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                            Before the
                Federal Communications Commission
                      Washington, D.C. 20554

In the Matter of                )
                                )
Amendment of Parts 1, 21 and 74 to Enable)   MM Docket No. 97-217
Multipoint Distribution Service and)
Instructional Television Fixed Service) File No. RM-9060
Licensees to Engage in Fixed    )
Two-Way Transmissions           )
                                )
Request For Declaratory Ruling on the Use)
of Digital Modulation by Multipoint)
Distribution Service and Instructional)
Television Fixed Service Stations)


              REPORT AND ORDER ON RECONSIDERATION


   Adopted:  July 13, 1999             Released:  July 29, 1999

By the Commission:

                       TABLE OF CONTENTS

                                                        Paragraph

I.  INTRODUCTION AND SUMMARY . . . . . . . . . . . . . . . . . .1

II. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . .2

III.     DISCUSSION. . . . . . . . . . . . . . . . . . . . . . .5
    A.   Application Processing Issues . . . . . . . . . . . . .6
    B.   Interference Complaints . . . . . . . . . . . . . . . 16
    C.   Interference. . . . . . . . . . . . . . . . . . . . . 20
         1.   Protection of ITFS Stations. . . . . . . . . . . 20
              a.   Registration of ITFS Receive Sites. . . . . 21
              b.   Point-to-Point ITFS Licensees . . . . . . . 22
         2.   Response Stations: Advance Notification and Professional Installation23
              a.   Response Stations Operating at +18 dBW EIRP or less, 
                   and/or on MDS Channels 1 or 2/2A. . . . . . 25
              b.   Effect of Timing of Construction of ITFS Registered Receive Sites35
              c.   Consent of ITFS Licensees . . . . . . . . . 36
              d.   Timing and Method of Advance Notification . 37
              e.   Content of Advance Notification . . . . . . 40
         3.   Technical Standards. . . . . . . . . . . . . . . 44
              a.   Spectral Mask . . . . . . . . . . . . . . . 44
              b.   Frequency Tolerance . . . . . . . . . . . . 48
              c.   Other Technical Considerations. . . . . . . 50
    D.   Proposals Specifically Regarding Use of 125 kHz Channels53
    E.   Issues Primarily Involving ITFS . . . . . . . . . . . 57
         1.   Channel Swapping and Shifting. . . . . . . . . . 57
         2.   Grandfathering of Excess Capacity Lease Provisions59
         3.   Assignment of Excess Capacity Leases . . . . . . 62
    F.   Booster Stations. . . . . . . . . . . . . . . . . . . 63
         1.   High-Power Booster Operations. . . . . . . . . . 63
         2.   Treatment of Currently-Licensed Boosters . . . . 64
         3.   Booster Licenses . . . . . . . . . . . . . . . . 67

IV. Digital Declaratory Ruling . . . . . . . . . . . . . . . . 68
    A    Introduction. . . . . . . . . . . . . . . . . . . . . 68
    B.   Limited Exception to the Protected Service Area Definition for Modifications69
    C.   Rights of Licensees Where Digital Operation Affects Use of Frequency Offset73
    D.   ITFS Recapture Rights . . . . . . . . . . . . . . . . 76

V.  Other Related Pleadings. . . . . . . . . . . . . . . . . . 77

VI. Procedural Matters and Ordering Clauses. . . . . . . . . . 78

Appendix A:   List of Petitioners
Appendix B:   Regulatory Flexibility Analysis
Appendix C:   Rules
              Appendix D:   Methodology for Predicting Interference From Response Station Transmitters and To
              Response Station Hubs and For Supplying Data on Response Station Systems

                   I. INTRODUCTION AND SUMMARY

    1.   In our order in Amendment of Parts 21 and 74 to Enable Multipoint Distribution
Service and Instructional Television Fixed Service Licensees to Engage in Fixed Two-Way
Transmissions, 13 FCC Rcd 19,112 (1998)("Two-Way Order"), we amended Parts 21 and 74 of our
rules to provide licensees in the Multipoint Distribution Service ("MDS") and Instructional Television
Fixed Service ("ITFS") with substantially increased operational and technical flexibility.  Specifically,
the rule changes were designed to allow these licensees, which had formerly provided primarily one-
way video services, to provide a wide range of high-speed, two-way services to a variety of users. 
In this order on reconsideration, we make some additional rule modifications which we believe will
further facilitate the provision of these services.  In this order, we also resolve petitions for
clarification filed in regard to our Declaratory Ruling and Order, In the Matter of the Request for
Declaratory Ruling on the Use of Digital Modulation by Multipoint Distribution Service and
Instructional Television Fixed Service Stations, 11 FCC Rcd 18,839, 18,858 (1996)("Digital
Declaratory Ruling").

                         II.  BACKGROUND

    2.   The MDS service historically has provided point-to-multipoint one-way video
transmission to subscribers that is often referred to as "wireless cable."  ITFS licensees traditionally
have utilized their spectrum to transmit educational and instructional material to students.  The two
services share spectrum in the 2500-2686 MHz band, which is divided into groups of 6 MHz
channels.  Although the ITFS/MDS spectrum is primarily used to provide either one-way video
service to students or wireless cable service to subscribers, some of the subject spectrum has been
used in recent years for the provision of two-way service.  

    3.   In order to subsidize their educational mission, ITFS entities may lease channel
capacity on their licensed spectrum, which they are not using, to MDS operators, subject to certain
technical limitations and programming requirements.  As a result, there is a history of cooperation
between ITFS licensees and MDS operators, with MDS operators providing funding used by ITFS
licensees for their educational mission in exchange for the extra channel capacity needed to make
most MDS systems viable.  In light of this history of cooperation, the Commission adopted a new
flexible deregulatory approach to both services, premised on cooperation between all the parties
involved rather than on close Commission involvement in every possible dispute that may arise,
especially in regard to interference problems.

    4.   The proceeding which resulted in the Two-Way Order was commenced in response
to a petition for rulemaking filed by a group of over one hundred participants in the wireless cable
industry,  including wireless cable system operators, MDS and ITFS licensees, equipment
manufacturers and consultants, who requested that the Commission amend its Rules to facilitate the
provision of two-way communication services by MDS and ITFS licensees.  Virtually all of the
comments received in response to that petition, as well as virtually all of the comments received in
response to the NPRM that we subsequently released, strongly supported amending our Rules to
enhance the ability of licensees to provide two-way service.  Although there was some disagreement
on the specifics of how best to proceed in a two-way digital environment, support for the basic two-
way concept was close to unanimous.  

                         III.  DISCUSSION

    5.   Following the release of the Two-Way Order, we received petitions for reconsideration
which primarily focused on requests that we: (1) expand our streamlined application processing to
cover all ITFS modification applications; (2) adopt a method for the Commission to resolve
interference complaints; and (3) make certain technical amendments to our rules.  We address each
of these and other issues in turn.

    A.   Application Processing Issues

    6.   In the Two-Way Order, we adopted a streamlined application processing system based
on applicant certifications of compliance with the technical and notice rules, timely notice to all
potentially affected parties and random audits of submitted applications.  We believed that failure
to adopt such a streamlined system would be "seriously detrimental to the provision of two-way
service."  We also concluded that failure to provide two-way service would jeopardize the survival
of the MDS industry. The majority of reconsideration petitioners advocate expanding the use of the
streamlined processing system to all ITFS major modification applications.  

    7.   BellSouth and other parties argue that it may be necessary to modify the main MDS
and ITFS stations as operators reconfigure their systems for cellularization, sectorization and two-
way services.  This could require major changes to ITFS stations that would be precluded under our
present rules without a filing window.  These parties contend that the delay and uncertainty that
would result from having to wait for such a window could prevent some systems from being built at
all and thereby deny service to the public.  In contrast, the greater certainty that would result from
simultaneous processing would enable business plans to be more reliable and operation timelines to
be more predictable.  The parties contend these factors would encourage investment in the MDS
industry, would increase the value of ITFS spectrum and would facilitate service to the public.  In
addition, as several reconsideration petitioners note, by placing ITFS major modifications in the
streamlined processing system, any ITFS major modification applications submitted during the initial
one-week filing window or any subsequent one-day rolling filing window that interfere with any
simultaneously filed applications would not be treated as mutually exclusive and would not be subject
to auction. Finally, adopting the streamlined procedures for ITFS major change applications would
be consistent with our streamlining goals.  We agree with these arguments of the various petitioners
and will implement the system as stated below.

    8.   The procedure we adopted in the Two-Way Order will utilize a rolling, one-day filing
window for MDS/ITFS applications for response station hubs and boosters.  That procedure will
now be extended to all ITFS modification applications.  Each applicant will have to provide
interference protection to all facilities existing or proposed prior to the filing of its application, but
its application will take precedence over all subsequently filed applications.  Applications filed in the
initial window or on the same day, in the case of the one-day rolling window, will not be treated as
mutually exclusive by the Commission, and it will be the responsibility of the parties to resolve any
conflicts.  Because parties will be unable to offer reliable service without resolving such conflicts, we
believe the incentive to reach a resolution will be so great that Commission involvement will be
unnecessary to resolve disputes. 

    9.   The applicant will be required to certify that it has met all requirements regarding
interference protection to existing and prior proposed facilities. The applicant will also be required
to certify that it has served all potentially affected parties with copies of its application and with its
engineering materials.  The engineering analysis for two-way systems must comply with the
methodology set out in Appendix D to the Two-Way Order, which is also Appendix D to this
document.  The applicant must also certify that it has obtained any necessary consent letters in lieu
of interference protection.  Any application that does not contain the proper certifications will be
dismissed with prejudice and will lose its priority over subsequently filed applications.

    10.  The Commission will rely on the applicant's certifications in issuing licenses and will
not conduct an independent engineering review of each application filed.  The applicant will only be
required to file the application form with the Commission.  However, in the interest of making sure
that engineering information is available to all present and future affected parties, applicants will be
required to provide copies of their applications, with all of their engineering materials, in both hard
copy and on disk, to the  Commission's contractor for public service records duplication,
International Transcription Services, Inc. ("ITS"), located in Portals II, 445 12th Street, S.W., Room
CY-B402, Washington, D.C. 20554 and to certify on their application they have done so.  Because
the ready availability of complete applications to interested parties is essential to the functioning of
the application processing system, failure to certify that the application and supporting material have
been provided to ITS will result in dismissal.  
    11.  In order to monitor applicant compliance with our Rules and to protect the integrity
of the certification process, the staff will conduct random audits, either prior to the expiration of the
60-day petition to deny period, described below, or after a license has been issued in reliance on a
certification.  In the event that an audit reveals that an applicant improperly certified or that an
application contains a material error, the application could be subject to dismissal or the license
subject to revocation.  In addition, if there is evidence that a certification was made in bad faith, we
delegate to the Mass Media Bureau the authority to impose a monetary forfeiture or it may refer the
matter to the Commission for designation for hearing.

    12.  The staff will review applications to make sure all required materials are included,
excluding all engineering showings submitted to ITS.  Complete applications filed with the proper
certifications will be placed on public notice without further review.  As we stated in the Two-Way
Order we believe placing the applications on public notice without prior staff interference analysis
will serve to speed the review process by making the relevant data available to all interested parties
as quickly as possible.  Parties will have 60 days from the date of the public notice to file petitions
to deny against the application.  Due to the complex nature of the engineering matters, we believe
a 60-day petition to deny period is more reasonable than the usual 30-day period.  If no petitions to
deny are received, the application shall be granted.  However, after a complete and properly certified
application is granted, if a new facility operated pursuant to that grant causes non-consensual
interference to any protected facility it must immediately cease operations, regardless of whether any
petitions to deny were filed against the application during the application process.  The burden of
proving that a facility is not causing non-consensual interference lies on the licensee following the
filing of a documented complaint of interference by an affected party.  

    13.  As discussed in the Two-Way Order, it is likely that a large number of applications will
be filed once the new rules become effective and that many of the applications submitted at that time
may conflict with others filed simultaneously.  In order to smooth the transition to the rolling one-day
filing window application processing system, we adopted a special one-week initial filing window,
the opening of which will be announced by public notice.  All applications filed during that week will
be deemed filed as of the same day.  Following the publication of a public notice announcing the
tendering for filing of applications submitted during that window, applicants would have a period of
60 days to amend their applications to resolve conflicts, provided such amendments do not result in
any increase in harmful interference to any previously proposed or authorized station (including
facilities proposed during the window), absent consent of the applicant for or licensee of the station
that would receive such interference.  During this 60-day period, no additional applications could be
filed, affording those who filed during the one-week window an opportunity to resolve any conflicts
without fear that, during the pendency of settlement discussions, third parties will propose facilities
that will have to be protected.

    14.  At the conclusion of that 60-day period, we will release a public notice of the
acceptance for filing of all applications submitted during the initial window, as amended during the
60-day period.  Interested parties will then have 60 days from the date of that public notice to file
petitions to deny.  Following the 60-day period, all properly certified, unopposed applications shall
be granted.  On the 61st day after the date of the second public notice, the rolling one-day filing
window will be in effect.

    15.  We note here that we will not tolerate frivolous petitions to deny which are intended
to delay the streamlined process.  Such petitions will be promptly dismissed and the parties subjected
to appropriate sanctions.  For example, a petition to deny based on the claim that an application is
mutually exclusive with a contemporaneously filed application will be frivolous and promptly
dismissed.  By contrast, a petition to deny that asserts non-consensual interference with a previously
applied-for facility will invoke staff review of the subject application and result in its removal from
the streamlined process.  If the petition to deny is granted, the application will be denied and the
applicant would have to re-file, losing its filing priority.  Therefore, it is essential for applicants to be
certain of the accuracy of their filings and to take every possible step to insure they will not create
unwanted interference before they even file their applications. Except during the 60-day period
following the initial filing window, the streamlined process does not allow for amendments to
applications.  To do so would throw the entire process into chaos because parties would be unable
to rely on the accuracy of previously filed applications whose proposed facilities they are required to
protect. An amendment to any one application could result in a cascade of amendments to
subsequently filed applications.  Therefore, we strongly urge parties to carefully review the accuracy
of their applications and to resolve any potential conflicts that would make their applications subject
to legitimate challenge.  Otherwise, they risk denial of their applications and the loss of filing priority.

    B.   Interference Complaints

    16.  Some petitioners have asked that the Commission adopt interference resolution
procedures, while other parties have asked us to abandon our decision to not treat any
simultaneously filed applications as mutually exclusive.  In addition, other petitioners, including
CTN, have asked that we clarify the term "documented complaint."  For the reasons stated below,
we decline to adopt the advocated interference resolution procedures and decline to change our
earlier decision regarding mutually exclusive applications.  We will clarify, however, the term
"documented complaint."

    17.  In the Two-Way Order and under our rules, we repeatedly emphasized that any two-
way facility that causes unauthorized that is, (non-consensual) interference to any protected facility
must immediately cease operations.  This rule applies regardless of whether any petitions to deny
were filed during the application process.  Furthermore, we stated:

        The burden of proving that a two-way facility is not causing unauthorized interference
    lies on the two-way licensee following the filing of a documented complaint of
    interference by an affected party.

Considering the severity of the penalty for interference, the placing of the burden of proof, and the
fact that a party cannot resume operation absent an appropriate determination authorizing such
operation, we believe that the incentives for the parties to act as fast as conceivably possible to
resolve such complaints already exist.  These incentives should result in complaints being resolved
much more quickly than would be the case if we adopted one of the proposed complaint resolution
procedures, such as the almost five-month process proposed by BellSouth.  These incentives should
also provide more than adequate protection to the interests of ITFS licensees.  Since in most cases
a simple on-off test will demonstrate whether a facility is causing harmful interference and since such
a test can be performed very quickly, we do not believe that MDS operators are seriously burdened
by this process.  In those very rare cases where Commission analysis is needed to resolve the
complaint, we believe our existing processes are sufficient.  Therefore, we will not adopt any new
formal complaint resolution procedure.

    18.  The Foundation has proposed that we abandon our decision to never treat
simultaneously filed ITFS and/or MDS modification applications as mutually exclusive.  The
Foundation contends that the system we adopted could result in three possible outcomes:  (1)  one
party builds, blocking service by the other, (2) both build, but are not able to offer reliable service,
and (3) no one builds and the two parties between them block other construction.  As we repeatedly
emphasized in the Two-Way Order, the system we have adopted is based in large part on the history
of mutual cooperation between MDS and ITFS licensees and the very real interdependence, both
technically and financially, of those entities.  In almost every instance, an MDS operator cannot be
competitive without access to ITFS channels.  Likewise, few ITFS entities can build their facilities
without income from MDS lessees.  Therefore, the three outcomes that the Foundation predicts are
improbable as between MDS and ITFS licensees.  In the case of conflicted MDS operators, failure
to resolve the conflict will create uncertainty in the ability of the operators to offer service and will
make it difficult for either party to finance system construction.  Failure to construct the relevant
systems will result in continuing lost revenue for all of the affected parties.  These results will compel
the parties to find a mutually satisfactory resolution as quickly as possible.

    19.  We do agree with CTN and other parties that we need to clarify what is meant by a
"documented complaint."  The bulk of our enforcement activities in this area will be based upon such
"documented complaints" and guidelines need to be established for the form of such complaints.  In
order to invoke Commission action and to compel shutdown of an MDS facility, a complaint must
contain a certification that the complainant has contacted the operator of the allegedly offending
facility and tried to resolve the situation before filing.  The complaint must then specify the nature of
the interference, whether the interference is constant or intermittent, when the interference began and
the site(s) most likely to be causing the interference.  Where possible, complainants should submit a
videotape or other evidence showing the effects of the interference.  The complaint must also contain
a motion for a temporary order to have the interfering station cease transmitting.  The complaint must
be filed with the Secretary's office and served on the allegedly offending party.  Service shall be in
accordance with  1.4 and 1.47 of our Rules.  Complained-against parties will have 2 business days
from the date of filing to respond to the complaint.  We emphasize again that the burden of proof lies
with the complained-against party.  If we find in favor of the complainant, we shall order immediate
shut-down of the facility.  The operator of the shut-down facility will be required to submit proof that
the interference has been cured before it is allowed to recommence operations.

    C.   Interference

         1.   Protection of ITFS Stations

    20.  In the Two-Way Order, we granted a protected service areas ("psa") to every ITFS
licensee and granted individual protection to all receive sites registered through the date of adoption 
of the Two-Way Order.  We explained that the psa protection "shall comprise an area within a 35
mile radius of the licensee's registered receive sites, [and] shall be in addition to the registered receive
site protection currently enjoyed by ITFS licensees."  Based on these actions, we halted registration
of ITFS receive sites.

              a.   Registration of ITFS Receive Sites

    21.  CTN asks us to clarify that the Commission will continue to register ITFS receive
sites.  Instead, we make clear that we will no longer do so.  Although CTN acknowledges that 47
C.F.R.  74.903(a)(5) states that receive sites more than 35 miles from the main transmitter are not
entitled to interference protection, it contends that this rule is designed to limit the ability of an ITFS
licensee to extend protection unfairly beyond its actual service area, and can be waived if a licensee
can demonstrate that a receive site farther from the main transmitter actually receives service.  This
position is inconsistent with the plain meaning of the rule.  Limiting protection to a 35 mile radius
provides certainty to cochannel and adjacent channel entities, especially now that booster stations can
originate signals.  Nevertheless, we affirm that receive sites registered as of the adoption date of the
Two-Way Order continue to receive protection of their specific parameters and that applicants for
new or modified MDS or ITFS stations are required to demonstrate protection of such sites. 
Furthermore, we emphasize that a receive site is entitled to protection as of the filing date of the
application listing it.

              b.   Point-to-Point ITFS Licensees
     
    22.  BellSouth urges the Commission to create an exception to Section 74.903(d) of the
new Rules, stating that point-to-point ITFS stations are not entitled to a psa, because psa protection
is irrelevant to their institutional needs, results in overprotection and spectral inefficiency, and causes
unintended adverse consequences.  BellSouth also states that the Commission has accorded secondary
protection to point-to-point ITFS stations and adds that a point-to-point ITFS licensee which seeks
to modify its facilities to provide point-to-multipoint services can do so subject to the interference
protection rights of incumbents. Although the Commission has licensed ITFS point-to-point studio
to transmitter links on a secondary basis, BellSouth's characterization of all ITFS point-to-point
operations as "secondary" is inaccurate.  Furthermore, adopting BellSouth's requested exception
would place an unacceptable burden on ITFS licensees who wish to convert from point-to-point to
point-to-multipoint transmission in the future, perhaps even precluding such a change.  Thus, we
decline to adopt the exception to automatic psa protection requested by BellSouth for point-to-point
operations.

         2.   Response Stations: Advance Notification and Professional Installation

    23.  In the Two-Way Order, we created a zone ("notification zone") with a radius of 1960
feet around each ITFS registered receive site, and required that the associated hub station licensee
notify the appropriate ITFS licensee by certified mail at least 20 days prior to the activation of any
response station within such a zone.  We stipulated that the notification must contain the street
address and geographic coordinates of the response station; a specification of the station's EIRP,
antenna pattern, orientation, polarization, height above mean sea level ("AMSL") and channels to be
used; and the name and telephone number of a contact person who will be responsible for
coordinating the resolution of any interference problems.  We also required that all response station
transmitters be installed professionally to minimize BFO, to help prevent cochannel and adjacent
channel interference, and to minimize the risk of human exposure to potentially hazardous radio-
frequency ("RF") emissions.

    24.  A number of the parties request that we modify these requirements.  Several parties
maintain that the advance notification and professional installation requirements pose a competitive
impediment because MDS operators will be alone in being unable to provide rapid installation or a
retail distribution channel, unlike other services including cable television or satellite antenna master
television ("SMATV"). CTN regards these arguments as "flawed," in that these other services do
not use radio-frequency transmissions for return paths, and thus interference issues are not a concern. 
Petitioners respond that "[p]rospective customers do not care about differences in technology or
whether a service provider is sharing spectrum with ITFS licensees - they want their service
immediately."

                                 a.   Response Stations Operating at +18 dBW EIRP or less, and/or on
                   MDS Channels 1 or 2/2A

    25.  Petitioners asked for reconsideration of our imposition of advance notification and
equipment installation requirements for response stations utilizing a transmit power of 18 dBW EIRP
or less.  Petitioners argue that, when no more than 18 dBW is used at a response station with digital
modulation operating as part of a two-way cellularized system in the 2500-2686 MHz band, no 20-
day notification requirement or professional equipment installation requirement should be imposed
for protection of ITFS receive sites.  In lieu of these requirements, Petitioners propose that
"improved" frequency downconverters be provided by hub station licensees to all ITFS receive sites
within 1960 feet of the hub station's response service area ("RSA").  The proposed downconverters
would be required to suppress non-cochannel and non-adjacent channel signals by an amount equal
to, or greater than, (4 - A - B) dB, where A represents the downconverter's maximum input power
capability (in dBm) and B represents the sum of the power (in dBm) of the desired signals at the input
of the  downconverter.  Petitioners additionally requested that the Commission reconsider, and
eliminate, the requirements for advance notification and professional installation of digital response
stations operating as part of a two-way cellularized system in the 2150-2162 MHz MDS band,
irrespective of EIRP utilized.  Petitioners argue that these requirements are unnecessary because
interference to ITFS stations operating in the 2500-2686 MHz band should not occur due to the
separation of over 300 MHz between these bands.

    26.  In response to Petitioners' proposal to install improved downconverters in
circumstances where interference could occur, CTN states that they would not oppose an exemption
from the notification and installation rules for stations utilizing 18 dBW or less EIRP, provided that
"the replacement downconverters meet an agreed-upon standard for resistance" to overload. 
Specifically, CTN recommends the following standards for such downconverters:  (1) a third-order
intercept point of 30 dBm; (2) a conversion gain of 32 dB, or the same gain as the existing
downconverter, whichever is less; and (3) a noise figure of no greater than 2.5 dB, or no more than
1 dB greater than the noise figure of the existing downconverter, whichever is greater.  Responding
to this proposal, Petitioners state that they do not object to CTN's specifications, and note that, if
downconverter interference occurred despite installation of such a replacement unit, then the hub
station operator would still be responsible for curing such interference by deploying an even better
downconverter and/or utilizing other interference mitigation techniques previously identified by
Petitioners.  Petitioners' request to exempt stations in the 2150-2162 MHz band from notification
and installation requirements is opposed by CTN, which argues that such stations still pose a threat
of downconverter overload to ITFS stations in the 2500-2686 MHz band.

    27.  We believe the proposal for the replacement of existing downconverters with newer,
more interference resistant, models in certain circumstances and modifying the notification rules
protects the interests of ITFS stations while removing the competitive disadvantage to MDS
operators.  We are therefore amending our rules to eliminate the notification and professional
installation requirements for digital response stations in two-way cellularized systems utilizing no
more than 18 dBW EIRP, contingent upon the operator of the associated hub station providing and
installing replacement downconverters at registered ITFS receive sites within the outer edge of the
RSA and beyond to a distance of 1960 feet.  The technical specifications of the replacement
downconverters shall, at a minimum, be consistent with those set out in  26, supra.  We are also
adopting Petitioners' suggested procedures for implementation of such arrangements, namely:  (1)
the proposal to upgrade downconverters should be made in writing and served on the affected ITFS
licensee, conditional licensee or applicant at the same time the application for the response station hub
license is served on cochannel and adjacent channel ITFS parties; (2) any objection by ITFS parties
would have to be made within the 60-day period allowed for petitions to deny the hub station
application, setting forth the specific reason(s) for the objection; (3) if no objection is filed, the offer
for downconverter replacement will be deemed to have been accepted; and (4) if an objection to
downconverter replacement is filed, the hub station application would nevertheless be granted, subject
to the Commission's requirements for notification and professional installation.  This arrangement
should facilitate the installation of very large numbers of response stations without the need for
notification or professional installation. 

    28.  We are not adopting Petitioners' request to totally exempt response stations in the
2150-2162 MHz MDS band from notification and professional installation requirements, although
such stations utilizing no more than 18 dBW EIRP are included in the provisions above.  We do not
find, and Petitioners did not provide, good cause for exempting stations in this band utilizing more
than 18 dBW from these requirements.  Despite the fact that this band is separated by over 300 MHz
from the ITFS channels, we agree with CTN that the potential for downconverter overload still exists,
although it should be significantly easier to eliminate, such as with the use of relatively inexpensive
filters.  Moreover, with respect to the equipment installation requirement, we are retaining this rule
provision for all MDS and ITFS stations using more than 18 dBW EIRP because of our concerns
relating to the potential for deleterious effects from human exposure to high-power microwave
emissions.  The Commission has adopted specific regulations relating to RF exposure and we
believe these provisions could be compromised if professional installation requirements were
eliminated for MDS and ITFS response stations operating at an EIRP in excess of 18 dBW.  For
stations operating up to and including 18 dBW EIRP, we believe that the probability of harmful
exposure is sufficiently limited that it should not be an impediment to implementing the exemption
from professional installation sought by the Petitioners.  

    29.  Our provisions for limiting RF exposure in the MDS and ITFS bands require a
routine environmental evaluation if:  (1) a non-building-mounted antenna less than 10 meters above
ground is used and the station EIRP is greater than 1640 watts; or (2) a building-mounted antenna
is used and the station EIRP is greater than 1640 watts.  The professional installation exemption we
are adopting is for response stations utilizing a maximum of 18 dBW EIRP, which corresponds to
a power of 63 watts EIRP.  Using the formulation 20 log(D1/D2) = 10 log(P1/P2), where D1 = 10
meters, P1 = 1640 Watts EIRP, and P2 = 63 Watts EIRP, the term D2 can be calculated to be
approximately 2 meters, which is the distance at which a 63 Watt EIRP signal would produce an RF
exposure level equivalent to that produced by a 1640 Watt EIRP signal at a distance of 10 meters. 
However, even this estimate for D2 is very conservative (i.e. too large) because, at that distance from
a response station dish antenna, any object would be in the "near field" of the antenna, i.e., within the
area where the lobe of the antenna is not yet fully formed and where the field of the antenna is
dispersed over a relatively wide area as a fraction of the distance from the reflecting surface of the
antenna.  Moreover, as the antennas in these systems will, of necessity, be mounted so as to have a
line-of-sight path to their associated booster and hub stations, it is reasonable to expect that they will
be mounted at roof level or above, where there is little probability of RF exposure to humans.  As an
additional safeguard, however, the current provisions of Sections 21.909(m) and 74.939(o) of our
Rules will be amended.  These sections now provide that response stations can be operated only when
engaged in communications with their associated hubs, boosters or primary stations, and radiation
of unmodulated carriers or other unnecessary transmissions are prohibited.  We are amending these
rules to also provide that response stations can only be initially activated, or reactivated if relocated,
by a signal from a booster or primary station, and that hub licensees have a means to remotely
deactivate any subscriber's response station transmitter within their RSA.  These provisions should
give an added measure of control to system licensees useful for conducting interference tests and
other system evaluations, and will result in a positive "interlock" feature that prevents inadvertent
activation of a newly installed response transmitter when the response antenna is not properly
installed so as to receive signals from the associated main or booster transmitters.

    30.  In its petition, Qualcomm Incorporated ("Qualcomm") requests that the Commission:
(1) amend the rules to eliminate (1) the notification and professional installation requirements for
MDS and ITFS response stations with EIRP no greater than -6 dBW; (2) the requirement that
response stations utilize directional receiving antennas; and (3) the requirement that response stations
utilize directional transmitting antennas.  Qualcomm argues that the notification/installation
regulations should not apply to stations with an EIRP no greater than -6 dBW (1/4 watt) because
such stations pose an extremely low potential threat for causing downconverter overload.  Virtually
all parties commenting on the issue support Qualcomm's request.
 
    31.  Qualcomm also argues that Section 21.906(d) of our Rules, which requires the use
(except at hub stations) of directional receiving antennas at MDS stations, has "outlived its regulatory
usefulness" and should be deleted.  Qualcomm states that this rule conflicts with 47 C.F.R. 
21.906(a), which provides for omnidirectional transmitting antennas at some MDS stations in certain
circumstances, and is in conflict with recently-adopted 47 C.F.R.  21.909(g)(4), which governs the
use of transmitting antennas at MDS response stations.  Qualcomm also wants 47 C.F.R.  74.937(b)
amended to eliminate what Qualcomm sees as an ambiguity within the rule and a possible
inconsistency with a portion of 47 C.F.R.  74.931.  These rules require the use of directive
transmitting antennas "whenever feasible" at certain ITFS stations, except that omnidirectional
transmitting antennas may be used when the stations are leased to provide a commercial service. 
Qualcomm asks that the provisions of 47 C.F.R.  74.939(g)(4), which governs the use of
transmitting antennas at ITFS stations, be referenced as an exception to the requirements of 47 C.F.R.
 74.937(b).  Qualcomm argues that the sections of both Part 21 and Part 74 of our Rules which it
wishes amended are not appropriate for response stations in two-way systems, as such stations "will
utilize a common antenna for transmissions and reception," and it would be impractical and
unnecessary for a response station to have one antenna for transmitting and a separate antenna for
receiving.  Additionally, such a requirement would not be compatible, Qualcomm argues, with their
low power response station, a small desktop unit with a short omnidirectional whip antenna, which
will be readily available for consumer purchase and installation.

    32.  We agree with Qualcomm, CTN and others who support elimination of the notification
and installation requirements for stations with EIRP no greater than -6 dBW, and we are amending
our rules accordingly.  The problems these requirements were meant to address, downconverter
overload and unsafe exposure to RF emissions, are very unlikely to be caused by such low power
stations, even those within 150 feet of an ITFS receive site.  Should such interference occur, it will
still be the responsibility of the hub station licensee to provide a remedy.   Therefore, response
stations with an EIRP no greater than -6 dBW do not need to comply with the advance notification
and professional installation requirements; stations with an EIRP between -6 dBW and 18 dBW are
subject to those requirements only within the notification zone subject to those exceptions set out
herein; and stations with an EIRP greater than 18 dBW are always subject to the professional
installation requirements and, subject to some exceptions, to the notification requirements when
within the notification zone.

    33.  With respect to Qualcomm's proposed amendments of the response station antenna
rules, we find the modifications as suggested would be contrary to the clear meaning of our proposals
and actions in this proceeding.  Specifically, with respect to MDS response stations, we proposed and
adopted 47 C.F.R.  21.906(d), which requires that directional receiving antennas be used.  This rule
is completely consistent with 47 C.F.R.  21.909(g)(4) which states that "each response station shall
employ a transmission antenna oriented towards the response station hub...."  The unambiguous
meaning of this language is that the MDS response station transmitting antenna must also be
directional, as the phrase "oriented towards" would otherwise be meaningless.  Qualcomm's reference
to omnidirectional antennas in 47 C.F.R  21.906(a) is inapposite, as this section applies only to
antennas at primary (and booster) MDS stations.  With respect to ITFS response stations, 47 C.F.R.
 74.937(a) calls for ITFS response stations to use directional receiving antennas and allows licensees
to install receiving antennas with performance superior to the specifications set forth at Figure I,
Section 74.937(a).  Also, 47 C.F.R.  74.939(g)(4) states that "each ITFS response station shall
employ a transmission antenna oriented towards the response station hub...."  Clearly, as with MDS
stations, the unambiguous meaning of this language is that the ITFS response station transmitting
antenna must be directional.  Qualcomm's reference to language in 47 C.F.R.  74.931(e)(7)
permitting omnidirectional ITFS transmitting antennas in certain circumstances is inapposite, as this
text applies only to antennas at primary (and booster) ITFS stations.

    34.  Although response stations in general are not permitted to use omnidirectional
antennas, stations operating at the very low EIRP proposed by Qualcomm will have little potential
to interfere with other systems irrespective of the type of antennas used.  Qualcomm's use of low
power transceivers which can be placed on a desk or other convenient indoor location to provide high
speed wireless internet access is, we believe, an appropriate and innovative use of this spectrum and
should be accommodated if at all possible.  In consideration of these facts, we have decided, to waive
our rules to the extent necessary to permit the use of omnidirectional transmitting and receiving
antennas at any ITFS or MDS response station with an EIRP no greater than -6 dBW.  This action,
we believe, is appropriate and warranted in these circumstances and is fully consistent with our
overall framework of encouraging expanding use of this spectrum while, at the same time, providing
adequate protection from harmful interference to all systems.  The use of omnidirectional antennas
under the provisions of this waiver does not exempt the licensee from our existing requirement that
interference calculations be based on the presumption that the response station utilizes a reference
receiving antenna with minimum performance characteristics conforming to Figure I of 47 C.F.R. 
74.937(a).  Users of omnidirectional response station receiving antennas will receive interference
protection as if they were using a receiving antenna with the reference pattern and will not be
protected from unwanted signal levels above those derived by use of this pattern. 

                                 b.   Effect of Timing of Construction of ITFS Registered 
                                      Receive Sites

    35.  Petitioners state that the advance notification and professional installation
requirements should not apply with respect to ITFS receive sites built after the filing of the associated
response station hub application.  They argue that ITFS licensees now are on notice of the risk of
BFO, and should be deploying downconverters better able to reject undesired signals.  We decline
to adopt Petitioners' proposed exception.  Interference protection rights within these services are
based on a "first in time, first in right" philosophy.  Because all ITFS registered receive sites will have
been registered before the filing of any response station hub applications, these sites are previously-
proposed and thus entitled to protection.  Our decision here is consistent with other provisions in the
new rules which require such protection.  We reiterate that the notification requirements will apply
only to registered receive sites and those for which registration was applied for as of the date of
adoption of the Two-Way Order.  

              c.   Consent of ITFS Licensees

    36.  No party objects to allowing ITFS licensees to consent to waive the advance
notification and professional installation requirements, and we grant Petitioners' proposal to permit
such consents. Indeed, the Two-Way Order specifically contemplates that consents will play a major
role in the licensing of two-way MDS and ITFS facilities.  However, while individual ITFS licensees
may forego their receipt of advance notification of response station activation, we agree with CTN
that the professional installation requirement may be nullified only where all potentially affected ITFS
licensees consent.  Specifically, response stations operating above -6 dBW EIRP and no greater than
+18 dBW EIRP need not be installed professionally so long as each and every ITFS licensee whose
notification zone encompasses such responses stations consents in writing to non-professional
installation of those response stations.  

              d.   Timing and Method of Advance Notification

    37.  Some parties propose shortening the notification period to enhance the competitive
position of MDS operators and the Bay Area Consortium urges the Commission to dispense with the
advance notification rules altogether.  CTN contends that the Bay Area Consortium's proposal, which
would simply require hub applications to be served on potentially affected ITFS licensees,  "is of little
use" given that the hub application may be filed months or years before a response station capable of
causing interference is activated and would not identify a specific, problematic response station. 
Dallas County opposes shortening the notification period, claiming that the benefits of retaining 20
days notice outweigh any perceived competitive disadvantage.  Relatedly, Petitioners suggest that
every response station hub application should be served on any ITFS licensee with a registered
receive site in, or within 1960 feet of, the proposed RSA to assure that the activation notice is not
the first time that an ITFS licensee learns of plans to deploy response stations in the vicinity of its
registered receive sites.

    38.  We will retain our advance notification requirement for response stations activated
within 1960 feet of ITFS registered receive sites, except for those activations which fall into any of
the above exceptions.  We also will limit the term of this notification to one business day in advance
of such activation.  The main purpose of the advance notification requirement is to jump-start the
BFO source identification process before BFO occurs, and we are persuaded that one business day
is sufficient notice to achieve this purpose, while at the same time allaying the concerns expressed by
some parties over the anti-competitive effects of a longer notification period.  We also adopt
Petitioners' suggestion for service of response station hub applications on non-co- and adjacent
channel ITFS licensees.

    39.  While the Two-Way Order requires that advance notification be performed by certified
mail, Petitioners request that an ITFS licensee be permitted to elect to receive it by electronic mail
(e-mail) or fax.  We will permit such notification provided that the ITFS licensee consents in writing. 
Regardless of the method used, notification should be timed so that it is received by the ITFS licensee
at least one day in advance of activation.
    
                                 e.   Content of Advance Notification

    40.  Petitioners propose that we limit the content of the notification to the ITFS receive
site(s) potentially affected by the new response station, the hub(s) with which the response station
may communicate, and the name and telephone number of a contact person.  Petitioners argue that
the required content of the advance notification contains far more information than the ITFS licensee
reasonably needs, and that this content thus should be reduced to protect proprietary and market
sensitive information.  However, CTN argues that it is unlikely that the location of response station
transmitters always could be hidden, and that no attempt has been made to show that a response
station's physical location or operating specifications are in any way confidential. 

    41.  We believe that the level of concern over predatory pricing by ITFS receiving notice,
or by their lessees is unfounded.  Reducing the advance notification period to one day minimizes any
the potential for a competitor to utilize the information in the notification to the detriment of an MDS
operator.  Therefore, the interest in providing the information called for by our advance notification
requirement to facilitate the identification of any BFO that may occur outweighs any of the concerns
expressed regarding possible anti-competitive effects.  

    42.  In addition, we are not persuaded by Petitioners' argument that it is impossible for
response station hub licensees to determine and supply in advance of response station activation
certain technical characteristics of the response station.  For one thing, some of those characteristics
should be predetermined by virtue of the applied-for parameters of the RSA, region and class
pertaining to the particular response station.  We believe the activation process will require extensive
coordination with the hub licensee or wireless cable operator, and from this the hub licensee will be
able to derive the information required on the notification.  Our adoption of rules requiring remote
activation of response stations to prevent inadvertent activation of an improperly installed response
transmitter also should facilitate recognition of the operating characteristics of the response station. 

    43.  The Bay Area Consortium depicts the existing advance notification requirements as
huge burdens for ITFS licensees on both sides of the notification.  Not only would the provider of
the notification be obligated to expend resources to prepare notifications, but the receiver also would
be obligated to review potentially thousands of notifications.  However, we agree with those other
parties who state that the need for interference protection outweighs the burdens.  The fact that the
notification zone extends only one-third of a mile from the registered receive site, coupled with the
exceptions to the notification requirement that we have carved out here, should greatly limit the
number of notifications.  Furthermore, we adopt the proposal by Dallas County, to require
identification of the potentially affected registered ITFS receive sites and the response station hub(s)
with which the newly activated response station may communicate because it will lessen the burden
on parties reviewing the notification. 

         3.   Technical Standards

              a.   Spectral Mask

    44.  Spike Technologies, Inc. ("Spike") asks the Commission to reconsider and amend the
rules relating to the definition of the spectral mask applicable to digital emissions used at MDS and
ITFS stations.  The spectral mask establishes the amount of attenuation which is required for the
portions of the transmitted signal which fall beyond the upper and lower edges of the channel in use. 
Specifically, Spike argues that there is an inconsistency between the emission limits given in 47 C.F.R.
 21.908(a), (b), (d) and the formulas in 47 C.F.R.  21.908(e) which, according to Spike, "could
be interpreted as being 18 dB more restrictive than intended...."  The text of Sections (a), (b) and
(d) sets out the specific attenuations for out-of-band emissions relative to the "licensed average 6
MHz channel power level."  Section 21.908(e) sets out two mathematical formulas that define two
alternative measurement methodologies which can be used for determining compliance with Sections
(a), (b) and (d).  Spike contends that the formulaic attenuation schema is inconsistent with the
relevant proposals in the NPRM and with the Commission's decisions in the Digital Declaratory
Ruling.  Spike argues that their understanding of our requirements for suppression of out-of-band
emissions in the Digital Declaratory Ruling and in the NPRM is that the magnitude of the out-of-
band emissions (as measured in the appropriate resolution bandwidth) is to be compared to the
magnitude of the total licensed average power within a 6 MHz channel, and that a ratio of these two
magnitudes would yield the requisite suppression.  Spike offers alternative formulas which, they say,
present the correct methodologies for calculating the required out-of-band attenuations.  In their
opposition, Petitioners state that Spike fundamentally misunderstands how the text and formulas of
the rule are to be correctly interpreted and that, in fact, there is no inconsistency between them and
they are both correct.  Petitioners argue that the rule text and formulas, as adopted, are completely
consistent with the procedures used in connection with the emission tests which formed the basis for
the Digital Declaratory Order; that Spike's alternative formulas are incorrect and inapplicable; and
that implementation of the spectral mask rules in conformance with Spike's interpretation would result
in a serious degradation of the MDS/ITFS band due to much greater levels of adjacent channel
interference.

    45.  The text of 47 C.F.R.  21.908 in both the NPRM and the Two-Way Order in this
proceeding is a direct carryover of the text in the Digital Declaratory Order, where we said
"Acceptable levels of out-of-band emissions shall reference the average transmitter output power." 
Referencing out- of-band emissions to the measured average power within a portion of a 6 MHz
channel (the resolution bandwidth) with uniform spectral density is an acceptable methodology and,
most significantly, is the method used by the Petitioners, for the emissions test in support of our
Digital Declaratory Ruling. We stated, by way of clarification, that "the relative power of out-of-
band emissions shall be measured with 100 kHz resolution bandwidth."  The purpose of this
statement was to highlight the fact that the resolution bandwidth of the measurement instrument must
be taken into account when comparing the magnitudes of in-channel and out-of-channel power.  In
the tests conducted by the Petitioners, the most common resolution bandwidth used was 100 kHz,
and, as the Digital Declaratory Order was based on these tests, that bandwidth was specified as the
measurement standard.  Subsequently, as a result of questions raised by comments to the NPRM,
Petitioners proposed two generalized mathematical formulas which could be used to evaluate the
relative levels of out-of-band emissions irrespective of the particular channel width and resolution
bandwidth(s) involved.  Those formulas were adopted by the Commission at 47 C.F.R.  21.908(e)
and they state, quantitatively, how the measurement of a spectral mask must be made in order to
comply with the requirements of 47 C.F.R.  21.908(a), (b) and (d).  We agree with Petitioners that
Spike is incorrect in their assertion that the text and formulas are inconsistent.  The purpose of the
text is as statement of what is to be measured, and the purpose of the formulas is to show the two
alternative means for how the measurement is to be taken in order to produce consistent and correct
results.  Spikes's proposed alternative formulas are meant to compare the total amount of power in
a 6 MHz wide channel against out-of-channel power measured within a 100 kHz bandwidth.  The
formulas which we adopted are meant to compare the power in a segment within the 6 MHz channel
(for example, a 100 kHz segment) against the out-of-channel power measured within a bandwidth
segment at the point of interest.  The difference in the results of these two approaches amounts to
approximately 18 dB for a resolution bandwidth of 100 kHz, i.e. 10 log(6 MHz/100 kHz), with
Spike's formulas permitting out-of-channel power to be 18 dB greater than that permitted by the rule
which we adopted.  Thus, the interpretation suggested by Spike would result in a degradation of the
emission mask by 18 dB and could result in unacceptably high levels of adjacent channel interference
in the MDS/ITFS band. 

    46.  Although we find Spike's interpretation of the formulas in 47 C.F.R.  21.908(e) to
be incorrect, we believe that Spike's misunderstanding of our measurement schema warrants a general
clarification of the applicability of these formulas to the digital emissions already approved for
MDS/ITFS and those that might be approved in the future.  Specifically, Spike states in their
petition for reconsideration that the formulas "mistakenly reference the [spectral] mask to the "flat
top" of the digital wave form."  In fact, this reference to the "flat top" of the digital emission's wave
form is correct and essential for establishing the correct portion of the signal to be measured when
using relative power measurements for determination of the shape of the spectral mask.  By "flat top,"
we are referring to that portion of the digital emission which falls at the center of the occupied
bandwidth of the emission, e.g. at the center of a 6 MHz channel, at which center point a
measurement of the power spectral density of the emission should yield, within a resolution
bandwidth such as 100 kHz, a value which is not exceeded at any other point within the emission
when measured within the same resolution bandwidth.  For emissions such as 64-QAM, which have
a relatively uniform power spectral density, a power measurement within a 100 kHz resolution
bandwidth taken at the "flat top" or within any other 100 kHz segment that is not located proximate
to the 6 MHz channel edge, should yield values which are essentially equal.  However, for emissions
such as QPSK and 4-QAM, this will not be true, as the "flat top" measurement value will exceed the
value found from measurements taken at points between the center of the emission and the channel
edges.  This is true because QPSK has a "Sin X/X" power spectral density configuration, i.e., the
emission is "dome shaped," with more power concentrated near the center of the channel and less
power concentrated towards the edges of the channel.

    47.  Thus, for emissions such as QPSK and 4-QAM, the "flat top" portion of the signal is
the only point within the channel at which a correct comparison of the relative levels of in-band and
out-of-band power can be taken.  We would also emphasize that such emissions are constrained in
terms of maximum permissible EIRP by the degree to which they are non-uniform.  The interference
protection rules which we proposed and adopted for digital emissions were premised on those
emissions having uniform power spectral density, and thus, at any measurement point inside the
occupied channel, presenting a uniform radiated power (EIRP) to which the 45 dB cochannel and 0
dB adjacent channel interference protection criteria could be applied.  In this way, the licensed EIRP
(e.g. 2000 watts) would be uniformly distributed across a 6 MHz channel (e.g. 333 watts/MHz) and
no more EIRP would be present within the measurement resolution bandwidth at the channel center
than would be present within the resolution bandwidth offset to a point removed from the center, e.g.
within 1 MHz of the edge of the channel.  For QPSK and similar emissions this will not be the case. 
For these emissions there will be, as discussed above, more power near the center of the emission
than near its edges.  The result of this concentration of power is that the center portion of the
emission presents a greater level of potentially interfering EIRP than do the portions away from the
center.  For equal EIRP's 64, a QPSK signal will have more interfering power near its channel center
than will a uniform emission, such as over a 6 MHz channel QAM, a result which would be contrary
to the premises of our interference protection standards especially with regard to subchanneling,
which is permitted on uniform spectral density.  We therefore caution applicants and licensees that
the transmitter power limits in 47 C.F.R.  21.904 and 74.935 are maximum values which, as applied
to digital emissions, are permissible only when those emissions have uniform power spectral density. 
For other emissions, such as QPSK and 4-QAM, the maximum permissible EIRP value will be lower,
dependant on the actual power spectral distribution of the signal.  Specifically, for non-uniform
emissions, the maximum permissible total channel power is that value which results in a "flat top"
power level no greater than the "flat top" power level which would be produced by a uniform digital
emission using the same channel width.  For purposes of measuring "flat top" power levels for non-
uniform emissions within a 6 MHz channel, we will assume the use of a 100 kHz resolution
bandwidth in a 6 MHz channel.  We have amended Sections 21.904 and 74.935 of our Rules to clarify
these power reduction requirements.

              b.   Frequency Tolerance

    48.  Spike and Cisco Systems, Inc. ("Cisco") object to the imposition of a +/- 1 kHz
frequency tolerance requirement on MDS and ITFS primary and high-power booster stations which
utilize digital modulations other than VSB.  These parties argue that frequency tolerance is not
relevant to non-VSB digital modulations because these emissions do not have a carrier frequency, and
that imposition of such a requirement will significantly increase the cost of transmitters at primary and
high-power booster stations because the frequency determining circuitry in these units will require
the use of an ovenized crystal oscillator, rather than a simpler and much less expensive temperature-
compensated crystal oscillator.  Cisco asserts that the required frequency tolerance cannot be justified
as a means of facilitating frequency-offset amelioration of cochannel interference because interference
caused by carrierless digital emissions is not amenable to such a remedy.  Spike argues that the
frequency tolerance requirement adopted in the Two-Way Order is inconsistent with our actions in
both the Digital Declaratory Ruling and the NPRM in this proceeding, and that "not a single
commenter in the proceeding advocated the imposition of frequency tolerance standards on non-VSB
digital transmissions."  Cisco suggests, as an alternative to the +/- 1 kHz requirement, that the
Commission amend its rules to require a tolerance of 0.001% for non-VSB digital emissions, arguing
that this looser standard will not adversely affect adjacent channel interference protection
requirements because all transmitters will still be required to comply with the Commission's spectral
mask regulations for digital emissions.  Petitioners responded to these parties, saying that frequency
tolerance is important for all digital emissions and arguing that Spike is incorrect in its assertion that
the +/- 1 kHz requirement was not supported in the comments to the NPRM, pointing out that
Petitioners themselves both recommended and supported this requirement consistently in their filings
in connection with the Digital Declaratory Ruling, the NPRM, and the Two-Way Order.  While
supporting retention of a tolerance requirement, Petitioners also stated that they would not be
opposed to a relaxation of the requirement "to levels that can be achieved without using ovenized
crystal oscillators."

    49.  With few exceptions, the Commission has routinely imposed frequency tolerance
requirements on transmitters used in all services, including MDS and ITFS.  This requirement has
been imposed as a means for assuring that the signal from the transmitter will stay within its assigned
channel or bandwidth and, using frequency offset techniques, as a means for ameliorating some
instances of cochannel interference between analog stations.  Frequency tolerance is specified in terms
of the stability of the "carrier" signal generated by the transmitter, and is typically expressed in
absolute terms, such as +/- 1 kHz, or in relative terms, such as 0.001%.  For emissions which do not
involve the transmission of a carrier as part of their modulated output, such as the digital emission
QAM, the relevance of frequency tolerance is significantly diminished.  In this proceeding, the
Commission proposed, and subsequently adopted, rules  applying the pre-existing +/- 1 kHz analog
emission tolerance requirement to all digital emissions, although low-power booster stations and all
response stations using digital emissions were exempted from the requirement, based on their limited
potential for causing interference which might result from a lack of frequency stability.  Our
rationale for continuing to apply a tolerance standard to digital emissions used at primary and high-
power booster stations was that "there is a much more significant potential interference impact and
we believe that requiring the emissions from these stations to be held steady within their assigned
channels is much more important."  Upon reconsideration, we find that this concern remains valid
and should continue to be a basis for imposing a tolerance requirement on these stations.  However,
we agree with Cisco that amending the requirement to 0.001% would be appropriate, as this would
not increase the potential for interference from these stations and would reduce the cost of
manufacturing the oscillators used in these transmitters very significantly.  In absolute terms, a
0.001% tolerance would amount to 26 kHz for a transmitter operating on a frequency of 2600 MHz. 
Within a 6 MHz wide MDS or ITFS channel, a variation of 26 kHz is insignificant and should have
no impact on the interference environment.  We are applying this rule amendment to all currently-
approved digital emissions for MDS and ITFS stations.

              c.   Other Technical Considerations

    50.  CTN requests that the Commission reconsider its references in the rules pertaining to
interference calculation requirements with respect to use of the terms "free space" and "unobstructed
path."  CTN notes, and we agree, that there is an inconsistent use of these terms in the rules adopted
in the Two-Way Order and in Appendix D attached thereto.  CTN suggests that these terms be
replaced by the term "terrain sensitive methodology," which would include both obstructed and
unobstructed paths.  We agree that this terminology is superior to that now used and we are therefore
amending 47 C.F.R.  21.902 and  74.903 accordingly.  This will reflect the fact that we have
permitted the inclusion of terrain factors in interference calculations for MDS and ITFS systems and
will continue to do so.  When prepackaged terrain-sensitive software is used in which keys can be set
for such factors as ground reflection and clutter environment, and/or when path-specific factors such
as ground conductivity or dielectric constant can be entered, this information must be clearly stated
within the interference calculation submission attached to the application(s) being filed so that it is
available for independent verification.  We are also amending our application processing procedures
for MDS and ITFS licenses to regard changes in antenna elevation pattern, as well as changes in
antenna azimuth pattern, as falling within the meaning of the phrase "in any direction" found in 47
C.F.R.  21.23(c)(1)(vi), 21.42(c)(8), and 74.911(a)(1). This recognizes the valid concern raised
by CTN that a modification to the elevation pattern of an MDS or ITFS antenna, as a result of
electrical (or mechanical) beam tilt or array reconfiguration, can be a potential source of interference
to neighboring stations even though the pattern of the antenna, as viewed in terms of its horizontal
directivity, may not have changed.

    51.  CTN also requests a clarification of 47 C.F.R.  21.909(o) and 74.939(q) with
respect to what signal propagation model(s) are permissible for use in connection with Appendix D. 
CTN argues that Appendix D, which sets out in detail the methodology for calculating interference
for response and hub stations, and which includes a lengthy discussion of the Epstein-Peterson signal
propagation model, is ambiguous as to whether propagation models other than Epstein-Peterson may
be used for Appendix D calculations.  CTN states that we "should resolve this ambiguity in a way that
does not favor a particular model."  The specific language which the Commission used in Appendix
D was as follows:  "When analyzing interference from response stations to other systems and from
other systems to response station hubs, a propagation model shall be used that takes into account the
effects of terrain and certain other factors."  The Commission then went on, at length, to describe
the propagation model (i.e. Epstein-Peterson) which is to be used.  Responding to concerns
paralleling those now raised by CTN, we stated our intention of requiring uniformity in response and
hub station interference calculations, saying "Nor do we agree that applicants should be free to
choose any methodology they wish for making interference calculations, as this would drastically slow
the evaluation of applications and almost certainly result in many Petitions to Deny, as licensees and
applicants struggled to understand the differing and potentially incompatible assumptions and
calculations incorporated into the various methodologies."  Inasmuch as the propagation
calculations are an integral and indispensable part of the interference calculation methodology of
Appendix D, we reject CTN's contention that there is any ambiguity in our position, and we remain
unable to discern any benefit to the flexibility sought by CTN which would offset the increased
complexity of requiring applicants and licensees to be conversant with multiple propagation
calculation schemes if they wished to be able to review the applications filed by neighboring systems
which could potentially be sources of interference.  It should be noted, however, that mandatory use
of the Epstein-Peterson model applies only to calculations performed in accordance with the
requirements of Appendix D, and does not apply to calculations not involving two-way cellularized
systems of response and hub stations.  Those calculations may continue to be performed using any
appropriate terrain-sensitive model.

    52.  With respect to another portion of Appendix D, which deals with the collection of
information to be submitted at the time of filing of an application, CTN requests modifications of and
additions to certain data fields.  Specifically, CTN asks that fields be added for electrical beam tilt
and for the direction (azimuth) of mechanical beam tilt of the station antenna, as well as replacing the
term "azimuth of main lobe" with the term "azimuth of main lobe or azimuth of symmetry."  CTN
also requests that the specification of antenna elevation patterns be from -90 degrees to +90 degrees,
rather than from 0 to 359 degrees as now required.  We agree that these modifications and additions
are justified and Appendix D is being amended appropriately.  The fields which CTN requests as
additions were inadvertently omitted in the drafting of Appendix D and are clearly necessary elements
in the specification of antenna characteristics at MDS and ITFS stations.  Adding the term "azimuth
of symmetry" will account for multi-lobed symmetrical antennas which do not have a single "azimuth
of main lobe."  Antenna elevation patterns are typically specified as suggested by CTN, with angles
below the horizon defined as positive numbers, e.g. a "depression angle of 2 degrees" would be
shown as +02.  With respect to Appendix D as a whole, CTN requests that the Commission provide
sample interference calculations which could be used for future reference for similar calculations
necessary in connection with the filing of applications and the evaluation of applications filed by
competing parties.  We believe this is unnecessary because, although the procedures set out in
Appendix D are complex, the complexity stems primarily from the number of calculations which must
be undertaken, rather than from any inherent complexity in the calculations themselves.

    D.   Proposals Specifically Regarding Use of 125 kHz Channels

    53.  In the Two-Way Order, we adopted rules in accordance with the most flexible
framework proposed in the NPRM for use of the 125 kHz channels, which included inter alia
redesignating these channels as the I Channels. On reconsideration, CTN requests that the
Commission permit applications for "traditional return-path use" of I channels to be filed under the
streamlined application processing rules, as are applications for downstream use of I channels.  We
grant this request as consistent with our decision to broaden the field of MDS and ITFS applications
subject to streamlined processing and specify that any application to use I channels for upstream
transmissions should be filed on FCC Form 331 and included in our new streamlined application
processing system.  

    54.  In addition, CTN contends that our rules may have the effect of limiting the flexibility
available to ITFS licensees to provide two-way analog services.  CTN explains that for ITFS
stations choosing to continue analog operations the I channels offer the only opportunity to provide
response transmissions in their networks.  CTN argues that allowing I channels to be used either for
upstream or downstream transmissions complicates the interference environment for any analog I
channel use and the ability of an ITFS licensee to use an I channel for analog response transmissions
may be lost.  Accordingly, CTN requests that the Commission modify 47 C.F.R.  74.939(l) to make
all downstream use of the I channels secondary to upstream use. 

    55.  In response, Petitioners counter that we should not adopt rules that would reduce
downstream operations on the I channels to secondary status. Petitioners contend that adoption
of CTN's current proposal would frustrate the deployment of downstream use of the I channels
because licensees would be reluctant to develop point-to-multipoint facilities if they could be required
to cease operations at a moment's notice in order to protect a newcomer using I channels for
upstream transmissions.  The result, Petitioners warn, would be to undermining the "more efficient
use of the spectrum" envisioned by the Two-Way Order.  

    56.  We disagree with CTN that upstream uses of I channels should be automatically
primary to point-to-multipoint uses.  Contrary to CTN's assertions, we believe that retaining the
flexibility that we established in the Two-Way Order for I channels usage actually will enhance the
value of the I channels, most of which have lain fallow in an analog environment.  In the digital two-
way environment, where channels of varying bandwidth will be utilized, we believe that the I channels
will provide valuable spectrum to an operator who uses them either for downstream or upstream
transmissions.  If anything, adopting CTN's proposal would undermine the value of the I Channels,
because it would detract from the certainty that licensees and operators enjoy in the interference
protection rights otherwise safeguarded by our rules.  MDS and ITFS licensees long have had the
ability to initiate response transmissions; we emphasize that those who do so before the initial one-
week window for two-way applications have rights as previous filers.  Moreover, ITFS licensees who
seek to establish new analog I channels response stations subsequent to our opening of the initial
window will have the same time-based rights as other contemporaneous applicants, and also may
swap channels with licensees employing digital transmissions, or lease to others employing digital
transmissions, to assist in avoiding interference conflicts.

    E.   Issues Primarily Involving ITFS

         1.   Channel Swapping and Shifting

    57.  In the Two-Way Order, we amended our rules to permit ITFS licensees to fulfill their
educational usage requirements on other channels within the same wireless cable system, regardless
of whether these channels are licensed to an MDS or ITFS entity ("channel shifting"), and to allow
ITFS licensees to trade some or all of their licensed spectrum for spectrum licensed to MDS entities
("channel swapping").  We found that these approaches would maximize flexibility by greatly
assisting operators in assembling the contiguous frequency blocks which are essential to a two-way
architecture.  While permitting any intra-ITFS channel swap, we specified that channel shifting and
channel swapping would be available only to licensees utilizing digital transmissions, leasing excess
capacity to an operator which utilizes digital transmissions, or swapping channels with a licensee
which utilizes digital transmissions.

    58.  Some parties have asked us to permit channel shifting by ITFS licensees that solely
utilize analog transmissions and do not lease to an operator employing digital technology, and to
permit channel swapping between ITFS and MDS licensees where both licensees only utilize analog
transmissions and do not lease to a lessee that employs digital technology.  Those parties claim
there is no reason to treat digital and analog systems differently in this respect.  We agree with these
parties and find that permitting such channel shifting and channel swapping will further maximize
flexibility of the services and thereby benefit the public.  Therefore, we will permit channel shifting
and channel swapping among MDS and ITFS licensees without regard to whether the entities at issue
employ digital technology or lease to a lessee using digital technology.

         2.   Grandfathering of Excess Capacity Lease Provisions

    59.  In the Two-Way Order, we generally grandfathered preexisting ITFS excess capacity
lease agreements for their duration in order to minimize disruptions to existing relationships caused
by the  need to comply with our new rules.  However, this protection did not apply to leases
entered into, renewed, or extended after March 31, 1997 because parties to such leases would have
had imputed notice of the impending rule changes following the release of our Public Notice
announcing the filing of the petition for rulemaking which initiated this proceeding.

    60.  CTN states that many excess capacity leases adopted under our former 10-year term
limitation contain a provision that automatically extends the initial term of the lease to the maximum
allowed in the event that the Commission permits longer terms, so that some of these leases were
extended automatically due to the new 15lyear lease term that we approved in the Two-Way Order. 
CTN is concerned that a literal reading of the Two-Way Order would treat these leases as extended
after March 31, 1997 and require them to be brought into compliance with all of the rule changes
governing excess capacity leases, even though they may have been negotiated years before the two-
way rules were proposed.  In the Two-Way Order, we did not intend to force a mass wave of lease
renegotiations where the parties had no notice of the forthcoming two-way rules at the time they
entered into the leases.  Because many of these leases may have been negotiated prior to March 31,
1997, the trigger date for when we impute parties to have had notice that two-way operations were
contemplated for ITFS and MDS, such leases should retain grandfathered status in the particular
circumstances depicted by CTN.  Extending the grandfathered status of leases in these circumstances
by five additional years allows the parties to continue to realize the benefits of the bargains that they
originally negotiated at a time when two-way operations were not factored into the equation, yet
ensures that successor leases will comply with the rules that we adopted in the Two-Way Order within
a reasonable time frame.  

    61.  Petitioners ask that the Commission clarify that a lease that is otherwise grandfathered
does not lose that status because it includes a provision under which the lease is renewed
automatically after March 31, 1997.  Petitioners' request theoretically could yield a result where
a lease may avoid compliance with the new rules into perpetuity.  Because Petitioners' request thus
controverts the intent of the Two-Way Order's admonition that leases renewed after March 31, 1997
be brought into compliance with the rules that we adopted in the Two-Way Order, we deny
Petitioners' requested clarification.

         3.   Assignment of Excess Capacity Leases

    62.  BellSouth and other parties have asked us to reconsider our decision not to permit
ITFS excess-capacity lease terms that would require assumption of the lease obligations by any
license assignee or transferee.  CTN, among others, opposes any change arguing that it would create
an undue burden on licensees.  We agree with CTN that any such lease provisions would place an
unreasonable impediment on the assignment or transfer of the ITFS facility.  We believe that this
rationale applies, because banning such provisions enhances the ITFS licensee's flexibility in finding
a buyer should it decide to sell.  We note that we do permit restrictions on excess-capacity leases that
would require ITFS licensees who are not seeking a buyer, but who simply wish to surrender their
licenses, to permit the lessee six months to locate an acceptable buyer. 

    F.   Booster Stations

         1.   High-Power Booster Operations

    63.  Petitioners state that the Commission should amend 47 C.F.R.  21.913(b) and 
74.985(b) of the new rules to eliminate the requirements that only a response station hub licensee,
conditional licensee or applicant may hold a high-power booster license, and that high-power boosters
may operate only utilizing digital modulation.  Petitioners maintain that there is no indication in the
Two-Way Order that these restrictions were intended and they appear to be contrary to the general
theme of licensee flexibility.  Furthermore, according to Petitioners, there still is a demand for high-
power analog booster stations to expand the coverage area of analog downstream video transmission
facilities.  We agree and we amend our Rules to make clear that high-power boosters may utilize
digital and/or analog modulation, and that two-way operations are not a prerequisite for licensing a
high-power booster.

         2.   Treatment of Currently-Licensed Boosters

    64.  C & W requests that the Commission clarify that it intended that currently licensed
booster stations will be able to operate pursuant to the new two-way rules upon their enactment.  C
& W reasons that to find differently would only result in creating the unnecessary administrative
burden of requiring booster licensees to re-file for their currently authorized stations under the new
rules, and may lead to an inequity to ongoing operations if they result in a mutual interference
situation with another station.  Petitioners, on the other hand, ask that the Commission make clear
that boosters licensed under the old regime are not entitled to protection within a booster service area
(BSA) at this juncture.  Instead, they propose that in order to secure a BSA, a booster licensee should
be required to submit a notification during the initial filing window which sets forth the information
specified in Sections 21.913(b)(4) - (6) or 74.985(b)(2), (3) and (6) of the new rules, relating to high-
power boosters, or Sections 21.913(e)(1) - (3) or 74.985(e)(1) - (3) of the new rules, relating to low-
power boosters, as appropriate.  Petitioners add that a BSA delineated during the initial window
would not be entitled to protection vis-…-vis applications proposed during the window, but would be
entitled to protection against subsequent proposals.

    65.  We generally support C & W's request, except we find some merit in Petitioners'
counter-request with respect to interference protection rights.  Specifically, we agree with Petitioners
that currently-licensed high-power boosters do not automatically receive BSA protection upon the
effective date of the high-power booster interference protection rules, and we concur with Petitioners'
proposed procedures for establishing high-power booster BSAs and with their recitation of the
relative interference protection rights accorded to such BSAs.  We disagree with Petitioners,
however, that these same procedures and rights apply to the establishment of low-power BSAs,
because our Rules, both current and impending, entail that notification of the construction of a low-
power booster is not relegated to a filing window nor subject to our new streamlined application
processing procedures.  Therefore, any notification of the construction of a low-power booster, that
is submitted following the effective date of new  21.913(e) and 74.985(e) of our rules, may
establish a BSA for the low-power booster station that is covered by the notification.

    66.  While we agree that currently-licensed high-power boosters may not establish BSAs
until the initial filing window, it does not follow that they are left completely unprotected against
subsequent applications, including those filed in the initial window; after all, most still will benefit at
least to some degree from the protection accorded the psa or Basic Trading Area ("BTA") in which
they are located.  Nevertheless, we anticipate that current licensees of high-power boosters will seek
to establish BSAs for these boosters, and the following procedures will apply when they attempt to
do so: The booster licensee should submit a notification of establishment of a BSA, on FCC Form
331, to the Commission in Washington, DC.  The licensee also should submit contemporaneously to
the Commission's duplication contractor the information called for in Sections 21.913(b)(4) - (6) or
74.985(b)(2), (3) and (6) of the new rules, as appropriate, along with a copy of the FCC Form 331
submitted to the Commission.  We further specify that current high-power booster station licensees
may seek to secure BSAs for their stations either during the initial filing window or in the subsequent
rolling, one-day filing window, and that these same procedures apply regardless of when the relevant
notifications are submitted.  Likewise, the same relative interference protection rights attach to newly-
established BSAs regardless of whether the relevant notifications are submitted during the initial
window or the subsequent rolling window, and these rights are consistent with Petitioners'
pronouncements on them.  Finally, we stress that while currently licensed high-power boosters may
not have BSAs established until the initial filing window at the earliest, licensees of these stations are
not responsible for demonstrating anew, during the process of attempting to secure BSAs,
interference protection to neighboring stations.

         3.   Booster Licensees

    67.  Several parties have objected to our decision to require that licenses for all
downstream booster stations and any associated return paths that employ ITFS licensed channels be
held by the ITFS licensee. These parties say that it would create greater system flexibility and
administrative efficiency to permit a single party to hold all booster station licenses throughout a
service area.  Other parties oppose any change in our decision because to do so would "undermine
the educational nature of the ITFS service and result in a de facto reallocation of spectrum for purely
commercial use."  We believe that we can address both of these concerns by permitting ITFS
excess-capacity lessees to apply for booster stations on ITFS frequencies with two conditions:  (1)
the lessee must obtain the written consent of the main station licensee before applying for such a
booster, and (2) the lease must contain provisions that require the lessee to offer to assign the booster
licenses to the main station licensee for purely nominal consideration upon termination of the lease. 
This will enable  ITFS excess-capacity lessees to benefit from the flexibility and efficiencies of having
all of the booster licenses for their systems held by a single entity, but not cause ITFS licensees to risk
permanently losing part of their licensed spectrum.

                IV.  DIGITAL DECLARATORY RULING

    A.   Introduction
    
    68.  The Commission also has before it petitions for clarification of the MDS and ITFS
Digital Declaratory Ruling.  In the Digital Declaratory Ruling, the Commission interpreted its rules
and policies to allow the utilization of digital transmissions by MDS and ITFS licensees on a non-
interference basis, adopting an interim approach to the use of QAM or VSB digital modulation upon
application by individual MDS or ITFS entities.  Petitions for clarification of the Digital Declaratory
Ruling were filed by WCA, BellSouth, and NIA.  A grouping of wireless cable operators and
investors (Commenters) and WCA separately submitted comments in support of BellSouth's
petition.  The Foundation filed comments which support BellSouth's petition and which support in
part and oppose in part Commenters' positions.  We will grant those aspects of the petitions and
comments related to clarification and expansion of the limited exception with respect to
grandfathering of interference within the protected service areas of ITFS stations and MDS incumbent
stations.  However, we refrain at this time from addressing the rights of licensees when digital
operation by them and/or neighboring cochannel licensees forcloses the opportunity to use frequency
offset techniques to enhance interference protection, and we deny as moot NIA's proposal regarding
recapture rights of ITFS licensees.

    B.   Limited Exception to the Protected Service Area Definition for Modifications

    69.  Paragraphs 23 and 24 of the Digital Declaratory Ruling describe a limited exception
to the 56.33 km (35 mile) psas of MDS "incumbent" stations, and apply this exception to modification
applications of MDS incumbents and "ITFS incumbents" seeking use of digital technology.  This
limited exception was initially set out in the Second Wireless Cable Reconsideration Order, where
we expanded the psa of MDS stations.  Pursuant to the limited exception, a modifying applicant can
secure a waiver of the 35 mile psa definition and maintain "grandfathered" interference where six
conditions are met: (1) the modification application is filed after the effective date (September 18,
1995) of the expanded 35 mile psa; (2) the station being modified was authorized or proposed on or
before the effective date of the expanded psa; (3) the station being interfered with (the desired
station) was authorized or proposed on or before the effective date of the expanded psa; (4) the
predicted interference does not occur within the former 710 square mile psa of the desired station;
(5) the modification does not increase the size of the area suffering harmful interference; and (6) the
modification does not result in any new interference to the desired station's psa.  In describing this
limited exception in paragraph 23 of the Digital Declaratory Ruling, we stated that "there would be
situations in which two expanded service areas would overlap.  Accordingly, we adopted a limited
exception to the 35 mile psa definition to govern modification applications of MDS incumbents,
where two psas overlap."

    70.  As urged by petitioning parties, we clarify that the psa overlap stipulation in paragraph
23 of the Digital Declaratory Ruling was intended merely as an example of a situation where waivers
pursuant to the limited exception would be granted.  We also are persuaded that we may expand the
exception, for any modification not resulting in any new interference to the desired station's psa nor
increasing the size of the area suffering harmful interference to effectively nullify the fourth condition
of the exception and allow preexisting interference even within the former 710 square mile psa which
pertained prior to September 18, 1995.  Petitioning parties and the Commenters argue that this
extension is important because without it licensees would face business or operational impediments
when seeking to implement digital operations or to make changes to digital systems that do not have
an adverse impact on the existing interference environment.  Staking its position on the implicit or
explicit agreement of the non-modifying licensee to accept interference from a previously proposed
station, WCA adds that "[a]s a matter of course," the Commission's staff has authorized subsequent
modifications to previously proposed stations even if the modifications do not eliminate the
interference within the pre-expansion psa or at registered ITFS receive sites, so long as the
modifications did not increase interference.  In establishing the fourth condition of the exception,
we were primarily concerned that "[n]o modification will be allowed which would cause existing
stations to adapt to additional interference."  As discussed in the Second Wireless Cable
Reconsideration Order, the limited exception set out there was designed to be similar to the approach
which the Commission utilized in 1984 in adopting the former 710 square mile psa: that "it would not
be useful to disturb existing situations" where MDS operators had adapted to interference.

    71.  Like the Commenters, the Foundation seeks to expand the exception further, albeit
in a different way, to include applications for digital emission designators where the modifying station
or the desired station was proposed after the effective date of the expanded psa.  The Foundation
particularly discusses ITFS circumstances which, it argues, warrant expansion of the exception.  Now
that we have granted all ITFS licensees psas, expanding the exception per the Foundation's request
brings the policies and procedures for ITFS stations into conformance with those for incumbent
stations with similar interference protection requirements, thus enhancing the compatibility for
wireless cable operators who use ITFS and MDS channels.  Furthermore, as discussed above, the
exception is designed primarily to at least maintain the interference status quo, so retaining the
safeguards against interference in new areas will ensure that the modification does not harm the
desired station, no matter when the modifying station or the desired station was originally proposed. 
We believe that these rationales apply regardless of whether or not the proposed modification is for
digital transmissions.  Therefore, we further extend the exception in the manner prompted by the
Foundation, but as it relates to any modification application, not merely digital modification
applications.

    72.  Thus, the limited exception set out in paragraphs 24-25 of the Second Wireless Cable
Reconsideration Order and paragraphs 23-24 of the Digital Declaratory Ruling is modified
accordingly, to permit any MDS or ITFS station modification predicted to cause interference to any
portion of the desired station's 35 mile psa, or to any of its receive sites that are registered 
previously, no matter when the modifying station or the desired station was originally proposed,
so long as such station modification is filed after the effective date of the expanded psa and adheres
to the stricture that it would cause no new interference to the desired station.  We further clarify, on
our own motion, that the exception also applies to grandfathered adjacent channel interference,
defined with respect to the predicted 0 dB desired-to-undesired (D/U) signal ratio contour line, even
though the Second Wireless Cable Reconsideration Order only makes explicit reference to the
cochannel 45 dB D/U standard.  We reiterate that the limited exception applies only to interference
already existing between the modifying station and desired station as to each other.

    C.   Rights of Licensees Where Digital Operation Affects Use of Frequency Offset

    73.  Frequency offset is an interference amelioration technique in which the carrier
frequencies of two cochannel signals are adjusted so that they are not identical, thus reducing the
potential for interference to either signal caused by the other.  Frequency offset techniques are
generally of no utility in reducing interference caused by a station employing digital modulation,
though we expressed our belief in the Digital Declaratory Ruling that there may be some utility in
frequency offset operation involving "pilot" carriers in VSB digital transmissions to prevent
interference to analog stations on lower adjacent channels.

    74.  Petitioning parties argue that a station using frequency offset which seeks to convert to
digital modulation should only be required to seek consent from the other offset station when there
is a written, binding and bilateral agreement between the two stations to employ frequency offset. 
They state that currently, such an agreement is required prior to the grant of an application that fails
to meet the 45 dB D/U standard with respect to another station.  Petitioning parties add that
because the parties voluntarily surrendered their rights in the agreement, only in this instance,
pursuant to the agreement, is there a rational basis for allowing a licensee or applicant to bar another
station from converting to digital modulation.  Petitioning parties specify two scenarios where the
desired offset station should not be able to bar the digital modification of the applicant station,
because, they claim, the subsequently proposed desired station in effect accepted whatever cochannel
interference it might receive from the other station.  In the first scenario, ITFS stations were
authorized based upon interference protection ratios as low as 28 dB, coupled with the applicant's
unilateral representation that it would use frequency offset.  Petitioning parties contend that in this
instance, the stations were authorized on an offset basis to protect the reception of the offset
incumbent stations.  In the second scenario, MDS and ITFS stations unilaterally proposed offset in
order to protect their own reception.  Conversely, WCA additionally argues that the ITFS relative
newcomer who seeks to convert to digital modulation must either protect the previously proposed
offset station at the 45 dB D/U level, or obtain the consent of the previously proposed station's
licensee in order to modify.  The Foundation concludes that without Commission acceptance of the
agreement-only bar to a previously proposed station's digital modification application, "it will be
impossible to implement digital service in many major metropolitan areas."

    75.  Very few of the Commission's rules governing the MDS and ITFS services deal
directly with utilization of frequency offset techniques.  Those that do primarily concern situations
where one licensee seeks to have the Commission involuntarily impose frequency offset operations
on another cochannel licensee in order to avoid or minimize interference.  Thus, the treatment of
frequency offset in MDS and ITFS has been largely a matter of pronouncements in rulemaking
proceedings and cases, and has undergone several changes.  At first blush, clarification of the relative
rights of the parties using the techniques may seem appropriate.  However, apparently belying the
ardor with which petitioning parties sought such a clarification, in the nearly three years since the
period for filing petitions on the Digital Declaratory Ruling expired, we have not been made aware
of any actual offset-based conflicts which have precluded any licensee's efforts to modify its station
for digital operations.  Because of our experience, we believe that delineating here a solution to a
problem that we have not found to hamper the industry would not be the prudent course at this
juncture.  Nonetheless, should this issue make or break a licensee's attempt to convert to digital
transmissions in a market, we are prepared fully to analyze the merits on an individual-case basis. 
Notwithstanding our caution in addressing alleged past offset-based conflicts, we specify that all
future offset arrangements are to be governed by binding agreements between the parties, unless the
Commission explicitly grants a waiver or imposes involuntary frequency offset operations on a
licensee.  However, given the anticipated digital future of MDS and ITFS, requests for waiver of
interference standards through use of offset techniques for analog transmissions will be viewed with
the utmost scrutiny.  Likewise, in the spirit of the Second Wireless Cable Reconsideration Order,
while we will continue to evaluate involuntary frequency offset proposals on a case-by-case basis, we
will entertain such proposals only in the most compelling of circumstances.  Finally, we stated in
the Digital Declaratory Ruling, as an interim measure subject to the outcome of a future rulemaking
proceeding, that we will not mandate a particular frequency offset or tolerance for the pilot carrier
stations utilizing VSB digital modulation.

    D.   ITFS Recapture Rights

    76.  In the Digital Declaratory Ruling, we declined to impose any changes in ITFS
educational usage requirements and deferred consideration to a future rulemaking.  NIA filed a
petition seeking reconsideration of this decision.  In the Two-Way Order, we thoroughly reevaluated
our ITFS educational usage requirements.  In light of our decisions in the Two-Way Order, we need
not address the arguments advanced by NIA in its petition for reconsideration of the Digital
Declaratory Ruling.

                  V.  OTHER RELATED PLEADINGS

    77.  Shortly after release of the Digital Declaratory Ruling, the Mass Media Bureau
released a Public Notice interpreting the Digital Declaratory Ruling to allow MDS and leased ITFS
frequencies authorized for digital transmissions to carry point-to-multipoint data transmissions
without any additional authorization by or notification to the Commission.  However, the Bureau
specified at the time that the Digital Declaratory Ruling did not contemplate use of such frequencies
for upstream digital data transmissions.  On November 18, 1996, CAI filed an application for
review of the October 17 Public Notice, requesting that the Commission clarify that "wireless cable
operators retain the flexibility to provide two-way voice, data and video services" so that MDS and
leased ITFS frequencies may be used to provide those services on a permanent basis, without
entailing costly and time-consuming waivers.  In light of our actions in the Two-Way Order, we find
that CAI's application for review is moot, and we dismiss it.

          VI.  PROCEDURAL MATTERS AND ORDERING CLAUSES
                                
    78.  Accordingly, IT IS ORDERED that the above-referenced petitions for reconsideration
and/or clarification of the Order ARE GRANTED IN PART AND DENIED IN PART, as described
above.

    79.  IT IS FURTHER ORDERED that the above-referenced petitions for clarification of
the Digital Declaratory Ruling ARE GRANTED IN PART AND DENIED IN PART, and that the
Declaratory Ruling on the Use of Digital Modulation by Multipoint Distribution Service and
Instructional Television Fixed Service Stations IS MODIFIED AND CLARIFIED to the extent
specified above.  These modifications and clarifications shall be effective upon the release of this
order.

    80.  IT IS FURTHER ORDERED that the application for review of the October 17 Public
Notice, filed November 18, 1996 by CAI Wireless Systems, Inc., IS DISMISSED AS MOOT.

    81.  IT IS FURTHER ORDERED that, pursuant to the authority contained in Sections 4(i)
and (j), 301, 303(f), 303(g), 303(h), 303(j), 303(r), 308(b), 403, and 405 of the Communications Act
of 1934, as amended, 47 U.S.C.  154(i), 154(j), 301, 303(f), 303(g), 303(h), 303(j), 303(r), 308(b),
403, and 405, this Report and Order on Reconsideration IS ADOPTED, the Order IS MODIFIED
AND CLARIFIED to the extent specified above, and Parts 21, 74, and 101 of the Commission's
Rules, 47 C.F.R.  21, 74, and 101, ARE AMENDED as set forth in the attached Appendix C.

    82.  The action contained herein has been analyzed with respect to the Paperwork
Reduction Act of 1995 and found to impose new or modified reporting and recordkeeping
requirements or burdens on the public.  Implementation of these new or modified reporting and
recordkeeping requirements will be subject to approval by the Office of Management and Budget
(OMB) as prescribed by the Act.  The new or modified paperwork requirements contained in this
Report and Order on Reconsideration (which are subject to approval by OMB) will go into effect
upon OMB approval.  However, IT IS FURTHER ORDERED that the rule amendments set forth
in Appendix C not pertaining to new or modified reporting or recordkeeping requirements WILL
BECOME EFFECTIVE 60 days after their publication in the Federal Register.

    83.  As required by Section 604 of the Regulatory Flexibility Act, 5 U.S.C.  604, the
Commission has prepared a Supplemental Final Regulatory Flexibility Analysis of the possible impact
on small entities of the rules and policies adopted in this document.  See Appendix B.  IT IS
FURTHER ORDERED that the Commission's Office of Public Affairs, Reference Operations
Division, SHALL SEND a copy of this Report and Order on Reconsideration, including the
Supplemental Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small
Business Administration.

                             FEDERAL COMMUNICATIONS COMMISSION



                             Magalie Rom n Salas
                             Secretary