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File how2ftp (.txt & .wp) is in directory /pub/Bureaus/Miscellaneous/Public_Notices/ ***************************************************************** ******** FCC 95-501 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of ) ) Amendment of Part 90 of the ) PR Docket No. 93-144 Commission's Rules to Facilitate ) RM-8117, RM-8030 Future Development of SMR Systems) RM-8029 in the 800 MHz Frequency Band ) ) Implementation of Sections 3(n) and 322) GN Docket No. 93-252 of the Communications Act ) Regulatory Treatment of Mobile Services) ) Implementation of Section 309(j) ) PP Docket No. 93-253 of the Communications Act -- ) Competitive Bidding ) FIRST REPORT AND ORDER, EIGHTH REPORT AND ORDER, AND SECOND FURTHER NOTICE OF PROPOSED RULE MAKING Adopted: December 15, 1995 Released: December 15, 1995 Comment Date: January 16, 1996 Reply Comment Date: January 25, 1996 By the Commission: Commissioner Barrett issuing a statement. TABLE OF CONTENTS Paragraph I. INTRODUCTION 1 II. EXECUTIVE SUMMARY 3 III. BACKGROUND 4 IV. FIRST REPORT AND ORDER A. Wide-Area SMR Licensing in the 800 MHz Band 1. Spectrum Designated for Geographic Area Licensing 9 2. Service Areas 15 3. EA Spectrum Blocks 26 4. 800 MHz SMR Spectrum Aggregation Limit 38 5. Licensing in Mexican and Canadian Border Areas 45 B. Rights and Obligations of EA Licensees 1. Operational Flexibility 49 2. Spectrum Management Rights--Acquisition and Recovery of Channels Within Spectrum Blocks 54 3. License Term and Renewal Expectancy 63 4. Treatment of Incumbent Systems a. Mandatory Relocation 65 b. Incumbent Operational Flexibility 80 5. Co-channel Interference Protection a. Incumbent SMR Systems 89 b. Adjacent EA Licensees 93 6. Emission Masks 97 C. Construction Requirements 1. EA Licensees 102 2. Extended Implementation Authority 105 3. Interim Coverage Requirements 115 D. EA License Application Issues 1. Initial Eligibility 123 2. Regulatory Classification of EA Licensees 128 Paragraph E. Redesignation of Other 800 MHz Spectrum -- General Category Channels and Inter-Category Sharing 1. General Category Channels 134 2. Inter-Category Sharing 138 V. EIGHTH REPORT AND ORDER A. Auctionability of the Upper 10 MHz Block of 800 MHz SMR Spectrum 143 B. Competitive Bidding Methodology for Upper 10 MHz Block 1. Competitive Bidding Design a. Simultaneous Multiple Round Auctions 152 b. Stopping Rules 155 c. Activity Rules 161 d. License Grouping 171 2. Bidding Issues for Upper 10 MHz Block of 800 MHz SMR Spectrum a. Bidding Procedures 174 b. Bid Increments 177 c. Duration of Bidding Rounds 180 3. Procedural and Payment Issues a. Pre-Auction Application Procedures 183 b. Amendments and Modifications 191 c. Upfront Payments 196 d. Down Payments and Full Payments i. Down Payments 204 ii. Long Form Applications 208 iii. Petitions to Deny and Limitations on Settlements 211 e. Bid Withdrawal, Default, and Disqualification 215 4. Regulatory Safeguards a. Rules Prohibiting Collusion 222 b. Transfer Disclosure Requirements 231 c. Performance Requirements 234 C. Treatment of Designated Entities 1. Overview, Objectives, and the Impact of Adarand Construction v. Pe¤a 237 2. Special Provisions for Designated Entities 242 3. Partitioning 251 4. Set-Aside Spectrum 254 Paragraph VI. SECOND FURTHER NOTICE OF PROPOSED RULE MAKING A. Disaggregation of Channel Blocks on the Upper 200 Channels of 800 MHz SMR Spectrum 259 B. Partitioning on the Upper 200 Channels of 800 MHz SMR Spectrum264 C. Mandatory Relocation in the Upper 200 Channels 1. Distributing Relocation Costs Among EA Licensees 269 2. Relocation Costs 270 3. Comparable Facilities 279 4. Relocation Guidelines -- Good Faith Requirement During Mandatory Relocation 285 D. BETRS Eligibility on the Upper 200 Channels of 800 MHz SMR Spectrum 287 E. Licensing of Lower 80 and General Category Frequencies 1. Geographic Area Licensing 289 2. Service Areas 295 3. Channel Assignments 298 4. Operational and Eligibility Restrictions 302 5. Channel Aggregation Limit 306 6. Construction Requirements a. Construction Period 309 b. Coverage Requirements 312 7. Treatment of Incumbents 315 8. Co-Channel Interference Protection 318 9. Licensing in Mexican and Canadian Border Areas 319 F. Regulatory Classification of Lower 80 and General Category Channels320 G. Competitive Bidding Issues for Lower 80 and General Category Channels 1. Auctionability of Lower 80 and General Category Channels323 2. Competitive Bidding Design a. Bidding Methodology 326 b. License Grouping 331 c. Bidding Procedures 335 d. Rules Prohibiting Collusion 343 3. Procedural and Payment Issues a. Pre-Auction Application Procedures 346 b. Amendments and Modifications 353 Paragraph c. Upfront Payments 356 d. Down Payment and Full Payment 359 e. Bid Withdrawal, Default, and Disqualification 362 f. Long-Form Applications 364 g. Petitions to Deny and Limitations on Settlements 366 h. Transfer Disclosure Requirements 369 i. Performance Requirements 371 4. Treatment of Designated Entities a. Overview and Objectives 372 b. Eligibility for Designated Entity Provisions i. Small Businesses a) Special Provisions 375 b) Definition 377 ii. Minority-and Women-Owned Business Definition 381 iii. Reduced Down Payment 386 c. Bidding Credits 389 d. Installment Payments 394 e. Set-Aside Spectrum 398 f. Unjust Enrichment Provisions 400 g. Partitioning 402 VII. CONCLUSION VIII.PROCEDURAL MATTERS APPENDIX A FINAL RULES APPENDIX B REGULATORY FLEXIBILITY ANALYSIS APPENDIX C LIST OF PARTIES I. INTRODUCTION 1. In this First Report and Order, Eighth Report and Order, and Second Further Notice of Proposed Rule Making, we adopt final service and competitive bidding rules for the "upper 10 MHz block" of 800 MHz Specialized Mobile Radio (SMR) spectrum. We also adopt final service rules and request comment on additional service and competitive bidding rules for the remaining 800 MHz SMR spectrum and the General Category channels. The rules that we adopt here will enable us to implement a new framework for licensing of 800 MHz SMR systems. The First Report and Order establishes technical and operational rules for new licensees in the upper 10 MHz block with service areas defined by the U.S. Department of Commerce Bureau of Economic Analysis Economic Areas (EAs), and defines the rights of incumbent SMR licensees already operating or authorized to operate on these channels. The Eighth Report and Order establishes competitive bidding rules for the upper 10 MHz block. In the Second Further Notice of Proposed Rule Making we set forth proposals for new licensing rules and auction procedures for the "lower 80" SMR and General Category channels. 2. We believe that the rules adopted and proposed herein strike a fair and equitable balance between the competing interests of 800 MHz SMR licensees seeking to provide local service and those desiring to provide geographic area service. We further believe that these rules and policies will promote competition, while providing opportunities for incumbents to continue to pursue their business plans. In this connection, we believe that as a result of the rules we adopt today, SMR licensees will have the opportunity to deploy a multiplicity of technologies; thus, our rules also will promote technical innovation. We also believe that our new rules not only will eliminate a cumbersome regulatory scheme and result in expeditious licensing of the 800 MHz SMR service, but will further the congressionally mandated goal of regulatory symmetry between 800 MHz SMR licensees and other competing providers of Commercial Mobile Radio Services (CMRS). II. EXECUTIVE SUMMARY 3. This Executive Summary summarizes the principal decisions and proposals made regarding service and competitive bidding rules for the 800 MHz SMR service in this First Report and Order, Eighth Report and Order, and Second Further Notice of Proposed Rule Making. A. First Report and Order: Service Rules for the Upper 10 MHz Block  Designates the upper 10 MHz block of 800 MHz SMR spectrum for geographic area licensing in three spectrum blocks, consisting of a 120-channel block, a 60-channel block, and a 20-channel block, in each EA.  Establishes EA licenses that provide licensees with: (1) the right to construct at any available site within the EA, and to add, remove, or relocate site locations within the EA during the license term, on a "self-coordinated" basis; (2) the right to use any available spectrum within the EA licensee's designated spectrum block on a self-coordinated basis, including full discretion over channelization of available spectrum within the block (on condition that emission mask requirements are met, and co-channel interference protection is afforded to incumbent licensees and co-channel EA licensees in neighboring EAs); (3) the right to use any spectrum within the EA block that is recovered by the Commission from an incumbent SMR licensee in the event of termination of the incumbent's license; and (4) the presumption that assignments from incumbents operating in the EA spectrum block to the EA licensee generally are in the public interest.  Adopts a ten-year license term and a five-year construction period for EA licenses from the date the EA license is granted, with EA licensees required to demonstrate (1) coverage of one-third of the population within their EA and use of 50 percent of the channels included in its spectrum block within three years after initial grant of the EA license, and (2) coverage of two-thirds of the EA population by the end of the five-year period. The EA license will be subject to automatic cancellation for failure to meet these interim coverage and channel use requirements.  Discontinues acceptance of applications for extended implementation for the 800 MHz SMR service under Section 90.629 of the Commission's rules; and requires that 800 MHz SMR licensees with extended implementation periods demonstrate that such additional time to construct continues to further the public interest.  Grants operational flexibility to incumbent SMR licensees to add, remove, or relocate site locations within their current 22 dBu contours, on a "self- coordinated" basis if the incumbent is not relocated.  Grants EA licensees the right to relocate incumbents within their spectrum blocks. Requires that within ninety days from the date of license grant, EA licensees provide written notification to all incumbents they intend to relocate.  Creates a two-phase mandatory relocation mechanism under which there is a fixed one-year period for voluntary negotiations between EA licensees and incumbents and a two-year period for mandatory negotiations. Under this mechanism, if an EA licensee and an incumbent licensee fail to reach an agreement by the conclusion of the mandatory negotiation period, then the EA licensee may request involuntary relocation of the incumbent's system provided that it: (1) guarantees payment of all costs of relocating the incumbent to comparable facilities; (2) completes all activities necessary for placing the new facilities into operation, including engineering and frequency coordination, if necessary; and (3) builds and tests the incumbent's new system.  Reallocates the General Category channels, consisting of 150 contiguous 25 KHz channels, to the 800 MHz SMR service.  Partially lifts the freeze on acceptance of new applications for the SMR Category and General Category channels to permit potential EA applicants to relocate incumbents out of the upper 10 MHz block of 800 MHz SMR spectrum, provided that: (1) the potential EA applicant and relocating incumbent are unaffiliated; (2) the incumbent relocates without changing its original 22 dBu service contour; (3) both the incumbent and the potential EA applicant certify that they are unaffiliated and that the application is for the sole purpose of relocating an incumbent to other channels in the 800 MHz band (for SMR licensees, this would mean the lower 80 or General Category channels, but for non-SMRs this would mean channels available in their respective service categories); and (4) the application is accepted for filing prior to release of the Public Notice announcing the auction for the upper 10 MHz block and establishing a date for filing of FCC Form 175 ("short-form") applications. B. Eighth Report and Order: Competitive Bidding Rules for the Upper 10 MHz Block  Provides for award of 525 EA licenses in the upper 10 MHz block by a single simultaneous multiple round auction. Both incumbents and new entrants are eligible to bid for all EA licenses, subject only to the CMRS spectrum aggregation limit provided in Section 20.6 of the Commission's rules.  Treats all applicants for EA licenses as initial applicants for public notice, application processing, and competitive bidding purposes.  The Wireless Telecommunications Bureau ("Bureau") will announce the time and place of the upper 10 MHz block auction in the 800 MHz SMR service and provide additional information to bidders by future Public Notice and a Bidder Information Package.  Applicants will apply for the upper 10 MHz block auction by filing a short- form application, indicating the markets and spectrum blocks for which they seek to apply, and paying an upfront payment. We adopt the standard upfront payment formula of $0.02 per activity unit, based on the particular spectrum blocks in each EA identified in the applicant's short-form application and the total EA population. The Bureau will announce, by Public Notice, the population calculation of each spectrum block in the EA, using a formula that takes into account incumbents within the EA.  Adopts the Milgrom-Wilson activity rule by which bidders are required to declare their maximum eligibility in terms of activity units and are limited to bidding on licenses encompassing no more than the activity units covered by their upfront payments, and uses a simultaneous stopping rule.  Adopts bid withdrawal and default rules for this auction similar to those used in prior auctions.  Applies the same regulatory safeguards as in prior auctions to prevent applicants from colluding during the auction.  Adopts a "tiered" approach to installment payments for small businesses in the upper 10 MHz block.  Allows partitioning for rural telephone companies. C. Second Further Notice of Proposed Rule Making: Additional Service Rules for the Upper 200 Channels and Service and Competitive Bidding Rules for the Lower 80 and General Category Channels 1. Disaggregation of Spectrum Blocks in the Upper 200 Channels  Tentatively concludes that EA licensees should be permitted to disaggregate their spectrum blocks. 2. Partitioning in the Upper 200 Channels  Tentatively concludes that the partitioning option should be extended to SMR licensees generally rather than limited to rural telephone companies. 3. Mandatory Relocation from the Upper 200 channels  Proposes that incumbents who are notified by several EA licensees of an intention to relocate may require that negotiations to relocate the incumbent include all EA licensees who have notified the incumbent.  Tentatively concludes that, for purposes of the mandatory negotiation period, an offer by an EA licensee to replace an incumbent's system with comparable facilities constitutes a good faith offer. Similarly, tentatively concludes that an incumbent that accepts such an offer presumably would be acting in good faith.  Proposes that "comparable facilities" be defined as a relocated incumbent (1) receiving the same number of channels with the same bandwidth; (2) having its entire system relocated, not just those channels desired by a particular EA licensee; and, (3) once relocated, having a 40 dBu service contour that encompasses all of the territory covered by the 40 dBu contour of its original system. 4. Licensing of Other 800 MHz SMR Channels  Tentatively concludes that these 800 MHz SMR channels should be licensed on a geographic basis with EA service areas. Proposes to license the lower 80 channels in five-channel blocks. Proposes to license the General Category channel blocks per geographic licensing area.  Proposes not to limit the number of lower 80 and General Category frequencies that a single applicant can request at one time. Aggregation would be limited only by the 45 MHz CMRS spectrum aggregation limit provided in Section 20.6 of the Commission's rules.  Tentatively concludes that there should be no mandatory relocation plan for these frequencies and that incumbents should be allowed to continue to operate under their existing site-specific authorizations, with geographic area licensees required to provide co-channel interference protection to all constructed and operating systems within their license area. Proposes to provide incumbent licensees operational flexibility within their currently authorized 22 dBu interference contour. 5. Competitive Bidding Rules for Other 800 MHz SMR Channels  Proposes to award geographic area licenses for the lower 80 channels through a simultaneous multiple round auction with 16 five-channel blocks in each EA and regional EA groupings for competitive bidding purposes. Proposes to employ market-by-market stopping rules for these licenses.  Proposes to award EA licenses for the General Category channels through a simultaneous multiple round auction for a 120-channel block, a 20-channel block, and a 10-channel block in each EA. We propose to employ simultaneous stopping rules for these licenses.  Proposes to use bid withdrawal and default rules for this auction similar to those used in prior auctions.  Proposes to apply 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.  Proposes to adopt a "tiered" approach to bidding credits whereby small businesses with gross revenues of not more than $3 million are eligible for a 15 percent bidding credit on geographic area licenses, and those with gross revenues of more than $3 million but not more than $15 million are eligible for a 10 percent bidding credit.  Proposes to adopt a "tiered" approach for installment payments and reduced down payments for small businesses.  Proposes to adopt size restrictions for entities applying for geographic area licenses for the remaining SMR channels (including the General Category) by designating them as an "entrepreneurs' block," with eligibility limitations based on gross revenues and total assets. III. BACKGROUND 4. The Commission's current rules for the 800 MHz SMR service were designed primarily to license dispatch radio systems on a transmitter-by-transmitter basis in local markets. In recent years, however, many SMR licensees have been authorized, through waivers and grants of extended implementation authority, to expand the geographic scope of their services and aggregate large numbers of channels to provide service more directly comparable to that provided by cellular operators and that envisioned for Personal Communications Services (PCS). While the 800 MHz SMR rules have proven sufficiently flexible to permit such expansion, the licensing process remains cumbersome because of the need to license each SMR transmitter site individually. By its very nature, site-by-site licensing deprives licensees of flexibility to move transmitter sites throughout a defined service area without seeking our prior approval. As a result, an SMR licensee's ability to respond quickly to changing market conditions and consumer demand is impaired because its operational responses cannot be fully implemented until the completion of the Commission's application processing. In addition, experience has shown that establishing a regulatory framework for wide-area 800 MHz SMR licensing through waivers and grants of extended implementation authority is an inefficient licensing mechanism because substantial administrative resources are utilized by individual review of each waiver and extended implementation request. Also, this is an unwieldy approach, because each request pertains to particular circumstances for the entity requesting the waiver or extended implementation authority, without benefit of an established uniform wide-area licensing regime. 5. In May 1993, the Commission adopted a Notice of Proposed Rule Making proposing wide-area licensing of the 800 MHz SMR service. In August 1993, Congress amended the Communications Act of 1934 ("Communications Act") to modify the regulatory treatment of all mobile services, including SMR. In the CMRS Second Report and Order, the Commission reclassified all mobile services into two statutorily-defined categories: CMRS and private mobile radio services (PMRS). The Commission concluded that all SMR systems either providing or authorized to provide interconnected service would be reclassified as CMRS. 6. In the CMRS Third Report and Order, the Commission concluded that 800 MHz SMR licensees either compete or have the potential to compete with other CMRS providers. As a result, the Commission determined that the technical and operational requirements for the 800 MHz SMR service should be made comparable, to the extent feasible, to those applicable to other CMRS providers. In this connection, the Commission concluded that licensing of the 800 MHz SMR spectrum should be accomplished through competitive bidding procedures. The Commission also elected to seek further comment before adopting specific service and auction rules. In addition, the Commission froze acceptance of new 800 MHz SMR applications pending completion of the rule making pertaining to the 800 MHz SMR service. 7. On October 20, 1994, the Commission adopted a Further Notice of Proposed Rule Making seeking comment on a new framework for licensing of 800 MHz SMR systems. Specifically, the Commission proposed to assign the upper 10 MHz of 800 MHz SMR spectrum in geographically-defined service areas to facilitate the development of wide-area, multi-channel SMR systems. We further proposed that the remaining lower 4 MHz of 800 MHz SMR spectrum would accommodate the needs of smaller SMR systems primarily seeking to provide local, more dispatch-oriented service. This proposal would allow incumbent licensees to continue operating under their existing authorizations with full protection from co-channel interference, but would not allow them to expand into the wide- area licensee's service area. The Further Notice also sought comment on: (1) whether geographic area licensees should be able to require incumbents to relocate to comparable alternative frequencies at the geographic area licensee's expense, (2) the status of waivers and grants of extended implementation authority, (3) future regulatory treatment of the General Category Channels, and (4) the type of competitive bidding rules most appropriate for the 800 MHz SMR service. 8. Over 80 parties filed initial comments and over 60 parties filed reply comments in response to the Further Notice. Numerous written ex parte presentations also have supplemented the record. IV. FIRST REPORT AND ORDER A. Geographic Area SMR Licensing in the 800 MHz Band 1. Spectrum Designated for Geographic Area Licensing 9. Background. In the CMRS Third Report and Order, we determined that assigning contiguous spectrum, where feasible, is likely to enhance the competitive potential of geographic area SMR providers. We indicated our belief that contiguous spectrum is essential to the competitive viability of a wide-area SMR system, because it permits use of spread spectrum and other broadband technologies that are available to other CMRS providers but unavailable to systems operating on non-contiguous spectrum. In the Further Notice, we proposed to designate the upper 10 MHz block of 800 MHz SMR spectrum for geographic area SMR licensing. 10. Comments. Numerous commenters support allocation of a portion of 800 MHz SMR spectrum for geographic area licensing. Dial Call, Nextel, OneComm, and Telecellular agree that such reallocation of 800 MHz SMR spectrum would further the Commission s goal of creating regulatory parity with other CMRS providers. Motorola and OneComm believe that a 10 MHz allocation would allow wide-area SMR operators to take advantage of innovative new technologies and succeed in the CMRS marketplace. In this regard, Motorola notes that currently available broadband technologies, such as Advanced Mobile Phone Service (AMPS), Code Division Multiple Access (CDMA), Groupe Special Mobile protocol (GSM), and Motorola Integrated Radio System (MIRS), require contiguous spectrum. OneComm also believes that licensing contiguous spectrum will allow SMR operators to take advantage of economies of scale with respect to equipment and would increase competition in the equipment manufacturing market. Nextel believes that the proposed 10 MHz wide-area licensing allocation is the most practical mechanism for achieving regulatory symmetry for the 800 MHz SMR service vis-a-vis other CMRS providers, with respect to spectrum allocation. 11. Other commenters, however, oppose the Commission s wide-area licensing proposal for the 800 MHz SMR service. These commenters argue that a wide-area licensing approach: (a) would have a negative impact on the already established SMR industry, particularly operators of small SMR systems and licensees operating in rural areas; (b) would benefit only one entity, Nextel; (c) is impractical and unworkable; (d) is unnecessary because the existing regulatory system for the 800 MHz service adequately addresses the current licensee demand for implementing wide-area systems; and, (e) would embroil the Commission in numerous controversies between licensees (both incumbents and wide-area licensees). Spectrum Communications argues that if the Commission wants to open a channel block for geographic area systems, it should do so in virgin spectrum, such as the 380-400 MHz bands that have been reserved for federal government use. 12. With respect to the particular portion of the 800 MHz band to be designated for wide-area SMR licensing, many commenters support the Commission s proposal to use the upper 10 MHz block of 800 MHz SMR spectrum. CTIA believes that contiguous spectrum is necessary for wide-area SMR operators to establish service comparable to that of other CMRS providers and would encourage wide-area SMR licensees to utilize more spectrum- efficient technologies. Southern, on the other hand, contends that the digital design of wide- area SMR equipment does not require contiguous spectrum. Similarly, DCL Associates, the Joint Commenters, and Racom, Inc., et al. believe that contiguous spectrum is not required for operation of competitive wide-area SMR systems. AMTA notes that the upper 10 MHz block is most suitable for those seeking to establish wide-area SMR services because it is the largest amount of contiguous spectrum now allocated for the 800 MHz SMR service, and it is at least as large as the smallest amount of spectrum authorized for other CMRS providers. Palmer suggests, however, that the Commission designate only 7 MHz of the upper 10 MHz block for wide-area use to balance more fairly the interests of those licensees desiring to provide wide-area service and those seeking to provide more localized or niche services. 13. Discussion. We conclude that a portion of 800 MHz SMR spectrum should be designated for wide-area licensing. Notably, the commenters in the CMRS proceeding contended that wide-area SMR systems need contiguous spectrum to obtain flexibility to implement advanced technologies and thereby compete effectively with other CMRS providers, such as cellular and broadband PCS systems. In the Further Notice, we stated our belief that contiguous spectrum offers greater flexibility to wide-area service providers who must tailor their spectrum use to afford protection to incumbent licensees within the 800 MHz band. The comment record established in PR Docket No. 93-144 and GN Docket No. 93- 252 evidences that the availability of contiguous spectrum for those licensees seeking to provide wide-area SMR service would further the Commission s regulatory symmetry goals. 14. We disagree with the commenters that suggest the need for wide-area licensing has not been demonstrated. Moreover, the current licensing scheme would not allow expeditious implementation of wide-area systems utilizing contiguous spectrum, because 800 MHz channels presently are not distributed on a contiguous basis. Thus, a licensee's attempts to acquire contiguous spectrum, especially on a large scale, in the absence of regulatory changes generally would entail significant transactional costs, as well as a substantial amount of time and preparation devoted to the filing of numerous applications. We also believe, as discussed infra, that the specific wide-area licensing scheme we adopt today adequately protects existing SMR operations in the 800 MHz band. This new scheme is not designed to benefit any particular entity, but to provide opportunities for a variety of licensees of different sizes to participate in the provision of wide-area service. We further conclude that the 800 MHz SMR spectrum most suitable to be designated primarily for wide-area use is the upper 10 MHz block, as it is the largest block of contiguous SMR Category spectrum in the 800 MHz band. As discussed supra, we believe that contiguous spectrum is an essential component of the wide-area licensing proposal we adopt today because it will give licensees the flexibility to use technologies that can operate on either contiguous or non-contiguous spectrum. Significantly, licensees' technological options are considerably more limited under a predefined channelization plan. We conclude that the entire 10 MHz block should be used, rather than a portion thereof, because it is equivalent in size to the smallest amount of spectrum presently authorized for broadband PCS. We agree with the commenters who suggest that designating this amount of spectrum would further the regulatory symmetry goals for operational and technical rules we set forth in the CMRS Third Report and Order. As discussed infra, we believe that our decision regarding the size of the wide-area spectrum blocks strikes an appropriate balance between the competing interests of licensees with varying spectrum needs. 2. Service Areas 15. Background. In the CMRS Third Report and Order, we concluded that the use of service areas based on Rand McNally Major Trading Areas (MTAs), identical to those adopted for broadband PCS, would be preferable for wide-area licensing of the 800 MHz SMR service. We indicated that allowing licensees to operate over MTAs as opposed to smaller areas, such as Rand McNally Basic Trading Areas (BTAs), would enhance their ability to invest in technology and to re-use channels more effectively. We further noted that many of the authorizations already granted to SMR licensees for wide-area systems are for MTA-sized areas, or for regions larger than a single MTA. As a result, we tentatively concluded that MTAs appear to be the most suitable "building blocks" for SMR licensees who seek to construct wide-area systems. 16. Comments. Several commenters support the Commission s proposal of MTAs in their initial comments. In support of using MTAs, these commenters contend that: (1) successful implementation of advanced broadband technologies and effective competition with other CMRS providers necessitate operation over substantial geographic areas, such as MTAs; (2) establishing wide-area systems is economically feasible only when they serve a large area with a high volume of potential customers; and, (3) MTA-sized service areas would provide geographic area licensees with optimum operational flexibility. 17. Although AMTA does not oppose MTA-based wide-area licensing, it indicates that it is not convinced that MTAs would be the most effective geographic divisions for wide- area licensing purposes. On the other hand, several commenters expressly oppose using MTAs as the geographic basis for wide-area 800 MHz SMR licensing. They oppose MTA- based licensing arguing that: (1) service areas of that size would not result in diverse entities participating in the provision of 800 MHz wide-area service or 800 MHz SMR spectrum auctions; (2) the large geographic area encompassed in an MTA would not adequately protect against spectrum warehousing, which could result in rural areas remaining unserved or underserved; (3) MTAs are too large for reasonable build-out by smaller licensees that would be forced to compete against larger system operators located a significant distance away; (4) Rand-McNally would not permit use of MTAs unless licensees were willing to negotiate an agreement to pay a fee for use of the copyrighted term; (5) MTAs do not conform to natural SMR market divisions; and, (6) there is an insufficient amount of vacant 800 MHz SMR spectrum to justify MTA-based licensing. 18. Given their opposition to an MTA-based licensing approach, several commenters suggest using other geographic areas as the service area bases for the new wide-area 800 MHz SMR licenses. Some commenters, for example, propose using EAs as the geographic basis for these licenses, arguing that: (1) they are designed around urban, suburban and rural traffic patterns and therefore more accurately would reflect natural SMR market boundaries; (2) they would provide more service options and flexibility, given that licensees will have the option of acquiring only the capacity needed in smaller markets; (3) they could increase both the number and diversity of entities interested in vying for spectrum designated for wide-area licensing; and, (4) Rand-McNally would not permit use of MTAs unless licensees were willing to negotiate an agreement to pay a fee for use of the copyrighted term. 19. Other commenters suggest that we award licenses on a BTA basis because, given their smaller size, BTAs, unlike MTAs, would increase competition and the efficiency of 800 MHz SMR spectrum use. Motorola, on the other hand, contends that BTA-based licensing will result in licensees being unable to compete economically with other CMRS providers. PCIA and SMR WON oppose use of BTAs on the basis that they are too small for a reasonable build-out, especially in the larger metropolitan areas. 20. PCIA proposes Metropolitan Service Areas (MSAs) as another geographic alternative for wide-area licensing. PCIA contends that MSAs represent more "natural" wireless service areas. PCIA notes, however, that in larger urban areas, even MSAs may prove to be too small for natural operational areas; therefore, it suggests using consolidated MSAs in those areas. 21. Significantly, the majority of reply commenters (representing small, medium, and large SMR operators) indicate that they either support or do not oppose the use of EAs as the geographic basis for the newly created wide-area 800 MHz SMR licenses. Supporters of EA-based licensing contend that EAs: (1) are sufficiently large so that operators can take advantage of economies of scale; (2) offer the opportunity for greater participation by a larger number of diverse entities, particularly local SMR operators, in the provision of wide- area service because they are smaller than MTAs; (3) more accurately reflect the natural scope of SMR operations; and, (4) are sufficiently few in number that the auction process will remain manageable. AMTA supports the use of EAs, stating that due to their number, size and configuration, they will meet most effectively the needs of both wide-area and traditional SMR licensees. Some reply commenters, on the other hand, indicate a preference for "Cluster EAs" (which are created by sequential groupings of four EAs) if EA- based licensing is used. These reply commenters contend that Cluster EAs: (1) may represent a viable alternative, since they are similar in size to MTAs; (2) provide a readily- partitionable geographic area; and, (3) provide an administratively-manageable number of wide-area SMR license auctions. 22. A few commenters expressly oppose EA-based licensing. Dial Call believes that EAs are unworkable because they are smaller than MTAs, and thus would place wide-area SMR operators at a competitive disadvantage vis-a-vis other CMRS providers. In fact, some reply commenters continue to favor an MTA-based licensing approach. 23. Discussion. Despite our previous conclusion in the CMRS proceeding that MTAs appear to be the most suitable building blocks for 800 MHz SMR licensees seeking to construct wide-area systems, a broad range of commenters express support for EAs rather than MTAs. We believe that use of these smaller geographic areas ultimately will result in a more diverse group of prospective bidders, because small and medium-sized operatives will have incentives to seek EA licenses in those markets where they are the largest incumbents. We conclude that such an outcome not only is desirable, but furthers the public interest because it would result in the dissemination of EA licenses among a variety of applicants as anticipated by Section 309(j) of the Communications Act. We are persuaded by these commenters that EAs reflect the actual coverage provided by 800 MHz SMR systems more accurately than MTAs because they are based on urban, suburban, and rural traffic patterns. We also reject commenters' proposal that we use Cluster EAs. We believe that these areas are inappropriate, because they do not reflect natural SMR markets and, due to their size, effectively may not meet the needs of traditional SMR licensees. Moreover, we believe that Cluster EAs, which are similar in size to MTAs, would not facilitate the participation of diverse entities in the provision of SMR services. 24. We also conclude that licensing based on EAs is preferable to using smaller service areas. We reject PCIA's suggestion that MSAs would be suitable for SMR licensing. Although we selected MSAs as the service areas for the original deployment of the cellular service, we expressly chose MTAs rather than MSAs as the appropriate geographic area for broadband PCS. We determined that the ten-year history of cellular service evidenced that MSA/RSA boundaries generally have been too small for the efficient provision of regional or nationwide mobile service. In this connection, we noted that cellular operators have experienced large transactional costs in their efforts to aggregate MSAs and RSAs to provide wider service areas for consumers and to lower costs of providing service. Because we anticipate that EA licensees will be interested in using geographic aggregation as a tool to accomplish similar results, we conclude that MSAs are inappropriate. Similarly, with respect to BTAs, we agree with those commenters who express concern that these geographic areas may not be sufficiently large to create a viable wide-area service. 25. Accordingly, we conclude that the 800 MHz SMR wide-area licenses will be based on EAs. There are 172 EAs covering the continental United States. Because EAs have not been established for the five U.S. possessions, that is, Guam, Northern Mariana Islands, Puerto Rico, U.S. Virgin Islands, and American Samoa, we will create additional licensing regions for systems operating in these territories. Specifically, we hereby designate the following additional three licensing regions: (1) Guam and the Northern Mariana Islands will be licensed as a single area; (2) Puerto Rico and the U.S. Virgin Islands, as a single area; and, (3) American Samoa as a single area. Telecellular recommends creating a single EA for Puerto Rico based on its assumption that EAs are based, in part, on commuter patterns of citizens in particular areas. As Telecellular correctly notes, in other CMRS services, we have combined Puerto Rico and the U.S. Virgin Islands as a single license area. Because Telecellular has not provided a justification specific to the 800 MHz SMR service for changing our approach for defining the license area for Puerto Rico, we decline to adopt Telecellular's recommendation. The EA Listings and the EA map are available for public inspection at the Wireless Telecommunications Bureau's Public Reference Room, Room 5608, 2025 M Street, N.W., Washington, D.C. 20554, and its Office of Operations - Gettysburg Reference Room, 1270 Fairfield Road, Gettysburg, Pennsylvania 17325-7245. 3. EA Spectrum Blocks 26. Background. In the CMRS Third Report and Order, we observed that most commenters agreed that wide-area SMR systems must have the ability to use (and re-use) a large number of channels, preferably on contiguous frequencies, to compete successfully with cellular and broadband PCS. In addition, we observed that we previously have proposed to allow geographic area licensees to acquire up to 42 channels at a time (equivalent to 2.1 MHz of spectrum) in an MTA. Our rationale for this initial proposal was that it reflected the minimum number of channels needed to construct a system, based on the technology then in most common use by SMR systems to implement frequency reuse. 27. Based on the record established earlier in this proceeding and the comments submitted in the CMRS proceeding, the Further Notice proposed to divide the upper 10 MHz block of 800 MHz SMR spectrum into four blocks of 2.5 MHz, corresponding to 50 channels per block, under our existing frequency allocation rules. These blocks approximate the 42- channel threshold for frequency re-use previously identified in the Notice and would allow for the possibility of licensing more than one wide-area provider in a market. We further proposed to allow applicants to bid for multiple blocks within a given MTA, so that the marketplace could determine whether these blocks are most valuable separate or aggregated together. 28. In the Further Notice, we expressly elected not to propose to issue a single license covering the entire 10 MHz upper block of 800 MHz SMR spectrum. We determined that a single 10 MHz license would preclude licensing of multiple geographic area licensees in each market. We also noted that some commenters in the CMRS proceeding disagreed with the contention that 10 MHz is the minimum amount of spectrum needed to create a viable competitor to cellular and PCS services. These commenters contended that viable, competitive wide-area SMR systems could be based on fewer channels, even though such systems might not be capable of providing the full array of services offered by a cellular or 30 MHz PCS licensee. 29. Comments. Several commenters support the Commission's proposal of four 50- channel blocks, because: (1) it appears to strike an appropriate balance between economies of scale and protection of competition within a geographic area; (2) it approximates the 42- channel threshold for frequency reuse previously identified by the Commission; and (3) it furthers competition by creating the opportunity to license more than one wide-area provider in each market. Although Genesee supports the concept of 50-channel blocks, it believes that only two such blocks should be auctioned, while the remaining 100 channels should be made available to incumbents for expansion and growth potential. 30. Several commenters oppose the Commission's spectrum block proposal. The opponents argue that: (1) 50-channel blocks are too small to offer licensees a meaningful opportunity to implement a viable wide-area system; (2) licensing of separate blocks will not facilitate wide-area licensing due to the time and expense that will be required to aggregate all spectrum blocks in a single market; (3) the Commission's proposal is based on a calculation of the minimum number of channels necessary to implement existing wide-area systems using technology specially adapted to fragmented SMR spectrum; (4) use of 50- channel blocks could preclude implementation of certain technologies; (5) the relatively small size of the proposed spectrum blocks may not deter speculators from participating in the 800 MHz SMR auctions solely for extracting settlements or for anti-competitive purposes: (6) the size of the proposed spectrum blocks would render any large-scale relocation scheme unworkable; and, (7) the proposal is at odds with the Commission's regulatory symmetry objectives, because a wide-area licensee could obtain considerably less spectrum than the competing CMRS providers in the market. 31. Other commenters believe that spectrum blocks of other sizes would be more appropriate. For example, Dial Call, Nextel, OneComm, and Telecellular support awarding a single 10 MHz wide-area license. Nextel, OneComm, Dial Call, and Motorola argue that such a license would better fulfill the Commission's stated regulatory symmetry goals. Nextel contends that wide-area SMR systems must have at least 10 MHz of contiguous spectrum to utilize future advanced technologies such as CDMA and GSM. E.F. Johnson and Gulf Coast argue that the entire 10 MHz block is not required by a single licensee in order to offer service. CellCall and IC&E oppose awarding a single 200-channel license on the basis that it could diminish competition. Instead, CellCall, supported by IC&E, contends that authorizing two 100-channel block licensees in each market is a better approach, because licensing larger blocks will reduce burdens on geographic area licensees with respect to relocation. Pittencrief indicates its acceptance of two wide-area licenses in a geographic area. 32. As a compromise, OneComm suggests allocating the upper 10 MHz block in two blocks, one a 6 MHz block (comprised of 120 contiguous channels), and the other a 4 MHz block (comprised of 80 contiguous channels). OneComm s proposal is premised on a minimum CDMA block size of 62 channels (consisting of 50 channels of contiguous spectrum with six-channel guardbands on both sides). In its reply comments, AMTA supports OneComm s proposal, noting that this proposal would reduce the transactional costs associated with relocation. 33. In its initial comments, PCIA proposes spectrum blocks of ten channels licensed in a geographic area. PCIA reasons that its channel allocation proposal would allow smaller entities to participate in wide-area licensing, minimize the need for frequency swaps and relocation on a large scale basis, and allow all 280 SMR channels to be made available for wide-area licensing. Several reply commenters support PCIA s proposal on the grounds that it would: (1) provide growth potential for operators of smaller SMR systems; (2) allow larger entities to apply only for those frequencies of true interest; and (3) protect incumbents' rights while establishing a geographic area licensing mechanism. In its ex parte comments, PCIA argues that the Commission should specify blocks of 60, 60, 60, and 20 channels. 34. SMR WON proposes eligibility and licensing restrictions on certain wide-area spectrum blocks. In its initial comments, SMR WON recommends licensing 100 channels in two 50-channel blocks, and the remaining 100 channels in six 15-channel blocks and two 5- channel blocks. Under SMR WON's proposal, eligibility for three 15-channel blocks and one 5-channel block would be limited to certain designated entities, including small businesses. For the other 15-channel blocks and the 5-channel block, eligibility would be restricted to existing operators providing SMR service in their respective license areas on June 20, 1994, the date Nextel originally proposed mandatory relocation for a portion of the 800 MHz SMR spectrum. SMR WON further proposes that Nextel and its affiliates, as well as cellular operators, should be ineligible for this "incumbent" block. In its reply comments, SMR WON modified its proposal to suggest that only 100 channels, in two 50-channel blocks, be designated primarily for wide-area licensing. Under SMR WON s modified channel block proposal, the second 50-channel block would be segmented into five 10-channel blocks. In its reply comments, Genesee supports SMR WON s modified channel block proposal. 35. If the Commission implements its proposed three channel blocks, Nextel believes the twenty-channel block should be on Channels 401-420; the sixty-channel block on Channels 421-480; and the 120-channel block on Channels 481-600. This ensures that the smallest block is most proximate to smaller SMR providers operating on channels below 400. Telecellular recommends that the EA spectrum block containing the largest number of channels -- and the largest number of incumbents -- be located closest to the lower eighty channels. Telecellular believes that the proximity to the lower 4 MHz of 800 MHz SMR spectrum will facilitate relocation. 36. Discussion. We reject commenters' proposal to license a single 10 MHz wide- area license, because it would preclude opportunities for those smaller operators desiring geographic flexibility but not a large number of channels. In fact, we agree with the commenters who assert that viable, competitive wide-area systems can be established with less than 10 MHz of spectrum. We further believe that dividing the spectrum into multiple blocks would allow applicants to apply only for the spectrum they actually need. As a result, this approach would promote more efficient spectrum use by licensees and discourage spectrum warehousing. Thus, we conclude that dividing the upper 10 MHz block into multiple spectrum blocks is both feasible and desirable. 37. With respect to the specific size of the spectrum blocks, we are persuaded by the commenters who suggest that our initial proposal of four 2.5 MHz spectrum blocks could preclude the use of certain broadband technologies such as CDMA and GSM, which require larger spectrum blocks. Thus, we conclude that larger spectrum block sizes are needed. This conclusion, however, does not diminish our commitment to ensuring that operators of smaller SMR systems are provided meaningful opportunities to participate in wide-area licensing. We also reject the proposal advanced by IC&E and CellCall to license two 5 MHz spectrum blocks. We believe that this alternative would not provide adequate opportunities for smaller entities. Moreover, we disagree with those commenters who propose spectrum blocks of 15-, 10-, and 5- channels. While we understand commenters' desire to create opportunities for smaller entities on the upper 10 MHz block, we nonetheless conclude that these spectrum blocks sizes are too small to permit a licensee to establish a viable and competitive wide-area system on a single spectrum block. In addition, we believe that the transactional costs associated with licensing these multiple small spectrum blocks ultimately would outweigh the benefits achieved by a wide-area licensing procedure. We further conclude that allocating varying size blocks will accomplish our goal of creating opportunities for wide-area SMR providers with differing spectrum needs. In addition, we conclude that such an approach would result in a total number of licenses that is administratively feasible for auction purposes. Thus, we will adopt an allocation plan which combines certain elements of OneComm's, AMTA's, and PCIA's proposals in an effort to balance equitably the interests of all potential and existing licensees. Under this allocation plan, we will allocate one 120- channel block, one 60-channel block, and one 20-channel block for licensing on an EA basis. The specific spectrum blocks are as follows: Spectrum Block Channel Numbers Frequencies (Base and Mobile) A 401-420 861.0125-861.4875 MHz 816.0125-816.4875 MHz B 421-480 861.5125-862.9875 MHz 816.5125-817.9875 MHz C 481-600 863.0125-865.9875 MHz 818.0125-820.9875 MHz We believe that these channel block sizes will accommodate the spectrum needs of diverse SMR providers. We anticipate that the 120-channel block will be of most interest to the operators of larger SMR systems. In this connection, we believe that selecting the 120 channels closest to the cellular spectrum allocation would facilitate dual mode operation, which is of interest to some licensees seeking to provide wide-area service through use of a large number of channels. We also anticipate that the 60-channel block will be attractive to medium-sized SMR operators or a consortium of smaller SMR operators. Based on the record in this proceeding, we anticipate that operators of smaller SMR systems will be most interested in the 20-channel block. In this connection, the 20-channel block is the portion of the upper 10 MHz block nearest to the lower 4 MHz block so that smaller operators or relocated incumbents can expand system capacity while minimizing costs and disruption to existing customers. Thus, we expect that both large and smaller SMR licensees will be able to coexist in the upper 10 MHz block and will be afforded a meaningful opportunity to provide wide-area service. 4. 800 MHz SMR Spectrum Aggregation Limit 38. Background. In the CMRS Third Report and Order, we adopted a 45 MHz limit on aggregation of broadband PCS, cellular, and SMR spectrum. We concluded that this limitation, combined with existing service-specific caps for cellular and PCS, was sufficient to maintain a competitive CMRS market. In light of this conclusion, in the Further Notice, we tentatively concluded that an additional aggregation limit within the 800 MHz SMR service was unnecessary. 39. Comments. Several commenters agree with our proposal that a single entity should be permitted to acquire more than one spectrum block in a particular geographic area. They support this arrangement because it would permit aggregation of spectrum for development of wide-area systems and allow flexibility to meet particular market conditions, and would further our goal of promoting competition in the CMRS marketplace. CellCall, Dru Jenkinson, et al., OneComm, Telecellular, and AMI contend that an aggregation limit for the 800 MHz SMR service is unnecessary. CellCall argues that restricting a single entity to less than the entire upper 10 MHz block of 800 MHz SMR spectrum would be inconsistent with the Commission's regulatory symmetry goals, since other CMRS providers are authorized a minimum of 10 MHz of spectrum. Similarly, Telecellular argues that an individual spectrum aggregation cap for the 800 MHz SMR service is not needed, because even if a wide-area licensee acquired the total 280 SMR channels in a particular market, it still would have less spectrum than that held by cellular and most PCS licensees. 40. Numerous commenters nonetheless advocate that a limit be placed on the amount of 800 MHz SMR spectrum that may be licensed to a single entity in any given market. Some of these commenters support an aggregation limit because they believe that allowing a single entity to acquire the entire upper 10 MHz block would adversely affect competition. SBA believes that a limit on aggregation of 800 MHz SMR spectrum is essential if an entrepreneurs block is not established for the service, because the combined effect of no spectrum aggregation limit and no entrepreneurs' block may be that smaller SMR operators do not obtain any additional spectrum in the upper 10 MHz block. 41. While several commenters agree that there should be an aggregation limit, they differ on how that limit should be defined. E.F. Johnson argues that consumers would be best served by a restriction that ensures more than two licensees in each service area, citing the lack of competition experienced in the cellular industry with only two licensees in each market. Applied contends that there should be at least three licensees per market with each licensee limited to a total of 66 channels. Other commenters argue that there should be a 7.5 MHz spectrum aggregation limit, consisting of three 50-channel blocks, which would permit at least two licensees per market. Pittencrief contends that if a single entity is permitted to acquire the entire 14 MHz of 800 MHz SMR spectrum, provision of traditional SMR service would decrease. Pittencrief suggests that the Commission could remove the aggregation limit, if appropriate, after five years. Morris and UTC believe that one licensee should have no more than two 50-channel blocks. Morris contends that such a limit would prevent spectrum warehousing and expedite delivery of new services to the public. UTC contends that such a limit would ensure that consumers would have an array of services from which to select. Gulf Coast contends that a single entity should be limited to a single 50- channel block in a particular market. By contrast, Southern and Total Com propose spectrum caps for the 800 MHz SMR service. Southern suggests a 140-channel limit, coupled with a limit that a single entity not be permitted to bid on more than two 50-channel blocks within a market, in order to preserve a competitive environment for all SMR licensees seeking to establish a wide-area system. SBA proposes a 10 MHz spectrum cap in any particular market, in order to prevent monopolization. Total Com advocates a 200-channel spectrum cap for the 800 MHz band, to allow for expansion by incumbents and entry by new entities with new technology. 42. Discussion. In the CMRS Third Report and Order, we conducted an extensive market analysis of CMRS providers to determine how best to protect and encourage competition among mobile service providers. We determined that all CMRS licensees -- including paging, SMR, PCS, and cellular -- are actual or potential competitors with one another, and therefore should be regarded as substantially similar for determining whether the statutory requirement for comparable technical rules applies. One of the rationales for the 45 MHz CMRS spectrum aggregation limit is to prevent CMRS providers from restricting competition by aggregating spectrum. In the Further Notice, we indicated our belief that additional limitations on aggregation of SMR spectrum were unnecessary to ensure a competitive CMRS market. 43. Given our analysis in the CMRS Third Report and Order, we conclude that allowing unrestricted aggregation of spectrum within the upper 10 MHz block would not impede CMRS competition. We reiterate our view that the 800 MHz SMR service is just one of many competitive services within the larger CMRS marketplace. For example, if a single licensee were to acquire all 10 MHz of wide-area licensed spectrum in a particular market, it would fall well short of the 45 MHz PCS/cellular/SMR spectrum cap. Moreover, as Telecellular notes, the licensee's aggregated spectrum holdings still would be significantly less than the amount of spectrum that may be aggregated by a cellular or broadband PCS licensee under our service-specific caps for those services. Additionally, if an 800 MHz SMR licensee neglects to respond to consumer demands, our flexible spectrum allocations and rules for other CMRS licensees (including cellular, PCS, and other SMR licensees) have created numerous competitors who can fill that vacuum by offering such services. 44. Moreover, we are concerned that limiting aggregation of 800 MHz SMR spectrum could handicap these potential competitors to broadband PCS and cellular providers with equal or larger spectrum holdings. Thus, we are not persuaded by commenters' arguments favoring a spectrum aggregation limit for the 800 MHz SMR service. We conclude, therefore, that SMR licensees will be permitted to seek and (if they are the high bidders for all EA licenses) obtain all three of the EA licenses in a market. This approach will allow the marketplace to determine whether the 800 MHz SMR spectrum is most valuable on an aggregated or disaggregated basis. We reiterate, however, that even though we are not adopting a spectrum aggregation limit specific to the 800 MHz SMR service, such licensees remain subject to the 45 MHz CMRS spectrum aggregation limit and to the competitive component of the public interest standard. 5. Licensing in Mexican and Canadian Border Areas 45. Background. Our SMR allocations in the Mexican and Canadian border areas differ from the allocations in the rest of the nation. Specifically, in the Mexican border area, SMR channel availability is limited to 30 channels in the upper 10 MHz block, five channels in the remaining 4 MHz of 800 MHz SMR spectrum, and 60 additional channels reserved for SMR use in the border areas that are allocated to non-SMR services elsewhere. Moreover, these channels are offset 12.5 kHz below the corresponding SMR channels in non-border areas. In the Canadian border area, SMR channel availability varies by region, with the majority of regions having between 55 and 120 channels in the upper 10 MHz block, none of the lower 80 channels, and some additional channels outside of either group. In the Further Notice, we tentatively concluded that attempting to create different allocations in border areas would be administratively unworkable and, thus, proposed to license wide-area spectrum blocks on a uniform basis without distinguishing border from non-border areas. We further proposed to license the channels in border areas not contained in the wide-area spectrum block on a channel-by-channel basis under the same rules we adopt for the lower 80 channels in non-border areas. 46. Comments. Nextel and PCIA support the Commission's tentative conclusion that attempting to create different allocations in border areas would be administratively unworkable. PCIA and Polar note that due to the different pool allocations and assignment of frequencies in the border areas, the Commission would have extreme difficulty in creating contiguous spectrum for such areas. Pittencrief agrees with the Commission's licensing proposal for the Canadian and Mexican border areas. 47. Other commenters suggest alternative channel assignment mechanisms for the border areas. AMI suggests that in the San Diego market, two wide-area blocks of 45 channels apiece with two of the 50 non-border area blocks would serve the unique needs of the market. Genesee, AMI, PCIA, and Pittencrief contend that inter-category sharing should be permitted in the border areas in order to compensate for the severe shortage of 800 MHz SMR spectrum in these areas. AMI further contends that inter-category sharing is essential for growth of SMR systems in these areas because there are few available channels. The Coalition urges the Commission to allocate a minimum of forty 800 MHz SMR channels for local use in all border areas. Pittencrief also expresses concern about the availability of sufficient SMR spectrum to meet incumbents' expansion needs in the border areas. It suggests that in the border areas, one-third of the available 800 MHz SMR spectrum should be designated for wide-area licensing to permit two licensees, one with 40 percent of such available channels and the other with 60 percent of these channels. Pittencrief further suggests that the remaining channels would be available, on a percentage basis, in the same fashion as the 800 MHz SMR channels in other areas. None of the commenters, however, addresses the issue of how to license channels in border areas that are not contained in the wide-area spectrum block. 48. Discussion. We conclude that the EA spectrum blocks should be licensed on a uniform basis, without distinguishing border from non-border areas. Thus, EA licensees will be entitled to use any available border area channels within their spectrum blocks, subject to international assignment and coordination of such channels. Although we recognize that some 800 MHz SMR channels will not be available in border areas, or may suffer from significant restrictions on power or antenna height, making them less attractive, we conclude that the alternative border area channel assignments proposed by the commenters are administratively infeasible. We believe that the limited channel availability and other operating restrictions in the border areas are matters to be assessed by EA applicants in their valuation of EA spectrum blocks for competitive bidding purposes. Thus, we conclude that it is unnecessary to establish a different wide-area spectrum block allocation for the border areas. Our decision does not preclude EA licensees from obtaining the rights to additional SMR spectrum in the border areas through private negotiation and agreement with other licensees. We will defer, however, the decision regarding treatment of 800 MHz SMR channels licensed in the border areas, but not included within the EA spectrum blocks, until the Second Further Notice of Proposed Rule Making in PR Docket No. 93-144. B. Rights and Obligations of EA Licensees 1. Operational Flexibility 49. Background. In the Further Notice, we stated that a key element in any new licensing scheme for wide-area SMR systems is to afford licensees the same flexibility, to the extent feasible, as cellular and broadband PCS licensees in terms of the location, design, construction, and modification of their facilities throughout their service areas. We tentatively concluded that wide-area SMR licensees in the 800 MHz band should be authorized to construct stations at any available site and on any available channel within their respective spectrum blocks. We also proposed to allow geographic area licensees to self-coordinate system modifications within their service areas -- that is, to add, remove, relocate, and otherwise modify individual base station facilities without prior Commission consent, provided they notify the Commission of the coordinates and certify compliance with our co-channel interference protection and emission mask requirements. 50. Comments. The majority of commenters who addressed this issue support the Commission's proposal to allow geographic area licensees to self-coordinate system modifications. AMTA and IC&E believe that self-coordination will help to alleviate the current disparities between 800 MHz SMR licensees and other CMRS providers. CellCall believes that regulatory symmetry requires that geographic area licensees be permitted to self- coordinate their system modifications. AMTA contends that self-coordination is largely illusory, since the wide-area licenses will be awarded in a heavily congested spectrum environment. AMI suggests that any channels shared by a wide-area licensee and incumbents should be coordinated by a certified coordinator. Dru Jenkinson, et al. suggests that incumbent co-channel licensees also should receive a copy of notice and certification of compliance regarding self-coordinated system modifications. McCaw argues that if geographic area licensees are afforded operational flexibility comparable to that enjoyed by cellular operators, the geographic area licensees also should be subject to the same notice and record-keeping requirements applicable to cellular carriers. 51. Other commenters are concerned that as a consequence of self-coordination by geographic area licensees, incumbents will be subjected to additional interference that will continue for an extended period of time before incumbents can obtain some type of relief. Southern observes that because SMR licensees already have considerable operational flexibility within their wide-area systems, there is no great benefit bestowed by the Commission s proposal. 52. Discussion. We conclude that EA licensees on the upper 10 MHz block of 800 MHz SMR spectrum will be authorized to construct stations at any available site and on any available channel within their respective spectrum blocks. The EA license will allow the holder of the authorization to expand or modify facilities anywhere in its service area without prior Commission approval, so long as the system continues to comply with applicable technical and operational rules and adequately protects incumbents. However, we will require EA licensees to notify the Commission of such changes. To fulfill this notification requirement, EA licensees must file an FCC Form 600 specifying the new technical parameters for the base stations that have been added, removed, relocated, or otherwise modified. Such filing will not require a filing fee if it is filed with the Commission within 30 days after their facilities are relocated. Given the substantial incumbent presence, we believe that this notification requirement is necessary to ensure the successful coexistence of EA licensees and incumbents in the upper 10 MHz block. Overall, these simplified procedures will reduce substantially the existing administrative burden on both SMR licensees and the Commission, and will establish greater consistency with our cellular licensing rules. 53. Although we recognize that an EA licensee's system modifications would be of interest to incumbent licensees operating within its spectrum block, we will encourage but not require the EA licensee to provide such incumbents with a copy of its notification to the Commission of system changes. We conclude that mandatory notification to other parties is unnecessary, because such system modifications will not reduce or eliminate the EA licensee's obligation to provide interference protection to incumbent licensees, as discussed infra. To the extent that an EA licensee's system modifications cause harmful interference to an incumbent, the affected incumbent will be able to seek redress under our rules to resolve such interference problems expeditiously. 2. Spectrum Management Rights -- Acquisition and Recovery of Channels Within Spectrum Blocks 54. Background. In the Further Notice, we recognized that the operational flexibility afforded to wide-area 800 MHz SMR licensees would be limited by the large number of systems already authorized and operating in the band, particularly in major markets. We noted that even if geographic area licensees do not immediately obtain clear spectrum comparable to our allocations for cellular or broadband PCS, wide-area licensing should confer other valuable rights that would enhance a licensee's ability to establish wide-area service. Thus, we proposed to assist geographic area licensees in consolidating spectrum within their respective blocks by providing that (1) if an incumbent fails to construct, discontinues operations, or otherwise has its license terminated by the Commission, the spectrum covered by the incumbent's authorization automatically reverts to the wide-area licensee; and, (2) if a wide-area licensee negotiates to acquire an incumbent system by assignment or transfer, the assignment or transfer presumptively will be considered in the public interest. 55. Comments. AMI, AMTA, CellCall, and OneComm agree that spectrum recovered from an incumbent by the Commission automatically should revert to the wide-area licensee that obtained the rights to that spectrum. AMI believes that this is a key incentive for seeking an EA spectrum block through competitive bidding. AMTA believes that adoption of such a provision will prevent further fragmentation of the heavily congested 800 MHz SMR channels and allow licensees sufficient spectrum for extensive frequency reuse across their geographic areas. CellCall believes that such a provision would provide the wide-area licensee with a useful right not otherwise available under the Commission s rules. Additionally, Nextel argues that the Commission should eliminate its finder's preference program in the 800 MHz SMR service and dismiss all pending applications, in order to prevent any entity other than the EA licensee from getting recovered spectrum included in the EA spectrum block. 56. On the other hand, Applied, Southern, and Total Com oppose automatically awarding recovered spectrum to geographic area licensees. Applied believes that giving recovered channels to geographic area licensees automatically would unlawfully divest those persons on waiting lists for frequencies of their procedural rights. Southern believes that such provision would foreclose any opportunity for other interested parties to apply for unused channels, undermine our current finder s preference policy, and inhibit competition. 57. Several commenters express support for the Commission's proposal that any request for transfer or assignment of an incumbent authorization to the EA licensee presumptively shall be considered in the public interest. AMTA believes that such presumptive treatment is appropriate and may help to speed clearing those channels designated primarily for wide-area use. Similarly, Dru Jenkinson, et al. believe that such a presumption will conserve scarce agency resources. Although several commenters support including such a provision, some express concern that it not preclude incumbents from transferring or assigning their authorizations to parties other than the EA licensee. Specifically, AMTA urges that incumbents' transfer or assignment of channels to a third party not be presumed to be contrary to the public interest. In this connection, Southern urges the Commission to exercise abundant caution before prematurely approving a transfer of control or an assignment without making a determination regarding market concentration or the public interest. Applied expressly opposes the Commission's proposal as violative of Section 310 of the Communications Act. 58. Applied also argues that our proposal would not comply with Section 314 of the Communications Act. Section 314 states, in pertinent part, that: [N]o person engaged directly, or indirectly through any person directly or indirectly controlling or controlled by, or under direct or indirect common control with, such person, or through an agent, or otherwise, in the business of transmitting and/or receiving for hire energy, communications, or signals by radio in accordance with the terms of the license issued under this Act shall by purchase, lease, construction, or otherwise, directly or indirectly, acquire, own, control, or operate any cable or wire telegraph or telephone line or system . . . [if] the purpose is and/or the effect thereof may be to substantially lessen competition or to restrain commerce . . . or unlawfully to create monopoly in any line of commerce. Applied argues that a presumption that an EA licensee's acquisition of an incumbent's authorizations is in the public interest violates Section 314 because the Communications Act requires a case-by-case determination of the competitive effects of such an acquisition. 59. Discussion. We conclude that spectrum within an EA licensee's spectrum block that is recovered by the Commission will revert automatically to the EA licensee, and we will generally consider transfers and assignments between an EA licensee and incumbents operating within its spectrum block presumptively to be in the public interest. We conclude that granting these rights to EA licensees will give them greater flexibility in managing their spectrum, establish greater consistency with our cellular and PCS rules, and reduce regulatory burdens on both licensees and the Commission with respect to future management of the spectrum within the wide-area blocks. As a direct consequence of our granting EA licenses which include these rights, we conclude that waiting lists, which are a by-product of channel- by-channel licensing, no longer would be useful. Thus, we hereby eliminate all waiting lists for SMR category channels within the upper 10 MHz block, because continuing such lists would be inconsistent with the wide-area licensing scheme we adopt today. In addition, all applications currently on waiting lists for frequencies that may become available in a geographic area are dismissed. 60. With respect to the impact of these rights on our finder's preference program, we conclude that successful applicants for a finder's preference will be considered an "incumbent" within the meaning of the rules adopted herein. In the CMRS Third Report and Order, we stated that the function of a finders' preference mechanism with respect to CMRS services will be addressed in a future rule making proceeding. While the broad issue of finders' preferences will be addressed in that proceeding, we eliminate it immediately for the 800 MHz SMR service. Thus, the Commission no longer will accept finders' preference requests following the adoption of this First Report and Order. As a result, the EA licensee will have the exclusive right to recover unconstructed or non-operational channels on blocks for which it is licensed. 61. With respect to Applied's arguments regarding Section 314 of the Communications Act, we believe that allowing EA licensees to acquire the facilities of incumbents operating within their spectrum block will in fact increase competition in the CMRS marketplace. In addition, we note that the CMRS market in general and not the 800 MHz SMR service in particular is the relevant market for assessing the competitive impact in this context. Applied further argues that a certain number of licensees is needed in each market to keep it competitive. We, however, have declined to adopt a spectrum aggregation limit for the 800 MHz SMR service (as discussed  42-44 supra). 62. With respect to the treatment of assignments and transfers between EA licensees and incumbents, we emphasize that under the approach we adopt today such assignments and transfers will be subject to a rebuttable presumption. Thus, any proposed assignments and transfers will undergo the review required under Sections 310 and 314 of the Communications Act. As a result, we disagree with Applied's contention that our approach would violate the Communications Act, given that we would make an individualized assessment of the public interest benefits associated with each incumbent-to-EA licensee assignment or transfer as required by the Communications Act. Furthermore, we note that this rebuttable presumption would not preclude the filing of petitions to deny. In addition, as suggested by AMTA, we reiterate that such treatment will not preclude incumbents from transferring or assigning their authorizations to parties other than the EA licensee. Consequently, the fact that an incumbent proposes to assign or transfer its license to an entity other than the EA licensee alone will not constitute an adequate basis for a petition to deny against such transfer and assignment. 3. License Term and Renewal Expectancy 63. Background. In the CMRS Third Report and Order, we determined that every Part 90 licensee that is reclassified and treated as a CMRS licensee shall have a ten-year license term and be afforded a renewal expectancy when its current license term expires, provided it is able to demonstrate that it: (1) has provided "substantial" service during the license term; and, (2) has complied with applicable Commission rules and policies, and the Communications Act. We also determined that "grandfathered" Part 90 licensees, because they retain their "private" status until August 10, 1996, would not be afforded either the ten- year license term or the renewal expectancy during the statutory transition period. 64. Discussion. Consistent with our decision in the CMRS Third Report and Order, EA licenses will have a term of ten years. In addition, EA licensees generally will be afforded a renewal expectancy as outlined above. We note, however, that some EA licensees may be "grandfathered" Part 90 licensees (that is, licensees who will retain their "private" status until August 10, 1996). Thus, we conclude that for those "grandfathered" Part 90 licensees who obtain EA licenses, only that service provided after the statutory transition period ending on August 10, 1996, will be considered in determining their renewal expectancy. We conclude that such treatment not only is appropriate but also fully consistent with our findings in the CMRS Third Report and Order. 4. Treatment of Incumbent Systems a. Mandatory Relocation 65. Background. In the Further Notice, we sought comment regarding the potential effect of our wide-area licensing proposal on the operations of incumbent SMR licensees occupying the upper 10 MHz block. We tentatively concluded that incumbent SMR systems should not be subject to mandatory relocation to new frequencies pursuant to Nextel s band- clearing proposal. We also expressed our concern that mandatory relocation could impose significant costs and disruption on incumbent licensees and their customers. Furthermore, we noted that relocation is likely to be complicated by a lack of sufficient alternative frequencies in many markets to accommodate all incumbents in the wide-area blocks on a one-to-one basis, which could require us to become involved in decisions about which incumbents are required to relocate and which are not. 66. We also expressed concern in the Further Notice that mandatory relocation would inevitably draw the Commission into disputes between licensees over substitutability of channels, compensable costs, and other related issues. As a result, we stated our preference for allowing geographic area licensees and incumbents to negotiate relocation, frequency swaps, mergers, purchases, or other arrangements on a voluntary basis, rather than mandating relocation. We noted that many licensees who currently are building wide-area SMR systems (and are likely to bid on wide-area licenses where such systems are located) previously have used such transactions to acquire consolidated blocks of frequencies. We further noted that we expected the process to continue, and, thus, we tentatively concluded that decisions regarding relocation should be left to the parties and the marketplace. 67. In the Further Notice, we sought comment on the feasibility of using a mandatory relocation model similar to that adopted in the Emerging Technologies docket for microwave licensees. Under this approach, incumbents and geographic area licensees have a period of time to determine relocation issues on a voluntary basis (e.g., one year). After the time has passed for voluntary negotiations, if such negotiations were unsuccessful, the wide-area licensee could request mandatory relocation, provided that sufficient spectrum is available and the incumbent receives comparable facilities. 68. Comments. Most commenters oppose mandatory relocation pursuant to a band- clearing approach such as proposed by Nextel. These commenters argue that: (1) there are no "fully comparable alternative frequencies" to which incumbents can be relocated; (2) such an approach is anti-competitive, because the relocated incumbents will be competing with the geographic area licensees benefiting from such relocation; (3) relocation would adversely affect incumbents' operations, with such consequences as disruption of customer service and loss of customer confidence and goodwill; (4) relocation lacks an adequate policy basis, given its resulting disruption to existing operations; (5) relocation would be unfair and inequitable to incumbents; and, (6) relocation would decrease the value of incumbent systems. AMTA notes that with few exceptions, traditional SMR operators strongly oppose such an approach, and, instead recommend continued reliance on market forces to define the future SMR landscape. 69. Nextel and Spectrum, on the other hand, support a band-clearing mandatory relocation approach. Nextel believes that mandatory retuning of incumbents from the upper 10 MHz block is statutorily mandated and required by the public interest because it is essential to regulatory symmetry. Nextel further believes that such wide-scale retuning is feasible. Spectrum believes that without mandatory relocation of incumbents, the newly created wide-area licenses would not provide existing licensees relief from the current licensing process, and that geographic area licensees would be unable to introduce advanced technologies in the 800 MHz SMR service to compete with other CMRS licensees. AMTA notes that certain existing wide-area applicants and licensees argue that the long-term economic viability of wide-area systems requires clear, contiguous spectrum which can support the more spectrally efficient technologies currently under development. 70. As a general matter, numerous commenters believe that decisions regarding relocation should be left to the parties and the marketplace. CellCall believes that voluntary relocation of incumbent licensees provides the most flexible, efficient, and equitable means to obtain contiguous spectrum and to promote the use of efficient wireless technologies. CellCall contends that frequency swaps between upper band and lower band licensees should be permitted. In fact, several commenters argue that the Commission should not become involved in negotiations between geographic area licensees and incumbents regarding relocation. 71. Other commenters argue that voluntary measures alone will not result in the relocation of a sufficient number of incumbents sufficient to implement our wide-area licensing proposal. Nextel contends that mandatory retuning will be necessary because no amount of voluntary negotiation alone will result in contiguous spectrum for the geographic area licensees due to the large number of existing SMR licensees. Nextel argues that purely voluntary retuning only will encourage greenmail and engender delay in achieving licensing symmetry between 800 MHz SMR licensees and other CMRS providers. OneComm contends that if the Commission s proposal is implemented it would perpetuate the existing fragmented nature of SMR spectrum. OneComm, based on its experience, argues that reliance on market forces alone is insufficient to assemble contiguous spectrum. OneComm believes that Commission s proposal could provide an even stronger economic incentive for incumbent licensees to hold out and demand above-market prices. AMTA is convinced that without some form of mandatory negotiation among the parties, creation of contiguous spectrum for wide-area licensing would not be accomplished. Dial Call believes that voluntary negotiations alone are insufficient inducements. ITA/Alliance believe that voluntary retuning provisions will not be sufficient to create regulatory parity. Spectrum opines that voluntary negotiations are insufficient to clear the upper 10 MHz block. 72. With respect to particular mandatory relocation schemes, the commenters propose a variety of alternatives. Nextel advocates requiring all incumbent licensees on the upper 10 MHz block to relocate within a defined window (e.g., one year), provided that alternative spectrum is available and the wide-area licensee pays for the full cost of relocation. AMTA and OneComm suggest a mechanism where mandatory relocation is triggered by partial band clearing on a voluntary basis. Under this proposal, a wide-area licensee would be required to relocate or otherwise clear a percentage of incumbents (e.g., 70 percent) off its spectrum block through voluntary negotiations. Once this threshold is reached, the wide-area licensee then could require remaining incumbents to relocate, provided that sufficient spectrum is available and the incumbent is fully compensated. In its initial comments, Motorola advocated deferring the decision on whether to employ mandatory relocation until the Commission could ascertain the effectiveness of voluntary negotiations. Under this approach, the Commission would revisit the issue of mandatory relocation in a subsequent proceeding after a defined period (e.g., one year). Another proposal, which was suggested by SMR WON, is that all incumbents are relocated from the upper 10 MHz block to the General Category channels with relocation expenses paid by the geographic area licensees benefitting from such relocation. 73. Discussion. Though we continue to believe that voluntary negotiations and marketplace incentives are important, based on the record in this proceeding, we conclude that a smooth and equitable transition to the new licensing framework we adopt today for the 800 MHz SMR service cannot be accomplished without some form of mandatory relocation as part of the relocation mechanism. The record supports our conclusion that voluntary negotiations in and of themselves will not be adequate to usher in the wide-area licensing approach we are implementing for the 800 MHz SMR service. Based on our experience in the broadband PCS context, we believe it is necessary for the Commission to define the broad parameters under which such negotiations are to take place, and to establish a mandatory mechanism for those situations where relocation is feasible but voluntary negotiations have proved unsuccessful. Thus, despite the difficulties we noted in the Further Notice pertaining to mandatory relocation in the 800 MHz SMR context (such as scarcity of vacant channels, the potential for service disruption, and potential significant costs), we conclude that a narrowly-tailored mandatory relocation mechanism is essential to implement a wide-area licensing scheme in the mature 800 MHz SMR industry. 74. We believe such a relocation scheme must be narrowly tailored in order to prevent adverse impact on the operations of existing licensees. Therefore, we emphasize two key tenets of our relocation scheme: (1) if an EA licensee is either unable or unwilling to provide an incumbent licensee with "comparable facilities" (as discussed in the Second Further Notice of Proposed Rule Making, infra), such incumbent would not be subject to mandatory relocation; and, (2) any incumbent that is relocated from frequencies within the upper 10 MHz block, either voluntarily or involuntarily, will not be required to relocate again if we adopt our geographic area licensing proposal for the lower 80 and General Category channels (see Second Further Notice of Proposed Rule Making, infra). We believe that these measures are necessary to protect the operational interests of incumbent licensees who relocate off of the upper 10 MHz block. We also believe that these protections are essential for such incumbents to be able to engage in effective business planning. 75. Prior to the upper 10 MHz block auction and commencement of the mandatory relocation scheme, we encourage potential EA applicants to enter into negotiations with incumbents. To facilitate such negotiations we are taking certain administrative actions. On October 4, 1995, the Bureau imposed a freeze on the filing of new applications for the General Category channels. As discussed in further detail, infra, we are designating the General Category channels for exclusive SMR use. Under both the Commission-imposed freeze on the 800 MHz SMR Category channels and the Bureau-imposed freeze on the General Category channels, assignment and transfer of control applications continue to be processed when the location of the licensed facilities remains unchanged. By today's action, we are initiating a partial lifting of the freeze on new applications for SMR and General Category channels to permit those assignments and transfers of control that involve modifications to licensed facilities, provided such assignments and transfers are designed to accommodate market-driven, voluntary relocation arrangements between incumbents and potential EA applicants, and do not change the 22 dBu service contour of the facilities to be relocated. 76. We reiterate that this option is solely available for licensees being relocated out of the upper 10 MHz block. We will not accept applications to relocate incumbents from one part of the upper 10 MHz block to another. To allow such relocations within the 10 MHz block prior to the auction could result in one EA applicant increasing the number of incumbent licensees on another spectrum block for which a competitor may apply. We also will require that the potential EA applicant and relocating incumbent(s) be completely unaffiliated. As a safeguard against abuse of the market-driven relocation option, we will require certifications from the assignor and assignee or transferor and transferee that (1) the transaction is part of a relocation arrangement negotiated and agreed upon by the parties, and (2) that the parties are not now, and have never been affiliates of one another. For purposes of this option, we will define an "affiliate" as an individual or entity who (1) directly or indirectly controls or has the power to control a party to the application, (2) is directly or indirectly controlled by a party to the application, (3) is directly or indirectly controlled by a third party or parties that also controls or has the power to control a party to the application, or (4) has an "identity of interest" with a party to the application. Processing of these assignments and transfers will continue until the date we release the Public Notice announcing the upper 10 MHz block auction. By this action, we are providing a means for a purely voluntary period before the mandatory relocation procedures are applicable to incumbent licensees. As evidenced by the record in this proceeding, numerous commenters support a relocation mechanism which operates on a purely voluntary basis. Thus, we believe that this partial lifting of both freezes imposed on these frequencies will facilitate a smooth transition to our new wide-area licensing scheme for the upper 10 MHz block by allowing existing licensees to begin the relocation process quickly. As of the adoption of this First Report and Order, we will not except new requests filed pursuant to the showing described in the CMRS Third Report and Order. 77. In addition to encouraging pre-auction negotiation, we adopt the following relocation mechanism, that will go into effect post-auction. This mechanism will consist of two phases before an EA licensee may proceed to request involuntary relocation of an incumbent. The first phase is a one-year period for voluntary negotiations. During this voluntary period, the EA licensee and incumbents may negotiate any mutually agreeable relocation agreement. Because negotiations are strictly voluntary and are not defined by any parameters, an EA licensee may choose to offer premium payments or superior facilities as an incentive to the incumbent to relocate quickly. We delegate to the Bureau the authority to announce the commencement of this first phase by issuance of a Public Notice. We anticipate that this first phase will commence shortly after all EA licenses are granted. 78. For incumbents to be treated fairly under our relocation mechanism, they need information and certainty about the EA licensees' relocation plans, and must receive this information as soon as possible. Incumbents need to factor such relocation into their respective business plans. Thus, we will require EA licensees to notify incumbents operating on frequencies included in their spectrum block of their intention to relocate such incumbents within 90 days of the release of the Public Notice commencing the voluntary negotiation period. If an incumbent does not receive timely notification of relocation, the EA licensee loses the right to require that incumbent to relocate. Because such notification affects an EA licensee's relocation rights, we will require that the EA licensee files a copy of the relocation notice and proof of the incumbent's receipt of the notice within ten days of such receipt. An EA licensee's failure to file such information with the Commission creates a presumption that the incumbent has not been notified of intended relocation. The incumbent licensee who has been notified of intended relocation will be able to require that all EA licensees negotiate with such licensee together. We believe that these requirements will ensure that incumbents are timely notified of possible relocation and that such relocation will occur on a system-wide rather than piecemeal basis. In addition, requiring all EA licensees that intend to relocate an incumbent to negotiate together provides a simple mechanism for sharing the costs of relocating an incumbents' entire system among all affected EA licensees. 79. If no agreement is reached between the EA licensee and incumbents during the first phase, the EA licensee may initiate a two-year mandatory negotiation period, during which the parties are required to negotiate in "good faith." In the event that the parties still fail to reach an agreement during this second phase, the EA licensee may request involuntary relocation of the incumbent's system. In such a case, the EA licensee must: (1) guarantee payment of all costs of relocating the incumbent to a comparable facility; (2) complete all activities necessary for placing the new facilities into operation, including engineering and frequency coordination, if necessary; and, (3) build and test the new system. Specifically, any relocation of an incumbent must be conducted in such a fashion that there is a "seamless" transition from the incumbents "old" frequency to its "relocated" frequency (that is, there is no significant disruption in the incumbent's operations). We recognize that this "seamless" transition obligation on the part of the EA licensee may require that a relocated incumbents' old system and its new post-relocation system operate simultaneously for a period in order to avoid significant service disruption. We believe this is an appropriate obligation to impose on the EA licensee, however, if no alternative means exists to carry out a seamless transition. Although this may be the most effective way of minimizing significant disruption to the incumbent's operations, we will not require EA licensees to conduct their incumbent relocations in this manner in every instance. We caution EA licensees, however, that if this is the only way in which they reasonably can ensure avoidance of significant service disruption to the incumbent we will not look favorably upon their decision not to employ this relocation approach. Similar to our approach in the broadband PCS context, we seek comment in the Second Further Notice of Proposed Rule Making in PR Docket No. 93-144 on how responsibilities for relocation should be shared by all EA licensees benefitting from relocation of the same incumbents and the definition of "comparable facilities." b. Incumbent Operational Flexibility 80. Background. In the Further Notice, we tentatively concluded that in those situations in which incumbents continue operating on already-licensed facilities, they should not be allowed to expand beyond their existing service areas on those channels designated for wide-area licensing without the consent of the wide-area licensee. We also noted that although we traditionally have applied the protected service area concept to non-cellular Part 22 services, we have not yet incorporated this concept into our Part 90 rules. We asked commenters to address whether we should enable incumbent systems operating on the upper 10 MHz block to construct stations anywhere within a defined protected service area. 81. Comments. CellCall and OneComm agree with our proposal to allow incumbents to expand beyond their existing service areas on channels included in the EA licensee's spectrum block only with the consent of the EA licensee. Several commenters, however, express concern that such an approach could affect adversely incumbents' operations because: (1) the expansion and operating potential of incumbent licensees would be limited; and, (2) the EA licensee s consent to incumbent expansion is not likely to be given, since it has every incentive to expand its own operations as quickly as possible. SBA and DCL Associates believe wide operational flexibility should be extended to all SMR licensees, whether they are wide-area or local licensees. 82. Some commenters suggest different scenarios under which incumbents should be permitted to expand their service area without first obtaining the EA licensee's consent. For example, several commenters recommend that the 40/22 dBu co-channel separation standard could be reduced in favor of incumbents within an EA licensee's coverage area, unless the EA licensee already had constructed co-channel facilities at a particular site. Similarly, Coalition proposes that where an upper block channel has remained available for 120 days or more, or where it is possible to extend service contours of an existing station into a presently unserved area without interfering with any operations of the wide-area licensee, incumbent licensees should be expressly permitted to file applications requesting expansion of their facilities. Coalition further proposes that incumbents discovering substantive construction and operational violations should continue to be able to request and obtain dispositive finder s preferences for bringing these violations to the Commission s attention. CellCall proposes that if an EA licensee withholds its consent, that licensee should be required to construct the requested channels within six months. If the EA licensee fails to complete such construction, the channel would become available to the incumbent upon a showing of need for inclusion of the channel in a geographic area. CellCall contends that such a mechanism will provide a measure of flexibility to incumbents with expansion needs, thereby putting channels to use promptly and efficiently. Telecellular requests the Commission to adopt a rule permitting incumbent licensees to file for new base stations when the incumbent can demonstrate that, based on interference protection requirements, the wide-area licensee could not construct a transmitter at the new site and that the new site would not materially extend the interference protection contour afforded the incumbent. 83. With respect to the operational flexibility that should be afforded to incumbents, several commenters argue that incumbent licensees should be permitted to relocate their facilities so long as they do not alter their 22 dBu contour. They contend that incumbents should be allowed: (1) to make minor system modifications, such as moving a transmitter because of loss of site or other site-related problems; or, (2) to establish new fill-in stations in certain limited circumstances (e.g., no expansion of the 40 dBu contour, or no expansion of the 22 dBu contour). They further argue that granting this operational flexibility to incumbents would not impose any additional operational restrictions on the EA licensee. 84. In addition, several commenters support incorporation of provisions affording incumbent licensees operational flexibility within a defined protected service area. Many of these commenters believe that a fixed-radius protected service area of 30 kilometers would be appropriate. Applied, Dru Jenkinson, et al., and UTC endorse a fixed-radius protected service area of thirty kilometers for existing licensees. Fisher, on the other hand, suggests a 70-mile fixed-radius protected service area for incumbent SMR systems in the 861-865 MHz spectrum block. Lagorio contends that if the Commission adopts a 20-mile standard protected service area for incumbents, it should adopt a 30-mile standard protected service area for licensees having exclusive use of channels in Northern California. AMTA, however, recommends against a fixed-radius definition for the protected service area, because such a standard bears little or no relevance to real-world system service or interference requirements. Instead, AMTA urges the Commission to permit licensees flexibility to deploy their authorized channels as long as they do not expand the 22 dBu contour of the original facility. Other commenters support AMTA's suggested approach. 85. Discussion. We conclude that allowing non-EA licensees to expand their systems at will after wide-area licensing has occurred is not feasible. Such an approach would render wide-area licenses of little value because it would create continuing uncertainty for wide-area applicants and licensees alike about the amount of spectrum available under the license. We believe that restricting incumbents ability to expand is necessary to balance the interests of EA licensees in building viable systems while allowing the incumbents to continue their existing operations in the upper 10 MHz block. 86. We nevertheless recognize, as noted by several commenters, that there may be circumstances in which an EA licensee should be required to permit incumbents to make minor alterations to their service areas to preserve the viability of their systems. We also believe that incumbent licensees should be provided with additional operational flexibility. Thus, as recommended by AMTA and a number of other commenters, we will allow an incumbent licensee to make modifications within its current 22 dBu interference contour. 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 22 dBu interference contours are not expanded. We reject the suggestion to use a fixed-radius protected service area for existing systems, because we conclude that this measure does not correspond adequately to the market served by 800 MHz SMR providers. We elect to use a 22 dBu criterion, rather than a 40 dBu criterion, because we believe it will give incumbents more operational flexibility without adversely impacting the EA licensee's ability to build a viable wide-area system in the same market. We believe that given the significant incumbent presence in the 800 MHz SMR service, additional operational flexiblity is necessary. An incumbent must, however, still comply with our short-spacing criteria in Section 90.621(b), even if its modifications do not extend its 22 dBu interference contour. 87. Incumbent licensees will be required to notify the Commission of any changes in technical parameters or additional stations constructed, including agreements with an EA 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. We believe that generally restricting incumbents ability to expand on wide-area spectrum blocks while providing incumbents with limited flexibility to modify their systems strikes a fair balance between the interests of incumbents and geographic area licensees. 88. In addition, similar to our approach in the 900 MHz SMR service, we will allow 800 MHz SMR incumbents who are not relocated to convert their current site-by-site licenses to a single license authorizing operations throughout the incumbents' contiguous and overlapping service area contours of its constructed multiple sites. This option will be granted upon the request of the incumbent after the 90 day period for notification of relocation has passed. Incumbents seeking such reissued licenses, however, must make a one-time filing of specific information for each of their external base station sites to assist the staff in updating the Commission's database after the close of the auction for the upper 10 MHz block of 800 MHz SMR spectrum. We also will require evidence that such facilities are constructed and placed in operation and that, by operation of our rules, no other licensee would be able to use these channels within this geographic area. We note that facilities added or modified that do not extend the 22 dBu interference contour will not require prior approval or subsequent notification under this procedure. Such facilities will not receive interference, because they will be indirectly protected by the presence of surrounding stations of the same licensee on the same channel or channel block. 5. Co-channel Interference Protection a. Incumbent SMR Systems 89. Background. In the CMRS Third Report and Order, we concluded that, as a general matter, we would retain our existing co-channel protection rules for CMRS licensees. We concluded that geographic area licensees would continue to be subject to existing station- specific interference criteria with respect to all incumbent co-channel stations. Under these rules, a wide-area licensee would be required to afford protection to incumbents, either by locating its stations at least 113 km (70 mi) from the facilities of any incumbent, or by complying with the co-channel separation standards set forth in our short-spacing rule if it seeks to operate stations located less than 113 km (70 mi) from an incumbent licensee s facilities. 90. Comments. Numerous commenters support the Commission's proposal. Dru Jenkinson, et al. believe that imposing such compliance on geographic area licensees would not unreasonably hamper their ability to fully construct their systems. Genesee agrees to maintenance of 40 dBu protection. Morris recommends that geographic area licensees should not be able to construct facilities within the 22 dBu contour of incumbent co-channel licensees. OneComm believes that establishing co-channel interference requirements to apply at the perimeter of licensed service areas would encourage development of contiguous spectrum systems and would promote regulatory symmetry with competing CMRS systems. 91. Several commenters contend that short-spacing of incumbents by geographic area licensees should not be allowed. Some of these commenters believe that by allowing short- spacing, the Commission makes the provision of SMR service less financially feasible. They further believe that a more strict separation standard will make it less likely that competing systems will lock in co-channel licensees to existing sites. Telecellular, on the other hand, believes that the Commission should maintain its existing short-spacing standards as solid protection for incumbents. Fisher believes that the current co-channel separation rules are too generous. Similarly, Lagorio suggests that the Commission take additional action to prevent the increase of harmful interference between co-channel stations. 92. Discussion. We will require EA licensees to afford interference protection to incumbent SMR systems, as provided in Section 90.621 of the Commission's rules. As a result, an EA licensee must satisfy its co-channel protection obligations with respect to incumbents in one of three ways: (1) by locating its stations at least 113 km (70 miles) from any incumbent's facilities; (2) by complying with our short-spacing rule if it seeks to operate stations less than 113 km from an incumbent's facilities; or, (3) by negotiating an even shorter distance with the incumbent licensee. We conclude that these requirements will ensure adequate protection of incumbent operations, without hampering the ability of EA licensees to construct stations throughout their authorized service areas. We are not persuaded by commenters' suggestions to eliminate the short-spacing rule. We believe that the short- spacing rule offers a balance between increased spectrum efficiency, adequate co-channel protection, and administrative convenience. Moreover, we are not convinced that continued use of the short-spacing rule in the context of a wide-area licensing scheme would result in a plethora of interference disputes to be resolved by the Commission. Rather, we believe that the rule will afford maximum flexibility to EA licensees, allow incumbents to fill in "dead spots," and protect incumbent licensees from actual interference. b. Adjacent EA Licensees 93. Background. In the CMRS Third Report and Order, we concluded that the co- channel interference protection obligations of geographic area licensees with respect to other geographic area licensees would be similar to those imposed in the cellular and PCS services. Cellular and PCS licensees are required to comply with interference protection criteria between Commission-defined service areas only at service area borders. In the Further Notice, we tentatively concluded, therefore, that wide-area SMR licensees in the 800 MHz band should not be allowed to exceed a signal level of 22 dBuV/m at their service area boundaries (unless they negotiate a different signal strength limit with all potentially affected adjacent licensees). 94. Comments. Genesee, Motorola, and Nextel endorse the Commission's tentative conclusion. Nextel believes that adoption of the indicated standard would provide incentives for cooperation, such as frequency sharing, between neighboring geographic area licensees desiring to extend their service contours to the geographic boundaries of their service areas. Nextel also notes that such an approach is similar to that used in the cellular service, which has worked well. 95. With respect to field strength level at the geographic area licensees' service area borders, Motorola argues that designating 22 dBuV/m at the service boundary will result in a gap in adequate coverage level at the edges of both adjacent service areas. Motorola contends that, as a practical matter, such a requirement will force adjacent geographic area licensees to negotiate different signal levels at their edges, as is done in the cellular service. Despite these concerns, Motorola believes that a 22 dBu contour for the EA license is a reasonable standard for minimization of interference. SMR WON believes that there will be many site-specific licenses that overlap adjacent service areas until the spectrum is cleared. As a result, SMR WON proposes that new operations must not place a 40 dBu signal across a wide-area service border, and also must protect existing site-specific operations to their protected contour areas without using the short-spacing tables. SMR WON also believes that licensees in adjacent wide-area service areas must coordinate to eliminate interference, and work together as they relocate incumbent licensees. 96. Discussion. We agree with SMR WON that 40 dBuV/m is an appropriate measure for the desired signal level at the service area border. We will prohibit EA licensees from exceeding a signal level of 40 dBuV/m at their service area boundaries, unless all bordering EA licensees agree to a higher field strength. We also will require coordination of frequency use between co-channel adjacent EA licensees and all other affected parties. This approach provides EA licensees with a signal strength level sufficient to operate their systems up to the borders of their EAs, while also providing protection to adjacent operations. As an exception to this requirement, when a single entity obtains licenses for adjacent EAs on the same spectrum block, it will not be required to coordinate its operations in this manner. 6. Emission Masks 97. Background. To protect against adjacent channel interference, we have emission mask rules in most mobile radio services to restrict transmitter emissions on the spectrum adjacent to the licensee s assigned channel. In the CMRS Third Report and Order, we affirmed our out-of-band emission rules for CMRS services. We also determined that out-of- band emission rules should apply only where emissions have the potential to affect other licensees operations. With respect to licensees that have exclusive use of a block of contiguous channels, we concluded that out-of-band emission rules would be applied only to the extent necessary to protect operations outside of the licensee s authorized spectrum. 98. Comments. Genesee believes that technology is changing so rapidly that our emission mask rules must take into account developing technologies such as frequency hopping and spread spectrum. In this regard, Genesee believes that the Commission needs to provide for high power digital systems on a narrow 5 kHz spacing, so that incumbent providers will have a possibility for expansion. Motorola supports maintaining the existing emission mask rules on the basis that such requirement is necessary to protect incumbent operations adequately. Pittencrief agrees with the Commission's proposal in concept, but notes that without mandatory relocation, incumbents will continue to use many channels in the interior of the wide-area system. As a result, Pittencrief believes that the Commission's rules should protect these interior co-channel users adequately. SMCI believes that SMR equipment should meet emission mask rules on all channels, provided that such a requirement does not severely impact the cost of the equipment. SMCI fears that weakening the emission mask rules would encourage production of poorly designed equipment, which eventually would cause undue interference problems. 99. Nextel believes that the Commission's proposal would require an out-of-band emission limitation more strict than that now in place at the end of the contiguous channel block band. Nextel further believes that an SMR station today is required to suppress its emissions by the proposed standard only in frequencies removed from the authorized frequency by more than 250 percent of the authorized bandwidth. As a result, Nextel proposes that the Commission retain its existing emission mask rule for systems using 25 kHz channels, and adopt the Commission's proposed emission mask limit for those systems using multiple 25 kHz channels in contiguous blocks. Nextel's rationale is that such an approach would result in a more flexible emission plan. 100. Ericsson suggests that the Commission adopt a different emission mask, which combines the emission mask proposed in the Further Notice and the emission mask rule currently applicable to 800 MHz SMR licensees. Ericsson argues that, because the proposed emission mask is more strict than the current emission mask under Part 90 of our Rules, 800 MHz SMR equipment manufacturers may be required to make major modifications to existing equipment so that it can continue to be used for 800 MHz SMR services. Ericsson contends that its suggested emission mask rule will enable manufacturers to design equipment to be used by both existing Part 90 licensees and EA licensees. Motorola notes that Ericsson's proposal could fostor innovative digital technologies provided that adjacent channel interference protection levels are preserved. In this connection, Motorola recommends that if Ericsson's proposal is adopted, that EA licensees be required to utilize the entire "skirt" of the current emission mask under Part 90 of our rules in order to maintain the existing level of adjacent channel interference protection. 101. Discussion. We conclude that out-of-band emission rules should apply only to the "outer" channels included in an EA license and to spectrum adjacent to interior channels used by incumbents. We believe that these channels alone have the potential to affect operations outside of the EA licensee s authorized bandwidth. We agree with Ericsson's suggested modification to the emission mask rule proposed in the Further Notice. We conclude that the emission mask rule suggested by Ericsson would protect other EA licensees adequately. Although Ericsson's proposed emission mask rule differs from that adopted for broadband PCS, we believe that such differences are warranted because they will smooth the transition from the existing regulatory scheme to the new wide-area licensing approach. We also believe that this requirement will facilitate dual mode SMR/cellular operation, similar to that in the PCS/cellular context, which ultimately will add capacity to the systems operated by the EA licensees. We also agree with Motorola's assertion that current adjacent channel interference protection requirements should be maintained. Thus, we adopt a modified version of Ericsson's proposed emission mask rule to include the additional requirement that existing level of adjacent channel interference protection be maintained. We believe that this emission mask rule will best accomodate the operations of both EA licensees and incumbents with the least disruption. C. Construction Requirements 1. EA Licensees 102. Background. In the CMRS Third Report and Order, we determined that the record in the CMRS proceeding generally supported use of longer construction periods, combined with interim coverage requirements, to ensure that wide-area CMRS licensees provide service to portions of their service area before the construction period expires. In the Further Notice, we noted that such an approach has been used for cellular service and recently was adopted for both broadband and narrowband PCS. We concluded in the CMRS docket that 800 MHz wide-area SMR systems should be subject to similar requirements, noting that we would need to tailor these requirements to reflect certain circumstances unique to the SMR service. In the Further Notice, we tentatively concluded that wide-area SMR licensees should have five years to construct their systems. 103. Comments. AMTA, CellCall, and OneComm support a five-year construction period for wide-area 800 MHz SMR licensees. AMTA believes that this period should be sufficient to construct facilities in any remaining "white space" in the geographic area, and to negotiate with incumbent operators. CellCall believes that a five-year construction period is consistent with both existing wide-area SMR rules and cellular rules. Although OneComm believes that a five-year construction period with interim coverage requirements will assist development of contiguous spectrum systems, it opines that, if voluntary relocation alone is adopted, a ten-year license and build-out requirement should be adopted because incumbents' refusal to relocate will impede the geographic area licensees' construction efforts. 104. Discussion. We conclude that EA licensees should have a five-year construction period. While this construction period is shorter than that imposed for PCS systems, we agree with the majority of commenters that it is the most appropriate time period for the 800 MHz SMR service. Notably, under our current rules, SMR licensees can request up to five years to construct a wide-area system in the 800 MHz band. In addition, given the substantial construction of 800 MHz SMR systems (including wide-area systems) to date, the ten-year construction period applicable to PCS appears excessive for the service. Although a five-year construction period may give some EA licensees more time to construct certain facilities than otherwise might have been allowed, we believe that EA licensees should have this flexibility. Moreover, we anticipate that geographic area licensees that have invested in existing systems will have an incentive to construct facilities and provide service promptly, to ensure a return on that investment. Furthermore, we believe that the use of competitive bidding to select geographic area licensees provides ample incentives for rapid system construction, since this permits license winners to recover their bidding expenses. 2. Extended Implementation Authority 105. Background. As we noted in the Further Notice, some existing SMR licensees have been granted extended implementation periods of up to five years to construct their systems, pursuant to either a waiver of our construction and loading rules or Section 90.629 of our Rules. Section 90.629 of our Rules outlines the circumstances under which a SMR licensee may be granted extended implementation authority. Specifically, any such authority is "conditioned upon the licensee constructing and placing its system in operation within the authorized implementation period and in accordance with an approved implementation plan of up to five years." Our rules also require SMR licensees with extended implementation authority to submit annual certifications of compliance with their yearly station construction commitments. Moreover, if the Commission concludes, at any time, that the licensee has failed to meet such construction commitments, it may terminate extended implementation authority and give the licensee six months from the termination date to complete construction of the system. 106. In the Further Notice, we proposed to cease accepting requests for extended implementation authority on the lower 80 channels, in order to prevent underutilization of 800 MHz SMR channels for long periods. We also sought comment on whether existing licensees with extended implementation periods should be given the full period to construct their systems, or if they should be given some shorter period. Additionally, we asked commenters to discuss what would be a reasonable time-frame for completing such systems, given the technologies presently available in the SMR market. 107. Following our adoption of the Further Notice, some SMR licensees filed requests for extended implementation authority, which remain pending. With respect to two such requests filed by Chadmoore and PCC Management Corp., the Bureau released a Public Notice seeking comment on whether the requests should be granted. In its extended implementation authority request, Chadmoore seeks three years to construct a non-contiguous "wide-area" SMR system that will extend from the southeastern United States through the upper Midwest and use new technology. Chadmoore argues that grant of its extended implementation request is warranted on four grounds: (a) Chadmoore's principals have demonstrated expertise in SMR sales and service; (b) Chadmoore previously has demonstrated its ability to acquire and construct those licenses granted to SMR "investors;" (c) Chadmoore's proposal would assist those licensees "who have, as yet, not constructed" their stations, and who are in danger of losing their investment once their already extended deadline has expired; and, (d) grant of Chadmoore's proposal will promote competition in the SMR equipment manufacturing market. Similarly, PCC seeks a period of three years to construct a regional, and ultimately nationwide, network of SMR systems. PCC's proposed system would include 2,181 channels, 849 conventional channels and 269 trunked channels, encompassing 1,118 licenses. PCC argues that grant of its extended implementation request is warranted for the following reasons: (a) climatic conditions for the region(s) in which the SMR systems are located preclude construction during certain seasons of the year; (b) grant of PCC's proposal will assist licensees who have not yet constructed their authorized facilities; (c) PCC's implementation plan will result in a more cost-effective build-out for the stations included in its proposal; and (d) grant of PCC's proposal will facilitate the implementation of an integrated nationwide network. 108. Comments. CellCall supports prohibiting future requests for extended implementation on the lower 80 channels. Cumulous, on the other hand, opines that the Commission has failed to provide a reasoned basis for such a prohibition. Cumulous further argues that the Commission should reject such a restriction, in order to promote maximum competition and additional new services. AMI, DCL, PCIA, Southern, and USIS argue that incumbent licensees with extended implementation authority should not have to rejustify their waiver requests, because they have relied on the grant of additional time to complete their systems. Pittencrief opposes changing an incumbent's existing grant of extended implementation on the basis that implementation of a new licensing scheme should not affect the incumbent's ability to construct its wide-area system. 109. All of the commenters responding to the Chadmoore/PCC Public Notice oppose grant of the Chadmoore and PCC extended implementation requests. These commenters contend that the licensees which ultimately will benefit from grant of the extended implementation requests not only have had a sufficient time in which to construct their stations, but also, as a result of the Goodman/Chan Order, have been given additional time in which to complete construction of their facilities. They also argue that the most efficient use of the spectrum would be achieved by recovering it and making it available to licensees who will construct expeditiously. PCIA further argues that these extended implementation requests are different from others, because they do not involve licensees of fully-loaded and operational systems. With respect to the specific proposals, AMTA, Nextel, and PCIA question Chadmoore's ability to fulfill its wide-area network proposal. With respect to PCC, DDI argues that PCC's arguments in support of its request either are consequences flowing from the affected SMR licensees' independent business decisions or risks commonly assumed by all SMR applicants and licensees. Finally, RRS and SJD question PCC's character qualifications on the basis of PCC's conduct regarding its wide-area system proposal and its business associations. 110. Discussion. We initially established extended implementation authority for SMRs to facilitate construction of wide-area systems. We believe that the wide-area licensing plan we adopt today will accomplish this result in a more uniform and expeditious fashion. Consequently, we conclude that the availability of extended implementation authority in the 800 MHz SMR service is no longer necessary. In fact, we are concerned that both existing and future grants of extended implementation authority would be contrary to the underlying goals of this proceeding. Specifically, we believe that allowing licensees to retain extended implementation authority of up to five years after our adoption of the wide-area licensing approach detailed in this First Report and Order would impinge upon the construction requirements imposed on EA licensees. For example, within three years of license grant, EA licensees are required to fulfill their construction requirements, which are based on population coverage and channel usage, regardless of incumbent presence. If certain channels remain unconstructed but authorized to an another entity for this three-year period, the EA licensee is estopped not only from utilizing the channel(s) directly but also from acquiring it from the holder of the authorization due to our prohibition against the transfer of unconstructed facilities. As a result, we believe that it is necessary not only to cease acceptance of requests for extended implementation authority but also to accelerate the termination date of existing implementation periods so that EA licensees will not be unnecessarily hampered in their efforts to comply with the construction requirements associated with their authorizations. 111. In addition, several licensees and commenters contend that such extended implementation grants have resulted in spectrum warehousing. To address these spectrum warehousing concerns, we will require all incumbent 800 MHz SMR licensees who have received extended implementation authority to demonstrate that allowing them extended time to construct their facilities is warranted and furthers the public interest. Specifically, a licensee seeking to retain extended implementation authority must: (a) indicate the duration of its extended implementation period (including commencement and termination date); (b) provide a copy of its implementation plan, as originally submitted and approved by the Commission, and any Commission-approved modifications thereto; (c) demonstrate its compliance with Section 90.629 of our rules if authority was granted pursuant to that provision, including confirmation that it has filed annual certifications regarding fulfillment of its implementation plan; and (d) certify that all facilities covered by the extended implementation authority proposed to be constructed as of the adoption date of this First Report and Order are fully constructed and that service to subscribers has commenced as defined in the CMRS Third Report and Order. These showings must be submitted within 90 days from the effective date of this First Report and Order. We note that all of the information to be included in the showing presently is required by Section 90.629 of our Rules. We hereby delegate to the Bureau the authority to review and take appropriate action upon such showings. 112. If a licensee's extended implementation authority showing is approved by the Bureau, such licensee will be afforded a construction period of two years or the remainder of its current extended implementation period, whichever is shorter. We recognize that some licensees were initially granted extended implementation periods which exceed this two-year period. In those instances where a licensee demonstrates that it has fully complied with the requirements of Section 90.629 of the Commission's rules and that its system cannot reasonably be completed within the two-year period, we will entertain requests for the minimum period of time necessary to complete implementation of the licensee's proposal provided that the licensee explains why the two-year period is an insufficient amount of time. We anticipate that such explanation would entail the same type of public interest showing associated with a request for waiver of the Commission's rules under Section 1.3 of our rules. 113. Upon the termination of this two-year period, authorizations for facilities that remain unconstructed will cancel automatically. If a licensee either fails to submit the showing described above within the designated time frame or submits an insufficient or incomplete showing, such licensee will have six months from the last day on which it could timely file such a showing or six months from the denial of its request to construct the remaining facilities covered under its implementation plan. After this six-month period, authorizations for facilities still unconstructed will cancel automatically. 114. With respect to requests for extended implementation authority currently pending before the Bureau, we hereby deny these requests. We conclude that grant of these requests would conflict with our goal of uniformly implementing wide-area licensing. Parties that remain interested in obtaining extended implementation authority are free to apply for an EA license under our new rules. In the case of the Chadmoore and PCC extended implementation requests, which involve several licensees that also were the subject of our decision in the Goodman/Chan Order, we granted such licensees limited relief from our construction requirements. We decline to directly or indirectly broaden the scope of this relief based on the same circumstances that we previously have considered. To the extent that these entities desire additional time in which to construct, we believe that it is more appropriate for them to seek such a result within the wide-area licensing plan that we adopt today. We believe that this competitive bidding process will be the most expeditious and efficient mechanism to ensure that those entities that most value providing service to the public rapidly are able to acquire sufficient spectrum for their present and future operations. 3. Interim Coverage Requirements 115. Background. In the CMRS Third Report and Order, we concluded that 800 MHz wide-area SMR licensees should be subject to interim coverage requirements that are similar to those in the cellular and PCS rules. In the Further Notice, we proposed that geographic area licensees be required to provide coverage to one-third of the population within their market area within three years of initial license grant, and to two-thirds of the population by the end of their five-year construction period. We also sought comment on whether compliance with these interim coverage requirements would be achieved by single channel or multi-channel coverage. 116. In the CMRS Third Report and Order, we noted that any interim coverage requirements for wide-area SMR systems must account for the fact that geographic area licensees may be required to provide co-channel protection to incumbent systems within their service area. In the Further Notice, we indicated our belief that when a licensee acquires a wide-area license, it assumes the responsibility of obtaining the right to use sufficient spectrum to provide coverage if such spectrum is not already available. We further indicated our expectation that coverage be achieved directly by constructing facilities on available spectrum authorized to the wide-area licensee or acquiring such spectrum through buy-outs of incumbent licensees within its authorized spectrum block. To the extent that the Further Notice could be read to propose that coverage could be met through use of resale or similar agreements, we clarify our intention that the wide-area licensee is free to engage in resale activities, but must satisfy our construction requirements through use of its facilities and not capacity acquired from others through resale. 117. Comments. With respect to interim coverage requirements, the commenters generally supported the proposal presented in the Further Notice. AMTA supports the use of interim construction requirements to ensure that licensees provide service to at least part of their authorized service area on a timely basis. AMTA suggests that the Commission consider other criteria on which to base these requirements, such as geographic coverage. AMTA notes that these additional criteria could be implemented in addition to, or as a substitute for, the proposed population requirements. Similarly, CellCall endorses adoption of a geographic coverage requirement in conjunction with, or as a replacement of, a population coverage requirement. Russ Miller suggests requiring both geographic and population coverage in order to force coverage over the entire EA. Dial Call supports coupling population requirements with a requirement that a minimum number of frequencies be constructed to serve the population. Pittencrief argues that geographic area licensees should be able to satisfy their interim coverage requirements by building out a system covering the relevant percentage of either the population or geographic area. Dial Call and OneComm support the Commission's proposal. Southern contends that the proposed coverage requirements would encourage spectrum underutilization and warehousing, because many geographic area licensees already meet the proposed coverage requirements. 118. Nextel recommends modifying the proposed interim coverage requirements to require geographic area licensees to demonstrate authority to encompass a per channel average of one-third of the population within the relevant geographic area after three years and a per channel average of two-thirds of the relevant geographic area after five years. Nextel suggests that the per channel average population would be the total per channel populations encompassed within the geographic area divided by the number of channels covered by the wide-area license. Nextel believes that construction and coverage requirements should be accompanied by stricter channel use requirements to ensure spectrum efficiency and to prevent anti-competitive conduct and spectrum warehousing. Therefore, Nextel recommends requiring auction winners to utilize at least fifty percent of their authorized channels in meeting the coverage requirements. Southern recommends requiring that one-third of the service area plus 25 percent of the channels be constructed in three years and the remaining two-thirds and 75 percent be constructed within five years. 119. Most commenters agree that failure to meet either of the interim coverage requirements should result in forfeiture of the wide-area license. CellCall, however, opposes imposition of license forfeiture for failure to comply with coverage requirements. Instead, CellCall suggests that the Commission adopt provisions based on cellular unserved area rules that mirror the proposal to award unconstructed incumbent channels to the wide- area licensee. Thus, under CellCall's proposal, unconstructed channels would be available to those incumbents, excluding geographic area licensees who fail to meet the coverage requirements, who need additional channels to expand their systems. 120. Discussion. We will require EA licensees to provide coverage to one-third of the population of their respective EAs within three years of initial license grant and to two- thirds by the end of their five-year construction period. This requirement is consistent with our 900 MHz SMR rules. Unlike our approach in the 900 MHz SMR context, we are not adopting a "substantial service" benchmark for the upper 10 MHz block as an alternative to the population coverage criteria. Given the already extensive licensing in the upper 10 MHz block, we believe it is unlikely that an EA licensee could provide substantial service without buying incumbent systems or relocating incumbents. Similarly, we did not adopt a "substantial service" standard in the Multipoint Distribution Service (MDS) because of extensive incumbent presence in that spectrum. 121. Channel Use Requirement. Given the extensive licensing of the upper 10 MHz block, we share the concern of several commenters that interim coverage requirements alone may not ensure efficient spectrum use unless a channel use requirement is added. Specifically, we are concerned that an EA licensee potentially could satisfy the interim coverage requirements by constructing only one channel in its spectrum block. This would result in inefficient use of 800 MHz SMR spectrum, for which there is great demand. In addition, unlike the 900 MHz SMR service and other lightly encumbered auctionable services, the substantial incumbent presence in the 800 MHz SMR service presents the potential for a bidder who is incapable of building out a wide-area system to participate in the auction solely to restrict a competing incumbent licensee's ability to expand. Accordingly, in addition to the population coverage requirements described supra, we will require EA licensees to construct 50 percent of the total channels included in their spectrum blocks in at least one location in their respective EAs within three years of initial license grant. We are not adopting an additional channel use requirement at five years from license grant. EA licensees are expected and required to maintain their compliance with the channel use requirement from the third year after license grant throughout the remainder of the five-year construction period. This channel use requirement furthers the efficient spectrum use and public interest goals enunciated in the Communications Act. We believe that this additional component of the interim coverage requirements is both reasonable and attainable for 800 MHz SMR EA licensees. We conclude that additional protections are warranted for this particular service. 122. Non-compliance with Interim Coverage Requirements. We conclude that an EA licensee's failure to meet either the three-year or five-year coverage requirements or the channel usage requirement will result in forfeiture of the entire EA license. Forfeiture of the EA license, however, will not result in the loss of any constructed facilities authorized to the licensee prior to the auction. This sanction for failure to comply with construction requirements is consistent with the sanctions provided in our broadband PCS and 900 MHz SMR rules. In addition, such action will allow the spectrum to be made available to other qualified applicants. D. EA License Application Issues 1. Initial Eligibility 123. Background. In the CMRS Third Report and Order and Further Notice, we tentatively concluded that the initial application process for wide-area SMR licenses should be open to any qualified applicant. We also sought comment on whether it was necessary to restrict eligibility for EA licenses to incumbent licensees (or to restrict eligibility based on other criteria) if competitive bidding procedures are used in the upper 10 MHz block. 124. Comments. While Genesee and Pittencrief support open eligibility for the wide- area 800 MHz SMR licenses, several commenters believe that initial eligibility for the licenses should be restricted. These commenters contend that an initial eligibility restriction is necessary to deter speculation in 800 MHz SMR spectrum and to provide incumbent licensees with a meaningful opportunity to participate in wide-area licensing. These commenters argue that initial eligibility for EA licenses should be restricted to: (a) entities already operating an SMR system in the geographic area covered by the particular wide-area license; and, (b) entities in compliance with Section 310(b) of the Communications Act. 125. With respect to an eligibility restriction based on existing operations, CellCall proposes that such eligibility be determined with a benchmark date of August 9, 1994, while Total Com proposes a January 1, 1995 date. Ericsson contends that if an eligibility restriction is adopted, it should not result in only those already operating wide-area 800 MHz SMR systems being eligible for the EA licenses. American SMR and CellCall contend that if initial eligibility is restricted, then entities with applications pending as of such date also should be eligible for EA licenses. CellCall also argues that wireline telephone common carriers should have initial eligibility because they have been prevented by rule from holding SMR licenses, rather than by lack of interest in providing service. 126. Discussion. We conclude that restrictions on eligibility for EA licenses are not warranted, except that, as discussed infra, EA applicants will be presumptively classified as CMRS, and therefore will be required to comply with the alien ownership requirements specified in Section 310 of the Act. Aside from alien ownership restrictions, we are not persuaded by commenters' arguments that eligibility restrictions are needed to deter speculation. We have adopted specific provisions in the service rules for the upper 10 MHz block to address these concerns, e.g., imposition of construction periods combined with interim coverage and channel use requirements. Moreover, we believe that the competitive bidding process itself will deter speculation by those not genuinely interested in providing service to the public. In addition, we believe that open eligibility for the EA licensees will be pro-competitive and potentially will result in a diverse group of entities providing wide-area SMR service in the upper 10 MHz block. This outcome furthers the objectives set forth in Section 309(j)(3)(B) of the Communications Act. 127. With respect to foreign ownership, all applicants will be subject to Section 310(b) of the Communications Act, except to the extent they have received waiver of preexisting ownership interests. In the CMRS docket, we established specific procedures for private mobile services licensees reclassified as CMRS to file waiver petitions to retain existing foreign ownership interests. The deadline for filing such waiver requires was February 10, 1994. Thus, any reclassified private mobile services licensees that have levels of alien ownership or control that would be prohibited when these licensees assume CMRS status must already have filed a petition seeking to have such interests grandfathered. 2. Regulatory Classification of EA Licensees 128. Background. In the CMRS Second Report and Order, we determined that SMR licensees would be classified as CMRS if they offered interconnected service and as PMRS if they did not offer such service. In the Further Notice, we indicated our view that most, if not all, EA licensees will be classified as CMRS, because they are likely to provide interconnected service as part of their service offering. As a result, we proposed to classify all EA licensees presumptively as CMRS providers. We also proposed that EA applicants or licensees who do not intend to provide CMRS service would be able to overcome this presumption by demonstrating that their service does not fall within the CMRS definition. We further proposed that the statutory grandfathering period also would apply with respect to the operation of this presumption. As a result, entities licensed in the SMR service as of August 10, 1993, would not be subject to CMRS regulation, other than foreign ownership restrictions, until August 10, 1996. 129. Comments. Madera, Cumulous, Fresno, Pro-Tec, and Kay contend that it is not apparent that SMR services are substantially similar to cellular or PCS services. CellCall argues that if wide-area SMR service is substantially similar to cellular, they should be subject to similar technical, operational and licensing rules. 130. With respect to grandfathering of reclassified Part 90 licensees, McCaw argues that such licensees should not be permitted to enjoy the benefits of CMRS status prior to being subject to the regulatory obligations imposed upon CMRS licensees. In this connection, McCaw contends that grant of operational flexibility to wide-area SMR operators should not take effect until the earlier of August 10, 1996, the end of the transition period, or such time as a licensee voluntarily agrees to be treated as a CMRS provider for all purposes. McCaw further contends that allowing these operators to enjoy the benefits of CMRS status without the associated regulatory obligations would create a new and significant 18-month disparity (dating from our adoption of the CMRS Third Report and Order), which unjustifiably would confer an artificial marketplace advantage on SMR licensees that Congress neither desired or intended. 131. Discussion. We reiterate our determination in the CMRS Second Report and Order that SMR providers that are either interconnected to the Public Switched Network or authorized for such interconnection will be classified as CMRS. Because we expect most SMR providers to meet the definition, we also reiterate our conclusion that EA licensees will be classified presumptively as CMRS providers. We also conclude that EA applicants and licensees, like other CMRS providers (such as broadband PCS applicants and licensees), will be able to overcome this presumption if they demonstrate that their service does not fall within the definition of CMRS provided in Section 332(d)(1) of the Communications Act. This approach is fully consistent with our action in the broadband PCS context. Although some commenters attempt to debate whether SMR is substantially similar to other CMRS, this issue does not address the fundamental issue of the appropriate regulatory classification for 800 MHz SMR EA licenses -- that is, whether they are CMRS or PMRS. The issue of whether SMR is substantially similar to cellular and PCS was analyzed in the CMRS Third Report and Order. To the extent that this issue is raised by the pending petitions for reconsideration of the CMRS Third Report and Order, we will address it in a separate order. If this matter is not raised in such petitions, the commenters' request that we revisit this issue now is untimely and beyond the scope of this proceeding. We consider the implicit attempt by some commenters to debate whether SMR is substantially similar to other CMRS as, in effect, an untimely request for reconsideration of the CMRS Second Report and Order, which clearly is beyond the scope of this proceeding. 132. We do not agree with McCaw's assertions that SMR licensees should not have operational flexibility until they become subject to CMRS regulation. CMRS status does not determine whether our rules should allow operational flexibility -- in fact, we initiated our efforts to introduce wide-area licensing in this service long before it was contemplated that SMR would be reclassified as CMRS. Furthermore, we do not consider McCaw's example of operational flexibility to be an appropriate example of CMRS regulation, because this is one of the rights conveyed by the EA license, which also conveys certain obligations. Consequently, we are not persuaded by McCaw's argument that this is a situation in which a reclassified Part 90 licensee benefits unfairly from the absence of CMRS regulation. E. Redesignation of Other 800 MHz Spectrum -- General Category Channels and Inter-Category Sharing 133. Currently, 800 MHz SMR systems may be licensed on the General Category channels or licensed under our inter-category sharing rules on 100 channels in the Industrial/Land Transportation and Business Categories (collectively, "Pool Channels"). In the Further Notice, we indicated that although we believe that SMR licensees with existing operations on the General Category or Pool Channels should be allowed to operate on such channels, we also believed that some restriction on future SMR applications for General Category or Pool Channels might be appropriate. 1. General Category Channels 134. Background. In the Further Notice, we asked commenters to address whether the entire General Category or some portion thereof should be designated for future licensing exclusively to SMR applicants. 135. Comments. Several commenters argue that we should maintain our current eligibility rules for the General Category channels because: (1) they allow PMRS and SMR operators to meet their expanding mobile communications needs; (2) the frequencies are heavily used by both PMRS and CMRS providers; and, (3) they are a source of extra capacity for public safety licensees. PCIA argues that the limited remaining vacant spectrum on the General Category channels should be available to private users. API and UTC argue that future SMR eligibility on the General Category channels should be prohibited to preserve sufficient spectrum for the needs of PMRS providers. 136. Numerous commenters, however, argue that the General Category channels should be set aside for SMR use. Nextel contends that the relative demand for SMR service warrants such action. Similarly, OneComm contends that the SMR waiting list and application backlog indicate that the demand for spectrum by SMR licensees is greater than non-SMR licensees. OneComm further contends that redesignation of the General Category channels to exclusive SMR use would facilitate relocation in the upper 10 MHz block, because they most likely would be attractive to incumbents since they are contiguous. AMI argues that redesignation of the General Category channels would promote efficient spectrum use, because it will ensure that the frequencies are available to the largest number of users. 137. Discussion. A review of our licensing records indicates that the overwhelming majority of General Category channels are used for SMR as opposed to non-SMR service. In fact, our licensing records indicate that there are three times as many SMR licensees in the General Category channels as any other type of Part 90 licensee. As a result, we conclude that the demand for additional spectrum by SMR providers is significantly greater than the demand by non-SMR services. In addition, given the already extensive licensing on the upper 10 MHz block and the mandatory relocation we adopt today as part of our wide-area licensing for the 800 MHz SMR service, we expect that demand for additional SMR spectrum will increase, as EA licensees seek frequencies for relocation of incumbents. We recognize that PMRS providers are concerned about having sufficient spectrum to meet their telecommunications needs. We believe, however, that by prohibiting SMR eligibility on the Pool Channels we will relieve much of the pressure on such frequencies. Furthermore, our decision here is intended to ensure that the 800 MHz SMR spectrum is used most efficiently. Based on the record in this proceeding and our licensing records, we conclude that the most efficient use of the General Category channels is to redesignate them exclusively for SMR use. 2. Inter-Category Sharing 138. Background. In the Further Notice, we noted that the Pool Channels are intended for non-commercial internal use by Business and Industrial/Land Transportation licensees, and their availability for SMR licensees was to be on a limited basis only. We sought comment on whether the future eligibility of SMR licensees on the Pool Channels should be restricted. We also sought comment on whether non-SMR licensees should be restricted from future eligibility on SMR channels. After the release of the Further Notice, the Bureau placed a freeze on inter-category sharing. 139. Comments. UTC strongly supports our proposal to revise the inter-category sharing rules, because it would provide a clear demarcation between SMR and non-SMR spectrum and would eliminate the risk of SMR encroachment on non-auctionable spectrum. AMTA contends that the Pool Channels support significantly less SMR usage than the General Category channels and, thus, would serve as an appropriate demarcation between SMR and non-SMR spectrum. APCO and AMI argue that future SMR licensing on Pool Channels should be prohibited in order to preserve availability of these channels in the future for PMRS uses. 140. Pittencrief, Motorola, E.F. Johnson, and OneComm argue that SMR availability of inter-category sharing should not be limited. Applied and Cumulous contend that the Pool Channels provide additional spectrum to meet the expansion demands of growing SMR operators. Some commenters argue that inter-category sharing should be permissible in the border areas, because SMR channels are limited in those regions. Telecellular argues that if future SMR eligibility for the Pool Channels is limited, this restriction should be based on a loading demonstration that such channels actually are needed by the SMR licensee. 141. Discussion. We are concerned that continuing to allow SMR applications for the Pool Channels could cause a scarcity of frequencies for PMRS uses. Specifically, if these channels remain available to SMR licensees, but are not subject to auctions, demand for the channels by SMR applicants seeking to avoid auctions may render them unavailable to other eligible Part 90 services. Thus, we are revising our current eligibility rules for inter-category sharing of the Pool Channels to eliminate the risk of SMR encroachment on spectrum allocated for PMRS purposes. We believe that this revision has the additional benefit of establishing a clear demarcation between our spectrum allocation for SMR and other Part 90 services and eliminates the risk of SMR encroachment on non-auctionable PMRS spectrum. With our redesignation of the General Category channels as SMR channels, we also believe that we have provided sufficient spectrum to address the current demand for SMR spectrum in the 800 MHz band. Therefore, SMR licensees no longer will be eligible to apply for Pool Channels on an inter-category sharing basis. 142. In light of our elimination of SMR eligibility for the Pool Channels, we conclude that non-SMR licensees no longer will be eligible for SMR channels, including the General Category channels. We believe that this additional restriction is appropriate not only for purposes of equity but also to ensure that SMR licensees are not required to compete with non-SMR providers for available channels. With respect to the upper 10 MHz block, we conclude that non-SMR incumbent licensees, like SMR incumbent licensees, will receive the operational rights and will be subject to the mandatory relocation mechanism described supra. With respect to the lower 4 MHz block of 800 MHz SMR spectrum and General Category channels, we are seeking comment in the Second Further Notice of Proposed Rule Making regarding the treatment of non-SMR incumbents. V. EIGHTH REPORT AND ORDER A. Auctionability of the Upper 10 MHz Block of 800 MHz SMR Spectrum 143. Background. Section 309(j) of the Communications Act, permits auctions only where: (1) mutually exclusive applications for initial licenses or construction permits are accepted for filing by the Commission; (2) the principal use of the spectrum will involve or is reasonably likely to involve the receipt by the licensee of compensation from subscribers in return for enabling those subscribers to receive or transmit communications signals; and, (3) the objectives set forth in Section 309(j)(3) would be promoted. Section 309(j)(3) provides that the Commission use of competitive bidding should promote the following objectives: (A) the development and rapid deployment of new technologies, products, and services for the benefit of the public, including those residing in rural areas, without administrative or judicial delays; (B) promoting economic opportunity and competition and ensuring 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; (C) recovery for the public of a portion of the value of the public spectrum resource made available for commercial use and avoidance of unjust enrichment through methods employed to award uses of that resource; and (D) efficient and intensive use of the electromagnetic spectrum. 144. In the Competitive Bidding Second Report and Order, we concluded that SMR as a class of service, including 800 MHz SMR, would satisfy the Section 309(j) criteria for auctionability. We noted that our rules explicitly contemplate and expect that SMR licensees will provide service to eligible subscribers for compensation. Based on this experience and the record in PP Docket No. 93-253, we concluded that the principal use of SMR spectrum, considered as a class, was reasonably likely to involve licensees receiving compensation from subscribers in return for enabling those subscribers to transmit or receive communications. We further concluded that the use of competitive bidding will speed the development and rapid deployment of SMR service, including service in rural areas, with minimal administrative or judicial delays, as required by Section 309(j)(3)(A). We also determined that competitive bidding would promote the objectives of Section 309(j)(3)(C) in the SMR service by recovering for the public a portion of the value of SMR spectrum made available for commercial use, and avoiding unjust enrichment. 145. In the CMRS Third Report and Order, we concluded that we generally should use competitive bidding procedures to select among mutually exclusive CMRS applications where we have the authority to do so and where we find such processing to be in the public interest. We specifically concluded that competitive bidding procedures should be used to select between mutually exclusive initial applications in the 800 MHz SMR service. We also concluded that, because the number of mutually exclusive applications in future licensing in the 800 MHz SMR service may be considerable, the use of competitive bidding will ensure that the qualified applicants who place the highest value on the available spectrum will prevail in the selection process. 146. Comments. Numerous commenters oppose use of competitive bidding procedures in the 800 MHz SMR service. These commenters oppose auctions here because: (1) the competitive bidding authority extended to the Commission in the Budget Act applies only to issuance of new authorizations in newly allocated services; (2) auctions would favor larger entities to the detriment of small businesses and existing licensees, because larger entities will have more financial resources to draw upon for bidding; (3) auctions are inappropriate for an extensively licensed service, because there are few vacant channels and little, if any, "white space" to be filled; and, (4) auctions would give a competitive advantage to one group of licensees over another, because the authorization which is auctioned would provide the successful bidder with additional operational rights. 147. Nextel, on the other hand, argues that auctioning 800 MHz SMR spectrum is within the Commission's competitive bidding authority under the Communications Act. Nextel notes that Congress specified those categories of licenses which were not auctionable and that 800 MHz SMR licenses are not included in such categories. Nextel further argues that auctioning of wide-area 800 MHz SMR licenses would be the most efficient means of licensing such spectrum and would ensure prompt delivery of new services to the public. 148. Discussion. We reiterate our conclusion that competitive bidding is an appropriate licensing tool for the 800 MHz SMR service. We agree with Nextel that auctioning of 800 MHz SMR spectrum is within our statutory authority. We emphasize that the use of auctions will apply only to issuance of initial licenses in the upper 10 MHz block, the EA licenses. These EA licenses previously have not been issued by the Commission, and include certain rights and obligations that previously were not granted to or required of licensees. Significantly, our granting of these EA licenses does not affect rights afforded to licensees under existing authorizations, because incumbent licensees will be able to continue to operate their systems. Even though incumbents will be subject to mandatory relocation under certain circumstances, their existing operations will be protected, as discussed supra. Furthermore, auctions will be used only in the event that there are competing applications for the same EA license. 149. We conclude that use of competitive bidding in the upper 10 MHz block, as described supra, is authorized by Section 309(j) of the Communications Act. We affirm our previous conclusion that 800 MHz SMR, as a service, satisfies the criteria set forth by Congress for determining when competitive bidding should be used. SMR licenses are used to provide service to subscribers for compensation, so a precondition to competitive bidding under Section 309(j)(2)(A) is met. Moreover, competitive bidding will further the public interest requirements of Section 309(j)(3), by promoting rapid development of service, fostering competition, recovering a portion of the value of the spectrum for the public, and encouraging efficient spectrum use. Where competitive bidding is utilized, a diverse group of entities, including incumbent licensees and potential new entrants, will be able to participate in the auction process, because we have decided not to restrict eligibility for these EA licenses. In addition, we have proposed special provisions for small businesses seeking EA licenses. Thus, we disagree with those commenters who contend that use of competitive bidding in the 800 MHz SMR service would favor particular licensees. Rather, we believe that it will result in a more diverse pool of applicants for 800 MHz SMR licenses, an outcome which furthers the goals of Section 309(j)(3)(B) of the Communications Act. 150. Additionally, we believe that competitive bidding procedures will minimize administrative or judicial delays in licensing, particularly when compared to other licensing alternatives -- comparative hearings, lotteries (which specifically are prohibited since the 800 MHz SMR service is auctionable), or first-come, first-served procedures. We employed first- come, first-served procedures in the 800 MHz SMR service prior to our implementation of the Budget Act. Our experience is that such procedures have resulted in processing delays. By contrast, we expect that use of competitive bidding will allow interested parties to obtain expeditious access to 800 MHz SMR spectrum and to use such spectrum efficiently. We conclude that this result furthers both Section 309(j)(3)(A) and Section 309(j)(3)(D) of the Communications Act. 151. Although we believe that several commenters' objections to the use of competitive bidding procedures in the 800 MHz SMR service are untimely petitions to reconsider our decision in the Competitive Bidding Second Report and Order that the 800 MHz SMR service is auctionable, we will address them nonetheless. We disagree with those commenters that argue that the Commission's competitive bidding authority does not extend to existing services. Section 309(j) of the Communications Act does not distinguish between new services (such as PCS) and existing services in terms of whether initial licenses in a given service should be subject to competitive bidding. Accordingly, we conclude that our determination that the 800 MHz SMR service is auctionable is fully consistent with Section 309(j) of the Communications Act. B. Competitive Bidding Methodology for Upper 10 MHz Block 1. Competitive Bidding Design a. Simultaneous Multiple Round Auctions 152. Background. In the Competitive Bidding Second Report and Order, we established the criteria for selecting from among auction methodologies for each service. In the Further Notice, we indicated that simultaneous multiple round auctions would be appropriate for the upper 10 MHz block, given the interdependence of licenses based on the desirability of aggregation across spectrum blocks and geographic regions. We further indicated that simultaneous multiple round bidding would allow bidders to consider the full value of the interdependency among licenses and provide bidders with the opportunity to pursue back-up strategies that enable them most efficiently to obtain the license combinations which satisfy their service needs. As a result, we tentatively concluded that simultaneous multiple round bidding would be most likely to award wide-area licenses to bidders who are most likely to deploy new 800 MHz SMR technologies and services rapidly. 153. Comments. Numerous commenters concur that a simultaneous multiple round auction is the most appropriate competitive bidding design for wide-area 800 MHz SMR licenses. Dial Call, AMTA, and Nextel support simultaneous multiple round auctions partly due to the high degree of interdependence between the wide-area licenses. CellCall, however, opposes the use of competitive bidding, including simultaneous multiple round auctions. CellCall further believes that the Commission should not be required to auction all wide-area licenses at once. Instead, CellCall suggests that we auction all licenses in a particular license area and conduct individual auctions for each license area. SBA, on the other hand, believes that single round sealed bidding should be used because it is a relatively easy method for small businesses to understand, and will allow them to use their own knowledge of the market to determine their bids. Genesee disagrees that a single round of sealed bids would be fair to all potential bidders, and suggests that at least two rounds be conducted with 30-day intervals. 154. Discussion. Based on the record in this proceeding and our successful experience conducting simultaneous multiple round auctions for other CMRS services (e.g., narrowband and broadband PCS), we believe a simultaneous multiple round auction is the most appropriate competitive bidding design for the 10 MHz upper block of 800 MHz SMR spectrum. We have developed and successfully conducted auctions with software capable of handling numerous licenses in a simultaneous multiple round auction. Thus, this methodology will afford us administrative convenience and enable us to hold an auction quickly and efficiently. For certain bidders, the value of these licenses will be significantly interdependent because of the desirability of aggregation across geographic regions. Given this high degree of interdependency among licenses, we reject SBA's suggestion that single round sealed bidding is a more appropriate competitive bidding design for licensing the upper 10 MHz SMR spectrum blocks. We believe that simultaneous multiple round bidding will generate more information about license values during the course of the auction and provide bidders with more flexibility to pursue back-up strategies, than if the licenses were auctioned separately or through sealed bidding. As we decided in the 900 MHz SMR service, the Bidder Information Package for the 10 MHz upper block licenses will provide all the information about incumbent licensees that is available in our licensing records as of 60 days prior to the filing deadline for participation in the auction. In this connection, upon release of the Public Notice announcing the date of the auction for the upper 10 MHz block of 800 MHz SMR spectrum, all pending applications for frequencies within this spectrum will be returned without prejudice to the applicants. These applicants then will be able to seek licenses for these frequencies through the competitive bidding process. In addition, we encourage all potential bidders to examine these records carefully and do their own independent investigation regarding existing licensees' operations in each EA in which they intend to bid in order to maximize their success in the auction. In response to SBA's concern about small businesses being able to understand the competitive bidding design which we employ, as we have done in other services, we will hold a seminar for prospective bidders to acquaint them with this competitive bidding design. We will announce the date and location for such seminar by Public Notice. We conclude, therefore, that simultaneous multiple round bidding is most likely to award licenses to the bidders who value them the most highly and to provide bidders with the greatest likelihood of obtaining the license combinations that best satisfy their service needs. b. Stopping Rules 155. Background. In a multiple round auction, a stopping rule must be established to determine when the auction is over. Three types of stopping rules exist that could be employed in simultaneous multiple round auctions: markets may close individually, simultaneously, or a hybrid approach may be used. In the Further Notice, we proposed that if simultaneous multiple round auctions are used for the upper 10 MHz block, we would use stopping rules the same as or similar to those used in simultaneous multiple round bidding for MTA-based broadband PCS licenses. In the Competitive Bidding Fifth Report and Order, we adopted a simultaneous stopping rule for broadband PCS. In addition, we retained the discretion to declare at any point after the 40 rounds in a simultaneous multiple round auction that the auction will end after some specified number of additional rounds. 156. Comments. The only commenter addressing this issue, Morris, supports using multiple round auctions for wide-area 800 MHz SMR licenses, and it proposes limiting the auctions to five rounds. 157. Discussion. We will adopt a simultaneous stopping rule for the upper 10 MHz block 800 MHz SMR auction. The simultaneous stopping rule is designed to allow bidders to decide how long the auction will run, based on bidding strategy and demand for each license. Under a simultaneous stopping rule, bidding will remain open on all licenses in an auction until bidding stops on every license. We conclude that the substitutability between licenses within the same EA and the ability to pursue back-up strategies support the use of a simultaneous stopping rule. 158. As a result, the upper 10 MHz block 800 MHz SMR auction will close after one round passes in which no new valid bids or proactive activity rule waivers (as defined in  162, infra) are submitted. We retain the discretion to keep the auction open even if no new acceptable bids and no proactive waivers are submitted in a single round. In the event that we exercise this discretion, the effect will be the same as if a bidder has submitted a proactive waiver. We also retain the discretion to announce market-by-market closings. 159. We further retain the discretion to declare after 40 rounds that the auction will end after some specified number of additional rounds. We reject Morris's proposal to conduct a five-round auction, based on our experience in previous auctions that 40 rounds will assure that the auction will not close prematurely, while providing bidders with fair assurance that the auction will be conducted as intended. Bids will be accepted only on licenses where the high bid has increased in the last three rounds. This will deter bidders from continuing to bid on a few low value licenses solely to delay the closing of the auction. It also will enable the Commission to end the auction when it determines that the benefits of terminating the auction and issuing licenses exceed the likely benefits of continuing to allow bidding. The Commission will announce by Public Notice the number of remaining rounds and other final bidding procedures. We hereby delegate authority to the Bureau to issue such Public Notices. 160. As we have recognized with previous auctions, the disadvantage of declaring an imminent end to an auction is that this may result in a less efficient allocation of licenses than if the auction remained open as long as new bids were received. Thus, we will 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 believe that this approach will 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. c. Activity Rules 161. Background. 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. We have used the Milgrom-Wilson activity rule to award broadband and narrowband PCS licenses. Under the three-stage Milgrom-Wilson approach, bidders are encouraged 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 activity unit. In the Further Notice, we proposed that if simultaneous multiple round auctions are used for the upper 10 MHz block, we would use activity rules the same as or similar to those used in simultaneous multiple round bidding for MTA-based PCS licenses. 162. In the Competitive Bidding Fifth Report and Order, we permitted broadband PCS bidders one "automatic" waiver from the activity rule during each stage of an auction. An automatic waiver is exercised by the Commission if a bidder fails to bid and fails to submit a "proactive" waiver, unless the bidder chooses to override the automatic waiver process to intentionally decrease eligibility: a "proactive" waiver is one which can be submitted by the bidder when it chooses not to bid in a round and wishes to maintain its current eligibility level. With respect to broadband PCS auctions, we initially determined that only proactive waivers, and not automatic waivers, would keep an auction open. In that context, however, 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 observed that 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. 163. Comments. No commenters addressed this issue. 164. Discussion. We will employ the Milgrom-Wilson activity rule in conjunction with the simultaneous stopping rule. Under the Milgrom-Wilson approach, the minimum activity level, measured as a fraction of the bidder's eligibility in the current round, increases during the course of the auction. The three-stage Milgrom-Wilson approach encourages bidders to participate in early rounds by limiting their maximum participation to some multiple of their minimum participation level. 165. Absent waivers (discussed supra  162), a bidder's eligibility (in terms of activity units) 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 $0.02 per activity unit. 166. In each round of Stage I, a bidder who wishes to maintain its current eligibility must be active on licenses encompassing at least one-half (50 percent) of the activity units for which it currently is eligible. Failure to maintain the requisite activity level will result in a reduction in the amount of activity units upon which a bidder will be eligible to bid in the next round of bidding (unless an activity rule waiver, as defined in  160, supra, is used). During Stage I, if bidding activity is below the required minimum level, eligibility in the next round will be calculated by multiplying the current round activity by two. Eligibility for each applicant in the first round of the auction is determined by the amount of the upfront payment received and the licenses identified in its auction application. In each round of Stage II, a bidder who wishes to maintain its current eligibility in the next round is required to be active on at least 75 percent of the activity units for which it is eligible in the current round. During Stage II, if activity is below the required minimum level, eligibility in the next round will be calculated by multiplying the current round activity by four-thirds (4/3). In each round of Stage III, a bidder who wishes to maintain its current eligibility must be active on licenses encompassing at least 95 percent of the activity units for which it is eligible in the current round. In Stage III, if activity in the current round is below 95 percent of current eligibility, eligibility in the next round will be calculated by multiplying the current round activity by twenty nineteenths (20/19). We reserve the discretion to set and, by announcement before or during the auction, vary the requisite minimum activity levels (and associated eligibility calculations) for each auction stage. Retaining this flexibility will improve the Commission's ability to control the pace of the auction and help ensure that the auction is completed within a reasonable period of time. 167. As in prior auctions, we will determine the transition from one stage to the next in the 800 MHz SMR auction by the aggregate level of bidding activity, subject to our discretion. The transition rule also may be defined in terms of the "auction activity level" -- the sum of activity units of those licenses whose high bid increased in the current round, as a percentage of the total activity units of all licenses in that auction. The auction will start in Stage I and move to Stage II when the auction activity level is below ten percent for three consecutive rounds in Stage I. The auction will move from Stage II to Stage III when the auction activity level is below five percent for three consecutive rounds in Stage II. In no case can the auction revert to an earlier stage. We retain the discretion, however, to determine and announce during the course of an auction when, and if, to move from one auction stage to the next. These determinations will be based on a variety of measures of bidder activity including, but not limited to, the auction activity level defined above, the percentage of licenses (measured in terms of activity units) on which there are new bids, the number of new bids, and the percentage increase in revenue. 168. 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 will provide bidders with five activity rule waivers that may be used in any round during the course of the auction. If a bidder's activity level is below the required activity level a waiver automatically will be applied. That is, if a bidder fails to submit a bid in a round, and its activity level from any "standing" high bids (i.e., high bids at the end of the bid withdrawal period in the previous round) falls below its required activity level, a waiver automatically will be applied. A waiver will preserve current eligibility in the next round, but cannot be used to correct an error in the bid amount. An activity rule waiver applies to an entire round of bidding and not to a particular EA service area. 169. Bidders will be afforded an opportunity to override the automatic waiver mechanism when they place a bid, if they wish to reduce their bidding eligibility and do not want to use a waiver to retain their eligibility at its current level. If a bidder overrides the automatic waiver mechanism, its eligibility permanently will be reduced (according to the formulas specified above), and it will not be permitted to regain its bidding eligibility from a previous round. An automatic waiver invoked in a round in which there are no valid bids will not keep the auction open. Bidders will have the option to enter a "proactive" waiver during the bid submission period. If a bidder submits a proactive waiver in a round in which no other bidding activity occurs, the auction will remain open. 170. The Commission retains the discretion to issue additional waivers during the course of an auction for circumstances beyond a bidder's control. The Commission also retains the flexibility to adjust, by Public Notice prior to an auction, the number of waivers permitted, or to institute a rule that allows one waiver during a specified number of bidding rounds or during specified stages of the auction. We hereby delegate to the Bureau the discretion to issue additional waivers or restrict the use of such waivers under the circumstances described supra. d. License Grouping 171. Background. In the Competitive Bidding Third Report and Order, the Commission determined that choosing which licenses to auction simultaneously requires a judgment about the degree of interdependence of the licenses, i.e., the extent to which the amount bidders are willing to pay for one license depends on the price of another. In the Further Notice, we tentatively concluded that if simultaneous multiple round auctions were used for the 800 MHz SMR wide-area spectrum blocks, the wide-area licenses covering these spectrum blocks should be auctioned simultaneously, because of the relatively high value and significant interdependence of the licenses. 172. Comments. CellCall, the sole commenter addressing this issue, suggests that the Commission auction all block licenses within a particular geographic area at the same time, but auction each geographic area individually. 173. Discussion. As we discussed supra, we believe that the licenses for the upper 10 MHz band are significantly interdependent. We believe that grouping interdependent licenses and putting them up for bid at the same time will facilitate awarding licenses to bidders who value them most highly by providing bidders with information about the prices of complementary and substitutable licenses during the course of an auction. Because potential bidders may be interested in aggregating spectrum across geographic areas as well as across spectrum blocks, we disagree with CellCall's suggestion to auction each geographic area individually. As a result, we conclude that all EA licenses for the upper 10 MHz block should be auctioned simultaneously. We further conclude that holding a single auction for all 175 EAs in the 800 MHz SMR band will be the fairest, fastest, and most efficient means of distributing these licenses. 2. Bidding Issues for Upper 10 MHz Block of 800 MHz SMR spectrum a. Bidding Procedures 174. Background. In the Competitive Bidding Second Report and Order, we adopted several bidding procedures and determined that we would incorporate certain of these procedures into the service-specific rules adopted in the future Reports and Orders for each auctionable service. In the Further Notice, we proposed that if simultaneous multiple round auctions are used for wide-area SMR licenses, we would use the same or similar bidding procedures to those used in simultaneous multiple round bidding for broadband PCS licenses. 175. Comments. No commenters addressed this issue. 176. Discussion. We will adopt the same bidding procedures used for MTA-based PCS licenses. Under these procedures, bidders will be able to submit bids via remote bidding, using special bidding software, or via telephone. We have established a schedule of fees that participants in the competitive bidding process will be assessed for certain on-line computer services, bidding software, and for Bidder Information Packages. In addition, bidders will be permitted to bid electronically only if they have filed a short-form application electronically. Bidders who file their short-form manually may bid only telephonically. When submitting bids telephonically, bidders may utilize the Internet to learn the round-by- round results of the auction. Online services such as CompuServe, Prodigy, and America Online provide Internet access at a reasonable cost. Bidders also may, at negligible cost, use a computerized bulletin board service, accessible by telephone lines, from which auction results can be downloaded to a personal computer. The Commission intends to hold a seminar for prospective bidders to acquaint them with these bidding procedures. b. Bid Increments 177. Background. In the Competitive Bidding Fifth Report and Order, we determined that it is important to specify minimum bid increments when using simultaneous multiple round auctions to award licenses. The bid increment is 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 speeds the progress of the auction, and, along with activity and stopping rules, helps to ensure that the auction closes within a reasonable period of time. With broadband PCS, we started the auction with large bid increments, and reduced the increments as bidding activity fell. The minimum bid increment in Stage I (stages discussed supra at  164-166) of the auction was set at 5 percent of the high bid in the previous round or $0.02 per activity unit, whichever was greater. We determined to reduce the minimum bid increment as the auction progressed, with a minimum bid increment of the greater of 2 percent or $0.01 per activity unit in Stage II, and the greater of 1 percent of $0.005 per activity unit in Stage III. At the same time, we retained the discretion to vary the minimum bid increments for individual licenses or groups of licenses over the course of an auction. In the Further Notice, we proposed that if simultaneous multiple round auctions are used for the upper 10 MHz block, we would use the same or similar procedures for bid increments as those used in simultaneous multiple round bidding for MTA-based PCS licenses. 178. Comments. No commenters addressed this issue. 179. Discussion. The Commission will announce, by Public Notice prior to the auction, the general guidelines for bid increments. The Commission retains the discretion to set and, by announcement before or during the auction, vary the minimum bid increments for individual licenses or groups of licenses over the course of the auction. c. Duration of Bidding Rounds 180. Background. In the Competitive Bidding Second Report and Order, we stated that duration of bidding rounds and the interval between rounds in simultaneous multiple round auctions will be announced in service-specific Reports and Orders, and may be varied by announcement during the course of an auction. We concluded in the Competitive Bidding Fifth Report and Order that at the early stages of the auction, prices will be low and contain relatively little information, so bidders will need less time to deliberate. In the final stages of the auction, however, when the consequences of bidding decisions are greatest, bidders will need more time to deliberate. In the Further Notice, we proposed that if simultaneous multiple round auctions are used for the upper 10 MHz block, we would use the same or similar procedures regarding duration of bidding rounds as those used in simultaneous multiple round bidding for MTA-based broadband PCS licenses. 181. Comments. No commenters addressed this issue. 182. Discussion. In simultaneous multiple round auctions, we recognize that bidders may need a significant amount of time to evaluate back-up strategies and develop their bidding plans. We hereby delegate to the Bureau the discretion to vary the duration of the bidding rounds or the interval at which bids are accepted (e.g., to run more than one round per day) in order to move the auction to closure more quickly. The Bureau will 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. 3. Procedural and Payment Issues a. Pre-Auction Application Procedures 183. Background. In the Competitive Bidding Second Report and Order, we determined that we should require only a short-form application (FCC Form 175) prior to auction, and that only winning bidders should be required to submit a long-form license application (FCC Form 600) after the auction. In this connection, we determined that such a procedure would fulfill the statutory requirements and objectives and adequately protect the public interest. In the Further Notice, we proposed to treat all wide-area applicants as initial applicants for public notice, application processing, and competitive bidding purposes, regardless of whether they already are incumbent licensees in the 800 MHz band. In addition, in the Further Notice, we proposed to require applicants for wide-area SMR licenses to file an initial "short-form" application in order to qualify for competitive bidding. 184. Comments. PCIA recommends that the Commission accept applications in two phases. In Phase 1, existing licensees would have the opportunity to request a wide-area license for purposes of converting existing operations into wide-area operations as a modification of their license. In Phase 2, the Commission could accept applications for areas and frequencies which were not assigned wide-area licenses in Phase 1. Under PCIA's proposal, a Phase 2 license would be considered a "new" license, and, thus, subject to mutually exclusive applications and petitions to deny. PCIA opines that its proposal will minimize the number of mutually exclusive applications and result in the least disruption possible for existing licensees. Several commenters support PCIA's proposal. Commenters premise their support of the proposal on the basis that it presents incumbents with an opportunity to participate in geographic licensing and minimizes incidents of mutual exclusivity. 185. Discussion. We will extend the pre-auction application procedures established in the Competitive Bidding Second Report and Order to the competitive bidding process for the upper 10 MHz block. With respect to the definition of "initial" application in the upper 10 MHz block of 800 MHz SMR spectrum, we believe that the most appropriate basis for this determination is an evaluation of the nature of the EA license. As EA 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 800 MHz SMR licensees that essentially are confined to smaller geographic areas, are site-specific, and do not encompass a large number of frequencies. Accordingly, we will treat all EA applicants as initial applicants for public notice, application processing, and auction purposes, regardless of whether they already are incumbent operators. 186. Prior to the start of the 800 MHz SMR auction, the Commission will release an initial Public Notice announcing the auction. The initial Public Notice will 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 will specify the method of competitive bidding to be used, applicable bid submission procedures, stopping rules, activity rules, the deadline by which short-form applications must be filed, and the amounts and deadlines for submitting upfront payments. We will not accept applications filed before or after the dates specified in the Public Notice. Applications submitted before the release of the Public Notice will be returned as premature. Likewise, applications submitted after the deadline specified by the Public Notice will be dismissed, with prejudice, as untimely. 187. Soon after the release of the initial Public Notice, a Bidder Information Package will be made available to prospective bidders. As discussed at  154, supra, the Bidder Information Package for the 800 MHz SMR service will contain information on the incumbents occupying blocks on which bidding will be available. 188. 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), Section 308(b), and Section 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 the Commission's rules, and we will dismiss applications not meeting those requirements prior to the auction. 189. Thus, all bidders will 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 are encouraged to file FCC Form 175 electronically. Detailed instructions regarding electronic filing will be contained in the Bidder Information Package. Those applicants filing manually will be required to submit one paper original and one diskette original of their application, as well as two diskette copies. In addition, applicants filing manually will not be permitted to bid electronically. The short-form applications will require applicants to provide the information required by Section 1.2105(a)(2) of the Commission's rules. Specifically, each applicant will be required to specify on its FCC Form 175 application certain identifying information, including its status as a designated entity, its classification (i.e., individual, corporation, partnership, trust, or other), the EAs and spectrum 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. Although we are not proposing special provisions for designated entities on the upper 10 MHz block, we nonetheless request applicants to indicate their designated entity status in order to assist us in analyzing the applicant pool and the auction results to determine whether we have accomplished substantial participation by minorities, women, small businesses, and rural telephone companies. In this connection, we note that Section 309(j) of the Communications Act requires us to prepare a report on the participation of designated entities in the auction and in the provision of spectrum-based services. 190. As we indicated in the Competitive Bidding Second Report and Order, if we receive only one application that is acceptable for filing for a particular license, and thus there is no mutual exclusivity, we will 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 will trigger the procedures permitting petitions to deny (as discussed at  209-212, infra). If no petitions to deny are filed, the application will be grantable after 30 days. The rules we adopt 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 rules will minimize the need to re-auction licenses and will prevent delays in the provision of 800 MHz SMR service to the public. In response to those commenters concerned about the ability of unsuccessful bidders to participate in geographic area licensing, we reiterate our decision in the First Report and Order that incumbents, post-auction, will be able to trade-in their multiple licenses for a single authorization in a particular area, provided certain conditions are satisfied. b. Amendments and Modifications 191. Background. To encourage maximum bidder participation, we proposed in the Competitive Bidding Second Report and Order to provide applicants with an opportunity to correct minor defects in their short-form applications prior to the auction. We stated that applicants whose short-form applications are substantially complete, but contain minor errors or defects, would be provided an opportunity to correct their applications prior to the auction. In the broadband PCS context, we modified our rules to permit ownership changes that result when consortium investors drop out of bidding consortia, even if control of the consortium changes due to this restructuring. In the CMRS Third Report and Order, we decided to adopt the same or similar definitions for initial applications and major and minor amendments and modifications for all CMRS in Parts 22 and 90, in order to facilitate similar system proposals and modifications for equal treatment of substantially similar services. 192. Comments. No commenters addressed this issue. 193. Discussion. We will adopt the following procedures for amendments to and modifications of short-form applications in the 800 MHz SMR service. Upon reviewing the short-form applications, we will issue a Public Notice listing all defective applications. Applicants with minor defects will be given an opportunity to cure them and resubmit a corrected version. By the resubmission date, all applicants will 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 should 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 will issue a second Public Notice announcing the names of all applicants that have been determined to be qualified to bid. An applicant who fails to submit a sufficient upfront payment to qualify it to bid on any license being auctioned will not be identified on this Public Notice as a qualified bidder. Each applicant listed on this Public Notice will be issued a bidder identification number and further information and instructions regarding auction procedures. 194. On the date set for submission of corrected applications, applicants that on their own have discovered minor errors in their applications (e.g., typographical errors, incorrect license designations, etc.) will be permitted to file corrected applications. We also will waive the ex parte rules as they apply to the submission of amended short-form applications for the 800 MHz SMR auctions, to maximize applicants' opportunities to seek Commission staff advice on making such amendments. Applicants will not be permitted to make any major modifications to their applications, including, but not limited to, changes in license areas and changes in control of the applicant, or additions of other bidders into the bidding consortia, until after the auction. Applicants also may 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 will not result in a change in de jure or de facto 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, i.e., EAs. In addition, applications that are not signed will be dismissed as unacceptable for filing, as will applications in which no market designations are made. 195. In addition, a single member of a bidding consortium may withdraw from a consortia only in a particular EA(s), but otherwise remain in the consortium for purposes of bidding on all other markets specified on the short-form application. However, such arrangements to assign the member's interests in particular licenses to other consortium members after the auction must be disclosed on an original or amended short-form application, and a request to transfer or assign the license also must be filed in conjunction with the long-form application. c. Upfront Payments 196. Background. In the Competitive Bidding Second Report and Order, we established a minimum upfront payment of $2,500 and stated that this amount could be modified on a service-specific basis. In the Further Notice, we proposed to require 800 MHz SMR auction participants to tender in advance to the Commission a substantial upfront payment. Specifically we proposed to require an upfront payment of $0.02 per activity unit for the largest combination of activity units on which a bidder anticipates bidding in any round, as a condition of bidding in order to ensure that only serious, qualified bidders participate in auctions and to ensure payment of the monetary assessment (discussed infra) in the event of bid withdrawal or default. We also sought comment on the upfront payment formula and minimum upfront payment most appropriate for the 800 MHz SMR service. 197. Comments. AMTA, Motorola and Nextel support the Commission s proposal to require bidders to tender a substantial upfront payment. Dru Jenkinson, et al. express concern that upfront payments not be structured so as to limit bidders solely to those with vast financial resources. 198. In terms of an appropriate upfront payment formula for the 800 MHz SMR service, Dru Jenkinson, et al. express concern that using the standard upfront payment formula of $0.02 per activity unit for the largest combination of activity units a bidder anticipates bidding on in any single round may limit the pool of bidders to those with the "deepest pockets." Pittencrief believes that the Commission s standard upfront payment formula should not apply here, given that the EA licensee likely will be required to negotiate with many incumbents. As a result, Pittencrief recommends an upfront payment of $0.002 per activity unit. Nextel, on the other hand, proposes that the Commission require a larger upfront payment, such as an upfront payment based on bidding for all wide-area spectrum blocks in a particular geographic area, even if the bidder intends to bid only on one wide-area spectrum block. SBA does not support the proposed upfront payment, because it believes that the $0.02 per pop factor is not a relevant figure in the SMR context, where the amount of population served in a given area is less important than the number of actual customers. 199. With respect to an appropriate upfront minimum payment, Genesee agrees with the proposed minimum upfront payment of $2,500. SBA believes that the minimum upfront payment should be $2,500 for local licensees and $5,000 for EA licensees. However, Dru Jenkinson, et al. believe that a $2,500 upfront payment is too low, and express concern that it may not operate as a sufficient deterrent to speculators. Telecellular suggests that the Commission not use the same upfront payment standard it used in the PCS context. Rather, Telecellular suggests that the Commission, at a minimum, refrain from establishing an upfront payment for SMR auctions until after comparable auctions (e.g., Block F PCS licenses) have been completed, so that a meaningful point of reference can be established. 200. Discussion. We disagree with Nextel that the $0.02 per activity unit formula is too low to deter speculation in the 800 MHz SMR service. The upfront payment for PCS was calculated to be approximately five percent of the final price to approximate one bid increment. In both the narrowband and broadband PCS auctions, in which we used the $0.02 per activity unit upfront payment, all bid withdrawal payments were paid in full and all winning bidders have paid all amounts due. Thus, our experience demonstrates that the upfront payment also will be sufficient to deter speculation in this auction. 201. We also are unpersuaded by Pittencrief's argument that an upfront payment formula utilizing a smaller per activity unit multiplier is required because EA licensees will need to negotiate with incumbents. Broadband PCS licensees also had negotiation and relocation costs associated with their accommodation of existing microwave licensees operating in the 2 GHz PCS band. The record here does not indicate that such costs in the 800 MHz SMR context are so great that they will prevent successful bidders from being able to satisfy their upfront payment obligations. However, potential bidders should take into account the number of incumbents located on a block before they bid, and use this information to adjust their bidding strategies accordingly. 202. Accordingly, we adopt the standard $0.02 per activity unit formula to calculate the upfront payment. We also adopt a minimum upfront payment of $2,500 for the 800 MHz SMR service. In the initial Public Notice issued prior to the auction, we will announce population information corresponding to each license and the upfront payment amount for each EA license. In general, population coverage for each channel block in each EA will be based on a formula that takes into account the presence of incumbent licensees. 203. Upfront payments will be due by a date specified by Public Notice, but generally no later than 14 days before a scheduled auction. Each qualified bidder will be issued a bidder identification number and further information and instructions regarding the auction procedures. During the auction, bidders will be required to provide their bidding identification numbers when submitting bids. d. Down Payments and Full Payments i. Down Payments 204. Background. In the Competitive Bidding Second Report and Order, we generally required successful bidders to tender a 20 percent down payment on their bids to discourage default between the auction and licensing, and to ensure payment of the monetary assessment if such default occurs. In the Further Notice, we proposed to require the winning bidders for 800 MHz SMR licenses to supplement their upfront payments with a down payment sufficient to bring their total deposits up to 20 percent of their winning bid(s). 205. Comments. Genesee, Pittencrief, AMTA, and Nextel support the Commission s proposal. SBA believes that the 20 percent figure adopted in the PCS context is appropriate for the 800 MHz SMR service. 206. Discussion. We conclude that winning bidders must supplement their upfront payments with a down payment sufficient to bring their total deposits up to 20 percent of their winning bid(s). If the upfront payment already tendered by a winning bidder, after deducting any bid withdrawal and default payments due, amounts to 20 percent or more of its winning bids, no additional deposit will be required. If the upfront payment amount on deposit is greater than 20 percent of the winning bid amount after deducting any bid withdrawal and default payments due, the additional monies will be refunded. If a bidder has withdrawn a bid or defaulted, but the amount of the payment cannot yet be determined, the bidder will 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 payment, any excess deposit will be refunded. Upfront payments will be applied to such deposits, and to bid withdrawal and default assessments due, before being applied toward the bidder's down payment on licenses the bidder has won and seeks to acquire. 207. We also will require winning bidders to submit the required down payment by cashier's check or wire transfer to our lock-box bank by a date and time to be specified by Public Notice, generally within five business days following the close of bidding. The Commission will hold the down payment until the high bidder is awarded the license and has paid the remaining balance due on such license, or until the winning bidder is found unqualified to be a licensee or has defaulted, in which case it will be returned, less applicable monetary assessments. All auction winners generally will be required to make full payment of the balance of their winning bids within five business days following Public Notice that the Commission is prepared to award the license. The Commission generally will grant uncontested licenses within ten business days after receiving full payment. During the period that deposits are held pending the ultimate award of the license, the interest that accrues, if any, will be retained by the U.S. Treasury. ii. Long-Form Applications 208. Background. In the Competitive Bidding Second Report and Order, we established rules that require a winning bidder to submit a long-form application. The long- form application is required to be filed by a specific date, generally within ten (10) business days after the close of the auction. We stated that after we received the high bidder's down payment and the long-form application, we would review the long-form application to determine if it is acceptable for filing. Once the long-form application is accepted for filing, we stated that we would release a Public Notice announcing this fact, triggering the filing window for petitions to deny. We also stated that if, pursuant to Section 309(d), we deny or dismiss all petitions to deny, if any are filed, and we otherwise are satisfied that the applicant is qualified, we would grant the license(s) to the auction winner. In the Further Notice, we proposed to use application procedures similar to those used for licensing PCS. Consistent with our approach in PCS, we proposed to require only the winning bidder to file a long-form application. 209. Comments. No commenters addressed this issue. 210. Discussion. We will follow these procedures if the winning bidder makes the down payment in a timely manner. A long-form application filed on FCC Form 600 must be filed by a date specified by Public Notice, generally within ten business days after the close of bidding. After the 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. 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 otherwise is satisfied that the applicant is qualified, the license(s) will be granted to the auction winner. iii. Petitions to Deny and Limitations on Settlements 211. Background. We determined in the Competitive Bidding Second Report and Order that the procedures concerning petitions to deny found in Section 309(j)(2) of the Communications Act should apply to competitive bidding. We determined that we would adopt expedited procedures to resolve substantial and material issues of fact concerning qualifications. We stated that we would entertain petitions to deny the application of the auction winner if the petitions to deny otherwise are provided for, under the Communications Act or our rules. We then determined that we would not conduct a hearing before denial if we determined that an applicant is not qualified and no substantial and material issue of fact exists concerning that determination. We also stated that if we identified substantial and material issues of fact in need of resolution, Sections 309(j)(5) and 309(j)(2) of the Communications Act permit submission of all or part of evidence in written form, and also allow employees other than administrative law judges to preside at the taking of written evidence. Additionally, in the Competitive Bidding Fourth Memorandum Opinion and Order, we stated that our anti-collusion and settlement procedures were designed to avoid the problem of entities filing applications solely for the purpose of demanding payment from other bidders in exchange for settlement or withdrawal. 212. Comments. No commenters addressed this issue. 213. Discussion. A party filing a petition to deny against an 800 MHz SMR application will be required to demonstrate standing and meet all other applicable filing requirements. The restrictions in Section 90.162 were established to prevent the filing of speculative applications and pleadings (or threats of the same) designed to extract money from 800 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 petition to deny to the legitimate and prudent expenses of the withdrawing applicant or petitioner. 214. 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 and material 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. e. Bid Withdrawal, Default, and Disqualification 215. Background. In the Further Notice, we proposed to adopt bid withdrawal, default, and disqualification rules for the 800 MHz SMR service, based on the procedures established in our general competitive bidding rules. In the Competitive Bidding Second Report and Order, we noted that it is critically important to the success of our competitive bidding process that potential bidders understand that there will be a substantial monetary assessment imposed if they withdraw a high bid, are found not to be qualified to hold licenses, or default on payment of a balance due. If a bidder withdraws a high bid before the Commission closes bidding or defaults by failing to timely remit the required down payment, it would be required to reimburse the Commission for any differences between its high bid and the amount of the winning bid, if the winning bid is lower. A defaulting auction winner also would be assessed three percent of either the subsequent winning bid or the amount of the defaulting bid, whichever is less. 216. Comments. AMTA, Genesee, and Pittencrief agree with the Commission s proposal. Nextel proposes that the Commission impose a larger punitive penalty on applicants withdrawing their bids, such as forfeiture of the upfront payment. Southern argues that proposals which increase withdrawal penalties would further assure that auction participation is limited. 217. Discussion. We disagree with Nextel's recommendation, because we believe that forfeiture of the entire upfront payment is too extreme for the bidder who withdraws only one bid. Since commenters have not stated why the 800 MHz SMR service differs in this respect from the narrowband and broadband PCS services, there is no justification for departing from the already tested narrowband and broadband PCS withdrawal, default, and disqualification assessments. Therefore, we believe applying Section 1.2104(g)(1) to the 800 MHz SMR auction is more equitable and is consistent with our practice in prior auctions. Section 1.2104(g)(1) provides that any bidder that withdraws a high bid during an auction before the Commission declares bidding closed will be required to reimburse the Commission in the amount of the difference between its high bid and the amount of the winning bid the next time the license is offered by the Commission, if this subsequent winning bid is lower than the withdrawn bid. 218. If a license is re-offered by auction, the "winning bid" refers to the high bid in the auction in which the license is re-offered. If a license is re-offered in the same auction, the winning bid refers to the high bid amount, made subsequent to the withdrawal, in that auction. If the subsequent high bidder also withdraws its bid, that bidder will be required to pay an assessment 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 instead is 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 will 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 will not hold them to their losing bids on a license for which a bidder has withdrawn a bid or on which a bidder has defaulted. 219. After bidding closes, we will apply Section 1.2104(g)(2) 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. We will hold deposits made by defaulting or disqualified auction winners until full payment is made. In the unlikely event that there is more than one bid withdrawal on the same license, we will hold each withdrawing bidder responsible for the difference between its withdrawn bid and the amount of the winning bid the next time the licenses are offered for auction by the Commission. 220. These payment requirements will discourage default and ensure that bidders 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. 221. If the EA license winner defaults, is otherwise disqualified after having made the required down payment, or the license is terminated or revoked, then the Commission will re- auction the license. 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 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. 4. Regulatory Safeguards a. Rules Prohibiting Collusion 222. Background. In the Competitive Bidding Second Report and Order, as modified by the Competitive Bidding Reconsideration Order, we adopted special rules prohibiting collusive conduct in the context of competitive bidding. In the Further Notice, we proposed to apply these rules prohibiting collusion to the 800 MHz SMR service. Our rules prevent parties from agreeing in advance to bidding strategies that divide the market according to their strategic interests and/or disadvantage other bidders. Bidders will be required to (i) disclose all parties with whom they have entered into any agreement that relates to the competitive bidding process, and (ii) certify they have not entered into any explicit or implicit agreements, arrangements, or understandings with any parties, other than those identified, regarding the amount of their bid, bidding strategies, particular properties on which they will or will not bid or any similar agreement. 223. Comments. IC&E supports adoption of the Commission's collusion rules. IC&E and Dial Call contend that the rules should have sufficient flexibility to allow formation of bidding consortia, partnerships or other arrangements prior to auctions. Genesee, on the other hand, expresses concern that wide-area operators not be permitted to utilize 800 MHz SMR auctions as a mechanism to combine their holdings. 224. Discussion. We will subject 800 MHz SMR licensees to the reporting requirements and rules prohibiting collusion embodied in Sections 1.2105 and 1.2107 of the Commission's rules. Bidders will be required by Section 1.2105(a)(2) to identify on their FCC 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. If parties agree in principle on all material terms, those parties must be identified on the short-form application, even if the agreement has not been reduced to writing. Only at such level of agreement can it be fairly stated that the parties have entered into a bidding consortium or other joint bidding arrangement. If the parties have not agreed in principle by the short-form filing deadline, an applicant would not include the names of those parties on its application, and may not continue negotiations with those parties. Bidders will 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. In this connection, any communications between EA bidders and incumbent licensees should take place prior to the deadline for filing FCC Form 175 applications. 225. After the FCC Form 175 filing deadline, applicants may not discuss the substance of their bids or bidding strategies with bidders, other than those identified on their FCC Form 175 application, that are bidding in the same license areas, i.e., EAs. This prohibition on discussions extends to providing indirect information that affects bids or bidding strategy. For example two applicants not listed on each other's FCC Form 175 applications for the 800 MHz SMR auctions may not discuss bids or bidding strategies with each other if they are bidding for licenses in any of the same EAs, even if they are not bidding for the same spectrum blocks. 226. Section 1.2105(c), however, provides certain exceptions to the rule prohibiting discussions with other applicants after the filing of the short-form application. First, applicants may make agreements to bid jointly for licenses, so long as the applicants have not applied for licenses in any of the same license areas. Second, an applicant may modify its short-form application to reflect formation of bidding agreements or changes in ownership at any time before or during the auction, as long as the changes do not result in change of de jure or de facto control of the applicant, and the parties forming the bidding agreement have not applied for licenses in any of the same license areas. Finally, a holder of a non- controlling attributable interest in an applicant may acquire an ownership interest in, or enter into a bidding agreement with other applicants in the same license area, if (1) the owner of the attributable interest certifies that it has not communicated and will not communicate bids or bidding strategies of more than one of the applicants in which it holds an attributable interest or with which it has a bidding agreement; and (2) the arrangements do not result in any change of control of the applicant. However, once the short-form application has been filed, a party with an attributable interest in once bidder may not acquire a controlling interest in another bidder bidding for licenses in any of the same license areas. 227. Where the applicant does not meet one of these exceptions, it may not discuss matters relating to bidding with other applicants. Even when an applicant has withdrawn its application after the short-form filing deadline, the applicant may not enter into a bidding agreement with another applicant bidding on authorizations in the license areas from which the first applicant withdrew. 228. If an applicant has the high bid for a license, Section 1.2107(d) requires the applicant to include with its long-form application a detailed explanation of the terms and conditions and parties involved in any bidding consortia, joint venture, partnership or other agreement or arrangement it had entered into relating to the competitive bidding process prior to the time bidding was completed. Under the Commission's rules prohibiting collusion, the term "applicant" includes the entity submitting the application, owners of 5 percent or more of the entity, and all officers and directors of such entity. 229. We note that even where the applicant discloses parties with whom it has reached on agreement on the short-form application, thereby permitting discussions with those parties, the applicant nevertheless is subject to existing antitrust laws. As discussed in the Competitive Bidding Fourth Memorandum Opinion and Order, under the antitrust laws, the parties to an agreement may not discuss bid prices if they have applied for licenses in the same license area. In addition, agreements between actual or potential competitors to submit collusive, non-competitive or rigged bids are per se violations of Section One of the Sherman Antitrust Act. Further, actual or potential competitors may not agree to divide territories horizontally in order to minimize competition, regardless of whether they split a license area in which they both do business, or whether they merely reserve one license area for one and another for the other. 230. We note that where specific instances of collusion in the competitive bidding process are alleged during the petition to deny process, we may conduct an investigation or refer such complaints to the United States Department of Justice for investigation. Bidders who are found to have violated the antitrust laws, in addition to any penalties they incur under the antitrust laws, or who are found to have violated the Commission's rules in connection with their participation in the auction process may be subject to a variety of sanctions, including forfeiture of their down payment or their full bid amount, revocation of their license(s), and may be prohibited from participating in future auctions. b. Transfer Disclosure Requirements 231. Background. In Section 309(j)(4)(E) of the Communications Act, 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 Competitive Bidding Second Report and 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 such licenses were held by a designated entity or not. We proposed in the Further Notice to adopt the transfer disclosure requirements of Section 1.2111(a) of our Rules to all 800 MHz SMR licenses obtained through the competitive bidding process. 232. Comments. Pittencrief agrees with the Commission's proposal. Pittencrief believes that such provisions will help deter submission of speculative applications and assist the Commission in identifying real-party-in-interest concerns. Genesee, however, supports a three-year ownership requirement. 233. Discussion. We believe that a three-year holding period is unnecessary. In other auctionable services, we have required holding periods only in limited circumstances. For example, our broadband PCS rules require those successful bidders benefitting from special provisions for designated entities to hold their licenses for a certain period of time and restrict the type of transfers and assignments of such licenses during that time. As discussed infra, we are not adopting special provisions for designated entities on the upper 10 MHz block of 800 MHz SMR spectrum. When we have not established special provisions for designated entities in other auctionable services, we generally have required only disclosure of certain information regarding transfers or assignments within the first three years after initial license grant. We conclude that this is the most appropriate course of action here. Thus, we will apply Section 1.2111(a) to all 800 MHz SMR licenses obtained through the competitive bidding process. Generally, licensees transferring their licenses within three years after the initial license grant will 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 their licenses. We will give particular scrutiny to auction winners who have not yet begun commercial service and who seek approval for a transfer of control or assignment of their licenses within three years after the initial license grant, so that we may determine if any unforeseen problems relating to unjust enrichment have arisen. c. Performance Requirements 234. Background. The Communications 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 Competitive Bidding Second Report and 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. In the Further Notice, we did not propose to adopt any additional performance requirements for competitive bidding purposes. 235. Comments. Genesee suggests imposition of a performance bond of $5,000 per channel for the five-year term of the license to ensure that the successful wide-area applicant will construct and operate over the term of the license. Genesee further suggests that an additional penalty of a mandatory six-month imprisonment should be imposed for falsifying reports and status to the Commission. 236. Discussion. We disagree with Genesee's suggestion that additional performance requirements are necessary for the 800 MHz SMR service. The service rules for the upper 10 MHz block contain specific performance requirements, such as the requirement to construct within a specific period of time, channel construction requirements, and interim coverage requirements. Because the failure to meet these requirements will result in automatic cancellation of the EA license, we believe this is a sufficient incentive to promote prompt service and prevent spectrum warehousing. Thus, we will not adopt any performance requirements for the 800 MHz SMR service beyond those required by Section 90.685. C. Treatment of Designated Entities 1. Overview, Objectives, and the Impact of Adarand Constructors v. Pe¤a 237. Overview and Objectives. The Communications Act provides that, in developing competitive bidding procedures, the Commission shall consider various statutory objectives and consider several alternative methods for achieving them. Specifically, the 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 in order to promote the Communications Act'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 Communications Act 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." 238. In our initial implementation of Section 309(j) of the Communications Act, we established in the Competitive Bidding Second Report & Order eligibility criteria and general rules that would govern the special measures available for designated entities. We also identified several measures, including installment payments, spectrum set-asides, and bidding credits, from which we could choose in establishing special provisions for designated entities in the auction process. 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. 239. To meet the statutory objectives of providing opportunities for designated entities, we have employed a wide range of special provisions and eligibility criteria in other spectrum-based services. 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 impeded opportunities for designated entities. After examining the record in the Competitive Bidding proceeding in PP Docket 93-253, we established provisions to enable designated entities to overcome the barriers to accessing capital in each particular service. Moreover, these provisions were designed to increase the likelihood that designated entities who win licenses in the auctions become strong competitors in the provision of wireless services. 240. Impact of Adarand Constructors, Inc. v. Pe¤a. In the broadband PCS docket, we determined that, on separate entrepreneurs' blocks, the bidding credits would vary according to the type of designated entity that applied (i.e., a small business would receive a 10 percent bidding credit, a business owned by minorities or women would receive a 15 percent bidding credit, and a small business owned by women 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. The Commission adopted special provisions for businesses owned by members of minority groups or women and analyzed their constitutionality using the "intermediate scrutiny" standard of review articulated in Metro Broadcasting v. FCC, because, as in Metro Broadcasting, the proposed provisions involved Congressionally-mandated benign race- and gender-conscious measures. 241. After the release of the Further Notice, the Supreme Court decided Adarand Constructors, Inc. v. Pe¤a, which overruled Metro Broadcasting "to the extent that Metro Broadcasting is inconsistent with" the holding in Adarand that "all racial classifications . . . must be analyzed by a reviewing court under strict scrutiny." As a result of the Adarand decision, the constitutionality of any federal program that makes distinctions on the basis of race must serve a compelling governmental interest and must be narrowly tailored to serve that interest. In this connection, the Bureau issued a Public Notice requesting further comment on the effect of the decision in Adarand on the proposals made in the Further Notice in order to supplement our record in the 800 MHz SMR proceeding. We received three comments in response to the 800 MHz SMR Further Comment Notice. 2. Special Provisions for Designated Entities 242. Background. In instructing the Commission to ensure the opportunity for designated entities to participate in auctions and provision of 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 these bidders encounter in accessing capital. For example, the legislative history accompanying Congress's 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." 243. Consistent with Congress's concern that auctions not operate to exclude small businesses, the provisions relating to installment payments clearly were 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." 244. In addition, with regard to access to capital, Congress previously 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." 245. In the 800 MHz SMR service, as in other auctionable services, we are committed to meeting 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 objectives set forth in the Communications Act, the Further Notice proposed bidding credits and a tax certificate program for businesses owned by women and minorities and installment payments for small businesses on all 800 MHz SMR channel blocks in each MTA. 246. Comments. As a general matter, few commenters addressed our proposals for special provisions for designated entities presented in the Further Notice. With respect to our proposed special provisions for businesses owned by minorities and women, some commenters support providing these entities with bidding credits. Their support for these special provisions is based primarily on the fact that they have been available in other CMRS services, e.g. broadband PCS. Other commenters oppose providing special provisions to minority- and women-owned entities because: (a) there is too much uncertainty concerning the value of the EA licenses; (b) SMR is a subset of the CMRS marketplace and it is sufficient that special opportunities have been provided for these entities in other CMRS; (c) the constitutionality of such provisions is being challenged and would delay the dissemination of the EA licenses; and, (d) there have been no demonstrated barriers to entry by minority- and women-owned companies in the SMR service. 247. The commenters responding to the 800 MHz SMR Further Comment Notice, AMTA, Motorola, and Nextel, agree that the Commission should not adopt separate special provisions for minority-owned and women-owned entities that are not small businesses as previously proposed in the Further Notice. AMTA indicates that it does not believe that the Commission has a sufficiently "compelling interest" to justify adoption of race- or gender- based measures applicable to the 800 MHz SMR service in light of Adarand. AMTA further indicates that it has been unable to identify any evidence of particularized instances of discrimination in the service because 800 MHz licensing is and has been competitive with non-discriminatory access to system financing. Motorola urges the Commission not to adopt special provisions for minority- and women-owned entities in order to avoid legal challenges based on the Adarand decision, because such challenges would serve only to delay the implementation of the Commission's wide-area licensing plan. Motorola also echoes AMTA's statement about the absence of evidence of discrimination in the 800 MHz SMR service. Similarly, Nextel states that there is no evidence of underrepresentation of women and minorities in the 800 SMR business or that women and minorities have experienced discrimination in obtaining SMR licenses. As a result, Nextel asserts that the Commission's adoption of race- or gender-based special provisions for the 800 MHz SMR service would not be justifiable under a "strict scrutiny" standard of review. 248. Discussion. We conclude that special provisions for small businesses are appropriate for the 800 MHz SMR service because build-out of an EA license may require a significant amount of capital. Although we believe that the 800 MHz SMR service is less capital intensive than PCS, we believe that it is more capital-intensive than the 900 MHz SMR service. We further believe that small entities may be disadvantaged in their efforts of acquiring 800 MHz SMR licenses if required to bid against existing large companies. For instance, if one or more of these big firms targets a market for strategic reasons, there is almost no likelihood that it could be outbid by a small business. We will address this potential outcome in two ways. First, for the upper 10 MHz block, we will adopt the same "tiered" installment payments approach adopted in the 900 MHz SMR service. Specifically, licensees who qualify for installment payments will be entitled to pay their winning bid amount in quarterly installments over the term of the license, with interest charges to be fixed at the time of licensing at a rate equal to the rate for ten-year U.S. Treasury obligations plus 2.5 percent. Small businesses with gross revenues less than $15 million will be required to pay interest only for the first two years of the license term at the same interest rate as set forth above. Interest will accrue at the Treasury note rate plus 2.5 percent. Small businesses with gross revenues less that $3 million will be able to make interest-only payments for five years. Interest will accrue at the Treasury note rate without the additional 2.5 percent. Timely payment of all quarterly installments will be a condition of the license grant, and failure to make such timely payment will be grounds for revocation of the license. As we have noted previously, 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. In determining eligibility for these installment payment plans, we will not attribute gross revenues of investors that hold less than a 20 percent interest in the applicant, but we will include the gross revenues of the applicant's affiliates and investors with ownership interests of 20 percent or more in the applicant. As has been the case in prior auctions where special provisions for small businesses have been made, it also is our expectation that a qualifying small business or principals of a qualifying small business will retain de facto and de jure control of the applicant. In determining attribution when 800 MHz SMR licensees are held indirectly through intervening corporate entities, we will use the same multiplier employed for the 900 MHz SMR service. 249. Second, we have proposed additional special provisions for small businesses seeking licenses for the lower 80 and General Category channels in the Second Further Notice of Proposed Rule Making, because we believe that most, if not all, of the incumbent licensees relocated will qualify as small businesses under our proposed definition, and the lower 80 and General Category channels will be the spectrum to which they most likely will be relocated. This approach is consistent with our approach in the broadband PCS context in which we designated certain frequency blocks as "entrepreneurs' blocks" and restricted eligibility based on size limitations. We also believe that the service areas and spectrum blocks for the upper 10 MHz block we adopted in the First Report and Order will permit operators of smaller SMR systems to participate in the upper 10 MHz block auction. 250. At this time we conclude that there is an insufficient record to support the adoption of special provisions solely benefitting minority- and women-owned businesses (regardless of size) for the upper 10 MHz block auction. We note, however, that in the Second Further Notice of Proposed Rule Making, we are seeking comment on this issue with respect to the lower 80 and General Category channels. Moreover, we believe that most minority- and women-owned businesses will be able to take advantage of the installment plan described above. We expect that the vast majority of minority and women-owned businesses will be able to qualify as small businesses under any definition we adopt. 3. Partitioning 251. Background. Congress directed the Commission to ensure that rural telephone companies have the opportunity to participate in spectrum-based services. In the Further Notice, we did not propose any special provisions for rural telephone companies, on the basis that: (1) they, like other wireline carriers, then were ineligible to hold SMR licenses; (2) even if wireline entry into SMR was permitted, we questioned whether special bidding provisions would be necessary to ensure the participation of rural telephone companies in the provision of SMR service given the relatively modest build-out costs involved to serve rural areas; and (3) in view of the fact that rural telephone companies may use their existing infrastructure to support integrated 800 MHz SMR service in their rural service areas, we anticipated that they would have ample opportunity to participate in 800 MHz SMR. 252. Comments. NTCA suggests that rural telephone companies that meet the "small business" definition applicable to the 800 MHz SMR service should benefit from the special provisions afforded to other small businesses. NTCA also contends that rural telephone companies should receive the right to partition. OPASTCO argues that providing special benefits to rural telephone companies in the 800 MHz SMR spectrum auctions will help to ensure that rural communities receive wireless services. Pittencrief, on the other hand, believes that the record does not support special treatment for rural telephone companies. 253. Discussion. Since adoption of the Further Notice, rural telephone companies have gained eligibility to hold SMR licenses. Thus, we conclude that rural telephone companies will be permitted to acquire partitioned EA licenses in either of two ways: (1) they may form bidding consortia to participate in auctions, and then partition the licenses won among consortia participants; and (2) they may acquire partitioned 800 MHz SMR licenses from other licensees through private negotiation and agreement either before or after the auction. Each member of a consortium will be required to file a long-form application, following the auction, for its respective mutually agreed-upon geographic area. Partitioned areas must conform to established geo-political boundaries (such as county lines), and each area must include all portions of the wireline service area of the rural telephone company applicant that lie within the EA service area. We also will use the definition for rural telephone companies used in our broadband PCS and 900 MHz SMR rules. Thus, rural telephone companies will be defined as "local exchange carriers having 100,000 or fewer access lines, including all affiliates." In the Second Further Notice of Proposed Rule Making, we seek comment on our proposal to extend the partitioning option to SMR licensees generally. 4. Set-Aside Spectrum 254. Background. In the Further Notice we expressed our concern, based on our experience with PCS, that designated entities may have difficulties competing for 800 MHz SMR licenses against large firms with significant financial resources. We tentatively concluded, however, that it would not be feasible to designate a wide-area spectrum block as an entrepreneurs block because the large number of incumbents already licensed throughout the spectrum designated for wide-area licensing make it virtually impossible to identify a suitable block. 255. Comments. Several commenters oppose establishment of an entrepreneurs' block in the 800 MHz SMR service. CellCall and AMTA agree with the Commission's tentative conclusion that it would not be feasible to establish an entrepreneurs' block in the 800 MHz SMR service given the extensive licensing in the service. Pittencrief contends that since local channels will continue to be used by small businesses, it would be unnecessary for the Commission to superimpose a preference structure on such spectrum for their benefit. Other commenters, however, believe that an entrepreneurs' block should be established in the 800 MHz band. SBA contends that only if the Commission, for technical reasons, is unable to develop an entrepreneurs' block in the upper 10 MHz block, should it nominate the lower 80 channels for designated entities. Dru Jenkinson, et al. disagree with the Commission's tentative conclusion and argue that if the Commission does not establish an entrepreneurs block within the upper 10 MHz block of 800 MHz SMR spectrum, then all lower 80 channels should be established as an entrepreneurs' block. Assuming that an entrepreneurs' block is established in the upper 10 MHz block, Dru Jenkinson, et al. and the SBA contend that it should consist of at least one 2.5 MHz block of spectrum. 256. Discussion. We will not adopt an entrepreneurs' block in the upper 10 MHz block of 800 MHz SMR spectrum. We conclude that an entrepreneur's block in this portion of 800 MHz SMR spectrum is not feasible, given the substantial number of licensees already licensed on such spectrum. However, we are interested in ensuring that small businesses have a meaningful opportunity to continue to participate in the provision of 800 MHz SMR service. Thus, in the Second Further Notice of Proposed Rule Making we seek additional comment on whether designation of an entrepreneurs' block for other 800 MHz spectrum would be feasible. VI. SECOND FURTHER NOTICE OF PROPOSED RULE MAKING 257. In this Second Further Notice of Proposed Rule Making, we seek comment on disaggregation of channel blocks and partitioning on the upper 200 channels of 800 MHz SMR spectrum, certain aspects of mandatory relocation as adopted in the First Report and Order, and eligibility of Basic Exchange Telecommunications Radio Service (BETRS) operators for certain upper 200 channels. With respect to our mandatory relocation plan, we propose to adopt a plan for sharing the costs of relocating systems licensed and operating on the upper 200 channels. Our proposal would establish a mechanism whereby EA licensees that incur costs to relocate incumbents would receive reimbursement for a portion of those costs from other EA licensees that also benefit from the resulting clearance of the spectrum. We seek comment on the desirability of establishing a cost-sharing mechanism for incumbent relocation and on the specifics of this proposal. We also seek comment on the definition of "comparable facilities" and "good faith negotiations," and the interrelation between the two concepts. 258. In addition, we propose to adopt service and competitive bidding rules for the lower 80 SMR channels and the General Category channels, which we have redesignated for exclusive SMR use. We seek comment on the specific proposals set forth herein. A. Disaggregation of Channel Blocks on the Upper 200 Channels of 800 MHz SMR Spectrum 259. Background. In the Further Notice, we asked commenters to address whether licensees should be allowed to sublicense portions of larger blocks instead of aggregating smaller blocks. 260. Comments. Total Com, AMTA, AMI and Motorola contend that EA licensees should be permitted to sublicense portions of their spectrum blocks. Motorola argues that allowing sublicensing on a spectrum basis would allow excess spectrum capacity to be made available for alternative uses and provide small SMR licensees with the opportunity to participate in the provision of wide-area service at levels commensurate with their business and customer interests and their financial resources. AMTA argues that such sublicensing should be permitted as long as construction and coverage requirements are satisfied, because such an approach would encourage development of bidding consortia of smaller operators, which otherwise might be incapable of participating in the competitive bidding process. Parkinson, et al. express concern that, by allowing sublicensing, an incumbent's operations unfairly and unreasonably would be restricted by the EA licensee. 261. Discussion. Given the extensive incumbent presence in the upper 10 MHz block of the 800 MHz SMR spectrum, we tentatively conclude that EA licensees should be permitted to disaggregate their spectrum blocks. We believe that this additional tool will enable EA licensees to manage their spectrum blocks more effectively and efficiently. We further believe that disaggregation not only will facilitate the coexistence of EA licensees and incumbents in the upper 200 channels, but also will result in the most efficient use of the 800 MHz SMR spectrum. We seek comment on this tentative conclusion. 262. As a general matter, we believe that any disaggregation agreements must comply with the Commission's pro-competitive policies. We propose that spectrum covered by an EA license may be sublicensed in either of two ways: (1) a group of licensees or entities may form bidding consortia to participate in auctions, and then disaggregate or partition the EA license(s) won among consortia participants; and (2) an EA licensee, through private negotiation and agreement before or after the auction, may elect to disaggregate or partition its spectrum block. We seek comment on this proposal. 263. Although we are interested in affording EA licensees optimal flexibility for spectrum management, we nonetheless do not want to undermine our goal to facilitate an effective and efficient wide-area licensing scheme. We ask commenters to discuss the conditions under which EA licensees should be permitted to disaggregate their spectrum blocks. Should EA licensees be required to retain a specified portion of their spectrum block, and if so, what is an appropriate amount? In addition, should there be a minimum amount of spectrum that EA licensees must disaggregate in order to utilize this spectrum management tool? Should geographic area licensees be permitted to disaggregate only after they have satisfied applicable construction and coverage requirements? We also ask commenters to discuss any other type of considerations applicable to disaggregation. B. Partitioning on the Upper 200 Channels of 800 MHz SMR Spectrum 264. Background. In the Eighth Report and Order, supra, we adopt a partitioning option for rural telephone companies. 265. Comments. Nextel contends that smaller, local operators wishing to participate in wide-area service could become involved through arrangements with the EA licensee to partition its service area. 266. Proposal. We tentatively conclude that partitioning should be an option not only for rural telephone companies but also for incumbents and eligible SMR licensees generally. We tentatively conclude that extending the partitioning option will further the goal of Section 309(j) in the dissemination of licenses to a variety of licensees because small businesses will have additional flexibility and opportunities to serve areas in which they already provide service, while the remainder of the service area could be served by other providers. 267. We propose that SMR licensees be permitted to acquire partitioned EA licenses in either of two ways: (1) they may form bidding consortia to participate in auctions, and then partition the licenses won among consortia participants; or (2) they may acquire partitioned 800 MHz SMR licenses from other licensees through private negotiation and agreement either before or after the auction. Each member of a consortium would be required to file a long-form application, following the auction, for its respective mutually agreed-upon geographic area. We propose that partitioned areas be required to conform to established geo- political boundaries (such as county lines). We further propose that these entities be subject to the same interim coverage and channel use requirements as EA licensees with respect to the geographic areas covered by their partitioned authorizations. We seek comment on our proposals and tentative conclusions and any alternatives. 268. As a general matter, we believe that any partitioning agreement must comply with the Commission's pro-competitive policies. We ask commenters to discuss the conditions under which EA licensees should be permitted to partition their service areas to other SMR licensees. Should EA licensees be required to retain a specified portion of their service area, and if so, what is an appropriate amount? Should geographic area licensees be permitted to partition only after they have satisfied applicable construction and coverage requirements? We also ask commenters to discuss any other type of considerations applicable to partitioning. C. Mandatory Relocation in the Upper 200 Channels 1. Distributing Relocation Costs Among EA Licensees 269. In the First Report and Order, supra, we determined that EA licensees must notify incumbents operating on the upper 200 channels of their intention to relocate such incumbents within 90 days of the release of the Public Notice commencing the voluntary negotiation period. We also determined that any incumbent licensee who has been so notified may require all EA licensees in whose spectrum blocks it operates to negotiate collectively with the incumbent. Because an incumbent licensee can compel simultaneous negotiations with all affected EA licensees, we tentatively conclude that the elaborate cost-sharing plan proposed for broadband PCS is unnecessary for the 800 MHz SMR service. Therefore, we propose to require EA licensees to share the relocation costs on a pro rata basis (based on the actual number of the incumbent's channels located in the EA licensees' respective spectrum blocks), unless all such licensees agree to a different cost-sharing arrangement. We believe that this approach would enhance significantly the speed of relocation given that incumbent licensees most likely will elect to negotiate with EA licensees collectively rather than individually to accommodate system-wide relocation agreements. This would in turn result in faster delivery of wide-area SMR service to the public. We seek comment on our tentative conclusions and on the advantages and disadvantages of our cost-sharing proposal. 2. Relocation Costs 270. Compensable Costs. As we indicated in the PCS Cost-Sharing Notice, when relocation will benefit multiple licensees, the issue arises as to what relocation costs should be shared by the benefitting licensees. Relocation costs can be divided roughly into two categories: (1) the actual cost of relocating an incumbent licensee to comparable facilities, and (2) payments above the cost of providing comparable facilities, also referred to as "premium payments." 271. Comments. Louisville believes that relocation costs should include expenses for: engineering, equipment, labor, construction, testing, FCC application fees, local fees, additional recurring operating costs, pay for lost time, cost analysis, frequency coordination, and any other expenses incurred by the incumbent as long as the expenses were caused by the new facilities not being comparable with the old facilities and they occurred within one year after the incumbent took control of the new facilities. Clarus argues that expenses paid by the EA licensee should include administrative costs and any loss of goodwill that the incumbent might suffer. Nextel believes that all out-of-pocket costs associated with retuning should be borne by the auction winner, such costs include those covered by the Commission's Emerging Technologies relocation plan. 272. Proposal. We tentatively conclude that premium payments should not be reimbursable, because such payments are likely to be paid by EA licensees to accelerate relocation so that they can be the first licensee in the market area to implement wide-area SMR service. Because other EA licensees have not received the corresponding advantage of being first to market and did not actively participate in the relocation negotiations, we do not believe that such licensees should be required to contribute to premium payments. We therefore propose to limit the calculation of reimbursable costs for the 800 MHz SMR service to actual relocation costs, unless the EA licensees involved mutually and expressly agree to share any premium payments. We tentatively conclude that "actual relocation costs" would include, but not be limited to: SMR equipment; towers and/or modifications; back-up power equipment; engineering costs; installation; system testing; FCC filing costs; site acquisition and civil works; zoning costs; training; disposal of old equipment; test equipment; spare equipment; project management; and site lease negotiation. We request comment on this proposal. We also ask commenters to address any additional costs they believe should be reimbursable and a supporting rationale for such treatment. 273. Creation of Reimbursement Rights. We tentatively conclude that an EA licensee who negotiates a relocation agreement that benefits one or more other EA licensees should obtain a right to reimbursement of a share of the relocation costs. We seek comment on how such rights should be created procedurally. We believe that some form of reimbursement rights should be conferred on EA licensees so that it will be possible to enforce the right to reimbursement and collect reimbursement from other EA licensees. We seek comment on these tentative conclusions and any alternatives. 274. Payment. We seek comment on when reimbursement payments should be due. Specifically, we ask commenters to address whether such payments should be due when the benefitting EA licensee begins to use the particular frequency or when the EA licensee commences testing of its wide-area system in the EA. 275. Dispute Resolution Issues. Comments. PCIA, AMI, and Motorola all argue that the Commission should establish a mediation mechanism to resolve disputes. PCIA believes that the EA winner should pay for the mediation unless the mediator finds that the incumbent is not acting in good faith. If mediation is not successful, Motorola and PCIA believe that the Commission should resolve the dispute. 276. Proposal. We tentatively conclude that incumbents and EA licensees should attempt to resolve disputes arising over the amount of reimbursement required, in the first instance, amongst themselves. We encourage parties to use expedited alternative dispute resolution ("ADR") procedures, such as binding arbitration or mediation. We seek comment on this proposal and on any other mechanisms that would expedite resolution of these disputes should they arise. 277. Similarly, to the extent that disputes arise between incumbents and EA licensees over relocation negotiations (including disputes over the comparability of facilities and the requirement to negotiate in good faith), we also encourage parties to use alternative dispute resolution techniques. We believe such techniques are an appropriate first step during both the voluntary and mandatory negotiation periods. We emphasize again that resolution of such disputes entirely by our adjudication processes would be time consuming and costly to all parties. 278. We also seek comment on whether either the industry trade associations or the FCC's Compliance and Information Bureau should be designated as arbiters for such disputes. We ask commenters to discuss the advantages and disadvantages of such designations as well as suggested dispute resolution procedures in the event that they were so designated. In addition, we seek comment on whether failure to comply with the relocation obligations or requirements should be taken into consideration by the Commission when deciding on renewal or transfer of control or assignment applications. 3. Comparable Facilities 279. Background. Under the mandatory relocation scheme we adopt in the First Report and Order, we require EA licensees to provide incumbents with "comparable facilities" as a condition for involuntary relocation. In the broadband PCS context, we also adopted a mandatory relocation scheme in which PCS licensees are required to provide microwave incumbents with comparable facilities as a condition for involuntary relocation. Although we have not adopted a definition of comparable facilities in the broadband PCS context, we have indicated that we generally require that comparable facilities be equal to or superior to existing facilities. We also indicated that we would consider, inter alia, system reliability, speed, bandwidth, throughput, overall efficiency, bands authorized for such services, and interference protection in making a determination regarding comparability. In the Further Notice, we asked commenters to discuss the meaning of comparable facilities in the 800 MHz SMR context. 280. Comments. Some commenters suggest, as a general matter, that a comparable system is one that is as good as or superior to the incumbent's existing system. The majority of commenters attempt to define comparable facilities by specifying what would need to be provided to the incumbent being relocated. These commenters argue that comparable facilities would include: (1) the same number of channels as are currently held by the incumbent; (2) the retuned frequencies being compatible in a multi-channel system at the incumbent's current location; (3) the retuned frequencies not having any co-channel licensees within the EA; (4) incumbents having 70-mile co-channel interference protection; (5) base station equipment being modified to operate on the retuned frequencies; (6) all user units and user control units being reprogrammed or recrystallized to the retuned frequencies (or, if modification of the incumbent's equipment is not possible, the EA licensee would be required to provide new equipment); (7) the incumbent's "retuned" system providing the same, if not superior, performance as the incumbent's existing system operating at the same antenna height, and with the same power and interference protection; and, (8) the same channel separation for the retuned frequencies. 281. Some commenters define "comparable facilities" on the basis of operational characteristics. For example, commenters contend that comparable facilities mean that the incumbent's retuned system should have the same or superior coverage as its existing system. Nextel argues that comparable facilities means having the same 40 dBu contour as the incumbent's current system. Several commenters argue that only other 800 MHz SMR channels could constitute comparable frequencies. In this connection, Spectrum believes that incumbents should be relocated elsewhere on the 800 MHz spectrum or to the 900 MHz spectrum, or the auction winner should buy-out the incumbent's system. 282. PCIA, supported by other commenters, proposes that retuned incumbents receive the following rights and privileges associated with mandatory relocation: (1) the ability to obtain geographic area licenses on retuned channels; (2) protection against being relocated more than once; (3) the right to demand one unified retuning plan from all EA license holders in whose spectrum blocks their frequencies are located; (4) a requirement of "seamless" transition, such that the EA holder would complete retuning before the incumbent moves; (5) no obligation to cease operations on the original channels unless alternative frequencies are identified and accepted; and, (6) the right to timely notification by the EA licensee that incumbents will be moved. PCIA also suggests that EA licensees be given one year in which to complete retuning, so that incumbents can make future business plans. Several commenters argue that there should be no selective retuning of incumbent channels; rather, all of an incumbent's channels within an EA spectrum block should be retuned. Moreover, several commenters argue that in terms of an EA licensee's relocation obligations, an incumbent system should be defined as all licenses issued to an entity or multiple entities participating in an integrated network. Nextel, on the other hand, contends that selective retuning should be allowed, so long as the channels are "comparable." 283. Proposal. Although we wish to provide parties with sufficient flexibility to negotiate mutually agreeable terms for determining comparability, based on our experience in the broadband PCS context, we tentatively conclude that comparable facilities, at a minimum, should provide the same level of service as the incumbents' existing facilities. We propose that by "comparable facilities," a relocated incumbent would: (a) receive the same number of channels with the same bandwidth; (b) have its entire system relocated, not just those frequencies desired by a particular EA licensee; and, (c) once relocated, have a 40 dBu service contour that encompasses all of the territory covered by the 40 dBu contour of its original system. We believe that this definition will ensure that incumbents' operations will not be adversely affected. We further believe that such definition would not preclude incumbents and EA licensees from negotiating to trade-off any of these system parameters for premium payments or other operational rights which are consistent with our rules. We believe that this flexibility in designing replacement facilities will expedite relocation, given the many variables involved with the system design of each individual system. We seek comment on our proposed definition of and tentative conclusions regarding "comparable facilities." We ask commenters to discuss whether the "comparable facilities" definition should include additional operational characteristics, if so, what characteristics should be specified. 284. With respect to old and new SMR equipment, we tentatively conclude that an EA licensee's relocation obligations to an incumbent will not require the EA licensee to replace existing analog equipment with digital equipment when there is an acceptable analog alternative that satisfies the comparable facilities definition. In the event that an incumbent still wishes to obtain digital equipment under these circumstances, we believe that the incumbent should be required to bear the additional costs associated with such an upgrade of its system. Consequently, we propose that under these circumstances, the cost obligation of the EA licensee would be the minimum cost the incumbent would incur if it sought to replace, but not upgrade, its system. However, if an analog alternative fails to meet any of the criteria included in the comparable facilities definition, the incumbent would not be required to accept such an alternative. In those instances in which an incumbent licensee is operating with digital equipment prior to relocation, we tentatively conclude that the incumbent's new system also must be digital, unless the EA licensee and incumbent mutually agree to different terms. We believe that the proposed definition of comparability would facilitate negotiations between incumbents and EA licensees during the voluntary period, because both parties would be better informed about the EA licensees' minimum obligation under our rules. We seek comment on our proposals and tentative conclusions and any alternatives. 4. Relocation Guidelines -- Good Faith Requirement During Mandatory Negotiations 285. In the First Report and Order, supra, we establish a mandatory relocation mechanism for the upper 10 MHz block. Under this mechanism, incumbents and EA licensees have a one-year voluntary negotiation period during which EA licensees are free to offer incumbents a variety of incentives to expedite relocation. If a relocation agreement is not reached during this period, the EA licensee may initiate a mandatory negotiation period during which the parties are required to negotiate in "good faith". 286. We believe that additional clarification of the term "good faith" will facilitate negotiations and help reduce the number of disputes that may arise over varying interpretations of what constitutes good faith. We tentatively conclude that, for purposes of the mandatory negotiation period, an offer by an EA licensee to replace an incumbent's system with comparable facilities constitutes a good faith offer. Likewise, an incumbent that accepts such an offer presumably would be acting in good faith; whereas, failure to accept an offer of comparable facilities would create a rebuttable presumption that the incumbent is not acting in good faith. Comparable facilities would be limited to actual costs associated with providing a replacement system and would exclude any expenses incurred by the incumbent without securing the approval, in advance, of the EA licensee. We believe that the time for expansive negotiation is during the voluntary negotiation period and that, by the time the parties have reached the mandatory negotiation period, only the bare essentials of comparability should be required. We seek comment on our proposal. We also seek comment on the appropriate penalty to impose on a licensee that fails to act in good faith. D. BETRS Eligibility on the Upper 200 Channels of 800 MHz SMR Spectrum 287. Background. Under Section 90.621(h) of the Commission's rules, Channel Numbers 401-410, 441-450, 481-490, 521-530, and 561-570 are available on co-primary basis to stations in Basic Exchange Telecommunications Radio Service (BETRS) as described in Part 22 of the Commission's rules. 288. Proposal. According to our licensing records, there are few BETRS facilities currently licensed on these frequencies. Based on the limited BETRS licensing on these frequencies and the goals of the wide-area licensing plan adopted in the First Report and Order in PR Docket No. 93-144 (in which these channels are included), we propose that BETRS stations no longer be authorized on these frequencies. In addition, as of the adoption of this Second Further Notice of Proposed Rule Making, we will no longer accept applications for BETRS facilities on these channels. E. Licensing of Lower 80 and General Category Channels 1. Geographic Area Licensing 289. Background. Under our current rules the lower 80 and General Category channels are licensed on a site-specific basis. In the Further Notice, we sought comment on whether to continue site-specific licensing or to adopt a form of geographic area licensing on these channels. 290. Comments. Several commenters advocate that we continue licensing channels designated for local SMR use based on the geographic separation and channelization criteria in our current SMR rules. These commenters argue that continued site-specific licensing would: (1) allow local operators to define their own markets; (2) permit construction of niche systems designed to meet unique and customized needs; and, (3) minimize disruption to operations of existing licensees. 291. Other commenters advocate discontinuing site-specific licensing of the lower 80 and General Category channels and instead offering licenses for individual channels or small channel blocks covering defined geographic areas. Cumulous argues that market-area licensing would allow local SMR operators to grow and develop into geographic area licensees in the future. Dru Jenkinson, et al. contend that market-area licensing would permit more efficient service area coverage than site-specific authorizations. Total Com believes that market-area licensing will be advantageous to market development, with minimal regulation. 292. Some commenters expressly oppose market-area licensing on the basis that: (1) there is no reason to license these channels on a market-defined area basis given the scarcity of vacant channels; and, (2) it could create an artificial shortage of local channels simply because a licensee secures an authorization covering a particular geographic area. Pittencrief contends that such an approach, if adopted, should be used only in those areas where the spectrum currently is not being used. 293. Although AMTA does not expressly support this licensing approach, it notes that there are certain advantages associated with geographic area licensing, including facilitation of future integration of local systems into wide-area operations should additional spectrum be desired. Pittencrief contends that even if site-specific licensing is retained, geographic area licensing would not necessarily be foreclosed in the future. In this regard, Pittencrief recommends that in order to secure a market-based license, a local licensee would be required to demonstrate either that: (a) no other co-channel systems serve the geographic area; or, (b) it has secured the consent of all affected co-channel licensees. In either case, Pittencrief suggests that the local licensee should be required to serve a certain percentage of the Commission-defined service area or face loss of the wide-area authorization. 294. Proposal. We tentatively conclude that the lower 80 and General Category channels should be converted to geographic area licensing. We believe that this new licensing approach will afford smaller SMR operators the flexibility to provide service to a defined geographic area on the same basis as licensees in the upper 10 MHz block. We further believe that geographic licensing would simplify system expansion and substantially reduce the administrative burden on both lower 80 and General Category licensees and the Commission. In fact, we expect that in many instances, existing licensees will seek to obtain market-area licenses for those areas in which they already operate, which would enable them to consolidate and expand their operations under a more flexible regulatory regime. We seek comment on our tentative conclusion. 2. Service Areas 295. Background. In the Further Notice, we indicated our belief that BTAs could be an appropriate service area for geographic area licensing on the lower 80 channels. In the First Report and Order, supra, we adopt EAs as the service area for licenses in the upper 10 MHz block. 296. Comments. AMTA recommends using EAs rather than BTAs, partly because EAs appear to approximate more closely the coverage range of existing systems. Pittencrief also supports use of EAs. DCL Associates and Telecellular support use of BTA service areas, because they believe that such licensing would permit substantially more operational flexibility than the traditional 35-mile radius licensing areas. E.F. Johnson believes use of BTAs is contrary to the public interest because it potentially would require operators to construct facilities where they did not anticipate providing service; and, it would limit the possibility that a co-channel licensee legitimately could reuse those channels to serve an adjacent area. CellCall favors licensing the lower 80 channels on an MTA basis. Dru Jenkinson, et al. believe that uniformity and efficiency of administration suggest that the lower 80 channels be licensed on the same geographic area as the upper 200 channels. Similarly, AMTA contends that such uniformity will preserve the value of lower 80 channels. 297. Proposal. We tentatively conclude that EAs would be the most appropriate service areas for a geographic area licensing approach on the lower 80 and General Category channels. As discussed in the First Report and Order, EAs are based on urban, suburban, and rural traffic patterns that accurately reflect the coverage provided by most 800 MHz SMR operators other than the largest wide-area systems. We therefore believe that this is an appropriate service area definition for the smaller systems that we anticipate will occupy the lower 80 and General Category channels. We also believe that using the same service area definition for licenses on these channels as for licenses on the upper 200 channels will result in greater administrative efficiency. We seek comment on this tentative conclusion and on alternative area definitions. 3. Channel Assignments 298. Background. In the Further Notice, we indicated that by continuing to license the lower channels in five-channel blocks, as we do currently, we would enable existing licensees to expand local systems on the same channels they are using presently. We also indicated that licensing fewer channels in each block might be an option that would give SMR operators more flexibility in channel configuration. 299. Comments. CellCall, Telecellular, AMI, Dru Jenkinson, et al., and Palmer support licensing the lower 80 channels in five-channel blocks. Palmer believes that such an approach would limit spectrum warehousing severely because channels would not be sitting idle while reserved for future service areas within a larger defined geographic region. Dru Jenkinson, et al. believes that a five-channel block is an appropriate grouping which would permit limited service application on a local basis, yet provide flexibility for system modification within the designated area. 300. Proposal. The five-channel blocks, which proved to be administratively convenient under a site-by-site licensing scheme, may also continue to be feasible under a geographic area licensing approach since incumbent licensees have established their systems based on such channelization. We anticipate that licensees operating on the lower 80 channels increasingly may become more interested in expanding the geographic areas served by their systems and preoccupied less with the number of frequencies utilized by such systems. We tentatively conclude that the lower 80 channels should be licensed in the same five-channel blocks under a geographic licensing approach in order to allow SMR operators to build upon the systems they have already established. Thus, we propose to license the lower 80 channels in five-channel blocks. We seek comment on this tentative conclusion and any alternatives. 301. For the General Category channels, we are not convinced that five-channel blocks would be the best licensing alternative. Unlike the lower 80 channels, the General Category channels are contiguous. As a result, licensees may be interested in establishing multiple-channel system networks. In addition, we are concerned that the competitive bidding process for these frequencies may be administratively unmanageable if they are licensed on a channel-by-channel basis, given the large number of channels involved. Thus, we tentatively conclude that the General Category channels should be licensed in channel blocks. We seek comment on our tentative conclusion. We also ask commenters to discuss what specific channel block size would be appropriate. One alternative is to license channel blocks of different sizes, e.g., a 120-channel block, a 20-channel block, and a 10-channel block. Another alternative is to license channel blocks of the same size, e.g., 25-channel or 10- channel blocks. We seek comment on these, as well as other, alternatives. 4. Operational and Eligibility Restrictions 302. Background. In the Further Notice, we proposed to allow licensees to use the lower 80 channels for any purpose that is technically consistent with our rules. We also did not propose to restrict the ability of licensees on the lower 80 channels to aggregate channels or integrate local systems to provide service over a larger area. 303. Comments. The majority of commenters addressing this issue endorse the Commission s proposal to allow licensees to use the lower 80 channels for any purpose that is technically consistent with our rules. Cumulous believes that the Commission should pursue licensing policies that allow the same use to be made of both the upper 10 MHz block of 800 MHz SMR spectrum and the lower 80 channels. OneComm believes that such a regime would make local channels more fungible in relocation negotiations and preserve the value of the lower 80 channels. 304. Some commenters, on the other hand, oppose allowing EA licensees to be able to obtain lower 80 channels. Ericsson believes that such channels should be reserved as a safe haven for any local licensees who currently operate in the upper 10 MHz block and do not obtain the EA license if a mandatory relocation plan is adopted. UTC believes that, in order to ensure the benefits of competition within all geographic markets, an entity should be restricted from holding EA licenses and authorizations for the lower 80 channels in the same geographic area. Fisher urges the Commission to clarify that if an EA licensee also holds licenses for systems made up of frequencies from the lower 80 channels, it would be allowed to incorporate such frequencies into its wide-area system. Fisher believes that such use would further the Commission s goal of efficient and full utilization of spectrum. 305. Proposal. We tentatively conclude that lower 80 and General Category SMR licensees should be permitted to use these channels for any purpose which is technically consistent with our rules. In light of our designation of 10 MHz of 800 MHz spectrum for wide-area licensing, however, we wish to ensure that our rules do not inadvertently allow licensees in the upper 10 MHz to acquire large numbers of additional SMR channels primarily intended for other use. As discussed infra, we propose to adopt size restrictions on eligibility for the lower 80 and General Category channels by designating these channels as an entrepreneurs' block. As a result of the economic size limitations associated with such designation, the largest licensees in the upper 10 MHz block would likely be ineligible for the lower 80 and General Category channels. Aside from this proposed restriction, however, we tentatively conclude that limiting the potential uses of lower 80 and General Category licenses would not serve the public interest. We believe that operational restrictions ultimately may restrict the ability of smaller SMR operators to expand their service area and service offerings by such means as integrating their frequencies into a wide-area system or establishing a multiple-channel network. Thus, we do not propose any additional restrictions for these channels. 5. Channel Aggregation Limit 306. Background. In the Further Notice, we tentatively concluded that a limit should be placed on the number of lower 80 channels that an applicant may obtain at one time in an area without constructing and commencing operations on previously licensed channels in the same area. We proposed to limit grants of the lower 80 channels to no more than five channels at one time, which is the applicable limit under our current rules. 307. Comments. All commenters addressing this issue agree that a limit should be placed on the number of lower 80 channels that an applicant may obtain at one time in an area without constructing and commencing operations on previously licensed channels in the same area. CellCall proposes a five-channel limit in a particular area for the lower 80 frequencies. Russ Miller believes, however, that a five-channel limit is too restrictive over a geographic area as large as a BTA service area. It proposes a five-channel limit, per location, not per area, for requested frequencies not licensed to the applicant within its existing footprint. Russ Miller suggests that the limit apply to any of the 800 MHz frequencies, not just SMR channels. Telecellular believes that lower 80 licensees should be permitted to apply for additional channels only after construction has been completed for any frequencies covered by previously issued authorizations in a given area, with "area" defined as any location within 40 miles of the unbuilt site. Total Com suggests that any licensee must have 90 percent of its channels constructed in each market before additional channels are authorized. 308. Proposal. We propose not to limit the number of frequencies a single applicant can request at one time. Under our site-specific 800 MHz SMR licensing rules, we generally have restricted the number of channels for which an entity could apply in a particular area at one time, to deter spectrum warehousing. We believe that the risk of channel warehousing would be limited because these licenses will be subject to competitive bidding and we anticipate that licensees will not bid for more channels than they actually need or can use. We also believe that lower 80 and General Category licensees should have the flexibility to pursue plans to establish wide-area systems by aggregating the lower 80 and General Category frequencies. We note, however, that CMRS spectrum holdings by these licensees still would be subject to the CMRS spectrum aggregation limit provided in Section 20.6 of our Rules. We seek comment on these proposals and any alternatives. 6. Construction Requirements a. Construction Period 309. Background. In the CMRS Third Report and Order, we established a uniform 12-month period for constructing a standard base station in all CMRS services that are licensed on a site-specific basis. In the Further Notice, we indicated that licensees of SMR systems presumptively are subject to this 12-month construction period. In the CMRS Third Report and Order, we also indicated that CMRS providers would be required to commence service to subscribers by the end of their construction period, with service to subscribers defined to mean the provision of service to at least one party not affiliated with, controlled by, or related to the CMRS provider. 310. Comments. All commenters addressing this issue endorse the Commission's proposal of a 12-month construction period, coupled with a commencement of service to subscribers requirement. 311. Proposal. Consistent with our conclusions in the CMRS Third Report and Order, we propose that lower 80 and General Category licensees be subject to a 12-month construction period. We further propose that these licensees be required to construct their facilities and commence "service to subscribers" within twelve months from the grant of their licenses. We seek comment on this proposal and any alternatives. b. Coverage Requirements 312. We seek comment on whether geographic area SMR licensees operating on the lower 80 and General Category frequencies should be subject to minimum coverage requirements as a condition of licensing. In the First Report and Order, supra, we require EA licensees operating in the upper 200 channels to provide coverage to one-third of the population within their EA within three years of initial license grant and to two-thirds of the population by the end of their five-year construction period. We propose to apply these same requirements to lower 80 and General Category geographic area licensees. We believe that these coverage requirements serve the public interest by deterring spectrum warehousing and ensuring the speedy delivery of SMR service to the public. We also propose that lower 80 and General Category licensees be able to satisfy their coverage requirements by meeting a "substantial service" standard, like that adopted in the broadband PCS 10 MHz blocks and 900 MHz SMR services. We ask commenters to address the advantages and disadvantages of imposing coverage requirements on lower 80 and General Category licensees, the specific coverage criteria proposed, and any alternative criteria that could be used. 313. We also tentatively conclude that the geographic area lower 80 and General Category licensees should be responsible for meeting their coverage requirements, regardless of the extent to which their service areas are occupied by co-channel incumbents. We believe that incumbents that already provide substantial coverage in certain areas will have sufficient incentive to seek geographic area licenses for these areas. Thus, we propose to require the geographic area licensees for the lower 80 and General Category channels to satisfy their coverage requirements directly. This proposal is consistent with our approach for EA licensees on the upper 200 channels. We seek comment on these proposals and any alternatives, including the impact, if any, on the construction period for the lower 80 and General Category channels. Assuming a twelve-month construction period, we ask commenters to address whether the coverage requirements should be imposed earlier in the license term. If so, we ask commenters to discuss what would be the appropriate time frame. 314. If we adopt coverage requirements, we also must determine what penalty should be imposed if the geographic area licensee fails to comply with such requirements. We tentatively conclude that a geographic area licensee's failure to meet the coverage requirements should result in forfeiture of the market-area license. We also tentatively conclude that in the event that a licensee loses its geographic area license for failure to comply with coverage requirements, any authorizations that such licensee held in that area prior to the auction for facilities that are constructed and operating would be reinstated. This approach is consistent with the sanctions provided for in our rules for the upper 10 MHz block of 800 MHz SMR spectrum, 900 MHz SMR, and broadband PCS. We seek comment on our proposal and any alternatives. 7. Treatment of Incumbents 315. Given the extensive licensing of the 800 MHz SMR service, we remain concerned about the ramifications of implementing a market-area licensing approach where systems have been licensed already on a site-specific basis. In the First Report and Order, supra, we adopt a mandatory relocation mechanism for the upper 10 MHz block. With respect to the lower 80 and General Category channels, however, we believe that there are no equitable means of relocating incumbents to alternative channels, and that there are no identifiable alternative channels to accommodate all such incumbents. We also believe that incumbent licensees relocated from the upper 200 channels should not be subject to relocation a second time. We therefore tentatively conclude that there should be no mandatory relocation mechanism for SMR operators operating on the lower 80 and General Category channels. We propose that incumbent SMR licensees on these frequencies be allowed to continue to operate under their existing site-specific authorizations, and geographic area licensees would be required to provide protection to all co-channel systems that are constructed and operating within their service areas. We further propose that no incumbent SMR licensee be allowed to expand beyond its existing service area (as discussed in further detail, infra) and into the geographic area licensee's territory without obtaining the prior consent of the geographic area licensee (unless, of course, the incumbent in question is itself the market-area licensee for the relevant channel). We seek comment on this proposal. In addition, we ask commenters to address how non-SMR licensees operating on the lower 80 and General Category channels should be treated. Should these licensees be relocated to non- SMR channels, and if so, under what circumstances and pursuant to what type of relocation plan? 316. Because incumbent licensees' ability to expand their service areas would be restricted as a result of our proposal, we believe that it is imperative that they be given the optimum amount of operational flexibility possible, without encroaching upon market-area licensees' operations. Consistent with our approach on the upper 200 channels, we propose that incumbent licensees on lower 80 and General Category channels be able to modify or add transmitters in their existing service area without prior notification to the Commission, so long as their 22 dBu interference contour is not expanded. As we note in the First Report and Order, supra, we believe that by using the 22 dBu interference contour as the benchmark for defining an incumbent's service area, incumbents will be afforded significant operational flexibility without detracting from the market-area licensee' operational capabilities. We seek comment on this proposal. We ask commenters to address whether our proposal strikes the appropriate balance between the competing interests of market-area and incumbent licensees. We also ask commenters to discuss whether a basis other than the 22 dBu interference contour should be used to determine an incumbent's service area. 317. In addition, similar to our approach in the upper 200 channels and the 900 MHz SMR service, we propose to allow SMR incumbents operating on the lower 80 and General Category channels to have their licenses reissued if they are not the successful bidder for the geographic area license which includes the area in which they are currently operating. Under this procedure, which will be granted post-auction upon the request of the incumbent, an incumbent may convert its current multiple site licenses to a single license, authorizing operations throughout the contiguous and overlapping 22 dBu contours of the incumbent's previously authorized sites. We propose that incumbents seeking such reissued licenses be required to make a one-time filing identifying each of their external base station sites to assist the staff in updating the Commission's database after the close of the auction for the lower 80 and General Category channels. We also propose to require evidence that such facilities are constructed and placed in operation and that, by operation of our rules, no other licensee would be able to use these channels within this geographic area. We believe that facilities added or modified within the 22 dBu contour without prior approval or subsequent notification under this procedure will not receive interference, because they will be protected by the presence of surrounding stations of the same licensee on the same channel or channel block. We seek comment on this proposal. 8. Co-Channel Interference Protection 318. Under our market-area licensing proposal for the lower 80 and General Category channels, market-area licensees will be required to provide interference protection both to incumbent co-channel facilities and to co-channel licensees in neighboring market areas. With respect to incumbent co-channel facilities, we propose to retain the level of protection afforded under our existing rules. Thus, a market-area licensee would be required either to locate its stations at least 113 km (70 mi) from the facilities of any incumbent or to comply with the co-channel separation standards set forth in our short-spacing rule if it seeks to operate stations located less than 113 km (70 mi) from an incumbent licensee's facilities. With respect to adjacent market-area licensees, we propose that market-area licensees provide interference protection either by reducing the signal level at their service area boundary, or negotiating some other mutually acceptable agreement with all potentially affected adjacent licensees. We seek comment on these proposals and we invite commenters to provide alternatives. 9. Licensing in Mexican and Canadian Border Areas 319. We recognize that a limited number of lower 80 channels are available for SMR licensing in the Mexican and Canadian border areas. In the First Report and Order, we have decided not to distinguish between border areas and non-border areas for licensing purposes. We propose the same approach for the lower 80 channels in the border areas, i.e., all market areas should be licensed on a uniform basis without distinguishing border from non-border areas, even if some spectrum is unusable. We believe that lower 80 and General Category applicants, like those in the upper 10 MHz block and other services, will be able to assess the impact of more limited spectrum availability when valuing those market areas for competitive bidding purposes. Moreover, we believe that altering the size of particular market areas because they are located near an international border is likely to be administratively unworkable. Thus, we propose that market-area licensees be entitled to use any available border-area channels, subject to the relevant rules regarding international assignment and coordination of such channels. We seek comment on this proposal. F. Regulatory Classification of Lower 80 and General Category Channels 320. Background. In the CMRS Third Report and Order, we determined that SMR licensees would be classified as CMRS if they offered interconnected service and as PMRS if they did not offer such service. In the Further Notice, we sought comment on whether the presumption of CMRS status should apply to licensees authorized for the lower 80 channels. 321. Comments. All of the commenters addressing this issue believe that there should not be a CMRS presumption for the lower 80 channels or any other channels designated primarily for local service. E.F. Johnson and Genesee opine that there is a significant difference between the type of services provided by local SMR systems and wide-area systems. AMTA opines that it is not persuaded that Congress intended to adopt a definition of CMRS so sweeping as to encompass even the smallest, most rural SMR system, irrespective of its practical ability to provide a service substantially similar to cellular or other CMRS systems. 322. Proposal. Based on our geographic area licensing proposal for the lower 80 and General Category channels, we believe that it is not evident that the operations of the licensees on these frequencies will be local in nature. In fact, some licensees may desire to establish regional networks on these frequencies. Furthermore, contrary to the suggestion by some commenters, the CMRS definition provided in the Communications Act does not distinguish mobile service providers based on their economic size. Instead, a service provider's regulatory classification is determined based on factors associated with the nature of its operations. In this connection, we believe that the operational opportunities for the lower 80 and General Category channels are not significantly different. Thus, we tentatively conclude that most if not all geographic area licensees on these channels will be classified as CMRS, because they are likely to provide interconnected service as part of their service offering. We therefore propose to classify all geographic area licensees on the lower 80 and General Category channels presumptively as CMRS. We also propose that market-area applicants or licensees who do not intend to provide CMRS service may overcome this presumption by demonstrating that their service does not fall within the CMRS definition. We also propose not to apply this presumption prior to August 10, 1996 in the case of any geographic area licensee who previously was licensed in the SMR service as of August 10, 1993. We seek comment on our tentative conclusion and proposals. G. Competitive Bidding Issues for Lower 80 and General Category Channels 1. Auctionability of Lower 80 and General Category Channels 323. In the Eighth Report and Order, we affirm our previous determination that the 800 MHz SMR service is auctionable. In addition, we conclude that use of competitive bidding in the upper 200 channels of 800 MHz SMR spectrum is fully consistent with Section 309(j) of the Communications Act. Because the lower 80 frequencies are SMR channels, and thus a subset of the 800 MHz SMR service, we believe that they also are auctionable. Consistent with our approach regarding the upper 200 channels, we propose to employ competitive bidding as a licensing tool to select among mutually exclusive applicants on the lower 80 channels. We seek comment on this proposal. 324. We also seek comment on whether to adopt equivalent auction procedures for competing applications for General Category channels. In the Eighth Report and Order, supra, we determine that in the future the General Category Channels will be licensed exclusively for SMR use. Consistent with our approach for other 800 MHz SMR spectrum, we tentatively conclude that if two or more entities file mutually exclusive initial applications, we intend to use competitive bidding to select from among competing applications. 325. We anticipate that a large number of applicants will file mutually exclusive geographic area applications for SMR operations on General Category frequencies. Competitive bidding will ensure that the qualified applicants who place the highest value on the available spectrum, and who will provide valuable services rapidly to the public, will prevail in the selection process. Thus, we tentatively conclude that all potential conflicts among General Category applicants will not be eliminated by our proposed geographic area licensing scheme. Competitive bidding procedures will be necessary to select from among competing applicants for these channels. We seek comment on this tentative conclusion. 2. Competitive Bidding Design a. Bidding Methodology 326. Background. In the Competitive Bidding Second Report and Order, we established criteria to be used in selecting which auction design to use for particular auctionable services. Generally, we concluded that awarding licenses to parties who value them most highly will foster Congress's policy objectives of stimulating economic growth and enhancing access to telecommunications services. We further noted that, because 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. In determining how best to promote this objective, we identified several auction design elements which, in combination, produce many different auction types. The two most important design elements are: (1) the number of auction rounds (single or multiple), and (2) the order in which licenses are auctioned (sequentially or simultaneously). These two elements can be combined to create four basic auction designs: sequential single round, simultaneous single round, sequential multiple round, and simultaneous multiple round. 327. In the Further Notice, we noted that because of the non-contiguous nature of the lower 80 channels, there did not appear to be a high degree of interdependency among them. We further noted that the limited geographic scope of the licenses is likely to make them less valuable than the licenses for the spectrum blocks for the upper 200 channels. 328. Comments. SBA supports use of single round sealed bidding. Genesee disagrees that one single round of auctions in sealed bidding would be fair, and suggests that at least two rounds be done with 30 day intervals. AMTA does not dispute the Commission s tentative conclusion regarding the appropriate competitive bidding methodology for local licenses. AMTA notes that it is reluctant to suggest an approach that might further complicate what would be an unjustifiably costly and complex process for those entities. AMTA contends that some grouping of frequency blocks and geographic areas might be necessary for this purpose, if the Commission determines to issue local licenses on a geographic, rather than site-specific basis. Morris proposes the use of multiple round auctions for local area licenses, limited to five rounds. Nextel proposes that after relocation is completed, the lower 80 channels and any other spectrum reallocated to exclusive SMR use, be auctioned on a single channel basis. 329. Proposal. We seek comment on which of the above auction methodologies should be used for the auction of the lower 80 and General Category licenses. In the Competitive Bidding Second Report and Order, we stated that simultaneous multiple round auctions would be the preferred method where licenses have strong value interdependencies. Accordingly, we have used this method in broadband and narrowband PCS services and the 900 MHz SMR service, and we will use the same methodology for the upper 200 channels in the 800 MHz SMR service. 330. Given our successful experience in conducting simultaneous multiple round auctions, we propose to use this competitive bidding methodology for the lower 80 and General Category channels as well. We seek comment on this proposal. We also note, however, that there is less interdependency between licenses for the lower 80 and General Category channels, both because channel aggregation is not required to provide SMR service and because channel selection may be largely dictated by which channels currently are licensed to incumbents in each license area. We therefore seek comment on alternatives to simultaneous multiple round bidding for these channels. One alternative would be to use the oral outcry method, i.e., sequential multiple round bidding. This method may allow us to conduct auctions expeditiously and in a manner that is not burdensome to applicants. b. License Grouping 331. Background. Depending upon the auction methodology chosen, several alternatives exist for grouping the lower 80 and General Category licenses. For example, the Commission determined in the Competitive Bidding 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. 332. Proposal. We seek comment on how lower 80 and General Category licenses should be grouped for competitive bidding purposes. As noted above, it does not appear that licenses on these channels are likely to be highly interdependent. We therefore propose that lower 80 licenses be grouped in 16 five-channel blocks for each license area. We seek comment on this proposal. We also ask commenters to indicate if there are instances in which licenses on multiple channels should be grouped together for competitive bidding purposes. 333. Assuming that we group lower 80 licenses by 16 five-channel blocks, the issue remains whether all geographic area licenses for specific channel blocks should be grouped together for competitive bidding purposes. Given the large number of licenses, we believe that it would be administratively feasible to employ an additional means of grouping the five- channel blocks. We believe that some licensees may elect to pursue regional service plans. Thus, we propose to group the five-channel blocks on a regional basis. We seek comment on this proposal. We recognize that there are other sets of interdependencies which could form a basis for license grouping. In a simultaneous multiple round auction, for example, we could auction all of the market areas for a five-channel block simultaneously. Alternatively, we could begin with the largest (i.e. most populated) markets and then move to smaller markets. We seek comment on these alternatives as well. Assuming that we group, the licenses on a regional basis, we ask commenters to discuss how the regions should be defined. For example, should the regions be defined by sequential groupings of EAs or some other basis? We also ask commenters to address whether there is a particular order in which the regions should be auctioned. 334. With respect to the General Category channels, which we propose to license in a 120-channel block, 20-channel block and 10-channel block, we believe that these licenses will be significantly interdependent, primarily due to their contiguity. Thus, we propose to auction the General Category geographic area licenses simultaneously. We seek comment on this proposal and any alternatives. c. Bidding Procedures 335. Background. In the Competitive Bidding Second Report and Order, the Commission established general procedures for simultaneous multiple round auctions, including bid increments, duration of bidding rounds, stopping rules, and activity rules. We further noted that these procedures could be modified on a service-specific basis. We seek comment on the bidding procedures that should be used for licensing of the lower 80 and General Category channels. 336. Bid Increments. If we use a multiple round auction, we propose to establish minimum bid increments for bidding in each round of the auction, based on the same considerations in the Eighth Report and Order. The bid increment is 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 speeds the progress of the auction and, along with activity and stopping rules, helps to ensure that the auction closes within a reasonable period of time. Establishing an appropriate minimum bid increment is especially 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. We seek comment on the appropriate minimum bid increments for the lower 80 and General Category channels. 337. For example, if simultaneous multiple round auctions are employed for the lower 80 and General Category licenses, we believe that we should start such auctions with relatively large bid increments, and reduce the increments as the number of active bidders declines. We also propose to adopt a minimum bid increment of five percent of the high bid in the previous round or $0.01 per activity unit, whichever is greater. We believe that applying a $0.01 per activity unit minimum bid increment in addition to the percentage calculation is appropriate to provide flexibility for a wide range of different license values, and to ensure timely closure of auctions. In addition, we propose to retain the discretion to vary the minimum bid increments for individual licenses 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 also propose to retain the discretion to keep an auction open if there is a round in which no bids or proactive waivers are submitted. We seek comment on these proposals. 338. Stopping Rules. If multiple round auctions are used, a stopping rule must be established for determining when the auction is over. Three types of stopping rules exist that could be employed in simultaneous multiple round auctions: markets may close individually, simultaneously, or a hybrid approach may be used. We believe a market-by- market stopping rule is most appropriate for the lower 80 channels given the lack of strong interdependencies among these licenses. We also believe that a market-by-market stopping rule would be the least complex approach from an administrative perspective. Under a market-by-market approach, bidding closes on each license after three rounds pass in which no new acceptable bids are submitted for that particular license. We tentatively conclude that a simultaneous stopping rule is not appropriate for these licenses, because market-by- market closure will provide bidders with sufficient flexibility to bid on the license of their choice. In addition, the complexity of implementation and the vulnerability to strategic delay by bidders seeking to impede closure of the auction outweigh the benefits of a simultaneous stopping rule given the nature of these SMR licenses. With a simultaneous stopping rule, bidding remains open on all licenses until there is no bidding on any license. Under this approach, all markets will close if three rounds pass in which no new acceptable bids are submitted for any license. We seek comment on our tentative conclusions. We also ask commenters to address the advantages and disadvantages of using a hybrid stopping rule. Under a hybrid approach, a simultaneous stopping rule, coupled with an activity rule designed to bring the markets to close within a reasonable period of time, could be used to close auctions with high value licenses. For lower value licenses, the simpler market-by-market closing could be employed. For the General Category licenses, we tentatively conclude that a simultaneous stopping rule is most appropriate, given the significant interdependencies between these licenses. We seek comment on this tentative conclusion. Regardless of which stopping rule we ultimately apply, we further propose to retain the discretion to declare when the auction will end, whether it be after one additional round or some other specified number of rounds. This proposal will ensure ultimate Commission control over the duration of the auction. We seek comment on this proposal. 339. Activity Rules. Based on our proposal to employ a market-by-market stopping rule for the lower 80 licenses, we tentatively conclude that it is unnecessary to implement an activity rule. We believe that an activity rule is less important when markets close one-by- one, because failure to participate in any given round may result in losing the opportunity to bid at all, if that round turns out to be the last. We seek comment on this tentative conclusion. We also ask commenters to address what activity rules, if any, would be appropriate if an alternative stopping rule is adopted. For example, in order to ensure that simultaneous auctions with simultaneous stopping rules close within a reasonable period, we believe that it may be necessary to impose an activity rule to prevent bidders from waiting until the end of the auction before participating. Because simultaneous stopping rules generally keep all markets open as long as anyone wishes to bid, they also create incentives for bidders to hold back, until prices approach equilibrium, before making a bid and risking payment of a monetary assessment for withdrawing. We believe that this could lead to very long auctions. 340. Thus, in the Competitive Bidding Second Report and Order, we adopted the Milgrom-Wilson activity rule as our preferred activity rule where a simultaneous stopping rule is used. We subsequently have adopted or proposed the Milgrom-Wilson rule in each of our simultaneous multiple round auctions. 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 activity units, and make the required upfront payment. That is, bidders will be limited to bidding on licenses encompassing no more than the number of activity units 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 activity unit limit. Under this approach, bidders have the flexibility to shift their bids among any licenses for which they have applied, so long as the total activity units encompassed by those licenses does not exceed the number for which they made an upfront payment. Moreover, bidders have the freedom to participate at whatever level they deem appropriate by making a sufficient upfront payment. To preserve their maximum eligibility, however, bidders are required to maintain some minimum activity level during each round of the auction. Accordingly, we propose to employ the Milgrom-Wilson activity rule for the General Category licenses. We seek comment on this proposal and any alternatives. 341. Under the Milgrom-Wilson approach, the minimum activity level, measured as a fraction of the self-declared maximum eligibility, will increase during the course of the auction. For this purpose, Milgrom and Wilson divide the auction into three stages. During the first stage of the auction, a bidder is required to be active on licenses encompassing one-third of the activity units for which it is eligible. The penalty for falling below that activity level is a reduction in eligibility. At this stage, bidder would lose three activity units in maximum eligibility for each activity unit below the minimum required activity level. In other words, each bidder would retain eligibility for three times the activity units for which it is an active bidder, up to the activity units covered by the bidder's upfront payment. In the second stage, bidders are required to be active on two-thirds of the activity units for which they are eligible. The penalty for falling below that activity level would be a loss of 1.5 activity units in eligibility for each activity unit below the minimum required activity level. In the third stage, bidders are required to be active on licenses encompassing all of the activity units for which they are eligible. The penalty for falling below that activity level is a loss of one activity unit in eligibility for each activity unit below the minimum required activity. Each bidder thus retains eligibility equal to its current activity level (1 times the activity units for which it is an active bidder). We seek comment on this alternative. 342. Duration of Bidding Rounds. We propose to retain the discretion to vary the duration of bidding rounds or the interval at which bids are accepted (e.g., run two or more rounds per day rather than one), in order to close the auction more quickly. If this mechanism is used, we most likely would shorten the duration and/or intervals between bidding rounds where there are relatively few licenses to be auctioned, where the value of the licenses is relatively low, or in early rounds to speed the auction process. Where license values are expected to be high or where large numbers of licenses are being auctioned, we propose to increase the duration and/or intervals between bidding rounds. We would announce by Public Notice, and may vary by announcement during an auction, the duration and intervals between bidding rounds. We also propose to announce by Public Notice, before each auction, the stopping rule we adopt. We seek comment on these proposals. d. Rules Prohibiting Collusion 343. Background. In the Competitive Bidding Second Report and Order, as modified by the Competitive Bidding Reconsideration Order, we adopted special rules prohibiting collusive conduct in the context of competitive bidding. In the Further Notice, we proposed to apply these rules prohibiting collusion to the 800 MHz SMR service. We want to prevent parties, especially large entities, from agreeing in advance to bidding strategies that divide the market according to their strategic interests and/or disadvantage other bidders. Bidders will be required to (i) reveal all parties with whom they have entered into any agreement that relates to the competitive bidding process, and (ii) certify they have not entered into any explicit or implicit agreements, arrangements, or understandings with any parties, other than those identified, regarding the amount of their bid, bidding strategies, particular properties on which they will or will not bid or any similar agreement. 344. Proposals. We tentatively conclude that we should subject the lower 80 and General Category licenses to the reporting requirements and rules prohibiting collusion embodied in Sections 1.2105 and 1.2107 of the Commission's rules. Specifically, we propose to implement Section 1.2105(a) to require bidders to identify on their short-form 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. We propose to apply Section 1.2105(c) of our rules, which prohibits bidders from communicating with one another (if they have applied for any of the same markets) regarding the substance of their bids or bidding strategies after short-form applications (FCC Form 175) have been filed. Section 1.2105(c) also prohibits bidders from entering into consortium arrangements or joint bidding agreements after the deadline for short-form applications has passed. Prohibited communications between such bidders cannot take place directly or indirectly. 345. Further, in the Competitive Bidding Fourth Memorandum Opinion and Order, we noted that communications among bidders concerning matters unrelated to the license auction would be permitted. In making this proposal, it is not our intent to discourage potential applicants from entering into consortia, joint ventures, or similar joint bidding arrangements for geographic area licenses prior to the short form filing deadline. To the contrary, we intend to provide parties with time to negotiate such arrangements before the start of the application process. To avoid compromising the auction process, however, such negotiations must end at the point that short forms are filed. As in other services, we also propose to require winning bidders to submit with their long-form application a detailed explanation of the terms, conditions and parties involved in any auction-related consortium, joint venture, partnership, or other agreement entered into prior to the close of bidding. We seek comment on these proposals. 3. Procedural and Payment Issues a. Pre-Auction Application Procedures 346. Background. In the Competitive Bidding Second Report and Order, the Commission established general competitive bidding rules and procedures, which we noted may be modified on a service-specific basis. In the Competitive Bidding Second Report and Order, we determined that we should require only a short-form application (FCC Form 175) prior to auction, and that only winning bidders should be required to submit a long-form license application (FCC Form 600) after the auction. In this connection, we determined that such a procedure would fulfill the statutory requirements and objectives and adequately protect the public interest. 347. As discussed below, we propose to follow generally the processing and procedural rules established in the Competitive Bidding Second Report & Order, with certain modifications designed to address the particular characteristics of the lower 80 and General Category licenses. 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 SMR services to the public. 348. Section 309(j)(5) of the Communications Act 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. 349. Under this proposal, before the auction for the lower 80 and General Category channels, the 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 the Public Notice would be dismissed, with prejudice, as untimely. We seek comment on these proposals. 350. Soon after the release of the initial Public Notice, a Bidder's Information Package will be made available to prospective bidders. The Bidder's Information 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. 351. 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 Information 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 application certain identifying information, including its status as a designated entity (if applicable), its classification (i.e., individual, corporation, partnership, trust, or other), the license areas 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. 352. As we indicated in the Competitive Bidding 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  365-366, infra). If no petitions to deny are filed, the application would be grantable after 30 days. We seek comment on the proposals discussed above. b. Amendments and Modifications 353. Background. To encourage maximum bidder participation, we proposed in the Competitive Bidding Second Report and Order to provide applicants with an opportunity to correct minor defects in their short-form applications prior to the auction. We stated that applicants whose short-form applications are substantially complete, but contain minor errors or defects, would be provided an opportunity to correct their applications prior to the auction. In the broadband PCS context, we modified our rules to permit ownership changes that result when consortium investors drop out of bidding consortia, even if control of the consortium changes due to this restructuring. In the CMRS Third Report and Order, we decided to adopt the same or similar definitions for initial applications and major and minor amendments and modifications for all CMRS in Part 22 and Part 90, in order to facilitate similar system proposals and modifications for equal treatment of substantially similar services. 354. On the date set for submission of corrected applications, applicants that discover minor errors in their own 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 SMR auctions. Under this proposal, applicants would not be permitted to make any major modifications to their applications, including changes in license areas 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. 355. Upon our review of 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 errors 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 are determined 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. c. Upfront Payments 356. Background. In the Competitive Bidding Second Report and Order, we established a minimum upfront payment of $2,500 and stated that this amount could be modified on a service-specific basis. In the Further Notice, we proposed to require 800 MHz SMR auction participants to tender in advance to the Commission a substantial upfront payment, $0.02 per activity unit for the largest combination of activity units a bidder anticipates bidding on in any round, as a condition of bidding in order to ensure that only serious, qualified bidders participate in auctions and to ensure payment of the penalty (discussed infra) in the event of bid withdrawal or default. We also sought comment on the upfront payment formula and minimum upfront payment most appropriate for the 800 MHz SMR service. 357. Proposals. As in the case of other auctionable services, we propose to require participants for the lower 80 and General Category auction to tender in advance to the Commission a substantial upfront payment as a condition of bidding, in order to ensure that only serious, qualified bidders participate in auctions and to ensure payment of the additional monetary assessments in the event of bid withdrawal or default. For services that are licensed by simultaneous multiple round auction, we have established a standard upfront payment formula of $0.02 per activity unit for the largest combination of activity units a bidder anticipates bidding on in any single round of bidding. We tentatively conclude that a minimum $2,500 upfront payment should be required, regardless of the bidding methodology we employ. We seek comment on our proposal regarding the appropriate minimum upfront payment for applications for the lower 80 or General Category channels. In particular, we seek comment on whether a minimum upfront payment of $2,500 is sufficient to discourage frivolous or speculative bidders in the auction process. 358. We tentatively conclude that upfront payments should be due no later than 14 days before a scheduled auction. This period should be sufficient to allow the Commission to process upfront payment data and release a Public Notice listing all qualified bidders. The specific procedures to be followed in the tendering and processing of upfront payments are set forth in Section 1.2106 of the Commission's rules. d. Down Payment and Full Payment 359. Background. In the Competitive Bidding Second Report and Order, we generally required successful bidders to tender a 20 percent down payment on their bids to discourage default between the auction and licensing and to ensure payment of the penalty if such default occurs. We concluded that this requirement 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. In the Further Notice, we proposed to require the winning bidders for 800 MHz SMR licenses to supplement their upfront payments with down payments sufficient to bring their total deposits up to 20 percent of their winning bid(s). 360. Proposals. We propose to apply the 20 percent down payment requirement to winning bidders for lower 80 and General Category licenses. Such a down payment would be due within five business days following the Public Notice announcing the winning bidders. We further propose that auction winners be required to pay the full balance of their winning bids within five business days following Public Notice that the Commission is prepared to award the license. We seek comment on this proposal. 361. To the extent that an auction winner is eligible to make payments through an installment plan (i.e., small businesses, as proposed infra at  397), we propose to apply different down 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 (this amount would include the upfront payment), and would have to pay an additional five percent of its winning bid to the Commission within five business days following Public Notice that the Commission is prepared to award the license. We seek comment on this proposal. e. Bid Withdrawal, Default, and Disqualification 362. Background. In the Further Notice, we proposed to adopt bid withdrawal, default, and disqualification rules for the 800 MHz SMR service based on the procedures established in our general competitive bidding rules. In the Competitive Bidding Second Report and Order, we noted that it is critically important to the success of our competitive bidding process that potential bidders understand that there will be a substantial penalty assessed if they withdraw a high bid, are found not to be qualified to hold licenses, or default on payment of a balance due. If a bidder withdraws a high bid before the Commission closes bidding or defaults by failing to timely remit the required down payment, it would be required to reimburse the Commission for any differences between its high bid and the amount of the winning bid, if the winning bid is lower. A defaulting auction winner also would be assessed three percent of either the subsequent winning bid or the amount of the defaulting bid, whichever is less. 363. Proposal. We propose to adopt bid withdrawal, default, and disqualification rules for the lower 80 and General Category licenses based on the procedures in our general competitive bidding rules. Under these procedures, any bidder who withdraws a high bid during an auction before the Commission declares bidding closed, or defaults by failing to remit the required down payment within the prescribed time, would be required to reimburse the Commission. The bidder would be required to pay the difference between its high bid and the amount of the winning bid the next time the license is offered by the Commission, if the subsequent winning bid is lower. A defaulting auction winner would be assessed 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 monetary assessment would be offset by the upfront payment. In the event that an auction winner defaults or is otherwise disqualified, we propose to re-auction the license either to existing or new applicants. The Commission would retain discretion, however, to offer the license to the next highest bidder at its final bid level if the default occurs within five business days of the close of bidding. We seek comment on these proposed procedures. f. Long-Form Applications 364. Background. In the Competitive Bidding Second Report and Order, we established rules that require a winning bidder to submit a long-form application. The long- form application is required to be filed by a specific date, generally within ten business days after the close of the auction. We stated that after we received the high bidder's down payment and the long-form application, we would review the long-form application to determine if it is acceptable for filing. Once the long-form application is accepted for filing, we stated that we would release a Public Notice announcing this fact, triggering the filing window for petitions to deny. We also stated that if, pursuant to Section 309(d), we deny or dismiss all petitions to deny, if any are filed, and we otherwise are satisfied that the applicant is qualified, we would grant the license(s) to the auction winner. In the Further Notice, we proposed to use application procedures similar to those used for licensing PCS. Consistent with our approach in PCS, we proposed to require only the winning bidder to file a long-form application (FCC Form 600). 365. Proposal. 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. g. Petitions to Deny and Limitations on Settlements 366. Background. We determined in the Competitive Bidding Second Report and Order that the procedures concerning petitions to deny found in Section 309(j)(2) of the Communications Act, should apply to competitive bidding. We determined that we would adopt expedited procedures to resolve substantial and material issues of fact concerning qualifications. We stated that we would entertain petitions to deny the application of the auction winner if the petitions to deny otherwise are provided for under the Communications Act or our rules. We then determined that we would not conduct a hearing before denial if we determined that an applicant is not qualified and no substantial and material issue of fact exists concerning that determination. We also stated that if we identified substantial and material issues of fact in need of resolution, Sections 309(j)(5) and 309(j)(2) of the Communications Act permit submission of all or part of evidence in written form, and also allow employees other than administrative law judges to preside at the taking of written evidence. Additionally, in the Competitive Bidding Fourth Memorandum, Opinion and Order, we stated that our anti-collusion and settlement procedures were designed to avoid the problem of entities filing applications solely for the purpose of demanding payment from other bidders in exchange for settlement or withdrawal. 367. As we have determined, the petition to deny procedures in Section 90.163 of the Commission's rules, adopted in the CMRS Third Report and Order, will apply to the processing of applications for the 800 MHz SMR service. Thus, a party filing a petition to deny against an application for the lower 80 and General Category channels will be required to demonstrate standing and meet all other applicable filing requirements. We also have adopted restrictions in Section 90.162 to prevent the filing of applications and pleading (or threats of the same) designed to extract money from 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. 368. 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. We seek comment on these proposals. h. Transfer Disclosure Requirements 369. In Section 309(j) of the Communications Act, 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 Competitive Bidding Second Report and 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. 370. We tentatively conclude that the transfer disclosure requirements of Section 1.2111(a) should apply to all lower 80 and General Category 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 their license. As we indicated in the Competitive Bidding Second Report and 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. We seek comment on these proposals. i. Performance Requirements 371. Section 309(j)(4)(B) of the Communications Act requires the Commission to establish rules for auctionable services that "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 Competitive Bidding Second Report and Order, we decided that in most auctionable services, existing construction and coverage requirements provided in our service rules would be sufficient to meet this standard, and that it was unnecessary to impose additional performance requirements. As discussed in Section IV(c)(3), supra, we have proposed service rules for SMR that would require market-area licensees to meet minimum population coverage requirements in their licensing areas. We tentatively conclude that these proposed coverage requirements are sufficient to meet the requirements of Section 309(j)(4)(B). As discussed infra, we propose that failure to meet these requirements would result in automatic license cancellation. Accordingly, we do not propose to adopt additional performance requirements for the lower 80 and General Category licenses. We seek comment on this proposal. 4. Treatment of Designated Entities a. Overview and Objectives 372. Section 309(j)(3)(B) of the Communications Act provides that in establishing auction 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." 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." 373. In the Competitive Bidding Second Report and Order, we established eligibility criteria and general rules regarding special measures for small businesses, rural telephone companies, and businesses owned by women and minorities (sometimes referred to collectively as "designated entities"). We also identified several measures, including installment payments, spectrum set-asides, and bidding credits, from which we could choose when establishing rules for auctionable 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. 374. When deciding which provisions to adopt to encourage designated entity participation in particular services, we have closely examined the specific characteristics of the service and determined whether any particular barriers to accessing capital have stood in the way of designated entity opportunities. In accordance with our statutory directive, we have adopted measures designed both to enhance the ability of designated entities to acquire licenses and to increase the likelihood that designated entity licensees will become strong competitors in the provision of wireless services. In narrowband PCS, for instance, we provided installment payments for small businesses and bidding credits for minority-owned and women-owned businesses. In broadband PCS, we designated certain spectrum blocks as entrepreneurs' blocks, allowed entrepreneurs' block licensees to make installment payments, and provided bidding credits for designated entities. In 900 MHz SMR, we adopted bidding credits and installment payments for small businesses. In the 800 MHz SMR service, we did not adopt special provisions for designated entities, with respect to the upper 200 channels. We nonetheless indicated that such approach would meet the statutory objectives of promoting economic opportunity and competition, avoiding excessive concentration of licenses, and ensuring access to new and innovative technologies by designated entities. As discussed in greater detail below, we seek comment on the type of designated entity provisions that should be incorporated into our competitive bidding procedures for the lower 80 and General Category channels. b. Eligibility for Designated Entity Provisions i. Small Businesses a) Special Provisions 375. Proposal. We tentatively conclude that it is appropriate to establish special provisions for small businesses in our competitive bidding rules for the lower 80 and General Category channels. We note that Congress specifically cited the needs of small businesses in enacting auction legislation. The House Report states that the statutory provisions related to installment payments were enacted 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 inadvertently does not favor incumbents with "deep pockets" over new companies or start-ups. 376. In addition, Congress made specific findings with regard to access to capital 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." For these reasons, and as discussed in greater detail below, we tentatively conclude that small businesses applying for these licenses should be entitled to some form of bidding credit and should be allowed to pay their bids in installments. This is consistent with our approach in the 900 MHz SMR service. We seek comment on this tentative conclusion. b) Definition 377. Comments. DCL Associates and Dru Jenkinson, et al. suggest that we adopt the SBA definition of small business initially adopted in the Competitive Bidding Second Report and Order. Under that definition, a "small business" is one which has a net worth not in excess of $6 million with average net income for the two preceding years not in excess of $2 million. Morris recommends using the small business definition utilized by the Internal Revenue Service. The SBA opines that a revenue test remains the best and least problematic guideline for determining whether a business is small. AMTA suggests that the better approach for the 800 MHz SMR service would be to incorporate preferential provisions for existing operators. 378. Several commenters offer other small business definitions. AMI suggests that small businesses be defined to have 30 channels licensed or managed and/or less than $540,000 in current system revenues. Genesee suggests using the U.S. Chamber of Commerce standard for retail/service companies of less than $5.5 million annually. Genesee and the SBA believe that the PCS small business definition, with a $40 million maximum would be inappropriate for the 800 MHz SMR service. The SBA believes that a smaller revenue figure, such as $15 million, would be more appropriate. 379. Proposal. We seek comment on the appropriate definition of "small business" to be applied for purposes of the bidding credits proposed above. In the Competitive Bidding Second Memorandum Opinion and Order, we stated that 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. In broadband PCS and regional narrowband PCS, we defined small businesses based on a $40 million annual revenue threshold. In the 220 MHz service, we have proposed two small business definitions: (1) for purposes of bidding on a nationwide or regional license, small businesses would be defined as entities with $15 million in average gross revenues for the preceding three years; and (2) for purposes of bidding on EA licenses, small businesses be would be defined as entities with $6 million in average gross revenues for the preceding three years. After considering the record in the 900 MHz proceeding, we concluded that both $15 million and $3 million small business definitions were warranted, which would entitle applicants for MTA licenses to 10 percent and 15 percent bidding credits respectively. 380. In conjunction with our proposal to provide two levels of bidding credits, we propose to establish two small business definitions: to obtain the 10 percent bidding credit, an applicant would be limited to $15 million in average gross revenues for the previous three years; to obtain the 15 percent credit, the applicant would be limited to $3 million in gross revenues for the previous three years. In both cases, we would require the applicant to aggregate the gross and revenues of its affiliates and investors for the preceding three years for purposes of determining eligibility. These proposed thresholds are comparable to what we have adopted in 900 MHz SMR, and they reflect our tentative view of the capital requirements and potential barriers to entry in the 800 MHz SMR service. We seek comment on whether these thresholds, and the proposed bidding credit amounts associated with them, are sufficient for the lower 80 and General Category Channels in light of the build-out costs associated with constructing an SMR system throughout a market area, or whether alternative definitions would be more suitable. We also seek comment on whether our proposed small business definitions are sufficiently restrictive to protect against businesses receiving bidding credits which in fact do not need them. ii. Minority- and Women-Owned Businesses 381. Background. Prior to the Supreme Court's decision in Adarand Constructors, Inc. v. Pe¤a, we concluded that in the licensing of broadband and narrowband PCS, minority and women-owned businesses might have difficulty accessing sufficient capital to be viable auction participants or service providers, in the absence of special provisions in our auction rules. We therefore adopted special provisions for minorities and women in these services. We further determined that such provisions were constitutional under the "intermediate scrutiny" standard used in Metro Broadcasting, Inc. v. FCC. 382. In Adarand, however, the Supreme Court ruled that racial classifications imposed by the federal government are subject to strict scrutiny. This holding will apply to any proposal to incorporate race-based measures into our rules; thus, it introduces an additional level of complexity to implementing Congress' mandate to ensure that businesses owned by minorities and women are provided "the opportunity to participate in the provisions of spectrum-based services." We emphasize that we have not concluded that race or gender- based measures are unconstitutional or otherwise inappropriate for spectrum auctions we will hold in the future. At a minimum, however, we believe that Adarand requires us to build a thorough factual record concerning the participation of minorities and women in spectrum- based services to support race- and gender-based measures. 383. Comments. DCL Associates and Dru Jenkinson, et al., the only commenters addressing this specific issue, propose that the PCS definitions of minority- and/or female- controlled firms should be utilized in the 800 MHz SMR service. Dru Jenkinson, et al. further suggest that there should be no difference in eligibility requirements for the wide-area and local licenses. 384. Proposal. We propose to adopt special provisions in the lower 80 and General Category competitive bidding rules for small businesses. We believe that such provisions can be structured in a way that would increase the likelihood of participation by women- and minority-owned businesses. In adopting designated entity measures for PCS, for example, we noted that such targeted provisions might not be necessary in services that are less capital intensive. We consider 800 MHz SMR to be significantly less capital-intensive than PCS and some other wireless services. In addition, we anticipate that our proposal to license each channel separately on an EA basis will mean lower entry costs for applicants. We also expect that the vast majority of minority and women-owned businesses will be able to qualify as small businesses under any definition we adopt. For example, U.S. Census Data shows that approximately 99 percent of all women-owned businesses and 99 percent of all minority- owned businesses generated net receipts of $1 million or less. Finally, in light of the statute's instruction to "design and test multiple alternative methodologies" we believe that it would be suitable to use more uniform measures for the lower 80 and General Category channels, because capital entry requirements are expected to be comparatively lower than other CMRS services. We seek comment on this proposal. 385. We also request comment on the possiblity that in addition to small business provisions, separate provisions for women- and minority-owned entities should be adopted for the lower 80 and General Category channels. To comply with the Supreme Court's ruling in Adarand, any race-based classification must be a narrowly tailored measure that furthers a compelling governmental interest. We also believe that gender-based provisions, although not addressed in Adarand, should be subject to the broadest possible comment. We therefore ask that commenters discuss whether the capital requirements of the 800 MHz SMR service pose a barrier to entry by minorities and women, and whether assisting women and minorities to overcome such a barrier, if it exists, would constitute a compelling government interest. In particular, we seek comment on the actual costs associated with acquisition, construction, and operation of an 800 MHz SMR system with a service area based on a pre-defined geographic area and the proportion of existing 800 MHz SMR businesses that are owned by women and minorities. We also seek comment on the analytical framework for establishing a history of past discrimination in the 800 MHz SMR industry and urge parties to submit evidence (statistical, documentary, anecdotal or otherwise) about patterns or actual cases of discrimination in this and related communications services. Assuming that a compelling government interest is established, we seek comment on whether separate provisions for women and minorities are necessary to further this interest, and whether such provisions can be narrowly tailored to satisfy the strict scrutiny standard. iii. Reduced Down Payment 386. Background. In the Competitive Bidding Second Report and Order, we noted that reduced upfront payments particularly may be appropriate for auctions of spectrum specifically set aside for designated entities as a means of encouraging participation in the auction, particularly by all eligible designated entities. For broadband PCS, we reduced the upfront payment requirement for designated entities in the entrepreneurs blocks, observing that requiring full compliance with the upfront payment could discourage auction participation by designated entities. 387. Comments. Several commenters support offering a reduced upfront payment option to designated entities. DCL Associates strongly supports availability of reduced upfront payments for minority- and/or women-owned businesses. Dru Jenkinson, Inc., et al., on the other hand, support offering the reduced upfront payment option to all designated entities. To encourage the participation of designated entities in an auction for a geographic area licenses, Pittencrief does not oppose a reduced upfront payment. Southern opines, however, that if the Commission imposes a higher than usual upfront payment, as other commenters suggest, then a reduced upfront payment option will not do much to facilitate participation by designated entities in the auctions for wide-area licenses. 388. Proposal. We propose to adopt reduced upfront payments for small businesses for geographic licenses on the lower 80 and General Category channels. We believe that this special provision will encourage participation in the auction by eligible designated entities. We seek comment on this proposal and tentative conclusion. c. Bidding Credits 389. Background. Bidding credits allow eligible designated entities to receive a payment discount (or credit) for their winning bid in an auction. In the Competitive Bidding Second Report and Order, we determined that competitive bidding rules applicable to individual services would specify the entities eligible for bidding credits and the bidding credit amounts for each particular service. As a result, we have adopted a variety of bidding credit provisions for small businesses and other designated entities in auctionable services. In the nationwide narrowband PCS auction, for example, we established a 25 percent bidding credit for minority and women-controlled businesses, while a 40 percent credit was used in the regional narrowband PCS auction. In broadband PCS, our pre-Adarand entrepreneurs' block rules included a 10 percent bidding credit for small businesses, a 15 percent credit for businesses owned by minorities or women, and an aggregated 25 percent credit for small businesses owned by women and/or minorities. In the MDS Report and Order, we allowed small businesses a 15 percent bidding credit. In the 900 MHz SMR service, we adopted a 15 percent bidding credit for small businesses with gross revenues that are not more than $3 million for the preceding three years and a 10 percent bidding credit for small businesses with gross revenues that are more than $3 million but not more than $15 million for the preceding three years. Finally, in the 220 MHz Second Memorandum Opinion and Order, we proposed a 40 percent small business bidding credit for nationwide and regional licenses and a 10 percent bidding credit for smaller EA licenses. 390. Comments. Few commenters addressed whether special provisions should be provided for businesses owned by minorities and/or women in the 800 MHz SMR auctions. With respect to bidding credits, Morris, Pittencrief, DCL Associates, Dru Jenkinson et al. and the SBA support the Commission's proposal to provide bidding credits for such entities. DCL Associates, Dru Jenkinson, et al., and the SBA support a forty percent bidding credit for minority- and women-owned entities for wide-area licenses. The SBA further supports affording minority- and women-owned entities a twenty-five percent bidding credit for local SMR licenses. Other commenters, however, oppose giving such entities any type of bidding credit. AMI opines that a bidding credit would be inappropriate, based on the uncertainty of the value of wide-area licenses at auction. Dial Call opposes bidding credits, contending the questionable constitutionality of such provisions only would serve to delay the ultimate resolution of the proceeding. 391. Proposal. We seek comment on the appropriate level of bidding credit for the lower 80 and General Category channels, in comparison to the services discussed above. We also seek comment on the possibility of offering "tiered" bidding credits for different classes of small businesses. We note that small businesses may vary in their ability to raise capital, depending on their size and gross revenues. By offering levels of bidding credits which depend on the size of the small business, we could increase the likelihood that the full range of small businesses would be able to participate in an auction and potentially provide service. We therefore propose to establish two levels of bidding credits: a 10 percent bidding credit for all small businesses, and a 15 percent credit for small businesses that meet a more restrictive gross revenue threshold. We believe that tiered bidding credits can help achieve our statutory objective under Section 309(j)(3)(B), by providing varying sizes of small businesses with a meaningful opportunity to obtain SMR licenses. We seek comment on this proposal. 392. We also seek comment on the degree to which the revenues of affiliates and major investors should be considered in determining small business eligibility. For example, in determining whether a PCS applicant qualifies as a small business, we include the gross revenues of the applicant's affiliates and investors with ownership interests of twenty-five percent or more in the applicant, but we do not attribute the gross revenues of investors who hold less than a twenty-five percent interest in the applicant unless they are members of the applicant's control group. We seek comment on what attribution standard should be applied to 800 MHz SMR applicants seeking to qualify as small businesses. Would a smaller attribution standard be more appropriate? 393. We propose to make the small business bidding credit available on all lower 80 and General Category Channels that are licensed on a market-area basis. We recognize that this would be a departure from our 900 MHz SMR rules, in which we offered bidding credits to small businesses on any available channel block. Our proposal is consistent, however, with our PCS rules in which bidding credits are available only on designated channels. We seek comment on this proposal. We also seek comment on whether there is a reasonable basis for providing credits on some channels and not others. d. Installment Payments 394. Background. In the Competitive Bidding Reconsideration Order, we indicated that in the future we would not necessarily limit the availability of installment payments to small businesses, but would consider offering the installment option (with varying rates and payment schedules) to other classes of designated entities. 395. Comments. AMI, CellCall, DCL Associates, Genesee, Pittencrief, and the SBA support the proposal that small businesses be eligible for installment payments. AMI opines that the availability of installment payments may prove useful in facilitating the participation of small operators in the 800 MHz SMR auctions. In addition, CellCall, DCL Associates, and Morris advocate that the Commission afford small businesses reduced upfront payments. Telecellular believes that the Commission should maximize the opportunities for small businesses by granting them bidding credits. Telecellular suggests adoption of the bidding credits provided under the Commission's broadband PCS designated entity provisions. 396. DCL Associates strongly supports the availability of installment payments for minority and/or women-owned businesses. Pittencrief does not object to offering installment payments as a means to encourage participation of designated entities in the auctions for wide-area licenses. 397. Proposal. We propose to adopt an installment payment option for small businesses that successfully bid for lower 80 and General Category licenses. As we noted in the Competitive Bidding Second Report and 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. Under this proposal, licensees who qualify for installment payments would be entitled to pay their winning bid amount in quarterly installments over the ten-year license term, 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. In addition, we propose to tailor installment payments to reflect the needs of different size entities. Under our proposal, small businesses with $3 million or less in gross revenues would make interest-only payments for the first five years of the license term, while small businesses with $15 million or less in gross revenues would make interest-only payments during the first two years. We believe that this installment payment structure, which is consistent with our approach in 900 MHz SMR and the upper 200 channels, will enable entities with less immediate access to capital to increase their chances of obtaining licenses. Timely payment of all installments would be a condition of the license grant and failure to make timely payment would be grounds for revocation of the license. We seek comment on this proposal. e. Set-Aside Spectrum 398. Background. In the Eighth Report and Order, we determined that designation of an entrepreneur's block for the upper 200 channels was not feasible. In the Further Notice, we indicated that an entrepreneurs' block could be feasible for the lower 80 channels which we contemplated would be used primarily by smaller SMR operators. 399. Proposal. We tentatively conclude that the lower 80 and the General Category Channels should be designated as an entrepreneurs' block. Such a designation would ensure that smaller SMR operators would have opportunities to maintain competitive and viable systems and also to pursue wide-area licensing strategies should they desire to do so. In our broadband PCS rules where we have authorized entrepreneurs' block licenses, we have required entrepreneurs to comply with financial caps based on gross revenues and total assets over a certain period of time. Because the 800 MHz SMR service is less capital-intensive than PCS, we believe that the entrepreneurs' block financial caps in the 800 MHz SMR service should be set at a lower level than those in broadband PCS. We seek comment on the feasibility of designating the lower 80 and General Category channels as an entrepreneurs' block. We also ask commenters to discuss what would be appropriate financial caps for such entrepreneurs' block. f. Unjust Enrichment Provisions 400. Background. In the Competitive Bidding Second Report and Order, we indicated that licensees that received bidding credits and installment payments and also chose to transfer their licenses to entities not eligible for these benefit, were required to repay the amount of the bidding credit on a graduated basis. No repayment would be required six years after the license grant. In addition, the ineligible transferee would not have the benefit of installment payments, and principal and accrued interest would come due. For the 900 MHz SMR service, we adopted unjust enrichment provisions which required reimbursement of the benefit received by a small business through bidding credits and installment payments in the event that such small business transferred its license to an entity not qualifying as a small business. In the Competitive Bidding Fifth Report and Order, we adopted restrictions on the transfer or assignment of broadband PCS entrepreneurs' block licenses to ensure that designated entities do not take advantage of special provisions by immediately assigning or transferring control of their licenses. 401. Proposal. Permitting an immediate transfer of a discounted license to an entity that is not a small business could undermine our basis for offering special provisions to small businesses, but we note that in services with no entrepreneurs' block, we have limited unjust enrichment to repayment of bidding credits or installment payments. We therefore seek comment on whether we should use an approach similar to that adopted for the 900 MHz SMR service or that adopted for broadband PCS entrepreneurs' block licenses. g. Partitioning 402. The Communications Act directs the Commission to ensure that 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. Rural telephone companies, however, are well positioned because of their existing infrastructure to serve these areas. In other services, such as broadband PCS and 900 MHz SMR, we have acknowledged this fact by allowing rural telephone companies to partition their licenses on a geographic basis, thereby increasing the likelihood of rapid introduction of service into rural areas. We also afforded rural telephone companies this opportunity under our rules for the upper 200 channels of 800 MHz SMR spectrum. We seek comment on whether we should incorporate similar provisions into our rules for the lower 80 and General Category channels. 403. If we adopt geographic partitioning for rural telephone companies, geographic partitioning should be made available to them on the same basis as in PCS and the upper 200 channels. Such a partitioning scheme would provide rural telephone companies with the flexibility 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 SMR licenses in one of two ways: (1) by forming bidding consortia consisting entirely of rural telephone companies to participate in auctions, and then partitioning the licenses won among consortia participants, or (2) by acquiring partitioned paging licenses from other licensees through private negotiation and agreement either before or after the auction. We also would require that partitioned areas conform to established geo-political boundaries, include all portions of the wireline service area of the rural telephone company applicant, and be reasonably related to the rural telephone company's wireline service area. We also propose to use the definition for rural telephone companies implemented in the Competitive Bidding Fifth Report and 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. We also seek comment on whether we should extend partitioning options to entities other than rural telephone companies, as we did in MDS and as we proposed for the upper 200 channels in this service. VII. CONCLUSION 404. We believe that the service and auction rules adopted in this First Report and Order and Ninth Report and Order will promote the public policy goals set forth by Congress. We believe that the service and auction proposals set forth in the Second Further Notice of Proposed Rule Making are additional efforts necessary to continue our implementation of a new licensing scheme for the 800 MHz SMR service. We further believe that the rules will facilitate the rapid implementation of wide-area licensing in the 800 MHz SMR service, thus advancing the public interest by fostering economic growth of competitive new services via efficient spectrum use. The rules also will allow the public to recover a portion of the value of the public spectrum and promote expeditious access to 800 MHz SMR services by consumers, and rapid deployment of 800 MHz SMR by existing licensees and potential new entrants. We also believe that the technical rules proposed and adopted herein strike the proper balance between the rights of incumbent licensees in the 800 MHz SMR spectrum and new EA licensees. VIII.PROCEDURAL MATTERS 405. With respect to this First Report and Order and Eighth Report and Order, pursuant to the Regulatory Flexibility Act of 1980, an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Further Notice of Proposed Rule Making in PR Docket No. 93-144. Written comments on the IRFA were requested. The Commission's final analysis is as follows: 406. Need for and purpose of the action. This rule making proceeding has implemented Sections 332 and 3(n), respectively, of the Communications Act of 1934, 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). 407. Issues raised in response to the IRFA. No comments were submitted in response to the IRFA. 408. Significant alternatives considered and rejected. All significant alternatives have been addressed in the First Report and Order in PR Docket No. 93-144, the Third Report and Order in GN Docket No. 93-252, and the Ninth Report and Order in PP Docket No. 93-253. 409. With respect to this Second Further Notice of Proposed Rule Making, 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 of the expected impact on small entities of the proposals suggested in the 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 remainder of the Second Further Notice of Proposed Rule Making, but they must have a separate and distinct heading designating them as responses to the IRFA. The Secretary shall send a copy of this Second Further Notice of Proposed Rule Making, including the IRFA, 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). 410. 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 CFR  1.1202, 1.1203, and 1.1206(a). 411. Pursuant to applicable procedures set forth in Sections 1.415 and 1.419 of the Commission's rules, 47 CFR  1.415 and 1.419, interested parties may file comments on or before January 16, 1996, and reply comments on or before January 25, 1996. 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 the 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. 412. Authority for issuance of this First Report and Order, Eighth Report and Order, and 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). 413. Accordingly, IT IS ORDERED that Part 90 of the Commission's Rules is amended as set forth in Appendix A. 414. IT IS FURTHER ORDERED that the rule changes made herein WILL BECOME EFFECTIVE 30 days after their publication in the Federal Register. This action is taken pursuant to Sections 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). 415. IT IS FURTHER ORDERED that the Regulatory Flexibility Analysis, as required by Section 604 of the Regulatory Flexibility Act, and as set forth in Appendix B is ADOPTED. 416. IT IS FURTHER ORDERED that upon the adoption of this First Report and Order, Ninth Report and Order, and Second Further Notice of Proposed Rule Making, the Commission will no longer accept finder's preference requests for frequencies in the 800 MHz SMR service. This action is procedural in nature and therefore is not subject to the notice and comment and effective date requirements of the Administrative Procedure Act (APA). See Kessler v. FCC, 326 F.2d 673 (D.C. Cir. 1963). Furthermore, good cause exists for noncompliance with these APA requirements. Adherence to the notice and comment and effective date requirements in this matter would be contrary to the public interest, because compliance would undercut the purposes of this action. 417. IT IS FURTHER ORDERED that upon the adoption of this First Report and Order, Ninth Report and Order, and Second Further Notice of Proposed Rule Making, the Commission will no longer accept BETRS applications for frequencies in the 800 MHz SMR service. This action is procedural in nature and therefore is not subject to the notice and comment and effective date requirements of the Administrative Procedure Act (APA). See Kessler v. FCC, 326 F.2d 673 (D.C. Cir. 1963). Furthermore, good cause exists for noncompliance with these APA requirements. Adherence to the notice and comment and effective date requirements in this matter would be contrary to the public interest, because compliance would undercut the purposes of this action. 418. IT IS FURTHER ORDERED that all waiting lists for the upper 10 MHz block of 800 MHz SMR spectrum ARE ELIMINATED and all applications currently on waitings lists for such frequencies ARE DISMISSED, effective December 15, 1995. 419. IT IS FURTHER ORDERED that all requests for extended implementation authority for the 800 MHz SMR service filed pursuant to Section 90.629 of the Commission's rules and currently pending before the Commission ARE DENIED. 420. IT IS FURTHER ORDERED that the Secretary shall send a copy of this First Report and Order, Eighth Report and Order, and Second Further Notice of Proposed Rule Making to the Chief Counsel for Advocacy of the Small Business Administration. 421. For further information concerning this proceeding, contact D'wana R. Speight (Legal Branch, Commercial Wireless Division, Wireless Telecommunications Bureau) at (202) 418-0620. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary APPENDIX A Part 90 of Chapter 1 of Title 47 of the Code of Federal Regulations is amended as follows: PART 90 -- PRIVATE LAND MOBILE RADIO SERVICES 422. The authority citation for Part 90 revised to read as follows: Authority: 47 U.S.C.  154, 303, and 332, unless otherwise noted. 423. Section 90.7 is amended by adding the definitions for "EA license" and "Economic Areas (EA)" in alphabetical order to read as follows:  90.7 Definitions. * * * * * EA-based or EA license. A license authorizing the right to use a specified block of SMR spectrum within one of the 175 Economic Areas (EAs) as defined by the Department of Commerce Bureau of Economic Analysis. The EA Listings and the EA Map are available for public inspection at the Wireless Telecommunications Bureau's public reference room, Room 5608, 2025 M St. NW Washington, DC 20554 and Office of Operations -- Gettysburg, 1270 Fairfield Road, Gettysburg, PA 17325. Economic Areas (EAs). A total of 175 licensing regions based on the United States Department of Commerce Bureau of Economic Analysis Economic Areas (see 60 Fed. Reg. 13,114-18 (March 10, 1995)) defined as of February 1995, with the following exceptions: (1) Guam and Northern Mariana Islands are licensed as a single EA-like area (2) Puerto Rico and the U.S. Virgin Islands are licensed as a single EA-like area (3) American Samoa is licensed as a single EA-like area * * * * * 424. Section 90.155 is amended by revising paragraph (a) to read as follows:  90.155 Time in which station must be placed in operation. (a) All stations authorized under this part, except as provided in paragraphs (b) and (d) of this section and in  90.629, 90.631(f), 90.665, and 90.685, must be placed in operation within eight (8) months from the date of grant or the authorization cancels automatically and must be returned to the Commission. * * * * * 425. Section 90.173 is amended by revising paragraph (k) introductory text and adding a new paragraph (l) to read as follows:  90.173 Policies governing the assignment of frequencies. * * * * * (k) Notwithstanding any other provisions of this part, any eligible person may seek a dispositive preference for a channel assignment on an exclusive basis in the 220-222 MHz, 470-512 MHz, and 800/900 MHz (except on frequencies designated exclusively for SMR service) bands by submitting information that leads to the recovery of channels in these bands. Recovery of such channels must result from information provided regarding the failure of existing licensees to comply with the provisions of  90.155, 90.157, 90.629, 90.631 (e) or (f), or 90.633 (c) or (d). Any recovered channels in the 900 MHz SMR service will revert automatically to the MTA licensee. * * * * * (l) Any recovered channels in the 800 MHz SMR service will revert automatically to the holder of the EA license within which such channels are included. If there is no EA licensee for recovered channels, such channels will be retained by the Commission for future licensing. 426. Section 90.210 is amended by adding a new footnote 3 against the frequency range "806-821/851-866" in the Table labelled "Applicable Emission Masks", and by adding a new footnote 3 and accompanying text at the end of the Table to read as follows:  90.210 Emission Masks. * * * * * 806-821/851-8663 B G * * * * * 3 Equipment used in this band licensed to EA systems shall comply with the emission mask provisions of Section 90.691. * * * * * 427. Section 90.609 is amended by modifying paragraphs (c) and (d) to read as follows:  90.609 Special limitations on amendment of applications for assignment or transfer of authorizations for radio systems above 800 MHz. * * * * * (c) Licensees of constructed systems in any category other than Spectrum Block D frequencies in the 800 MHz SMR service ( formerly General Category) are permitted to make partial assignments of an authorized grant to an applicant proposing to create a new system or to an existing licensee that has loaded its system to 70 mobiles per channel and is expanding that system. An applicant authorized to expand an existing system or to create a new system with frequencies from any category other than Spectrum Block D frequencies in the 800 MHz SMR service obtained through partial assignment will receive the assignor's existing license expiration date and loading deadline for the frequencies that are assigned. A licensee that makes a partial assignment of a station's frequencies will not be authorized to obtain additional frequencies for that station for a period of one year from the date of the partial assignment. (d) A constructed system originally licensed in the General Category that is authorized to operate in the conventional mode may be combined with an existing SMR system above 800 MHz authorized to operate in the trunked mode by assignment of an authorized grant of the General Category station to the SMR station. 428. Section 90.611 is amended by modifying paragraphs (a) and (c) and by removing and reserving paragraph (d) to read as follows:  90.611 Processing of applications. * * * * * (a) All applications will first be considered to determine whether they are substantially complete and acceptable for filing. If so, except as otherwise specifically provided for in this subpart, they will be assigned a file number and put in pending status. If not, they will be returned to the applicant. * * * * * (c) Each application will be reviewed to determine whether it can be granted. Applicants must specify the intended frequency (or frequencies) of operation. (d) [Reserved] * * * * * 429. Section 90.615 is revised in its entirety to read as follows:  90.615 Frequencies available in Spectrum Block D in the 800 MHz SMR service (formerly General Category). (a) Except as indicated in Section 90.619, as of [effective date of these rules], frequencies in the 800 MHz Spectrum Block D (Channels 1-150) previously designated as General Category channels are re-allocated for use exclusively by the SMR service for either trunked or conventional operations. The frequencies are available to SMR licensees 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. (b) Non-SMR stations that were authorized to transmit on these frequencies prior to [effective date of these rules] and have remained so authorized continuously since that time may continue to operate in accordance with their current authorizations. Such authorizations may be renewed unchanged or with minor modifications as described in  90.693 of this subpart. 430. Section 90.617 is amended by revising the text of paragraphs (b), (c), (d), and by revising Table 4A of paragraph (d) 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. * * * * * (b) The channels listed in Table 2A are available to eligible applicants in the Industrial/Land Transportation Category (consisting of the Power, Petroleum, Forest Products, Film and Video Production, Relay Press, Special Industrial, Manufacturers, Telephone Maintenance, Motor Carrier, Railroad, Taxicab and Automobile Emergency Radio Services). These frequencies are available in areas farther than 110 km (68.4 miles) from the U.S./Mexico border and farther than 140 km (87.0 miles) from the U.S./Canada border. Specialized Mobile Radio (SMR) systems will not be authorized on these frequencies. These channels are available for inter-category sharing as indicated in  90.621(g). * * * * * (c) The channels listed in Table 3A are available to eligible applicants in the Business Radio Category. This category does not include Specialized Mobile Radio Systems as defined in  90.7. These frequencies are available in areas farther than 110 km (68.4 miles) from the U.S./Mexico border and farther than 140 km (87.0 miles) from the U.S./Canada border. Specialized Mobile Radio Systems will not be authorized on these frequencies. These channels are available for inter-category sharing as indicated in  90.621(g). * * * * * (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 4A are available to SMR eligibles desiring to be authorized for EA-based service areas in accordance with Section 90.681. SMR licensees licensed on Channels 401 - 600 on or before [effective date of these rules] may continue to utilize these frequencies within their existing service areas, subject to the mandatory relocation provisions of  90.699. Systems licensed on the channels listed in Table 4A as Spectrum Block D or E Channels will be licensed on a site-specific basis. 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 blocks as outlined in Table 4C. Table 4A--SMR Category 806-821/851-866 MHz Band Channels EA-Based SMR Category Systems (200 channels) Spectrum Block Channel No. A ................................. 401-420 B ................................. 421-480 C ................................. 481-600 SMR Category (230 channels) Spectrum Block Channel No. D ................................. 1-150 E ................................. 201-208, 221-228, 241-248, 261-268, 281-288, 301-308, 321-328, 341-348, 361-368, 381-388 * * * * * 431. Section 90.619 is amended by revising paragraphs (a)(3), (a)(5), (b)(8), (b)(9), (b)(10), and (b)(11) to read as follows:  90.619 Frequencies available for use in the U.S./Mexico and U.S/Canada border areas. (a)* * * (3) Tables 2A and 2B list the channels that are available for assignment to eligible applicants in the Industrial/Land Transportation Category (consisting of the Power, Petroleum, Forest Products, Video Production, Relay Press, Special Industrial, Manufacturers, Telephone Maintenance, Motor Carrier, Railroad, Taxicab and Automobile Emergency Radio Services). New applications for Specialized Mobile Radio systems will not be accepted for these channels after [effective date of these rules]. * * * * * (5) Tables 4A and 4B list the channels that are available for assignment for the SMR Category (consisting of Specialized Mobile Radio systems as defined in  90.7). These channels are not available for inter-category sharing. TABLE 4A - UNITED STATES-MEXICO BORDER AREA, SMR CATEGORY 806-821/851-866 MHZ BAND (95 CHANNELS): EA-Based SMR Category (30 Channels) Spectrum Block Offset Channel No. A ............................ None B ............................ 429, 431, 433, 435, 437,439, 469, 471, 473, 475, 477, 479 C ............................ 509, 511, 513, 515, 517, 519, 549, 551, 553, 555, 557, 559, 589, 591, 593, 595, 597, 599 SMR Category (65 Channels) Spectrum Block Offset Channel No. D ............................ None E ............................ None Other ............................ 228-240, 268-280, 308-320, 348-360, 388-400 * * * * * (b)* * * (8)* * * TABLE 12--SMR CATEGORY--95 Channels [Regions 1, 4, 5, 6] EA-Based SMR Category (90 Channels) Spectrum Block Channel No. A ............................ None B ............................ 463-480 C ............................ 493-510, 523-540, 553-570, 583-600 SMR Category (5 Channels) Spectrum Block Channel No. D ............................ 30, 60, 90, 120, 150 E ............................ None (9)* * * TABLE 16--SMR CATEGORY--60 Channels [Region 2] EA-Based SMR Category (55 Channels) Spectrum Block Channel No. A ............................ None B ............................ None C ............................ 518-528, 536-546, 554-564, 572-582, 590-600 SMR Category (5 Channels) Spectrum Block Channel No. D ............................ 18, 36, 54, 72, 90 E ............................ None (10)* * * TABLE 20--SMR CATEGORY--135 Channels [Region 3] EA-Based SMR Category (120 Channels) Spectrum Block Channel No. A ............................ 417-420 B ............................ 421-440, 457-480 C ............................ 497-520, 537-560, 577-600 SMR Category (15 Channels) Spectrum Block Channel No. D ............................ 38, 39, 40, 78, 79, 80, 118, 119,120 E ............................ None Other ............................ 158, 159, 160, 198, 199, 200 (11)* * * TABLE 24--(REGIONS 7, 8) SMR CATEGORY--190 Channels EA-Based SMR Category (80 Channels) Spectrum Block Channel No. A ............................ None B ............................ 425-440, 465-480 C ............................ 505-520, 545-560, 585-600 SMR Category (110 Channels) Spectrum Block Channel No. D ............................ 35-40, 75-80, 115-120 E ............................ 225-228, 265-268, 305-308, 345-348, 385-388 Other ............................ 155-160, 195-200, 229-240, 269-280, 309-320, 349-360, 389-400 * * * * * 432. Section 90.621 is amended by revising paragraph (a) introductory text, revising paragraph (a)(1)(iii), removing paragraph (a)(1)(iv), revising paragraph (b) introductory text, paragraph (c), and paragraph (3) introductory text, and removing and reserving paragraphs (e)(2), (e)(3), and (e)(4) to read as follows:  90.621 Selection and assignment of frequencies. (a) Applicants for frequencies in the Public Safety, Industrial/Land Transportation, and Business Categories must specify on the application the frequencies on which the proposed system will operate pursuant to a recommendation by the applicable frequency coordinator. Applicants for frequencies in the SMR Category must request specific frequencies by including in their applications the frequencies requested. (1) * * * (i) * * * (ii) * * * (iii) There are no limitations on the number of frequencies that may be trunked. Authorizations for non-SMR stations may be granted for up to 20 trunked frequency pairs at a time in accordance with the frequencies listed in Secs. 90.615, 90.617, and 90.619. * * * * * (b) Stations authorized on frequencies listed in this Subpart, except for those stations authorized pursuant to paragraph (g) of this section and EA-based and MTA-based SMR systems, will be afforded protection solely on the basis of fixed distance separation criteria. The separation between co-channel systems will be a minimum of 113 km (70 mi) with the following exceptions: * * * * * (c) Conventional systems authorized on frequencies in the Public Safety (except for those systems that have participated in a formal regional planning process as described in Sec. 90.16), Industrial/Land Transportation, Business, and Spectrum Block D frequencies in the 800 MHz SMR service (formerly General) Categories which have not met the loading levels necessary for channel exclusivity will not be afforded co-channel protection. * * * * * (e) Frequencies in the 806-821/851-866 MHz bands listed as available for eligibles in the Public Safety, Industrial/Land Transportation, and Business Categories are available for inter-category sharing under the following conditions: * * * * * (2) [Reserved] (3) [Reserved] (4) [Reserved] * * * * * 433. Section 90.629 is amended by adding a new paragraph (e) to read as follows:  90.629 Extended implementation period. * * * * * (e) As of [effective date of these rules], Specialized Mobile Radio systems are not eligible for extended implementation periods under this section. Additionally, all 800 MHz SMR licensees that are operating under extended implementation authority as of [effective date of these rules] must, by [90 days from effective date of this item], demonstrate that continuing to allow them to have an extended period of time to construct their facilities is warranted and furthers the public interest. If a licensee's extended implementation authority showing is approved by the Bureau, such licensee will be afforded an extended implementation of two years or the remainder of its current extended implementation period, whichever is shorter. Upon the termination of this period, the authorizations for those facilities that remain unconstructed will terminate automatically. If a licensee with a current extended implementation period fails to submit the showing mentioned above within the designated timeframe or submits an insufficient or incomplete showing, such licensee will have six months from the last day on which it could timely file such a showing or from the disapproval of its request to construct the remaining facilities covered under its implementation plan to construct any unconstructed facilities for which it is authorized. The authorizations for those facilities remaining unconstructed after this six-month period will terminate automatically. 434. Section 90.631(b) is amended by replacing the expression "General Category" with the expression "Spectrum Block D frequencies in the 800 MHz SMR service (formerly General Category)"  90.631 Trunked systems loading, construction and authorization requirements. * * * * * (b)* * * If a trunked system has channels from more than one category, Spectrum Block D frequencies in the 800 MHz SMR service (formerly General Category) channels are the first channels considered to cancel automatically. * * * * * * * * 435. Subpart S is amended by adding a new heading following Section 90.671 to read as follows: POLICIES GOVERNING THE LICENSING AND USE OF EA-BASED SMR SYSTEMS IN THE 816-821/861-866 BAND. 436. A new section 90.681 is added to Subpart S to read as follows:  90.681 EA-based SMR Service Areas. EA licenses for SMR spectrum blocks in the 816-821/861-866 band listed in Table 4A of Section 90.617(d) are available in 175 Economic Areas (EAs) as defined in Section 90.7. 437. A new Section 90.683 is added to Subpart S to read as follows:  90.683 EA-Based SMR System Operations. (a) EA-based licensees authorized in the 816-821/861-866 MHz band pursuant to Section 90.681 may construct and operate base stations using any of the base station frequencies identified in their spectrum block anywhere within their authorized EA, provided that: (1) The EA licensee affords protection, in accordance with 90.621(b), to all previously authorized co-channel stations that are not associated with another EA license. (2) The EA licensee complies with any rules and international agreements that restrict use of frequencies identified in their spectrum block, including the provisions of  90.619 relating to U.S./Canadian and U.S./Mexican border areas. (3) The EA licensee limits the field strength of its base stations at any location on the border of the EA service area in accordance with  90.689. (4) The EA licensee notifies the Commission within 30 days of the completion of the addition, removal, relocation or modification of any of its facilities within the EA. Such notification must be made by submitting an FCC Form 600 and must include the appropriate filing fee, if any. (5) For any construction or alteration that would exceed the requirements of  17.7 of this chapter, licensees must notify the appropriate Regional Office of the Federal Aviation Administration (FAA Form 7460-1) and file a request for antenna height clearance and obstruction marking and lighting specifications (FCC Form 854) with the FCC, WTB, Support Services Branch, Gettysburg, PA 17325. (6) Any additional transmitters placed in operation must not have a significant environmental effect as defined by  1.1301 through 1.1319 of this Chapter. (b) In the event that the authorization for a previously authorized co-channel station within the EA licensee's spectrum block is terminated or revoked, the EA licensee's co-channel obligations to such station will cease upon deletion of the facility from the Commission's official licensing records, and the EA licensee then will be able to construct and operate without regard to that previous authorization. 438. A new Section 90.685 is added to Subpart S to read as follows:  90.685 Authorization, Construction and Implementation of EA Licenses. (a) EA licenses in the 816-821/861-866 MHz band will be issued for a term not to exceed ten years. Additionally, EA licensees generally will be afforded a renewal expectancy only for those stations put into service after August 10, 1996. (b) EA licensees in the 816-821/861-866 band will be permitted five years to construct their stations. This five-year period will commence with the issuance of the EA-based license and will apply to all of the licensee's stations within the EA spectrum block, including any stations that may have been subject to an earlier construction deadline arising from a pre- existing authorization. (c) EA licensees in the 816-821/861-866 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 its EA-based service area. Further, each EA licensee must provide coverage to at least two-thirds of the population of the EA-based service area within five years. (d) Channel Use Requirement. In addition to the population coverage requirements described in this section, we will require EA licensees to construct 50 percent of the total channels included in their spectrum block in at least one location in their respective EA-based service area within three years of initial license grant and to retain such channel usage for the remainder of the construction period. (e) An EA licensee's failure to meet the population coverage requirements of paragraphs (c) and (d) of this section, will result in forfeiture of the entire EA license. Forfeiture of the EA license, however, would not result in the loss of any constructed facilities authorized to the licensee prior to the date of the commencement of the auction for the EA licenses. 439. A new Section 90.687 is added to Subpart S to read as follows:  90.687 Special provisions regarding assignments and transfers of authorizations for incumbent SMR licensees in the 816-821/861-866 MHz band. An SMR licensee initially authorized on any of the channels listed in Table 4A of Section 90.617 may transfer or assign its channel(s) to another entity subject to the provisions of  90.153 and 90.609(b). If the proposed transferee or assignee is the EA licensee for the spectrum block to which the channel is allocated, such transfer or assignment presumptively will be deemed to be in the public interest. However, such presumption will be rebuttable. 440. A new Section 90.689 is added to Subpart S to read as follows:  90.689 Field Strength Limits. (a) For purposes of implementing  90.689 through 90.699, predicted 40 dBuV/m contours shall be calculated using Figure 10 of  73.699 of this Chapter with a correction factor of -9 dB, and predicted 22 dBuV/m contours shall be calculated using Figure 10a of  73.699 with a correction factor of -9 dB. (b) The predicted or measured field strength at any location on the border of the EA-based service area for EA licensees must not exceed 40 dBuV/m unless all bordering EA licensees agree to a higher field strength. In the event that this standard conflicts with the EA licensee's obligation to provide co-channel protection to incumbent licensees pursuant to  90.621(b), the requirements of Section 90.621(b) shall prevail. 441. A new Section 90.691 is added to Subpart S to read as follows:  90.691 Emission Mask Requirements for EA-based Systems. (a) Out-of-band emission requirement shall apply only to the "outer" channels included in an EA license and to spectrum adjacent to interior channels used by incumbent licensees. The emission limits are as follows: (1) For any frequency removed from the EA licensee's frequency block by up to and including 37.5 kHz, the power of any emission shall be attenuated below the transmitter power (P) in watts by at least 116 Log10(f/6.1) decibels or 50 + 10 Log10(P) decibels or 80 decibels, whichever is the lesser attenuation, where f is the frequency removed from the center of the outer channel in the block in kilohertz and where f is greater than 12.5 kHz. (2) For any frequency removed from the EA licensee's frequency block greater than 37.5 kHz, the power of any emission shall be attenuated below the transmitter power (P) in watts by at least 43 + 10Log10(P) decibels or 80 decibels, whichever is the lesser attenuation, where f is the frequency remvoed form the center of the outer channel in the block in kilohertz and where f is greater than 37.5 kHz. (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. 442. A new section 90.683 is added to Subpart S to read as follows:  90.693 Grandfathering provisions for incumbent licensees in spectrum blocks A, B, and C. (a) These provisions apply to "incumbent licensees", all 800 MHz SMR licensees who obtained licenses or filed applications on or before December 15, 1995. An incumbent licensee's service area shall be defined by its originally-licensed 40 dBu field strength contour and its interference contour shall be defined as its originally-licensed 22 dBu field strength contour. Incumbent licensees are permitted to add, remove or modify transmitter sites within this existing service area without prior notification to the Commission so long as their original 22 dBu field strength contour is not expanded and the station complies with the Commission's short-spacing criteria in  90.621(b)(4) through 90.621(b)(6). The incumbent licensee must, however, notify the Commission within 30 days of the completion of any changes in technical parameters or additional stations constructed through a minor modification of their license. Such notification must be made by submitting an FCC Form 600 and must include the appropriate filing fee, if any. These minor modification applications are not subject to public notice and petition to deny requirements or mutually exclusive applications. (b) Incumbent licensees operating at multiple sites may, after grant of EA licenses has been completed, exchange multiple site licenses for a single license, authorizing operations throughout the contiguous and overlapping 40 dBu field strength contours of the multiple sites. Incumbents exercising this license exchange option must submit specific information for each of their external base sites after the close of the 800 MHz SMR auction. 443. A new Section 90.699 is added to Subpart S to read as follows:  90.699 Transition of the Upper 200 Channels in the 800 MHz Band to EA Licensing. In order to facilitate provision of service throughout an EA, an EA licensee may relocate incumbent licensees in its EA by providing "comparable facilities" on other frequencies in the 800 MHz band. Such relocation is subject to the following provisions: (a) EA licensees may negotiate with incumbent licensees as defined in  90.693 of this subpart operating on frequencies in Spectrum Blocks A, B, and C for the purpose of agreeing to terms under which the incumbents would relocate their operations to other channels in the 800 MHz band, or alternatively, would accept a sharing arrangement with the EA licensee that may result in an otherwise impermissible level of interference to the incumbent licensee's operations. EA licensees may also negotiate agreements for relocation of the incumbents' facilities within Spectrum Blocks A, B or C in which all interested parties agree to the relocation of the incumbent's facilities elsewhere within these bands. "All interested parties" includes the incumbent licensee, the EA licensee requesting and paying for the relocation, and any EA licensee of the spectrum to which the incumbent's facilities are to be relocated. (b) The relocation mechanism consists of two phases that must be completed before an EA licensee may proceed to request the involuntary relocation of an incumbent licensee. (1) Voluntary period. There is a one year voluntary period during which an EA licensee and an incumbent may negotiate any mutually agreeable relocation agreement. The Commission will announce the commencement of the first phase voluntary period by Public Notice. EA licensees must notify incumbents operating on frequencies included in their spectrum block of their intention to relocate such incumbents within 90 days of the release of the Public Notice that commences the voluntary negotiation period. Failure on the part of the EA licensee to notify the incumbent licensee during this 90 period of its intention to relocate the incumbent will result in the forfeiture of the EA licensee's right to request involuntary relocation of the incumbent at any time in the future. (2) Mandatory period. If no agreement is reached by the end of the voluntary period, a two-year mandatory period will begin during which both the EA licensee and the incumbent must negotiate in "good faith". Failure on the part of the EA licensee to negotiate in good faith during this mandatory period will result in the forfeiture of the EA licensee's right to request involuntary relocation of the incumbent at any time in the future. (c) If no agreement is reached during either the voluntary or mandatory negotiating periods, the EA licensee may request involuntary relocation of the incumbent's system. In such a situation, the EA licensee must: (1) Guarantee payment of all costs of relocating the incumbent to a comparable facility; (2) Complete all activities necessary for placing the new facilities into operation; and (3) Build and test the new system (d) If an EA licensee cannot provide comparable facilities to an incumbent licensee as defined in this section, the incumbent licensee may continue to operate its system on a primary basis in accordance with the provisions of this rule part. 444. A new Subpart V is added with a heading to read as follows: SUBPART V -- COMPETITIVE BIDDING PROCEDURES FOR 800 MHz SPECIALIZED MOBILE RADIO SERVICE 445. A new Section 90.901 is added to Subpart V to read as follows:  90.901 800 MHz SMR spectrum subject to competitive bidding. Mutually exclusive initial applications for Spectrum Blocks A, B, and C in the 800 MHz band are subject to competitive bidding procedures. The general competitive bidding procedures provided in 47 C.F.R. Part 1, Subpart Q will apply unless otherwise indicated in this subpart. 446. A new Section 90.902 is added to Subpart V to read as follows:  90.902 Competitive bidding design for 800 MHz SMR licensing. The Commission will employ a simultaneous multiple round auction design when selecting from among mutually exclusive initial applications for EA licenses for Spectrum Blocks A, B, and C in the 800 MHz band, unless otherwise specified by the Wireless Telecommunications Bureau before the auction. 447. A new Section 90.903 is added to Subpart V to read as follows:  90.903 Competitive bidding mechanisms. (a) Sequencing. The Wireless Telecommunications Bureau will establish and may vary the sequence in which 800 MHz SMR licenses for Spectrum Blocks A, B, and C will be auctioned. (b) Grouping. All EA licenses for Spectrum Blocks A, B, and C will be auctioned simultaneously, unless the Wireless Telecommunications Bureau announces, by Public Notice prior to the auction, an alternative competitive bidding design. (c) Minimum Bid Increments. The Wireless Telecommunications Bureau will, by announcement before or during an auction, require minimum bid increments in dollar or percentage terms. (d) Stopping Rules. The Wireless Telecommunications Bureau will establish stopping rules before or during the multiple round auctions in order to terminate an auction within a reasonable time. (e) Activity Rules. The Wireless Telecommunications Bureau 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. 448. A new Section 90.904 is added to Subpart V to read as follows:  90.904 Aggregation of EA licenses for spectrum blocks A, B, and C. The Commission will license each Spectrum Block A, B, and C in the 800 MHz band separately. Applicants may aggregate across spectrum blocks within the limitations specified in  20.6 of this Chapter. 449. A new Section 90.905 is added to Subpart V to read as follows:  90.905 Withdrawal, default and disqualification payments. (a) During the course of an auction conducted pursuant to  90.902, 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 (b) of this section plus an additional monetary asssessment 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. If the default occurs within five (5) 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. 450. A new Section 90.906 is added to Subpart V to read as follows:  90.906 Bidding application (FCC Form 175 and 175-S Short-form). All applicants to participate in competitive bidding for 800 MHz SMR licenses in Spectrum Blocks A, B, and C 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 these 800 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 800 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 and/or a women-owned entity, as defined in  90.912(e). 451. A new Section 90.907 is added to Subpart V to read as follows:  90.907 Submission of upfront payments and down payments. (a) Bidders in the 800 MHz SMR auction for Spectrum Blocks A, B, and C will be required to submit an upfront payment of $0.02 per activity unit, in accordance with  1.2106 of this Chapter. (b) Winning bidders in a 800 MHz SMR auction for Spectrum Blocks A, B, and C must submit a down payment to the Commission in an amount sufficient to bring their total deposits up to 20 percent of their winning bids within five (5) business days after the auction closes, and the remaining balance due on the license shall be paid within five (5) business days after Public Notice announcing that the Commission is prepared to award the license. 452. A new Section 90.908 is added to Subpart V to read as follows:  90.908 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  90.911) will be eligible to file applications on FCC Form 600 for initial 800 MHz SMR licenses in the event of mutual exclusivity between applicants filing FCC Form 175. 453. A new Section 90.909 is added to Subpart V to read as follows:  90.909 License grant, denial, default, and disqualification for spectrum blocks A, B, and C. (a) Except with respect to entities eligible for installment payments (see  90.912) 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  90.905 of this Part or  1.2109 of this Chapter, as applicable. (c) EA licenses pursued through competitive bidding procedures will be granted pursuant to the requirements specified in  90.166. 454. A new Section 90.910 is added to Subpart V to read as follows:  90.910 Installment payments for licenses for spectrum blocks A, B, and C. (a) Each licensee for Spectrum Blocks A, B, and C that qualifies as a small business may pay the remaining 90 percent of the net auction price for the license in quarterly installment payments pursuant to  1.2110(e) of this Chapter. Licensees who qualify for installment payments are 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. Payments shall include both principal and interest amortized over the term of the license. An EA license issued to an eligible small business that elects installment payments will be conditioned on the full and timely performance of the license holder's quarterly payments. The additional following terms apply: (1) An eligible licensee qualifying as a small business under Section 90.912(b)(1)(i) may make interest-only payments for five years. Interest will accrue at the Treasury note rate. Payments of interest and principal shall be amortized over the remaining five years of the license term. (2) An eligible licensee qualifying as a small business under Section 90.912(b)(1)(ii) may make interest-only payments for the first two years of the license term. Interest will accrue at the Treasury note rate plus an additional 2.5 percent. Payments of interest and principal shall be amortized over the remaining eight years of the license term. (b) 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. (3) If a licensee that utilizes installment financing under this section seeks to assign or transfer control of a license to an entity that does not qualify for as favorable an installment payment plan, the installment payment plan for which the acquiring entity qualifies will become effective immediately upon transfer. 455. A new Section 90.911 is added to Subpart V to read as follows:  90.911 Procedures for partitioned licenses in spectrum blocks A, B, and C. (a) Notwithstanding  90.661, a rural telephone company, as defined in  90.912, may be granted a 800 MHz SMR license that is geographically partitioned from a separately licensed EA, so long as the EA 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 other entities 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 EA filed by the auction winner. (c) If the partitioned license is being applied for as a partial assignment of the EA 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 set forth in  90.685. 456. A new Section 90.912 is added to Subpart V to read as follows:  90.912 Definitions for spectrum blocks A, B, and C. (a) Scope. The definitions in this section apply to  90.910 and 90.911, unless otherwise specified in those sections. (b) Small Business: Consortium of Small Businesses. (1) A small business is an entity that either: (i) together with its affiliates, persons or entities that hold attributable interests in such entity, and their affiliates, has average gross revenues that are not more than $3 million for the three preceding years; or (ii) together with its affiliates, persons, or entities that hold attributable interests in such entity, and their affiliates, has average gross revenues that are not more than $15 million for the preceding three years. (2) For purposes of determining whether an entity meets the $3 million or $15 million average annual gross revenues size standard set forth in paragraph (b)(1) of this section, the gross revenues of the entity, its affiliates, persons, or entities holding interests in the entity and their affiliates shall be considered on a cumulative basis and aggregated, subject to the exceptions set forth in  90.912(h). (3) 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. In a consortium of small businesses, each individual member must establish its eligibility as a small business, as defined in 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. 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) Attributable Interests. Partnership and other ownership interests and any stock interest amounting to 20 percent or more of the equity, or outstanding stock, or outstanding voting stock of a licensee or applicant will be attributable. NOTE: Ownership interests that are held indirectly by any party through one or more intervening corporations will be determined by successive multiplication of the ownership percentages for each link in the vertical ownership chain and application of the relevant attribution benchmark to the resulting product, except that if the ownership percentages for an interest in any link in the chain exceeds 50 percent or represents actual control, it shall be treated as if it were a 100 percent interest. (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. 457. A new Section 90.913 is added to Subpart V to read as follows:  90.913 Eligibility for small business status for spectrum blocks A, B, and C. (a) Short-Form Applications: Certifications and Disclosure. Each applicant for an EA license for Spectrum Blocks A, B, or C which qualifies as a small business or consortium of small businesses shall append the following information as an exhibit to its short-form application (FCC Form 175): (1) The identity of the applicant's affiliates, persons or entities that hold attributable interests in such entity, and their affiliates, and, if a consortium of small businesses, the members of the joint venture; and (2) The applicant's gross revenues, computed in accordance with  90.912. (b) Long-Form Applications: Certifications and Disclosure. In addition to the requirements in subpart V of this part, each applicant submitting a long- form application for license(s) for Spectrum Blocks A, B, or C and qualifying as a small business shall, in an exhibit to its long-form application: (1) Disclose separately and in the aggregate the gross revenues, computed in accordance with  90.912, for each of the following: the applicant, the applicant's affiliates, the applicant's attributable investors, affiliates of its attributable investors, and, if a consortium of small businesses, the members of the joint venture; (2) List and summarize all agreements or other instruments (with appropriate references to specific provisions in the text of such agreements and instruments) that support the applicant's eligibility as a small business under  90.910 and 90.911, including the establishment of de facto and de jure control; such agreements and instruments include articles of incorporation and bylaws, shareholder agreements, voting or other trust agreements, franchise agreements, and any other relevant agreements (including letters of intent), oral or written; and (3) List and summarize any investor protection agreements, including rights of first refusal, supermajority clauses, options, veto rights, and rights to hire and fire employees and to appoint members to boards of directors or management committees. (c) Records Maintenance. All winning bidders qualifying as small businesses, shall maintain at their principal place of business an updated file of ownership, revenue and asset information, including any document necessary to establish eligibility as a small business and/or consortium of small businesses under  90.912. Licensees (and their successors in interest) shall maintain such files for the term of the license. (d) Audits. (1) Applicants and licensees claiming eligibility as a a small business and/or consortium of small businesses under  90.910 and 90.911 shall be subject to audits by the Commission, using in-house and contract resources. Selection for audit may be random, on information, or on the basis of other factors. (2) Consent to such audits is part of the certification included in the short-form application (FCC Form 175). Such consent shall include consent to the audit of the applicant's or licensee's books, documents and other material (including accounting procedures and practices) regardless of form or type, sufficient to confirm that such applicant's or licensee's representations are, and remain, accurate. Such consent shall include inspection at all reasonable times of the facilities, or parts thereof, engaged in providing and transacting business, or keeping records regarding licensed 800 MHz SMR service and shall also include consent to the interview of principals, employees, customers and suppliers of the applicant or licensee. (3) Definitions. The terms affiliate, attributable interests, consortium of small businesses, gross revenues, small business used in this dection are defined in  90.912. APPENDIX B 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 Second 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 800 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 for the remaining 800 MHz SMR spectrum 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 800 MHz SMR. Objectives: The Commission proposes changes to its rules for the 800 MHz SMR service that are intended to promote the growth of traditional local SMR service and emerging geographic area SMR services, and to enhance the ability of all SMR providers to compete in the larger commercial mobile services market. Specifically, the Commission seeks to designate both contiguous and non-contiguous spectrum in the 800 MHz SMR band for use by smaller SMR systems to provide opportunities for those that seek to provide local niche services as well as those that seek to provide service on a geographic area basis. It also seeks to encourage more efficient use of spectrum in congested areas and to accommodate technologically advanced systems. Finally, the Second Further Notice of Proposed Rule Making seeks to establish a new licensing mechanism for the 800 MHz SMR service that will significantly streamline the processing of applications, reducing the administrative burden for both applicants and the Commission. 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 geographic area 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 Second Further Notice of Proposed Rule Making potentially affects numerous small entities already operating 800 MHz SMR systems on frequencies that would be designated for geographic area licensing. The Second Further Notice of Proposed Rule Making tentatively concludes that existing licensees on these frequencies should be allowed to continue operating under their existing authorizations. The competitive bidding proposals contained in the Second Further Notice of Proposed Rule Making also could affect small entities seeking initial licenses in the 800 MHz SMR service. The Second Further Notice of Proposed Rule Making proposes special provisions in the Commission's auction rules to benefit small businesses. After evaluating comments filed in response to the Second 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 Second 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 409 of the First Report and Order, Eighth Report and Order, and Second Further Notice of Proposed Rule Making. APPENDIX C LIST OF COMMENTERS Advanced Communications, Inc. (ACI) Advanced MobileComm, Inc. (Advanced MobileComm) Air Waves Communications, Inc. American Industrial & Marine Electronics, Inc. (AI&ME) American Mobile Telecommunications Association (AMTA) American Petroleum Institute (API) American SMR Company L.C. (American SMR) Anheuser-Busch Companies, Inc. (Anheuser-Busch) Applied Technology Group, Inc. (Applied Technology) Bill Ashby Association of Public-Safety Communications Officials-International, Inc. (APCO) Atlantic Cellular Company L.P. (Atlantic Cellular) Automated Business Communications (ABC) B & C Communications (B & C) Bis-Man Mobile Phone, Inc. (Bis-Man) Bolin Communication Systems (Bolin) Douglas L. Bradley & Dennis Hulford (Bradley & Hulford) Brandon Communications, Inc. (Brandon) August Bert Carver T/A Action Radio (Carver) Cellcall, Inc. (Cellcall) The Cellular Telecommunications Industry Association (CTIA) Centennial Telecommunications, Inc. (Centennial) Chadmoore Communications, Inc. (Chadmoore) Communications Center, Inc. (CCI) Communications, Inc. Communications Unlimited, Inc. (CUI) The Council of Independent Communication Suppliers (CICS) Courtesy Communications (Courtesy) Cumulous Communications Corp. (Cumulous) Dakota Electronics (Dakota) DCL Associates, Inc. (DCL) Deck Communications, Inc. (Deck) Delta Communications, Inc. (Delta) Dial Call Communications, Inc. (Dial Call) Diamond "L" Industries, Inc. (Diamond "L") Don Clark Radio Communications, Inc. (Don Clark Radio) Dru Jenkinson, Inc., (Dru Jenkinson, et al.) Jana Green, Inc. Shelly Curttright, Inc. Eden Communications, Inc. (Eden) E.F. Johnson Company (EF Johnson) Entergy Services, Inc. (Entergy) Ericsson Corporation (Ericsson) E.T. Communications Co. (ET Communications) Robert Fetterman d/b/a R.F. Communications (Fetterman) Fisher Communications, Inc. (Fisher) Freedom Mobile Communication, Inc. Fresno Mobile Radio, Inc. (Fresno) Genesee Business Radio Systems, Inc. (Genesee) Gulf Coast Radiofone (Gulf Coast) Industrial Communications & Electronics, Inc. (IC&E) Industrial Telecommunications Association, Inc. & The Alliance of Private 800/900 MHz Licensees (ITA) Joriga Electronics, Inc. (Joriga) James A. Kay, Jr. (Kay) Keller Communications, Inc. (Keller) Lagorio Communications (Lagorio) Kevin Lausman d/b/a Communications Service Center (Lausman) Link Communications, Inc. Thomas Luczak (Luczak) Madera Radio Dispatch, Inc. (Madera) McCaw Cellular Communications, Inc. (McCaw) Morris Communications, Inc. (Morris) Motorola, Inc. (Motorola) NashTel, L.L.C. (NashTel) National Telephone Cooperative Association (NTCA) Nextel Communications, Inc. (Nextel) Nielson Communications, Inc. (Nielson) Nodak Communications, Inc. (Nodak) Onecomm Corporation (OneComm) Organization for the Protection and Advancement of Small Telephone Companies (OPASTCO) Palmer Communications Incorporated (Palmer) Parkinson Electronics Company, Inc., (Parkinson, et al.) Banks Tower Communications, Ltd. Speed-Net Peacock's Radio Wild's Computer Service, Inc. & Mobile Relays, Inc. Personal Communications Industry Association (PCIA) Pierre Radio Paging & Telephone Inc. (Pierre Radio) Pittencrief Communications, Inc. (Pittencrief) L. Clark Phillips II Pro Tec Mobile Communications, Inc. (Pro-Tec) Radio Communications Center (RCC) Raserco, Inc. (Racerco) Rayfield Communications, Inc. (Rayfield) Russ Miller Rental (Russ Miller) Sierra Electronics SMR Small Business Coalition (Coalition) SMR WON Marc Sobel d/b/a Airwave Communications (Sobel) The Southern Company (Southern) Southern Minnesota Communications, Inc. (SMCI) Spectrum Resources, Inc. (Spectrum) C.T. Spruill Rod Stalvey d/b/a Stalvey Communications (Stalvey) Supreme Radio Communications, Inc. (Supreme Radio) Catherine Sutter Telecellular de Puerto Rico, Inc. (Telecellular) T & K Communications Systems, Inc. (T & K) Total Com, Inc. (Total Com) Triangle Communications, Inc. (Triangle) U.S. Small Business Administration (SBA) United States Sugar Corporation (US Sugar) UTC, The Telecommunications Association (UTC) Vanguard Cellular Systems, Inc. (Vanguard) Vantek Communications, Inc. (Vantek) Wiztronics, Inc. (Wiztronics) LIST OF REPLY COMMENTERS 4X Corporation Advanced MobileComm, Inc. American Mobile Telecommunications Association Anheuser-Busch Companies, Inc. Applied Technology Group, Inc. (Applied) Cellcall, Inc. Council of Independent Communications Suppliers Cumulous Communications Corp. DCL Associates, Inc. Dial Call Communications, Inc. Eden Communications, Inc. E.F. Johnson Company Entergy Services, Inc. (Entergy) Ericsson Corporation Robert Fetterman d/b/a R. F. Communications Fisher Communications, Inc. Fresno Mobile Radio, Inc. Genesee Business Radio Systems, Inc. Industrial Communications & Electronics, Inc. (IC&E) Industrial Telecommunications Association, Inc. & The Alliance of Private 800/900 MHz Licensees Joint Commenters (Joint Commenters) Radio Communications Center Deck's Communications, Inc. Air Communications, Inc. North Plains Communications, Inc. Alan Johansen d/b/a Al's Radio & Marine Electronics Control Communications Corp. Stan's Communications, Inc. Triangle Communications, Inc. General Communications, Inc. Nielson communications, Inc. Allied Radio Communications, Inc. Southern Minnesota Communications, Inc. Industrial Electronics, Inc. Mobile Communications of Miami, Inc. T & K Communications Systems, Inc. Intermountain Communications of Southern Idaho, Inc. Platte Valley Communications, Inc. Bill Wayne d/b/a Mr. Radio Robert Fetterman d/b/a R. F. Communications XW Corporation Radicom, Inc. Mobile Relay Associates, Inc. Coast Communications, Inc. Graybill Electronics, Inc. Elder's Radio Communications Lee's Two-Way Radio, Inc. Electronic Specialists, Inc. Radio Communications of Cary, Inc. Hinds & Campbell Properties, Inc. Almar Communications, Inc. Three-Way Communications, Inc. Knight's Communications, Inc. IDA Corporation RCM, Inc. Wecom, Inc. Atlantic Communications, Inc. South Central Radio, Inc. Trident, Inc. Future Communications, Inc. Keane Communications, Inc. Stone's Mobile Radio, Inc. Hendrix Electronics, Inc. Solar Communications, Inc. SMR Services, Inc. Delta Communications, Inc. California Trunking, Inc. Felder Communications, Inc. B & C Communications, Inc. J. G. Boswell Company James A. Kay, Jr. Edward H. Lachowicz Lagorio Communications Thomas Luczak Madera Radio Dispatch, Inc. Motorola, Inc. Nextel Communications, Inc. OneComm Corporation Personal Communications Industry Association John H. Phipps d/b/a Porta-Phone (Phipps) Pittencrief Communications, Inc. Polar Communications Mutual Aid Corporation (Polar) Pro-Tec Mobile Communications, Inc. Qualicom Systems, Inc. (Qualicom) Racom, Inc. et al. Racom, Inc. Parkinson Electronics Company, Inc. Banks Tower Communications, Ltd. Speed-Net Peacock's Radio and Wild's Computer Service, Inc. Mobile Relays, Inc. Rayfield Communications, Inc. North Sight Communications, Inc. Tri-Communications, Inc. Morris Communications, Inc. Fred Burg d/b/a Fred Burg Communications Beam Radio, inc. Savin and Hill Company (Participation withdrawn by attorney letter dated 3/23/95) Skyline Communications, Inc. James W. Bayne d/b/a Bayne Systems Bert Carver Mobile Radio Dispatch, Inc. Radiowave Communications, Inc. Anderson Communications, Inc. Ten-Four Communications, Inc. Russ Miller Rental SMR WON The Southern Company Spectrum Resources, Inc. Supreme Radio Communications, Inc. Telecellular de Puerto Rico, Inc. T & K Communications, Inc. Triangle Communications, Inc. U.S. Small Business Administration United States Sugar Corporation UTC Voice Link Communications (Voice Link) LIST OF EX PARTE COMMENTERS American Mobile Telecommunications Association, Inc. (filed Feb. 23, 1995) American Mobile Telecommunications Association, Inc. (filed Sept. 29, 1995) Auto-Comm Engineering Corporation (filed Feb. 10, 1995) Auto-Comm Engineering Corporation (filed Sept. 27, 1995) California Trunking (filed Oct. 3, 1995) Federal Express Corporation (filed Sept. 29, 1995) (FedEx) Fresno Mobile Radio, Inc. (filed Oct. 3, 1995) Ernst Concrete & Supply Company Columbia Communications, Inc., of Kennewick, WA Communicom of York, PA Future Communications USA, Inc. (filed Oct. 3, 1995) Group of 66 (filed Sept. 29, 1995) (Group of 66) Fresno Mobile Radio, Inc. Madera Radio Dispatch, Inc. Applied Technology Group, Inc. G & K Rentals of Bakersfield Alpha Radio Service of Bakersfield Cumulous Communications Corporation of Fresno McGee Communications Electronics, Inc. Ray's Radio, Inc. Eden Communications, Inc. X. W. Corporation d/b/a John Mitchell Company Mobile U.H.F., Inc. of Garden Grove A-1-A Security & Communications of Westminster Anderson Communications Corporation of Palm Desert Wise Electronics, Inc. Communications Licensing Consultant Radio Link Company Silke Communications, Inc. Pro Tec Mobile Communications, Inc. Gila Electronics of Yuma Durham Communications, Inc. GSC Electric & Communications Specialty Communications Omni Range Communications Bran-Dex Wireline Services, Inc. Communications Center, Inc. of Pierre, South Dakota Dakota Electronics Dave Fant Company d/b/a Oklahoma Radio Systems Leon's Radio, Inc. CommNet Communications Network, Inc. Communications Center, Inc. of Covington, Louisiana Viking Communications, Inc. Communications Electronics Air Communications of Central Wisconsin, Inc. JSM Systems, Inc. 4X Corporation of Appleton, Wisconsin Supreme Radio Communications, Inc. Craig Antenna Service DeltaCom, Inc. Electronic Communications Company Midcom Service General Communications Company Johnson Repeater Company Kay Communication State Systems Radio, Inc. Mobile Communications Corporation Domer Communications, Inc. E.A. Henson Donald R. Nelsch d/b/a Donnel Communications Memphis 3rd Mobile Associates Robert J. Fetterman d/b/a R.F. Communications LMR International, Inc. Mid Atlantic Communications, Inc. LandAir Communications & Electronics, Inc. Business Autophones, Inc. Valley Communications of Union Hall, Virginia Specialty Electronics Systems Company, Inc. Piedmont Electronics Company VA-KY Communications CoastCom, Inc. Communications Service Center T & K Communications, Inc. Gennesee Business Radio Systems, Inc. Allstate Mobile Communications Corporation JPJ Electronic Communications, Inc. Furman Communications, Inc. Utility Communications, Inc. Industrial Communications & Electronics, Inc. (filed Sept. 29, 1995) Industrial Telecommunications Association, Inc. (filed Oct. 2, 1995) Joint Utilities (filed Sept. 29, 1995) (Joint Utilities) Baltimore Gas & Electric Company Central & South West Services, Inc. Consumers Power Company Delmarva Power Company Entergy Services, Inc. Indianapolis Power and Light Company Omaha Public Power District Union Electric Company Leflore Communications, Inc. (filed Nov. 1, 1994) (Leflore) Louisville Two-Way Radio (filed Sept. 29, 1995) (Louisville) Cynthia McGee (filed March 7, 1995) Motorola, Inc. (filed Sept. 29, 1995) Nextel Communications, Inc. (filed Sept. 29, 1995) Personal Communications Industry Association (filed Sept. 29, 1995) Pittencrief Communications, Inc. (filed by Sept. 29, 1995) Sea Coast Communications, Inc. (filed by Sept. 29, 1995) Sierra Electronics (filed by April 19, 1995) SMR Operators (filed Sept. 29, 1995) (SMR Operators) Leflore Communications, Inc. Bert Carver Banks Tower Communications, Ltd. SMR Operators 3 (filed Oct. 3, 1995) (SMR Operators 3) XW Communications, Inc. B & C Communications, Inc. Mobile Communications Service of Miami, Inc. Nielson Communications, Inc. The Southern Company (filed Sept. 29, 1995) Voice Link Communications (filed Oct. 2, 1995) Graybill Electronics, Inc. Wiztronics, Inc. (filed Sept. 28, 1995) SEPARATE STATEMENT OF COMMISSIONER ANDREW C. BARRETT Re: Amendment of Part 90 of the Commission's Rules to Facilitate Future Development of SMR Systems in the 800 MHz Frequency Band By this Order, the Commission has made some difficult decisions involving the future of 800 MHz Specialized Mobile Radio ("SMR") service. Throughout this proceeding, I have been concerned about the impact of any Commission action on the small business incumbents. I commend the Wireless Telecommunications Bureau's (the "Bureau") efforts to include the SMR industry in the decision-making process so as to make certain that the concerns of industry players, and in particular, incumbents were heard and addressed by the Commission. Technological advances have given SMR providers the ability to compete against cellular and personal communications services (PCS) competitors through wide service areas. While I have always believed that there is much good that is derived from small businesses in the marketplace, I have also believed that the consumer should have the opportunity to receive the most innovative services possible. In this case, I believe that the Commission has managed to develop a way by which small SMR providers will be able to compete in the auction for licenses in the upper 10 MHz through the use of installment payment provisions. Moreover, I believe that the Commission's proposal for the lower eighty (80) and General Category channels will provide smaller incumbents with the opportunity to also provide enhanced services as well. Thus, I support this Order because of the significant input that has been received from the industry as reflected in the delicate balance which has been struck between the Commission's objectives for nurturing an environment for the development of enhanced services and the incumbents' needs so that they may continue to provide many of the traditional SMR services. To that end, I welcome the opportunity to review the comments with regard to the definition of comparable facilities, which I believe will be critical to the proper relocation of the incumbents. And as a result of this Order, I look forward to the further growth of the SMR industry as a direct competitor to cellular service and PCS.