NOTICE ********************************************************* NOTICE ********************************************************* This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file pnmc5021. File pnmc5021 (.txt & .wp) is in directory \pub\Public_Notices\Miscellaneous. ***************************************************************** ******** $// R&O, FNPRM, 900 MHz SMR, PR 89-553, PP 93-253, GN 93-252, FCC 95-159//$ $/ 90.7 Definitions/$ $/ 90.661 MTA-based SMR service areas/$ $/ 90.663 MTA-based SMR System operations/$ $/ 90.669 Emission limits/$ RECORD ONLY Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) FCC 95-159 ) Amendment of Parts 2 and 90 of the ) PR Docket No. 89-553 Commission's Rules to Provide for the ) Use of 200 Channels Outside the ) Designated Filing Areas in the ) 896-901 MHz and the 935-940 MHz Bands ) Allotted to the Specialized Mobile Radio Pool ) ) Implementation of Section 309(j) ) of the Communications Act - ) PP Docket No. 93-253 Competitive Bidding ) ) Implementation of Sections 3(n) and 322 ) of the Communications Act ) GN Docket No. 93-252 SECOND REPORT AND ORDER AND SECOND FURTHER NOTICE OF PROPOSED RULE MAKING Adopted: April 14, 1995 Released: April 17, 1995 Comment Date: May 24, 1995 Reply Comment Date: June 1, 1995 By the Commission: Commissioner Barrett concurring and issuing a statement. TABLE OF CONTENTS Paragraph I. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 II. EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . 2-23 III. BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . .24-28 IV. SECOND REPORT AND ORDER A. SERVICE RULES 1. Overview. . . . . . . . . . . . . . . . . . . . . .29-30 a. Service Area . . . . . . . . . . . . . . . .31-35 b. Channel Blocks . . . . . . . . . . . . . . .36-37 2. Coverage Requirements . . . . . . . . . . . . . . .38-43 3. Treatment of Incumbents . . . . . . . . . . . . . .44-47 4. Field Strength Limit at the MTA Boundary. . . . . .48-49 5. Secondary Sites . . . . . . . . . . . . . . . . . 50-53 6. Loading Requirements. . . . . . . . . . . . . . . 54-59 7. Emission Masks. . . . . . . . . . . . . . . . . . 60-61 8. Mexican/Canadian Border Areas . . . . . . . . . . .62-63 9. Discontinuance of Operation . . . . . . . . . . . .64-65 B. MISCELLANEOUS MATTERS 1. Spectrum Cap and Attribution. . . . . . . . . . . .66-68 2. Grandfathering. . . . . . . . . . . . . . . . . . .69-71 V. SECOND FURTHER NOTICE OF PROPOSED RULEMAKING AUCTION RULES A. Competitive Bidding . . . . . . . . . . . . . . . .72-78 1. Competitive Bidding Design for 900 MHz SMR .73-75 2. License Grouping . . . . . . . . . . . . . .76-78 B. Bidding Issues. . . . . . . . . . . . . . . . . . .79-96 1. Bid Increments . . . . . . . . . . . . . . 79-80 2. Stopping Rules . . . . . . . . . . . . . . 81-85 3. Duration of Bidding Rounds . . . . . . . . . . 86 4. Activity Rules . . . . . . . . . . . . . . .87-93 5. Rules Prohibiting Collusion. . . . . . . . 94-96 C. Procedural and Payment Issues. . . . . . . . . . 97-121 1. Pre-Auction Application Procedures . . . . 97-104 2. Amendments and Modifications . . . . . . .105-106 3. Upfront Payments . . . . . . . . . . . . . . .107 4. Down Payments and Full Payments. . . . . .108-110 5. Bid Withdrawal, Default, and Disqualification111-115 6. Long-Form Applications. . . . . . . . . . . .116 7. Petitions to Deny and Limitations on Settlements117-118 8. Transfer Disclosure Requirements . . . . 119-120 9. Performance Requirements. . . . . . . . . . .121 D. Treatment of Designated Entities . . . . . . . .122-147 1. Overview and Objectives. . . . . . . . . .122-128 2. Bidding Credits. . . . . . . . . . . . . .129-132 3. Reduced Down Payments/Installment Payments133-134 4. Eligibility for Bidding Credits, Installment Payments and Reduced Down Payments. . . . . . . . . . . . . . . . .135-140 5. Transfer Restrictions and Unjust Enrichment Provisions141-143 6. Rural Telephone Company Partitioning . . .144-145 7. Other Provisions . . . . . . . . . . . . 146-147 VI. CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 VII. PROCEDURAL MATTERS A. Regulatory Flexibility Act. . . . . . . . . . . . . . . . 14-153 B. Ex Parte Rules -- Non-Restricted Proceeding . . . . . . . . .154 C. Comment Dates . . . . . . . . . . . . . . . . . . . . . . . .155 D. Ordering Clauses. . . . . . . . . . . . . . . . . . . . .156-158 E. Contact Person. . . . . . . . . . . . . . . . . . . . . . . .159 APPENDIX A -- FINAL RULES APPENDIX B -- PROPOSED RULES APPENDIX C -- INITIAL REGULATORY FLEXIBILITY ANALYSIS APPENDIX D -- PETITIONERS AND COMMENTERS I. INTRODUCTION 1. In this Second Report and Order and Second Further Notice of Proposed Rulemaking, we adopt final service rules, and request comment on auction rules that will enable us to complete the licensing of the 900 MHz Specialized Mobile Radio (SMR) service. The Further Notice requests comment on further aspects of the Commission's decision in the Third Report and Order inGN Docket No. 93-252 (CMRS Third Report & Order), to license the 900 MHz band on an MTA basis, and to use competitive bidding to select from among mutually exclusive applicants. We establish technical and operational rules for the new MTA licensees, and also define the rights of incumbent SMR licensees already operating in the 900 MHz band. We set forth proposals for new licensing rules and auction procedures for the service, including provisions for designated entities. These proposed rules will serve our twin goals of providing service to the public expeditiously, and allowing the marketplace to respond to consumer demands. The rules adopted and policies set forth and proposed herein will promote competition, while allowing incumbents to continue to pursue their business plans. Finally, we address issues raised on reconsideration of the CMRS Third Report & Order pertaining specifically to the 900 MHz SMR service. II. EXECUTIVE SUMMARY 2. The following paragraphs summarize the principal decisions made in this Order regarding service rules, and the proposals in the Further Notice concerning auction rules. A. Second Report and Order: Service Rules 3. As decided in the CMRS Third Report & Order, the 900 MHz SMR band will be divided into 20 ten-channel blocks in each of 51 service areas based on Major Trading Areas (MTAs), which match the blocks previously licensed for the Designated Filing Areas ("DFAs"). Each MTA license will give the licensee the right to operate throughout the MTA on the designated channels except where a co-channel incumbent licensee already is operating. MTA licensees also will be allowed to aggregate multiple blocks within an MTA and to aggregate blocks geographically in multiple MTAs. 4. MTA licensees in this service will be required to meet coverage requirements in their service areas. Specifically, we require coverage of 1/3 of the population in the service area within three years of the initial license grant and 2/3 of the population within five years. Alternatively, a licensee may make a showing at five years that it is providing "substantial service." In evaluating such showings, the Commission may consider such factors as whether the licensee offers a service that covers multiple MTAs or is offering an otherwise specialized or technologically sophisticated service that does not require ubiquitous coverage to be of benefit to customers. MTA licensees must satisfy these requirements regardless of the area or percentage of the MTA population that is served by incumbent licensees. As we have provided in the broadband PCS service, licensees may resell spectrum within their service area, provided that use of the spectrum remains subject to the licensee's ultimate control. We believe that allowing such resale will encourage provision of service to small markets and rural areas, which will help licensees to fulfill coverage requirements, and will promote the most efficient use of the spectrum. 5. In order to ensure that incumbent licensees receive protection from interference by MTA licensees, the Order provides that MTA licensees either must maintain a minimum 113 kilometer (70 mile) geographic separation or comply with our short-spacing rules with respect to all incumbent facilities in their service area or in adjacent MTAs. We also give incumbents the flexibility to modify or add facilities within their existing service areas so long as they do not expand coverage beyond their existing 40 dBu signal strength contour. 6. With respect to co-channel interference between adjacent MTA licensees, MTA licensees will not be permitted to exceed a signal level of 40 dBuV/m at their service area boundaries, and we will require coordination of frequency usage between co-channel adjacent MTA licensees and incumbents. Also, we will apply emission mask rules (rules that restrict transmitter emissions on the spectrum adjacent to the licensee's adjacent channel) to the "outer" MTA channels in each block (i.e., the channels on the outer edges of the MTA licensee's channel block) and to any "interior" MTA channels that are adjacent to those used by incumbent licensees (i.e., the channels inside of the MTA licensee's channel block assignment that are adjacent to other licensees). 7. We partially reconsider our decision in the CMRS Third Report & Order to grant primary site protection only to 900 MHz secondary site authorizations that were granted on or before August 9, 1994. In this Order, we also extend primary site protection to secondary sites for which applications were filed on or before August 9, 1994 but which were granted after that date. We deny reconsideration, however, of our decision in the CMRS Third Report & Order with respect to loading requirements in the 900 MHz service. Consequently, incumbent 900 MHz SMR licensees will continue to be subject to our prior loading requirements, although they are eliminated for MTA licensees. 8. Although some 900 MHz channels are not available in Mexican and Canadian border areas, we will use the same channel block allocation for MTA licensees in these areas as in other parts of the country. Licensees whose MTAs include border areas may use only the channels in their block only to the extent that such channels are available to United States licensees pursuant to international agreement. 9. We also modify our rule regarding discontinuance of operation to conform with the standard in  22.317, which allows a licensee to discontinue operations for 90 continuous days with notification to the Commission. B. Second Further Notice of Proposed Rulemaking 1. Auction Rules 10. A total of 1,020 MTA licenses (51 MTAs times 20 licenses in each MTA) will be awarded in the 900 MHz SMR service. In this Further Notice, we tentatively conclude that we will use a single simultaneous multiple round auction to award these licenses, because the licenses are interdependent, and licensees likely will aggregate and/or substitute across spectrum blocks and geographic areas. We reserve the discretion, however, to hold more than one auction, and to issue a public notice to notify applicants, if we determine that a single auction is administratively unworkable. Both incumbents and new entrants would be eligible to bid for all MTA licenses without restriction. All applicants for MTA licenses would be treated as initial applicants for public notice, application processing, and auction purposes. The Wireless Telecommunications Bureau would announce the time and place of the auction and provide additional information to bidders by future public notice. 11. As proposed, applicants would apply for the 900 MHz SMR auction by filing a short-form application (FCC Form 175) and paying an upfront payment. We propose adoption of the standard upfront payment formula of $0.02 per pop-MHz, based on the number of 10-channel blocks in each MTA identified on the applicant's Form 175 and the total MTA population regardless of incumbent coverage. We also propose adoption of the Milgrom-Wilson activity rule used in previous multiple-round simultaneous auctions, which requires bidders to declare their maximum eligibility in terms of MHz-pops and limits them to bidding on licenses encompassing no more than the MHz-pops covered by their upfront payment. 12. As proposed, each applicant would be required to specify on its Form 175 its classification, status as a designated entity (if applicable), markets and frequency blocks applied for, and persons authorized to place or withdraw bids. Applicants would have to identify any arrangements or agreements with other parties relating to the licenses that are being auctioned, and certify that there are no arrangements other than those specified. Applicants would be able to correct minor defects in their short-form applications prior to the auction, but could not make any major modifications to their applications, including market changes, cognizable ownership changes or changes in the identification of parties to bidding consortia, until after the auction. However, applicants could modify their short-form applications to reflect formation of consortia or changes in ownership at any time before or during an auction, provided such changes do not result in a change in control of the applicant, and provided that the parties forming consortia or entering into ownership agreements have not applied for licenses in any of the same geographic license areas. In instances where only a single applicant has applied for a particular MTA channel block, the Commission would cancel the auction for that block and establish a deadline for filing of the applicant's long- form application. In all instances where mutually exclusive applications are filed, the MTA channel block would be included in the auction. 13. As proposed, the timing and duration of auction rounds would be determined by the Wireless Telecommunications Bureau and announced by public notice. As in prior auctions, we expect to start the auction with relatively large bid increments and reduce increments as bidding activity falls. We also propose adoption of a simultaneous stopping rule for this auction to afford bidders flexibility to pursue back-up strategies to ensure that bidders will not hold back bids until the final round. During the auction, we retain the discretion to declare that the auction will end after a specified number of additional rounds. 14. We also propose to specify bid increments, i.e., the amount or percentage by which the bid must be raised above the previous round's high bid in order to be accepted as a valid bid in the current bidding round. The application of a minimum bid increment helps to ensure that the auction closes within a reasonable period of time and is expressed in both a percentage and fixed dollar amount. Under this proposal, we may impose a minimum bid increment of five percent or $0.02 per pop-MHz, whichever is greater, but we also retain the discretion to set, and by announcement before or during the auction, vary the minimum bid increments for licenses over the course of an auction. 15. We propose adoption of the bid withdrawal and default rules for this auction similar to those used in prior auctions. Under these rules, any bidder that withdraws a high bid during an auction before the Commission declares bidding closed must reimburse the Commission for the difference between the amount of the ultimate winning bid and the withdrawn bid if the winning bid is lower than the withdrawn bid. An auction winner defaulting after the close of the auction would also have to pay the lesser of three percent of the subsequent winning bid or three percent of the amount of the defaulting bid. In the event that an auction winner defaults, is disqualified, or if the license is revoked or terminated, the Commission would re-auction the license, except that the Commission may offer the license to the second highest bidder if the default occurs within five days after the auction closes. 16. At the conclusion of the auction, winning bidders would be required to supplement their upfront payments and file their long-form applications (FCC Form 600). The upfront payment would have to be supplemented in an amount sufficient to bring the winning bidder's deposit up to 20 percent of its winning bid within five days after the close of the auction. Designated entities eligible for installment payments, however, would have to bring their deposits up to five percent of the winning bid within five days after the close of the auction. Once each applicant has filed its long form and submitted its down payment, the Wireless Bureau would issue a public notice announcing the application's acceptance for filing and opening a 30-day window for filing of petitions to deny. 17. As we propose, the 900 MHz SMR auction would be subject to the same regulatory safeguards as prior auctions to prevent applicants from colluding during the auction or obtaining unjust enrichment from subsequent transfer of the license. To prevent collusion, bidders who have applied for licenses in the same geographic area on their short forms may not cooperate, collaborate, discuss, or disclose the substance of their bids or strategies with other bidders during the auction except pursuant to a consortium or arrangement identified in the short-form application. Bidders would also have to attach an exhibit to the Form 600 explaining the terms, conditions, and parties involved in any bidding arrangement. With respect to transfers, licensees transferring their licenses within three years of the initial license grant would have to disclose to the Commission all contracts and other documentation associated with the transfer. 2. Designated Entities 18. Because of the large number of available licenses and the presence of incumbents throughout the 900 MHz SMR band, we state our tentative conclusion not to create an entrepreneurs' block in this service. However, we request comment on whether the capital requirements of the service may be so substantial that we should insulate certain blocks from large bidders to provide opportunities for designated entities. 19. Nevertheless, we propose to adopt several provisions for bidding in the 900 MHz auction by designated entities. Under our tentative conclusion, small businesses, including small businesses owned by women and minorities, would be eligible for a ten percent bidding credit on any MTA license. Under this proposal, small businesses would be allowed to make a reduced down payment (five percent of the winning bid following the close of the auction, with the balance of the down payment to be paid five days after the license grant), and would also be entitled to pay the bid balance in installments over the remaining license term. 20. We believe that broadening the scope of opportunities for very small businesses has the potential to result in substantial participation by women and minorities, and we believe that the expected capital outlay for the 900 MHz service will not present the same type of obstacles for those entities as a more costly spectrum-based service like PCS. However, we request comment on the projected costs associated with acquisition, construction and operation of 900 MHz MTA licenses, and the extent of participation of women-owned and minority-owned entities in the current 900 MHz SMR service. We also request comment on whether we should adopt separate provisions for women-owned and minority-owned entities. 21. We tentatively conclude that reduced upfront payments for designated entities are unnecessary in the 900 MHz service, but request comment on that tentative conclusion. Finally, we propose adoption of partitioning rules for rural telephone companies similar to those that we have applied to broadband PCS. 22. For purposes of determining eligibility for the small business provisions we propose for the 900 MHz SMR service, we propose to define a small business as an entity that, together with affiliates, has average gross revenues for the three preceding years of less than $3 million. We also propose to use the 25 percent attribution threshold and affiliation rules applicable to PCS. For purposes of determining eligibility for minority-owned and women-owned entities, if we adopt separate provisions for such entities, we propose to use the definition contained in Section 1.2110(b)(2) of the Commission's rules. 23. We tentatively conclude that designated entities entitled to special provisions in the 900 MHz SMR service will be subject to restrictions on transfer or assignment of their licenses. During the first three years of the license term, those entities may not transfer or assign their licenses to anyone, and transfers will be limited to other designated entities during the fourth and fifth year. If the assignee is not eligible for the same provisions, the small business would reimburse the government for the amount of the bidding credit before transfer of the license would be permitted. III. BACKGROUND 24. The 900 MHz SMR service was established in 1986, when the Commission allocated 200 channel pairs in the 896-901 MHz and 935-940 MHz bands for SMRs in order to alleviate congestion in the 800 MHz SMR band. To expedite service in major markets where demand for SMR service was greatest, the Commission elected to use a two-phase licensing process. In Phase I, licenses were assigned in 46 "Designated Filing Areas" (DFAs) comprised of the top 50 markets. Following Phase I, the Commission envisioned licensing facilities in areas outside these markets in Phase II. In the meantime, however, licensing outside the DFAs was frozen after 1986, when the Commission opened its filing window for the DFAs. 25. In 1989, the Commission adopted a Notice of Proposed Rule Making in PR Docket 89-553, proposing to begin Phase II licensing of SMR facilities nationwide. The NPRM contained proposals intended to add flexibility to SMR systems. The Commission continued its freeze on licensing outside the DFAs while the rulemaking was pending, but some DFA licensees elected to become licensed for secondary sites (i.e., facilities that may not cause interference to primary licensees and must accept interference from primary licensees) outside their DFAs to accommodate system expansion. 26. In 1993, the Commission adopted a First Report & Order and Further Notice of Proposed Rulemaking in PR Docket 89-553, modifying its Phase II proposal and seeking comment on whether to license the 900 MHz SMR band to a combination of nationwide, regional, and local systems. Shortly after the First Report &Order/Further Notice, Congress amended the Communications Act to reclassify most SMR licensees as Commercial Mobile Radio Service (CMRS) providers and establish the authority to use competitive bidding to select from among mutually exclusive applicants for certain licensed services. Accordingly, the Commission deferred further consideration of Phase II and incorporated the 900 MHz docket (as well as the companion docket relating to 800 MHz SMR), into its CMRS proceeding to ensure that the regulation of all SMRs would be consistent with the regulation of competing CMRS services such as cellular and PCS and to consider the impact of auction authority on the record of the pending 900 MHz proceeding. 27. In the CMRS Third Report & Order, the Commission further revised its Phase II proposals and established the broad outlines for the completion of licensing in the 900 MHz SMR band. The Commission concluded that (1) the 900 MHz SMR band would be licensed in 20 ten-channel blocks using MTAs as service areas; (2) licensing of mutually exclusive applicants for this spectrum would be based on competitive bidding; (3) incumbent licensees in the band would retain the right to operate under their existing authorizations, but would be required to obtain the relevant MTA license (or obtain the consent of the MTA licensee) to be able to expand their systems. The Commission noted that some licensees had been granted authorizations to construct facilities outside of the DFAs, so they could link facilities in different markets. With respect to those unprotected sites (i.e., "secondary sites"), the Commission stated that those that were licensed on or before August 9, 1994, would be entitled to primary site protection. The Commission also eliminated loading requirements for future MTA licensees, but retained them for incumbent 900 MHz SMR licensees that do not obtain MTA licenses. 28. While the CMRS Third Report & Order established the framework for 900 MHz licensing, the Commission left the adoption of specific auction and service rules for the Phase II Order. Various parties filed for reconsideration of the CMRS Third Report and Order and made ex parte presentations concerning, inter alia, secondary sites, loading requirements, treatment of incumbents vis a vis the MTA licensees, coverage requirements, and auction designs. Those petitions relating specifically to the 900 MHz SMR service will be considered here. IV. SECOND REPORT AND ORDER A. SERVICE RULES 1. Overview 29. Unlike the 800 MHz SMR band, the 900 MHz SMR band is lightly occupied, due to the fact that we have licensed the twenty 10-channel 900 MHz spectrum blocks only within the immediate vicinity of the top 50 markets in the country. We allocated 200 channel pairs (12.5 kHz per channel) in the 900 MHz band for the SMR service in 1986 and established a two-phase process for licensing these channels. Phase I licensing began in 1987 and was completed in 1992 within the 46 "Designated Filing Areas'' (DFAs) representing the top 50 markets in the nation. Twenty licenses were authorized within each DFA. Currently, all 20 channel blocks are licensed for the 900 MHz SMR service in only nine of the top markets. Furthermore, since these initial licenses were awarded in 1987, we have cancelled a significant percentage of licenses for failure to timely construct and place their systems in operation, additionally increasing the availability of channel blocks in the 900 MHz SMR service. 30. Based on our view of actual and potential competition in the CMRS market, we determined in the CMRS Third Report & Order that our channel assignment and service area rules for 900 MHz SMR service, like those for 800 MHz, would be comparable to those of cellular and PCS to the extent practical. Although only 5 MHz of spectrum is available in the 900 MHz band, we stated our belief that this service presents significant opportunities for the development of certain types of wide-area mobile voice and data services that could compete with these other services. In addition, the limited amount of prior licensing at 900 MHz makes implementation of wide-area licensing throughout pre-defined geographic areas considerably simpler than at 800 MHz, where extensive licensing has already occurred. a. Service Areas 31. In the CMRS Third Report & Order, we decided to use MTAs as the service area for future 900 MHz SMR licensing. We concluded that the limited success of existing 900 MHz systems confined to providing service in DFAs argued against the use of more numerous BTAs or similarly small service areas, which are not substantially larger (and are in some cases smaller) than DFAs in most major markets. We found that MTA licensing was more likely to create opportunities for both existing licensees and new entrants to meet customer demands for wide-area service. We also concluded that using MTAs was preferable to using larger regional service areas or licensing on a nationwide basis, because use of these larger service areas could restrict unnecessarily entry into the 900 MHz market to a very small number of licensees. We found that use of MTAs for licensing of 900 MHz services would promote greater opportunities for entry without foreclosing the possibility of geographic consolidation, subject to Commission review and approval. 32. We note that Rand McNally & Company is the copyright owner of the MTA Listings, which list the counties contained in each MTA, as embodied in Rand McNally's Trading Area System MTA Diskette and geographically represented in the map contained in Rand McNally's Commercial Atlas & Marketing Guide (the "MTA Map.") At the time of the CMRS Third Report & Order, Rand McNally had licensed the use of its copyrighted MTA/BTA Listings and maps for certain services such as PCS and 800 MHz SMR, but had not concluded such an agreement for 900 MHz SMR users. On reconsideration of the CMRS Third Report and Order, Rand McNally requested that the Commission refrain from adopting the use of MTAs as the geographic boundaries for the 900 MHz SMR service, as it had not licensed its MTA Listings in connection with that service. 33. Since that time, however, an agreement in principle for a blanket copyright license has been reached between Rand McNally and the American Mobile Telecommunications Association ("AMTA"). This license agreement would authorize the conditional use of Rand McNally's copyrighted material in connection with the 900 MHz SMR service. This agreement would require interested persons using the material to include a legend on reproductions (as specified in the license agreement) indicating Rand McNally's ownership. Grantees of 900 MHz SMR ten-channel block MTA licenses would obtain a license to use Rand McNally's copyrighted material pursuant to the Rand McNally/AMTA license agreement upon payment to Rand McNally of $125.00 per each ten-channel block MTA license a grantee obtains. 34. The MTA Listings, the MTA Map and the draft Rand McNally/AMTA license agreement are available for public inspection at the Wireless Telecommunications Bureau's public reference room, Room 628, 1919 M Street N.W. Washington D.C. 20554. Copies of the foregoing also can be obtained by contacting Kim McLean, Marketing Coordinator, Rand McNally & Company, 8255 North Central Park, Skokie, Illinois 60076 (telephone: (800) 333- 0134) or the American Mobile Telecommunications Association, 1150 18th Street N.W., Suite 250 Washington D.C. 20036 (telephone: (202) 331-7773). 35. We have been informed by the parties that grantees who do not wish to take part in the Rand McNally/AMTA license agreement are free to negotiate their own licensing arrangement with Rand McNally. In any event, it is important to emphasize that a 900 MHz SMR MTA license grantee who does not obtain a copyright license (either through the Rand McNally/AMTA license agreement or some other arrangement with Rand McNally) from Rand McNally for use of the copyrighted material may not rely on grant of an MTA-based SMR license from the Commission as a defense to any claim of copyright infringement brought by Rand McNally against such grantee. In view of the foregoing, we fully expect that Rand McNally and AMTA will finalize their license agreement and, accordingly, we deny Rand McNally's petition for reconsideration. b. Channel Blocks 36. The 900 MHz SMR band is comprised of 20 blocks of 10 contiguous channels each, interleaved with channels assigned to other Part 90 services. In the CMRS Third Report & Order, we concluded that in light of the flexibility conferred by our ability to use auctions, each 10-channel block would be separately licensed and that applicants would be permitted to aggregate blocks. We also concluded that we would not restrict eligibility for any channel block, and that it would be appropriate to allow both incumbents and new entrants to bid without restriction for one or more 900 MHz blocks. Eligibility is limited only by the overall 45 MHz aggregate CMRS spectrum cap, as discussed at  66-68, infra. 37. Consistent with the flexibility granted to cellular and PCS licensees, MTA licensees on 900 MHz channels will be authorized to construct stations anywhere in their MTAs on unoccupied channels that are available for construction. The MTA license will allow a licensee to expand or modify facilities throughout its service area without prior Commission approval, so long as the system continues to be in compliance with our technical and operational rules and protects incumbents, but the licensee will be required to notify the Commission of such changes. 2. Coverage Requirements 38. In the CMRS Third Report & Order, we concluded that 900 MHz MTA licensees should be subject to construction requirements similar to those established for other wide-area CMRS licensees such as cellular and broadband PCS. Specifically, we provided 900 MHz MTA licensees five years to construct and operate their systems. We also concluded in the CMRS Third Report & Order that 900 MHz wide-area SMR licensees should be subject to interim coverage requirements that are similar to those in the cellular and PCS rules. We deferred establishing specific coverage requirements for these systems, however, until the completion of this 900 MHz Phase II proceeding. 39. RAM and Geotek have proposed that 900 MHz MTA licensees provide coverage to one-fourth of the population of their service area within three years of initial license grant and to one-third of the population of their service area within five years. They argue for a less stringent coverage requirement than that proposed for the 800 MHz service on the grounds that there has not been as much buildout in the 900 MHz service and because current applications of 900 MHz SMR are primarily specialized services for businesses that do not require ubiquitous coverage. 40. We will require 900 MHz MTA licensees to provide coverage to one-third of the population of their service area within three years of initial license grant and to two-thirds of the population of their service area within five years. Alternatively, at the five year mark, MTA licensees may submit a showing to the Commission demonstrating that they are providing substantial service. This requirement fits squarely between our 10 MHz broadband PCS rules, which require coverage to one-fourth of the population of the licensee's service area within five years, or alternatively, to submit a showing to the Commission that a licensee is providing substantial service, and our narrowband PCS rules, which require coverage of one-fourth of the population within five years, and three-fourths of the population within 10 years. We will also follow the model in broadband PCS, by allowing licensees to resell spectrum within their service area, provided that use of the spectrum remains subject to the licensee's ultimate control. We believe that allowing such resale will encourage provision of service to small markets and rural areas, which will help licensees to fulfill coverage requirements, and will promote the most efficient use of the spectrum. 41. While current 900 MHz services may be used primarily for specialized business uses, there may be some MTA licensees who seek to provide ubiquitous wide-area service to the public for uses that we have not yet anticipated. Therefore, we believe that this coverage requirement is reasonable and attainable for 900 MHz MTA licensees while also serving as a suitable deterrent to competitors who may seek to obtain MTA licenses for anti-competitive warehousing rather than for service to the public. We also conclude that a showing of "substantial service" is appropriate for 900 MHz because several current offerings in this band are cutting-edge niche services. Moreover, it is more difficult for a 900 MHz MTA licensee who aggregates only a total of 5 MHz of spectrum, to provide the ubiquitous coverage that a 30 MHz broadband PCS licensees may contemplate. Thus, we believe that 900 MHz MTA licensees should be held to a stricter coverage standard than is proposed by RAM and Geotek, but not as stringent as the 30 MHz broadband requirements. 42. Additionally, we noted in the CMRS Third Report & Order that any interim coverage requirements for MTA SMR systems must account for the fact that MTA licensees must provide co-channel protection to incumbent systems in their service area. As discussed at  44-47, infra, 900 MHz MTA licensees will be required to protect incumbent SMR systems. We believe that when a licensee acquires an MTA license, it must assume the responsibility of obtaining the right to use sufficient spectrum to provide coverage if such spectrum is not already available. This responsibility may be achieved either directly (by utilizing available spectrum authorized to the MTA licensee or acquiring such spectrum through buyouts of incumbent licensees within its authorized MTA block) or indirectly (through resale or other leasing agreements with incumbents). Thus, an MTA licensee must satisfy its coverage requirements regardless of the extent of the presence of incumbents within its MTA block. We believe that this will also serve to discourage applicants who have a limited ability to provide coverage within an MTA from seeking MTA licenses for anti- competitive reasons, e.g., to block potential acquisition of the MTA license by an applicant who already provides substantial coverage in the MTA. 43. The imposition of interim coverage requirements also raises the issue of the consequences of the MTA licensee's failure to meet such requirements. We conclude that an MTA licensee's failure to meet the coverage requirements imposed at either the third or fifth years of its construction period, or to make a convincing showing of substantial service at the five-year mark, will result in forfeiture of the entire MTA license. This penalty for failure to comply with construction requirements is consistent with the penalties provided in our PCS rules. Additionally, such action would allow the spectrum to be made available to other qualified applicants who could provide service to the public. 3. Treatment of Incumbents 44. In the CMRS Third Report & Order, the Commission concluded that incumbent SMR systems in the 900 MHz MTA blocks were entitled to co-channel protection by MTA licensees, as well as adjacent channel interference protection, as discussed in 44-47, infra. We determined that mandatory relocation of incumbents was not feasible in the 900 MHz band because no alternative 900 MHz SMR channels were available for relocation, but stated that MTA licensees could negotiate mergers, buyouts, frequency swaps, or similar arrangements with incumbent systems on a voluntary basis. We will therefore require MTA licensees to afford protection to incumbent SMR systems as provided by 47 C.F.R.  90.621(b), either by locating their stations at least 113 km (70 mi) from the facilities of any incumbent, by complying with the co-channel separation standards set forth in our "short- spacing" rule if they seek to operate stations located less than 113 km (70 mi) from an incumbent licensee's facilities, or by negotiating an even shorter distance with the incumbent licensee. This will adequately protect incumbent operations without hampering the ability of MTA licensees to construct stations throughout their authorized service area. 45. Additionally, the Commission stated in the CMRS Third Report & Order that while incumbent 900 MHz SMR systems are entitled to full co-channel interference protection for existing facilities, they would not be allowed to expand beyond existing service areas unless they obtain the MTA license for the relevant channels. The Order, however, did not specifically define what the Commission considered to be an incumbent licensee's existing service area. RAM and Geotek assert that the Commission should define incumbent service areas in terms of fixed mileage distances. They argue that an incumbent licensee's operating area should be determined by the mileage equivalent of each originally-licensed site's 22 dBu contour, which defines the station's undesired or interfering signal level. Similarly, AMTA states that a modification application to relocate a station should not be considered an initial application if it can be demonstrated that the proposed modification will not expand the station's 22 dBu contour. Motorola supports AMTA's request that the Commission classify applications that do not alter the 22 dBu contour of an existing system as modification, rather than new, applications. PCIA, however, requests that the Commission define existing service areas by the DFA boundary for systems that have been constructed within the DFA boundaries, and that transmitter site locations constructed within the DFA boundaries can be moved within the DFA so long as the new transmitter locations do not expand the coverage area beyond the DFA boundaries. 46. To provide incumbent 900 MHz SMR licensees with additional flexibility, we are defining the existing service area of an incumbent system by its originally-licensed 40 dBu signal strength contour. We are rejecting RAM and Geotek's suggestion that we adopt a fixed mileage separation based upon the 22 dBu signal strength contour because in the 900 MHz SMR service we have consistently defined the desired signal strength contour by the 40 dBu signal strength contour. We decline to adopt the suggestion of AMTA and Motorola to utilize the 22 dBu signal strength contour for incumbent protected service areas, because we believe it would be difficult to expand the 22 dBu contour without also expanding the 40 dBu contour. We also reject PCIA's request that we define existing service areas by DFA boundaries. Adoption of a DFA service area definition would be inequitable, since it does not require an incumbent licensee to have provided coverage of its service area prior to receiving protection. 47. Our objective is to allow incumbents to continue existing operations without harmful interference and to give them flexibility to modify or augment their systems so long as they do not encroach on the MTA licensee's operations. Thus, incumbent licensees will be able to add new transmitters in their existing service area, without prior notification to the Commission, e.g., to fill in "dead spots" in coverage or to reconfigure their systems to increase capacity within their service area, so long as their original 40 dBu signal strength contour is not expanded. Incumbent licensees will be required to notify the Commission of any changes in technical parameters or additional stations constructed, including agreements with an MTA licensee to expand beyond their signal strength contour, through a minor modification of their license. These minor modification applications will not be subject to public notice and petition to deny requirements or mutually exclusive applications. 4. Field Strength Limit at the MTA Boundary 48. In the CMRS Third Report & Order, we also concluded that co-channel interference criteria for adjacent MTA licensees would be similar to those imposed on the cellular and PCS services in that they would only apply to transmitting locations near the boundaries of each licensee's MTA. With respect to the co-channel interference criteria between adjacent MTA licensees, RAM and Geotek support permitting a field strength limit at any location on the border of the MTA service area of 40 dBuV/m, unless all affected parties agree to a higher level. They also ask that MTA licensees be required to coordinate in good faith their frequency usage with co-channel adjacent MTA licensees, and, if applicable, other affected parties. 49. We agree that MTA licensees should not be permitted to exceed a signal level of 40 dBuV/m at their service area boundaries, unless all bordering MTA licensees agree to a higher field strength. We also adopt RAM and Geotek's proposal to require coordination of frequency usage between co-channel adjacent MTA licensees and all other affected parties. This approach provides MTA licensees a signal strength level sufficient to operate their systems up to the borders of their MTA licenses while also providing protection to adjacent operations. As an exception to this requirement, to the extent that a single entity obtains licenses for adjacent MTAs on the same channel block, it will not be required to coordinate its operations in this manner. 5. Secondary Sites 50. In discussing the treatment of 900 MHz SMR incumbent systems, the Commission determined in the CMRS Third Report & Order that incumbent systems are entitled to full co- channel interference protection for existing facilities, but are not allowed to expand beyond existing service areas unless they obtain the MTA license for the relevant channels. We also noted that, in some instances, incumbent 900 MHz licensees had been granted authorizations to construct facilities outside of their DFAs on a secondary (i.e., unprotected) basis to link their facilities in different markets. Although the Commission did not afford formal protection to these sites originally, they developed on an interference-free basis as a practical matter, due to the freeze on primary licensing outside the DFAs. To prevent unnecessary disruption of existing operations, the Commission concluded that 900 MHz secondary sites licensed on or before August 9, 1994 would be afforded primary status, thus requiring the new MTA licensees to afford them full co-channel interference protection. 51. On reconsideration, and in subsequent ex parte requests to the Commission, RAM and Geotek urge the Commission to extend protected status to all secondary sites for which applications were filed on or before August 9, 1994, even if they were not granted until after August 9. The American Mobile Telecommunications Association (AMTA) and the Personal Communications Industries Association also filed petitions for reconsideration, Motorola filed reply comments raising the same issue, and both PCIA and AMTA have since submitted letters supporting the RAM/Geotek position. 52. In support of their request, RAM and Geotek argue that many of these pre-August 10 applications had been pending at the Commission for several months when the CMRS Third Report & Order was adopted, and could have been granted on or before August 9 but for delays in Commission processing. Geotek also argues that the Commission's recent decision to process the much larger backlog of pending 800 MHz SMR applications compels similar treatment of 900 MHz applications. According to RAM, the equities lie with the incumbents who have built systems at 900 MHz and have taken tremendous risks to develop innovative systems and services. In that same vein, AMTA points out that, during the suspension of expanded 900 MHz SMR licensing, many licensees assumed substantial business risk by applying for and constructing unprotected secondary sites to permit uninterrupted service coverage and to satisfy customer demand. In the alternative, RAM and Geotek propose that the Commission's technical rules permit an incumbent to construct sites on a protected basis within the DFA areas to which they previously have been licensed. 53. While we do not agree that our 800 MHz decision compels granting of primary site protection, we are persuaded by petitioners' other arguments and grant their requests. First, granting primary site protection for additional sites will promote uninterrupted service to the public. Second, affected incumbents would acquire protection for only a de minimis amount of new spectrum. Finally, our delays in processing secondary site applications in the 900 MHz SMR service appear to have produced an inequitable result for applicants who otherwise would have been entitled to protection under the CMRS Third Report & Order. Therefore, we require all MTA licensees to provide complete co-channel protection to all sites for which applications were filed on or before August 9, 1994. Secondary sites based on applications filed after August 9 will not be afforded such protection, however. Information with respect to which secondary sites will be entitled to primary site protection will be available in the bidder's package for this service. 6. Loading Requirements 54. In the CMRS Third Report & Order, the Commission determined that loading requirements, which were adopted in the SMR services to protect against spectrum warehousing, are not necessary for MTA-based licensing of 900 MHz SMR, provided that licensees are subject to strict construction and coverage requirements. However, the Commission retained the loading/automatic cancellation requirement for 900 MHz SMR incumbent licensees. We distinguished 900 MHz service from 800 MHz service in this respect, noting that while 800 MHz SMR has matured to a point where continued application of loading requirements no longer served a public interest purpose, the 900 MHz SMR market is less mature both because initial licensing occurred more recently than at 800 MHz and because 900 MHz systems have hitherto operated in limited service areas. We also noted that our then-existing 900 MHz SMR rules did not require licensees to achieve significant coverage of their designated service areas in order to retain their authorizations. 55. On reconsideration, Geotek, RAM, AMTA, Motorola, and PCIA urge the Commission to eliminate loading requirements for all 900 MHz licensees, including incumbents. Geotek argues that to do so would achieve regulatory parity among competing services, consistent with the goals of the Budget Act. RAM argues that imposing loading requirements unfairly penalizes incumbents because of the Commission's unwillingness to give them the same ability to expand that has consistently been given to other systems. AMTA argues that the 900 MHz service is, in fact, more mature than the 800 MHz service because the 800 MHz loading requirements only applied to systems that were licensed for new or additional channels after September 1989 and prior to June 1, 1993, while many 900 MHz systems were licensed and placed in operation in 1987. AMTA also asserts that because the Commission's rules precluded 900 MHz SMR operators from providing significant coverage outside the DFAs, the Commission cannot rely on the licensees' failure to provide wider coverage as justification for retaining the loading requirements. PCIA and Motorola argue that legitimate licensees in the band who have invested seven years of capital and labor in the business should not be forced to relinquish channels because they were not fully permitted to provide the service for which the allocation was designed. These petitioners also contend that the requirement places 900 MHz licensees on an uneven playing field with other CMRS licensees. 56. Assuming that we elect to retain loading requirements for incumbents, RAM has requested a temporary stay of these requirements as they apply to RAM pending the outcome of the 900 MHz auction. RAM states that the nature of its nationwide data system makes it difficult to apply loading criteria to particular stations or channels, and that application of loading criteria between now and the 900 MHz auction could therefore cause it to lose some of its existing authorizations. RAM also states that it intends to participate fully in the 900 MHz auction to obtain MTA licenses for the channel blocks that it currently uses, which would eliminate loading requirements for RAM where it is the successful bidder. RAM therefore requests that we stay the loading requirements as they apply to its existing authorizations until 30 days after the MTA license for each 10-channel block issued. If RAM is the successful bidder, the loading issue would be mooted; if it is not the successful bidder, it would be required to comply with loading requirements for its existing authorizations in the block. In support of its request, RAM contends its system has unique characteristics that make it unnecessary to mechanically apply the current loading requirements. RAM points out that it has already constructed a wide area network of more than 900 sites that covers more than 64% of the nation's population, and 25% of the population in all but two of the continental United States MTAs and Hawaii. This amount of coverage, RAM notes, compares favorably with coverage requirements for broadband PCS licensees. 57. While we recognize the concerns of the petitioners, we affirm our decision in the CMRS Third Report & Order that the loading requirements for incumbent 900 MHz SMR licensees should be retained. Our decision is based on the unique history and nature of the 900 MHz service as it has developed to date. As we pointed out in the CMRS Third Report & Order, the 900 MHz service is not a mature service, both because it was licensed more recently than 800 MHz and because Phase I licensing has been confined to limited service areas. Based on these factors, we have already granted special relief to 900 MHz licensees by providing them with an additional two years to load their systems on top of the five years originally granted. Having granted this relief, we believe that eliminating loading requirements at this point for incumbent licensees who have failed to fully load their systems would not be in the public interest. Even if it is true, as petitioners contend, that incumbents have been unable to load their systems because they are limited to operating in DFAs, they now have the ability to overcome this obstacle by obtaining an MTA license, which exempts them from all previously applicable loading requirements. We see no reason, however, why an incumbent who does not obtain an MTA license should be entitled to retain spectrum that it has been unable to load for seven years. Moreover, these requirements will prevent the warehousing of spectrum. Once the Commission takes back channels from an incumbent licensee who has not met loading requirements, the spectrum covered by the incumbent's authorization will automatically revert to the MTA licensee who has obtained the contingent rights to that spectrum. 58. While we are retaining the loading requirements for 900 MHz incumbents generally, we will grant RAM's request for temporary relief from loading requirements until the conclusion of the auction. Because RAM's request would allow it to retain certain authorizations without making a loading showing at this point, we find RAM's request more analogous to a waiver request than a request for stay. Before a request for waiver will be granted, the petitioner must clearly demonstrate that the general rule is not in the public interest when applied to its particular case, and that the grant of the waiver will not undermine the public policy served by the rule. We find that RAM has presented unique circumstances that warrant granting of a waiver. 59. First, RAM is one of the few 900 MHz incumbents that actually has constructed a wide-area network. Because of the unusual size and complexity of the network, we have previously granted RAM an extension of the construction period for its system and have allowed it four years to load each system to the required level. RAM has used this authority in a timely manner to construct a substantial wide area network of more than 900 sites that covers more than 64% of the nation's population, and 25% of the population in all but two of the continental United States MTAs and Hawaii. Second, we agree with RAM that the nature of its nationwide data system makes it difficult to apply loading criteria to particular stations or channels, and that the application of such criteria could be disruptive to its existing network. Finally, we note that RAM intends to participate fully in the auction, and that it is willing to submit to loading requirements to the extent that it does not obtain MTA licenses for the areas in which it operates. Based on these factors, we will waive the application of the loading rules to RAM's system until 30 days after the completion of the auction. At that point, RAM will be required to demonstrate loading for any authorization (1) for which a showing would otherwise have been required prior to the auction, and (2) that is not within the area of an MTA license obtained by RAM. 7. Emission Masks 60. The Commission generally subjects mobile radio services to emission mask rules that restrict transmitter emissions on the spectrum adjacent to the licensee's adjacent channel. In the CMRS Third Report & Order, we affirmed that our out-of-band emission rules should apply only where emissions have the potential to affect other licensees' operations. 61. Thus, we will only apply emission mask rules to "outer" MTA channels in each block (i.e., the channels on the outer edges of an MTA licensee's channel block) and to "interior" MTA channels (i.e., the channels inside of the MTA licensee's channel block assignment that are adjacent to other licensees) where there are incumbent SMR licensees who will be affected by the MTA licensee's operations. We believe that these channels alone have the potential to affect operations outside of the MTA licensee's authorized bandwidth. Moreover, this approach is consistent with our action in the broadband PCS context. Specifically, for wide-area licensees in the 900 MHz SMR band on any frequency outside the MTA licensee's frequency block, the peak power of any emission shall be attenuated below the transmitter power (P) by at least 43 plus 10 log10(P) decibels or 80 decibels, whichever is the lesser attenuation. We conclude that this emission mask will adequately protect other MTA licensees. We note, however, that MTA licensees will also be required to provide adjacent channel protection to "interior" channels used by incumbent licensees, as we decided in the CMRS Third Report & Order. As an exception to this requirement, if a single entity aggregates adjacent channel blocks, it will not be required to mask its emissions at the band edge of each ten channel block. 8. Mexican/Canadian Border Areas 62. In the Mexican and Canadian border areas, 900 MHz SMR channel availability is restricted by treaty and limitations on ERP and antenna height have been placed on additional channels. As a result, some 900 MHz channels may not be available to MTA licensees operating in border areas or may suffer from significant restrictions on ERP or antenna height, making them less attractive for MTA licensees. 63. We will, however, use the same allocation of MTA channel blocks in border areas as in non-border areas. Thus, use of channels in MTAs that encompass border areas will be subject to the relevant rules regarding international assignments and coordination of such channels. This permits applicants to assess the impact of the border requirements in their valuation of those blocks for competitive bidding purposes. 9. Discontinuance of Operation 64. In the Phase II First Report & Order, the Commission revised Section 90.631(f), which provides that SMR licenses cancel automatically if a licensee discontinues station operations for more than 60 consecutive days, unless the Commission authorizes additional time for station operations to remain discontinued. Under the rule, if the Commission does not authorize additional time, the subject license cancels automatically unless the station resumes operations within five days after the licensee receives the Commission's letter declining to authorize additional time. Shortly thereafter, the Commission stayed the enforcement of that rule, in response to a request by AMTA, pending the Commission's disposition of AMTA's petition for reconsideration. In this Order, we rule on AMTA's petition for reconsideration, which requests that the Commission extend that five-day time period to 60 days, based on the unavoidable nature of a temporary discontinuance of operation, and the onerous effect of a five-day cancellation in some instances. As examples, AMTA cites the discovery of the inadequacy of a site, due to either technical problems or business considerations. AMTA expresses concern that if the Commission does not share the licensee's view that its showing is sufficient to be out of operation for more than 60 days, then five days is inadequate to rectify the problem and reinstitute service. 65. The Omnibus Budget Reconciliation Act of 1993 requires the Commission to modify its rules, to the extent "necessary and practical," to ensure that substantially similar services are subject to "comparable" technical requirements. Moreover, we concluded in the CMRS Third Report & Order that the 800 and 900 MHz SMR services compete or have the potential to compete with existing wide-area CMRS service providers. We believe that we should modify our existing permanent discontinuance rule in accordance with the requirements for cellular and PCS to the extent practical. Therefore, we are modifying Section 90.631(f) to include provisions comparable to those contained in Section 22.317 for cellular operations. This will permit licensees to discontinue operations for 90 continuous days and removes any provisions for licensees to request an additional extension of this period. AMTA's concern about extending from five days to sixty days the period for reinstituting service, therefore, is no longer valid. Thus, we find AMTA's petition for reconsideration moot, and we will enforce Section 90.631(f), as modified herein. B. MISCELLANEOUS MATTERS 1. Spectrum Cap and Attribution 66. In the CMRS Third Report & Order, we adopted a 45 MHz aggregate spectrum cap on CMRS uses within the three radio services, broadband PCS, cellular, and SMR. Accordingly, an entity may hold up to 45 MHz of spectrum in the three services in any geographic area. For example, an entity may hold 5 MHz of 900 MHz SMR spectrum, a 30 MHz PCS, and a 10 MHz PCS license in the same area; or an entity may hold 10 MHz of SMR spectrum, a cellular license accounting for 25 MHz and a 10 MHz PCS license. 67. We also adopted a 20 percent cross-ownership attribution rule for purposes of the SMR, broadband PCS, and cellular spectrum aggregation limit. By this rule, an entity with 20 percent or greater ownership of a 900 MHz SMR license who has 40 MHz of broadband PCS spectrum in a geographic market would reach the spectrum cap with 5 MHz of SMR spectrum in an MTA within that geographic market. Although we stated that we would use the multiplier adopted in the Broadband PCS Further Order on Reconsideration, in lieu of a bright-line test, to determine attribution when cellular, broadband PCS and SMR licensees are held indirectly through intervening corporate entities, we have since refined and clarified our PCS rules with respect to the use of the multiplier. 68. We also adopted a 10 percent population overlap threshold, in which a provider's spectrum counts toward the cellular-PCS-SMR spectrum cap if the carrier is licensed to serve 10 percent or more of the population of the MTA. As indicated, all 900 MHz SMR channels count toward the limit. Therefore, 900 MHz SMR operators who intend to aggregate across channel blocks must comply with the spectrum cap. 2. Grandfathering a. Regulatory Classification 69. In the CMRS Second Report & Order, the Commission stated that SMR licensees are classified as CMRS if they offer interconnected service, and are otherwise classified as PMRS. All 900 MHz MTA licensees presumptively will be classified as CMRS providers. Consistent with the CMRS Third Report & Order, however, the presumption will not be applied before August 10, 1996 to an MTA licensee who was an incumbent in the 900 MHz service before August 10, 1993. As such, these licensees are not subject to CMRS regulation for three years from the enactment date under the Budget Act's grandfathering provision. b. Foreign Ownership Waivers 70. Section 332(c)(6) of the Communications Act permits the Commission to waive the application of Section 310(b) to any foreign ownership that lawfully existed before May 24, 1993, of any provider of a private land mobile service that will be treated as a common carrier, as a result of the Budget Act, on the condition that the extent of foreign ownership not increase above the pre-May 24, 1993 level, and that no subsequent transfer of ownership is made to anyone in violation of Section 310(b). As a result of our decision to treat incumbent licensees as new applicants for purposes of competing for an MTA license, the question arises as to whether a waiver filed by an incumbent licensee will cover the MTA license, in the event that the incumbent wins the MTA license. 71. We will grandfather any timely-filed waiver petitions with respect to the MTA license filed by an incumbent within the MTA. Although the MTA license is considered a "new" license, the existing facilities of the provider will be entirely subsumed in the new license. Thus, we believe it is unnecessary to require an additional filing by an incumbent who wins the MTA license. V. SECOND FURTHER NOTICE OF PROPOSED RULEMAKING: AUCTION RULES A. Competitive Bidding 72. In the CMRS Third Report & Order, the Commission determined that it would use competitive bidding to select from among mutually exclusive applicants in the 900 MHz SMR service. Accordingly, under our auction authority, if mutually exclusive applications for an MTA 10-channel block are accepted for filing, we will award that license through competitive bidding. We request comment on specific bidding procedures, as set forth below. 1. Competitive Bidding Design for 900 MHz SMR 73. In the Auctions Second Report & Order, we established the criteria to be used in selecting from among auction methodologies to use for each particular auctionable service. Generally, we concluded that awarding licenses to those parties who value them most highly would foster Congress's policy objectives. We noted there that since a bidder's ability to introduce valuable new services and to deploy them quickly, intensively, and efficiently increases the value of a license to that bidder, an auction design that awards licenses to those bidders with the highest willingness to pay tends to promote the development and rapid deployment of new services and the efficient and intensive use of the spectrum. We also stated that: (l) licenses with strong value interdependencies should be auctioned simultaneously and (2) multiple round auctions generally will yield more efficient allocations of licenses and higher revenues by providing bidders with information regarding other bidders' valuations of licenses, especially where there is substantial uncertainty as to value. Thus, where the licenses to be auctioned are interdependent and their value is expected to be high, simultaneous multiple round auctions would best achieve the Commission's goals for competitive bidding. 74. Based on the factors identified in the Auctions Second Report & Order, we tentatively conclude that simultaneous multiple round auctions are appropriate for the 900 MHz SMR service. As in the case of PCS, the 900 MHz SMR licenses are interdependent, and licensees likely will aggregate and substitute across spectrum blocks and geographic regions. Therefore, simultaneous multiple round bidding is likely to generate the most information about license values during the course of the auction and facilitate efficient aggregation of licenses across spectrum bands. We seek comments on this tentative conclusion. 75. We note, however, that the presence of incumbents on certain channels could affect the relative desirability and value of otherwise identical MTA licenses in ways we do not anticipate. In the event that the short-form filings indicate that particular 900 MHz licenses are not substantially interdependent, we propose to delegate authority to the Wireless Telecommunications Bureau to revisit the issue of whether another auction design would be more appropriate. Under this proposal, the bidder's package would include information about available spectrum on each channel block within each MTA. 2. License Grouping 76. The Commission determined in the Auctions Second Report and Order that in a multiple round auction, highly interdependent licenses should be grouped together and put up for bid at the same time because such grouping provides bidders with the most information about the prices of complementary and substitutable licenses during the course of an auction. We also determined that the greater the degree of interdependence among the licenses, the greater the benefit of auctioning a group of licenses together in a simultaneous multiple round auction. 77. RAM and Geotek, the two largest incumbents in the 900 MHz SMR service, question whether it is practical to hold a simultaneous auction of all MTA licenses given the aggregate number of licenses to be auctioned. They suggest that we auction the licenses on an MTA-by-MTA basis, starting with the most densely populated MTA and ending with the least densely populated MTA, or that we group the MTA licenses by region for auction purposes. 78. We tentatively conclude that all 51 MTAs in the 900 MHz SMR band should be auctioned simultaneously, but seek comment on the proposals discussed above. Although grouping the licenses together may be somewhat more costly from an administrative viewpoint than breaking the licenses into groups, we believe that the added cost will be outweighed by the informational and bidding flexibility advantages afforded by a single auction. The 900 MHz service may not present the same obstacles in this regard as the broadband PCS service, in which we determined that despite the high degree of interdependence among all broadband PCS licenses, a single simultaneous auction would be too costly and complex. The 1,020 licenses to be auctioned in the 900 MHz SMR service are less than half the number of broadband PCS licenses to be auctioned in Blocks A through F, and unlike broadband PCS, all licenses will be for the same amount of spectrum and will use a single service area definition. Therefore, we tentatively conclude to hold a single auction, while reserving the discretion to inform applicants by Public Notice if we determine to hold more than one auction, on the basis that a single auction proves administratively difficult. We seek comment on this issue. B. Bidding Issues 1. Bid Increments 79. As we have done in previous multiple round auctions, we propose to establish minimum bid increments for bidding in each round of the auction. The bid increment is the amount or percentage by which a bid must be raised above the previous round's high bid in order to be accepted as valid in the current bidding round. The application of a minimum bid increment helps to ensure that the auction closes within a reasonable period of time. Establishing an appropriate minimum bid increment is important in a simultaneous auction with a simultaneous closing rule, because all markets remain open until there is no bidding on any license and a delay in closing one market will delay the closing of all markets. 80. Consistent with our PCS auction procedures, we propose to start the 900 MHz auction with relatively large bid increments, and adjust the increments as bidding activity indicates. The minimum bid increment in Stage I of the auction generally would be five percent of the high bid in the previous round or $.02 per MHz-pop, whichever is greater. In Stage II, we propose to reduce the minimum bid increment to the greater of five percent or $.01 per MHz-pop, and in Stage III, the bid increment would remain at the greater of five percent or $.01 per MHz-pop. We propose to retain the discretion to vary the minimum bid increments for individual license or groups of licenses at any time before or during the course of the auction, based on the number of bidders, bidding activity, and the aggregate high bid amounts. We propose to retain the discretion to keep an auction open if there is a round in which no bids or proactive waivers are submitted. (See discussion of stopping rules at   81- 85, infra) 2. Stopping Rules 81. In multiple round auctions, a stopping rule must be established for determining when the auction is over. In simultaneous multiple round auctions, bidding may close separately on individual licenses, simultaneously on all licenses, or a hybrid approach may be used. Under a license-by-license approach, bidding closes on each license after a certain number of rounds pass in which no new acceptable bids are submitted for that particular license. With a simultaneous stopping rule, bidding remains open on all licenses until there is no new acceptable bid for any license. This approach provides bidders full flexibility to bid for any license as more information becomes available during the course of the auction, but it may lead to very long auctions unless an activity rule is imposed. Under a hybrid approach, we may use a simultaneous stopping rule (along with an activity rule designed to expedite closure for licenses subject to the simultaneous stopping rule) for the higher value licenses. For lower value licenses, where the loss from eliminating some back-up strategies is less, we may use the license-by-license approach. 82. For 900 MHz SMR, we propose to adopt a simultaneous stopping rule. MTA licenses are expected to have relatively high values because of the substantial amount of clear spectrum that remains available and the high valuation of SMR spectrum in secondary market transactions. The substitutability between licenses within the same MTA, and the ability to pursue back-up strategies also support the proposal to use a simultaneous stopping rule. Additionally, using MTAs rather than BTAs or other more numerous service areas should reduce the complexity of implementing a simultaneous stopping rule. Because we propose to impose an activity rule (as discussed at  87-93, infra), we believe that allowing simultaneous closing for all licenses should afford bidders flexibility to pursue back-up strategies. We seek comment on this issue. 83. In the event we adopt a simultaneous stopping rule, we will retain the discretion to announce at any time during the auction that the auction will end after a specified number of additional rounds. If we adopt this proposal, bids would only be accepted on licenses where the high bid has increased in the last three rounds. This proposal would deter bidders from continuing to bid on a few low value licenses solely to delay the closing of the auction. It would also enable the Commission to end the auction when it determines that the benefits of terminating the auction and issuing licenses exceed likely benefits of continuing to allow bidding. If this mechanism is used, the number of remaining rounds and other final bidding procedures would be announced by public notice. We also propose to retain the discretion to conduct market-by-market closings, if circumstances so warrant. We seek comment on this issue. 84. The disadvantages of declaring an imminent end to an auction, however, are that the procedure may result in less efficient allocation of licenses than if the auction remained open as long as new bids were received. Therefore, we propose to declare the imminent end of the auction only in the case of extremely dilatory bidding, as we favor other methods to hasten the end of an auction -- shortening the bidding rounds, raising the minimum bid increments, and proceeding to a later auction stage. We seek comment on this issue. 85. In the Fourth Memorandum Opinion & Order, we determined that we will keep an auction open in a round in which no new acceptable bids are submitted if we receive a "proactive" waiver of the activity rules. (See discussion of activity rule waivers at  87- 93, infra). With respect to the broadband PCS auctions, we later modified the rule by retaining the discretion to keep an auction open even if no new acceptable bids and no proactive waivers are submitted in a single round. We propose to employ the same procedure with respect to the 900 MHz SMR auctions. This would facilitate the rapid completion of the auction by permitting the Commission to use larger bid increments, thereby speeding the auction pace without risking a premature auction close. We seek comment on these issues. 3. Duration of Bidding Rounds 86. We propose to reserve the discretion to vary the duration of bidding rounds or the interval at which bids are accepted (e.g., run more than one round per day) in order to move the auction toward closure more quickly. Under this proposal, we would announce any changes to the duration of and intervals between bidding rounds either by public notice prior to the auction or by announcement during the auction. We seek comment on this issue. 4. Activity Rules 87. As discussed above, in order to ensure that simultaneous auctions with simultaneous stopping rules close within a reasonable period of time and to increase the information conveyed by bid prices during the auction, it is necessary to impose an activity rule to prevent bidders from waiting until the end of the auction before participating. In the Auctions Second Report & Order, we adopted the Milgrom-Wilson activity rule as our preferred activity rule where a simultaneous stopping rule is used. The Milgrom-Wilson approach encourages bidders to participate in early rounds by limiting their maximum participation to some multiple of their minimum participation level. Bidders are required to declare their maximum eligibility in terms of MHz-pops, and make an upfront payment equal to $0.02 per MHz-pop. (See discussion of upfront payments at  107, infra) In each round, bidders are limited to bidding on licenses encompassing no more than the number of MHz-pops covered by their upfront payment. Licenses on which a bidder is the high bidder from the previous round, as well as licenses on which a new valid bid is placed, count toward this MHz-pop limit. Under this approach, bidders have the flexibility to shift their bids among any license for which they have applied so long as, within each round, the total MHz- pops encompassed by those licenses does not exceed the total number of MHz-pops on which they are eligible to bid. 88. We tentatively conclude that the Milgrom-Wilson activity rule should be used in conjunction with the proposed simultaneous stopping rule to award 900 MHz SMR licenses. This proposal would best achieve the Commission's goals of affording bidders flexibility to pursue backup strategies, while at the same time ensuring that simultaneous auctions are concluded within a reasonable period of time. Under the Milgrom-Wilson procedure, the minimum activity level, measured as a fraction of the bidder's eligibility in the current round, increases during the course of the auction. Absent waivers (discussed infra), a bidder's eligibility (in terms of MHz-pops) in the current round is determined by the bidder's activity level and eligibility in the previous round. In the first round, however, eligibility is determined by the bidder's upfront payment and is equal to the upfront payment divided by $.02 per MHz-pop. We seek comment on this issue. 89. During Stage I, we tentatively conclude that a bidder must be active on licenses encompassing one-half of the MHz-pops for which it is eligible. In Stage II and Stage III, we tentatively conclude that the bidder must be active on 75% and 95%, respectively, of the MHz-pops for which it is eligible. Under this proposal, the "penalty" for falling below the minimum activity level at any stage would be a reduction in maximum eligibility to bid in future rounds. For example, in Stage I, the penalty for falling below that activity level would be the loss of 2 MHz-pops in eligibility for each MHz-pop that the bidder falls below the minimum required activity level. As in prior auctions, we propose to determine the transition from one stage to the next in the 900 MHz SMR auction by the aggregate level of bidding activity, subject to our discretion. The transition rule may also be defined in terms of the "auction activity level" -- the sum of the MHz-pops of those licenses whose high bid increased in the current round, as a percentage of the total MHz-pops of all licenses in that auction. Under our proposal, the auction would start in Stage I and move to Stage II when, in each of three consecutive rounds of bidding, the high bid has increased on 10 percent or less of the spectrum (measured in terms of MHz-pops) being auctioned. Similarly, the auction would move to Stage III when the high bid has increased on five percent or less of the spectrum being auctioned in each of three consecutive rounds of bidding in Stage II. We seek comment on these proposals. 90. Moreover, if we adopt this proposal, we reserve the discretion to increase or decrease these activity levels, as well as to vary the timing of stages and activity levels for each stage through public notices issued after applications are filed and before the auction begins, as circumstances warrant. In addition, we would retain the discretion during the auction to change stages. 91. To avoid the consequences of clerical errors and to compensate for unusual circumstances that might delay a bidder's bid preparation or submission on a particular day, we propose to implement a procedure for waiver of the activity rule. In the Fourth Memorandum Opinion & Order, we stated that the Commission retained the discretion to modify the method and timing of submitting waivers and to allow for two types of waivers -- "proactive" and "automatic." As explained therein, proactive waivers invoked in a round in which there are no new valid bids will keep an auction open, while an automatic waiver submitted in a round in which no other bidding activity occurs will not keep an auction open. Proactive waivers are submitted by the bidder while automatic waivers would be submitted automatically for a bidder whenever a bidder's eligibility would be reduced because of insufficient bidding activity and a waiver is available unless the bidder specifically chooses not to have the automatic waiver apply. Automatic activity rule waivers would be automatically applied by the bidding system in any round where a bidder's activity is below the requested activity level as long as the bidder has waivers remaining. 92. Under this proposal, we would announce by Public Notice how many waivers bidders will receive. A waiver would permit a bidder to maintain its eligibility at the same level as in the round for which the waiver is applied. A waiver, however, could not be used to correct an error in the amount bid. This would ensure that bidders are not arbitrarily penalized by having their eligibility reduced due to an accidental act or circumstances not under the bidder's control. We seek comment on these proposals. 93. While we are proposing the adoption of the Milgrom-Wilson activity rule by this Further Notice, we also retain the discretion to use an alternative activity rule for 900 MHz if we determine that the Milgrom-Wilson rule is too complicated or costly to administer. Any such change would be announced by public notice before commencement of the auction. 5. Rules Prohibiting Collusion 94. In the Auctions Second Report & Order, we adopted a special rule prohibiting collusive conduct in the context of competitive bidding. We observed that such a rule would serve the objectives of the Budget Act by preventing parties, especially the largest firms, from agreeing in advance to bidding strategies that divide the market according to their strategic interests and disadvantage other bidders. We believe that this rule is appropriate for the 900 MHz SMR service. Therefore, we tentatively conclude that Section 1.2105(c) will apply to 900 MHz SMR auctions. The rule prohibits bidders from communicating with one another after short-form applications have been filed regarding the substance of their bids or bidding strategies, and also prohibits bidders from entering into consortium arrangements or joint bidding agreements after the deadline for short-form applications has passed. In the Second Memorandum Opinion & Order, we modified the rule so that bidders who have not filed Form 175 applications for licenses in any of the same geographic markets may enter into such discussions, consortia, or arrangements, or add equity partners, during the course of an auction, because of the low risk of anticompetitive conduct among bidders that have not applied for licenses in any of the same geographic areas. Furthermore, in the Fourth Memorandum Opinion & Order, we noted that communications among bidders concerning matters unrelated to the license auctions would be permitted. We seek comment on this proposal. 95. In addition, as discussed at  103, infra, bidders would be required by Section 1.2105(a)(2) to identify on their Form 175 applications all parties with whom they have entered into any consortium arrangements, joint ventures, partnerships or other agreements or understandings which relate to the competitive bidding process. Bidders would be required to certify that they have not entered and will not enter into any explicit or implicit agreements, arrangements or understandings with any parties, other than those identified, regarding the amount of their bid, bidding strategies or the particular properties on which they will or will not bid. We seek comment on this proposal. 96. We propose that winning bidders in 900 MHz SMR auctions be subject to Section 1.2107 of the Commission's Rules, which, inter alia, requires each winning bidder to attach as an exhibit to the Form 600 long-form application a detailed explanation of the terms and conditions and parties involved in any bidding consortium, joint venture, partnership, or other agreement or arrangement they had entered into relating to the competitive bidding process prior to the close of bidding. Under this rule, all such arrangements must have been entered into prior to the filing of short-form applications. In addition, where specific instances of collusion in the competitive bidding process are alleged during the petition to deny process, the Commission may conduct an investigation or refer such complaints to the United States Department of Justice for investigation. Bidders who are found to have violated the antitrust laws or the Commission's rules in connection with participation in the auction process may be subject to forfeiture of their down payment or their full bid amount and revocation of their license(s), and they may be prohibited from participating in future auctions. We seek comment on this proposal. C. Procedural and Payment Issues 1. Pre-Auction Application Procedures 97. In the Auctions Second Report & Order, the Commission established general competitive bidding rules and procedures which we noted may be modified on a service- specific basis. As discussed below, we propose to follow generally the processing and procedural rules established in the Auctions Second Report & Order, with certain modifications designed to address the particular characteristics of the 900 MHz SMR service. These proposed rules are structured to ensure that bidders and licensees are qualified and will be able to construct systems quickly and offer service to the public. By ensuring that bidders and license winners are serious, qualified applicants, these proposed rules will minimize the need to re-auction licenses and prevent delays in the provision of 900 MHz SMR service to the public. 98. As MTA licensees will gain use of a large geographic area and the freedom to locate base stations anywhere within that larger geographic region, they differ from the existing 900 MHz licensees that are essentially confined to the smaller DFA region. Accordingly, we propose to treat all MTA applicants as initial applicants for public notice, application processing, and auction purposes, regardless of whether they are already incumbent operators. 99. Section 309(j)(5) provides that no party may participate in an auction "unless such bidder submits such information and assurances as the Commission may require to demonstrate that such bidder's application is acceptable for filing." Moreover, "[n]o license shall be granted to an applicant selected pursuant to this subsection unless the Commission determines that the applicant is qualified pursuant to Section 309(a) and Section 308(b) and 310" of the Communications Act. As the legislative history of Section 309(j) makes clear, the Commission may require that bidders' applications contain all information and documentation sufficient to demonstrate that the application is not in violation of Commission rules, and we propose to dismiss applications not meeting those requirements prior to the competitive bidding. 100. In the Auctions Second Report & Order, we determined that we should require only a short-form application prior to competitive bidding, and that only winning bidders should be required to submit a long-form license application after the auction. As we determined that such a procedure would fulfill the statutory requirements and objectives and adequately protect the public interest, we incorporated these requirements into the rules adopted in the Auctions Second Report & Order. Accordingly, we propose to extend the application of these rules to the competitive bidding process for 900 MHz SMR. 101. Under this proposal, before the 900 MHz SMR auction, the Wireless Telecommunications Bureau would release an initial Public Notice announcing the auction. The initial Public Notice would specify the licenses to be auctioned and the time and place of the auction in the event that mutually exclusive applications are filed. The Public Notice would specify the method of competitive bidding to be used, applicable bid submission procedures, stopping rules, activity rules, and the deadline by which short-form applications must be filed and the amounts and deadlines for submitting the upfront payment. We would not accept applications filed before or after the dates specified in the Public Notice. Applications submitted before the release of the Public Notice would be returned as premature. Likewise, applications submitted after the deadline specified by Public Notice would be dismissed, with prejudice, as untimely. We seek comment on these proposals. 102. Soon after the release of the initial Public Notice, an auction information package will be made available to prospective bidders. The bidders' package will contain information on the incumbents occupying blocks on which bidding will be available. Incumbents will be expected to update information on file with the Commission, such as current address and phone number, so that such information will be of use to prospective bidders. 103. Under this proposal, all bidders would be required to submit short-form applications on FCC Form 175 (and FCC Form 175-S, if applicable), by the date specified in the initial Public Notice. Applicants would be encouraged to file Form 175 electronically. Detailed instructions regarding electronic filing would be contained in the Bidder Package. Those applicants filing manually would be required to submit one paper original and one microfiche original of their application, as well as two microfiche copies. The short-form applications would require applicants to provide the information required by Section 1.2105(a)(2) of the Commission's Rules. Specifically, each applicant would be required to specify on its Form 175 applications certain identifying information, including its status as a designated entity (if applicable), its classification (i.e., individual, corporation, partnership, trust, or other), the markets and frequency blocks for which it is applying, and assuming that the licenses will be auctioned, the names of persons authorized to place or withdraw a bid on its behalf. 104. As we indicated in the Auctions Second Report & Order, if we receive only one application that is acceptable for filing for a particular license, and thus there is no mutual exclusivity, we propose to issue a Public Notice cancelling the auction for this license and establishing a date for the filing of a long-form application, the acceptance of which would trigger the procedures permitting petitions to deny (as discussed at  116, infra). If no petitions to deny are filed, the application would be grantable after 30 days. We seek comment on the proposals discussed above. 2. Amendments and Modifications 105. To encourage maximum bidder participation, we propose to provide applicants with an opportunity to correct minor defects in their short-form applications prior to the auction. On the date set for submission of corrected applications, applicants that on their own discover minor errors in their applications (e.g., typographical errors, incorrect license designations, etc.) also would be permitted to file corrected applications. Recently, the Commission waived the ex parte rules as they applied to the submission of amended short- form applications for the A and B blocks of the broadband PCS auctions, to maximize applicants' opportunities to seek Commission staff advice on making such amendments. We propose to apply the same principles to the 900 MHz SMR auctions. Under this proposal, applicants would not be permitted to make any major modifications to their applications, including changes in markets and changes in control of the applicant, or additions of other bidders into the bidding consortia, until after the auction. Applicants could modify their short-form applications to reflect formation of consortia or changes in ownership at any time before or during an auction, provided such changes would not result in a change in control of the applicant, and provided that the parties forming consortia or entering into ownership agreements have not applied for licenses in any of the same geographic license areas. In addition, applications that are not signed would be dismissed as unacceptable. 106. Upon reviewing the short-form applications, we propose to issue a public notice listing all defective applications and applicants with minor defects would be given an opportunity to cure and resubmit a corrected version. After reviewing the corrected applications, the Commission would release a second public notice announcing the names of all applicants whose applications have been accepted for filing. These applicants would be required to submit an upfront payment to the Commission, as discussed below, to the Commission's lock-box by the date specified in the Public Notice, which generally would be no later than 14 days before the scheduled auction. After the Commission receives from its lock-box bank the names of all applicants who have submitted timely upfront payments, the Commission would issue a third public notice announcing the names of all applicants that have been determined as qualified to bid. An applicant who fails to submit a sufficient upfront payment to qualify it to bid on any license being auctioned would not be identified on this Public Notice as a qualified bidder. Each applicant listed on this public notice would be issued a bidder identification number and further information and instructions regarding auction procedures. We seek comment on the proposals discussed above. 3. Upfront Payments 107. We concluded in the Auctions Second Report & Order that a substantial upfront payment prior to the beginning of an auction is necessary to ensure that only serious and qualified bidders participate. By requiring such a payment, we also help to ensure that any bid withdrawal or default penalties are paid. We tentatively conclude that the standard upfront payment formula of $0.02 per MHz-pop, based on the number of 10-channel blocks in each MTA identified by an applicant on its Form 175, is appropriate for the 900 MHz SMR service. Using this formula will provide bidders with the flexibility to change their strategy during an auction and to bid on a larger number of smaller licenses (i.e., MTAs with fewer pops), or a smaller number of larger licenses, so long as the total MHz-pops combination does not exceed that amount covered by the upfront payment. If licenses covering the nation are being auctioned simultaneously, a bidder would not be required to file an upfront payment representing national coverage unless it intended to bid on licenses covering the entire nation in a single bidding round. The $0.02 per MHz-pop formula also works well with the Milgrom-Wilson activity rule that we propose to employ in the 900 MHz SMR auction, as described in  87-93, supra. In the initial Public Notice issued prior to the auction, we would announce population information corresponding to each license to enable bidders to calculate their upfront payments. We seek comment on these proposals. 4. Down Payment and Full Payment 108. In the Auctions Second Report & Order, we established a 20 percent down payment requirement for winning bidders to discourage default between the auction and licensing and to ensure payment of the penalty if such default occurs. We concluded that a 20 percent down payment was appropriate to ensure that auction winners have the necessary financial capabilities to complete payment for the license and to pay for the costs of constructing a system, while not being so onerous as to hinder growth or diminish access. We also determined that this amount was appropriate for the broadband PCS auctions. We believe that the reasoning employed in those Orders is equally applicable to the 900 MHz SMR service. Thus, we tentatively conclude that, with the exception of designated entities eligible for installment payments (as proposed at  135-140, infra), winning bidders in 900 MHz SMR auctions must supplement their upfront payments with a down payment sufficient to bring their total deposits up to 20 percent of their winning bid(s). Under this proposal, if the upfront payment already tendered by a winning bidder, after deducting any bid withdrawal and default penalties due, amounts to 20 percent or more of its winning bids, no additional deposit would be required. If the upfront payment amount on deposit is greater than 20 percent of the winning bid amount after deducting any bid withdrawal and default penalties due, the additional monies would be refunded. If a bidder has withdrawn a bid or defaulted but the amount of the penalty cannot yet be determined, the bidder would be required to make a deposit of 20 percent of the amount bid on such licenses. When it becomes possible to calculate and assess the penalty, any excess deposit would be refunded. Upfront payments would be applied to such deposits and to bid withdrawal and default penalties due before being applied toward the bidder's down payment on licenses the bidder has won and seeks to acquire. We seek comment on these proposals. 109. We propose to require winning bidders to submit the required down payment by cashier's check or wire transfer to our lock-box bank by a date to be specified by Public Notice, generally within five (5) business days following the close of bidding. All auction winners generally would be required to make full payment of the balance of their winning bids within five (5) business days following Public Notice that the license is ready for grant. Under this proposal the Commission would grant the license within ten (10) business days after receiving full payment. We seek comment on this proposal. 110. We propose to subject an auction winner that is eligible to make payments through an installment plan (i.e., designated entities, as proposed at  133-134, infra) to different payment requirements. Such an entity would be required to bring its deposit with the Commission up to five percent of its winning bid after the bidding closes, and would have to pay an additional five percent of its winning bid to the Commission within five (5) business days following public notice that the license is ready for grant. The Commission would then grant the license within ten (10) business days after receiving the five percent payment. 5. Bid Withdrawal, Default and Disqualification 111. As we have determined in the Auctions Second Report & Order, there must be a substantial penalty assessed to bidders if they withdraw a high bid, are found not to be qualified to hold licenses, or default on payment of a balance due. Although we concluded that payment of all amounts that a bidder has on deposit may be too severe in many cases, we devised alternative disincentives for withdrawal, default, or disqualification. We tentatively conclude that these procedures, found in Sections 1.2104(g) and 1.2109 of the Commission's Rules, are appropriate for the 900 MHz SMR auction as well. Accordingly, we propose that any bidder that withdraws a high bid during an auction before the Commission declares bidding closed would be required to reimburse the Commission in the amount of the difference between its high bid and the amount of the winning bid the next time the license is offered by the Commission, if this subsequent winning bid is lower than the withdrawn bid. We seek comment on this proposal. 112. If a license is re-offered by auction, the "winning bid" refers to the high bid in the auction in which the license is re-offered. If a license is re-offered in the same auction, the winning bid refers to the high bid amount, made subsequent to the withdrawal, in that auction. Under our proposal, if the subsequent high bidder also withdraws its bid, that bidder would be required to pay a penalty equal to the difference between its withdrawn bid and the amount of the subsequent winning bid the next time the license is offered by the Commission. If a license which is the subject of withdrawal or default is not re-auctioned, but is instead offered to the highest losing bidders in the initial auction, the "winning bid" refers to the bid of the highest bidder who accepts the offer. Losing bidders would not be required to accept the offer, i.e., they may decline without penalty. We wish to encourage losing bidders in simultaneous multiple round auctions to bid on other licenses, and therefore we propose not to hold them to their losing bids on a license for which a bidder has withdrawn a bid or on which a bidder has defaulted. 113. After bidding closes, we propose to assess a defaulting auction winner an additional payment of three percent of the subsequent winning bid or three percent of the amount of the defaulting bid, whichever is less. The additional three percent payment is designed to encourage bidders who wish to withdraw their bids to do so before bidding ceases. Under this proposal, we would hold deposits made by defaulting or disqualified auction winners until full payment. 114. We believe that these payment requirements will discourage default and ensure that bidders have adequate financing and that they meet all eligibility and qualification requirements. If a default or disqualification involves gross misconduct, misrepresentation or bad faith by an applicant, the Commission may declare the applicant and its principals ineligible to bid in future auctions, and may take any other action that it deems necessary, including institution of proceedings to revoke any existing licenses held by the applicant. 115. If the MTA winner defaults, is otherwise disqualified after having made the required down payment, or the license is terminated or revoked, then we tentatively conclude that the Commission will re-auction the license. Under this proposal, if the default occurs within five business days after the bidding has closed, the Commission retains the discretion to offer the license to the second highest bidder at its final bid level, or if that bidder declines the offer, to offer the license to other bidders (in descending order of their bid amounts) at the final bid levels. If only a small number of relatively low-value licenses are to be re-auctioned and only a short time has passed since the initial auction, the Commission may choose to offer the license to the highest losing bidders if the cost of running another auction exceeds the benefits. We seek comment on the proposals discussed above. 6. Long-Form Applications 116. If the winning bidder makes the down payment in a timely manner, we propose the following procedures: A long-form application filed on FCC Form 600 must be filed by a date specified by Public Notice, generally within ten (10) business days after the close of bidding. After the Commission receives the winning bidder's down payment and long-form application, we will review the long-form application to determine if it is acceptable for filing. In addition to the information required in the Form 600, designated entities will be required to submit evidence to support their claim to any special provision available for designated entities described in this Order. This information may be included in an exhibit to FCC Form 600. This information will enable the Commission, and other interested parties, to ensure the validity of the applicant's certification of eligibility for bidding credits, installment payment options, and other special provisions. Upon acceptance for filing of the long-form application, the Commission will issue a Public Notice announcing this fact, triggering the filing window for petitions to deny. If the Commission denies all petitions to deny, and is otherwise satisfied that the applicant is qualified, the license(s) will be granted to the auction winner. We seek comment on this proposal. 7. Petitions to Deny and Limitations on Settlements 117. As we have determined, the petition to deny procedures in Section 90.163 of the Commission's Rules, adopted in the CMRS Third Report & Order will apply to the processing of applications for the 900 MHz SMR service. Thus, a party filing a petition to deny against a 900 MHz SMR application will be required to demonstrate standing and meet all other applicable filing requirements. We have also adopted "greenmail" restrictions in Section 90.162 to prevent the filing of speculative applications and pleadings (or threats of the same) designed to extract money from 900 MHz SMR applicants. Thus, we will limit the consideration that an applicant or petitioner is permitted to receive for agreeing to withdraw an application or a petition to deny to the legitimate and prudent expenses of the withdrawing applicant or petitioner. 118. With respect to petitions to deny, the Commission need not conduct a hearing before denying an application if it determines that an applicant is not qualified and no substantial issue of fact exists concerning that determination. In the event the Commission identifies substantial and material issues of fact, Section 309(i)(2) of the Communications Act permits the submission of all or part of evidence in written form in any hearing and allows employees other than administrative law judges to preside over the taking of written evidence. 8. Transfer Disclosure Requirements 119. In Section 309(j), Congress directed the Commission to "require such transfer disclosures and anti-trafficking restrictions and payment schedules as may be necessary to prevent unjust enrichment as a result of the methods employed to issue licenses and permits." In the Auctions Second Report & Order, the Commission adopted safeguards designed to ensure that the requirements of Section 309(j)(4)(E) are satisfied. We decided that it was important to monitor transfers of licenses awarded by competitive bidding to accumulate the necessary data to evaluate our auction designs and to judge whether "licenses [have been] issued for bids that fall short of the true market value of the license." Therefore, we imposed a transfer disclosure requirement on licenses obtained through the competitive bidding process, whether by a designated entity or not. 120. We tentatively conclude that the transfer disclosure requirements of Section 1.2111(a) should apply to all 900 MHz SMR licenses obtained through the competitive bidding process. Generally, licensees transferring their licenses within three years after the initial license grant would be required to file, together with their transfer applications, the associated contracts for sale, option agreements, management agreements, and all other documents disclosing the total consideration received in return for the transfer of its license. As we indicated in the Auctions Second Report & Order, we would give particular scrutiny to auction winners who have not yet begun commercial service and who seek approval for a transfer of control or assignment of their licenses within three years after the initial license grant, so that we may determine if any unforeseen problems relating to unjust enrichment have arisen outside the designated entity context. 9. Performance Requirements 121. The Budget Act requires the Commission to "include performance requirements, such as appropriate deadlines and penalties for performance failures, to ensure prompt delivery of service to rural areas, to prevent stockpiling or warehousing of spectrum by licensees or permittees, and to promote investment in and rapid deployment of new technologies and services." In the Auctions Second Report & Order, we decided it was unnecessary and undesirable to impose additional performance requirements, beyond those already provided in the service rules, for all auctionable services. We tentatively conclude that the coverage requirements that we adopt in this Order for the 900 MHz SMR service (discussed at  38-43, supra ) are sufficient to address the spectrum warehousing concern. As discussed infra, failure to meet these requirements will result in automatic cancellation of license. Accordingly, propose to adopt no additional performance requirements for the 900 MHz SMR service. We seek comment on this proposal. D. Treatment of Designated Entities 1. Overview and Objectives 122. Congress provided that, in developing competitive bidding procedures, the Commission shall consider various congressional objectives and consider several alternative methods for achieving them. Specifically, the auction statute provides that in establishing eligibility criteria and bidding methodologies the Commission shall "promot[e] economic opportunity and competition and ensur[e] that new and innovative technologies are readily accessible to the American people by avoiding excessive concentration of licenses and by disseminating licenses among a wide variety of applicants, including small businesses, rural telephone companies, and businesses owned by members of minority groups and women." Small businesses, rural telephone companies and businesses owned by minorities and/or women are collectively referred to as "designated entities." Section 309(j)(4)(A) provides that to promote the statute's objectives the Commission shall "consider alternative payment schedules and methods of calculation, including lump sums or guaranteed installment payments, with or without royalty payments, or other schedules or methods . . . and combinations of such schedules and methods." The statute also requires the Commission to "ensure that small businesses, rural telephone companies, and businesses owned by members of minority groups and women are given the opportunity to participate in the provision of spectrum-based services." To achieve this goal, the statute indicates that the Commission should "consider the use of tax certificates, bidding preferences, and other procedures." 123. In instructing the Commission to ensure the opportunity for designated entities to participate in auctions and spectrum-based services, Congress was well aware of the problems that designated entities would have in competing against large, well-capitalized companies in auctions and the difficulties they encounter in accessing capital. For example, the legislative history accompanying our grant of auction authority states generally that the Commission's regulations "must promote economic opportunity and competition," and "[t]he Commission will realize these goals by avoiding excessive concentration of licenses and by disseminating licenses among a wide variety of applicants, including small businesses and businesses owned by members of minority groups and women." The House Report states that the House Committee was concerned that, "unless the Commission is sensitive to the need to maintain opportunities for small businesses, competitive bidding could result in a significant increase in concentration in the telecommunications industries." More specifically, the House Committee was concerned that adoption of competitive bidding should not have the effect of "excluding" small businesses from the Commission's licensing procedures, and anticipated that the Commission would adopt regulations to ensure that small businesses would "continue to have opportunities to become licensees." 124. Consistent with Congress's concern that auctions not operate to exclude small businesses, the provisions relating to installment payments were clearly intended to assist small businesses. The House Report states that these related provisions were drafted to "ensure that all small businesses will be covered by the Commission's regulations, including those owned by members of minority groups and women." It also states that the provisions in section 309(j)(4)(A) relating to installment payments were intended to promote economic opportunity by ensuring that competitive bidding does not inadvertently favor incumbents with "deep pockets" "over new companies or start-ups." 125. In addition, with regard to access to capital, Congress had made specific findings in the Small Business Credit and Business Opportunity Enhancement Act of 1992, that "small business concerns, which represent higher degrees of risk in financial markets than do large businesses, are experiencing increased difficulties in obtaining credit." As a result of these difficulties, Congress resolved to consider carefully legislation and regulations "to ensure that small business concerns are not negatively impacted" and to give priority to passage of "legislation and regulations that enhance the viability of small business concerns." 126. In our initial implementation of Section 309(j) of the Communications Act, we established in the Second Report & Order eligibility criteria and general rules that would govern the special measures for designated entities. We also identified several measures, including installment payments, spectrum set-asides, bidding credits and tax certificates, from which we could choose in establishing rules for auctionable spectrum-based services. We stated that we would decide whether and how to use these special provisions, or others, when we developed specific competitive bidding rules for particular services. In addition, we set forth rules designed to prevent unjust enrichment by designated entities who transfer ownership in licenses obtained through the use of these special measures or who otherwise lose their designated entity status. 127. We have employed a wide range of special provisions and eligibility criteria designed to meet the statutory objectives of providing opportunities to designated entities in other spectrum-based services. For instance, we determined that minority-owned and women- owned businesses in the nationwide narrowband PCS auction would receive a 25 percent bidding credit on certain channels in the regional narrowband PCS auction women-owned and minority-owned businesses would receive a 40 percent bidding credit on certain channels and small businesses would be eligible for installment payments on all channels; in the broadband PCS auction, on separate entrepreneurs' blocks, the bidding credits would vary according to the type of qualifying designated entity that applied (i.e., a small business would receive a 10 percent bidding credit, a business owned by minorities and/or women would receive a 15 percent bidding credit, and a small business owned by women and/or minorities would receive an aggregated bidding credit of 25 percent), and all entrepreneurs' block licensees would be eligible for varying degrees of installment payments. For the Interactive Video and Data Service (IVDS), we adopted a 25 percent bidding credit for one license in each market for women-owned and minority-owned businesses and installment payments for small businesses. The measures adopted thus far for each service were established after closely examining the specific characteristics of the service and determining whether any particular barriers to accessing capital stood in the way of designated entity opportunities. After examining the record in the competitive bidding proceeding in PP Docket 93-253, we established provisions necessary to enable designated entities to overcome the barriers to accessing capital in each particular service. Moreover, the measures we adopted also were designed to increase the likelihood that designated entities who win licenses in the auctions become strong competitors in the provision of wireless services. 128. As in other auctionable services, we fully intend in the 900 MHz SMR service to meet the statutory objectives of promoting economic opportunity and competition, of avoiding excessive concentration of licenses, and of ensuring access to new and innovative technologies by disseminating licenses among a wide variety of applicants, including small businesses, rural telephone companies, and businesses owned by members of minority groups and women. Accordingly, in balancing the congressional objectives set forth in the auction statute, we tentatively conclude that bidding credits, reduced down payments and installment payments should be made available to small businesses -- including those owned by minorities and women and small rural telephone companies -- on all 900 MHz SMR channel blocks in each MTA. In addition, to facilitate the introduction of service to rural areas, we propose to allow rural telephone companies to obtain geographically partitioned 900 MHz SMR licenses in areas where they provide telephone service, similar to the program adopted in broadband PCS. 2. Bidding Credits 129. Bidding credits allow eligible designated entities to receive a payment discount for their winning bid in an auction. In the Auctions Second Report & Order, we determined that competitive bidding rules applicable to individual services would specify the designated entities eligible for bidding credits and the amounts of the available bidding credits for that particular service. In the Auctions Third Report & Order, we determined that eligible designated entities in the nationwide narrowband PCS auction would receive a 25 percent bidding credit. In the regional narrowband PCS auction designated entities would receive a 40 percent bidding credit. For broadband PCS, the bidding credits would vary according to the type of qualifying designated entity that applied (i.e., a small business received a 10 percent bidding credit, a business owned by minorities and/or women received a 15 percent bidding credit, and a small business owned by women and/or minorities received an aggregated bidding credit of 25 percent). For the Interactive Video and Data Service (IVDS), we adopted a 25 percent bidding credit in each market for women-owned and minority-owned businesses. 130. We propose to offer a 10 percent bidding credit to small businesses bidding on any of the ten-channel blocks within each MTA. We believe these bidding credits will help, along with other provisions proposed below, achieve the objectives of Congress by providing small businesses, including women-owned and minority-owned small businesses, with a meaningful opportunity to obtain licenses in the 900 MHz SMR auction, while taking into account the concerns of incumbents within the DFAs. While some discount is needed to put small businesses on equal footing with other larger applicants, considering the large number of licenses available in this service (i.e., 1,020), we believe it may be unnecessary to provide a higher bidding credit, such as that provided for certain designated entities in regional narrowband PCS. In narrowband PCS and broadband PCS, we limited the channel blocks on which bidding credits were available to designated entities. In IVDS, we permitted the use of bidding credits on both available channels, yet imposed a limit of one bidding credit per service area. Due to the characteristics of the 900 MHz SMR service, we are proposing a departure from these other service-specific auction rules. We propose to offer bidding credits for eligible designated entities on all channel blocks in each MTA, rather than limiting this measure to certain blocks. Due to the presence of incumbents throughout all blocks, it may be impractical to choose certain blocks for bidding credits that would not affect the incumbents occupying those blocks. Additionally, we believe that we would be providing greater opportunities for small businesses if we provide bidding credits across all blocks. 131. We seek comment on this proposal. Specifically, is a 10 percent credit sufficient to enhance bidding opportunities? Also, how should the presence of incumbents on all channel blocks affect the availability of bidding credits on all blocks? We observe that in auctions conducted to date, bidding credits have been available for women and minority- owned applicants, with installment payments available for both women and minority-owned businesses and small businesses. The Commission has adopted a 10 percent bidding credit for broadband PCS applicants on the C and F blocks. In auctions where bidding credits for women and minorities have been available, participation and success in spectrum-based auctions have varied. For example, in nationwide narrowband PCS, a 25 percent bidding credit did not produce successful bidders among women and minority-owned applicants. In regional narrowband PCS, four of the nine winning bidders relied on a 40 percent bidding credit and installment payments to obtain licenses. Our auction experience has to date not included our current proposal to provide a small business bidding credit available on all blocks. 132. As discussed above, we propose to limit eligibility for bidding credits to small businesses and we also seek comment on whether this eligibility should be expanded to include businesses owned by minorities and/or women, even if they do not fall within our small business size standards for 900 MHz SMRs. In the event that we modify our bidding credit eligibility proposal to include minority and women-owned businesses, we also seek comment on a second bidding credit alternative, which would entitle small businesses, and minority and women-owned businesses to receive bidding credits on the five least encumbered blocks in each MTA. In the event that we adopt our proposal to limit bidding credits to small businesses, should we also limit availability of the credit to the channel blocks with the fewest incumbents, or would this limitation dilute the effectiveness of a small business credit as a means of attracting broad designated entity participation in the 900 MHz SMR service? What bidding credit amounts should apply to women and minority-owned businesses and small businesses? Should women-owned and minority-owned businesses that are also small businesses receive an aggregated bidding credit? We seek comment on the ramifications of each proposal for the incumbents in each block. Finally, we seek comment on any possible alternative bidding credit schemes. 3. Reduced Down Payments/Installment Payments 133. We propose to adopt an installment payment option for small businesses that are winning bidders in the 900 MHz SMR auction. As we noted in the Auctions Second Report & Order, allowing installment payments reduces the amount of private financing needed by prospective small business licensees and therefore mitigates the effect of limited access to capital by small businesses, especially those owned by minorities and/or women. Under this proposal, licensees who qualify for installment payments would be entitled to pay their winning bid amount in installments over the term of the license, with interest charges to be fixed at the time of licensing at a rate equal to the rate for ten-year U.S. Treasury obligations plus 2.5 percent. Under this proposed rule, qualified licensees would make interest-only payments during the first two years of the license term. Timely payment of all installments would be a condition of the license grant and failure to make such timely payment would be grounds for revocation of the license. 134. Additionally, we tentatively conclude that small businesses that are eligible for installment payments may pay a reduced down payment (five percent of the winning bid) five days after the auction closes, with the remaining five percent down payment due five days after Public Notice that the license is ready for grant. Under this proposal, the Commission would grant the license within ten (10) business days after receiving such down payment. We seek comment on these payment procedures. If we expand our installment payment eligibility proposal to women-owned and minority-owned entities, should we also provide them with reduced down payments provisions and, if so, on what terms? In the event we adopt provisions for minority and women-owned applicants, should enhanced installment payments be made available? 4. Eligibility for Bidding Credits, Installment Payments and Reduced Down Payments 135. We propose to limit eligibility for bidding credits, installment payments and reduced down payments to small businesses, including those owned by members of minority groups and women and those rural telephone companies that meet our small business size standards. As discussed below, we propose to define small businesses as those entities with less than $3 million in average gross revenues for the preceding three years. We do not believe that it is necessary to develop different eligibility criteria for minority and women- owned entities that do not meet our small business size standards in order to achieve the goals of Section 309(j) in the 900 MHz SMR service. Nor do we believe that enhanced bidding credits or other measures for small businesses owned by minorities and/or women are necessary for this service. We believe that providing credits on all blocks and lowering the gross revenue threshold for small businesses, as discussed in  130, supra, will, in turn, create even more opportunities for minorities and women. For example, U.S. Census Data shows that approximately 99% of all women-owned businesses and 99% of all minority-owned businesses generated net receipts of $1 million or less. Thus, we expect that we will capture the majority of minority and women-owned businesses within this category. Moreover, in light of Congress's instruction to "design and test multiple alternative methodologies" we believe that the 900 MHz SMR service may be a suitable service in which to test more uniform measures, because capital entry requirements are expected to be lower than PCS and the spectrum is contaminated by incumbents who will not be required to relocate. 136. In designing our auction rules for broadband PCS, we observed that the different capital requirements of each spectrum-based service would influence our decision as to the types of provisions necessary for designated entities. In that context, we decided that lack of access to capital for women and minorities becomes especially problematic for very costly spectrum-based services, such as broadband PCS and nationwide narrowband PCS. As a result, we found that women and minorities could not overcome their difficulties in accessing capital without additional provisions. We also decided that such targeted provisions may not be necessary in other less costly spectrum-based services. Our expectation is that while 900 MHz MTA service may be a capital-intensive undertaking, it should require considerably less capital than PCS, thereby providing greater opportunities for participation by smaller businesses, including those owned by women and minorities. However, to enhance our understanding of the capital requirements the 900 MHz SMR service is likely to entail, we seek comment on the projected costs associated with acquisition, construction and operation of 900 MHz MTA licenses. In addition, to gain some insight into whether the level of small business participation in the current 900 MHz SMR service has resulted in opportunities for women and/or minority-owned businesses to play a meaningful role in this service, we ask for comment on the composition of existing 900 MHz SMR providers. What proportion of existing 900 MHz SMR businesses are owned by women or minorities? In this respect, we observe that the 900 MHz networkds built by RAM and Geotek have relied to a certain extent upon entering into management agreements with local 900 MHz SMR operators. We ask for comment as to what extent participants in 900 MHz SMR networks have been small businesses owned by minorities and women. What is the likelihood that such management agreements are likely to serve as a vehicle for participation in the 900 MHz SMR service by minority and women-owned businesses? 137. Whether or not we adopt our proposal only for small businesses, we intend to continue to request bidder information on the short-form filings as to minority and/or women- owned status, and, in analyzing the applicant pool and the auction results, we will monitor whether we have accomplished substantial participation by minorities and women through the broad provisions available to small businesses. This will also assist us in preparing our report to Congress on the success of designated entities in auctions. If bidding credits only for small businesses proves unsuccessful in encouraging licenses won by a significant number of women and minority-owned entities, we retain discretion to tailor our approach for future auctions. We seek comment on this monitoring proposal. 138. Small Business Definition. In the Auctions Second Memorandum Opinion & Order, we stated we would define eligibility requirements for small businesses on a service- specific basis, taking into account the capital requirements and other characteristics of each particular service in establishing the appropriate threshold. With respect to eligibility in the 900 MHz auction for provisions available to small businesses, we believe that, because the 900 MHz SMR service is expected to be less capital-intensive than broadband PCS and regional narrowband PCS, where we adopted a $40 million threshold, and it encompasses a smaller amount of spectrum than PCS and less area than regional narrowband PCS, a much lower gross revenue threshold is warranted. Therefore, we propose to define a small business as an entity that, together with affiliates and attributable investors, has average gross revenues for the three preceding years of less than $3 million. We believe this standard is appropriate for 900 MHz SMR service because build-out costs are likely to be much lower than those for broadband PCS and regional narrowband PCS. Additionally, the license supply (1,020) is more abundant and we believe that the costs of acquiring a 900 MHz SMR license are lower than for broadband or narrowband regional PCS licenses. We believe that many of the incumbents already licensed in the 900 MHz SMR service will fall within the $3 million definition of small business. 139. This small business definition is a variation of the definition used for broadband PCS, and is generally supported by AMTA. We seek comment on this proposal. Is this an appropriate threshold? Should it be higher or lower, based on the types of companies that are likely to benefit from the special provisions proposed here? We also tentatively conclude that we will consider the revenues of affiliates and certain investors and we propose to apply the 25 percent attribution threshold and affiliation rules similar to whose used in the PCS auction rules. In other words, we will not attribute the gross revenues of investors that hold less than a 25 percent interest in the applicant, but we will include the gross revenues of the applicant's affiliates and investors with ownership interests of 25 percent or more in the applicant in determining whether an applicant qualifies as a small business. Is a different attribution threshold warranted for the 900 MHz SMR service? We seek comment on these issues. 140. If we adopt separate provisions for minority-owned and women-owned entities, we also seek comment on whether we should adopt the definition of minority-owned businesses and women-owned businesses contained in Section 1.2110(b)(2) of the Commission's rules, i.e., businesses in which minorities and /or women who control the applicant, have at least 50.1 percent equity ownership and, in the case of a corporate applicant, a 50.1 percent voting interest. Under this rule, every general partner in a partnership either must be a minority and/or woman who individually or together own at least 50.1 percent of the partnership equity. 5. Transfer Restrictions and Unjust Enrichment Provisions 141. In the Auctions Fifth Report & Order, we adopted restrictions on the transfer or assignment of licenses to ensure that designated entities do not take advantage of special provisions by immediately assigning or transferring control of their licenses. We propose to adopt these restrictions on transfer and assignment of licenses won by designated entities. Under this proposal, a designated entity would be prohibited from voluntarily assigning or transferring control of its license to any other entity during the three years after license grant. In addition, in the fourth and fifth years of the license term, the designated entity would only be able to assign or transfer control of its license to another qualified designated entity. Finally, if a designated entity were to assign or transfer its license during years four or five of the license term, no unjust enrichment could be gained through the transfer. Therefore, if the entity to which the designated entity transfers/assigns the license is not eligible for the same provisions, then the difference would have to be paid back to the U.S. Treasury as a condition of approval of the transfer or assignment. We seek comment on these proposals. 142. For the remainder of the license term, we propose to continue to impose unjust enrichment rules on designated entities. The Commission's unjust enrichment provisions are integral to the success of the special provisions provided to designated entities in the various auctionable services. In the Auctions Second Report & Order, we outlined unjust enrichment provisions applicable specifically to designated entities. We established these provisions to deter speculation and participation in the licensing process by those who do not intend to offer service to the public, or who intend to use our provisions to obtain a license at a lower cost than they otherwise would have to pay, and later to sell it for a profit. 143. Under this proposal, licensees seeking to transfer their licenses for profit, as a condition to approval of the transfer, would have to remit to the government a payment equal to a portion of the total value of the benefit conferred by the government. Therefore, if a designated entity making installment payments sells its license to an entity that does not qualify as a designated entity, we would require payment of the remaining principal and any interest accrued through the date of assignment as a condition of the license assignment or transfer. If a transfer is made to another eligible designated entity, no penalty would be assessed against the original designated entity license holder. If bidding credits were awarded to a licensee, we will require the licensee seeking approval for a transfer of control or an assignment of license to a non-designated entity, or who proposes to take any other action relating to ownership or control that would result in loss of status as an eligible designated entity, to reimburse the government for the amount of the bidding credit before transfer of the license will be permitted. We propose to apply these payment requirements for the entire license term to ensure that designated entities will look first to other designated entities, when deciding to transfer their licenses. We seek comment on this proposal. 6. Rural Telephone Company Partitioning 144. Congress directed the Commission to ensure that, together with other designated entities, rural telephone companies have the opportunity to participate in the provision of spectrum-based services. Rural areas, because of their more dispersed populations, tend to be less profitable to serve than more densely populated urban areas. Therefore, service to these areas may not be a priority or economically feasible for many licensees. Rural telephone companies, however, are well positioned because of their existing infrastructure to serve these areas. Therefore, we propose a geographic partitioning scheme similar to that adopted in broadband PCS, which will encourage participation by rural telephone companies, thereby increasing the likelihood of rapid introduction of service to rural areas. 145. This partitioning scheme would prevent rural telephone companies from having to bid on the entire MTA license to obtain licenses covering their wireline service areas. In addition, partitioning would provide rural telephone companies with the flexibility to be able to serve areas in which they already provide service, while the remainder of the service area could be served by other providers. Under this proposal, rural telephone companies would be permitted to acquire partitioned 900 MHz SMR licenses in either of two ways: (1) they may form bidding consortia consisting entirely of rural telephone companies to participate in auctions, and then partition the licenses won among consortia participants; and (2) they may acquire partitioned 900 MHz SMR licenses from other licensees through private negotiation and agreement either before or after the auction. We would also require that partitioned areas conform to established geopolitical boundaries and that each area include all portions of the wireline service area of the rural telephone company applicant that lies within the service area. We also propose to use the definition for rural telephone companies implemented in the Auctions Fifth Report & Order for broadband PCS. Rural telephone companies would be defined as local exchange carriers having 100,000 or fewer access lines, including all affiliates. We seek comment on this proposal. 7. Other Provisions 146. Reduced Upfront Payments. We propose not to adopt a reduced upfront payment option in the 900 MHz SMR service for designated entities. Considering the other provisions adopted here (i.e., bidding credits, installments payments and reduced down payments) we believe a reduced upfront payment option is unnecessary and, in the absence of an entrepreneur's block, may be too costly to administer in the 900 MHz SMR service. Moreover, we want to ensure sincere bidding by all parties. We seek comment on this proposal. If we adopt provisions for minority and women-owned entities, should we apply a reduced upfront payment provision to those entities only? 147. Set-aside Spectrum. In the Auctions Fifth Report & Order we established entrepreneurs' blocks on which only qualified entrepreneurs, including designated entities, could bid. We tentatively conclude not to adopt an entrepreneurs' block for the 900 MHz SMR auction for several reasons. First, the large numbers of licenses available and relatively small spectrum allocations in the 900 MHz SMR service should allow for extensive small business participation. Second, unlike broadband PCS, we do not believe that the effectiveness of bidding credits, reduced down payments and installment payments will be diluted, due to the smaller capital outlay anticipated for this service. Third, it may be impractical to choose particular blocks to set aside for bidding solely by entrepreneurs, because each of the 20 channel blocks is encumbered in approximately 19 of the 46 DFAs. We request comment on this proposal. Are the capital requirements of this service anticipated to be so substantial that we should insulate certain blocks from very large bidders in order to provide meaningful opportunities for designated entities? VI. CONCLUSION 148. We believe that the service rules adopted in this Order and the auction proposals set forth for 900 MHz SMR licenses in the Further Notice will promote the public policy goals set forth by Congress. The rules and proposals should facilitate the rapid implementation of the 900 MHz SMR service, thus advancing the public interest by fostering economic growth of new competitive new services via efficient spectrum use. The proposed rules will allow the public to recover a portion of the value of the public spectrum, and will promote access to 900 MHz SMR services by consumers, producers, and new entrants by ensuring that designated entities will have genuine opportunities to participate in the auctions and in the provision of service. At the same time, we believe that the technical rules adopted and clarified herein strike the proper balance between the rights of incumbent licensees in the 900 MHz SMR spectrum, and new MTA licensees. VII. PROCEDURAL MATTERS A. Regulatory Flexibility Act 149. With respect to this Second Report & Order, pursuant to the Regulatory Flexibility Act of 1980, an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Notice of Proposed Rulemaking inGN Docket No. 93-252. Written comments on the IRFA were requested. The Commission's final analysis is as follows: 150. Need for and purpose of the action. This rulemaking proceeding was initiated to implement Sections 332 and 3(n), respectively, of the Communications Act, as amended. The rules adopted herein will carry out Congress's intent to establish a consistent regulatory framework for all commercial mobile radio service (CMRS). 151. Issues raised in response to the IRFA. No comments were submitted in response to the IRFA inGN Docket No. 93-252. 152. Significant alternatives considered and rejected. All significant alternatives have been addressed in the Second Report & Order, and the CMRS Third Report & Order. 153. With respect to this Second Further Notice of Proposed Rulemaking, an Initial Regulatory Flexibility Analysis is contained in Appendix B. As required by Section 603 of the Regulatory Flexibility Act, the Commission has prepared an Initial Regulatory Flexibility Analysis (IRFA) of the expected impact on small entities of the proposals suggested in this document. Written public comments are requested on the IRFA. These comments must be filed in accordance with the same filing deadlines as comments on the rest of the Further Notice of Proposed Rule Making, but they must have a separate and distinct heading designating them as responses to the Initial Regulatory Flexibility Analysis. The Secretary shall send a copy of this Further Notice of Proposed Rule Making, including the Initial Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business Administration in accordance with paragraph 603(a) of the Regulatory Flexibility Act. Pub. L. No. 96-354, 94 Stat. 1164, 5 U.S.C.  601 et. seq. (1981). B. Ex Parte Rules--Non-Restricted Proceeding 154. This is a non-restricted notice and comment rule making proceeding. Ex parte presentations are permitted except during the Sunshine Agenda period, provided they are disclosed as provided in Commission rules. See generally 47 C.F.R.  1.1202, 1.1203, and 1.1206(a). C. Comment Dates 155. Pursuant to applicable procedures set forth in Sections 1.415 and 1.419 of the Commission's Rules, 47 C.F.R.  1.415 and 1.419, interested parties may file comments on or before May 24, 1995, and reply comments on or before June 1, 1995. To file formally in this proceeding, you must file an original and four copies of all comments, reply comments, and supporting comments. If you want each Commissioner to receive a personal copy of your comments, you must file an original plus nine copies. You should send comments and reply comments to Office of the Secretary, Federal Communications Commission, Washington, D.C. 20554. Comments and reply comments will be available for public inspection during regular business hours in the FCC Reference Center of the Federal Communications Commission, Room 239, 1919 M Street, N.W., Washington, D.C. 20554. D. Ordering Clauses 156. Authority for issuance of this Second Further Notice of Proposed Rule Making is contained in Section 4(i), 303(r), and 309(j) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 303(r) and 309(j). 157. Accordingly, IT IS ORDERED that Part 90 of the Commission's Rules is amended as set forth in the attached Appendix A. 158. IT IS FURTHER ORDERED that the rules changes made herein WILL BECOME EFFECTIVE 30 days after their publication in the Federal Register. This action is taken pursuant to Sections 4(i) and 303(r) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i) and 303(r). E. Contact Person 159. For further information concerning this proceeding, contact David Furth or Rosalind K. Allen at (202) 418-0620 (Wireless Telecommunications Bureau, Commercial Wireless Division). FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary APPENDIX A FINAL RULES Part 90 of Chapter I of Title 47 of the Code of Federal Regulations is amended as follows: PART 90 -- PRIVATE LAND MOBILE RADIO SERVICES 1. The authority citation for Part 90 is revised to read as follows: Authority: Sections 4, 303, 309 and 332, 48 Stat. 1066, 1082, as amended; 47 U.S.C.  154, 303, 309 and 332, unless otherwise noted. 2. Section 90.7 is amended by adding the definition for "MTA license" following the definition for "Mobile station" to read as follows:  90.7 Definitions. * * * * * MTA-based license or MTA license. A license authorizing the right to use a specified block of SMR spectrum within one of the 51 Major Trading Areas ("MTAs"), as embodied in Rand McNally's Trading Area System MTA Diskette and geographically represented in the map contained in Rand McNally's Commercial Atlas & Marketing Guide (the "MTA Map.") The MTA Listings, the MTA Map and the Rand McNally/AMTA license agreement are available for public inspection at the Wireless Telecommunications Bureau's public reference room, Room 628, 1919 M Street N.W. Washington D.C. 20554. * * * * * 3. Section 90.617 is amended by revising paragraph (d), introductory text, to read as follows:  90.617 Frequencies in the 809.750-824/854.750-869 MHz, and 896-901/935-940 MHz bands available for trunked or conventional system use in non-border areas. * * * * * (d) The channels listed in Tables 4A and 4B are available only to eligibles in the SMR category, which consists of Specialized Mobile Radio (SMR) stations and eligible end users. The frequencies listed in Table 4B are available to SMR eligibles desiring to be authorized on MTA service areas in accordance with Section 90.661. SMR licensees licensed on the channels listed in Table 4B on or before August 9, 1994 may continue to utilize these frequencies within their existing service areas, as provided in Section 90.661. This paragraph deals with the assignment of frequencies only in areas farther than 110 km (68.4 miles) from the U.S./Mexico border and farther than 140 km (87 miles) from the U.S./Canada border. See  90.619 for the assignment of SMR frequencies in these border areas. For stations located within 113 km (70 miles) of Chicago, channels 401-600 will be assigned in groups as outlined in Table 4C. * * * * * 4. Section 90.631 is amended by revising paragraphs (f) and (i) to read as follows:  90.631 Trunked systems loading, construction and authorization requirements. * * * * * (f) If a station is not placed in permanent operation, in accordance with the technical parameters of the station authorization, within one year, except as provided in  90.629, its license cancels automatically and must be returned to the Commission. For purposes of this section, a base station is not considered to be placed in operation unless at least two associated mobile stations, or one control station and one mobile station, are also placed in operation. An SMR licensee with facilities that have discontinued operations for 90 continuous days is presumed to have permanently discontinued operations, unless the licensee notifies the FCC otherwise prior to the end of the 90 day period and provides a date on which operation will resume, which date must not be in excess of 30 additional days. * * * * * (i) For SMRS category trunked systems licensed in the 896-901/935-940 MHz band (other than MTA-licensed systems), if at the end of the initial five-year license term the licensee of such a trunked system has not satisfied the loading requirements of paragraph (b) of this section, the licensee requesting renewal of its license will be granted a renewal for only a two-year period. Regardless of the date of grant of the two-year renewal, the licensee will be required to comply fully with the minimum requirements set forth in paragraph (b) of this section at the end of the two-year renewal term. As an exception to this requirement, if the licensee obtains the MTA license covering its assigned spectrum in accordance with Sections 90.661 through 90.671, these loading requirements will no longer be applicable and the coverage requirements of Section 90.665 will govern. 5. Subpart S is amended by adding a new heading following Section 90.659 to read as follows: POLICIES GOVERNING THE LICENSING AND USE OF MTA-BASED SMR SYSTEMS IN THE 896-901/935-940 MHZ BAND. 6. A new Section 90.661 is added to Subpart S to read as follows:  90.661 MTA-based SMR service areas. MTA licenses for SMR spectrum blocks in the 896-901/935-940 MHz band listed in Table 4B of Section 90.617(d) are available in 51 Major Trading Areas (MTAs) as defined in Section 90.7. Within these MTAs, licenses will be authorized in ten channel blocks as specified in Table 4B of Section 90.617(d) through the competitive bidding procedures described in Subpart U of this Part. 7. A new Section 90.663 is added to Subpart S to read as follows:  90.663 MTA-based SMR system operations. (a) MTA-based licensees authorized in the 896-901/935-940 MHz band pursuant to Section 90.661 may construct and operate base stations using any frequency identified in their spectrum block anywhere within their authorized MTA, provided that: (1) The MTA licensee affords protection, in accordance with Section 90.621(b), to all sites for which applications were filed on or prior to August 9, 1994. (2) The MTA licensee complies with any rules and international agreements that restrict use of frequencies identified in their spectrum block, including the provisions of Section 90.619 relating to U.S./Canadian and U.S./Mexican border areas. (3) The MTA licensee limits its field strength at any location on the border of the MTA service area in accordance with Section 90.671 and masks its emissions in accordance with Section 90.669. (b) In the event that the authorization for a previously authorized co-channel station within the MTA licensee's authorized spectrum block is terminated or revoked, the MTA licensee's co-channel obligations to such station will cease upon deletion of the facility from the Commission's licensing record. The MTA licensee then will be able to construct and operate base stations using such frequency. 8. A new Section 90.665 is added to Subpart S to read as follows:  90.665 Authorization, construction and implementation of MTA licenses. (a) MTA licenses in the 896-901/935-940 MHz band will be issued for a term not to exceed ten years. (b) MTA licensees in the 896-901/935-940 MHz band will be permitted five years to construct their stations. This five-year period will commence with the issuance of the MTA- wide authorization and will apply to all of the licensee's stations within the MTA spectrum block, including any stations that may have been subject to an earlier construction deadline arising from a pre-existing authorization. (c) MTA licensees in the 896-901/935-940 MHz band must, within three years, construct and place into operation a sufficient number of base stations to provide coverage to at least one-third of the population of the MTA. Further, each MTA licensee must provide coverage to at least two-thirds of the population of the MTA within five years or, alternatively, submit a showing to the Commission demonstrating that they are providing substantial service. (d) MTA licensees who fail to meet the coverage requirements imposed at either the third or fifth years of their construction period, or to make a convincing showing of substantial service, will forfeit their entire MTA license. 9. A new Section 90.667 is added to Subpart S to read as follows:  90.667 Grandfathering provisions for incumbent licensees. (a) These provisions apply to all 900 MHz SMR licensees who obtained licenses or filed applications on or before August 9, 1994 ("incumbent licensees"). An incumbent licensee's service area shall be defined by its originally-licensed 40 dBu signal strength contour. Incumbent licensees are permitted to add new transmit sites in this existing service area without prior notification to the Commission so long as their original 40 dBu signal strength contour is not expanded. Incumbents will be required to notify the Commission of any changes in technical parameters or additional stations constructed with a minor modification application. These minor modification applications will not be subject to public notice and petition to deny requirements or mutually exclusive applications. (b) Applications in the 900 MHz SMR service for secondary sites filed after August 9, 1994 shall be authorized on a secondary, non-interference basis to MTA licensee operations. No secondary sites shall be granted on this basis in an MTA once the MTA licensee has been selected. 10. A new Section 90.669 is added to Subpart S to read as follows:  90.669 Emission limits. (a) On any frequency in an MTA licensee's spectrum block that is adjacent to a non-MTA frequency, the power of any emission shall be attenuated below the transmitter power (P) by at least 43 plus 10 log10(P) decibels or 80 decibels, whichever is the lesser attenuation. NOTE: The measurements of emission power can be expressed in peak or average values, provided they are expressed in the same parameters as the transmitter power. (b) When an emission outside of the authorized bandwidth causes harmful interference, the Commission may, at its discretion, require greater attenuation than specified in this section. 11. A new Section 90.671 is added to Subpart S to read as follows:  90.671 Field strength limits. The predicted or measured field strength at any location on the border of the MTA service area for MTA licensees shall not exceed 40 dBuV/m unless all bordering MTA licensees agree to a higher field strength. MTA licensees are also required to coordinate their frequency usage with co-channel adjacent MTA licensees and all other affected parties. To the extent that a single entity obtains licenses for adjacent MTAs on the same channel block, it will not be required to coordinate its operations in this manner. In the event that this standard conflicts with the MTA licensee's obligation to provide co-channel protection to incumbent licensees under Section 90.621(b), the requirements of Section 90.621(b) shall prevail. APPENDIX B PROPOSED RULES 12. A new subpart U consisting of  90.801 through 90.814 is proposed to be added to Part 90 to read as follows: Subpart U -- Competitive Bidding Procedures for 900 MHz Specialized Mobile Radio Sec. 90.801 900 MHz SMR subject to competitive bidding. 90.802 Competitive bidding design for 900 MHz SMR licensing. 90.803 Competitive bidding mechanisms. 90.804 Aggregation of 900 MHz SMR licenses. 90.805 Withdrawal, default and disqualification payments. 90.806 Bidding application (FCC Form 175 and 175-S Short-form). 90.807 Submission of upfront payments and down payments. 90.808 Long-form applications. 90.809 License grant, denial, default, and disqualification. 90.810 Bidding credits for small businesses. 90.811 Reduced down payment for licenses won by small businesses. 90.812 Installment payments for licenses won by small businesses. 90.813 Procedures for partitioned licenses. 90.814 Definitions.  90.801 900 MHz SMR subject to competitive bidding. Mutually exclusive initial applications to provide 900 MHz SMR service are subject to competitive bidding procedures. The general competitive bidding procedures found in 47 CFR Part 1, Subpart Q will apply unless otherwise provided in this part.  90.802 Competitive bidding design for 900 MHz SMR licensing. The Commission will employ a simultaneous multiple round auction design when choosing from among mutually exclusive initial applications to provide 900 MHz SMR service, unless otherwise specified by the Wireless Telecommunications Bureau before the auction.  90.803 Competitive bidding mechanisms. (a) Sequencing. The Commission will establish and may vary the sequence in which 900 MHz SMR licenses will be auctioned. (b) Grouping. All 900 MHz SMR licenses for each of the MTAs will be auctioned simultaneously, unless the Wireless Telecommunications Bureau announces, by Public Notice prior to the auction, an alternative auction scheme. (c) Minimum Bid Increments. The Commission will, by announcement before or during an auction, require minimum bid increments in dollar or percentage terms. (d) Stopping Rules. The Commission will establish stopping rules before or during multiple round auctions in order to terminate an auction within a reasonable time. (e) Activity Rules. The Commission will establish activity rules which require a minimum amount of bidding activity. In the event that the Commission establishes an activity rule in connection with a simultaneous multiple round auction, each bidder will be entitled to request and will be automatically granted a certain number of waivers of such rule during the auction.  90.804 Aggregation of 900 MHz SMR licenses. The Commission will license each 10-channel block in the 900 MHz SMR spectrum separately. Applicants may aggregate across spectrum blocks within the limitation specified in  20.6(b) of this Chapter.  90.805 Withdrawal, default and disqualification payments. (a) During the course of an auction conducted pursuant to  90.802, the Commission will impose payments on bidders who withdraw high bids during the course of an auction, who default on payments due after an auction closes, or who are disqualified. (b) Bid withdrawal prior to close of auction. A bidder who withdraws a high bid during the course of an auction will be subject to a payment equal to the difference between the amount bid and the amount of the winning bid the next time the license if offered by the Commission. No withdrawal payment would be assessed if the subsequent winning bid exceeds the withdrawn bid. This payment amount will be deducted from any upfront payments or down payments that the withdrawing bidder has deposited with the Commission. (c) Default or disqualification after close of auction. If a high bidder defaults or is disqualified after the close of such an auction, the defaulting bidder will be subject to the payment in paragraph (1) of this section plus an additional penalty equal to three (3) percent of the subsequent winning bid. If the subsequent winning bid exceeds the defaulting bidder's bid amount, the 3 percent payment will be calculated based on the defaulting bidder's bid amount. These amounts will be deducted from any upfront payments or down payments that the defaulting or disqualified bidder has deposited with the Commission.  90.806 Bidding application (FCC Form 175 and 175-S Short-form). All applicants to participate in competitive bidding for 900 MHz SMR licenses must submit applications on FCC Forms 175 and 175-S pursuant to the provisions of  1.2105 of this Chapter. The Wireless Telecommunications Bureau will issue a Public Notice announcing the availability of 900 MHz SMR licenses and, in the event that mutually exclusive applications are filed, the date of the auction for those licenses. This Public Notice also will specify the date on or before which applicants intending to participate in a 900 MHz SMR auction must file their applications in order to be eligible for that auction, and it will contain information necessary for completion of the application as well as other important information such as the materials which must accompany the Forms, any filing fee that must accompany the application or any upfront payment that will need to be submitted, and the location where the application must be filed. In addition to identifying its status as a small business or rural telephone company, each applicant must indicate whether it is a minority-owned entity, as defined in  90.814(g) and/or a women-owned entity.  90.807 Submission of upfront payments and down payments. (a) Bidders in the 900 MHz SMR auction will be required to submit an upfront payment of $0.02 per pop per MHz, in accordance with  1.2106 of this Chapter. (b) Winning bidders in a 900 MHz SMR auction must submit a down payment to the Commission in an amount sufficient to bring their total deposits up to 20 percent of their winning bids, and in accordance with  1.2107(b) of this Chapter, except for small businesses that are winning bidders, which are governed by  90.811.  90.808 Long-form applications. Each winning bidder will be required to submit a long-form application on FCC Form 600 within ten (10) business days after being notified by Public Notice that it is the winning bidder. Applications on FCC Form 600 shall be submitted pursuant to the procedures set forth in 90.119 of this Part and any associated Public Notices. Only auction winners (and rural telephone companies seeking partitioned licenses pursuant to agreements with auction winners under  90.813) will be eligible to file applications on FCC Form 600 for initial 900 MHz SMR licenses in the event of mutual exclusivity between applicants filing Form 175.  90.809 License grant, denial, default, and disqualification. (a) Except with respect to entities eligible for installment payments (see  90.812) each winning bidder will be required to pay the balance of its winning bid in a lump sum payment within five (5) business days following Public Notice that the license is ready for grant. The Commission will grant the license within ten (10) business days after receipt of full and timely payment of the winning bid amount. (b) A bidder who withdraws its bid subsequent to the close of bidding, defaults on a payment due, or is disqualified, will be subject to the payments specified in  90.805 of this Part or  1.2109 of this Chapter, as applicable. (c) MTA licenses pursued through competitive bidding procedures will be granted pursuant to the requirements specified in  90.166.  90.810 Bidding credits for small businesses. (a) A winning bidder that qualifies as a small business or a consortium of small businesses, (as defined in  90.814) may use a bidding credit of 10 percent to lower the cost of its winning bid on any of the blocks identified in  90.617(d), Table 4B of this Part. (b) Unjust Enrichment. (1) If a licensee that utilizes a bidding credit under this section seeks to assign or transfer control of its license to an entity not meeting the eligibility standards for bidding credits or seeks to make any other change in ownership that would result in the licensee no longer qualifying for bidding credits under this section, the licensee must seek Commission approval of such assignment, transfer or other ownership change. (2) If a licensee that utilizes a bidding credit under this section seeks to assign or transfer control of its license to an entity meeting the eligibility standards for lower bidding credits or seeks to make any other change in ownership that would result in the licensee qualifying for a lower bidding credit under this section, the licensee must seek Commission approval and reimburse the government for the difference between the amount of the bidding credit obtained by the licensee and the bidding credit for which the assignee, transferee or licensee is eligible under this section as a condition of the approval of such assignment, transfer or other ownership change.  90.811 Reduced down payment for licenses won by small businesses. Each winning bidder that qualifies as a small business shall make a down payment equal to ten percent of its winning bid (less applicable bidding credits); a winning bidder shall bring its total amount on deposit with the Commission (including upfront payment) to five percent of its net winning bid within five (5) business days after the auction closes, and the remainder of the down payment (five percent) shall be paid within five (5) business days following Public Notice that the license is ready for grant. The Commission will grant the license within ten (10) business days after receipt of the remainder of the down payment.  90.812 Installment payments for licenses won by small businesses. (a) Each licensee that qualifies as a small business may pay the remaining 90 percent of the net auction price for the license in installment payments pursuant to  1.2110(e) of this Chapter. (b) Interest shall be imposed based on the rate for ten-year U.S. Treasury obligations applicable on the date the license is granted, plus 2.5 percent; payments shall include interest only for the first two years and payments of interest and principal amortized over the remaining eight years of the license term. (c) Unjust Enrichment. (1) If a licensee that utilizes installment financing under this section seeks to assign or transfer control of its license to an entity not meeting the eligibility standards for installment payments, the licensee must make full payment of the remaining unpaid principal and any unpaid interest accrued through the date of assignment or transfer as a condition of approval. (2) If a licensee that utilizes installment financing under this section seeks to make any change in ownership structure that would result in the licensee losing eligibility for installment payments, the licensee shall first seek Commission approval and must make full payment of the remaining unpaid principal and any unpaid interest accrued through the date of such change as a condition of approval.  90.813 Procedures for partitioned licenses. (a) Notwithstanding  90.661, an applicant that is a rural telephone company, as defined in  90.814, may be granted a 900 MHz SMR license that is geographically partitioned from a separately licensed MTA, so long as the MTA applicant or licensee has voluntarily agreed (in writing) to partition a portion of the license to the rural telephone company. (b) If partitioned licenses are being applied for in conjunction with a license(s) to be awarded through competitive bidding procedures -- (1) The applicable procedures for filing short-form applications and for submitting upfront payments and down payments contained in this Part and Part 1 of this Chapter shall be followed by the applicant, who must disclose as part of its short-form application all parties to agreement(s) with or among rural telephone companies to partition the license pursuant to this section, if won at auction (see 47 CFR 1.2105(a)(2)(viii)); (2) Each rural telephone company that is a party to an agreement to partition the license shall file a long-form application for its respective, mutually agreed-upon geographic area together with the application for the remainder of the MTA filed by the auction winner. (c) If the partitioned license is being applied for as a partial assignment of the MTA license following grant of the initial license, request for authorization for partial assignment of a license shall be made pursuant to  90.153. (d) Each application for a partitioned area (long-form initial application or partial assignment application) shall contain a partitioning plan that must propose to establish a partitioned area to be licensed that meets the following criteria: (1) Conforms to established geopolitical boundaries (such as county lines); (2) Includes the wireline service area of the rural telephone company applicant; and (3) Is reasonably related to the rural telephone company's wireline service area. Note: A partitioned service area will be presumed to be reasonably related to the rural telephone company's wireline service area if the partitioned service area contains no more than twice the population overlap between the rural telephone company's wireline service area and the partitioned area. (e) Each licensee in each partitioned area will be responsible for meeting the construction requirements in its area (see  90.665).  90.814 Definitions. (a) Scope. The definitions in this section apply to  90.810 through 90.813, unless otherwise specified in those sections. (b) Small Business: Consortium of Small Businesses. (1) A small business is an entity that, together with its affiliates and persons or entities that hold attributable interests in such entity and their affiliates, has average gross revenues for the three preceding years of less than $3 million. (2) A small business consortium is conglomerate organization formed as a joint venture between or among mutually-independent business firms, each of which individually satisfies the definition of a small business in paragraphs (b)(1) and (b)(2) of this section. (c) Rural Telephone Company. A rural telephone company is a local exchange carrier having 100,000 or fewer access lines, including all affiliates. (d) Gross Revenues. Gross revenues shall mean all income received by an entity, whether earned or passive, before any deductions are made for costs of doing business (e.g., cost of goods sold), as evidenced by audited financial statements for the relevant number of calendar years preceding January 1, 1994, or, if audited financial statements were not prepared on a calendar-year basis, of the most recently completed fiscal years preceding the filing of the applicant's short-form application (Form 175). For applications filed after December 31, 1994, gross revenues shall be evidenced by audited financial statements for the preceding relevant number of calendar or fiscal years. If an entity was not in existence for all or part of the relevant period, gross revenues shall be evidenced by the audited financial statements of the entity's predecessor-in-interest or, if there is no identifiable predecessor-in-interest, unaudited financial statements certified by the applicant as accurate. (e) Businesses Owned by Members of Minority Groups and/or Women. A business owned by members of minority groups and/or women is one in which minorities and/or women who are U.S. citizens control the applicant, have at least 50.1 percent equity ownership and, in the case of a corporate applicant, a 50.1 percent voting interest. For applicants that are partnerships, every general partner either must be a minority and/or woman (or minorities and/or women) who are U.S. citizens and who individually or together own at least 50.1 percent of the partnership equity, or an entity that is 100 percent owned and controlled by minorities and/or women who are U.S. citizens. The interests of minorities and women are to be calculated on a fully-diluted basis; agreements such as stock options and convertible debentures shall be considered to have a present effect on the power to control an entity and shall be treated as if the rights thereunder already have been fully exercised. However, upon a demonstration that options or conversion rights held by non-controlling principals will not deprive the minority and female principals of a substantial financial stake in the venture or impair their rights to control the designated entity, a designated entity may seek a waiver of the requirement that the equity of the minority and female principals must be calculated on a fully-diluted basis. (f) Members of Minority Groups. Members of minority groups includes Blacks, Hispanics, American Indians, Alaskan Natives, Asians, and Pacific Islanders. (g) Nonattributable Equity. Nonattributable equity shall mean: (i) For corporations, voting stock or non-voting stock that includes no more than 25 percent of the total voting equity, including the right to vote such stock through a voting trust or other arrangement; (ii) For partnerships, joint ventures and other non-corporate entities, limited partnership interests and similar interests that do not afford the power to exercise control of the entity. (h) Affiliate. (1) Basis for Affiliation. An individual or entity is an affiliate of an applicant or of a person holding an attributable interest in an applicant (both referred to herein as "the applicant") if such individual or entity: (i) Directly or indirectly controls or has the power to control the applicant, or (ii) Is directly or indirectly controlled by the applicant, or (iii) Is directly or indirectly controlled by a third party or parties that also controls or has the power to control the applicant, or (iv) Has an "identity of interest" with the applicant. (2) Nature of control in determining affiliation. (i) Every business concern is considered to have one or more parties who directly or indirectly control or have the power to control it. Control may be affirmative or negative and it is immaterial whether it is exercised so long as the power to control exists. Example for paragraph (h)(2)(i). An applicant owning 50 percent of the voting stock of another concern would have negative power to control such concern since such party can block any action of the other stockholders. Also, the bylaws of a corporation may permit a stockholder with less than 50 percent of the voting to block any actions taken by the other stockholders in the other entity. Affiliation exists when the applicant has the power to control a concern while at the same time another person, or persons, are in control of the concern at the will of the party or parties with the power of control. (ii) Control can arise through stock ownership; occupancy of director, officer or key employee positions; contractual or other business relations; or combinations of these and other factors. A key employee is an employee who, because of his/her position in the concern, has a critical influence in or substantive control over the operations or management of the concern. (iii) Control can arise through management positions where a concern's voting stock is so widely distributed that no effective control can be established. Example for paragraph (h)(2)(iii). In a corporation where the officers and directors own various size blocks of stock totaling 40 percent of the corporation's voting stock, but no officer or director has a block sufficient to give him or her control or the power to control and the remaining 60 percent is widely distributed with no individual stockholder having a stock interest greater than 10 percent, management has the power to control. If persons with such management control of the other entity are persons with attributable interests in the applicant, the other entity will be deemed an affiliate of the applicant. (3) Identity of interest between and among persons. Affiliation can arise between or among two or more persons with an identity of interest, such as members of the same family or persons with common investments. In determining if the applicant controls or is controlled by a concern, persons with an identity of interest will be treated as though they were one person. Example 1. Two shareholders in Corporation Y each have attributable interests in the same SMR application. While neither shareholder has enough shares to individually control Corporation Y, together they have the power to control Corporation Y. The two shareholders with these common investments (or identity of interest) are treated as though they are one person and Corporation Y would be deemed an affiliate of the applicant. Example 2. One shareholder in Corporation Y, shareholder A, has an attributable interest in a SMR application. Another shareholder in Corporation Y, shareholder B, has a nonattributable interest in the same SMR application. While neither shareholder has enough shares to individually control Corporation Y, together they have the power to control Corporation Y. Through the common investment of shareholders A and B in the SMR application, Corporation Y would still be deemed an affiliate of the applicant. (i) Spousal Affiliation. Both spouses are deemed to own or control or have the power to control interests owned or controlled by either of them, unless they are subject to a legal separation recognized by a court of competent jurisdiction in the United States. (ii) Kinship Affiliation. Immediate family members will be presumed to own or control or have the power to control interests owned or controlled by other immediate family members. In this context "immediate family member" means father, mother, husband, wife, son, daughter, brother, sister, father- or mother-in-law, son- or daughter-in-law, brother- or sister-in-law, step-father, or -mother, step-brother, or -sister, step-son, or -daughter, half brother or sister. This presumption may be rebutted by showing that (A) The family members are estranged, (B) The family ties are remote, or (C) The family members are not closely involved with each other in business matters. Example for paragraph (h)(3)(ii). A owns a controlling interest in Corporation X. A's sister-in-law, B, has an attributable interest in an SMR application. Because A and B have a presumptive kinship affiliation, A's interest in Corporation X is attributable to B, and thus to the applicant, unless B rebuts the presumption with the necessary showing. (4) Affiliation through stock ownership. (i) An applicant is presumed to control or have the power to control a concern if he or she owns or controls or has the power to control 50 percent or more of its voting stock. (ii) An applicant is presumed to control or have the power to control a concern even though he or she owns, controls or has the power to control less than 50 percent of the concern's voting stock, if the block of stock he or she owns, controls or has the power to control is large as compared with any other outstanding block of stock. (iii) If two or more persons each owns, controls or has the power to control less than 50 percent of the voting stock of a concern, such minority holdings are equal or approximately equal in size, and the aggregate of these minority holdings is large as compared with any other stock holding, the presumption arises that each one of these persons individually controls or has the power to control the concern; however, such presumption may be rebutted by a showing that such control or power to control, in fact, does not exist. (5) Affiliation arising under stock options, convertible debentures, and agreements to merge. Stock options, convertible debentures, and agreements to merge (including agreements in principle) are generally considered to have a present effect on the power to control the concern. Therefore, in making a size determination, such options, debentures, and agreements will generally be treated as though the rights held thereunder had been exercised. However, neither an affiliate nor an applicant can use such options and debentures to appear to terminate its control over another concern before it actually does so. Example 1 for paragraph (h)(5). If company B holds an option to purchase a controlling interest in company A, who holds an attributable interest in an SMR application, the situation is treated as though company B had exercised its rights and had become owner of a controlling interest in company A. The gross revenues of company B must be taken into account in determining the size of the applicant. Example 2 for paragraph (h)(5). If a large company, BigCo, holds 70% (70 of 100 outstanding shares) of the voting stock of company A, who holds an attributable interest in an SMR application, and gives a third party, SmallCo, an option to purchase 50 of the 70 shares owned by BigCo, BigCo will be deemed to be an affiliate of company, and thus the applicant, until SmallCo actually exercises its options to purchase such shares. In order to prevent BigCo from circumventing the intent of the rule which requires such options to be considered on a fully diluted basis, the option is not considered to have present effect in this case. Example 3 for paragraph (h)(5). If company A has entered into an agreement to merge with company B in the future, the situation is treated as though the merger has taken place. (6) Affiliation under voting trusts. (i) Stock interests held in trust shall be deemed controlled by any person who holds or shares the power to vote such stock, to any person who has the sole power to sell such stock, and to any person who has the right to revoke the trust at will or to replace the trustee at will. (ii) If a trustee has a familial, personal or extra-trust business relationship to the grantor or the beneficiary, the stock interests held in trust will be deemed controlled by the grantor or beneficiary, as appropriate. (iii) If the primary purpose of a voting trust, or similar agreement, is to separate voting power from beneficial ownership of voting stock for the purpose of shifting control of or the power to control a concern in order that such concern or another concern may meet the Commission's size standards, such voting trust shall not be considered valid for this purpose regardless of whether it is or is not recognized within the appropriate jurisdiction. (7) Affiliation through common management. Affiliation generally arises where officers, directors, or key employees serve as the majority or otherwise as the controlling element of the board of directors and/or the management of another entity. (8) Affiliation through common facilities. Affiliation generally arises where one concern shares office space and/or employees and/or other facilities with another concern, particularly where such concerns are in the same or related industry or field of operations, or where such concerns were formerly affiliated, and through these sharing arrangements one concern has control, or potential control, of the other concern. (9) Affiliation through contractual relationships. Affiliation generally arises where one concern is dependent upon another concern for contracts and business to such a degree that one concern has control, or potential control, of the other concern. (10) Affiliation under joint venture arrangements. (i) A joint venture for size determination purposes is an association of concerns and/or individuals, with interests in any degree or proportion, formed by contract, express or implied, to engage in and carry out a single, specific business venture for joint profit for which purpose they combine their efforts, property, money, skill and knowledge, but not on a continuing or permanent basis for conducting business generally. The determination whether an entity is a joint venture is based upon the facts of the business operation, regardless of how the business operation may be designated by the parties involved. An agreement to share profits/losses proportionate to each party's contribution to the business operation is a significant factor in determining whether the business operation is a joint venture. (ii) The parties to a joint venture are considered to be affiliated with each other. APPENDIX C INITIAL REGULATORY FLEXIBILITY ANALYSIS As required by Section 603 of the Regulatory Flexibility Act, the Commission has prepared an Initial Regulatory Flexibility Analysis (IRFA) of the expected impact on small entities of the policies and rules proposed in this Further Notice of Proposed Rule Making. Written public comments are requested on the IRFA. Reason for Action: This rule making proceeding was initiated to secure comment on proposals for establishing a flexible regulatory scheme for the 900 MHz Specialized Mobile Radio (SMR) service that would promote efficient licensing and enhance the service's competitive potential in the commercial mobile radio marketplace. The proposals advanced in the Second Further Notice of Proposed Rule Making are also designed to implement Congress's goal of regulatory symmetry in the regulation of competing commercial mobile radio services as described in Sections 3(n) and 332 of the Communications Act, 47 U.S.C.  153(n), 332, as amended by Title VI of the Omnibus Budget Reconciliation Act of 1993 (Budget Act). The Commission also seeks to adopt rules regarding competitive bidding in the 900 MHz SMR service based on Section 309(j) of the Communications Act, 47 U.S.C.  309(j), which delegates authority to the Commission to use auctions to select among mutually exclusive initial applications in certain services, including 900 MHz SMR. Objectives: The Commission proposes to adopt rules for the 900 MHz SMR service that are intended to promote the growth of incumbent 900 MHz SMR systems, and emerging MTA SMR licensees, and to enhance the ability of all SMR providers to compete in the larger commercial mobile services market. The Further Notice of Proposed Rule Making seeks to establish competitive bidding procedures and a new licensing mechanism for the 900 MHz SMR service that will expedite service to the public and promote competition in the CMRS marketplace. Legal Basis: The proposed action is authorized under the Budget Act, Pub. L. No. 103-66, Title VI, 6002, and Sections 2(a), 3(n), 4(i), 302, 303(g), 303(r), 309(i), 309(j), 332(a), 332(c), and 332(d) of the Communications Act of 1934, 47 U.S.C.  152(a), 153(n), 154(i), 302, 303(g), 303(r), 309(i), 309(j), 332(a), 332(c) and 332(d), as amended. Reporting, Recordkeeping, and Other Compliance Requirements: Under the proposal contained in the Further Notice of Proposed Rule Making, SMR licensees who obtain MTA- based licenses may be required to report information regarding location of their facilities and coverage of their service areas. SMR applicants seeking treatment as "designated entities" may also be subject to reporting and recordkeeping requirements to demonstrate compliance with our competitive bidding rules. Federal Rules Which Overlap, Duplicate or Conflict With These Rules: None. Description, Potential Impact, and Number of Small Entities Involved: The Further Notice of Proposed Rule Making potentially affects numerous small entities already operating 900 MHz SMR systems in Designated Filing Areas that will co-exist with 900 MHz SMR MTA licensees. The competitive bidding proposals contained in the Further Notice of Proposed Rule Making also could affect small entities seeking initial licenses in the 900 MHz SMR service. The Further Notice of Proposed Rule Making proposes special provisions in the Commission's auction rules to benefit "designated entity" applicants, including small businesses. After evaluating comments filed in response to the Further Notice of Proposed Rule Making, the Commission will examine further the impact of all rule changes on small entities and set forth its findings in the Final Regulatory Flexibility Analysis. Significant Alternatives Minimizing the Impact on Small Entities Consistent with the Stated Objectives: This Further Notice of Proposed Rule Making solicits comment on a variety of alternatives. Any additional significant alternatives presented in the comments will also be considered. IRFA Comments: We request written public comment on the foregoing Initial Regulatory Flexibility Analysis. Comments must have a separate and distinct heading designating them as responses to the IRFA and must be filed by the deadlines provided in paragraph __ of this Further Notice of Proposed Rule Making. APPENDIX D PETITIONERS AND COMMENTERS COMMENTS FILED IN NOTICE OF PROPOSED RULEMAKING, PP DOCKET NO. 93- 253, 8 FCC RCD 7635 (1993), PERTAINING TO 900 MHZ SMR American Mobile Telecommunications Association, Inc. Geotek Communications, Inc. RAM Mobile Data USA Limited Partnership REPLY COMMENTS FILED IN NOTICE OF PROPOSED RULEMAKING, PP DOCKET NO. 93-253, 8 FCC RCD 7635 (1993), PERTAINING TO 900 MHZ SMR RAM Mobile Data USA Limited Partnership PETITIONS FOR RECONSIDERATION FILED IN THIRD REPORT AND ORDER,GN Docket NO. 93-252, 9 FCC RCD 7988 (1994), PERTAINING TO 900 MHZ SMR American Mobile Telecommunications Association, Inc. Geotek Communications, Inc. Personal Communications Industry Association RAM Mobile Data USA Limited Partnership Rand McNally & Company COMMENTS/OPPOSITIONS TO PETITIONS FOR RECONSIDERATION FILED IN THIRD REPORT AND ORDER,GN Docket NO. 93-252, 9 FCC RCD 7988 (1994), PERTAINING TO 900 MHZ SMR Motorola Personal Communications Industry Association REPLY TO COMMENTS/OPPOSITIONS TO PETITIONS FOR RECONSIDERATION FILED IN THIRD REPORT AND ORDER,GN Docket NO. 93-253, 9 FCC RCD 7988 (1994), PERTAINING TO 900 MHZ SMR Personal Communications Industry Association APPENDIX D (CONTINUED) PETITIONS FOR RECONSIDERATION FILED IN FIRST REPORT AND ORDER AND FURTHER NOTICE OF PROPOSED RULEMAKING, PR DOCKET NO. 89-553, 8 FCC RCD 1469 (1993) American Mobile Telecommunications Association, Inc. EX PARTE FILINGS IN FIRST REPORT AND ORDER AND FURTHER NOTICE OF PROPOSED RULEMAKING, PR DOCKET NO. 89-553, 8 FCC RCD 1469 (1993), AND THIRD REPORT AND ORDER, GN Docket NO. 93-252, 9 FCC RCD 7988 (1994), PERTAINING TO 900 MHZ SMR American Mobile Telecommunications Association, Inc. Geotek Communications, Inc. Personal Communications Industry Association RAM Mobile Data USA Limited Partnership CONCURRING STATEMENT OF COMMISSIONER ANDREW C. BARRETT Title: In the Matter of Amendment of Parts 2 and 90 of the Commission s Rules to Provide for the Use of 200 Channels Outside the Designated Filing Areas in the 896-901 MHz and the 935-940 MHz Bands Allotted to the Specialized Mobile Radio Pool. In today s decision, the Commission issues the service rules for 900 MHz specialized mobile radio (SMR) as well as a Further Notice of Proposed Rule Making (FNPRM) with respect to the auction rules. I support this long-awaited decision which will assure the further deployment of this SMR service. However, I concur with respect to the auction rules. By contemplating an auction scheme that is premised on granting a bidding credit for small businesses only, it appears that the Commission is abandoning its policy and rules which were designed to enhance ownership opportunities in other technologies for those that have historically lacked access to capital. This retreat seems to be based solely on speculation about legislative and judicial activity and in some cases, on state referendum to abolish similar policies. Regardless of my personal views about the effectiveness of these rules, I believe that the Commission should not modify its policy or its rules until such time as it is directed to do so. In June 1994, the Commission took a monumental step to ensure the meaningful participation of small businesses, and female and minority-owned businesses in the provision of spectrum-auctionable services. I believed, at that time, that the Commission had made a commitment to ensuring the diversity of new service providers allocated through the auction process by addressing the historic capital formation problems that was a part of Congress s mandate which granted the Commission auction authority. While I remain committed to these objectives, I am concerned that the Commission has signaled a change in its policy by proposing a small business credit that would purportedly incorporate the majority of minority and female-owned businesses in the country. If that is the case, I am convinced that we will greatly diminish the effectiveness of our efforts to ensure diverse participation other than for those well-capitalized entities or individuals that make up a large portion of today's communications industry. In the end, I believe that this proposed modification of the auction rules for the service, could result in a 900 MHz SMR service that will lack participation by diverse service providers despite the Commission's efforts to the contrary. It is clear that the political winds have changed with respect to objectives which attempt to level the playing field for females and minorities. Moreover, the Commission has suffered set backs that have recently included the elimination of the minority tax certificate policy and the court s issuance of a stay for the C and F block auctions in broadband PCS. Despite these challenges, I believe the Commission must forge ahead until their efforts in this area are affirmatively impeded by legislative or judicial determination. To that end, we must not voluntarily retreat from our stated goal of increasing ownership opportunities for minorities and women in new services solely in anticipation of further legislative or judicial action. Further, while the FNPRM seeks to capture minorities and women under the umbrella of a very small business definition, I am concerned that the Commission s intentions may be misguided for several reasons. First, the Commission has a. statutory obligation to ensure the participation of minorities and female-owned businesses. We have determined in prior decisions that this requires that the Commission address access to capital issues for these entities I anticipate that the proposed bidding credit of 10% for small businesses in this service will only be marginally effective for the attraction of financing in a service that is allegedly not as capital intensive as PCS. Second, it is questionable whether the proposed bidding credit provides a small business with the appropriate tools to successfully bid against the larger and well-capitalized incumbents or even other potential bidders that have greater access to capital. Third, experience has demonstrated to the Commission that diverse participation in auctioned services is unrealistic unless the rules are designed to truly address capital formation issues. While successful participation by entities that have historically lacked access to capital is never guaranteed, we know that failure for these entities is likely without equal access to capital. Finally, while this FNPRM does not represent a final determination, it is an unmistakable indication that the Commission is not entirely comfortable with its prior decision with regard to race and gender-based preferences. Therefore, I urge potential SMR providers, and potential participants in future auctions, to heed this signal by providing information that is not purely anecdotal, but which will allow the Commission to recognize the potential adverse impact of the proposed revisions to the auction rules. In the end, I have no doubt that a failure to meet this challenge will result in the increasingly diminished participation of businesses that have been underrepresented in the past in the newer and more expensive technologies.