection and copying during normal

business hours in the FCC Reference

Center (Room 239), 1919 M St., NW.,

Washington, DC. The complete text also

may be obtained through the World

Wide Web, at http://www.fcc.gov/

Bureaus/Common Carrier/Orders/

fcc96483.wp, or may be purchased from

the Commission’s copy contractor,

International Transcription Service,

Inc., (202) 857–3800, 2100 M St., NW.,

Suite 140, Washington, DC 20037.

Regulatory Flexibility Analysis

There are no new rules or

modifications to existing rules adopted

in this Order.

Paperwork Reduction Act

There are no new or modified

collections of information required by

this Order.

Synopsis of Order

I. Introduction

1. On August 1, 1996, the Commission

adopted rules implementing the local

competition provisions of the

Telecommunications Act of 1996 (1996

Act). On October 2, 1996, the Rural

Telephone Coalition (RTC) filed a

motion for stay of three rules adopted in

the First Report and Order, 61 FR 45476

(August 29, 1996), pending judicial

review. Oppositions to the motion for

stay were filed by MCI, the Association

for Local Telecommunications Service

(ALTS), and the National Cable

Television Association (NCTA). For the

reasons set forth below, we dismiss the

motion in part, and otherwise deny the

motion for stay.

II. Background

2. Section 251(c) of the

Communications Act of 1934, as

amended, (the Act) imposes on

incumbent local exchange carriers

(LECs) obligations regarding

interconnection, resale of services, and

unbundled network elements. Section

251(f)(1) of the Act provides that a rural

telephone company is exempt from the

requirements of section 251(c) unless

the state commission finds that the rural

carrier has received a bona fide request

for interconnection, services, or network

elements, and the state commission

determines that the request ‘‘is not

unduly economically burdensome, is

technically feasible, and is consistent

with section 254 (other than subsections

(b)(7) and (c)(1)(D) thereof).’’ Section

251(f)(2) of the Act permits LECs ‘‘with

fewer than 2 percent of the Nation’s

subscriber lines installed nationwide’’

to petition a state commission for

suspension or modification of

application of one or more requirements

of sections 251(b) or 251(c). The petition