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hp x (#Right Par 5aaaRight Par 5aaa` hp x (#X` hp x (##Xv6X@CX@##C\  P6QP#X` hp x (#` hp x (#2PlRIlKl*NZRight Par 6aaaRight Par 6aaa` hp x (#X` hp x (#0#Xv6X@CX@##C\  P6QP#X` hp x (#0` hp x (#Right Par 7aaaRight Par 7aaa` hp x (#X` hp x (##Xv6X@CX@##C\  P6QP#X` hp x (#` hp x (#Right Par 8aaaRight Par 8aaa` hp x (#X` hp x (#0#Xv6X@CX@##C\  P6QP#X` hp x (#0` hp x (#2P X4  #Xj\  P6G;XP# `5(#lFCC 95501  X4+` Before the  av4#|\  P6G;CP# FEDERAL COMMUNICATIONS COMMISSION#Xj\  P6G;XP#у  X'+Washington, D.C. 20554 ă  X; 4In the Matter of  hhCq) ` `  hhCq)  X 4Amendment of Part 90 of thehhCq)ppPR Docket No. 93144  X 4Commission's Rules to FacilitatehhCq)ppRM8117, RM8030  X 4Future Development of SMR Systemsq)ppRM8029  X 4in the 800 MHz Frequency BandhhCq) ` `  hhCq)  X4Implementation of Sections 3(n) and 322q)ppGN Docket No. 93252  X4of the Communications ActhhCq)  Xl4Regulatory Treatment of Mobile Servicesq) ` `  hhCq)  X>4Implementation of Section 309(j)hhCq)ppPP Docket No. 93253  X'4 of the Communications Act hhCq)  X4Competitive Bidding hhCq)  X49{ FIRST REPORT AND ORDER, EIGHTH REPORT AND ORDER, AND  SECOND FURTHER NOTICE OF PROPOSED RULE MAKING\  X4  Xo4 Adopted: December 15, 1995qppReleased: December 15, 1995 Comment Date: January 16, 1996 Reply Comment Date: January 25, 1996 By the Commission: Commissioner Barrett issuing a statement. " 0*((U" ;TABLE OF CONTENTS  X4`(#wParagraphă  X4I.INTRODUCTION`u!(#1  X_4II.EXECUTIVE SUMMARY`u!(#3  X14III.BACKGROUND`u!(#4  X 4IV.FIRST REPORT AND ORDER  X 4A.` ` WideArea SMR Licensing in the 800 MHz Band  X 4` ` 1. Spectrum Designated for Geographic Area Licensing`i (# 9  X 4` ` 2. Service Areas `!(#15  X4` ` 3. EA Spectrum Blocks `!(#26  Xy4` ` 4. 800 MHz SMR Spectrum Aggregation Limit`!(#38  Xb4` ` 5. Licensing in Mexican and Canadian Border Areas`!(#45  X44B.` ` Rights and Obligations of EA Licensees  X4` ` 1. Operational Flexibility`!(#49  X4` ` 2. Spectrum Management RightsAcquisition ` `  and Recovery of Channels Within Spectrum Blocks`!(#54  X4` ` 3. License Term and Renewal Expectancy(# `!(#63  X4` ` 4. Treatment of Incumbent Systems  X4` `  a.Mandatory Relocation`!(#65  X4` `  b.Incumbent Operational Flexibility`!(#80  X|4` ` 5. Cochannel Interference Protection  Xe4` `  a.Incumbent SMR Systems`!(#89  XN4` `  b.Adjacent EA Licensees`!(#93  X74` ` 6. Emission Masks`!(#97  X 4C.` ` Construction Requirements  X4` ` 1. EA Licensees` (#102  X4` ` 2. Extended Implementation Authority` (#105  X 4` ` 3. Interim Coverage Requirements` (#115  X"4D.` ` EA License Application Issues  X#4` ` 1. Initial Eligibility` (#123  Xh$4` ` 2. Regulatory Classification of EA Licensees` (#128  XQ%4"Q%0*((e#"  X4`(#wParagraphă  X4E.` ` Redesignation of Other 800 MHz Spectrum General Category ` ` Channels and InterCategory Sharing  X4` ` 1. General Category Channels` (#134  X4` ` 2. InterCategory Sharing` (#138  X_4V.EIGHTH REPORT AND ORDER  X14A.` ` Auctionability of the Upper 10 MHz Block of 800 MHz ` ` SMR Spectrum` (#143  X 4B.` ` Competitive Bidding Methodology for Upper 10 MHz Block  X 4` ` 1. Competitive Bidding Design  X 4` `  a.Simultaneous Multiple Round Auctions` (#152  X 4` `  b.Stopping Rules` (#155  X4` `  c.Activity Rules` (#161  Xy4` `  d.License Grouping` (#171  Xb4` ` 2. Bidding Issues for Upper 10 MHz Block of 800 MHz  XK4` `  SMR Spectrum   X44` `  a.Bidding Procedures` (#174  X4` `  b.Bid Increments` (#177  X4` `  c.Duration of Bidding Rounds` (#180  X4` ` 3. Procedural and Payment Issues  X4` `  a.PreAuction Application Procedures` (#183  X4` `  b.Amendments and Modifications` (#191  X4` `  c.Upfront Payments` (#196  X4` `  d.Down Payments and Full Payments  *xxX   X|4` `  i.hhCDown Payments` (#204  Xe4` `  ii.hhCLong Form Applications` (#208  XN4` `  iii.hhCPetitions to Deny and Limitations on Settlements` (#211  X74` `  e.Bid Withdrawal, Default, and Disqualification` (#215  X 4` ` 4. Regulatory Safeguards  X 4` `  a.Rules Prohibiting Collusion` (#222  X4` `  b.Transfer Disclosure Requirements` (#231  X4` `  c.Performance Requirements` (#234  X!4C.` ` Treatment of Designated Entities  X"4` ` 1. Overview, Objectives, and the Impact of Adarand  X#4` `  Construction v. Pe9a` (#237  Xl$4 ` ` 2. Special Provisions for Designated Entities` (#242  XW%4` ` 3. Partitioning` (#251  X@&4` ` 4. SetAside Spectrum` (#254 ")'0*((%"  X4`(#wParagraphă  X4VI.SECOND FURTHER NOTICE OF PROPOSED RULE MAKING  X4A.` ` Disaggregation of Channel Blocks on the Upper 200 Channels  X4 ` ` of 800 MHz SMR Spectrum` (#259  X_4B.` ` Partitioning on the Upper 200 Channels of 800 MHz SMR Spectrum` (#264  X14C.` ` Mandatory Relocation in the Upper 200 Channels  X 4` ` 1. Distributing Relocation Costs Among EA Licensees` (#269  X 4` ` 2. Relocation Costs` (#270  X 4` ` 3. Comparable Facilities(# ` (#279  X 4` ` 4. Relocation Guidelines Good Faith Requirement ` `  During Mandatory Relocation` (#285  X4D.` ` BETRS Eligibility on the Upper 200 Channels ` ` of 800 MHz SMR Spectrum` (#287  XK4E.` ` Licensing of Lower 80 and General Category Frequencies  X44` ` 1. Geographic Area Licensing` (#289  X4` ` 2. Service Areas` (#295  X4` ` 3.  Channel Assignments` (#298  X4` ` 4. Operational and Eligibility Restrictions` (#302  X4` ` 5. Channel Aggregation Limit` (#306  X4` ` 6.  Construction Requirements  X4` `  a.Construction Period` (#309  X4` `  b.Coverage Requirements` (#312  X|4` ` 7. Treatment of Incumbents` (#315  Xe4` ` 8. CoChannel Interference Protection` (#318  XN4` ` 9. Licensing in Mexican and Canadian Border Areas` (#319  X 4F.` ` Regulatory Classification of Lower 80 and General Category Channels` (#320  X4G.` ` Competitive Bidding Issues for Lower 80 and General Category Channels  X4` ` 1. Auctionability of Lower 80 and General Category Channels` (#323  X 4` ` 2. Competitive Bidding Design  X!4` `  a.Bidding Methodology` (#326  X"4` `  b.License Grouping` (#331  X#4` `  c.Bidding Procedures` (#335  Xh$4` `  d.Rules Prohibiting Collusion` (#343  XQ%4` ` 3. Procedural and Payment Issuespp  *xxX   X:&4` `  a.PreAuction Application Procedures` (#346  X#'4` `  b.Amendments and Modifications` (#353 "#'0*((%"  X4`(#wParagraphă  X4` `  c.Upfront Payments` (#356  X4` `  d.Down Payment and Full Payment` (#359  X4` `  e.Bid Withdrawal, Default, and Disqualification` (#362  X4` `  f. LongForm Applications` (#364  Xv4` `  g.Petitions to Deny and Limitations on Settlements` (#366  X_4` `  h. Transfer Disclosure Requirements` (#369  XH4` `  i. Performance Requirements` (#371  X14` ` 4. Treatment of Designated Entitiespp  *xxX   X 4` `  a.Overview and Objectives` (#372  X 4` `  b. Eligibility for Designated Entity Provisions  X 4` `  i.hhCSmall Businesses  X 4` `  hhCa)qSpecial Provisions` (#375  X 4` `  hhCb)qDefinition` (#377  X 4` `  ii. hhCMinorityand WomenOwned Business Definition` (#381  X4` `  iii. hhCReduced Down Payment` (#386  Xy4` `  c.Bidding Credits` (#389  Xb4` `  d. Installment Payments` (#394  XK4` `  e. SetAside Spectrum` (#398  X44` `  f. Unjust Enrichment Provisions` (#400  X4` `  g. Partitioning` (#402  X4`(#(#ă  X4VII.CONCLUSION  X4VIII.PROCEDURAL MATTERS  X4APPENDIX A  FINAL RULES  Xe4APPENDIX B REGULATORY FLEXIBILITY ANALYSIS  X74APPENDIX C LIST OF PARTIES  X ' I.INTRODUCTION  X4 I. A. 1. a.(1)(a) i) a) 1. 1. i.(1)(a)(i) 1) a)  X41. In this First Report and Order, Eighth Report and Order, and Second Further  X 4Notice of Proposed Rule Making, we adopt final service and competitive bidding rules for the  X!4"upper 10 MHz block"X!ʫ yO*$'ԍThe "upper 10 MHz block" consists of Channel Nos. 401600 in the 800 MHz band, a total of 200 paired  yO$'channels at 816821/861866 MHz. The upper 10 MHz block also will be referred to herein as the "upper 200 channels."  of 800 MHz Specialized Mobile Radio (SMR) spectrum. We also adopt final service rules and request comment on additional service and competitive bidding""0*(( "  X4rules for the remaining 800 MHz SMR spectrum and the General Category channels.&ʫ yOy'ԍThe General Category channels consist of Channel Nos. 1150, corresponding to frequencies 806 {OA'809.750/851854.750 , in the 800 MHz band. As discussed in the Second Further Notice of Proposed Rule  {O 'Making, we have tentatively concluded that the General Category channels will be auctionable as a result of our  {O'decision in  137 infra to redesignate them as exclusively SMR. The rules that we adopt here will enable us to implement a new framework for licensing of 800  X4MHz SMR systems. The First Report and Order establishes technical and operational rules for new licensees in the upper 10 MHz block with service areas defined by the U.S.  X4Department of Commerce Bureau of Economic Analysis Economic Areas (EAs)$ʫ yO 'ԍThe Department of Commerce Bureau of Economic Analysis has established 172 EAs which cover the  {O 'continental United States. See "Final Redefinition of the BEA Economic Areas," 60 Fed. Reg. 31,114 (Mar. 10,  {O '1995). As discussed in  25 infra, we are establishing three additional licensing regions for the five U.S. possessions. , and defines the rights of incumbent SMR licensees already operating or authorized to operate on these  Xx4channels. The Eighth Report and Order establishes competitive bidding rules for the upper  Xc410 MHz block. In the Second Further Notice of Proposed Rule Making we set forth  XN4proposals for new licensing rules and auction procedures for the "lower 80"x Nʫ yO'ԍThe "lower 80" channels consists of the noncontiguous SMR Category Channels in the 806809.750/851859.750 MHz bands. The "lower 80" channels are: 201208, 221228, 241248, 261268, 281288, 301308, 321328, 341348, 361368, and 381388. These channels also will be referred to as the "lower 4 MHz" of 800 MHz SMR spectrum.x SMR and General Category channels.  X 42. 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).  X' II.EXECUTIVE SUMMARY  X43. This Executive Summary summarizes the principal decisions and proposals made  X4regarding 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  X4Making. "o 0*((W"Ԍ X4 A.` ` First Report and Order: Service Rules for the Upper 10 MHz Block (#`  X4` ` Designates the upper 10 MHz block of 800 MHz SMR spectrum for geographic area licensing in three spectrum blocks, consisting of a 120channel block, a 60channel block, and a 20channel block, in each EA.(#`  Xw4` ` Establishes EA licenses that provide licensees with:(#`  XX` ` X (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 "selfcoordinated" basis;(#  ` ` X (2) the right to use any available spectrum within the EA licensee's designated spectrum block on a selfcoordinated basis, including full discretion over channelization of available spectrum within the block (on condition that emission mask requirements are met, and cochannel interference protection is afforded to incumbent licensees and cochannel EA licensees in neighboring EAs);(#  ` ` X (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(#  ` ` X (4) the presumption that assignments from incumbents operating in the EA spectrum block to the EA licensee generally are in the public interest. (#  X4` ` Adopts a tenyear license term and a fiveyear construction period for EA licenses from the date the EA license is granted, with EA licensees required to demonstrate (1) coverage of onethird 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 twothirds of the EA population by the end of the fiveyear period. The EA license will be subject to automatic cancellation for failure to meet these interim coverage and channel use requirements.(#`  X 4` ` 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.(#`  X;&4` ` Grants operational flexibility to incumbent SMR licensees to add, remove, or relocate site locations within their current 22 dBu contours, on a "self"$'0*((,%"ԫcoordinated" basis if the incumbent is not relocated.(#`  X4` ` 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.(#`  Xv4` ` Creates a twophase mandatory relocation mechanism under which there is a fixed oneyear period for voluntary negotiations between EA licensees and incumbents and a twoyear 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  X 4necessary; and (3) builds and tests the incumbent's new system . (#`  Xy4` ` Reallocates the General Category channels, consisting of 150 contiguous 25 KHz channels, to the 800 MHz SMR service.(#`  X44` ` 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 nonSMRs 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 ("shortform") applications. (#`  X4 B.` ` Eighth Report and Order: Competitive Bidding Rules for the Upper 10  X'MHz Block (#`  X!4` ` Provides for award of 525 EA licenses!ʫ yO'$'ԍWe are establishing three spectrum blocks for each of the 175 EAs. Thus, the total number of EA licenses is calculated by multiplying 175 by 3. 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"# 0*((!"  X4aggregation limit provided in Section 20.6 of the Commission's rules.2Zʫ yOy'ԍBroadband PCS, cellular, and SMR licensees may have attributable interests in no more than 45 MHz of licensed broadband PCS, cellular and SMR spectrum regulated as CMRS with significant overlap in any  {O 'geographic area. See 47 CFR  20.6.2(#`  X4` ` Treats all applicants for EA licenses as initial applicants for public notice, application processing, and competitive bidding purposes.(#`  X4` ` 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.(#`   X 4` ` Applicants will apply for the upper 10 MHz block auction by filing a shortform application, indicating the markets and spectrum blocks for which they seek to apply, and paying an upfront payment. We adopt the standard upfront  X 4payment formula of $0.02 per activity unit6X ʫ yOp'ԍAn "activity unit" is defined as the number of megahertz of spectrum multiplied by the population of the relevant license area, or "pops." The activity units/MHzpops measurement is used to describe the activity rules, stage transition rules, bid increment rules, etc. 6, based on the particular spectrum blocks in each EA identified in the applicant's shortform 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.(#`   XK4` ` Adopts the MilgromWilson 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.(#`   X4` ` Adopts bid withdrawal and default rules for this auction similar to those used in prior auctions. (#`  X4` ` Applies the same regulatory safeguards as in prior auctions to prevent applicants from colluding during the auction. (#`  XN4` ` Adopts a "tiered" approach to installment payments for small businesses in the upper 10 MHz block.(#`   X 4` ` Allows partitioning for rural telephone companies. (#` "  0*(("  X4 C.` ` Second Further Notice of Proposed Rule Making: Additional Service Rules for the Upper 200 Channels and Service and Competitive Bidding Rules  X'for the Lower 80 and General Category Channels (#`  X' ` ` 1. Disaggregation of Spectrum Blocks in the Upper 200 Channels  X4  Xw4` ` Tentatively concludes that EA licensees should be permitted to disaggregate their spectrum blocks. (#`  X2' ` ` 2. Partitioning in the Upper 200 Channels  X 4  X 4 ` ` Tentatively concludes that the partitioning option should be extended to SMR  X 4licensees generally rather than limited to rural telephone companies. (#`  X '` ` 3. Mandatory Relocation from the Upper 200 channels  X 4   X4` ` 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. (#`   X54` ` 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.(#`  X4` ` 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.(#`   X!4` ` 4. Licensing of Other 800 MHz SMR Channels /Z!ʫ {O'ԍIn light of our decision in the First Report and Order to redesignate the General Category channels as exclusively for SMR use, licensing of other 800 MHz SMR channels refers to both the lower 4 MHz of 800 MHz SMR spectrum and the General Category channels./  X4` ` 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 fivechannel blocks. Proposes to license the General Category channel blocks per geographic licensing area.(#`  X#4` ` Proposes not to limit the number of lower 80 and General Category frequencies"# 0*((!" 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.(#`  X4` ` 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 sitespecific authorizations, with geographic area licensees required to provide cochannel 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. (#`  X ' ` ` 5. Competitive Bidding Rules for Other 800 MHz SMR Channels (#   X 4` ` Proposes to award geographic area licenses for the lower 80 channels through a simultaneous multiple round auction with 16 fivechannel blocks in each EA and regional EA groupings for competitive bidding purposes. Proposes to employ marketbymarket stopping rules for these licenses.(#`  XK4` ` Proposes to award EA licenses for the General Category channels through a simultaneous multiple round auction for a 120channel block, a 20channel block, and a 10channel block in each EA. We propose to employ simultaneous stopping rules for these licenses.(#` ` `  X4` ` Proposes to use bid withdrawal and default rules for this auction similar to those used in prior auctions. (#`  X4` ` 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.(#`  X74` ` 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.(#` ` `  X!4` ` Proposes to adopt a "tiered" approach for installment payments and reduced down payments for small businesses.(#`  Xh$4` ` 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. (#` "#' 0*((%"Ԍ` `  X' III.BACKGROUND  X44. The Commission's current rules for the 800 MHz SMR service were designed primarily to license dispatch radio systems on a transmitterbytransmitter 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  X14Communications Services (PCS). &1ʫ {O 'ԍSee, e.g., Fleet Call, Inc., Memorandum Opinion and Order, 6 FCC Rcd 1533, recon. dismissed, 6 FCC Rcd 6989 (1991); Letter from Ralph A. Haller, Chief, Private Radio Bureau to David Weisman, DA 921734, 8 FCC  {O< 'Rcd 143 (1993). See also Amendment of Part 90 of the Commission's Rules Governing Extended  {O 'Implementation Periods, PR Docket No. 92210, Report and Order, 8 FCC Rcd 3975 (1993). 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, sitebysite 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 widearea 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 widearea licensing regime.  X45. In May 1993, the Commission adopted a Notice of Proposed Rule Making0 \ʫ yO?'ԍAmendment of Part 90 of the Commission's Rules to Facilitate Future Development of SMR Systems in  {O'the 800 MHz Frequency Band, PR Docket No. 93144, Notice of Proposed Rule Making, 8 FCC Rcd 3950  {O'(1993) (Notice).0 proposing widearea licensing of the 800 MHz SMR service. In August 1993, Congress amended the Communications Act of 1934 ("Communications Act") to modify the regulatory  X4treatment of all mobile services, including SMR. ʫ {O "'ԍSee Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 10366, Title VI,  6002(b), 107 Stat. 312,  {O"'392 (1993) (Budget Act), codified at 47 U.S.C.  332. In the CMRS Second Report and Order,- \6 ʫ yO|$'ԍImplementation of Sections 3(n) and 332 of the Communications Act, Regulatory Treatment of Mobile  {OD%'Services, GN Docket No. 93252, Second Report and Order, 9 FCC Rcd 1411 (1994) (CMRS Second Report and  {O&'Order). - the Commission reclassified all mobile services into two statutorilydefined categories: " Z 0*((z" 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  X4as CMRS.~ \ʫ {OK'ԍId. at 145051,  90, 91. It should be noted, however, that in the CMRS Second Report and Order, we also concluded that licensees in the private land mobile services other than paging who were licensed as of  {O'August 10, 1993, would be treated as PMRS until August 10, 1996. Id. at 1513,  281.~  X46. In the CMRS Third Report and Order, the Commission concluded that 800 MHz  X4SMR licensees either compete or have the potential to compete with other CMRS providers.9\ʫ yO, 'ԍImplementation of Sections 3(n) and 332 of the Communications Act, Regulatory Treatment of Mobile  {O 'Services, GN Docket No. 93252, Third Report and Order, 9 FCC Rcd 7988, 8042,  94 (1994) (CMRS Third  {O 'Report and Order).9 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  X 4service and auction rules.R ʫ {O'ԍId. at 8042, 8045,  94, 100.R In addition, the Commission froze acceptance of new 800 MHz SMR applications pending completion of the rule making pertaining to the 800 MHz SMR  X 4service.D ʫ {O*'ԍId. at 8167,  415.D  X 47. On October 20, 1994, the Commission adopted a Further Notice of Proposed Rule  X4Making@\4 ʫ yOy'ԍAmendment of Part 90 of the Commission's Rules to Facilitate Future Development of SMR Systems in  {OA'the 800 MHz Frequency Band, PR Docket No. 93144, Further Notice of Proposed Rule Making, 10 FCC Rcd  {O '7970 (1995) (Further Notice).@ 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 geographicallydefined service areas to facilitate the development of widearea,  XQ4multichannel SMR systems.ZQX ʫ {OZ 'ԍFurther Notice, 10 FCC Rcd at 7983,  17.Z We further proposed that the remaining lower 4 MHz of 800 MHz SMR spectrum would accommodate the needs of smaller SMR systems primarily  X#4seeking to provide local, more dispatchoriented service.;#ʫ {O#'ԍId.,  18.; This proposal would allow incumbent licensees to continue operating under their existing authorizations with full protection from cochannel interference, but would not allow them to expand into the wide" |0*(("ԫ X4area licensee's service area.Qʫ {Oy'ԍId. at 7992, 7993,  37, 39.Q The Further Notice also sought comment on: (1) whether geographic area licensees should be able to require incumbents to relocate to comparable  X4alternative frequencies at the geographic area licensee's expense,LZʫ {O'ԍSee id. at 79917992,  36.L (2) the status of waivers  X4and grants of extended implementation authority,Zʫ {OZ'ԍSee id. at 79957996, 7997,  44, 47.Z (3) future regulatory treatment of the  X4General Category Channels,T~ʫ {O 'ԍSee id. at 7973, 8000,  1, 54.T and (4) the type of competitive bidding rules most appropriate  X4for the 800 MHz SMR service.Zʫ {OP 'ԍSee id. at 80068020,  71106.Z  Xa48. Over 80 parties filed initial comments and over 60 parties filed reply comments in  XJ4response to the Further Notice.&Jʫ {O'ԍThe comment and reply comment dates in the Further Notice were extended to January 5, 1995, and March  {Og'1, 1995, respectively. See Amendment of Part 90 of the Commission's Rules to Facilitate Future Development  {O1'of SMR Systems in the 800 MHz Frequency Band, Order, 9 FCC Rcd 7217 (1994); Order, 60 Fed. Reg. 8341 (February 14, 1995).  Numerous written ex parte presentations also have  X54supplemented the record.l5 ʫ {Ov'ԍSee Appendix D for a comprehensive list of commenting parties.l  X ' IV.FIRST REPORT AND ORDER  X 'A.` ` Geographic Area SMR Licensing in the 800 MHz Band  X '` ` 1. Spectrum Designated for Geographic Area Licensing  X4  X}49. Background. In the CMRS Third Report and Order, we determined that assigning contiguous spectrum, where feasible, is likely to enhance the competitive potential of  XQ4geographic area SMR providers.gQ"ʫ {O$!'ԍCMRS Third Report and Order, 9 FCC Rcd at 8046,  103.g We indicated our belief that contiguous spectrum is essential to the competitive viability of a widearea SMR system, because it permits use of spread spectrum and other broadband technologies that are available to other CMRS providers  X 4but unavailable to systems operating on noncontiguous spectrum.D ʫ {Oq%'ԍId. at 8046,  102.D In the Further Notice, we proposed to designate the upper 10 MHz block of 800 MHz SMR spectrum for geographic"F0*(("  X4area SMR licensing.Zʫ {Oy'ԍFurther Notice, 10 FCC Rcd at 7983,  17.Z  X4 10. Comments.  Numerous commenters support allocation of a portion of 800 MHz  X4SMR spectrum for geographic area licensing.qZʫ yO'ЍAMI Comments at 2; AMTA Comments at 1011; CellCall Comments at 7; CTIA Comments at 12; CICS Comments at 5; Cumulous Comments at 3; Dial Call Comments at 3; IC&E Reply Comments at 45; Motorola Comments at 4; Nextel Comments at 2; OneComm Comments at 89; Palmer Comments at 3; Pittencrief  {O 'Comments at 56; Telecellular Comments at 2; TotalCom Comments at 4; See Appendix D for a list of the  {O 'acronyms used to cite commenters and reply commenters responding to the Further Notice in PR Docket No. 93144.q Dial Call, Nextel, OneComm, and Telecellular agree that such reallocation of 800 MHz SMR spectrum would further the Commissions goal  X4of creating regulatory parity with other CMRS providers.ʫ yO'ԍDial Comments at 3; Nextel Comments at 40; OneComm Comments at 11; Telecellular Comments at 3. Motorola and OneComm believe that a 10 MHz allocation would allow widearea SMR operators to take advantage of  X_4innovative new technologies and succeed in the CMRS marketplace.V _f ʫ yOv'ԍMotorola Comments at 4; OneComm Comments at 8.V 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  X 4protocol (GSM), and Motorola Integrated Radio System (MIRS),! ʫ yO'ԍSubsequent to the filing of its comments, Motorola modified the technology it employs and this new technology is known as Motorola Integrated Dispatch Enhanced Network (IDEN). require contiguous  X 4spectrum.?" N ʫ yO'ԍMotorola Comments at 5.? OneComm also believes that licensing contiguous spectrum will allow SMR operators to take advantage of economies of scale with respect to equipment and would  X 4increase competition in the equipment manufacturing market.?# ʫ yOd'ԍOneComm Comments at 12.? Nextel believes that the proposed 10 MHz widearea licensing allocation is the most practical mechanism for achieving regulatory symmetry for the 800 MHz SMR service visavis other CMRS  X4providers, with respect to spectrum allocation.>$nʫ yO 'ԍNextel Comments at 40.>   Xb4 11. Other commenters, however, oppose the Commissions widearea licensing  XK4proposal for the 800 MHz SMR service.% Kʫ yO$'ЍApplied Comments at 5; Bradley & Hulford Comments at 1; Carver Comments at 12; CCI Comments at 1; CUI Comments at 34; E.F. Johnson Comments at 45; Ericsson Comments at 2; Fetterman Comments at 12; Fisher Comments at 2; Fresno Comments at 56; Joriga Comments at 12; Kay Comments at 12; Lausman Comments at 3; Luczak Comments at 3; Madera Comments at 12; PCIA Comments at 2; Polar Reply"R'$0*((]'" Comments at 67; Sobel Comments at 12; Southern Comments at 56; Spruill Comments at 12; Stalvey Comments at 12; Supreme Radio Comments at 12, 67; Triangle Comments at 12; SBA Comments at 7. These commenters argue that a widearea licensing"K %0*((7" 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  X4benefit only one entity, Nextel; (c) is impractical and unworkable;&" ʫ yO'ЍCarver Comments at 12; Eden Comments at 12; Fetterman Comments at 12; Joriga Comments at 12; Kay Comments at 12; Madera Comments at 12; Sobel Comments at 12; Spruill Comments at 12; Stalvey  {O3'Comments at 12; Triangle Comments at 12; Clark Ex Parte Comments at 2; Peacock Ex Parte Comments at 13.  (d) is unnecessary because the existing regulatory system for the 800 MHz service adequately addresses the current  X4licensee demand for implementing widearea systems;' ʫ yO_ 'ԍEricsson Comments at 2; Cumulous Comments at 5; SBA Comments at 78; Fresno Comments at 5; Fisher Comments at 2; Southern Comments at 6; Lausman Comments at 3. and, (e) would embroil the Commission in numerous controversies between licensees (both incumbents and widearea  Xv4licensees).@(vb ʫ yO'ԍApplied Comments at 56.@ 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  XH4380400 MHz bands that have been reserved for federal government use.])H ʫ {O'ԍSpectrum Communications Ex Parte Comments at 2.]  X 4 12. With respect to the particular portion of the 800 MHz band to be designated for widearea SMR licensing, many commenters support the Commissions proposal to use the  X 4upper 10 MHz block of 800 MHz SMR spectrum.*X ʫ yO!'ЍAMTA Comments at 1011; CellCall Comments at 7; CICS Comments at 5; IC&E Reply Comments at 5; Nextel Comments at 40; OneComm Comments at 8; Palmer Comments at 3; Telecellular Comments at 2; Total Com Comments at 4. CTIA believes that contiguous spectrum is necessary for widearea SMR operators to establish service comparable to that of other CMRS providers and would encourage widearea SMR licensees to utilize more spectrum X 4efficient technologies.;+ ʫ yO'ԍCTIA Comments at 3.; Southern, on the other hand, contends that the digital design of wide X4area SMR equipment does not require contiguous spectrum.?,4ʫ yOu!'ԍSouthern Comments at 6.? Similarly, DCL Associates, the  Xy4Joint Commenters, and Racom, Inc., et al. believe that contiguous spectrum is not required for  Xd4operation of competitive widearea SMR systems.-dʫ {O$'ԍDCL Associates Reply Comments at 34; Joint Commenters Reply Comments at 9; Racom Inc., et al. Reply Comments at 10. AMTA notes that the upper 10 MHz block is most suitable for those seeking to establish widearea SMR services because it is the largest amount of contiguous spectrum now allocated for the 800 MHz SMR service, and it is"6-0*(("  X4at least as large as the smallest amount of spectrum authorized for other CMRS providers.?.ʫ yOy'ԍAMTA Comments at 1011.? Palmer suggests, however, that the Commission designate only 7 MHz of the upper 10 MHz block for widearea use to balance more fairly the interests of those licensees desiring to  X4provide widearea service and those seeking to provide more localized or niche services.=/Xʫ yO'ԍPalmer Comments at 3.=  X4 13. Discussion.  We conclude that a portion of 800 MHz SMR spectrum should be designated for widearea licensing. Notably, the commenters in the CMRS proceeding contended that widearea SMR systems need contiguous spectrum to obtain flexibility to implement advanced technologies and thereby compete effectively with other CMRS  X14providers, such as cellular and broadband PCS systems.^01ʫ {O 'ԍSee Further Notice, 10 FCC Rcd at 7982,  17.^ In the Further Notice, we stated our belief that contiguous spectrum offers greater flexibility to widearea service providers who must tailor their spectrum use to afford protection to incumbent licensees within the 800 MHz  X 4band.C1 zʫ {O'ԍId. at 7983,  17.C The comment record established in PR Docket No. 93144 and GN Docket No. 93252 evidences that the availability of contiguous spectrum for those licensees seeking to provide widearea SMR service would further the Commissions regulatory symmetry goals.  X4 14. We disagree with the commenters that suggest the need for widearea licensing has not been demonstrated. Moreover, the current licensing scheme would not allow expeditious implementation of widearea 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  X4discussed infra, that the specific widearea 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 widearea service. We further conclude that the 800 MHz SMR spectrum most suitable to be designated primarily for widearea use is the upper 10 MHz block, as it is the largest block of contiguous SMR Category spectrum in the 800  Xi4MHz band. As discussed supra, we believe that contiguous spectrum is an essential component of the widearea licensing proposal we adopt today because it will give licensees the flexibility to use technologies that can operate on either contiguous or noncontiguous 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" 10*((" suggest that designating this amount of spectrum would further the regulatory symmetry goals  X4for operational and technical rules we set forth in the CMRS Third Report and Order. As  X4discussed infra, we believe that our decision regarding the size of the widearea spectrum blocks strikes an appropriate balance between the competing interests of licensees with varying spectrum needs.  Xz4 ` ` 2. Service Areas   XL415.  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 widearea licensing of the 800 MHz  X 4SMR service.f2 ʫ {O 'ԍCMRS Third Report and Order, 9 FCC Rcd at 8044,  99.f 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  X 4ability to invest in technology and to reuse channels more effectively.:3 Zʫ {O'ԍId. at 8045.: We further noted that many of the authorizations already granted to SMR licensees for widearea systems are  X 4for MTAsized areas, or for regions larger than a single MTA.14 ʫ {OJ'ԍId.1 As a result, we tentatively concluded that MTAs appear to be the most suitable "building blocks" for SMR licensees who  X4seek to construct widearea systems.15~ʫ {O'ԍId.1  XQ416.  Comments. Several commenters support the Commissions proposal of MTAs in  X:4their initial comments.6:ʫ yO'#X\  P6G;QwP#эCellCall Comments at 7; Dial Call Comments at 3; Motorola Comments at 9; Nextel Comments at 32; OneComm Comments at 8; Telecellular Comments at 2. 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  X4MTAs;f7h ʫ {O 'ԍCellCall Comments at 7; Nextel Ex Parte Comments at 45.f (2) establishing widearea systems is economically feasible only when they serve a  X4large area with a high volume of potential customers;i8 ʫ {O"'ԍMotorola Comments at 912; Nextel Ex Parte Comments at 45.i and, (3) MTAsized service areas  X4would provide geographic area licensees with optimum operational flexibility.C9 ʫ yO%'ԍTelecellular Comments at 2.C  X417. Although AMTA does not oppose MTAbased widearea licensing, it indicates that it is not convinced that MTAs would be the most effective geographic divisions for wide"90*(("ԫ X4area licensing purposes.<:ʫ yOy'ԍAMTA Comments at 14.< On the other hand, several commenters expressly oppose using  X4MTAs as the geographic basis for widearea 800 MHz SMR licensing. ;XXʫ yO'ЍAMI Comments at 34; CCI Comments at 1; Cumulous Comments at 2; Genesee Comments at 2; Joint Commenters Comments at 67; Kay Comments at 12; PCIA Comments at 1920; Southern Comments at 11; Total Com Comments at 4.  They oppose MTAbased licensing arguing that: (1) service areas of that size would not result in diverse entities participating in the provision of 800 MHz widearea service or 800 MHz SMR spectrum  X4auctions;U<xʫ yO 'ԍAMI Comments at 34; Total Com Comments at 9.U (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  Xv4underserved;S=vʫ yO/'ԍCCI Comments at 1; Total Com Comments at 4.S (3) MTAs are too large for reasonable buildout by smaller licensees that would be forced to compete against larger system operators located a significant distance  XH4away;f>Hʫ yO'ԍPCIA Comments at 1920; Joint Commenters Reply Comments at 14.f (4) RandMcNally would not permit use of MTAs unless licensees were willing to  X14negotiate an agreement to pay a fee for use of the copyrighted term;T?1( ʫ yO 'ԍAMI Comments at 34; SMR WON Comments at 84.T (5) MTAs do not  X 4conform to natural SMR market divisions;@ ʫ yO'ԍAMI Comments at 3; Cumulous Comments at 2; Genesee Comments at 3; SMR WON Comments at 53; Lagorio Comments at 10. and, (6) there is an insufficient amount of vacant  X 4800 MHz SMR spectrum to justify MTAbased licensing.@A ʫ yO'ԍSouthern Comments at 11.@  X 418. Given their opposition to an MTAbased licensing approach, several commenters suggest using other geographic areas as the service area bases for the new widearea 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  Xy4patterns and therefore more accurately would reflect natural SMR market boundaries; sByʫ yO 'ԍAMI Comments at 3; DCL Associates Comments at 7; SMR WON Comments at 5354.s (2) they would provide more service options and flexibility, given that licensees will have the  XK4option of acquiring only the capacity needed in smaller markets;:CK0ʫ yO,$'ԍAMI Comments at 4.: (3) they could increase both the number and diversity of entities interested in vying for spectrum designated for widearea  X4licensing;1Dʫ {O''ԍId.1 and, (4) RandMcNally would not permit use of MTAs unless licensees were"RD0*((%"  X4willing to negotiate an agreement to pay a fee for use of the copyrighted term.?Eʫ yOy'ԍSMR WON Comments at 54.?  X419. 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  X4MHz SMR spectrum use.ZFXʫ yO'ԍCumulous Comments at 3, 4; Genesee Comments at 2 .Z Motorola, on the other hand, contends that BTAbased licensing  X4will result in licensees being unable to compete economically with other CMRS providers.BGʫ yO& 'ԍMotorola Comments at 912.B PCIA and SMR WON oppose use of BTAs on the basis that they are too small for a  X_4reasonable buildout, especially in the larger metropolitan areas.TH_xʫ yO 'ԍPCIA Comments at 20; SMR WON Comments at 53.T  X1420. PCIA proposes Metropolitan Service Areas (MSAs) as another geographic  X 4alternative for widearea licensing.<I ʫ yO'ԍPCIA Comments at 21.< 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  X 4MSAs in those areas.1J ʫ {O'ԍId.1  X 421. 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  Xy4geographic basis for the newly created widearea 800 MHz SMR licenses. Ky* ʫ {OT'ЍSee, e.g., AMI Reply Comments at 3; AMTA Reply Comments at 1718; DCL Associates Reply Comments at 6; E.F. Johnson Reply Comments at 5; Ericsson Reply Comments at 3; Fisher Reply Comments at 3; Genesee Reply Comments at 2; Motorola Reply Comments at 7; OneComm Reply Comments at 9; Pittencrief Reply Comments at 4; Russ Miller Reply Comments at 7; SMR WON Reply Comments at 9; Telecellular Reply  {Ov'Comments at 3; AMI Ex Parte Comments at 3.  Supporters of EAbased licensing contend that EAs: (1) are sufficiently large so that operators can take  XK4advantage of economies of scale;OLKʫ yO!'ЍMotorola Reply Comments at 7.O (2) offer the opportunity for greater participation by a larger number of diverse entities, particularly local SMR operators, in the provision of wide X4area service because they are smaller than MTAs;Mnʫ yO<%'ЍE.F. Johnson Reply Comments at 5; Motorola Reply Comments at 7; Pittencrief Reply Comments at 45. (3) more accurately reflect the natural  X4scope of SMR operations;Nʫ yO''ԍEricsson Reply Comments at 3; Fisher Reply Comments at 3; AMTA Reply Comments at 1718. and, (4) are sufficiently few in number that the auction process"N0*(("  X4will remain manageable.OOʫ yOy'ЍMotorola Reply Comments at 7.O AMTA supports the use of EAs, stating that due to their number, size and configuration, they will meet most effectively the needs of both widearea and  X4traditional SMR licensees.EPXʫ yO'ԍAMTA Reply Comments at 1718.E Some reply commenters, on the other hand, indicate a preference for "Cluster EAs" (which are created by sequential groupings of four EAs) if EA X4based licensing is used.Qʫ yO= 'ЍDial Call Reply Comments at 45, n.2; Nextel Reply Comments at 89; Onecomm Reply Comments at 9. These reply commenters contend that Cluster EAs: (1) may  X4represent a viable alternative, since they are similar in size to MTAs;WRxʫ yO 'ЍDial Call Reply Comments at 45, n.2.W (2) provide a readily Xv4partitionable geographic area;MSvʫ yO/'ЍNextel Reply Comments at 9.M and, (3) provide an administrativelymanageable number of  X_4widearea SMR license auctions.;T_ʫ {O'ЍId.;  X1422. A few commenters expressly oppose EAbased licensing.qU1* ʫ yO 'ЍDial Call Reply Comments at 45, n.2; IC&E Reply Comments at 5.q Dial Call believes that EAs are unworkable because they are smaller than MTAs, and thus would place widearea  X 4SMR operators at a competitive disadvantage visavis other CMRS providers.BV ʫ yOn'ԍDial Call Comments at 45.B In fact, some  X 4reply commenters continue to favor an MTAbased licensing approach.W J ʫ yO'ЍCellCall Reply Comments at 8, n.20; Dial Call Reply Comments at 45, n.2; IC&E Reply Comments at 5; Nextel Reply Comments at 8; OneComm Reply Comments at 89.  X 423. 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 widearea 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 mediumsized 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  X4by Section 309(j) of the Communications Act.NXʫ {O[%'ԍSee 47 U.S.C.  309(j)(3)(B).N 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"4X0*((" 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.  Xv424. 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  X 4broadband PCS.Y ʫ {O 'ԍSee Amendment of the Commission's Rules to Establish New Personal Communications Services, GEN  {O] 'Docket No. 90314, Memorandum Opinion and Order, 9 FCC Rcd 4957, 4987,  76 (1994). We determined that the tenyear history of cellular service evidenced that MSA/RSA boundaries generally have been too small for the efficient provision of regional or  X 4nationwide mobile service.1Z $ʫ {O'ԍId.1 In this connection, we noted that cellular operators have experienced large transactional costs in their efforts to aggregate MSAs and RSAs to provide  X 4wider service areas for consumers and to lower costs of providing service.1[ ʫ {O%'ԍId.1 Because we anticipate that EA licensees will be interested in using geographic aggregation as a tool to accomplish similar results, we conclude that MSAs are inappropriate. Similarly, with respect to BTAs, we agree with those commenters who express concern that these geographic areas may not be sufficiently large to create a viable widearea service.  X4425. Accordingly, we conclude that the 800 MHz SMR widearea licenses will be based on EAs. There are 172 EAs covering the continental United States. Because EAs have not been established for the five U.S. possessions, that is, Guam, Northern Mariana Islands, Puerto Rico, U.S. Virgin Islands, and American Samoa, we will create additional licensing regions for systems operating in these territories. Specifically, we hereby designate the  X4following additional three licensing regions: (1) Guam and the Northern Mariana Islands will be licensed as a single area; (2) Puerto Rico and the U.S. Virgin Islands, as a single area; and, (3) American Samoa as a single area. Telecellular recommends creating a single EA for Puerto Rico based on its assumption that EAs are based, in part, on commuter patterns of  Xe4citizens in particular areas.I\eHʫ yO^"'ԍTelecellular Reply Comments at 4.I As Telecellular correctly notes, in other CMRS services, we  XN4have combined Puerto Rico and the U.S. Virgin Islands as a single license area.~]Nʫ {O$'ԍSee 47 C.F.R.  24.202(a) (broadband PCS); 47 C.F.R.  90.7 (900 MHz SMR).~ 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  X 4Telecellular's recommendation. The EA Listings and the EA map are available for public" j ]0*((" 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 173257245.  X'` ` 3. EA Spectrum Blocks  Xv426.  Background. In the CMRS Third Report and Order, we observed that most commenters agreed that widearea SMR systems must have the ability to use (and reuse) a large number of channels, preferably on contiguous frequencies, to compete successfully with  X34cellular and broadband PCS.g^3ʫ {O 'ԍCMRS Third Report and Order, 9 FCC Rcd at 8045,  101.g 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  X 4of spectrum) in an MTA.1_ Zʫ {O'ԍId.1 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  X 4most common use by SMR systems to implement frequency reuse.1` ʫ {Ot'ԍId.1  X 427. Based on the record established earlier in this proceeding and the comments  X4submitted 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  Xf4per block, under our existing frequency allocation rules.Zaf~ʫ {O'ԍFurther Notice, 10 FCC Rcd at 7984,  22.Z These blocks approximate the 42 XO4channel threshold for frequency reuse previously identified in the Notice and would allow for  X:4the possibility of licensing more than one widearea provider in a market.Hb:ʫ {O'ԍId. at 79847985,  22.H 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  X4together.Ccʫ {OH'ԍId. at 7985,  22.C  X428. In the Further Notice, we expressly elected not to propose to issue a single license  X4covering the entire 10 MHz upper block of 800 MHz SMR spectrum.Cd4 ʫ {O#'ԍId. at 7984,  20.C We determined that a single 10 MHz license would preclude licensing of multiple geographic area licensees in  X4each market.1e ʫ {O&'ԍId.1 We also noted that some commenters in the CMRS proceeding disagreed with"X e0*((" the contention that 10 MHz is the minimum amount of spectrum needed to create a viable  X4competitor to cellular and PCS services.1fʫ {Ob'ԍId.1 These commenters contended that viable, competitive widearea 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  X430 MHz PCS licensee.5gZʫ {O'ԍSee id.5  Xv429.  Comments. Several commenters support the Commission's proposal of four 50 X_4channel blocks,lh_ʫ yO 'ЍAMI Comments at 2; AMTA Comments at 11; ABC Comments at 2; B&C Comments at 2; BisMan Comments at 2; Bolin Comments at 2; Dakota Comments at 2; Deck Comments at 2; Diamond "L" Comments at  {O '2; Dru Jenkinson, et al. Comments at 4; E.F. Johnson Comments at 67; E.T. Communications Co. Comments at 2; Genesee Comments at 2; Gulf Coast Comments at 1; Keller Comments at 2; Morris Comments at 2; Nielson Comments at 2; Nodak Comments at 2; RCC Comments at 2; Raserco Comments at 2; Rayfield Comments at 2; SMCI Comments at 2; Total Com Comments at 5.l because: (1) it appears to strike an appropriate balance between economies  XH4of scale and protection of competition within a geographic area;<iHf ʫ yO_'ԍAMTA Comments at 11.< (2) it approximates the 42 X14channel threshold for frequency reuse previously identified by the Commission;Rj1 ʫ {O'ԍDru Jenkinson, et al. Comments at 4.R and (3) it  X 4furthers competition by creating the opportunity to license more than one widearea provider  X 4in each market.pk ʫ {O<'ԍDru Jenkinson, et al. Comments at 4; E.F. Johnson Comments at 67.p Although Genesee supports the concept of 50channel blocks, it believes that only two such blocks should be auctioned, while the remaining 100 channels should be  X 4made available to incumbents for expansion and growth potential.>l ʫ yO'ԍGenesee Comments at 2.>  X 430. Several commenters oppose the Commission's spectrum block proposal. mX ʫ yO'ЍCellCall Comments at 12; Dial Call Comments at 5; Fisher Comments at 2; Nextel Comments at 41; OneComm Comments at 14; PCIA Comments at 12; SMR WON Comments at 55; Southern Comments at 9; Telecellular Comments at 34.  The opponents argue that: (1) 50channel blocks are too small to offer licensees a meaningful  Xy4opportunity to implement a viable widearea system;qnyʫ yO#'ԍCellCall Comments at 12; Nextel Comments at 41; IC&E Reply Comments at 5.q (2) licensing of separate blocks will not facilitate widearea licensing due to the time and expense that will be required to  XK4aggregate all spectrum blocks in a single market;ooKZʫ yOV''ԍDial Call Comments at 3; Nextel Comments at 43; OneComm Comments at 15.o (3) the Commission's proposal is based on"Ko0*((Q" a calculation of the minimum number of channels necessary to implement existing widearea  X4systems using technology specially adapted to fragmented SMR spectrum;?pʫ yOb'ԍOneComm Comments at 15.? (4) use of 50 X4channel blocks could preclude implementation of certain technologies;zqXʫ yO'ԍMotorola Reply Comments at 8; OneComm Reply Comments at 10; Nextel Comments at 42.z (5) the relatively small size of the proposed spectrum blocks may not deter speculators from participating in the  X4800 MHz SMR auctions solely for extracting settlements or for anticompetitive purposes:rʫ {O= 'ԍNextel Comments at 43; Dial Call Reply Comments at 56; Nextel Ex Parte Comments at 57. (6) the size of the proposed spectrum blocks would render any largescale relocation scheme  Xv4unworkable;isvzʫ yO 'ԍOneComm Comments at 13; Joint Commenters Reply Comments at 1415.i and, (7) the proposal is at odds with the Commission's regulatory symmetry objectives, because a widearea licensee could obtain considerably less spectrum than the  XH4competing CMRS providers in the market.tH ʫ {O'ԍOneComm Comments at 15; Southern Comments at 9; Telecellular Comments at 34; Nextel Ex Parte Comments at 57.  X 431. Other commenters believe that spectrum blocks of other sizes would be more appropriate. For example, Dial Call, Nextel, OneComm, and Telecellular support awarding a  X 4single 10 MHz widearea license.u d ʫ yO'ԍDial Call Comments at 3; Nextel Comments at 42; OneComm Comments at 14; Telecellular Comments at  {O'34; Nextel Ex Parte Comments at 57. Nextel, OneComm, Dial Call, and Motorola argue that  X 4such a license would better fulfill the Commission's stated regulatory symmetry goals.v ʫ yOD'ԍNextel Comments at 4043; OneComm Comments at 15; Dial Call Reply Comments at 4; Motorola Reply  {O 'Comments at 9; Nextel Reply Comments at 29; Nextel Ex Parte Comments at 57. Nextel contends that widearea SMR systems must have at least 10 MHz of contiguous  X 4spectrum to utilize future advanced technologies such as CDMA and GSM.Dw ʫ yOp'ԍNextel Reply Comments at 42.D E.F. Johnson and Gulf Coast argue that the entire 10 MHz block is not required by a single licensee in  Xy4order to offer service._xyʫ yO 'ԍE.F. Johnson Comments at 67; Gulf Coast Comments at 1._ CellCall and IC&E oppose awarding a single 200channel license on  Xb4the basis that it could diminish competition.\yb8ʫ yOK#'ԍCellCall Comments at 12; IC&E Reply Comments at 56.\ Instead, CellCall, supported by IC&E, contends that authorizing two 100channel block licensees in each market is a better approach, because licensing larger blocks will reduce burdens on geographic area licensees with respect  X4to relocation.zzʫ yO''ԍCellCall Comments at 13; CellCall Reply Comments at 10; IC&E Reply Comments at 5. z Pittencrief indicates its acceptance of two widearea licenses in a geographic"Xz0*((%"  X4area.H{ʫ yOy'ԍPittencrief Reply Comments at 4.H   X432. 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  X4block (comprised of 80 contiguous channels).?|Xʫ yO'ԍOneComm Comments at 13.? OneComms proposal is premised on a minimum CDMA block size of 62 channels (consisting of 50 channels of contiguous spectrum  Xv4with sixchannel guardbands on both sides).1}vʫ {O 'ԍId.1 In its reply comments, AMTA supports OneComms proposal, noting that this proposal would reduce the transactional costs associated  XH4with relocation.B~Hzʫ yOs'ԍAMTA Reply Comments at 19.B  X 4 33. In its initial comments, PCIA proposes spectrum blocks of ten channels licensed  X 4in a geographic area.< ʫ yO'ԍPCIA Comments at 13.< PCIA reasons that its channel allocation proposal would allow smaller entities to participate in widearea licensing, minimize the need for frequency swaps and relocation on a large scale basis, and allow all 280 SMR channels to be made available  X 4for widearea licensing.1 ʫ {O 'ԍId.1 Several reply commenters support PCIAs proposal on the grounds  X 4that it would: (1) provide growth potential for operators of smaller SMR systems;K , ʫ yO'ԍDCL Associates Reply Comments at 5.K (2) allow  X4larger entities to apply only for those frequencies of true interest;C ʫ yO'ԍFisher Reply Comments at 4.C and (3) protect  Xy4incumbents' rights while establishing a geographic area licensing mechanism.NyL ʫ yOv'ԍJoint Commenters Reply Comments at 15.N In its ex  Xd4parte comments, PCIA argues that the Commission should specify blocks of 60, 60, 60, and  XO420 channels.JOʫ {O!'ԍPCIA Ex Parte Comments at 6.J  X!4!34. SMR WON proposes eligibility and licensing restrictions on certain widearea spectrum blocks. In its initial comments, SMR WON recommends licensing 100 channels in two 50channel blocks, and the remaining 100 channels in six 15channel blocks and two 5channel blocks. Under SMR WON's proposal, eligibility for three 15channel blocks and one 5channel block would be limited to certain designated entities, including small businesses. "n0*((" For the other 15channel blocks and the 5channel 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  X4operators, should be ineligible for this "incumbent" block.?ʫ yO'ԍSMR WON Comments at 57.? In its reply comments, SMR WON modified its proposal to suggest that only 100 channels, in two 50channel blocks, be designated primarily for widearea licensing. Under SMR WONs modified channel block  X_4proposal, the second 50channel block would be segmented into five 10channel blocks.D_Xʫ yOh 'ԍSMR WON Reply Comments at 9.D In  XH4its reply comments, Genesee supports SMR WONs modified channel block proposal.DHʫ yO 'ԍGenesee Reply Comments at 2.D  X 4"35. If the Commission implements its proposed three channel blocks, Nextel believes the twentychannel block should be on Channels 401420; the sixtychannel block on Channels 421480; and the 120channel block on Channels 481600. This ensures that the smallest block is most proximate to smaller SMR providers operating on channels below  X 4400.N xʫ {O'ԍNextel Ex Parte Comments at 78.N 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  Xy4spectrum will facilitate relocation.Ry ʫ {O4'ԍTelecellular Ex Parte Comments at 2.R   XK4#36. Discussion. We reject commenters' proposal to license a single 10 MHz widearea 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 widearea 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.  Xe4$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 widearea licensing. We"0*((" 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 widearea 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 widearea licensing procedure. We further conclude that allocating varying size blocks will accomplish our goal of creating opportunities for widearea 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 120channel block, one 60channel block, and one 20channel block for licensing on an EA basis. The specific spectrum blocks are as follows: T ddx !ddxb( ( ( T  z  V   Spectrum Blocky  Channel Numbersy  Frequencies (Base and Mobile)z z b VV   Amy  401420my 861.0125861.4875 MHz 816.0125816.4875 MHzz Z  V<   B_  421480_ 861.5125862.9875 MHz 816.5125817.9875 MHzZ   V <c   CQ  481600Q 863.0125865.9875 MHz 818.0125820.9875 MHz  c We believe that these channel block sizes will accommodate the spectrum needs of diverse SMR providers. We anticipate that the 120channel 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 widearea service through use of a large number of channels. We also anticipate that the 60channel block will be attractive to mediumsized 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 20channel block. In this connection, the 20channel 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 widearea service. "&0*(($r"Ԍ X'ԙ` ` 4. 800 MHz SMR Spectrum Aggregation Limit  X4  X4%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 servicespecific caps for cellular and PCS, was sufficient to  X4maintain a competitive CMRS market.f {O'ԍCMRS Third Report and Order, 9 FCC Rcd at 7999,  16.f In light of this conclusion, in the Further Notice,  Xz4we tentatively concluded that an additional aggregation limit within the 800 MHz SMR  Xc4service was unnecessary.ZcZ {On 'ԍFurther Notice, 10 FCC Rcd at 7985,  23.Z  X54&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  X 4area.bH  {O'ЍSee e.g. AMTA Comments at 11; ABC Comments at 23; B&C Comments at 23; BisMan Comments at 23; Bolin Comments at 23; Dakota Comments at 23; Deck Comments at 23; Diamond L Comments at 23; E.T. Communications Co. Comments at 23; Keller Comments at 23; Nielson Comments at 23; Nodak Comments at 23; RCC Comments at 23; Raserco Comments at 23; Rayfield Comments at 23; SMCI  {O'Comments at 23; Vantek Comments at 23; CellCall Comments at 13; Dru Jenkinson, et al. Comments at 4; Morris Comments at 2; OneComm Comments at 24; Pittencrief Comments at 56; Southern Comments at 8,15;  {OX'Telecellular Comments at 4; AMI Reply Comments at 23; UTC Reply Comments at 8; AMI Ex Parte  {O"'Comments at 3; PCIA Ex Parte Comments at 6.b They support this arrangement because it would permit aggregation of spectrum for development of widearea systems and allow flexibility to meet particular market  X 4conditions,<  yO'ԍAMTA Comments at 11.< and would further our goal of promoting competition in the CMRS  X 4marketplace.  {O'ԍCellCall Comments at 13; Dru Jenkinson, et al. Comments at 5; AMI Reply Comments at 23. CellCall, Dru Jenkinson, et al., OneComm, Telecellular, and AMI contend  X 4that an aggregation limit for the 800 MHz SMR service is unnecessary.  {O|'ԍCellCall Comments at 13; Dru Jenkinson, et al. Comments at 4; OneComm Comments at 24; Telecellular Comments at 4; AMI Reply Comments at 3. 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  Xh4CMRS providers are authorized a minimum of 10 MHz of spectrum.@hx yO"'ԍCellCall Comments at 13.@ Similarly, Telecellular argues that an individual spectrum aggregation cap for the 800 MHz SMR service is not needed, because even if a widearea 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  X 4licensees.C  yO''ԍTelecellular Comments at 4.C" 0*((r"Ԍ X4ԙ'40. Numerous commenters nonetheless advocate that a limit be placed on the amount  X4of 800 MHz SMR spectrum that may be licensed to a single entity in any given market.x yOb'ЍAmerican SMR Comments at 56; Applied Comments at 12; ABC Comments at 23; B&C Comments at 23; BisMan Comments at 23; Bolin Comments at 23; Dakota Comments at 23; Deck Comments at 23; Diamond "L" Comments at 23; E.T. Communications Comments at 23; Gulf Coast Comments at 1; Kay Comments at 4,6; Keller Comments at 23; Morris Comments at 2; Nielson Comments at 23; Nodak Comments at 23; Pittencrief Comments at 56; RCC Comments at 23; Raserco Comments at 23; Rayfield Comments at 23; Southern Comments at 23; SMCI Comments at 23; Total Com Comments at 5,7; SBA Comments at 25; UTC Reply Comments at 8; Vantek Comments at 23. Some of these commenters support an aggregation limit because they believe that allowing a  X4single entity to acquire the entire upper 10 MHz block would adversely affect competition. yOt 'ЍAmerican SMR Comments at 56; Pittencrief Comments at 5; Southern Comments at 8; Kay Reply Comments at 4,6. 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  X_4not obtain any additional spectrum in the upper 10 MHz block. ;_`  yOp'ԍSBA Comments at 25.;  X14(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  X 4market. e  yOv'ԍE.F. Johnson Comments at 6; E.F. Johnson Reply Comments at 5.e Applied contends that there should be at least three licensees per market with each  X 4licensee limited to a total of 66 channels.?  yO'ԍApplied Comments at 12.? Other commenters argue that there should be a 7.5 MHz spectrum aggregation limit, consisting of three 50channel blocks, which would  X4permit at least two licensees per market. yOQ'ЍABC Comments at 23; B&C Comments at 23; BisMan Comments at 23; Bolin Comments at 23; Dakota Comments at 23; Deck Comments at 23; Diamond L Comments at 23; E.T. Communications Comments at 23; Keller Comments at 23; Nielson Comments at 23; Nodak Comments at 23; Pittencrief Comments at 56; RCC Comments at 23; Raserco Comments at 23; Rayfield Comments at 23; SMCI Comments at 23; Vantek Comments at 23. Pittencrief contends that if a single entity is permitted to acquire the entire 14 MHz of 800 MHz SMR spectrum, provision of traditional  Xb4SMR service would decrease.Bb yO$'ԍPittencrief Comments at 6.B Pittencrief suggests that the Commission could remove the  XK4aggregation limit, if appropriate, after five years.7KP {OL''ԍId.7 Morris and UTC believe that one licensee"K0*((r"  X4should have no more than two 50channel blocks.V yOy'ԍMorris Comments at 2; UTC Reply Comments at 8.V Morris contends that such a limit would  X4prevent spectrum warehousing and expedite delivery of new services to the public.=X yO'ԍMorris Comments at 2.= UTC contends that such a limit would ensure that consumers would have an array of services from  X4which to select.@ yOT'ԍUTC Reply Comments at 8.@ Gulf Coast contends that a single entity should be limited to a single 50 X4channel block in a particular market.Ax yO 'ԍGulf Coast Comments at 1.A By contrast, Southern and Total Com propose  X4spectrum caps for the 800 MHz SMR service.Z yOF 'ԍSouthern Comments at 8; Total Com Comments at 5,7.Z Southern suggests a 140channel limit, coupled with a limit that a single entity not be permitted to bid on more than two 50channel blocks within a market, in order to preserve a competitive environment for all SMR licensees  XH4seeking to establish a widearea system.BH yO'ԍSouthern Comments at 8,14.B SBA proposes a 10 MHz spectrum cap in any  X14particular market, in order to prevent monopolization.;1(  yO 'ԍSBA Comments at 25.; Total Com advocates a 200channel spectrum cap for the 800 MHz band, to allow for expansion by incumbents and entry by new  X 4entities with new technology.B  yOl'ԍTotal Com Comments at 5,7.B  X 4)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  X 4competition among mobile service providers.r H  {O'ԍCMRS Third Report and Order, 9 FCC Rcd at 80098035,  3777.r 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  Xd4statutory requirement for comparable technical rules applies.Cd {O 'ԍId. at 8012,  43.C One of the rationales for the 45 MHz CMRS spectrum aggregation limit is to prevent CMRS providers from restricting  X64competition by aggregating spectrum.H6l {OS$'ԍSee id. at 8100,  238.H In the Further Notice, we indicated our belief that additional limitations on aggregation of SMR spectrum were unnecessary to ensure a  X 4competitive CMRS market.Z  {O''ԍFurther Notice, 10 FCC Rcd at 7985,  23.Z" 0*((r"Ԍ X4ę*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 widearea 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 servicespecific 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.  X 4+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  Xd4all EA licenses) obtain all three of the EA licenses in a market.d {O'ԍWe note, however, that in the Second Further Notice of Proposed Rule Making, in PR Docket No. 93144, we have proposed to increase the spectrum in the 800 MHz band designated for SMR use by an additional 3.75  {Oo'MHz, consisting of the 150 Contiguous General Category channels. See Second Further Notice of Proposed Rule  {O9'Making, infra  255394. In light of the heavy congestion of these channels and our proposed special provisions for designated entities, we do not believe the availability of additional SMR spectrum and the amount thereof will alter our conclusions here. 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  X4remain subject to the 45 MHz CMRS spectrum aggregation limit<ZF {O'ԍSee 47 CFR  20.6. Under Section 20.6 of the Commission's rules, an entity may hold up to 45 MHz of CMRS spectrum through a combination of broadband PCS, cellular, and SMR spectrum, provided that such holdings do not violate aggregation limits within these services.< and to the competitive  X4component of the public interest standard.h  {O 'ԍSee 47 U.S.C.  332(c)(1)(C). Under Section 332(c)(1)(C) of the Communications Act, as part of making a public interest determination regarding common carrier treatment of CMRS providers, the Commission "shall consider whether the proposed regulation (or amendment thereof) will promote competitive market conditions, including the extent to which such regulation (or amendment) will enhance competition among providers of  {O,#'commercial mobile services." Id.  X' ` ` 5. Licensing in Mexican and Canadian Border Areas  X4  X4,45.  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,"~ 0*((zr" 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 nonSMR services elsewhere. Moreover, these channels are offset 12.5 kHz below the corresponding SMR channels in nonborder  X4areas.H {O'ԍSee 47 CFR  90.619(a).H 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  Xv4the lower 80 channels, and some additional channels outside of either group.BvZ {O 'ԍId.,  90.619(b).B In the Further  Xa4Notice, we tentatively concluded that attempting to create different allocations in border areas would be administratively unworkable and, thus, proposed to license widearea spectrum  X54blocks on a uniform basis without distinguishing border from nonborder areas.Z5 {O 'ԍFurther Notice, 10 FCC Rcd at 7988,  28.Z We further proposed to license the channels in border areas not contained in the widearea spectrum block on a channelbychannel basis under the same rules we adopt for the lower 80 channels  X 4in nonborder areas.; ~ {O'ԍId.,  29.;  X 4-46.  Comments. Nextel and PCIA support the Commission's tentative conclusion that attempting to create different allocations in border areas would be administratively  X4unworkable.Y yOU'ԍNextel Comments at 5152; PCIA Comments at 1112.Y 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  Xf4contiguous spectrum for such areas.Yf yO'ԍPCIA Comments at 12; Polar Reply Comments at 56.Y Pittencrief agrees with the Commission's licensing  XO4proposal for the Canadian and Mexican border areas.BO0  yO0'ԍPittencrief Comments at 9.B  X!4.47. Other commenters suggest alternative channel assignment mechanisms for the border areas. AMI suggests that in the San Diego market, two widearea blocks of 45 channels apiece with two of the 50 nonborder area blocks would serve the unique needs of  X4the market.:  yOM#'ԍAMI Comments at 5.: Genesee, AMI, PCIA, and Pittencrief contend that intercategory sharing should be permitted in the border areas in order to compensate for the severe shortage of 800  X4MHz SMR spectrum in these areas.P  {O&'ԍGenesee Comments at 2; AMI Comments at 5; AMI Ex Parte Comments at 1115; PCIA Ex Parte  {Oy''Comments at 20; Pittencrief Ex Parte Comments at 2. AMI further contends that intercategory sharing is"!0*((Br" essential for growth of SMR systems in these areas because there are few available  X4channels.I {Ob'ԍAMI Ex Parte Comments at 7.I The Coalition urges the Commission to allocate a minimum of forty 800 MHz  X4SMR channels for local use in all border areas.DZ yO'ԍCoalition Comments at 1920.D 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, onethird of the available 800 MHz SMR spectrum should be designated for widearea 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  XH4fashion as the 800 MHz SMR channels in other areas.HH yO 'ԍPittencrief Reply Comments at 7.H None of the commenters, however, addresses the issue of how to license channels in border areas that are not contained in the widearea spectrum block.  X 4/48. Discussion. We conclude that the EA spectrum blocks should be licensed on a uniform basis, without distinguishing border from nonborder 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 widearea 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  X4areas, but not included within the EA spectrum blocks, until the Second Further Notice of  X4Proposed Rule Making in PR Docket No. 93144.  X'  Xi' B.` ` Rights and Obligations of EA Licensees  X;'` ` 1. Operational Flexibility  X$4  X 4049.  Background. In the Further Notice, we stated that a key element in any new licensing scheme for widearea 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 widearea SMR licensees in the 800 MHz band should be authorized to"!"z0*((? r" construct stations at any available site and on any available channel within their respective  X4spectrum blocks._ {Ob'ԍFurther Notice, 10 FCC Rcd at 79887989,  30._ We also proposed to allow geographic area licensees to selfcoordinate 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 cochannel  X4interference protection and emission mask requirements.:Z {O'ԍId. at 7989.:  X_4150.  Comments. The majority of commenters who addressed this issue support the Commission's proposal to allow geographic area licensees to selfcoordinate system  X14modifications.Z1 {O 'ЍAMI Comments at 9; AMTA Comments at 1112; CellCall Comments at 15; Dru Jenkinson, et al. Comments at 6; IC&E Reply Comments at 6; McCaw Comments at 7; OneComm Comments at 24; Total Com Comments at 7. AMTA and IC&E believe that selfcoordination will help to alleviate the  X 4current disparities between 800 MHz SMR licensees and other CMRS providers.Y  yO'ԍAMTA Comments at 1112; IC&E Reply Comments at 6.Y CellCall believes that regulatory symmetry requires that geographic area licensees be permitted to self X 4coordinate their system modifications.C  yO;'ԍCellCall Comments at 1415.C AMTA contends that selfcoordination is largely illusory, since the widearea licenses will be awarded in a heavily congested spectrum  X 4environment.< .  yO'ԍAMTA Comments at 13.< AMI suggests that any channels shared by a widearea licensee and  X 4incumbents should be coordinated by a certified coordinator.:  yO'ԍAMI Comments at 9.: Dru Jenkinson, et al. suggests that incumbent cochannel licensees also should receive a copy of notice and certification of  X{4compliance regarding selfcoordinated system modifications.R{N  {Oz'ԍDru Jenkinson, et al. Comments at 7.R 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  X64recordkeeping requirements applicable to cellular carriers.<6 yO"'ԍMcCaw Comments at 7.<  X4251. Other commenters are concerned that as a consequence of selfcoordination by geographic area licensees, incumbents will be subjected to additional interference that will"#p0*((r"  X4continue for an extended period of time before incumbents can obtain some type of relief.w yOy'ЍCourtesy Comments at 12; Coalition Comments at 17.w Southern observes that because SMR licensees already have considerable operational flexibility within their widearea systems, there is no great benefit bestowed by the  X4Commissions proposal.FX yO'ԍSouthern Reply Comments at 14.F  X4352. 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  X 4technical and operational rules$  yO'ԍThese technical and operational requirements include, but are not limited to, ensuring that the EA licensee's operations do not have a significant effect on the environment, as defined in Part 1 of our Rules, and  {OC'comply with applicable air safety requirements, as outlined in Part 17 of our Rules. See 47 C.F.R.  1.1301 et  {O 'seq. and 47 C.F.R.  17.1 et seq. 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.  X4453. 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  X4obligation 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.  X9' ` ` 2. Spectrum Management Rights Acquisition and Recovery of Channels Within Spectrum Blocks(#  X 4  X4554.  Background. In the Further Notice, we recognized that the operational flexibility afforded to widearea 800 MHz SMR licensees would be limited by the large number of"$0*((r" 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, widearea licensing should confer other valuable rights that would enhance a licensee's ability to establish widearea 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 widearea licensee; and, (2) if a widearea licensee negotiates to acquire an incumbent system by assignment or transfer, the assignment or transfer presumptively will be considered in the  X 4public interest.Z  {O 'ԍFurther Notice, 10 FCC Rcd at 7989,  31.Z  X 4655.  Comments. AMI, AMTA, CellCall, and OneComm agree that spectrum recovered from an incumbent by the Commission automatically should revert to the widearea licensee  X 4that obtained the rights to that spectrum. Z yO'ԍAMI Comments 67; AMTA Comments at 12; CellCall Comments at 16; OneComm Comments at 25. AMI believes that this is a key incentive for  X 4seeking an EA spectrum block through competitive bidding.<  yOB'ԍAMI Comments at 67.< 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  Xb4their geographic areas.<bz yO'ԍAMTA Comments at 12.< CellCall believes that such a provision would provide the widearea  XK4licensee with a useful right not otherwise available under the Commissions rules.@K  yO'ԍCellCall Comments at 16.@ 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  X4EA spectrum block.P {O:'ԍNextel Ex Parte Comments at 1415.P  X4756. On the other hand, Applied, Southern, and Total Com oppose automatically  X4awarding recovered spectrum to geographic area licensees.u,  yO#'ԍApplied Comments at 1718; Southern Comments at 16; Total Com Comments at 17.u Applied believes that giving recovered channels to geographic area licensees automatically would unlawfully divest those  X|4persons on waiting lists for frequencies of their procedural rights.B|  yO&'ԍApplied Comments at 1718.B Southern believes that such provision would foreclose any opportunity for other interested parties to apply for"e%L 0*((r"  X4unused channels, undermine our current finders preference policy, and inhibit competition.@ yOy'ԍSouthern Comments at 16.@  X4857. Several commenters express support for the Commission's proposal that any request for transfer or assignment of an incumbent authorization to the EA licensee  X4presumptively shall be considered in the public interest.X {O'ԍAMI Comments at 7; AMTA Comments at 13; CellCall Comments at 16; Dru Jenkinson, et al. Comments at 8; Pittencrief Comments at 10. AMTA believes that such presumptive treatment is appropriate and may help to speed clearing those channels designated  Xv4primarily for widearea use.<v yO 'ԍAMTA Comments at 13.< Similarly, Dru Jenkinson, et al. believe that such a  Xa4presumption will conserve scarce agency resources.RaB {OT'ԍDru Jenkinson, et al. Comments at 8.R Although several commenters support including such a provision, some express concern that it not preclude incumbents from  X34transferring or assigning their authorizations to parties other than the EA licensee.3 yO'ԍAMI Comments at 7; AMTA Comments at 13; Fresno Comments at 7; Pittencrief Comments at 10. Specifically, AMTA urges that incumbents' transfer or assignment of channels to a third party  X 4not be presumed to be contrary to the public interest.< d  yO'ԍAMTA Comments at 13.< 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  X 4the public interest.@  yOe'ԍSouthern Comments at 17.@ Applied expressly opposes the Commission's proposal as violative of  X 4Section 310 of the Communications Act.I  yO'ԍApplied Comments at 1112. I  X{4958. Applied also argues that our proposal would not comply with Section 314 of the  Xd4Communications Act.7d {O) 'ԍId.7 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 . . ."&0*((\r" [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  X4any line of commerce.A yOK'ԍ47 U.S.C.  314.A (#` 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  Xv4requires a casebycase determination of the competitive effects of such an acquisition.CvX yO 'ԍApplied Comments at 1112. C  XH4:59.  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 widearea blocks. As a direct consequence of our granting EA licenses which include these rights, we conclude that waiting lists, which are a byproduct of channelbychannel 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 widearea 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.  X4;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"  X4within 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  X4will be addressed in a future rule making proceeding.g {O.'ԍCMRS Third Report and Order, 9 FCC Rcd at 8162,  398.g 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  XP4following the adoption of this First Report and Order. As a result, the EA licensee will have the exclusive right to recover unconstructed or nonoperational channels on blocks for which it is licensed.  X4<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"!'z0*((? r" MHz SMR service in particular is the relevant market for assessing the competitive impact in  X4this context. Applied further argues that a certain number of licensees is needed in each  X4market to keep it competitive.A yOK'ԍApplied Comments at 12. A We, however, have declined to adopt a spectrum aggregation  X4limit for the 800 MHz SMR service (as discussed  4244 supra) .  X4=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  X34Act.3X {O< 'ԍAs discussed in  131132 infra, on August 10, 1996, all EA licensees presumptively will be CMRS. 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 incumbenttoEA 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.  X6' ` ` 3. License Term and Renewal Expectancy   X4>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 tenyear license term and be afforded a renewal expectancy when its current license term expires,  X4provided it is able to demonstrate that it: (1) has provided "substantial" service(Z yO`'ԍWe have defined "substantial" service as service that is sound, favorable, and substantially above a level of  {O('mediocre service, which would barely warrant renewal. See CMRS Third Report and Order, 9 FCC Rcd at 8157, n. 712.( during the license term; and, (2) has complied with applicable Commission rules and policies, and the  X4Communications Act.g  {OT!'ԍCMRS Third Report and Order, 9 FCC Rcd at 8157,  386.g 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 Xi4year license term or the renewal expectancy during the statutory transition period.Ai {O$'ԍId. at 8157, n.715.A  X;4?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"&(0 0*((/r" 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  Xv4with our findings in the CMRS Third Report and Order.  XJ' ` ` 4. Treatment of Incumbent Systems  X '` `  a.Mandatory Relocation  X 4  X 4@65.  Background. In the Further Notice, we sought comment regarding the potential effect of our widearea licensing proposal on the operations of incumbent SMR licensees  X 4occupying the upper 10 MHz block. We tentatively concluded that incumbent SMR systems should not be subject to mandatory relocation to new frequencies pursuant to Nextels band X4clearing proposal.j yO 'ԍIn the CMRS proceeding, Nextel proposed that existing SMR stations on the upper 10 MHz block would be required to "retune" their equipment to operate on other 800 MHz channels for which SMR licensees are eligible. Nextel further proposed that the cost of retuning would be paid by the widearea licensee and that no licensee would be forced to move off its frequencies unless acceptable alternative frequencies were available.  {O-'See CMRS Third Report and Order, 9 FCC Rcd at 80408041,  90 (citing Nextel Comments in PP Docket No. 93252 at 1112).j 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 widearea blocks on a onetoone basis, which could require us to become involved in decisions about which incumbents are  X!4required to relocate and which are not.f!B {O'ԍFurther Notice, 10 FCC Rcd at 79897991,  3234.f  X4A66. We also expressed concern in the Further Notice that mandatory relocation would inevitably draw the Commission into disputes between licensees over substitutability of  X4channels, 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 widearea SMR systems (and are likely to bid on widearea 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  X&4regarding relocation should be left to the parties and the marketplace.K& {O&'ԍId. at 7991,  34, 35.K  X4 ")f 0*((r"Ԍ X4B67. In the Further Notice, we sought comment on the feasibility of using a mandatory  X4relocation 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  X4time 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 widearea licensee could request mandatory relocation, provided that sufficient spectrum is available and  X|4the incumbent receives comparable facilities._| {O'ԍFurther Notice, 10 FCC Rcd at 79917992,  36._  XN4 C68.  Comments. Most commenters oppose mandatory relocation pursuant to a band X74clearing approach such as proposed by Nextel.7Z yOB 'ԍAmerican Industrial Comments at 2; API Comments at 4; Applied Comments at 10; Atlantic Comments at 24; ABC Comments at 3; B&C Comments at 3; Bisman Comments at 3; Bolin Comments at 3; Dakota Comments at 3; Deck Comments at 3; Diamond "L" Comments at 3; E.T. Communications Comments at 3; Keller Comments at 3; Morris Comments at 3; Nielson Comments at 3; Nodak Comments at 3; RCC Comments at 3; Raserco Comments at 3; Rayfield Comments at 3; SMCI Comments at 3; Vantek Comments at 3; Brandon Comments at 2; CellCall Comments at 23; Centennial Comments at 23; Chadmoore Comments at 24; CICS  {O'Comments at 4; Cumulous Comments at 1112; Dial Call Comments at 34; Dru Jenkinson, et al. Comments at 7; Ericsson Comments at 6; Fisher Comments at 2; Genesee Comments at 5; Gulf Coast Comments at 2; Lagorio Comments at 59; Lausman Comments at 3; Luczak Comments at 6; Nashtel Comments at 4; Palmer Comments  {OL'at 5; Parkinson Electronics, et al. Comments at 78; PCIA Comments at 1011; Pittencrief Comments at 11; Coalition Comments at 1213; SMR WON Comments at 3840; Supreme Comments at 2; Sutter Comments at 1; Total Com Comments at 7; US Sugar Comments at 5; UTC Comments at 5; DCL Associates Reply Comments at 3; Eden Reply Comments at 5; Fresno Reply Comments at 6; IC&E Reply Comments at 78; Joint Commenters Reply Comments at 78; Kay Reply Comments at 12; Lachowicz Reply Comments at 1; Phipps Reply  {O6'Comments at 3; Qualicom Reply Comments at 2; Racom, Inc., et al. Reply Comments at 12; Russ Miller Reply Comments at 9; Southern Reply Comments at 1314; Triangle Reply Comments at 910; Voicelink Reply  {O'Comments at 12; D & G Communications Ex Parte Comments at 1; Galesburg Ex Parte Comments at 1;  {O'Jamestown Ex Parte Comments at 1; Pacific Gas Ex Parte Comments at 7; Joint Utilities Ex Parte Comments at  {O\'1112; Louisville Ex Parte Comments at 9. These commenters argue that: (1) there are  X 4no "fully comparable alternative frequencies" to which incumbents can be relocated;   {O'ԍApplied Comments at 10; Chadmoore Comments at 24; Cumulous Comments at 12; Dru Jenkinson, et al. Comments at 7; Ericsson Comments at 6; Lagorio Comments at 7; Coalition Comments at 13; SMR WON  {Oi'Comments at 42; Ericsson Reply Comments at 2; Kay Reply Comments at 12; Racom, Inc., et al. Reply  {O3'Comments at 12; Supreme Reply Comments at 3; IC&E Reply Comments at 9; FedEx Ex Parte Comments at 2;  {O'Louisville Ex Parte Comments at 35, 7, 10, 13; Group of 66 Ex Parte Comments at 10; AI & ME Ex Parte  {O 'Comments at 12; Earl Ex Parte Comments at 2; Fresno Ex Parte Comments at 10; US Sugar Ex Parte Comments at 1.  (2) such an approach is anticompetitive, because the relocated incumbents will be competing  X 4with the geographic area licensees benefiting from such relocation;P\ P yO$'ԍAtlantic Comments at 2; Centennial Comments at 3; Galesburg ex parte Comments at 2; D & G  {O%'Communications ex parte Comments at 1; C & S Ex Parte Comments at 2; Communications Center Ex Parte  {O&'Comments at 2; Sea Coast Ex Parte Comments at 1.P (3) relocation would adversely affect incumbents' operations, with such consequences as disruption of customer" *t0*(( r"  X4service and loss of customer confidence and goodwill; yOy'ԍBrandon Comments at 3; CellCall Comments at 23; Centennial Comments at 3; Fisher Comments at 2; Genesee Comments at 3; Luczak Comments at 67; Nashtel Comments at 4; CICS Reply Comments at 2; DCL Associates Reply Comments at 3; Ericsson Reply Comments at 2; Joint Commenters Reply Comments at 78; Lachowicz Reply Comments at 1; Luczak Reply Comments at 45; Qualicom Reply Comments at 2; PEC Mobile  {O'Ex Parte Comments at 2; Joint Utilities Ex Parte Comments at 12; Louisville Ex Parte Comments at 5, 10;  {Oc'Group of 66 Ex Parte Comments at 7; AI & ME Ex Parte Comments at 12; Bolin Ex Parte Comments at 1; C  {O-'& S Ex Parte Comments at 1; CellCall Ex Parte Comments at 2; RACOM Ex Parte Comments at 4, 6; RCS Ex  {O'Parte Comments at 12; Sea Coast Ex Parte Comments at 1; Southern Ex Parte Comments at 79; Spectrum Ex  {O'Parte Comments at 1. (4) relocation lacks an adequate  X4policy basis, given its resulting disruption to existing operations;R yO< 'ԍCICS Comments at 4; Brandon Comments at 2.R (5) relocation would be  X4unfair and inequitable to incumbents; 2  yO 'ԍBrandon Comments at 2; CellCall Comments at 23; Chadmoore Comments at 2425; Cumulous Comments at 11; Ericsson Comments at 6; Lausman Comments at 3; US Sugar Comments at 5; Fisher Reply Comments at  {OE'7; PCIA Reply Comments at 19; Southern Reply Comments at 31; D & G Communications Ex ParteĠComments  {O'at 1; PEC Mobile Ex Parte Comments at 1; FedEx Ex Parte Comments at 12; Jamestown Ex Parte Comments  {O'at 1; Galesburg Ex Parte Comments at 1; Groups of 66 Ex Parte Comments at 5; ABC Ex Parte Comments at 1;  {O'Lectro Ex Parte Comments at 1. and, (6) relocation would decrease the value of  X4incumbent systems. {O'ԍParkinson Electronics, et al. Comments at 8; PCIA Comments at 11; SMR WON Comments at 3840; Triangle Reply Comments at 10. AMTA notes that with few exceptions, traditional SMR operators strongly oppose such an approach, and, instead recommend continued reliance on market  X4forces to define the future SMR landscape.<  yOJ'ԍAMTA Comments at 17.<  X_4D69. Nextel and Spectrum, on the other hand, support a bandclearing mandatory  XH4relocation approach.^H yO'ԍNextel Comments at 27; Spectrum Reply Comments at 13.^ 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  X 4essential to regulatory symmetry.D , yO'ԍNextel Reply Comments at 29.D Nextel further believes that such widescale retuning is  X 4feasible.A  yOp"'ԍNextel Comments at 3840.A Spectrum believes that without mandatory relocation of incumbents, the newly created widearea licenses would not provide existing licensees relief from the current licensing process, and that geographic area licensees would be unable to introduce advanced  X 4technologies in the 800 MHz SMR service to compete with other CMRS licensees.G L yO&'ԍSpectrum Reply Comments at 13.G AMTA notes that certain existing widearea applicants and licensees argue that the longterm" +0*(( r" economic viability of widearea systems requires clear, contiguous spectrum which can  X4support the more spectrally efficient technologies currently under development.< yOb'ԍAMTA Comments at 18.<  X4E70. As a general matter, numerous commenters believe that decisions regarding  X4relocation should be left to the parties and the marketplace.xX yO'ԍAMTA Comments at 1920; Atlantic Comments at 2; ABC Comments at 3; B&C Comments at 3; Dakota Comments at 3; Deck Comments at 3; Diamond "L" Comments at 3; E.T. Communications Comments at 3; Keller Comments at 3; Morris Comments at 3; Nielson Comments at 3; Nodak Comments at 3; RCC Comments at 3; Raserco Comments at 3; Rayfield Comments at 3; SMCI Comments at 3; Vantek Comments at 3; CICS Comments at 5; Dial Call Comments at 6; Genesee Comments at 3; Palmer Comments at 5; Pittencrief Comments at 11; SMR WON Comments at 41; UTC Comments at 5; Fisher Reply Comments at 7; CellCall Reply Comments at 15; IC&E Reply Comments at 78.  CellCall believes that voluntary relocation of incumbent licensees provides the most flexible, efficient, and equitable means to  Xv4obtain contiguous spectrum and to promote the use of efficient wireless technologies.Fv yO'ԍCellCall Reply Comments at 10.F CellCall contends that frequency swaps between upper band and lower band licensees should  XH4be permitted.@H(  yO!'ԍCellCall Comments at 14.@ In fact, several commenters argue that the Commission should not become involved in negotiations between geographic area licensees and incumbents regarding  X 4relocation.  yO'ԍAmerican Industrial Comments at 2; Applied Comments at 910; Ericsson Comments at 7; SBA Comments at 2627.  X 4F71. Other commenters argue that voluntary measures alone will not result in the relocation of a sufficient number of incumbents sufficient to implement our widearea 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  Xb4symmetry between 800 MHz SMR licensees and other CMRS providers.>b yO# 'ԍNextel Comments at 32.> OneComm contends that if the Commissions 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 Commissions proposal could provide an even stronger economic incentive for incumbent  X4licensees to hold out and demand abovemarket prices.B yO@&'ԍOneComm Comments at 1819.B AMTA is convinced that without some form of mandatory negotiation among the parties, creation of contiguous spectrum for",00*((nr"  X4widearea licensing would not be accomplished.B yOy'ԍAMTA Reply Comments at 10.B Dial Call believes that voluntary  X4negotiations alone are insufficient inducements.FX yO'ԍDial Call Reply Comments at 8.F ITA/Alliance believe that voluntary  X4retuning provisions will not be sufficient to create regulatory parity.J yOk'ԍITA/Alliance Reply Comments at 12.J Spectrum opines that  X4voluntary negotiations are insufficient to clear the upper 10 MHz block.Gx yO 'ԍSpectrum Reply Comments at 34.G  X4G72. With respect to particular mandatory relocation schemes, the commenters propose a variety of alternatives. Nextel advocates requiring all incumbent licensees on the upper 10  X_4MHz block to relocate within a defined window (e.g., one year), provided that alternative  XJ4spectrum is available and the widearea licensee pays for the full cost of relocation.>J yO'ԍNextel Comments at 33.> AMTA and OneComm suggest a mechanism where mandatory relocation is triggered by partial band clearing on a voluntary basis. Under this proposal, a widearea licensee would be required to  X 4relocate or otherwise clear a percentage of incumbents (e.g., 70 percent) off its spectrum block through voluntary negotiations. Once this threshold is reached, the widearea licensee then could require remaining incumbents to relocate, provided that sufficient spectrum is  X 4available and the incumbent is fully compensated.`  yO 'ԍAMTA Reply Comments at 2225; OneComm Comments at 1011.` 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  Xf4after a defined period (e.g., one year).@f(  yO?'ԍMotorola Comments at 17.@ 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  X#4from such relocation.B#  yO 'ԍSMR WON Comments at 4445.B  X '  X4 H73. 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 widearea licensing"-H 0*((r"  X4approach we are implementing for the 800 MHz SMR service. {Oy'ԍSee e.g. Nextel Comments at 31, 32; OneComm Comments at 8, 1819; AMTA Reply Comments at 10; Dial Call Reply Comments at 8; ITA/Alliance Reply Comments at 12; Spectrum Reply Comments 3. 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  X4proved unsuccessful.(" {Ow'ԍSee Redevelopment of Spectrum to Encourage Innovation in the Use of New Telecommunications  {OA 'Technologies, ET Docket No. 929, First Report and Order and Third Notice of Proposed Rule Making, 7 FCC  {O 'Rcd 6886 (1992); Second Report and Order, 8 FCC Rcd 6495 (1993); Third Report and Order and  {O 'Memorandum Opinion and Order, 8 FCC Rcd 6589. 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 narrowlytailored mandatory relocation mechanism is essential to implement a widearea licensing scheme in the mature 800 MHz SMR industry.  X 4I74. 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  X 4provide an incumbent licensee with "comparable facilities" (as discussed in the Second  X 4Further 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  Xh4channels (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.  X4J75. Prior to the upper 10 MHz block auction and commencement of the mandatory  X4relocation 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  X4General Category channels. {O^!'ԍSee Licensing of General Category Frequencies in the 806809.750/851854.750 MHz Bands, DA 952119,  {O("'Order, released October 4, 1995. As discussed in further detail, infra, we are designating the General Category channels for exclusive SMR use. Under both the Commissionimposed freeze on the 800 MHz SMR Category channels and the Bureauimposed 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".n 0*((r" modifications to licensed facilities, provided such assignments and transfers are designed to accommodate marketdriven, voluntary relocation arrangements between incumbents and potential EA applicants, and do not change the 22 dBu service contour of the facilities to be relocated.  X4K76. 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 marketdriven 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 widearea licensing scheme for the upper 10 MHz block by allowing existing  X4licensees to begin the relocation process quickly. As of the adoption of this First Report and  X~4Order, we will not except new requests filed pursuant to the showing described in the CMRS  Xi4Third Report and Order.ii {O'ԍCMRS Third Report and Order, 9 FCC Rcd 80478048,  108.i  XT'  X=4 L77. In addition to encouraging preauction negotiation, we adopt the following relocation mechanism, that will go into effect postauction. 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 oneyear 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. "W%/Z0*((#r"Ԍ X4M78. 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 systemwide 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.  XK4N79. If no agreement is reached between the EA licensee and incumbents during the first phase, the EA licensee may initiate a twoyear mandatory negotiation period, during  X4which 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 postrelocation 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  Xh$4Second Further Notice of Proposed Rule Making in PR Docket No. 93144 on how responsibilities for relocation should be shared by all EA licensees benefitting from relocation  X<&4of the same incumbents and the definition of "comparable facilities." "%'00*((%r"Ԍ X' ` `  b. Incumbent Operational Flexibility  X4 O80.  Background. In the Further Notice, we tentatively concluded that in those situations in which incumbents continue operating on alreadylicensed facilities, they should not be allowed to expand beyond their existing service areas on those channels designated for  X4widearea licensing without the consent of the widearea licensee.Z {O'ԍFurther Notice, 10 FCC Rcd at 7992,  37.Z We also noted that although we traditionally have applied the protected service area concept to noncellular 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  X3410 MHz block to construct stations anywhere within a defined protected service area.C3Z {O> 'ԍId. at 7993,  40.C  X 4P81.  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  X 4spectrum block only with the consent of the EA licensee.X  yOt'ԍCellCall Comments at 24; OneComm Comments at 25.X Several commenters, however, express concern that such an approach could affect adversely incumbents' operations because:  X 4(1) the expansion and operating potential of incumbent licensees would be limited;A\ | yO'ԍApplied Comments at 1314; CUI Comments at 7; CICS Comments at 3; Ericsson Comments at 4;  {O'Southern Comments at 18; Total Comments at 8; see also D & G Communications Ex Parte Comments at 1;  {Oh'Galesburg Ex Parte Comments at 1.A and, (2) the EA licensees consent to incumbent expansion is not likely to be given, since it has  X{4every incentive to expand its own operations as quickly as possible.X{ yO'ԍEricsson Comments at 4; Southern Comments at 18.X SBA and DCL Associates believe wide operational flexibility should be extended to all SMR licensees,  XM4whether they are widearea or local licensees._M0  yO.'ԍSBA Comments at 29; DCL Associates Reply Comments at 7._  X4Q82. 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 cochannel separation standard could be reduced in favor of incumbents within an EA licensee's coverage area, unless the  X4EA licensee already had constructed cochannel facilities at a particular site.  yO4$'ԍABC Comments at 4; B&C Comments at 4; BisMan Comments at 4; Bolin Comments at 4; Brandon Comments at 2; Dakota Comments at 4; Deck Comments at 4; Diamond L Comments at 4; E.T. Communications Comments at 4; Keller Comments at 4; Morris Comments at 4; Nielson Comments at 4; Nodak Comments at 4; RCC Comments at 4; Raserco Comments at 4; Rayfield Comments at 4; SMCI Comments at 4; Vantek Comments at 4. Similarly,"1p0*((>r" 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 widearea 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 finders  Xv4preferences for bringing these violations to the Commissions attention.Av yO'ԍCoalition Comments at 16.A 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  X 4promptly and efficiently.@ X yO'ԍCellCall Comments at 24.@ 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 widearea licensee could not construct a transmitter at the new site and that the new site would not materially extend the interference  X4protection contour afforded the incumbent.C yO)'ԍTelecellular Comments at 8.C  Xb4R83. With respect to the operational flexibility that should be afforded to incumbents,  XK4several commenters argue that incumbent licensees should be permitted to relocate their  X44facilities so long as they do not alter their 22 dBu contour.~4x yO]'ԍABC Comments at 4; B&C Comments at 4; BisMan Comments at 4; Bolin Comments at 4; Brandon Comments at 2; Dakota Comments at 4; Deck Comments at 4; Diamond L Comments at 4; E.T. Communications Comments at 4; Keller Comments at 4; Morris Comments at 3; Nielson Comments at 4; Nodak Comments at 4; RCC Comments at 4; Raserco Comments at 4; Rayfield Comments at 4; SMCI Comments at 4;  {O}'Vantek Comments at 4; AMI Ex Parte Comments at 34; AMTA Ex Parte Comments at 2, Supp.1; PCIA Ex  {OG'Parte Comments at 67; Pittencrief Ex Parte Comments at 23; Small Business SMR Ex Parte Comments at 8;  {O'Southern Ex Parte Comments at 13. They contend that incumbents should be allowed: (1) to make minor system modifications, such as moving a transmitter  X4because of loss of site or other siterelated problems;  yOu!'ԍCellCall Comments at 24; Fisher Comments at 3; Pittencrief Comments at 12; Fisher Reply Comments at 9. or, (2) to establish new fillin stations  X4in certain limited circumstances (e.g., no expansion of the 40 dBu contour, or no expansion of  X4the 22 dBu contour).h \ yO%'ԍMotorola Comments at 20; OneComm Comments at 25; Nextel Comments at 34; Dial Call Reply  {Oi&'Comments at 11; Telecellular Reply Comments at 23; see also PEC Mobile Ex Parte Comments at 2; Russ  {O3''Miller Ex Parte Comments at 2; Southern Ex Parte Comments at 1011.h They further argue that granting this operational flexibility to"2: 0*((:r"  X4incumbents would not impose any additional operational restrictions on the EA licensee.K  {Oy'ԍAMI Ex Parte Comments at 34.K  X4S84. In addition, s  everal commenters support incorporation of provisions affording  X4incumbent licensees operational flexibility within a defined protected service area. "Z {O'ԍAMTA Comments at 19; Dru Jenkinson, et al. Comments at 8; UTC Comments at 18; American Industrial Comments at 2; API Comments at 8; Applied Comments at 16; Dial Call Comments at 4, 11; Lagorio Comments at 23; Telecellular Comments at 78; Total Com Comments at 9; Fisher Reply Comments at 10; Russ Miller  yO 'Reply Comments at 7. č Many of these commenters believe that a fixedradius protected service area of 30 kilometers would be  X4appropriate. D {O 'ԍAmerican Industrial Comments at 2; Applied Comments at 16; Dru Jenkinson, et al. Comments at 9; Telecellular Comments at 78; UTC Comments at 5; Fisher Reply Comments at 10. Applied, Dru Jenkinson, et al., and UTC endorse a fixedradius protected  Xx4service area of thirty kilometers for existing licensees.} x {O'ԍApplied Comments at 16; Dru Jenkinson, et al. Comments at 9; UTC Comments at 5.} Fisher, on the other hand, suggests a 70mile fixedradius protected service area for incumbent SMR systems in the 861865 MHz  XJ4spectrum block.DJ0  yO+'ԍFisher Reply Comments at 10.D Lagorio contends that if the Commission adopts a 20mile standard protected service area for incumbents, it should adopt a 30mile standard protected service  X 4area for licensees having exclusive use of channels in Northern California.?  yO'ԍLagorio Comments at 23.? AMTA, however, recommends against a fixedradius definition for the protected service area, because such a standard bears little or no relevance to realworld 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  X 4facility.< P  yO'ԍAMTA Comments at 20.< Other commenters support AMTA's suggested approach.  yO:'ԍABC Comments at 45; B&C Comments at 45; Bisman Comments at 45; Bolin Comments at 45; Dakota Comments at 5; Deck Comments at 45; Diamond "L" Comments at 5; E.T. Communications Comments at 45; Keller Comments at 45; Morris Comments at 3; Nielson Comments at 45; Nodak Comments at 45; RCC Comments at 45; Raserco Comments at 45; Rayfield Comments at 45; SMCI Comments at 45; Dial Call Comments at 8; Russ Miller Reply Comments at 7; Vantek Comments at 5.  X{4T85.  Discussion. We conclude that allowing nonEA licensees to expand their systems at will after widearea licensing has occurred is not feasible. Such an approach would render widearea licenses of little value because it would create continuing uncertainty for widearea 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"30*((r" existing operations in the upper 10 MHz block.  X4U86. 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.  Xv4Thus, as recommended by AMTA and a number of other commenters,v {O'ԍSee e.g. ABC Comments at 45; B&C Comments at 45; Bisman Comments at 45; Bolin Comments at 45; Dakota Comments at 5; Deck Comments at 45; Diamond "L" Comments at 5; E.T. Communications Comments at 45; Keller Comments at 45; Morris Comments at 3; Nielson Comments at 45; Nodak Comments at 45; RCC Comments at 45; Raserco Comments at 45; Rayfield Comments at 45; SMCI Comments at 45; Dial Call Comments at 8; Russ Miller Reply Comments at 7; Vantek Comments at 5. 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  X14prior 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 fixedradius 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 widearea 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 shortspacing criteria in Section 90.621(b), even if its modifications do not extend its 22 dBu interference contour.  X4V87. 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 widearea 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.  XP4W88. 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 sitebysite 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 onetime 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"!4z0*(( r" 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.  X_4  XH' ` ` 5. Cochannel Interference Protection  X '` `  a.Incumbent SMR Systems  X 4  X 4X89.  Background. In the CMRS Third Report and Order, we concluded that, as a general matter, we would retain our existing cochannel protection rules for CMRS licensees. We concluded that geographic area licensees would continue to be subject to existing station X 4specific interference criteria with respect to all incumbent cochannel stations.g  {O"'ԍCMRS Third Report and Order, 9 FCC Rcd at 8062,  145.g Under these rules, a widearea 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 cochannel separation standards set forth in our shortspacing rule if it seeks to operate stations located less than 113 km (70 mi) from an incumbent licensees  X64facilities.A6Z yOA'ԍ47 C.F.R.  90.621(b).A  X4Y90.  Comments. Numerous commenters support the Commission's proposal.\" {O'ԍAMI Comments at 56; API Comments at 8; DCL Associates Comments at 910; Dru Jenkinson, et al. Comments at 8; Motorola Comments at 20; Nextel Comments at 4748; Pittencrief Comments at 9; Coalition Comments at 18; SBA Comments at 3031; Qualicom Reply Comments at 2; Telecellular Reply Comments at 56.\ Dru  X4Jenkinson, et al. believe that imposing such compliance on geographic area licensees would  X4not unreasonably hamper their ability to fully construct their systems.R {Oa'ԍDru Jenkinson, et al. Comments at 8.R Genesee agrees to  X4maintenance of 40 dBu protection.>f  yO!'ԍGenesee Comments at 3.> Morris recommends that geographic area licensees should not be able to construct facilities within the 22 dBu contour of incumbent cochannel  X4licensees. ^  {O>%'ԍMorris Comments at 3; see also AMTA Ex Parte Comments at 2, Supp.1; Centennial Ex Parte Comments  {O&'at 5; Hawaiian Ex Parte Comments at 45; IC&E Ex Parte Comments at 3; Obex Ex Parte Comments at 8;  {O&'Small Business SMR Ex Parte Comments at 8; Southern Ex Parte Comments at 13. OneComm believes that establishing cochannel interference requirements to apply at the perimeter of licensed service areas would encourage development of contiguous"50*((r"  X4spectrum systems and would promote regulatory symmetry with competing CMRS systems.B yOy'ԍOneComm Comments at 2526.B   X4Z91. Several commenters contend that shortspacing of incumbents by geographic area  X4licensees should not be allowed.X yO'ԍAmerican Industrial Comments at 2; ABC Comments at 3; B&C Comments at 3; Bisman Comments at 3; Bolin Comments at 3; Dakota Comments at 3; Deck Comments at 3; Diamond L Comments at 3; E.T. Communications Comments at 3; Keller Comments at 3; Nielson Comments at 3; Nodak Comments at 3; RCC Comments at 3; Raserco Comments at 3; Rayfield Comments at 3; SMCI Comments at 3; SMR WON Reply Comments at 11; Total Com Comments at 8; Vantek Comments at 3. Some of these commenters believe that by allowing shortspacing, 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  Xv4systems will lock in cochannel licensees to existing sites. v yO/'ԍABC Comments at 3; B&C Comments at 3; Bisman Comments at 3; Bolin Comments at 3; Dakota Comments at 3; Deck Comments at 3; Diamond L Comments at 3; E.T. Communications Comments at 3; Keller Comments at 3; Nielson Comments at 3; Nodak Comments at 3; RCC Comments at 3; Raserco Comments at 3; Rayfield Comments at 3; SMCI Comments at 3; Vantek Comments at 3. Telecellular, on the other hand, believes that the Commission should maintain its existing shortspacing standards as  XH4solid protection for incumbents.CH  yO'ԍTelecellular Comments at 7.C Fisher believes that the current cochannel separation rules  X14are too generous.D1  yOb'ԍFisher Reply Comments at 10.D Similarly, Lagorio suggests that the Commission take additional action to  X 4prevent the increase of harmful interference between cochannel stations.?  yO'ԍLagorio Comments at 19.?  X '  X 4 [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 cochannel 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 shortspacing 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 shortspacing rule. We believe that the shortspacing rule offers a balance between increased spectrum efficiency, adequate cochannel protection, and administrative convenience. Moreover, we are not convinced that continued use of the shortspacing rule in the context of a widearea 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"60*((r"  X4spots," and protect incumbent licensees from actual interference.  X4  X'` `  b.Adjacent EA Licensees  X4\93. Background.  In the CMRS Third Report and Order, we concluded that the cochannel 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  Xa4services.ga {O'ԍCMRS Third Report and Order, 9 FCC Rcd at 8062,  145.g Cellular and PCS licensees are required to comply with interference protection  XJ4criteria between Commissiondefined service areas only at service area borders.h JZ {OU 'ԍCMRS Third Report and Order, 9 FCC Rcd at 8057,  131. h In the  X34Further Notice, we tentatively concluded, therefore, that widearea 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  X 4adjacent licensees).Z!  {O'ԍFurther Notice, 10 FCC Rcd at 7994,  41.Z  X 4]94. Comments.  Genesee, Motorola, and Nextel endorse the Commission's tentative  X 4conclusion.n" ~ yO'ԍGenesee Comments at 3; Motorola Comments at 20; Nextel Comments at 47.n 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  XO4service, which has worked well.>#O yO'ԍNextel Comments at 47.>  X!4^95. 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  X4for minimization of interference.C$ yO"'ԍMotorola Comments at 2021.C SMR WON believes that there will be many sitespecific 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 widearea service border, and also must protect existing sitespecific operations to their protected contour areas without using the shortspacing tables. SMR WON also believes that licensees in adjacent widearea service areas must coordinate to eliminate interference, and work together as they"$7. $0*((<r"  X4relocate incumbent licensees.E% yOy'ԍSMR WON Reply Comments at 11.E  X4_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 cochannel 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.  X ' ` ` 6. Emission Masks  X 4`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  X4adjacent to the licensees assigned channel.g&X {O'ԍCMRS Third Report and Order, 9 FCC Rcd at 8066,  158.g In the CMRS Third Report and Order, we affirmed our outofband emission rules for CMRS services. We also determined that outofband 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 outofband emission rules would be applied only to  X4the extent necessary to protect operations outside of the licensees authorized spectrum.G' {O'ԍId. at 806768,  161.G  X4 a98.  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  X4providers will have a possibility for expansion.D(| yO'ԍGenesee Reply Comments at 3.D Motorola supports maintaining the existing emission mask rules on the basis that such requirement is necessary to protect incumbent  Xg4operations adequately.@)g  yO$#'ԍMotorola Comments at 21.@ 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 widearea system. As a result, Pittencrief believes that the Commission's rules  X"4should protect these interior cochannel users adequately.C*" yOo''ԍPittencrief Comments at 13.C SMCI believes that SMR""8, *0*((/r" 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  X4would cause undue interference problems. ;+Id yO4'ԍSMCI Comments at 5.;  X4 b99.  Nextel believes that the Commission's proposal would require an outofband 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  X 4would result in a more flexible emission plan. >, X yO'ԍNextel Comments at 51.>  X 4c100. Ericsson suggests that the Commission adopt a different emission mask, which  X4combines 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  X4adjacent channel interference protection.- {O.'ԍSee Letter to William Caton, Acting Secretary, FCC from Michael A. Lewis, on behalf of Motorola, Inc., filed December 8, 1995.  Xg4d101. Discussion. We conclude that outofband 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 licensees authorized bandwidth. We agree with Ericsson's  X 4suggested 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" 9B-0*((|r" transition from the existing regulatory scheme to the new widearea 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.  X ' C.` ` Construction Requirements  X ' ` ` 1. EA Licensees  X 4  X 4e102. 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 widearea CMRS licensees  X{4provide service to portions of their service area before the construction period expires.g.{ {O'ԍCMRS Third Report and Order, 9 FCC Rcd at 8076,  179.g In  Xd4the 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 widearea SMR systems should be subject to similar requirements, noting that we would need to tailor these requirements to reflect certain circumstances unique  X 4to the SMR service. In the Further Notice, we tentatively concluded that widearea SMR  X4licensees should have five years to construct their systems.Z/Z {O'ԍFurther Notice, 10 FCC Rcd at 7996,  46.Z  X4f103. Comments.  AMTA, CellCall, and OneComm support a fiveyear construction  X4period for widearea 800 MHz SMR licensees.s0 yOM'ԍAMTA Comments at 1415; CellCall Comments at 17; OneComm Comments at 2627.s AMTA believes that this period should be sufficient to construct facilities in any remaining "white space" in the geographic area, and to  X4negotiate with incumbent operators.?1| yO 'ԍAMTA Comments at 1415.? CellCall believes that a fiveyear construction period is  Xk4consistent with both existing widearea SMR rules and cellular rules.@2k  yO(#'ԍCellCall Comments at 17.@ Although OneComm believes that a fiveyear construction period with interim coverage requirements will assist development of contiguous spectrum systems, it opines that, if voluntary relocation alone is adopted, a tenyear license and buildout requirement should be adopted because incumbents'"&:20*(("r"  X4refusal to relocate will impede the geographic area licensees' construction efforts. B3Id yOy'ԍOneComm Comments at 2627.B  X4g104. Discussion.  We conclude that EA licensees should have a fiveyear 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 widearea system in the 800 MHz band. In addition, given the substantial construction of 800 MHz SMR systems (including widearea systems) to date, the tenyear construction period applicable to PCS appears excessive for the service. Although a fiveyear 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  X 4permits license winners to recover their bidding expenses.  Xy' ` ` 2. Extended Implementation Authority  Xb4  XK4h105.  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  X4systems, pursuant to either a waiver of our construction and loading rules4ZX {O('ԍSee e.g., Fleet Call, Inc., Memorandum Opinion and Order, 6 FCC Rcd 1533, recon dismissed, 6 FCC Rcd 6989 (1991); Letter from Ralph A. Haller, Chief, Private Radio Bureau to David Weisman, DA 921734, 8 FCC Rcd 143 (1993). or Section 90.629  X4of our Rules.v5z {O3'ԍ47 C.F.R.  90.629. See Further Notice, 10 FCC Rcd at 7997,  47.v 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  X4up to five years."16  {Oi 'ԍId.1 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.  X 4i106. 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";60*((r" 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 timeframe for completing such systems, given the technologies presently available in the SMR market.  Xv4j107. Following our adoption of the Further Notice, some SMR licensees filed requests for extended implementation authority, which remain pending. With respect to two such  XJ4requests filed by Chadmoore and PCC Management Corp., the Bureau released a Public  X34Notice seeking comment on whether the requests should be granted.Z7Z3 yO 'ԍPublic Notice, "Wireless Telecommunications Bureau Seeks Comment on Requests of Chadmoore Communications, Inc. and PCC Management Corp. for Extended Implementation Authority Under Section  {O< '90.629 of the Commission's Rules," DA 951613, July 19, 1995 (Chadmoore/PCC Public Notice). Z In its extended implementation authority request, Chadmoore seeks three years to construct a noncontiguous "widearea" SMR system that will extend from the southeastern United States through the  X 4upper Midwest and use new technology.8  yO'ԍRequest for Extended Implementation Authorization, filed June 16, 1995, by Chadmoore at 1, 11. In its initial submission, Chadmoore indicated that its proposed system would "cover" 27 states and include 3,516  {O'channels. Id. at 14. In supplemental filings, Chadmoore modified its system proposal to include a total of 2,312 channels, consisting of 1,991 singlechannel conventional SMR stations and 321 fivechannel trunked SMR  yO'stations.  Chadmoore Communications, Inc., Third Supplement at Exhibit 1 Listing by Last Name (filed Sept. 11, 1995). According to Chadmoore, 2,061 SMR licenses would be included in this modified proposal. Chadmoore argues that grant of its extended implementation request is warranted on four grounds: (a) Chadmoore's principals have  X 4demonstrated expertise in SMR sales and service;79 d  {O'ԍId. at 2.7 (b) Chadmoore previously has  X 4demonstrated its ability to acquire and construct those licenses granted to SMR "investors;"4:  {OP'ԍId. 4 (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  Xd4deadline has expired;;^d  {O'ԍId. Chadmoore notes that we previously granted a number of these licensees limited relief in the form of  {Og'a fourmonth extension of time in which to construct their facilities. See Daniel R. Goodman, Receiver/Dr.  {O1 'Robert Chan, Memorandum Opinion and Order, FCC 95211, 10 FCC Rcd 8537 (1995) (Goodman/Chan Order).  and, (d) grant of Chadmoore's proposal will promote competition in  XM4the SMR equipment manufacturing market.9<M {O"'ԍId. at 24.9 Similarly, PCC seeks a period of three years  X64to construct a regional, and ultimately nationwide, network of SMR systems.P=Z6@ yO'%'ԍRequest for Extended Implementation Authorization, filed January 12, 1995, by PCC at 2. It should be noted that PCC's and CCI's requests for extended implementation are completely independent of each other.  {O&'PCC Reply Comments to Chadmoore/PCC Public Notice at 1, n.1. P PCC's proposed system would include 2,181 channels, 849 conventional channels and 269 trunked"<b=0*((r"  X4channels, encompassing 1,118 licenses.e> {Oy'ԍPCC Reply Comments to Chadmoore/PCC Public Notice at 2.e 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 costeffective buildout for the stations included in its proposal; and (d) grant of PCC's proposal will  Xv4facilitate the implementation of an integrated nationwide network.?vZ yO 'ԍRequest for Extended Implementation Authorization, filed January 12, 1995, by PCC at 24.   XH4k108.    Comments. CellCall supports prohibiting future requests for extended  X14implementation on the lower 80 channels.@@1 yO 'ԍCellCall Comments at 14.@ 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  X 4competition and additional new services.?A z yO'ԍCumulous Comments at 9.? 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  X 4systems.B  {Ob'ԍAMI Ex Parte Comments at 78; DCL Associates Ex Parte Comments at 25; PCIA Ex Parte Comments  {O,'at 1213; Southern Ex Parte Comments at 12; USIS Ex Parte Comments at 12. Pittencrief opposes changing an incumbent's existing grant of extended implementation on the basis that implementation of a new licensing scheme should not affect  Xy4the incumbent's ability to construct its widearea system.SCyf  {O'ԍPittencrief Ex Parte Comments at 12.S  XK4l109. All of the commenters responding to the Chadmoore/PCC Public Notice oppose  X64grant of the Chadmoore and PCC extended implementation requests.D(6  {O'ԍSee AMTA Chadmoore/PCC Public Notice Comments; Decimal Datalink, Inc. Chadmoore/PCC Public  {O'Notice Comments (DDI); Nextel Chadmoore/PCC Public Notice Comments; PCIA Chadmoore/PCC Public  {Os 'Notice Comments; Rio Radio Supply, Inc. Chadmoore/PCC Public Notice Comments (RRS); Susan Jacobs  {O=!'Designs, Inc. Chadmoore/PCC Public Notice Comments (SJD).  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  X4stations, but also, as a result of the Goodman/Chan Order, have been given additional time in"=D0*((r"  X4which to complete construction of their facilities.#E\ {Oy'ԍAMTA Chadmoore/PCC Public Notice Comments at  8; DDI Chadmoore/PCC Public Notice Comments  {OC'at 35; Nextel Chadmoore/PCC Public Notice Comments at 23, 56; PCIA Chadmoore/PCC Public Notice Comments at 2. # They also argue that the most efficient use of the spectrum would be achieved by recovering it and making it available to licensees  X4who will construct expeditiously.>F^ {Oo'ԍAMTA Chadmoore/PCC Public Notice Comments at  8, 11; DDI Chadmoore/PCC Public Notice  {O9'Comments at 810; Nextel Chadmoore/PCC Public Notice Comments at 67; PCIA Chadmoore/PCC Public  {O 'Notice Comments at 23. > PCIA further argues that these extended implementation requests are different from others, because they do not involve licensees of fullyloaded and  X4operational systems.]G {Og 'ԍPCIA Chadmoore/PCC Public Notice Comments at 3.] With respect to the specific proposals, AMTA, Nextel, and PCIA  X4question Chadmoore's ability to fulfill its widearea network proposal.H {O'ԍAMTA Chadmoore/PCC Public Notice Comments at  12, 13; Nextel Chadmoore/PCC Public Notice  {O'Supplemental Comments at 2; PCIA Chadmoore/PCC Public Notice Comments at 4. 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  XH4assumed by all SMR applicants and licensees.^IH  {O'ԍDDI Chadmoore/PCC Public Notice Comments at 67.^ Finally, RRS and SJD question PCC's character qualifications on the basis of PCC's conduct regarding its widearea system proposal  X 4and its business associations.J  {O]'ԍRRS Chadmoore/PCC Public Notice Comments at 14; SJD Chadmoore/PCC Public Notice Comments at 12.  X 4m110. Discussion. We initially established extended implementation authority for SMRs to facilitate construction of widearea systems. We believe that the widearea 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 widearea licensing  X44approach 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 threeyear 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">J0*((r" 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.  X4n111. In addition, several licensees and commenters contend that such extended  X4implementation grants have resulted in spectrum warehousing.0K {O'ԍSee e.g., APCO Comments at 2 (contending that the availability of extended implementation authority is a factor that has contributed to the current speculative environment in the 800 MHz SMR service); PEC Mobile Communications Comments at 3 (contending that its expansion potential has been limited by the availability of  {O` 'extended implementation authority in the 800 MHz SMR service); see also, Total Com Comments at 6; Sierra  {O* 'Electronics Ex Parte Comments at 1.0 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 Commissionapproved modifications thereto; (c) demonstrate its compliance with Section 90.629 of our rules if authority was granted pursuant to that  X 4provision,-LZ ~ yO'ԍWe recognize, however, that certain grants of extended implementation authority were made purusant to  {O'waiver. See e.g., Fleet Call, Inc., Memorandum Opinion and Order, 6 FCC Rcd 1533, recon dismissed, 6 FCC Rcd 6989 (1991)- including confirmation that it has filed annual certifications regarding fulfillment of its implementation plan; and (d) certify that all facilities covered by the extended  X4implementation authority proposed to be constructed as of the adoption date of this First  X{4Report and Order are fully constructed and that service to subscribers has commenced as  Xf4defined in the CMRS Third Report and Order. These showings must be submitted within 90  XQ4days 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.  X4o112. 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 twoyear 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 twoyear 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 twoyear period is an insufficient amount of time. We anticipate that such explanation would entail the same type of public interest showing"?L0*((r" associated with a request for waiver of the Commission's rules under Section 1.3 of our  X4rules.EM {Oy'ԍSee 47 C.F.R.  1.3.E  X4p113. Upon the termination of this twoyear 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 sixmonth period, authorizations for facilities still unconstructed will cancel automatically.  X 4q114. 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  X 4would conflict with our goal of uniformly implementing widearea 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  Xy4Goodman/Chan Order, we granted such licensees limited relief from our construction  Xd4requirements.jNdq {O'ԍGoodman/Chan Order, 10 FCC Rcd at 85458550,  2028.j 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 widearea 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  X4acquire sufficient spectrum for their present and future operations.   X4   X' ` ` 3. Interim Coverage Requirements  X~4r115. Background.  In the CMRS Third Report and Order, we concluded that 800 MHz widearea SMR licensees should be subject to interim coverage requirements that are  XR4similar to those in the cellular and PCS rules.gOR {O 'ԍCMRS Third Report and Order, 9 FCC Rcd at 8076,  179.g In the Further Notice, we proposed that geographic area licensees be required to provide coverage to onethird of the population within their market area within three years of initial license grant, and to twothirds of the population by the end of their fiveyear construction period. We also sought comment on whether compliance with these interim coverage requirements would be achieved by single  X4channel or multichannel coverage.ZP {O'&'ԍFurther Notice, 10 FCC Rcd at 7998,  48.Z " @'P0*((|r"Ԍ X4s116. In the CMRS Third Report and Order, we noted that any interim coverage requirements for widearea SMR systems must account for the fact that geographic area licensees may be required to provide cochannel protection to incumbent systems within their  X4service area.gQ {O6'ԍCMRS Third Report and Order, 9 FCC Rcd at 8076,  180.g In the Further Notice, we indicated our belief that when a licensee acquires a widearea 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 widearea licensee or acquiring such spectrum through buyouts of  XL4incumbent licensees within its authorized spectrum block.[RLZ {OW 'ԍFurther Notice, 10 FCC Rcd at 7998,  49. [ To the extent that the Further  X74Notice could be read to propose that coverage could be met through use of resale or similar agreements, we clarify our intention that the widearea licensee is free to engage in resale activities, but must satisfy our construction requirements through use of its facilities and not  X 4capacity acquired from others through resale.S$  {O'ԍSee Amendment of Parts 2 and 90 of the Commission's Rules to Provide for the Use of 200 Channels Outside the Designated Filing Areas in the 896901 MHz and the 935940 MHz Bands Allotted to the  {O#'Specialized Mobile Radio Pool, PR Docket No. 89553, Third Order on Reconsideration, FCC 95159, released October 20, 1995.   X 4t117. Comments.  With respect to interim coverage requirements, the commenters  X 4generally 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,  X>4the proposed population requirements.?T> yO'ԍAMTA Comments at 1516.? Similarly, CellCall endorses adoption of a geographic coverage requirement in conjunction with, or as a replacement of, a population  X4coverage requirement.@Uh  yO)'ԍCellCall Comments at 18.@ Russ Miller suggests requiring both geographic and population  X4coverage in order to force coverage over the entire EA.QV  {O!'ԍRuss Miller Ex Parte Comments at 2.Q Dial Call supports coupling population requirements with a requirement that a minimum number of frequencies be  X4constructed to serve the population.@W  yO%'ԍDial Call Comments at 7.@ Pittencrief argues that geographic area licensees should be able to satisfy their interim coverage requirements by building out a system covering the"AW0*(((r"  X4relevant percentage of either the population or geographic area.FX yOy'ԍPittencrief Comments at 1415.F Dial Call and OneComm  X4support the Commission's proposal.XYX yO'ԍDial Call Comments at 4; OneComm Comments at 26.X Southern contends that the proposed coverage requirements would encourage spectrum underutilization and warehousing, because many  X4geographic area licensees already meet the proposed coverage requirements. FZ yOT'ԍSouthern Reply Comments at 17.F  X4u118. Nextel recommends modifying the proposed interim coverage requirements to require geographic area licensees to demonstrate authority to encompass a per channel average of onethird of the population within the relevant geographic area after three years and a per channel average of twothirds 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  X 4widearea license.c[ x {O,'ԍNextel Comments at 46; Nextel Ex Parte Comments at 8.c Nextel believes that construction and coverage requirements should be accompanied by stricter channel use requirements to ensure spectrum efficiency and to prevent  X 4anticompetitive conduct and spectrum warehousing.L\  {O'ԍNextel Ex Parte Comments at 8.L Therefore, Nextel recommends requiring auction winners to utilize at least fifty percent of their authorized channels in  X 4meeting the coverage requirements.7]  {O'ԍId. at 9.7 Southern recommends requiring that onethird of the service area plus 25 percent of the channels be constructed in three years and the remaining  Xy4twothirds and 75 percent be constructed within five years.O^y.  {OX'ԍSouthern Ex Parte Comments at 12.O  XK4v119. Most commenters agree that failure to meet either of the interim coverage  X44requirements should result in forfeiture of the widearea license._4  yO'ԍABC Comments at 5; B&C Comments at 5; Bisman Comments at 5; Bolin Comments at 5; Dakota Comments at 5; Deck Comments at 5; Diamond "L" Comments at 5; E.T. Communications Comments at 5; Keller Comments at 5; Morris Comments at 4; Nielson Comments at 5; Nodak Comments at 5; RCC Comments at 5; Raserco Comments at 5; Rayfield Comments at 5; SMCI Comments at 5; Vantek Comments at 5; Dial Call Comments at 4; Pittencrief Comments at 14. 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 widearea licensee. Thus, under CellCall's proposal, unconstructed channels would be available to those incumbents, excluding geographic area licensees who fail to meet the coverage"Bp_0*((er" requirements, who need additional channels to expand their systems.  X4w120. Discussion. We will require EA licensees to provide coverage to onethird of the population of their respective EAs within three years of initial license grant and to twothirds by the end of their fiveyear construction period. This requirement is consistent with  X4our 900 MHz SMR rules.H` {O'ԍSee 47 CFR  90.665(c).H 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  X 4extensive incumbent presence in that spectrum.eaZ Z yO'ԍ Amendment of Parts 21 and 74 of the Commission's Rules with Regard to Filing Procedures in the Multipoint Distribution Service and in the Instructional Television Fixed Service, MM Docket No. 94131,  {O'Report and Order, 10 FCC Rcd 9589, 9613,  43 (1995) (MDS Report and Order).e  X 4x121. 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  X{4coverage requirements by constructing only one channel in its spectrum block.b{| {O'ԍSeveral commenters also express concern about this result. See e.g., Dial Call Comments at 7; Nextel  {Or'Comments at 46; Nextel Ex Parte Comments at 8; Southern Ex Parte Comments at 12. 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 widearea system to participate in the auction solely to restrict a competing incumbent licensee's ability to expand. Accordingly, in addition to the  X4population 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 fiveyear 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.  X4y122. Noncompliance with Interim Coverage Requirements. We conclude that an EA"Cb0*((r" licensee's failure to meet either the threeyear or fiveyear coverage requirements or the  X4channel 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.  X_4  XH' D.` ` EA License Application Issues  X '` ` 1. Initial Eligibility  X 4   X 4z123. Background.   In the CMRS Third Report and Order and Further Notice, we tentatively concluded that the initial application process for widearea SMR licenses should be  X 4open to any qualified applicant.gc  {O9'ԍCMRS Third Report and Order, 9 FCC Rcd at 8140,  341.g We also sought comment on whether it was necessary to restrict eligibility for EA licenses to incumbent licensees (or to restrict eligibility based on  X4other criteria) if competitive bidding procedures are used in the upper 10 MHz block.ZdZ {O'ԍFurther Notice, 10 FCC Rcd at 8001,  56.Z  Xd4{124. Comments.   While Genesee and Pittencrief support open eligibility for the widearea 800 MHz SMR licenses, several commenters believe that initial eligibility for the licenses  X64should be restricted.LeZ6 yO'ЍAmerican Industrial Comments at 3; CellCall Comments at 911; DCL Associates Reply Comments at 5;  {O'Parkinson Electronics et al. Comments at 10; PCIA Comments at 1718; Phipps Reply Comments at 3; Russ Miller Reply Comments at 3; Telecellular Comments at 12.L These commenters contend that an initial eligibility restriction is  X4necessary to deter speculation in 800 MHz SMR spectrumf yO'ԍAmerican Industrial Comments at 2; Telecellular Comments at 13; Russ Miller Reply Comments at 3. and to provide incumbent  X4licensees with a meaningful opportunity to participate in widearea licensing.Dg yOW'ԍTelecellular Comments at 12.D 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 widearea  X4license;h.  {O"'ԍCellCall Comments at 911; Total Com Comments at 10; Telecellular Comments at 12. See also American Industrial Comments at 3; Russ Miller Reply Comments at 3. and, (b) entities in compliance with Section 310(b) of the Communications Act.)iX  yO$'ԍNextel Comments at 53. Section 310(b) of the Communications Act, 47 U.S.C.  310(b), prohibits the grant of radio licenses, including licenses for common carrier service, to aliens and to corporations with specific levels of alien ownership and control.) "Di0*((r"Ԍ X4|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  X4Total Com proposes a January 1, 1995 date.Zj yOK'ԍCellCall Comments at 28; Total Com Comments at 10.Z Ericsson contends that if an eligibility restriction is adopted, it should not result in only those already operating widearea 800 MHz  X4SMR systems being eligible for the EA licenses.EkX yO'ԍEricsson Reply Comments at 3.E American SMR and CellCall contend that if initial eligibility is restricted, then entities with applications pending as of such date also  Xv4should be eligible for EA licenses.Ylv yO 'ԍAmerican SMR Comments at 4; CellCall Reply at 28.Y CellCall also argues that wireline telephone common carriers should have initial eligibility because they have been prevented by rule from holding  XH4SMR licenses, rather than by lack of interest in providing service.@mHx yOq'ԍCellCall Comments at 12.@  X 4}126. Discussion. We conclude that restrictions on eligibility for EA licenses are not  X 4warranted, except that, as discussed infra, EA applicants will be presumptively classified as  X 4CMRS, and therefore will be required to comply with the alien ownership requirements  X 4specified in Section 310 of the Act.gn  {O'ԍCMRS Third Report and Order, 9 FCC Rcd at 8125,  306.g 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  X4block 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 procompetitive and potentially will result in a diverse group of entities providing widearea SMR service in the upper 10 MHz block. This outcome furthers the objectives set forth in  X 4Section 309(j)(3)(B) of the Communications Act.No  {OU'ԍSee 47 U.S.C.  309(j)(3)(B).N  X4~127. 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  X4existing foreign ownership interests.p,  {O]%'ԍSee Implementation of Sections 3(n) and 332 of the Communications Act, Regulatory Treatment of Mobile  {O'&'Services, First Report and Order, GN Docket No. 93252, 9 FCC Rcd at 1056, 10581059,  1215 (1994). The deadline for filing such waiver requires was"E p0*((r"  X4February 10, 1994.Eq {Oy'ԍ Id. at 1059,  15.E 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.  X' ` ` 2. Regulatory Classification of EA Licensees  X_4128.   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  X34they did not offer such service.~r3Z {O> 'ԍCMRS Second Report and Order, 9 FCC Rcd at 14501451, 1510,  8893, 269.~ 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  X 4interconnected service as part of their service offering.Zs  {O'ԍFurther Notice, 10 FCC Rcd at 8006,  70.Z 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  X4the operation of this presumption.1t~ {O'ԍId.1 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.  X84129. Comments.   Madera, Cumulous, Fresno, ProTec, and Kay contend that it is not  X!4apparent that SMR services are substantially similar to cellular or PCS services.u! yO'ԍMadera Reply Comments at 2; Cumulous Reply Comments at 2; Fresno Reply Comments at 34; ProTec Reply Comments at 5; Kay Reply Comments at 56. CellCall argues that if widearea SMR service is substantially similar to cellular, they should be subject  X4to similar technical, operational and licensing rules.Gvh  yO 'ԍCellCall Reply Comments at 78.G  X4130. 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 widearea 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";F v0*((_r" the associated regulatory obligations would create a new and significant 18month disparity  X4(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  X4intended.<w yO6'ԍMcCaw Comments at 6.<  X4131. Discussion. We reiterate our determination in the CMRS Second Report and  Xz4Order that SMR providers that are either interconnected to the Public Switched Network or  Xe4authorized for such interconnection will be classified as CMRS.xeX {On 'ԍCMRS Second Report and Order, 9 FCC Rcd at 14341437, 14501451,  5460, 8893. Because we expect most  XN4SMR 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  X 4within the definition of CMRS provided in Section 332(d)(1) of the Communications Act.Ay  yO'ԍ47 U.S.C.  332(d)(1).A 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  X4whether SMR is substantially similar to cellular and PCS was analyzed in the CMRS Third  Xj4Report and Order.zjz {O'ԍSee CMRS Third Report and Order, 9 FCC Rcd at 80018036, 8042,  2279, 94. To the extent that this issue is raised by the pending petitions for  XU4reconsideration 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  X4effect, an untimely request for reconsideration of the CMRS Second Report and Order, which clearly is beyond the scope of this proceeding.  X4132. 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 widearea 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. "G z0*((r"Ԍ X' E.` ` Redesignation of Other 800 MHz Spectrum General Category Channels and InterCategory Sharing(#`  X4  X4133.  Currently, 800 MHz SMR systems may be licensed on the General Category channels or licensed under our intercategory sharing rules on 100 channels in the  X4Industrial/Land Transportation and Business Categories (collectively, "Pool Channels").{& {O'ԍSee InterCategory Sharing of Private Mobile Radio Frequencies in the 806821/851866 MHz bands, DA  {O'95741, Order, 10 FCC Rcd 7350, reconsideration denied, InterCategory Sharing of Private Mobile Radio  {O'Frequencies in the 806821/851866 MHz bands, DA 951669, Memorandum Opinion and Order, 1995 WL 444261 (F.C.C.) (1995). In  Xv4the 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  X34Category or Pool Channels might be appropriate.Z|3 {O'ԍFurther Notice, 10 FCC Rcd at 7999,  52.Z  X ' ` ` 1. General Category Channels   X 4134. 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  X 4exclusively to SMR applicants.C} H {O'ԍId. at 8000,  53.C  X}4135. Comments. Several commenters argue that we should maintain our current eligibility rules for the General Category channels because: (1) they allow PMRS and SMR  XO4operators to meet their expanding mobile communications needs;~&O yO'ԍPCIA Comments at 17; Entergy Reply Comments at 67; Ericsson Reply Comments at 3; UTC Reply  {O'Comments; AnheuserBusch Reply Comments at 34, 5; Russ Miller Reply Comments at 5; Joint Utilities Ex  {Ol'Parte Comments at 39; Louisville Ex Parte Comments at 56; Group of 66 Ex Parte Comments at 4, 16;  {O6'AnheuserBusch Ex Parte Comments at 4. (2) the frequencies are  X84heavily used by both PMRS and CMRS providers;A8  yO'ԍPCIA Reply Comments at 23A and, (3) they are a source of extra  X!4capacity for public safety licensees.;!X  yO*"'ԍAPCO Comments at 5.; PCIA argues that the limited remaining vacant  X 4spectrum on the General Category channels should be available to private users.?  yO$'ԍPCIA Comments at 1516.? API and UTC argue that future SMR eligibility on the General Category channels should be prohibited"Hx0*((r"  X4to preserve sufficient spectrum for the needs of PMRS providers.M yOy'ԍAPI Comments at 5; UTC Comments at 4.M  X4136. Numerous commenters, however, argue that the General Category channels  X4should be set aside for SMR use.6X yO'ԍNextel Comments at 9; Russ Miller ex parte Comments at 3; AMI Comments at 3; AMTA Comments at 22; ABC Comments at 4; B&C Comments at 4; BisMan Comments at 4; Bolin Comments at 4; Dakota Comments at 5; Deck Comments at 5; Diamond "L" Comments at 5; E.T. Communications Co. Comments at 5; Keller Comments at 5; Morris Comments at 4; Nielson Comments at 5; Nodak Comments at 5; RCC Comments at 5; Raserco Comments at 5; Rayfield Comments at 5; Vantek Comments at 5; Gulf Coast Radiofone Comments at 2; OneComm Comments at 2728.6 Nextel contends that the relative demand for SMR  X4service warrants such action.= yO% 'ԍNextel Comments at 9.= Similarly, OneComm contends that the SMR waiting list and application backlog indicate that the demand for spectrum by SMR licensees is greater than  Xv4nonSMR licensees.Bv`  yO'ԍOneComm Comments at 2728.B OneComm further contends that redesignation of the General Category channels to exclusive SMR use would facilitate relocation in the upper 10 MHz block,  XH4because they most likely would be attractive to incumbents since they are contiguous.?H  yO'ԍOneComm Comments at 28.? AMI argues that redesignation of the General Category channels would promote efficient spectrum  X 4use, because it will ensure that the frequencies are available to the largest number of users.:  yOK'ԍAMI Comments at 3.:   X 4 137. Discussion. A review of our licensing records indicates that the overwhelming majority of General Category channels are used for SMR as opposed to nonSMR 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 nonSMR 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 widearea 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  X4use.   "|I0*((r"Ԍ X' ` ` 2. InterCategory Sharing  X4138. Background. In the Further Notice, we noted that the Pool Channels are intended for noncommercial internal use by Business and Industrial/Land Transportation  X4licensees, and their availability for SMR licensees was to be on a limited basis only.Z {O'ԍFurther Notice, 10 FCC Rcd at 7999,  52.Z We sought comment on whether the future eligibility of SMR licensees on the Pool Channels  Xx4should be restricted.CxZ {O 'ԍId. at 8000,  53.C We also sought comment on whether nonSMR licensees should be  Xa4restricted from future eligibility on SMR channels.;a {O 'ԍId.,  54.; After the release of the Further Notice,  XL4the Bureau placed a freeze on intercategory sharing.L~ yO{'ԍInterCategory Sharing of Private Mobile Radio Frequencies in the 806821/851866 MHz Bands, DA 95 {OC'741, Order, 10 FCC Rcd 7350 (1995).  X 4139. Comments. UTC strongly supports our proposal to revise the intercategory sharing rules, because it would provide a clear demarcation between SMR and nonSMR  X 4spectrum and would eliminate the risk of SMR encroachment on nonauctionable spectrum.:  yOy'ԍUTC Comments at 2.: 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  X 4SMR and nonSMR spectrum.< h  yO'ԍAMTA Comments at 24.< 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  X}4for PMRS uses.N}  yO&'ԍAPCO Comments at 5; AMI Comments at 5.N  XO4140. Pittencrief, Motorola, E.F. Johnson, and OneComm argue that SMR availability  X84of intercategory sharing should not be limited.8  yOq 'ԍPittencrief Reply Comments at 12; Motorola Comments at 17; E.F. Johnson Reply Comments at 11; OneComm Reply Comments at 1718. Applied and Cumulous contend that the Pool Channels provide additional spectrum to meet the expansion demands of growing SMR  X 4operators.W  yO$'ԍApplied Comments at 11; Cumulous Comments at 6.W Some commenters argue that intercategory sharing should be permissible in the  X4border areas, because SMR channels are limited in those regions._p {O''ԍPittencrief Ex Parte Comments; AMI Comments at 5._ Telecellular argues that "J0*((r" if future SMR eligibility for the Pool Channels is limited, this restriction should be based on a  X4loading demonstration that such channels actually are needed by the SMR licensee.D yOb'ԍTelecellular Comments at 12.D  X4141. 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 intercategory 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 nonauctionable 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 intercategory sharing basis.  Xy4142. In light of our elimination of SMR eligibility for the Pool Channels, we conclude that nonSMR 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 nonSMR providers for available channels. With respect to the upper 10 MHz block, we conclude that nonSMR incumbent licensees, like SMR incumbent licensees, will receive the  X4operational 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  X4channels, we are seeking comment in the Second Further Notice of Proposed Rule Making   X4regarding the treatment of nonSMR incumbents.  X' V.EIGHTH REPORT AND ORDER  XR'A.` ` Auctionability of the Upper 10 MHz Block of 800 MHz SMR Spectrum  X;4  X$4143. 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)  X!4the objectives set forth in Section 309(j)(3) would be promoted.>!X yO%'ԍ47 U.S.C.  309(j).> Section 309(j)(3) provides that the Commission use of competitive bidding should promote the following objectives: "#K0*((!r"Ԍ X4` ` (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;(#  X4 ` ` (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;(#  X 4` ` (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 (# ` `  X4` ` (D) efficient and intensive use of the electromagnetic spectrum.A yO 'ԍ47 U.S.C.  309(j)(3).A(#  Xb4144. 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  X64auctionability.6\6X yO?'ԍImplementation of Section 309(j) of the Communications Act Competitive Bidding, PP Docket No. 93 {O'252, Second Report and Order, 9 FCC Rcd 2348, 2359,  63 (1994) (Competitive Bidding Second Report and  {O'Order).6 We noted that our rules explicitly contemplate and expect that SMR  X4licensees will provide service to eligible subscribers for compensation.1| {OL'ԍId.1 Based on this experience and the record in PP Docket No. 93253, 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  X4communications.1 {O'ԍId.1 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  XP4available for commercial use, and avoiding unjust enrichment.HP {O%'ԍId. at 23592360,  64.H   X"4145. In the CMRS Third Report and Order, we concluded that we generally should""L2 0*(("r" 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  X4interest.g {OK'ԍCMRS Third Report and Order, 9 FCC Rcd at 8135,  328.g We specifically concluded that competitive bidding procedures should be used to  X4select between mutually exclusive initial applications in the 800 MHz SMR service.DZ {O'ԍId. at 8140,  341.D 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  X_4in the selection process.1_ {O 'ԍId.1  X14146. Comments. Numerous commenters oppose use of competitive bidding  X 4procedures in the 800 MHz SMR service. ~ yOI'ԍAMTA Comments at 78; CCI Comments at 1; CICS Comments at 6; Courtesy Comments at 1; Dial Call Comments at 5; Don Clark Radio Comments at 2; Ericsson Comments at 45; Lagorio Comments 1415;  {O'Lausman Comments at 3; NTCA Comments at 4; Parkinson, et al. Comments at 11; PCIA Comments at 18; Pierre Radio Comments at 1; ProTec Comments at 8; Coalition Comments at 89; SMR WON Comments at 3031; T&K Comments at 4; Total Com Comments at 11; DCL Associates Reply Comments at 2, 6: Dial Call Reply Comments at 1213; Fisher Reply Comments at 11; Joint Commenters Reply Comments at 1516; Kay Reply Comments at 2; Lachowicz Reply Comments at 2; Phipps Reply Comments at 2; Russ Miller Reply  {O'Comments at 1011; SBA Reply Comments at 23; D & G Communications Ex Parte Comments at 1; PEC  {O'Mobile Ex Parte Comments at 3; FedEx Ex Parte Comments at 3; Galesburg Ex Parte Comments at 1. These commenters oppose auctions here because: (1) the competitive bidding authority extended to the Commission in the Budget Act applies  X 4only to issuance of new authorizations in newly allocated services; T  {O'ԍAMTA Comments at 78; CCI Comments at 1; Dial Call Comments at 1113; Parkinson, et al. Comments at 11; PCIA Comments at 1819; Coalition Comments at 89; T&K Comments at 4; DCL Associates Reply Comments at 2, 6; Fisher Reply Comments at 11; Joint Commenters Reply Comments at 1516; Lachowicz Reply Comments at 2; Phipps Reply Comments at 3; Russ Miller Reply Comments at 1011; SBA Reply  {O'Comments at 23; Louisville Ex Parte Comments at 5; Group of 66 Ex Parte Comments at iii; RACOM Ex  {O'Parte Comments at 5; Operators 3 Ex Parte Comments at 2; California Trucking Ex Parte Comments at 2;  {O'Operators 2 Ex Parte Comments at 2. (2) auctions would favor larger entities to the detriment of small businesses and existing licensees, because larger  X 4entities will have more financial resources to draw upon for bidding;X  yO "'ԍCICS Comments at 6; Courtesy Comments at 1; Don Clark Radio Comments at 2; Ericsson Comments at 45; Pierre Radio Comments at 1; ProTec Comments at 8; Kay Reply Comments at 2; Lachowicz Reply Comments at 2. (3) auctions are inappropriate for an extensively licensed service, because there are few vacant channels and  X4little, if any, "white space" to be filled;; yO&'ԍNTCA Comments at 4.; and, (4) auctions would give a competitive"ML0*((lr" advantage to one group of licensees over another, because the authorization which is  X4auctioned would provide the successful bidder with additional operational rights.\ yOb'ԍSMR WON Comments at 3031; Total Com Comments at 11.\  X4147. 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  Xv4and that 800 MHz SMR licenses are not included in such categories.GvX yO 'ԍNextel Reply Comments at 1617.G Nextel further argues that auctioning of widearea 800 MHz SMR licenses would be the most efficient means of  XH4licensing such spectrum and would ensure prompt delivery of new services to the public.DH yO 'ԍNextel Reply Comments at 22.D  X 4148. 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  XK4under 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.  X4149. We conclude that use of competitive bidding in the upper 10 MHz block, as  X4described 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"!Nx0*((? r" which furthers the goals of Section 309(j)(3)(B) of the Communications Act.  X4150. 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 firstcome, firstserved procedures. We employed firstcome, firstserved 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.  X 4151. Although we believe that several commenters' objections to the use of competitive bidding procedures in the 800 MHz SMR service are untimely petitions to  X 4reconsider 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.  X' B.` ` Competitive Bidding Methodology for Upper 10 MHz Block  X4  X' ` ` 1. Competitive Bidding Design ` `   X~'` `  a.Simultaneous Multiple Round Auctions  Xg4 ` `    XP4152. Background.   In the Competitive Bidding Second Report and Order, we  X;4established the criteria for selecting from among auction methodologies for each service.; {O'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 23602367,  68115. In  X$4the 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  X4desirability of aggregation across spectrum blocks and geographic regions.ZZ {O#'ԍFurther Notice, 10 FCC Rcd at 8008,  75.Z 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 backup 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 widearea licenses to bidders who are"#O0*((!r"  X4most likely to deploy new 800 MHz SMR technologies and services rapidly.1 {Oy'ԍId.1  X4153. Comments.  Numerous commenters concur that a simultaneous multiple round auction is the most appropriate competitive bidding design for widearea 800 MHz SMR  X4licenses.Z yO'ԍAMI Comments at 9; Genesee Comments at 4; Morris Comments at 5; Nextel Comments at 59; Dial Call Reply Comments at 14; Motorola Reply Comments at 11; AMTA Reply Comments at 2930. Dial Call, AMTA, and Nextel support simultaneous multiple round auctions partly  X4due to the high degree of interdependence between the widearea licenses. yO 'ԍDial Call Reply Comments at 14; AMTA Reply Comments at 30; Nextel Reply Comments at 55. CellCall, however, opposes the use of competitive bidding, including simultaneous multiple round  X_4auctions.@_B yOR'ԍCellCall Comments at 28.@ CellCall further believes that the Commission should not be required to auction  XH4all widearea licenses at once.CH yO'ԍCellCall Comments at 2829.C Instead, CellCall suggests that we auction all licenses in a  X14particular license area and conduct individual auctions for each license area.11b  {OD'ԍId.1 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  X 4knowledge of the market to determine their bids.;  yO'ԍSBA Comments at 20.; Genesee disagrees that a single round of sealed bids would be fair to all potential bidders, and suggests that at least two rounds be  X 4conducted with 30day intervals.>  yO'ԍGenesee Comments at 4.>  X4154. Discussion. Based on the record in this proceeding and our successful  Xy4experience 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"~P0*((r" with more flexibility to pursue backup 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  X4prior to the filing deadline for participation in the auction. yO'ԍ Amendment of Parts 2 and 90 of the Commission's Rules to Provide for the Use of 200 Channels Outside the Designated Filing Areas in the 896901 MHz and the 935940 MHz Bands Allotted to the Specialized Mobile Radio Pool, PR Docket No. 89553, Implementation of Section 309(j) of the Communications Act Competitive Bidding, PP Docket No. 93253, Implementation of Sections 3(n) and 322 of the Communications Act, GN  {O= 'Docket No. 93252, Second Order on Reconsideration and Seventh Report and Order, 60 Fed. Reg. 48,913 (Sept.  {O '21, 1995),  152153 (900 MHz Reconsideration Order/7th R&O). 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.  X4'` `  b.Stopping Rules  X4155. Background. In a multiple round auction, a stopping rule must be established to  X4determine when the auction is over.wD {O'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2369,  127.w Three types of stopping rules exist that could be employed in simultaneous multiple round auctions: markets may close individually,  X4simultaneously, or a hybrid approach may be used.u {OH 'ԍCompetitive Bidding Fifth Report and Order, 9 FCC Rcd at 5552,  49.u 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  X~4MTAbased broadband PCS licenses.1~h  {O$'ԍId.1 In the Competitive Bidding Fifth Report and Order,  Xi4we adopted a simultaneous stopping rule for broadband PCS.Ni  {O''ԍId., 9 FCC Rcd at 5551,  47.N In addition, we retained the"iQ 0*((qr" discretion to declare at any point after the 40 rounds in a simultaneous multiple round auction  X4that the auction will end after some specified number of additional rounds.C {Ob'ԍId. at 5551,  48.C  X4156. Comments. The only commenter addressing this issue, Morris, supports using multiple round auctions for widearea 800 MHz SMR licenses, and it proposes limiting the  X4auctions to five rounds.=Z yO'ԍMorris Comments at 5.=  X_4157. 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 backup strategies support the use of a simultaneous stopping rule.  X 4158. 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  Xy4 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 marketbymarket closings.  X4159. 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 fiveround 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.  X4160. 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"#R0*((!r" 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  X4auction close.` `  X' ` `  c.Activity Rules  X4  Xv4161. 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  X14bidders from waiting until the end of the auction before participating.u1 {O 'ԍCompetitive Bidding Third Report and Order, 9 FCC Rcd at 2955,  36.u We have used the  X 4MilgromWilson activity rule to award broadband and narrowband PCS licenses. Z {O% 'ԍSee, e.g., Competitive Bidding Third Report and Order, 9 FCC Rcd at 2956,  40. Under the threestage MilgromWilson 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 MHzpops, and  X 4make 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  X{4for MTAbased PCS licenses._{ {O'ԍFurther Notice, 10 FCC Rcd at 80098010,  79._  XM4162. In the Competitive Bidding Fifth Report and Order, we permitted broadband  X84PCS bidders one "automatic" waiver from the activity rule during each stage of an auction.1Z8~ {Og'ԍCompetitive Bidding Fifth Report and Order, 9 FCC Rcd at 5556,  56. A waiver permits a bidder to maintain eligibility at the same level as in the round for which the waiver is submitted, regardless of the bidder's level of bidding activity in that round.1 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  X4only proactive waivers, and not automatic waivers, would keep an auction open. {O!'ԍCompetitive Bidding Fourth Memorandum Opinion and Order, 9 FCC Rcd at 6861,  15. 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  Xi4round.i2  {OL&'ԍImplementation of Section 309(j) Competitive Bidding, Memorandum Opinion and Order, PP Docket No. 93253, 9 FCC Rcd 7684, 7685,  3 (1994). We observed that this would facilitate the rapid completion of the auction, by"iS 0*((r" permitting the Commission to use larger bid increments, thereby speeding the auction pace  X4without risking a premature auction close.. yOb'ԍ.  X4163. Comments. No commenters addressed this issue.  X4164. Discussion. We will employ the MilgromWilson activity rule in conjunction with the simultaneous stopping rule. Under the MilgromWilson 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 threestage MilgromWilson approach encourages bidders to participate in early rounds by limiting their maximum participation to some multiple of their minimum participation level.   X 4165. 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.  X{4166. In each round of Stage I, a bidder who wishes to maintain its current eligibility must be active on licenses encompassing at least onehalf (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  X4next 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 fourthirds (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.  Xl$4167. 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"U%TX0*((#r" 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.  X 4168. 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  Xb4its 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.  X4169. 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.  X4170. 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  Xj$4circumstances described supra. ` `   X>&'` `  d.License Grouping "''U0*((%r"Ԍ X4171. Background. In the Competitive Bidding Third Report and Order, the Commission determined that choosing which licenses to auction simultaneously requires a  X4judgment about the degree of interdependence of the licenses, i.e., the extent to which the  X4amount bidders are willing to pay for one license depends on the price of another.u {O8'ԍCompetitive Bidding Third Report and Order, 9 FCC Rcd at 2951,  26.u In the  X4Further Notice, we tentatively concluded that if simultaneous multiple round auctions were used for the 800 MHz SMR widearea spectrum blocks, the widearea licenses covering these spectrum blocks should be auctioned simultaneously, because of the relatively high value and  Xe4significant interdependence of the licenses._eZ {Op 'ԍFurther Notice, 10 FCC Rcd at 80088009,  76._  X74172. 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,  X 4but auction each geographic area individually.@  yO'ԍCellCall Comments at 28.@  X 4173. 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.   X' ` ` 2. Bidding Issues for Upper 10 MHz Block of 800 MHz SMR spectrum   X'` `  a.Bidding Procedures  X4  Xm4174. 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 servicespecific rules adopted in the future Reports and Orders for each  X*4auctionable service.w*| {OW$'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2367,  116.w In the Further Notice, we proposed that if simultaneous multiple round auctions are used for widearea SMR licenses, we would use the same or similar bidding procedures to those used in simultaneous multiple round bidding for broadband PCS"V0*((r"  X4licenses.Z {Oy'ԍFurther Notice, 10 FCC Rcd at 8009,  79.Z  X4175. Comments. No commenters addressed this issue.  X4176. Discussion. We will adopt the same bidding procedures used for MTAbased 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 online computer  XH4services, bidding software, and for Bidder Information Packages.HZ {OS 'ԍSee Assessment and Collection of Charges for FCC Proprietary Remote Software Packages, OnLine Communications Services Charges, and Bidder's Information Packages in Connection With Auctionable Services, WT Docket No. 9569, FCC 95308, 60 Fed. Reg. 38,276 (July 26, 1995). Specifically, the Commission has adopted a fee schedule for obtaining access to the Commission's database and remote bidding software packages. The remote access bidding software package is available for $175. The charge for online remote access via a 900 number is $2.30 per minute. Bidders also may bid via telephone for no additional charge.  In addition, bidders will be permitted to bid electronically only if they have filed a shortform application electronically. Bidders who file their shortform manually may bid only telephonically. When submitting bids telephonically, bidders may utilize the Internet to learn the roundbyround results of the auction. Online services such as CompuServe, Prodigy, and America Online provide Internet access at a reasonable cost. Bidders also may, at negligible cost, use a computerized bulletin board service, accessible by telephone lines, from which auction  X 4results can be downloaded to a personal computer.i\  {O,'ԍSee Amendment of Parts 21 and 74 of the Commission's Rules With Regard to Filing Procedures in the Multipoint Distribution Service and in the Instructional Television Fixed Service, MM Docket No. 94131, PP  {O'Docket No. 93253, Report and Order, FCC 95230, released June 30, 1995,  107.i The Commission intends to hold a seminar for prospective bidders to acquaint them with these bidding procedures.  Xb'` `  b.Bid Increments  X44177. Background. In the Competitive Bidding Fifth Report and Order, we determined that it is important to specify minimum bid increments when using simultaneous multiple  X4round auctions to award licenses.u  {O 'ԍCompetitive Bidding Fifth Report and Order, 9 FCC Rcd at 5548,  41.u The bid increment is the amount or percentage by which the bid must be raised above the previous round's high bid in order to be accepted as a valid  X4bid in the current bidding round.1  {O$'ԍId.1 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  X4auction closes within a reasonable period of time.1 {Oy''ԍId.1 With broadband PCS, we started the"W0*((r"  X4auction with large bid increments, and reduced the increments as bidding activity fell.C {Oy'ԍId. at 5549,  44.C The  X4minimum bid increment in Stage I (stages discussed supra at  164166) of the auction was set at 5 percent of the high bid in the previous round or $0.02 per activity unit, whichever  X4was greater.1Z {O'ԍId.1 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  X4unit in Stage II, and the greater of 1 percent of $0.005 per activity unit in Stage III.1 {O, 'ԍId.1 At the same time, we retained the discretion to vary the minimum bid increments for individual  Xa4licenses or groups of licenses over the course of an auction.1a~ {O 'ԍId.1 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  X 4multiple round bidding for MTAbased PCS licenses.Z  {O'ԍFurther Notice, 10 FCC Rcd at 8009,  79.Z  X 4178. Comments. No commenters addressed this issue.  X 4179. 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.   XO'` `  c.Duration of Bidding Rounds  X!4180. 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 servicespecific Reports and Orders, and may be varied  X4by announcement during the course of an auction.w {O1 'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2368,  123.w We concluded in the Competitive  X4Bidding Fifth Report and Order that at the early stages of the auction, prices will be low and  X4contain relatively little information, so bidders will need less time to deliberate.u4  {O#'ԍCompetitive Bidding Fifth Report and Order, 9 FCC Rcd at 5553,  50.u In the final stages of the auction, however, when the consequences of bidding decisions are greatest,  X4bidders will need more time to deliberate.1  {O&'ԍId.1 In the Further Notice, we proposed that if"XX 0*((r" 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  X4multiple round bidding for MTAbased broadband PCS licenses.Z {OK'ԍFurther Notice, 10 FCC Rcd at 8009,  79.Z  X4181. Comments. No commenters addressed this issue.  Xv4182. Discussion. In simultaneous multiple round auctions, we recognize that bidders may need a significant amount of time to evaluate backup strategies and develop their bidding plans. We hereby delegate to the Bureau the discretion to vary the duration of the  X14bidding 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. ` `  X ' ` ` 3. Procedural and Payment Issues  X'` `  a.PreAuction Application Procedures  X{4  Xd4183. Background. In the Competitive Bidding Second Report and Order, we determined that we should require only a shortform application (FCC Form 175) prior to auction, and that only winning bidders should be required to submit a longform license  X!4application (FCC Form 600) after the auction.w!Z {O,'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2376,  165.w In this connection, we determined that such a procedure would fulfill the statutory requirements and objectives and adequately protect the  X4public interest.Q {O'ԍId. at 23752377,  161166.Q In the Further Notice, we proposed to treat all widearea applicants as initial applicants for public notice, application processing, and competitive bidding purposes,  X4regardless of whether they already are incumbent licensees in the 800 MHz band.Z~ {O'ԍFurther Notice, 10 FCC Rcd at 8001,  58.Z In  X4addition, in the Further Notice, we proposed to require applicants for widearea SMR licenses  X4to file an initial "shortform" application in order to qualify for competitive bidding.Z {O\!'ԍFurther Notice, 10 FCC Rcd at 8001,  59.Z  Xm4184. Comments. PCIA recommends that the Commission accept applications in two phases. In Phase 1, existing licensees would have the opportunity to request a widearea license for purposes of converting existing operations into widearea operations as a modification of their license. In Phase 2, the Commission could accept applications for areas and frequencies which were not assigned widearea licenses in Phase 1. Under PCIA's proposal, a Phase 2 license would be considered a "new" license, and, thus, subject to"Y0*((r" 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  X4possible for existing licensees. Several commenters support PCIA's proposal. {OK'ԍParkinson Electronics, et al. Comments at 10; DCL Associates Reply Comments at 5; Phipps Reply Comments at 3; Russ Miller Reply Comments at 4. Commenters premise their support of the proposal on the basis that it presents incumbents with an  X4opportunity to participate in geographic licensing[" {Ow'ԍParkinson Electronics et al. Comments at 10. [ and minimizes incidents of mutual  X4exclusivity.1 {O 'ԍId.1  Xv4  X_4185. Discussion. We will extend the preauction application procedures established  XH4in 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 sitespecific, 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.  XM4186. 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 shortform 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.  XP4187. Soon after the release of the initial Public Notice, a Bidder Information Package  X94will 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.  X4188. 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" ZF0*((br"  X4demonstrate that such bidder's application is acceptable for filing."A yOy'ԍ47 U.S.C.  309(j)(5).A 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  X4Section 310" of the Communications Act.AX yO'ԍ47 U.S.C.  309(i)(2).A 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  X_4the auction.{_ {O 'ԍSee Competitive Bidding Second Report and Order, 9 FCC Rcd at 2375,  161.{  X14189. Thus, all bidders will be required to submit shortform applications on FCC Form 175 (and FCC Form 175S, if applicable), by the date specified in the initial Public  X 4Notice. z yO.'ԍThe shortform application (FCC Form 175) recently has been revised, and the form used for auctions prior to October 1995 no longer will be accepted. 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 shortform 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  XK4classification (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  X~4and in the provision of spectrumbased services.O~ {O#'ԍSee 47 U.S.C.  309(j)(12)(D).O  XP4190. 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 longform application, the acceptance of which will" [d 0*((r"  X4trigger the procedures permitting petitions to deny (as discussed at  209212, infra).w {Oy'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2376,  165.w 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 reauction 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  Xa4geographic area licensing, we reiterate our decision in the First Report and Order that incumbents, postauction, will be able to tradein their multiple licenses for a single  X54authorization in a particular area, provided certain conditions are satisfied.U5Z {O@ 'ԍSee discussion at  88, supra.U  X ' ` `  b.Amendments and Modifications  X 4191. Background. To encourage maximum bidder participation, we proposed in the  X 4Competitive Bidding Second Report and Order to provide applicants with an opportunity to  X 4correct minor defects in their shortform applications prior to the auction.  {OJ'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2377,  167168. We stated that applicants whose shortform applications are substantially complete, but contain minor errors or defects, would be provided an opportunity to correct their applications prior to the  Xh4auction.1h~ {O'ԍId.1 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  X:4consortium changes due to this restructuring.: {O'ԍCompetitive Bidding Fourth Memorandum Opinion and Order, 9 FCC Rcd at 6868,  57. 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  X4system proposals and modifications for equal treatment of substantially similar services.g {OJ'ԍCMRS Third Report and Order, 9 FCC Rcd at 8144,  354.g  X4192. Comments. No commenters addressed this issue.  X4193. Discussion. We will adopt the following procedures for amendments to and modifications of shortform applications in the 800 MHz SMR service. Upon reviewing the shortform 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 lockbox by the"(\4 0*((<r" date specified in the Public Notice, which should be no later than 14 days before the scheduled auction. After the Commission receives from its lockbox 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.  X14194. On the date set for submission of corrected applications, applicants that on their  X 4own have discovered minor errors in their applications (e.g., typographical errors, incorrect  X 4license designations, etc.) will be permitted to file corrected applications. We also will waive  X 4the ex parte rules as they apply to the submission of amended shortform applications for the 800 MHz SMR auctions, to maximize applicants' opportunities to seek Commission staff  X 4advice on making such amendments.#  {O='ԍSee Public Notice, "Commission Announces that Mutually Exclusive Short Form Applications (Form 175)  {O'to Participate in Competitive Bidding Process (Auctions) are Treated as Exempt for Ex Parte Purposes," 9 FCC  {O'Rcd 6760 (1994). The Commission also has waived the ex parte rules as they apply to the submission of amended shortform applications in order 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 shortform applications to reflect formation of consortia or changes in ownership at any time before or during an auction,  XQ4provided 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  X%4agreements 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.  X4195. 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 shortform 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 shortform application, and a request to transfer or assign the license also must be filed in conjunction with the longform application.  X'` `  c.Upfront Payments  X4  X4196. 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" ]~0*((.r"  X4modified on a servicespecific basis.w {Oy'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2379,  180.w 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  X4participate in auctions and to ensure payment of the monetary assessment (discussed infra) in  Xz4the event of bid withdrawal or default.ZzZ {O 'ԍFurther Notice, 10 FCC Rcd at 8010,  81.Z We also sought comment on the upfront payment  Xc4formula and minimum upfront payment most appropriate for the 800 MHz SMR service.1c {O 'ԍId.1  X54197. Comments.  AMTA, Motorola and Nextel support the Commissions proposal to  X 4require bidders to tender a substantial upfront payment.~ ~ yOM'ԍAMTA Reply Comments at 31; Motorola Reply Comments at 13; Nextel Reply Comments at 55.~ Dru Jenkinson, et al. express concern that upfront payments not be structured so as to limit bidders solely to those with vast  X 4financial resources.S  {O'ԍDru Jenkinson, et al. Comments at 11.S  X 4198. In terms of an appropriate upfront payment formula for the 800 MHz SMR  X 4service, 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  Xj4pockets."1j {O'ԍId.1 Pittencrief believes that the Commissions 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  X%4activity unit.C%2  yO'ԍPittencrief Comments at 19.C Nextel, on the other hand, proposes that the Commission require a larger upfront payment, such as an upfront payment based on bidding for all widearea spectrum blocks in a particular geographic area, even if the bidder intends to bid only on one widearea  X4spectrum block.>  yOS#'ԍNextel Comments at 57.> 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  X4population served in a given area is less important than the number of actual customers.;R  yO&'ԍSBA Comments at 20.; "^0*((9r"Ԍ X4199. With respect to an appropriate upfront minimum payment, Genesee agrees with  X4the proposed minimum upfront payment of $2,500.> yOb'ԍGenesee Comments at 4.> SBA believes that the minimum  X4upfront payment should be $2,500 for local licensees and $5,000 for EA licensees.;X yO'ԍSBA Comments at 21.;  X4However, Dru Jenkinson, et al. believe that a $2,500 upfront payment is too low, and express  X4concern that it may not operate as a sufficient deterrent to speculators.S {O? 'ԍDru Jenkinson, et al. Comments at 11.S 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  Xa4establishing 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  X54established.D5z yO`'ԍTelecellular Comments at 14.D  X 4    X 4200. 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.  XO4201. 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.  Xi4202. 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. "_ 0*((r"Ԍ X4203. 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.  Xv' ` `  d.Down Payments and Full Payments ` `    XH'` `  i.hhCDown Payments  X 4204. 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  X 4if such default occurs.w  {OP'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2381,  190.w 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  X 4sufficient to bring their total deposits up to 20 percent of their winning bid(s).Z Z {O'ԍFurther Notice, 10 FCC Rcd at 8010,  82.Z  X}4205. Comments.  Genesee, Pittencrief, AMTA, and Nextel support the Commissions  Xf4proposal.f yO'ԍGenesee Comments at 4; Pittencrief Comments at 19; AMTA Reply Comments at 31; Nextel Reply Comments at 55. SBA believes that the 20 percent figure adopted in the PCS context is appropriate  XO4for the 800 MHz SMR service.;OD yOD'ԍSBA Comments at 20.;  X!4206. 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.  X4207. We also will require winning bidders to submit the required down payment by"`0*((r" cashier's check or wire transfer to our lockbox 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.  X ' ` `  ii.hhCLongForm Applications   X 4208. Background. In the Competitive Bidding Second Report and Order, we  X 4established rules that require a winning bidder to submit a longform application.w  {O"'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2383,  199.w The longform application is required to be filed by a specific date, generally within ten (10) business  X{4days after the close of the auction.1{Z {O'ԍId.1 We stated that after we received the high bidder's down payment and the longform application, we would review the longform application to  XM4determine if it is acceptable for filing.1M {O'ԍId.1 Once the longform application is accepted for filing, we stated that we would release a Public Notice announcing this fact, triggering the  X4filing window for petitions to deny.1~ {ON'ԍId.1 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  X4applicant is qualified, we would grant the license(s) to the auction winner.1 {O'ԍId.1 In the Further  X4Notice, we proposed to use application procedures similar to those used for licensing PCS.Z {O/ 'ԍFurther Notice, 10 FCC Rcd at 8001,  58.Z Consistent with our approach in PCS, we proposed to require only the winning bidder to file a  X4longform application.C4  {O#'ԍId. at 8001,  59.C  X4209. Comments. No commenters addressed this issue.  XT4210. Discussion. We will follow these procedures if the winning bidder makes the"Ta 0*((r" down payment in a timely manner. A longform 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 longform application, we will review the longform application to determine if it is acceptable for filing. Upon acceptance for filing of the longform 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.   X1' ` `  iii.hhCPetitions to Deny and Limitations on Settlements  X 4211. Background. We determined in the Competitive Bidding Second Report and  X 4Order that the procedures concerning petitions to deny found in Section 309(j)(2) of the  X 4Communications Act should apply to competitive bidding.w  {OR'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2383,  200.w We determined that we would adopt expedited procedures to resolve substantial and material issues of fact concerning  X 4qualifications.U Z {O'ԍId; see also, 47 U.S.C.  309(j)(5).U 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  X}4Act or our rules.} {O'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2383,  200; see also 47 U.S.C.  309(b), (d)(1). 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  XO4exists concerning that determination.wOF {OF'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2383,  202.w 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  X4evidence. Additionally, in the Competitive Bidding Fourth Memorandum Opinion and Order, we stated that our anticollusion and settlement procedures were designed to avoid the problem of entities filing applications solely for the purpose of demanding payment from  X4other bidders in exchange for settlement or withdrawal. {O9!'ԍCompetitive Bidding Fourth Memorandum Opinion and Order, 9 FCC Rcd at 6867,  50.   X4212. Comments. No commenters addressed this issue.  XT4213. 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"bj 0*((r" 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.  X4214. 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  Xv4substantial and material issue of fact exists concerning that determination.Dv yO'ԍ47 U.S.C.  309(i)(2)(C).D 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  X 4of written evidence.D X yO# 'ԍ47 U.S.C.  309(i)(2)(B).D  X ' ` `  e.Bid Withdrawal, Default, and Disqualification  X 4  X 4215. 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  X4established in our general competitive bidding rules.Z {O+'ԍFurther Notice, 10 FCC Rcd at 8011,  83.Z In the Competitive Bidding Second  X}4Report 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  X:4licenses, or default on payment of a balance due.w:z {Oe'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2373,  151.w 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  X4high bid and the amount of the winning bid, if the winning bid is lower.1  {O'ԍId.1 A defaulting auction winner also would be assessed three percent of either the subsequent winning bid or  X4the amount of the defaulting bid, whichever is less.1 {O!'ԍId.1  X4216. Comments.   AMTA, Genesee, and Pittencrief agree with the Commissions  X4proposal.u0  yOc%'ԍAMTA Reply Comments at 31; Genesee Comments at 4; Pittencrief Comments at 19.u Nextel proposes that the Commission impose a larger punitive penalty on"c 0*((r"  X4applicants withdrawing their bids, such as forfeiture of the upfront payment.> yOy'ԍNextel Comments at 59.> Southern argues that proposals which increase withdrawal penalties would further  X4assure that auction participation is limited.FX yO'ԍSouthern Reply Comments at 35.F  X4217. 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  X 4the withdrawn bid.D  yO@'ԍ47 C.F.R.  1.2104(g)(1).D  Xy4218. If a license is reoffered by auction, the "winning bid" refers to the high bid in the auction in which the license is reoffered. If a license is reoffered in the same auction, the winning bid refers to the high bid amount, made subsequent to the withdrawal, in that auction. If 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 reauctioned, but instead is offered to the highest losing bidders in the initial auction, the "winning bid" refers to the bid of the highest  X4bidder 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.  X94219. 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  X 4percent of the amount of the defaulting bid, whichever is less.D x yO4%'ԍ47 C.F.R.  1.2104(g)(2).D 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"d0*((r" 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.  X4220. 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.  X 4221. 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 reauction 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.  X' ` ` 4. Regulatory Safeguards  X'` `  a.Rules Prohibiting Collusion  X4  X4222. Background. In the Competitive Bidding Second Report and Order, as modified  X4by the Competitive Bidding Reconsideration Order, we adopted special rules prohibiting  X4collusive conduct in the context of competitive bidding. & {O'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 23862388,  221226; Implementation of  {O'Section 309(j) of the Communications Act Competitive Bidding, PP Docket No. 93253, Second Memorandum  {O'Opinion and Order, 9 FCC Rcd 7245, 725354,  4853 (Competitive Bidding Reconsideration Order), Erratum, PP Docket No. 93253, released October 19, 1994. In the Further Notice, we  X4proposed to apply these rules prohibiting collusion to the 800 MHz SMR service.Z  {O'ԍFurther Notice, 10 FCC Rcd at 8012,  86.Z 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"eH 0*((r"  X4or will not bid or any similar agreement.1  {Oy'ԍId.1  X4223. Comments.  IC&E supports adoption of the Commission's collusion rules.E Z yO'ԍIC&E Reply Comments at 1213.E IC&E and Dial Call contend that the rules should have sufficient flexibility to allow formation  X4of bidding consortia, partnerships or other arrangements prior to auctions.e  yO? 'ԍIC&E Reply Comments at 1213; Dial Call Reply Comments at 14.e Genesee, on the other hand, expresses concern that widearea operators not be permitted to utilize 800 MHz  Xv4SMR auctions as a mechanism to combine their holdings.>vz yO 'ԍGenesee Comments at 5.>  XH4224. 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 shortform application, even if the agreement has not been  X 4reduced to writing.H  {Ob'ԍSee 47 CFR  1.2105(c).H 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 shortform 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.  X4225. 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  X|4FCC Form 175 application, that are bidding in the same license areas, i.e., EAs.| {O#'ԍ47 CFR  1.2105(c)(1); Competitive Bidding Fourth Memorandum Opinion and Order, 9 FCC Rcd at 6868. This prohibition on discussions extends to providing indirect information that affects bids or"gf 0*((r"  X4bidding strategy. {Oy'ԍSee Letter to R. Michael Senkowski from Rosalind K. Allen, Acting Chief, Commercial Radio Division, released Dec. 1, 1994. 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.  X4226. Section 1.2105(c), however, provides certain exceptions to the rule prohibiting discussions with other applicants after the filing of the shortform application. First, applicants may make agreements to bid jointly for licenses, so long as the applicants have not  XH4applied for licenses in any of the same license areas.AH" yO 'ԍ47 CFR  1.2105(c)(2).A Second, an applicant may modify its shortform application to reflect formation of bidding agreements or changes in ownership at  X 4any time before or during the auction, as long as the changes do not result in change of de  X 4jure or de facto control of the applicant, and the parties forming the bidding agreement have  X 4not applied for licenses in any of the same license areas.A  yOS'ԍ47 CFR  1.2105(c)(2).A Finally, a holder of a noncontrolling 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  Xf4any change of control of the applicant.AfB yOY'ԍ47 CFR  1.2105(c)(4).A However, once the shortform 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.  X 4227. 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 shortform filing deadline, the applicant may not enter into a bidding agreement with another applicant bidding on authorizations in the license areas from which  X4the first applicant withdrew.y {O1!'ԍCompetitive Bidding Fourth Memorandum Opinion and Order, 9 FCC Rcd at 6867.y  X4228. If an applicant has the high bid for a license, Section 1.2107(d) requires the applicant to include with its longform 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";gd 0*((Er"  X4to the time bidding was completed.> yOy'ԍ47 CFR  1.2107(d).> Under the Commission's rules prohibiting collusion, the term "applicant" includes the entity submitting the application, owners of 5 percent or  X4more of the entity, and all officers and directors of such entity.DX yO'ԍ47 CFR  1.2105(c)(6)(i).D  X4229. We note that even where the applicant discloses parties with whom it has reached on agreement on the shortform application, thereby permitting discussions with those  Xv4parties, the applicant nevertheless is subject to existing antitrust laws.v {O 'ԍCompetitive Bidding Fourth Memorandum Opinion and Order, 9 FCC Rcd at 6869, n.134. As discussed in the  X_4Competitive 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  X 4collusive, noncompetitive or rigged bids are per se violations of Section One of the Sherman  X 4Antitrust Act.1 z {O2'ԍId.1 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  X 4another for the other.1  {O'ԍId.1  X4230. 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  X4license(s), and may be prohibited from participating in future auctions.} {OB'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2388,  226.}   X'` `  b.Transfer Disclosure Requirements  X4231. Background. In Section 309(j)(4)(E) of the Communications Act, Congress directed the Commission to "require such transfer disclosures and antitrafficking restrictions and payment schedules as may be necessary to prevent unjust enrichment as a result of the  XR4methods employed to issue licenses and permits."DR0  yO3''ԍ47 U.S.C.  309(j)(4)(E).D In the Competitive Bidding Second"Rh 0*((r"  X4Report 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  X4fall short of the true market value of the license." {O'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2385,  214 (quoting H.R. Rep. No. 103111 at 257). Therefore, we imposed a transfer disclosure requirement on licenses obtained through the competitive bidding process, whether  Xx4such 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  XL4SMR licenses obtained through the competitive bidding process.ZL" {O 'ԍFurther Notice, 10 FCC Rcd at 8011,  84.Z  X 4232. Comments. Pittencrief agrees with the Commission's proposal. Pittencrief believes that such provisions will help deter submission of speculative applications and assist  X 4the Commission in identifying realpartyininterest concerns.C  yOU'ԍPittencrief Comments at 19.C Genesee, however, supports a  X 4threeyear ownership requirement.>  D yO'ԍGenesee Comments at 5.>  X 4233. Discussion. We believe that a threeyear 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  XO4the type of transfers and assignments of such licenses during that time.v!O {O'ԍCompetitive Bidding Fifth Report and Order, 9 FCC Rcd at 5583,  117.v 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  XT4licenses."Tf  yOk&'ԍIf potential assignors document total consideration for the license transfer, they have met the transfer disclosure requirements. We will give particular scrutiny to auction winners who have not yet begun"Ti "0*((hr" 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.  X' ` `  c.Performance Requirements  Xv4234. 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  X 4deployment of new technologies and services."D#  yO 'ԍ47 U.S.C.  309(j)(4)(B).D In the Competitive Bidding Second Report  X 4and Order, we decided it was unnecessary and undesirable to impose additional performance requirements, beyond those already provided in the service rules, for all auctionable  X 4services.w$ X {O'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2386,  219.w In the Further Notice, we did not propose to adopt any additional performance  X 4requirements for competitive bidding purposes.Z%  {O_'ԍFurther Notice, 10 FCC Rcd at 8012,  85.Z  X4235. Comments. Genesee suggests imposition of a performance bond of $5,000 per channel for the fiveyear term of the license to ensure that the successful widearea applicant will construct and operate over the term of the license. Genesee further suggests that an additional penalty of a mandatory sixmonth imprisonment should be imposed for falsifying  X:4reports and status to the Commission.>&:| yOg'ԍGenesee Comments at 4.>  X 4236. 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  Xk4requirements for the 800 MHz SMR service beyond those required by Section 90.685.Q'k  {O(#'ԍSee 47 CFR  90.685 (Appendix A)Q  X=' C.` ` Treatment of Designated Entities  X4` ` 1. Overview, Objectives, and the Impact of Adarand Constructors v.  W4Pe9a(# "j'0*((r"Ԍ X4 ę237. 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  XH4minority groups and women."D(H yO 'ԍ47 U.S.C.  309(j)(3)(B).D Small businesses, rural telephone companies and businesses  X14owned by minorities and/or women are collectively referred to as "designated entities."w)1X {O: 'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2388,  227.w 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,  X 4or other schedules or methods . . . and combinations of such schedules and methods."D*  yOp'ԍ47 U.S.C.  309(j)(4)(A).D 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  X4given the opportunity to participate in the provision of spectrumbased services."D+z yO'ԍ47 U.S.C.  309(j)(4)(D).D  Xb4238. In our initial implementation of Section 309(j) of the Communications Act, we  XK4established in the Competitive Bidding Second Report & Order eligibility criteria and general  X64rules that would govern the special measures available for designated entities.,6  {O'ԍSee Competitive Bidding Second Report and Order, 9 FCC Rcd at 23882393, 23952398,  227251,  {O'266288. See also Competitive Bidding Reconsideration Order, 9 FCC Rcd at 23592376,  64165. We also identified several measures, including installment payments, spectrum setasides, and bidding  X4credits, 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.  Xg4239. To meet the statutory objectives of providing opportunities for designated  XP4entities, w e have employed a wide range of special provisions and eligibility criteria in other"Pkf ,0*((hr"  X4spectrumbased services.-p  yOy'ԍFor instance, we determined that minorityowned and womenowned businesses in the nationwide  {OA'narrowband PCS auction would receive a 25 percent bidding credit on certain channels. Competitive Bidding  {O 'Third Report and Order at  72. In the regional narrowband PCS auction womenowned and minorityowned businesses would receive a 40 percent bidding credit on certain channels and small businesses would be eligible  {O'for installment payments on all channels. Id. at  87; Implementation of Section 309(j) of the Communications  {Og'Act Competitive Bidding, PP Docket No. 93253, Third Memorandum Opinion and Order and Further Notice  {O1'of Proposed Rule Making, 10 FCC Rcd 175 (1994) (Competitive Bidding Third Memorandum Opinion & Order  {O'& Further Notice) at  58. For the Interactive Video and Data Service (IVDS), we adopted a 25 percent bidding  yO'credit for one license in each market for womenowned and minorityowned businesses and installment payments for small businesses. Implementation of Section 309(j) of the Communications Act Competitive Bidding,  {OU 'Fourth Report and Order, PP Docket No. 93253, 9 FCC Rcd 2330 (1994) (Competitive Bidding Fourth Report  {O '& Order) at  39, 53. 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 93253, 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  Xv4likelihood that designated entities who win licenses in the auctions become strong competitors in the provision of wireless services.   X14240. Impact of Adarand Constructors, Inc. v. Pe9a. In the broadband PCS docket, we determined that, on separate entrepreneurs' blocks, the bidding credits would vary  X 4according 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  X 4aggregated bidding credit of 25 percent),.^  {Os'ԍCompetitive Bidding Fifth Report & Order at  133. See also Implementation of Section 309(j) of the  {O='Communications Act Competitive Bidding, PP Docket No. 93253, Fifth Memorandum Opinion and Order, 10  {O'FCC Rcd 403 (1994) (Competitive Bidding Fifth Memorandum Opinion & Order) at  99. and all entrepreneurs' block licensees would be  X 4eligible for varying degrees of installment payments.u/ & {O'ԍCompetitive Bidding Fifth Memorandum Opinion & Order at  103.u The Commission adopted special provisions for businesses owned by members of minority groups or women and analyzed their  X}4constitutionality using the "intermediate scrutiny" standard of review articulated in Metro  Xh4Broadcasting v. FCC,D0h yO!'ԍ497 U.S. 547, 56465 (1990).D because, as in Metro Broadcasting, the proposed provisions involved  XS4Congressionallymandated benign race and genderconscious measures.1SH} {OL$'ԍImplementation of Section 309(j) of the Communications Act Competitive Bidding, Notice of Proposed  {O%'Rule Making, PP Docket No. 93253, 8 FCC Rcd 7635 (1993) at  73.  X>4  X'4241. After the release of the Further Notice, the Supreme Court decided Adarand"'l10*((r"  X4Constructors, Inc. v. Pe9a,>2 yOy'ԍ115 S.Ct. 2097 (1995).> which overruled Metro Broadcasting "to the extent that Metro  X4Broadcasting is inconsistent with" the holding in Adarand that "all racial classifications . . .  X4must be analyzed by a reviewing court under strict scrutiny."Q3^X {O'ԍAdarand, 115 S.Ct. at 2113. Metro Broadcasting held that Congressionallymandated remedial provisions  {O'which made distinctions based on race were to be analyzed under an intermediate scrutiny test. Metro  {Os'Broadcasting, 497 U.S. at 564565.Q 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  X4that interest.14~ {O 'ԍId.1 In this connection, the Bureau issued a Public Notice requesting further  X|4comment on the effect of the decision in Adarand on the proposals made in the Further  Xg4Notice in order to supplement our record in the 800 MHz SMR proceeding.5g yO('ԍPublic Notice, "Request for Comment in 800 MHz SMR Proceeding," DA 951651, released July 25, 1995  {O'(800 MHz SMR Further Comment Notice). We received  XR4three comments in response to the 800 MHz SMR Further Comment Notice.  X& ' ` ` 2. Special Provisions for Designated Entities(#  X 4  X 4242. Background. In instructing the Commission to ensure the opportunity for designated entities to participate in auctions and provision of spectrumbased services, Congress was well aware of the problems that designated entities would have in competing against large, wellcapitalized 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  X)4minority groups and women."<6)j  yOD'ԍHouse Report at 254.< 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  X4the telecommunications industries."17  {O"'ԍId.1 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  X4to become licensees."98  {O''ԍId. at 255.9 "m80*((r"Ԍ X4ԙ243. 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  X4those owned by members of minority groups and women."19 {O'ԍId.1 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  X_4deep pockets "over new companies or startups."1:_Z {Oj 'ԍId.1   X14244. 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  X 4do large businesses, are experiencing increased difficulties in obtaining credit.";  yO'ԍSmall Business Credit and Business Opportunity Enhancement Act of 1992,  331(a) (3), Pub. Law 102366, Sept. 4, 1992. As a result  X 4of 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  X4concerns."N<D {O'ԍId. at  331(b)(2),(3).N  Xb4245. 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,  X4the 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  X4MHz SMR channel blocks in each MTA.=$ {O3!'ԍIn the Further Notice, we proposed a tax certificate program for minority and womenowned businesses  {O!'under 26 U.S.C.  1071. Further Notice, 10 FCC Rcd at 8013, 8015,  90, 94. Congress subsequently repealed Section 1071. H.R. 831, 104th Cong. 1st Sess.  2. As a result, we are compelled not to adopt such tax certificate program proposal as part of our 800 MHz SMR rules.   X~4246. Comments. As a general matter, few commenters addressed our proposals for  Xg4special 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"Rn =0*((hr"  X4support providing these entities with bidding credits.> {Oy'ԍMorris Comments at 4; Dru Jenkinson, et al. Comments at 1112; Genesee Comments at 4. Their support for these special provisions is based primarily on the fact that they have been available in other CMRS  X4services, e.g. broadband PCS.c?Z {O'ԍSee e.g., Dru Jenkinson, et al. Comments at 11.c Other commenters oppose providing special provisions to minority and womenowned entities because: (a) there is too much uncertainty concerning  X4the value of the EA licenses;;@ yOC 'ԍAMI Comments at 10.; (b) SMR is a subset of the CMRS marketplace and it is  X4sufficient that special opportunities have been provided for these entities in other CMRS;cA| yO 'ԍMotorola Reply Comments at 1112; Nextel Comments at 5455.c (c) the constitutionality of such provisions is being challenged and would delay the dissemination  Xa4of the EA licenses;bBa  yO'ԍAMTA Reply Comments at 32; Dial Call Reply Comments at 13.b and, (d) there have been no demonstrated barriers to entry by minority  XJ4and womenowned companies in the SMR service.ACJ yO'ԍEden Reply Comments at 5.A  X 4247. 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 minorityowned and womenowned entities that are not small businesses as  X 4previously 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 X 4based measures applicable to the 800 MHz SMR service in light of Adarand.>D ,  yO'ԍAMTA Comments at 910.> 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  Xj4nondiscriminatory access to system financing.?Ej  yO'ԍAMTA Comments at 1014.? Motorola urges the Commission not to adopt special provisions for minority and womenowned entities in order to avoid legal  X<4challenges based on the Adarand decision, because such challenges would serve only to delay  X'4the implementation of the Commission's widearea licensing plan.AF'L  yO$"'ԍMotorola Comments at 12.A Motorola also echoes AMTA's statement about the absence of evidence of discrimination in the 800 MHz SMR  X4service.?G yO%'ԍMotorola Comments at 4.? 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"olG0*((r"  X4discrimination in obtaining SMR licenses.=H yOy'ԍNextel Comments at 8.= As a result, Nextel asserts that the Commission's adoption of race or genderbased special provisions for the 800 MHz SMR service would not  X4be justifiable under a "strict scrutiny" standard of review.>IX yO'ԍNextel Comments at 10.>  X4248. Discussion. We conclude that special provisions for small businesses are appropriate for the 800 MHz SMR service because buildout 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 capitalintensive 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 tenyear 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 interestonly 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  X4access to capital by small businesses.J {OC'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2389,  231232. 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  X 4small 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.  X 4249. Second, we have proposed additional special provisions for small businesses  X!4seeking licenses for the lower 80 and General Category channels in the Second Further Notice"!pzJ0*((? r"  X4of 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  X4on size limitations.zK {O'ԍSee Competitive Bidding Fifth Report and Order, 9 FCC Rcd at 5585,  121.z We also believe that the service areas and spectrum blocks for the  Xx4upper 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.  X54250. At this time we conclude that there is an insufficient record to support the adoption of special provisions solely benefitting minority and womenowned businesses (regardless of size) for the upper 10 MHz block auction. We note, however, that in the  X 4Second Further Notice of Proposed Rule Making, we are seeking comment on this issue with  X 4respect to the lower 80 and General Category channels.L Z {O'ԍSee Second Further Notice of Proposed Rule Making,  382, infra.  Moreover, we believe that most minority and womenowned businesses will be able to take advantage of the installment plan described above. We expect that the vast majority of minority and womenowned businesses  X4will be able to qualify as small businesses under any definition we adopt.1M {O3'ԍId.1  Xh' ` ` 3. Partitioning  X:4251. Background.   Congress directed the Commission to ensure that rural telephone  X#4companies have the opportunity to participate in spectrumbased services.NN#~ {OR'ԍSee 47 U.S.C.  309(j)(4)(D).N In the Further  X4Notice, 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 buildout 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  Xo4would have ample opportunity to participate in 800 MHz SMR.hOo {O0#'ԍFurther Notice, 10 FCC Rcd at 80178018,  100101.h  XA4252. 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"*qO0*(("r"  X4provisions afforded to other small businesses.;P yOy'ԍNTCA Comments at 5.; NTCA also contends that rural telephone  X4companies should receive the right to partition.>QX yO'ԍOPASTCO Comments at 7.> OPASTCO argues that providing special benefits to rural telephone companies in the 800 MHz SMR spectrum auctions will help to  X4ensure that rural communities receive wireless services.FR yOT'ԍPittencrief Comments at 1920.F Pittencrief, on the other hand,  X4believes that the record does not support special treatment for rural telephone companies.  ESx yO 'ԍDCL Associates Comments at 8.E  Xv4253. Discussion. Since adoption of the Further Notice, rural telephone companies  Xa4have gained eligibility to hold SMR licenses.!T\a {O'ԍIn re Eligibility for the Specialized Mobile Radio Services and Radio Services in the 220222 MHz Land  {O'Mobile Band and Use of Radio Dispatch Communications, Report and Order, GEN Docket No. 9490, FCC 9598 (March 7, 1995).! 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 longform application, following the auction, for its respective mutually agreedupon geographic area. Partitioned areas must conform to established geopolitical 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  X{4telephone companies used in our broadband PCS and 900 MHz SMR rules.U{,  {OX'ԍSee, e.g., Competitive Bidding Fifth Report and Order, 9 FCC Rcd at 5615,  193. Thus, rural telephone companies will be defined as "local exchange carriers having 100,000 or fewer  XM4access lines, including all affiliates."V\M  {O'ԍId. Note that this definition has been modified from the Competitive Bidding Second Report and Order where rural telephone companies were defined as companies having no more than 50,000 access lines, including  {ON 'all affiliates. Competitive Bidding Second Report and Order, 9 FCC Rcd at 2397,  282. In the Second Further Notice of Proposed Rule  X84Making, we seek comment on our proposal to extend the partitioning option to SMR licensees generally.  X' ` ` 4. SetAside Spectrum  X4254. 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"rV0*(((r"  X4SMR licenses against large firms with significant financial resources.`W {Oy'ԍFurther Notice, 10 FCC Rcd at 80188019,  104.` We tentatively concluded, however, that it would not be feasible to designate a widearea spectrum block as an entrepreneurs block because the large number of incumbents already licensed throughout the spectrum designated for widearea licensing make it virtually impossible to identify a  X4suitable block. 1XZ {O'ԍId.1  Xv4255. Comments.  Several commenters oppose establishment of an entrepreneurs' block  X_4in the 800 MHz SMR service.Y_ yO 'ЍAMI Comments at 10; AMTA Reply Comments at 33; CellCall Comments at 29; Pittencrief Comments at 20. 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  X14SMR service given the extensive licensing in the service.[Z1D yO&'ԍCellCall Comments at 29; AMTA Reply Comments at 33.[ Pittencrief contends that since local channels will continue to be used by small businesses, it would be unnecessary for the  X 4Commission to superimpose a preference structure on such spectrum for their benefit.C[  yO'ԍPittencrief Comments at 20.C Other commenters, however, believe that an entrepreneurs' block should be established in the  X 4800 MHz band.\ d  {O'ЍDCL Associates Comments at 7; Dru Jenkinson et al. Comments at 5; Gulf Coast Comments at 2; the SBA Comments at 15. 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  X 480 channels for designated entities.;]  yO'ԍSBA Comments at 15.; 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  Xd4should be established as an entrepreneurs' block.R^dN  {Oc'ԍDru Jenkinson, et al. Comments at 5.R Assuming that an entrepreneurs' block is  XM4established in the upper 10 MHz block, Dru Jenkinson, et al. and the SBA contend that it  X84should consist of at least one 2.5 MHz block of spectrum.i_8 {O"'ԍDru Jenkinson, et al. Comments at 4; SBA Comments at 1314.i  X 4256. 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"sr_0*((r" a meaningful opportunity to continue to participate in the provision of 800 MHz SMR service.  X4Thus, 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.   X' VI.SECOND FURTHER NOTICE OF PROPOSED RULE MAKING  Xx4  Xa4257. 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  X54SMR spectrum, certain aspects of mandatory relocation as adopted in the First Report and  X 4Order, 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 costsharing 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.  X%4258. 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.  X' A.` ` Disaggregation of Channel Blocks on the Upper 200 Channels of 800 MHz SMR Spectrum(#`  X4  X4259. Background. In the Further Notice, we asked commenters to address whether licensees should be allowed to sublicense portions of larger blocks instead of aggregating  XX4smaller blocks.Z`X {O'ԍFurther Notice, 10 FCC Rcd at 7985,  22.Z  X*4260. Comments. Total Com, AMTA, AMI and Motorola contend that EA licensees  X4should be permitted to sublicense portions of their spectrum blocks.aZ {O"'ԍTotal Com Comments at 5; AMTA Reply comments at 32; Motorola Reply Comments at 10; AMI Ex  {O"'Parte Comments at 3; PCIA Ex Parte Comments at 6. 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 widearea service at levels commensurate with their business" ta0*((Hr"  X4and customer interests and their financial resources.Fb yOy'ԍMotorola Reply Comments at 10.F 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,  X4which otherwise might be incapable of participating in the competitive bidding process.BcX yO'ԍAMTA Reply Comments at 32.B  X4Parkinson, et al. express concern that, by allowing sublicensing, an incumbent's operations  X4unfairly and unreasonably would be restricted by the EA licensee.Od {O( 'ԍParkinson, et al. Comments at 10.O  Xa4261. 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  X 4enable EA licensees to manage their spectrum blocks more effectively and efficiently.eZ z {OG'ԍAs discussed at  258, infra, we also seek comment on whether geographic area licensees should be afforded the additional spectrum management tool of partitioning, which is the equivalent of sublicensing on a geographic basis. 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.  X 4262. As a general matter, we believe that any disaggregation agreements must comply with the Commission's procompetitive 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.  X4263. 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 widearea 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.  X' B.` ` Partitioning on the Upper 200 Channels of 800 MHz SMR Spectrum (#(#(#` "ue0*((r"Ԍ X4ԙ264. Background. In the Eighth Report and Order, supra, we adopt a partitioning option for rural telephone companies.  X4265. Comments. Nextel contends that smaller, local operators wishing to participate in widearea service could become involved through arrangements with the EA licensee to  X4partition its service area.rf {O'ԍNextel Comments at 2223; see also AMI Ex Parte Comments at 3.r  Xa4 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.  X 4 267. 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 longform application, following the auction, for its respective mutually agreedupon geographic area. We propose that partitioned areas be required to conform to established geopolitical 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.  X4 268. As a general matter, we believe that any partitioning agreement must comply with the Commission's procompetitive 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.  X'   X'C.` ` Mandatory Relocation in the Upper 200 Channels   X!'` ` 1. Distributing Relocation Costs Among EA Licensees  X"4  X#4 269. 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"U%vZf0*((#r" 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 costsharing 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 costsharing 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 systemwide relocation agreements. This would in turn result in faster delivery of widearea SMR service to the public. We seek comment on our tentative conclusions and on the advantages and disadvantages of our costsharing proposal.  X ' ` ` 2. Relocation Costs  X4 270. Compensable Costs. As we indicated in the PCS CostSharing 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."  X4271. 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  X~4after the incumbent took control of the new facilities.g~ {O'ԍLouisville Ex Parte Comments at 1213; see also US Sugar Comments at 78; Kay Reply Comments at 2. Clarus argues that expenses paid by the EA licensee should include administrative costs and any loss of goodwill that the  XP4incumbent might suffer.NhPZ {O['ԍClarus Ex Parte Comments at 23.N Nextel believes that all outofpocket costs associated with retuning should be borne by the auction winner, such costs include those covered by the  X"4Commission's Emerging Technologies relocation plan.Ai" yO"'ԍNextel Comments at 3435.A  X4272. 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 widearea SMR service. Because other EA licensees have not received the corresponding advantage of"!w|i0*((? r" 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; backup 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.   X 4273. 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.  X64274. 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 widearea system in the EA.  X4275. Dispute Resolution Issues. Comments. PCIA, AMI, and Motorola all argue that  X4the Commission should establish a mediation mechanism to resolve disputes.j {O)'ԍPCIA Ex Parte Comments at 10; AMI Ex Parte Comments at 7; Motorola Ex Parte Comments at 45. PCIA believes that the EA winner should pay for the mediation unless the mediator finds that the  X4incumbent is not acting in good faith.KkZ {O'ԍPCIA Ex Parte Comments at 10.K If mediation is not successful, Motorola and PCIA  Xk4believe that the Commission should resolve the dispute.ulk {O 'ԍMotorola Ex Parte Comments at 5; PCIA Ex Parte Comments at 1819.u  X=4276. 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. "!x~l0*((? r"Ԍ X4277. 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  X4resolution techniques.m {O4'ԍSee Use of Alternative Dispute Resolution Procedures in Commission Proceedings and Proceedings in  {O'which the Commission is a Party, Initial Policy Statement and Order, 6 FCC Rcd at 5669 (1991). Information regarding the use of alternative dispute resolution is available from the Commission's Designated ADR Specialist, ADR Program, Office of the General Counsel, Federal Communications Commission, 1919 M Street, N.W., Washington, D.C. 20554. 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.  XH4278. 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.  X'` ` 3. Comparable Facilities  Xy4  Xb4279. Background. Under the mandatory relocation scheme we adopt in the First  XM4Report 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  X 4incumbents with comparable facilities as a condition for involuntary relocation.Jn | {O7'ԍSee 47 CFR  94.59(c)(3).J 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  X4existing facilities.o {O'ԍSee Redevelopment of Spectrum to Encourage Innovation in the Use of New Telecommunications  {ON 'Technologies, ET Docket No. 929, Third Report and Order and Memorandum Opinion and Order, 8 FCC Rcd  {O!'6589, 660304,  3536 (1993) (Emerging Technologies Third Report and Order). But see Amendment to the Commission's Rules Regarding a Plan for Sharing the Costs of Microwave Relocation, WT Docket No. 95157,  {O"'Notice of Proposed Rule Making, FCC 95426, released October 13, 1995, (PCS CostSharing Notice).  We also indicated that we would consider, inter alia, system reliability, speed, bandwidth, throughput, overall efficiency, bands authorized for such services, and  X4interference protection in making a determination regarding comparability.p  {O&'ԍEmerging Technologies Third Report and Order, 8 FCC Rcd at 660304,  3536. In the Further  X4Notice, we asked commenters to discuss the meaning of comparable facilities in the 800 MHz"yX p0*((r"  X4SMR context.^q {Oy'ԍSee Further Notice, 10 FCC Rcd at 7992,  36.^  X4280. Comments. Some commenters suggest, as a general matter, that a comparable  X4system is one that is as good as or superior to the incumbent's existing system.rZ {O'ԍSee e.g. PCIA Ex Parte Comments at 14; AMI Ex Parte Comments at 910; Motorola Ex Parte Comments at 34. 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  X_4incumbent;s(_ {O 'ԍAMTA Reply Comments at 2223; PCIA Ex Parte Comments at 14; AMI Ex Parte Comments at 910;  {O 'AMTA Ex Parte Comments at 3; Clarus Ex Parte Comments at 23; FedEx Ex Parte Comments at 2; Louisville  {OX'Ex Parte Comments at 13; Motorola Ex Parte Comments at 34; Nextel Ex Parte Comments at 1112; Southern  {O"'Ex Parte Comments at 13. (2) the retuned frequencies being compatible in a multichannel system at the  XH4incumbent's current location;tH {O'ԍPCIA Ex Parte Comments at 14; Cumulous Comments at 1213; AMI Ex Parte Comments at 910; Clarus  {Og'Ex Parte Comments at 23; FedEx Ex Parte Comments at 2; Motorola Ex Parte Comments at 34. (3) the retuned frequencies not having any cochannel  X14licensees within the EA;pu1  {O'ԍPCIA Ex Parte Comments at 14; AMI Ex Parte Comments at 910.p (4) incumbents having 70mile cochannel interference  X 4protection;v  {O]'ԍPCIA Ex Parte Comments at 14; Dial Call Reply Comments at 89; E.F. Johnson Reply Comments at 89; Fisher Reply Comments at 8; Motorola Reply Comments at 1822; Pittencrief at 8. (5) base station equipment being modified to operate on the retuned  X 4frequencies;w  {O'ԍPCIA Ex Parte Comments at 14; AMI Ex Parte Comments at 910; Louisville Ex Parte Comments at 1213. (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  X 4EA licensee would be required to provide new equipment);x F {O'ԍMotorola Comments at 16; PCIA Ex Parte Comments at 14; AMI Ex Parte Comments at 910; Louisville  {O'Ex Parte Comments at 1213; Motorola Ex Parte Comments at 34; Fresno Ex Parte Comments at 18. (7) the incumbent's "retuned"  X 4system providing the same, if not superior, performance as the incumbent's existing systemiy  {O"'ԍAMTA Reply Comments at 2223; PCIA Ex Parte Comments at 14.i  X 4operating at the same antenna height,z 4 {O$'ԍId.; Louisville Ex Parte Comments at 13; Mobex Ex Parte Comments at 5. and with the same powerK{  {O&'ԍPCIA Ex Parte Comments at 14.K and interference" zX{0*(( r"  X4protection;t| {Oy'ԍPCIA Ex Parte Comments at 14; Nextel Ex Parte Comments at 1011.t and, (8) the same channel  X4separation for the retuned frequencies.}&Z {O'ԍPCIA Ex Parte Comments at 14; AMI Ex Parte Comments at 910; AMTA Ex Parte Comments at 3;  {O'Hawaiian Ex Parte Comments at 2; Louisville Ex Parte Comments at 13; Obex Ex Parte Comments at 5;  {O'Motorola Ex Parte Comments at 34; Nextel Ex Parte Comments at 1011; Small Business SMR Ex Parte Comments at 5.  X4281. 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  Xv4system.~(vH {Oo 'ԍMotorola Comments at 16; AMTA Ex Parte Comments at 3; Centennial Ex Parte Comments at 4; Clarus  {O9'Ex Parte Comments at 23; FedEx Ex Parte Comments at 2; Hawaiian Ex Parte Comments at 3; IC&E Ex Parte  {O'Comments at 4; Louisville Ex Parte Comments at 13; Motorola Ex Parte Comments at 34; Peacock's Ex Parte  {O'Comments at 3; Southern Ex Parte Comments at 13. Nextel argues that comparable facilities means having the same 40 dBu contour as  X_4the incumbent's current system.P_8  {OH'ԍNextel Ex Parte Comments at 1112.P Several commenters argue that only other 800 MHz SMR  XH4channels could constitute comparable frequencies. (H  {O'ԍAMTA Reply Comments at 2223; ABC Ex Parte Comments at 1; C & S Ex Parte Comments at 2; E.T.  {O'Communications Ex Parte Comments at 1; Jamestown Ex Parte Comments at 1; Lectro Ex Parte Comments at 1;  {OW'Obex Ex Parte Comments at 5; Small Business SMR Ex Parte Comments at 5; Spectrum Ex Parte Comments at  {O!'1; see also Cumulous Comments at 1213 (must be in 851861 MHz bands).  In this connection, Spectrum believes that incumbents should be relocated elsewhere on the 800 MHz spectrum or to the 900 MHz  X 4spectrum, or the auction winner should buyout the incumbent's system.K  yO'ԍSpectrum Resources Comments at 68.K  X 4282. PCIA, supported by other commenters, proposes that retuned incumbents receive the following rights and privileges associated with mandatory relocation: (1) the ability to  X 4obtain geographic area licenses on retuned channels; J {O'ԍPCIA Ex Parte Comments at 8; AMI Ex Parte Comments at 56; Jamestown Ex Parte Comments at 1;  {O 'Obex Ex Parte Comments at 67; Small Business SMR Ex Parte Comments at 67. (2) protection against being relocated  X 4more than once;  {O"'ԍDial Call Reply Comments at 10; PCIA Ex Parte Comments at 6; AMI Ex Parte Comments at 6; AMTA  {O#'Ex Parte Comments at 3; Motorola Ex Parte Comments at 6. (3) the right to demand one unified retuning plan from all EA license  X4holders in whose spectrum blocks their frequencies are located; {OC&'ԍAMTA Reply Comments at 2223; PCIA Ex Parte Comments at 9; AMI Ex Parte Comments at 6. (4) a requirement of "seamless" transition, such that the EA holder would complete retuning before the incumbent"y{0*((r"  X4moves;z^ {Oy'ԍDial Call Reply Comments at 9; PCIA Ex Parte Comments at 14; AMI Ex Parte Comments at 10;  {OC'Louisville Ex Parte Comments at 10; Motorola Ex Parte Comments at 34; Spectrum Ex Parte Comments at 1;  {O 'US Sugar Ex Parte Comments Attachment at 2; Total Com Comments at 8.z (5) no obligation to cease operations on the original channels unless alternative  X4frequencies are identified and accepted; {O'ԍPCIA Ex Parte Comments at 15; AMI Ex Parte Comments at 10; Motorola Ex Parte Comments at 5. and, (6) the right to timely notification by the EA  X4licensee that incumbents will be moved.^ {O 'ԍAMTA Reply Comments at 21 (notification within six months); PCIA Ex Parte Comments at 15  {O '(notification within one year); AMTA Ex Parte Comments at 3 (timely notification); CellCall Ex Parte  {O 'Comments at 2 (timely notification); Clarus Ex Parte Comments at 23 (notification within two to three months). PCIA also suggests that EA licensees be given one  X4year in which to complete retuning, so that incumbents can make future business plans. {O 'ԍPCIA Ex Parte Comments at 89; AMI Ex Parte Comments at 5; CellCall Ex Parte Comments at 2. Several commenters argue that there should be no selective retuning of incumbent channels;  X4rather, all of an incumbent's channels within an EA spectrum block should be retuned._^8  {Ov'ԍAMTA Ex Parte Comments at 3; CellCall Ex Parte Comments at 2; Centennial Ex Parte Comments at 4;  {O@'Clarus Ex Parte Comments at 2; Hawaiian Ex Parte Comments at 34; IC&E Ex Parte Comments at 45;  {O 'Peacock's Ex Parte Comments at 23._ 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  XH4participating in an integrated network.H^  {OW'ԍCentennial Ex Parte Comments at 4; Hawaiian Ex Parte Comments at 4; IC&E Ex Parte Comments at 4. Nextel, on the other hand, contends that selective  X14retuning should be allowed, so long as the channels are "comparable."M1 {O'ԍNextel Ex Parte Comments at 13.M  X 4283. 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 tradeoff 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"|0*((Kr" facilities." We ask commenters to discuss whether the "comparable facilities" definition should include additional operational characteristics, if so, what characteristics should be specified.  X4284. 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.  X' ` ` 4. Relocation Guidelines Good Faith Requirement During Mandatory Negotiations(#  X4  X4285. 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 oneyear 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".  X 4286. 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"%'}0*((%r" 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.  X' D.` ` BETRS Eligibility on the Upper 200 Channels of 800 MHz SMR Spectrum (#`  Xv4287. Background. Under Section 90.621(h) of the Commission's rules, Channel Numbers 401410, 441450, 481490, 521530, and 561570 are available on coprimary basis to stations in Basic Exchange Telecommunications Radio Service (BETRS) as described in  X14Part 22 of the Commission's rules.K1 {O 'ԍSee 47 C.F.R.  90.621(h).K  X 4288. Proposal. According to our licensing records, there are few BETRS facilities currently licensed on these frequencies. Based on the limited BETRS licensing on these  X 4frequencies and the goals of the widearea licensing plan adopted in the First Report and  X 4Order in PR Docket No. 93144 (in which these channels are included), we propose that BETRS stations no longer be authorized on these frequencies. In addition, as of the adoption  X4of this Second Further Notice of Proposed Rule Making, we will no longer accept applications for BETRS facilities on these channels.  XQ' E.` ` Licensing of Lower 80 and General Category Channels  X#'` ` 1. Geographic Area Licensing  X 4  X4 289. Background. Under our current rules the lower 80 and General Category  X4channels are licensed on a sitespecific basis. In the Further Notice, we sought comment on whether to continue sitespecific licensing or to adopt a form of geographic area licensing on  X4these channels._Z {O'ԍFurther Notice, 10 FCC Rcd at 79857986,  24._  X4!290. Comments. Several commenters advocate that we continue licensing channels designated for local SMR use based on the geographic separation and channelization criteria  XV4in our current SMR rules.xV yO 'ЍAMI Comments at 5; AMTA Comments at 25; ABC Comments at 3; B&C Comments at 3; Bisman Comments at 3; Bolin Comments at 3; Dakota Comments at 3; Deck Comments at 3; Diamond L Comments at 3; E.T. Communications Comments at 3; Keller Comments at 3; Nielson Comments at 3; Nodak Comments at 3; RCC Comments at 3; Raserco Comments at 3; Rayfield Comments at 3; SMCI Comments at 3; Vantek Comments at 3; E.F. Johnson Comments at 7; Genesee Comments at 2; Motorola Comments at 1213; Palmer Comments at 4; Pittencrief Comments at 7; Fisher Reply Comments at 10; IC&E Reply Comments at 6; OneComm Reply Comments at 18. These commenters argue that continued sitespecific licensing"V~, 0*((r"  X4would: (1) allow local operators to define their own markets;a yOy'ЍAMI Comments at 5; E.F. Johnson Comments at 7. a (2) permit construction of niche systems designed to meet unique  X4and customized needs;EX yO'ЍAMI Comments at 5. E and, (3) minimize disruption to operations of existing licensees. yOk'ЍAMTA Comments at 25; Motorola Comments at 1213; Palmer Comments at 4; Pittencrief Comments at 7; Fisher Reply Comments at 10; IC&E Reply Comments at 6.  X4"291. Other commenters advocate discontinuing sitespecific licensing of the lower 80 and General Category channels and instead offering licenses for individual channels or small  Xv4channel blocks covering defined geographic areas.v@ {Og 'ЍCumulous Comments at 9; Dru Jenkinson, et al. Comments at 6; Telecellular Comments at 5; Total Com Comments at 6. Cumulous argues that marketarea licensing would allow local SMR operators to grow and develop into geographic area  XH4licensees in the future.?H yO'ԍCumulous Comments at 9.? Dru Jenkinson, et al. contend that marketarea licensing would  X34permit more efficient service area coverage than sitespecific authorizations.R3*  {O'ԍDru Jenkinson, et al. Comments at 6.R Total Com believes that marketarea licensing will be advantageous to market development, with minimal  X 4regulation.@  yOr'ԍTotal Com Comments at 6.@  X 4#292. Some commenters expressly oppose marketarea licensing on the basis that: (1) there is no reason to license these channels on a marketdefined area basis given the scarcity  X 4of vacant channels;s L  yO'ԍEricsson Comments at 9; Southern Comments at 12; Pittencrief Comments at 8.s and, (2) it could create an artificial shortage of local channels simply  X4because a licensee secures an authorization covering a particular geographic area.K yO'ԍE.F. Johnson Reply Comments at 56.K Pittencrief contends that such an approach, if adopted, should be used only in those areas  Xd4where the spectrum currently is not being used.Bdl yO"'ԍPittencrief Comments at 8.B  X64$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 widearea operations should additional spectrum be"0*((r"  X4desired.< yOy'ԍAMTA Comments at 25.< Pittencrief contends that even if sitespecific 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 marketbased license, a local licensee would be required to demonstrate either that: (a) no other cochannel systems serve the geographic area; or, (b) it has secured the consent of all affected cochannel licensees. In either case, Pittencrief suggests that the local licensee should be required to serve a certain percentage of the  Xv4Commissiondefined service area or face loss of the widearea authorization.HvX yO 'ԍPittencrief Reply Comments at 6.H  XH4%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 marketarea 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.   XK' ` ` 2. Service Areas  X4&295.  Background. In the Further Notice, we indicated our belief that BTAs could be  X4an appropriate service area for geographic area licensing on the lower 80 channels.Z {O'ԍFurther Notice, 10 FCC Rcd at 7986,  25.Z In the  X4First Report and Order, supra, we adopt EAs as the service area for licenses in the upper 10 MHz block.  X4'296.  Comments. AMTA recommends using EAs rather than BTAs, partly because  X4EAs appear to approximate more closely the coverage range of existing systems.<z yO'ԍAMTA Comments at 26.< Pittencrief  X4also supports use of EAs.B  yO;"'ԍPittencrief Comments at 8.B DCL Associates and Telecellular support use of BTA service areas, because they believe that such licensing would permit substantially more operational  XR4flexibility than the traditional 35mile radius licensing areas.cR yO%'ԍDCL Associates Comments at 89; Telecellular Comments at 5.c 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"$* 0*((<r" possibility that a cochannel licensee legitimately could reuse those channels to serve an  X4adjacent area.C yOb'ԍE.F. Johnson Comments at 8.C CellCall favors licensing the lower 80 channels on an MTA basis.@X yO'ԍCellCall Comments at 14.@ Dru  X4Jenkinson, et al. believe that uniformity and efficiency of administration suggest that the  X4lower 80 channels be licensed on the same geographic area as the upper 200 channels.R {OV'ԍDru Jenkinson, et al. Comments at 6.R Similarly, AMTA contends that such uniformity will preserve the value of lower 80  X4channels.Bz yO 'ԍAMTA Reply Comments at 18.B  Xa4(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  X34channels. 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 widearea 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.  Xf'` ` 3. Channel Assignments  X84)298.  Background. In the Further Notice, we indicated that by continuing to license the lower channels in fivechannel 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  X4operators more flexibility in channel configuration.Z  {O'ԍFurther Notice, 10 FCC Rcd at 7986,  25.Z  X4*299.  Comments. CellCall, Telecellular, AMI, Dru Jenkinson, et al., and Palmer  X4support licensing the lower 80 channels in fivechannel blocks. {O"'ԍCellCall Comments at 1314; Telecellular Comments at 5; AMI Comments at 5; Dru Jenkinson et al. Comments at 6; Palmer Comments at 4. Palmer believes that such an approach would limit spectrum warehousing severely because channels would not be sitting  Xm4idle while reserved for future service areas within a larger defined geographic region.=m  yO''ԍPalmer Comments at 4.= Dru"m 0*((r"  X4Jenkinson, et al. believes that a fivechannel block is an appropriate grouping which would permit limited service application on a local basis, yet provide flexibility for system  X4modification within the designated area.R {OM'ԍDru Jenkinson, et al. Comments at 6.R  X4+300. Proposal. The fivechannel blocks, which proved to be administratively convenient under a sitebysite 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 fivechannel 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 fivechannel blocks. We seek comment on this tentative conclusion and any alternatives.  X 4,301. For the General Category channels, we are not convinced that fivechannel 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 multiplechannel 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 channelbychannel 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  X4different sizes, e.g., a 120channel block, a 20channel block, and a 10channel block.  X4Another alternative is to license channel blocks of the same size, e.g., 25channel or 10channel blocks. We seek comment on these, as well as other, alternatives.  X' ` ` 4. Operational and Eligibility Restrictions  Xk4  XT4-302.  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.  X4.303.  Comments. The majority of commenters addressing this issue endorse the Commissions proposal to allow licensees to use the lower 80 channels for any purpose that is  X!4technically consistent with our rules.X!Z yO%'ЍABC Comments at 2; B&C Comments at 2; Bisman Comments at 2; Bolin Comments at 2; Dakota Comments at 2; Deck Comments at 2; Diamond L Comments at 2; E.T. Communications Comments at 2; Keller Comments at 2; Nielson Comments at 2; Nodak Comments at 2; RCC Comments at 2; Raserco Comments"P'0*((`'" at 2; Rayfield Comments at 2; SMCI Comments at 2; Vantek Comments at 2; CellCall Comments at 14; OneComm Comments at 29; Pittencrief Comments at 4. Cumulous believes that the Commission should"! 0*(( r" pursue licensing policies that allow the same use to be made of both the upper 10 MHz block  X4of 800 MHz SMR spectrum and the lower 80 channels.A  yO'ԍCumulous Comments at 89.A OneComm believes that such a regime would make local channels more fungible in relocation negotiations and preserve the  X4value of the lower 80 channels.? yO 'ԍOneComm Comments at 29.?  X4/304. Some commenters, on the other hand, oppose allowing EA licensees to be able  Xv4to obtain lower 80 channels.\v@ yOg 'ЍEricsson Comments at 8; UTC Comments at 7.\ 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  XH4not obtain the EA license if a mandatory relocation plan is adopted.?H yO'ԍEricsson Comments at 8.? 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  X 4geographic area.: `  yO'ԍUTC Comments at 7.: 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  X 4to incorporate such frequencies into its widearea system.C  yOv'ԍFisher Reply Comments at 5.C Fisher believes that such use  X 4would further the Commissions goal of efficient and full utilization of spectrum.7  {O'ԍId.7  X40305. 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 widearea 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  X4intended 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"~0*((r" by such means as integrating their frequencies into a widearea system or establishing a multiplechannel network. Thus, we do not propose any additional restrictions for these channels.  X' ` ` 5. Channel Aggregation Limit  Xv41306.   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  X34same area.Z3 {O 'ԍFurther Notice, 10 FCC Rcd at 7987,  26.Z We proposed to limit grants of the lower 80 channels to no more than five  X 4channels at one time, which is the applicable limit under our current rules.1 Z {O' 'ԍId.1  X 42307.  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  X 4same area.  yOF'ЍCellCall Comments at 14; Telecellular Comments at 56; Total Com Comments at 6; Russ Miller Comments at 4. CellCall proposes a fivechannel limit in a particular area for the lower 80  X4frequencies.@D yO'ԍCellCall Comments at 14.@ Russ Miller believes, however, that a fivechannel limit is too restrictive over  X{4a geographic area as large as a BTA service area.7{ {O'ԍId. at 9.7 It proposes a fivechannel limit, per location, not per area, for requested frequencies not licensed to the applicant within its  XM4existing footprint.HMf  yOd'ԍRuss Miller Reply Comments at 4.H 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  X4any location within 40 miles of the unbuilt site.C  yO!'ԍTelecellular Comments at 6.C Total Com suggests that any licensee must have 90 percent of its channels constructed in each market before additional channels are  X4authorized.@  yO$'ԍTotal Com Comments at 6.@  X43308. Proposal. We propose not to limit the number of frequencies a single applicant can request at one time. Under our sitespecific 800 MHz SMR licensing rules, we generally"~0*((r" 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 widearea 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. "10*((r"  X' ` ` 6. Construction Requirements   X'` `  a.Construction Period  X44309. Background.  In the CMRS Third Report and Order, we established a uniform 12month period for constructing a standard base station in all CMRS services that are  Xx4licensed on a sitespecific basis.gx {O'ԍCMRS Third Report and Order, 9 FCC Rcd at 8074,  177.g In the Further Notice, we indicated that licensees of SMR  Xc4systems presumptively are subject to this 12month construction period.ZcZ {On 'ԍFurther Notice, 10 FCC Rcd at 7995,  44.Z In the CMRS Third  XN4Report 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  X 4by, or related to the CMRS provider.i  {O'ԍCMRS Third Report and Order , 9 FCC Rcd at 8075,  178.i  X 45310. Comments. All commenters addressing this issue endorse the Commission's proposal of a 12month construction period, coupled with a commencement of service to  X 4subscribers requirement. ~ yO'ԍABC Comments at 5; B&C Comments at 5; Bisman Comments at 5; Bolin Comments at 5; Dakota Comments at 5; Deck Comments at 5; Diamond "L" Comments at 5; E.T. Communications Comments at 5; Keller Comments at 5; Morris Comments at 4; Nielson Comments at 5; Nodak Comments at 5; RCC Comments at 5; Raserco Comments at 5; Rayfield Comments at 5; SMCI Comments at 5; Vantek Comments at 5; OneComm Comments at 2930; Pittencrief Comments at 13.  X46311. 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 12month 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.  X'` `   b.Coverage Requirements   X4  X47312. We seek comment on whether geographic area SMR licensees operating on the lower 80 and General Category frequencies should be subject to minimum coverage  X4requirements 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 onethird of the population within their EA within three years of initial license grant and to twothirds of the population by the end of their fiveyear 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",. 0*((r" 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.  X_48313. 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 cochannel 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 twelvemonth 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.  X449314. 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 marketarea 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  X|4block of 800 MHz SMR spectrum, 900 MHz SMR, and broadband PCS.| {O'ԍSee 47 CFR  90.685 (Appendix A); 47 CFR 90.665(d) (900 MHz SMR); 47 CFR 24.203(b) (broadband PCS). We seek comment on our proposal and any alternatives.  X7' ` ` 7. Treatment of Incumbents  X 4  X 4:315. Given the extensive licensing of the 800 MHz SMR service, we remain concerned about the ramifications of implementing a marketarea licensing approach where  X4systems have been licensed already on a sitespecific basis. In the First Report and Order,  X 4supra, 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"l$"0*(("r" 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 sitespecific authorizations, and geographic area licensees would be required to provide protection to all cochannel 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  X_4detail, 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 marketarea licensee for the relevant channel). We seek comment on this proposal. In addition, we ask commenters to address how nonSMR licensees operating on the lower 80 and General Category channels should be treated. Should these licensees be relocated to nonSMR channels, and if so, under what circumstances and pursuant to what type of relocation plan?  X 4;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 marketarea 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  X4as their 22 dBu interference contour is not expanded. As we note in the First Report and  X 4Order, 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 marketarea 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 marketarea 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.  XT4<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 postauction 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 onetime 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")'0*((%r" 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.  X' ` ` 8. CoChannel Interference Protection  Xv4=318. Under our marketarea licensing proposal for the lower 80 and General Category channels, marketarea licensees will be required to provide interference protection both to incumbent cochannel facilities and to cochannel licensees in neighboring market areas. With respect to incumbent cochannel facilities, we propose to retain the level of protection afforded under our existing rules. Thus, a marketarea 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 cochannel separation standards set forth in our shortspacing rule if it seeks to  X 4operate stations located less than 113 km (70 mi) from an incumbent licensee's facilities.H  {ON'ԍSee 47 CFR  90.621(b).H With respect to adjacent marketarea licensees, we propose that marketarea 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.  X4' ` ` 9. Licensing in Mexican and Canadian Border Areas  X4  X4>319. We recognize that a limited number of lower 80 channels are available for SMR  X4licensing in the Mexican and Canadian border areas. In the First Report and Order, we have decided not to distinguish between border areas and nonborder areas for licensing purposes.  X4We 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 nonborder 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 marketarea licensees be entitled to use any available borderarea channels, subject to the relevant rules regarding international assignment and coordination of such channels. We seek comment on this proposal.  X ' F.` ` Regulatory Classification of Lower 80 and General Category Channels  X"4?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  Xn$4they did not offer such service. In the Further Notice, we sought comment on whether the"n$Z0*(("r"  X4presumption of CMRS status should apply to licensees authorized for the lower 80 channels.Z {Oy'ԍFurther Notice, 10 FCC Rcd at 8006,  70.Z  X4@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  X4primarily for local service.Z yO'ԍABC Comments at 6; B&C Comments at 6; Bisman Comments at 6; Bolin Comments at 6; Dakota Comments at 6; Deck Comments at 6; Diamond "L" Comments at 6; E.T. Communications Comments at 6; Keller Comments at 6; Nielson Comments at 6; Nodak Comments at 6; RCC Comments at 6; Raserco Comments at 6; Rayfield Comments at 6; SMCI Comments at 6; Vantek Comments at 6; E.F. Johnson Comments at 14; Genesee Comments at 4; Pittencrief Comments at 18. E.F. Johnson and Genesee opine that there is a significant difference between the type of services provided by local SMR systems and widearea  Xv4systems._v  yO1'ԍE. F. Johnson Comments at 1415; Genesee Comments at 4._ 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  X14CMRS systems.;1 yO|'ԍAMTA Comments at 7.;  X 4A322. 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 marketarea 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. "e* 0*((qr"  X' G.XCompetitive Bidding Issues for Lower 80 and General Category Channels(#  X'` ` 1. Auctionability of Lower 80 and General Category Channels  X4  X4B323. In the Eighth Report and Order, we affirm our previous determination that the  Xx4800 MHz SMR service is auctionable.bx {O'ԍSee discussion at  146, supra.b 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.  X 4C324. We also seek comment on whether to adopt equivalent auction procedures for  X 4competing applications for General Category channels. In the Eighth Report and Order,  X4supra, 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,  XQ4we intend to use competitive bidding to select from among competing applications.   X#4D325. 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.  XT' ` ` 2. Competitive Bidding Design  X&'` `  a.Bidding Methodology  X4  X4E326.ؠ 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"Y%Z0*((#r" 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  X4which licenses are auctioned (sequentially or simultaneously). {O'ԍSee Competitive Bidding Second Report and Order, 9 FCC Rcd at 2361,  79. These two elements can be combined to create four basic auction designs: sequential single round, simultaneous single  Xv4round, sequential multiple round, and simultaneous multiple round.vZ {O 'ԍId. at 23622365,  8097. The four auction designs are described in detail in the Competitive Bidding  {OK 'Second Report and Order. See 9 FCC Rcd 2348.  XH4F327.   In the Further Notice, we noted that because of the noncontiguous nature of the lower 80 channels, there did not appear to be a high degree of interdependency among  X 4them.Z  {O'ԍFurther Notice, 10 FCC Rcd at 8009,  77.Z We further noted that the limited geographic scope of the licenses is likely to make  X 4them less valuable than the licenses for the spectrum blocks for the upper 200 channels.1 H {O'ԍId.1  X 4G328. Comments.  SBA supports use of single round sealed bidding.;  yOb'ԍSBA Comments at 20.; Genesee disagrees that one single round of auctions in sealed bidding would be fair, and suggests that  X 4at least two rounds be done with 30 day intervals.> j  yO'ԍGenesee Comments at 4.> AMTA does not dispute the Commissions tentative conclusion regarding the appropriate competitive bidding methodology  X{4for local licenses.B{  yO&'ԍAMTA Reply Comments at 30.B 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  X4geographic, rather than sitespecific basis.=  {OZ!'ԍId.= Morris proposes the use of multiple round  X4auctions for local area licenses, limited to five rounds.= yO#'ԍMorris Comments at 4.= Nextel proposes that after relocation is completed, the lower 80 channels and any other spectrum reallocated to exclusive SMR use,  X4be auctioned on a single channel basis.D yO7''ԍNextel Reply Comments at 10.D"<0*((r"Ԍ X4ԙH329. 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  X4Competitive Bidding Second Report and Order, we stated that simultaneous multiple round  X4auctions would be the preferred method where licenses have strong value interdependencies. {O6'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2367,  109111. 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.  XJ4I330. Given our successful experience in conducting simultaneous multiple round auctions, we propose to use this competitive bidding methodology for the lower 80 and  X 4General 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  X4oral 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.  XO' ` ` X b.License Grouping (#   X!4J331. Background. Depending upon the auction methodology chosen, several alternatives exist for grouping the lower 80 and General Category licenses. For example, the  X4Commission 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  X4auction.RZ {O'ԍId. at 2366,  106107.R 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  Xk4multiple round auction.Uk {O 'ԍId. at 23632364,  8994.U  X=4K332. 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 fivechannel 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."!~0*((? r"Ԍ X4ԙL333. Assuming that we group lower 80 licenses by 16 fivechannel 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 fivechannel blocks. We believe that some licensees may elect to pursue regional service plans. Thus, we propose to group the fivechannel 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 fivechannel block simultaneously. Alternatively, we  X14could 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.  X4M334. With respect to the General Category channels, which we propose to license in a 120channel block, 20channel block and 10channel 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. ` `  X'` `  c.Bidding Procedures  X4N335. Background. In the Competitive Bidding Second Report and Order, the Commission established general procedures for simultaneous multiple round auctions,  X4including bid increments, duration of bidding rounds, stopping rules, and activity rules.w {O''ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2367,  116.w We  X4further noted that these procedures could be modified on a servicespecific basis.1Z {O'ԍId.1 We seek comment on the bidding procedures that should be used for licensing of the lower 80 and General Category channels.  X;4O336. 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  X 4considerations in the Eighth Report and Order.  {O#'ԍSee, e.g., Competitive Bidding Third Report and Order, 9 FCC Rcd at 2953,  3032. 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  X4accepted as a valid bid in the current bidding round.C~ {O''ԍId. at 2953,  30.C The application of a minimum bid"0*((r" increment speeds the progress of the auction and, along with activity and stopping rules, helps  X4to ensure that the auction closes within a reasonable period of time.1 {Ob'ԍId.1 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.  XH4P337. 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  X 4declines.( Z {O'ԍId. at  3233; see also Amendment of Part 90 of the Commission's Rules to Provide for the Use of the  {O'220222 MHz Band by the Private Land Mobile Radio Service, Second Memorandum Opinion and Order and  {O'Third Notice of Proposed Rule Making, PR Docket No. 89552, FCC 95312, 60 Fed. Reg. 46,564,  117118  {Ol'(1995) (220 MHz Second Memorandum Opinion and Order). 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 $0.01 per activity unit minimum bid increment in addition to the percentage calculation is appropriate to provide flexibility for a wide range of different license values, and to ensure timely closure of auctions. In addition, we propose to retain the discretion to vary the minimum bid increments for individual licenses or groups of licenses at any time before or during the course of the auction, based on the number of bidders, bidding activity, and the aggregate high bid amounts. We also propose to retain the discretion to keep an  XK4auction open if there is a round in which no bids or proactive waivers are submitted.KJ yOF'ԍ A proactive waiver is one which can be submitted by the bidder when it chooses not to bid in a round and  {O'wishes to maintain its current eligibility level. (See discussion,  162) We seek comment on these proposals.  X4Q338. Stopping Rules. If multiple round auctions are used, a stopping rule must be  X4established for determining when the auction is over. {OD'ԍSee Competitive Bidding Second Report and Order, 9 FCC Rcd at 2369,  127. See also, Competitive  {O 'Bidding Third Report and Order, 9 FCC Rcd at 2954,  33. Three types of stopping rules exist that could be employed in simultaneous multiple round auctions: markets may close  X4individually, simultaneously, or a hybrid approach may be used.  {Or#'ԍSee Competitive Bidding Third Report and Order, 9 FCC Rcd at 2954,  33; see also 220 MHz Second  {O<$'Memorandum Opinion and Order, 60 Fed. Reg. 46,564,  119. We believe a marketbymarket stopping rule is most appropriate for the lower 80 channels given the lack of strong interdependencies among these licenses. We also believe that a marketbymarket stopping rule would be the least complex approach from an administrative perspective. Under a"|\ 0*((r" marketbymarket approach, bidding closes on each license after three rounds pass in which  X4no new acceptable bids are submitted for that particular license.{ {Ob'ԍSee Competitive Bidding Second Report and Order, 9 FCC Rcd at 2370,  129.{ We tentatively conclude that a simultaneous stopping rule is not appropriate for these licenses, because marketbymarket 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 marketbymarket  X 4closing could be employed. Z {O'ԍWe also have sought comment on a hybrid stopping rule approach for 220 MHz EA licenses. See 220  {O'MHz Second Memorandum Opinion and Order, 60 Fed. Reg. 46,564,  120. 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.  X4R339. Activity Rules. Based on our proposal to employ a marketbymarket 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 onebyone, 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  X4payment of a monetary assessment for withdrawing. {OY%'ԍSee Competitive Bidding Third Report and Order, 9 FCC Rcd. at 2955,  36; see also 900 MHz Second  {O#&'Report and Order, 60 Fed. Reg. 21,987,  83. We believe that this could lead to very long auctions. "0*((r"Ԍ X4ԙS340. Thus, in the Competitive Bidding Second Report and Order, we adopted the MilgromWilson activity rule as our preferred activity rule where a simultaneous stopping rule  X4is used. {OM'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 237273,  144145. We subsequently have adopted or proposed the MilgromWilson rule in each of  X4our simultaneous multiple round auctions.3Z {O'ԍSee, e.g., 900 MHz Reconsideration Order/7th R&O, supra note 428,  88; Competitive Bidding Third  {O'Report and Order, 9 FCC Rcd at 295556,  3640; MDS Report and Order, 60 Fed. Reg. 36,524,  114123.3 The MilgromWilson approach encourages bidders to participate in early rounds by limiting their maximum participation to some  X4multiple of their minimum participation level. {O 'ԍSee, e.g.,Competitive Bidding Third Report and Order, 9 FCC Rcd at 2955,  37. Bidders are required to declare their  Xx4maximum eligibility in terms of activity units,xH {Oq 'ԍSee, e.g., 900 MHz Second Report and Order, supra note 428,  82; see also 220 MHz Second  {O;'Memorandum Opinion and Order, 60 Fed. Reg. 46,564,  123. and make the required upfront payment.vx {O'ԍSee Section V(B)(3)(c), infra, for discussion of upfront payments.v 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 MilgromWilson activity rule for the General Category licenses. We seek comment on this proposal and any alternatives.  XM4T341. Under the MilgromWilson approach, the minimum activity level, measured as a fraction of the selfdeclared maximum eligibility, will increase during the course of the  X4auction. For this purpose, Milgrom and Wilson divide the auction into three stages.^6  yO'ԍThe auction would move from stage one to stage two when, after three rounds of bidding, the high bid has changed on five percent or fewer of the licenses (measured in terms of activity units) being auctioned. Stage three would begin when the high bid has changed on two percent or fewer licenses (measured in terms of activity units) over three rounds. We retain the discretion to modify this method and announce such  {O&"'modification by Public Notice. See, e.g., Competitive Bidding Third Report and Order, 9 FCC Rcd at 2956,  38, n.16.^ During the first stage of the auction, a bidder is required to be active on licenses encompassing onethird of the activity units for which it is eligible. The penalty for falling  X4below that activity level is a reduction in eligibility.= {O;''ԍId. at  38.= At this stage, bidder would lose three"B0*((:r" 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  X4payment.1 {O4'ԍId.1 In the second stage, bidders are required to be active on twothirds 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  X_4all of the activity units for which they are eligible.1_Z {Oj 'ԍId.1 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.  X 4U342. Duration of Bidding Rounds. We propose to retain the discretion to vary the  X 4duration 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.   X'` `  d.Rules Prohibiting Collusion  X4  X4V343.ؠ Background. In the Competitive Bidding Second Report and Order, as modified  X4by the Competitive Bidding Reconsideration Order, we adopted special rules prohibiting  Xk4collusive conduct in the context of competitive bidding.k {O 'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 23862388,  221226; Competitive  {O 'Bidding Reconsideration Order, 9 FCC Rcd at 725354,  4853. In the Further Notice, we  XV4proposed to apply these rules prohibiting collusion to the 800 MHz SMR service.ZVH {OO#'ԍFurther Notice, 10 FCC Rcd at 8012,  86.Z 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"0*((r" 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,  X4particular properties on which they will or will not bid or any similar agreement.1 {OK'ԍId.1  X4W344.ؠ 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 shortform 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 shortform 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 shortform applications has  X 4passed.D Z yO'ԍ47 C.F.R.  1.2105(c)(3).D Prohibited communications between such bidders cannot take place directly or indirectly.   Xb4X345. Further, in the Competitive Bidding Fourth Memorandum Opinion and Order, we noted that communications among bidders concerning matters unrelated to the license auction  X64would be permitted.nZ6 {O'ԍCompetitive Bidding Fourth Memorandum Opinion and Order, 9 FCC Rcd at 6869,  59. See also Letter from R. Allen, Acting Chief, Commercial Radio Division, to R.M. Senkowski (Dec. 1, 1994) (discussions that indirectly provide information that affects bidding strategy are also precluded by anticollusion rules).n 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 longform application a detailed explanation of the terms, conditions and parties involved in any auctionrelated consortium, joint venture, partnership, or other agreement entered into prior to the close of bidding. We seek comment on these proposals.  X9' ` ` 3. Procedural and Payment Issues  X '` `  a.PreAuction Application Procedures  X4  X4Y346. Background. In the  Competitive Bidding Secon  d Report and Order, the" 0*((r" Commission established general competitive bidding rules and procedures, which we noted  X4may be modified on a servicespecific basis.N {Ob'ԍSee 47 C.F.R. Part 1, Subpart Q.N In the Competitive Bidding Second Report  X4and Order, we determined that we should require only a shortform application (FCC Form 175) prior to auction, and that only winning bidders should be required to submit a longform  X4license application (FCC Form 600) after the auction.wZ {O'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2376,  165.w In this connection, we determined that such a procedure would fulfill the statutory requirements and objectives and adequately  Xz4protect the public interest.Qz {O 'ԍId. at 23752377,  161166.Q   XL4Z347. As discusse  d below, we propose to follow generally the processing and  X54procedural rules established in the Competitive Bidding Second Report & Order, with certain modifications designed to address the particular characteristics of the lower 80 and General  X 4Category 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 reauction licenses and prevent delays in the provision of SMR services to the public.  X4[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  X:4filing."A:~ yOi'ԍ47 U.S.C.  309(j)(5).A 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  X 4Section 309(a) and Section 308(b) and 310" of the Communications Act.1  {O'ԍId.1 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  X4requirements prior to the competitive bidding.u {O"'ԍSee H.R. Rep. No. 111, 103d Cong., 1st Sess. 258 (1993) (House Report).u  X4\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,"&2 0*((<r" stopping rules, activity rules, and the deadline by which shortform applications must be filed  X4and the amounts and deadlines for submitting the upfront payment. {Ob'ԍSee Competitive Bidding Second Report and Order, 9 FCC Rcd at 2376,  164. 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,  X4applications submitted after the deadline specified by the Public Notice would be dismissed, with prejudice, as untimely. We seek comment on these proposals.  Xa4]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.  X 4^351. Under this proposal, all bidders would be required to submit shortform  X 4applications on FCC Form 175 (and FCC Form 175S, if applicable), by the date specified in  X4the initial Public Notice.Z yO'ԍWe note that the shortform application, FCC Form 175, recently has been revised. If this proposal is adopted we will not accept Form 175 applications printed prior to October 1995. 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  XM4and one microfiche original of their application, as well as two microfiche copies. The shortform applications would require applicants to provide the information required by Section  X41.2105(a)(2) of the Commission's rules.D yO'ԍ47 C.F.R.  1.2105(a)(2).D Specifically, each applicant would be required to  X4specify on its Form 175 application certain identifying information, including its status as a  X4designated 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.   X4_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 longform application, the acceptance of  X&4which would trigger the procedures permitting petitions to deny (as discussed at  365366,  X4infra).B {O&'ԍSee Competitive Bidding Second Report and Order, 9 FCC Rcd at 2376,  165. If no petitions to deny are filed, the application would be grantable after 30 days. We seek comment on the proposals discussed above. "0*((r"Ԍ X' ` `  b.Amendments and Modifications  X'  X4`353. Background. To encourage maximum bidder participation, we proposed in the  X4Competitive Bidding Second Report and Order to provide applicants with an opportunity to  X4correct minor defects in their shortform applications prior to the auction.~ {O'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2377,  16768.~ We stated that applicants whose shortform applications are substantially complete, but contain minor errors or defects, would be provided an opportunity to correct their applications prior to the  Xa4auction.1aZ {Ol 'ԍId.1 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  X34consortium changes due to this restructuring.3 {O 'ԍCompetitive Bidding Fourth Memorandum Opinion and Order, 9 FCC Rcd at 6868,  57. 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  X 4services.g ~ {O'ԍCMRS Third Report and Order, 9 FCC Rcd at 8144,  354.g   X 4a354. On the date set for submission of corrected applications, applicants that discover  X4minor errors in their own applications (e.g., typographical errors, incorrect license designations, etc.) also would be permitted to file corrected applications. Recently, the  Xh4Commission waived the ex parte rules as they applied to the submission of amended shortform applications for the A and B blocks of the broadband PCS auctions, to maximize  X<4applicants' opportunities to seek Commission staff advice on making such amendments.-Z< yO'ԍCommission Announces that Mutually Exclusive "Short Form" Applications (Form 175) to Participate in  {O'Competitive Bidding Process ("Auctions") are Treated as Exempt for Ex Parte Purposes, Public Notice, 9 FCC Rcd 6760 (1994).-  X%4 We propose to apply the same principles to the SMR auctions. Under this proposal,  X4 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 shortform 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  X4agreements have not applied for licenses in any of the same geographic license areas.2  {Og%'ԍCompetitive Bidding Second Memorandum Opinion & Order, 9 FCC Rcd at 7254,  52. In  Xm4addition, applications that are not signed would be dismissed as unacceptable.  XV4  "V 0*((r"Ԍ X4b355. Upon our review of the shortform applications, we propose to issue a Public Notice listing all defective applications, and applicants with minor defects would be given an  X4opportunity 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 lockbox 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  XH4lockbox 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.  X 4We seek comment on the proposals discussed above.  X' ` `  c.Upfront Payments ` `  Xb4c356. 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  X64modified on a servicespecific basis.w6 {O'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2379,  180.w 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  X4(discussed infra) in the event of bid withdrawal or default.ZZ {O'ԍFurther Notice, 10 FCC Rcd at 8010,  81.Z We also sought comment on the upfront payment formula and minimum upfront payment most appropriate for the 800 MHz  X4SMR service.1 {O6'ԍId.1   Xk4d357. 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"!~0*((Y r" 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.  X4e358. We tentatively conclude that upfront payments should be due no later than 14  Xv4days before a scheduled auction.wv {O'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2380,  188.w 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  X14forth in Section 1.2106 of the Commission's rules.>1Z yO< 'ԍ47 C.F.R.  1.2106.>  X ' ` `  d.Down Payment and Full Payment  X 4  X 4f359. 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  X4occurs.w {O-'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2381,  190.w 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  XM4access.1M| {Oz'ԍId.1 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  X!4their total deposits up to 20 percent of their winning bid(s).Z! {O'ԍFurther Notice, 10 FCC Rcd at 8010,  82.Z   X4g360.ؠ Proposals. We propose to apply the 20 percent down payment requirement to  X4winning bidders for lower 80 and General Category licenses. {O- 'ԍA proposal for reduced down payments for small businesses is discussed in Section VI(G)(4)(b)(iii), infra. 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.  XR4h361. To the extent that an auction winner is eligible to make payments through an  X;4installment 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"&2 0*((<r" 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.  X'` `  e.Bid Withdrawal, Default, and Disqualification   X_4i362. 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  X34established in our general competitive bidding rules.Z3 {O 'ԍFurther Notice, 10 FCC Rcd at 8011,  83.Z In the Competitive Bidding Second  X 4Report 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  X 4on payment of a balance due.w Z {O'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2373,  151.w 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  X4amount of the winning bid, if the winning bid is lower.1 {O3'ԍId.1 A defaulting auction winner also would be assessed three percent of either the subsequent winning bid or the amount of the  Xh4defaulting bid, whichever is less.1h~ {O'ԍId.1   X:4j363.ؠ 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  X 4competitive bidding rules.V  yO'ԍ47 C.F.R.  1.2104(g) and 1.2109.V 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 reauction 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. "0*((r"Ԍ X'ԙ` ` X f.LongForm Applications(#  X4   X4k364. Background. In the Competitive Bidding Second Report and Order, we  X4established rules that require a winning bidder to submit a longform application.w {O6'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2383,  199.w The longform application is required to be filed by a specific date, generally within ten business days  X4after the close of the auction.1Z {O'ԍId.1 We stated that after we received the high bidder's down payment and the longform application, we would review the longform application to  Xa4determine if it is acceptable for filing.1 a {O 'ԍId.1 Once the longform application is accepted for filing, we stated that we would release a Public Notice announcing this fact, triggering the  X34filing window for petitions to deny.1 3~ {Ob'ԍId.1 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  X 4applicant is qualified, we would grant the license(s) to the auction winner.1   {O'ԍId.1 In the Further  X 4Notice, we proposed to use application procedures similar to those used for licensing PCS.Z   {OC'ԍFurther Notice, 10 FCC Rcd at 8001,  58.Z Consistent with our approach in PCS, we proposed to require only the winning bidder to file a  X 4longform application (FCC Form 600).C  4  {O'ԍId. at 8001,  59.C   X4l365. Proposal. If the winning bidder makes the down payment in a timely manner, we propose the following procedures: A longform 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 longform application, we will review the longform 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 longform 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"k 0*((r"  X4be granted to the auction winner.] {Oy'ԍSee generally 47 C.F.R.  90.16390.166.] We seek comment on this proposal.   X'XX` `  g.Petitions to Deny and Limitations on Settlements (#`  X4   X4m366. Background. We determined in the Competitive Bidding Second Report and  X4Order that the procedures concerning petitions to deny found in Section 309(j)(2) of the  Xz4Communications Act, should apply to competitive bidding.wzZ {O 'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2383,  200.w We determined that we would adopt expedited procedures to resolve substantial and material issues of fact concerning  XL4qualifications.UL {O 'ԍId; see also, 47 U.S.C.  309(j)(5).U 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  X 4Act or our rules.R ~ {OM'ԍId; see also Section 309(b), (d)(1).R 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  X 4exists concerning that determination.w  {O'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2383,  202.w 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  X4evidence. Additionally, in the Competitive Bidding Fourth Memorandum, Opinion and Order, we stated that our anticollusion and settlement procedures were designed to avoid the problem of entities filing applications solely for the purpose of demanding payment from  XQ4other bidders in exchange for settlement or withdrawal.Q {O'ԍCompetitive Bidding Fourth Memorandum Opinion and Order, 9 FCC Rcd at 6867,  50.  X#4n367. As we have determined, the petition to deny procedures in Section 90.163 of the  X 4Commission's rules, adopted in the CMRS Third Report and Order, will apply to the  X4processing of applications for the 800 MHz SMR service.4  {O 'ԍCMRS Third Report and Order, 9 FCC Rcd at 8000, 8138, 8142,  21, 337, 347. 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  X4adopted 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  XV4applicant or petitioner.  "V 0*((r"Ԍ  X4o368. 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  X4substantial issue of fact exists concerning that determination.w {O4'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2328,  202.w 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.   X1' ` `  h.Transfer Disclosure Requirements (#`  X '  X 4 p369. In Section 309(j) of the Communications Act, Congress directed the Commission to "require such transfer disclosures and antitrafficking restrictions and payment schedules as may be necessary to prevent unjust enrichment as a result of the methods employed to issue  X 4licenses and permits."D Z yO'ԍ47 U.S.C.  309(j)(4)(E).D In the Competitive Bidding Second Report and Order, the Commission adopted safeguards designed to ensure that the requirements of Section  X4309(j)(4)(E) are satisfied. {O-'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd. at 238488,  210216, 258265. 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  XM4the true market value of the license."M| {Oz'ԍSee House Report at 257; Competitive Bidding Second Report and Order, 9 FCC Rcd at 2385,  214. Therefore, we imposed a transfer disclosure requirement on licenses obtained through the competitive bidding process, whether by a  X4designated entity or not.K {O'ԍSee 47 C.F.R.  1.2111(a).K  X4q370. 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  Xg4their 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"$0*((/r"  X4relating to unjust enrichment have arisen outside the designated entity context.2\ {Oy'ԍSee Competitive Bidding Second Report and Order, 9 FCC Rcd at 2385,  214. We note that these transfer disclosure requirements are in addition to the unjust enrichment provisions discussed in this Order at   {O '400401, infra.2 We seek comment on these proposals.  X' ` `  i.Performance Requirements   X4r371.ؠ 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  X 4services."D  yO'ԍ47 U.S.C.  309(j)(4)(B).D 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  X 4additional performance requirements. As discussed in Section IV(c)(3), supra, we have proposed service rules for SMR that would require marketarea 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  X}4309(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.  X ' X` ` 4. Treatment of Designated Entities(# ` `  hhCq  X'` ` X a.Overview and Objectives(#  X4  X4s372. 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  X=4telephone companies, and businesses owned by members of minority groups and women."D=| yOj#'ԍ47 U.S.C.  309(j)(3)(B).D 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" 0*((r"  X4methods . . . and combinations of such schedules and methods."D yOy'ԍ47 U.S.C.  309(j)(4)(A).D  X4t373. 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  X4collectively as "designated entities").X {O'ԍSee Competitive Bidding Second Report and Order, 9 FCC Rcd at 2388,  227, et seq.ď We also identified several measures, including installment payments, spectrum setasides, 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.  X 4u374. 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 minorityowned  X4and womenowned businesses. {O'ԍCompetitive Bidding Third Report and Order, 9 FCC Rcd at 2978,  87. Minority and womenowned  {O'businesses received a 25 percent bidding credit in the nationwide narrowband PCS auctions. Id. at  72. In the  {ON'regional narrowband auctions, the bidding credit was increased to 40 percent. See Implementation of Section  {O'309(j) of the Communications Act Competitive Bidding, Third Memorandum Opinion and Order and Further  {O'Notice of Proposed Rule Making, PP Docket No. 93253, 10 FCC Rcd 175, 201 at  58. In broadband PCS, we designated certain spectrum blocks as entrepreneurs' blocks, allowed entrepreneurs' block licensees to make installment  X4payments, and provided bidding credits for designated entities.d  {OF'ԍCompetitive Bidding Fifth Report and Order, 9 FCC Rcd at 5591,  133. See also Implementation of  {O 'Section 309(j) of the Communications Act Competitive Bidding, Competitive Bidding Fifth Memorandum  {O 'Opinion and Order, PP Docket No. 93253, 10 FCC Rcd 403 at 453, 459,  99, 103. Originally, small businesses applying for broadband PCS licenses in the entrepreneurs' blocks were eligible for a 10 percent bidding credit, businesses owned by minorities and/or women were to receive a 15 percent bidding credit, and small businesses owned by women and/or minorities were to receive an aggregated bidding credit of 25 percent.  {O#'In light of the Supreme Court decision in Adarand Contractors, Inc. v. Pe9a, discussed infra, we have eliminated  {O$'race and genderbased provisions in our C block rules in order to avoid further delay of the auction. See  {O%'generally Competitive Bidding Sixth Report and Order. d In 900 MHz SMR, we" 0*(()r"  X4adopted bidding credits and installment payments for small businesses.v! {Oy'ԍ900 MHz Second Report and Order, 60 Fed. Reg. 21,987,  129, 133.v 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.  XH'  X1'` `  b.Eligibility for Designated Entity Provisions (#  X '` `  i.hhCSmall Businesses  X '` ` hhCa)qSpecial Provisions  X 4  X 4v375. 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  X4women."i"Z {O('ԍSee H.R. Rep. No. 111, 103d Cong., 1st Sess. (1993) at 255.i 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  X4startups.1# {Ou'ԍId.1  X4w376. 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  Xe4businesses, are experiencing increased difficulties in obtaining credit."$e~ yO!'ԍSmall Business Credit and Business Opportunity Enhancement Act of 1992, Pub. L. No. 102366,  331(a)(3), 106 Stat. 1007. 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  X 4"legislation and regulations that enhance the viability of small business concerns."H%  {O&'ԍId. at  331(b)(2),(3).H For these reasons, and as discussed in greater detail below, we tentatively conclude that small" h %0*((r" 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.   X'` `  hhC b)qDefinition  Xv4x377. Comments. DCL Associates and Dru Jenkinson, et al. suggest that we adopt the  Xa4SBA definition of small business initially adopted in the Competitive Bidding Second Report  XL4and Order.q&L {O 'ԍDCL Associates Comments at 8; Dru Jenkinson et al. Comments at 12.q 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  X 4guideline for determining whether a business is small.;' Z yO'ԍSBA Comments at 18.; AMTA suggests that the better approach for the 800 MHz SMR service would be to incorporate preferential provisions for  X 4existing operators.E(  yO_'ԍAMTA Reply Comments at 3233.E  X4y378. 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  Xh4$540,000 in current system revenues.;)hz yO'ԍAMI Comments at 10.; Genesee suggests using the U.S. Chamber of  XQ4Commerce standard for retail/service companies of less than $5.5 million annually.>*Q  yO 'ԍGenesee Comments at 5.> Genesee and the SBA believe that the PCS small business definition, with a $40 million  X#4maximum would be inappropriate for the 800 MHz SMR service.R+# yOn'ԍGenesee Comments at 5; SBA Comments at 19.R The SBA believes that a  X 4smaller revenue figure, such as $15 million, would be more appropriate.Q, *  yO'ԍMorris Comments at 5; NTCA Comments at 5.Q  X4z379. Proposal. We seek comment on the appropriate definition of "small business" to  X4be applied for purposes of the bidding credits proposed above. In the Competitive Bidding  X4Second Memorandum Opinion and Order, we stated that we would define eligibility requirements for small businesses on a servicespecific basis, taking into account the capital requirements and other characteristics of each particular service in establishing the appropriate" ,0*((r"  X4threshold.- {Oy'ԍCompetitive Bidding Second Memorandum Opinion and Order, 9 FCC Rcd at 7269,  145. In broadband PCS and regional narrowband PCS, we defined small businesses  X4based on a $40 million annual revenue threshold..Z {O'ԍCompetitive Bidding Fifth Report and Order, 9 FCC Rcd at 5608,  175; Competitive Bidding Third  {O'Memorandum Opinion and Order, 10 FCC Rcd at 196,  46. 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  Xv4the preceding three years.{/v {O 'ԍ220 MHz Second Memorandum Opinion and Order, 60 Fed. Reg. 46,564 at  171.{ 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.  X 4{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  Xb4we have adopted in 900 MHz SMR,10bH {O['ԍId.1 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 buildout 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.   X'` `  ii.hhCMinority and WomenOwned Businesses   Xe4|381. Background. Prior to the Supreme Court's decision in Adarand Constructors,  XP4Inc. v. Pe9a, we concluded that in the licensing of broadband and narrowband PCS, minority and womenowned businesses might have difficulty accessing sufficient capital to be viable auction participants or service providers, in the absence of special provisions in our auction"$00*((r"  X4rules.1 {Oy'ԍSee Competitive Bidding Second Report and Order, 9 FCC Rcd at 2391,  242; Competitive Bidding Fifth  {OC'Report and Order, 9 FCC Rcd at 5572,  96. We therefore adopted special provisions for minorities and women in these services. We further determined that such provisions were constitutional under the "intermediate  X4scrutiny" standard used in Metro Broadcasting, Inc. v. FCC.2$ {O'ԍ497 U.S. 547, 564565 (1990). See Competitive Bidding Fifth Report and Order, 9 FCC Rcd at 557180,  yOq' 93112.Ľ  X4}382. In Adarand, however, the Supreme Court ruled that racial classifications imposed  X4by the federal government are subject to strict scrutiny.?3~ yO 'ԍ115 S. Ct. 2097 (1995).?  This holding will apply to any proposal to incorporate racebased 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  X74spectrumbased services."D47 yO'ԍ47 U.S.C.  309(j)(4)(D).D We emphasize that we have not concluded that race or genderbased measures are unconstitutional or otherwise inappropriate for spectrum auctions we will  X 4hold in the future.5  {OX'ԍSee generally Competitive Bidding Sixth Report and Order, 60 Fed. Reg. 37,786. At a minimum, however, we believe that Adarand requires us to build a thorough factual record concerning the participation of minorities and women in spectrumbased services to support race and genderbased measures.  X 4~383. 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 X4controlled firms should be utilized in the 800 MHz SMR service.q60  {Od'ԍDCL Associates Comments at 8; Dru Jenkinson, et al. Comments at 12.q Dru Jenkinson, et al. further suggest that there should be no difference in eligibility requirements for the widearea  XW4and local licenses.S7W  {O'ԍDru Jenkinson, et al. Comments at 12.S  X)4384. 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 minorityowned 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  X4intensive.8T  {O&'ԍSee Competitive Bidding Second Report and Order, 9 FCC Rcd at 2391,  242; Competitive Bidding Fifth  {O''Report and Order, 9 FCC Rcd at 5572,  96. We consider 800 MHz SMR to be significantly less capitalintensive than PCS"80*(((r" 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 womenowned 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 womenowned businesses and 99 percent of all minority X4owned businesses generated net receipts of $1 million or less.9$ {O'ԍWomenOwned Businesses, WB 871, 1987 Economic Census, p. 144, Table 8; Survey of MinorityOwned  {O'Business Enterprises, MB 874, 1987 Economic Census, pp 8182, Table 8. For purposes of this data, these are entities that earned at least $500 and filed an IRS Form 1040, Schedule C, and in which at least 51 percent of  yOb 'the assets are owned by minorities or women.   Finally, in light of the  Xv4statute's instruction to "design and test multiple alternative methodologies"A:v yO 'ԍ47 U.S.C.  309(j)(3).A 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.  X 4385. We also request comment on the possiblity that in addition to small business provisions, separate provisions for women and minorityowned entities should be adopted for the lower 80 and General Category channels. To comply with the Supreme Court's ruling in  X 4Adarand, any racebased classification must be a narrowly tailored measure that furthers a  X 4compelling governmental interest.Q; D {O'ԍSee Adarand, 155 S.Ct. 2097, 2113. Q We also believe that genderbased provisions, although  X4not 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 predefined 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.  X;'` `   iii.hhCReduced Down Payment   X 4386. Background.   In the Competitive Bidding Second Report and Order, we noted that reduced upfront payments particularly may be appropriate for auctions of spectrum";0*((r" 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.  Xv4387. Comments.     Several commenters support offering a reduced upfront payment  X_4option to designated entities.<_ {O'ЍDCL Associates Comments at 8; Dru Jenkinson, et al., Comments at 11; Pittencrief Comments at 20. DCL Associates strongly supports availability of reduced  XH4upfront payments for minority and/or womenowned businesses.E=HZ yOS 'ԍDCL Associates Comments at 8.E Dru Jenkinson, Inc., et  X34al., on the other hand, support offering the reduced upfront payment option to all designated  X 4entities.Y>  {O'ԍDru Jenkinson, et al. Comments at 11.Y To encourage the participation of designated entities in an auction for a geographic  X 4area licenses, Pittencrief does not oppose a reduced upfront payment.C? | yO4'ԍPittencrief Comments at 20.C 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  X 4participation by designated entities in the auctions for widearea licenses.I@  yO'ԍSouthern Reply Comments at 3435.I  X4388. 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.  X!' X` `  c.Bidding Credits (#  X4389.ؠ Background. Bidding credits allow eligible designated entities to receive a  X4payment discount (or credit) for their winning bid in an auction. In the Competitive Bidding  X4Second 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  X4amounts for each particular service.xA {O"'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2391,  241. x As a result, we have adopted a variety of bidding credit provisions for small businesses and other designated entities in auctionable services. In  Xm4the nationwide narrowband PCS auction, for example, we established a 25 percent bidding credit for minority and womencontrolled businesses, while a 40 percent credit was used in"V. A0*((r"  X4the regional narrowband PCS auction.|B^ {Oy'ԍCompetitive Bidding Third Report and Order, 9 FCC Rcd at 2970,  72; Implementation of Section 309(j)  {OC'of the Communications Act Competitive Bidding Narrowband PCS, PP Docket No. 93314, Competitive  {O 'Bidding Third Memorandum Opinion and Order, 10 FCC Rcd 175, 201,  58.| In broadband PCS, our preAdarand 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  X4businesses owned by women and/or minorities.~C {O\'ԍCompetitive Bidding Sixth Report and Order, 60 Fed. Reg. 37,786,  4748.~ In the MDS Report and Order, we allowed  X4small businesses a 15 percent bidding credit.aD {O 'ԍMDS Report and Order, 10 FCC Rcd at 9669,  188.a 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 $15 million for the preceding  XL4three years.}EL {O'ԍ900 Reconsideration Order/7th Report and Order, supra note 428,  164.} Finally, in the 220 MHz Second Memorandum Opinion and Order, we proposed a 40 percent small business bidding credit for nationwide and regional licenses and a  X 410 percent bidding credit for smaller EA licenses.F  {Ou'ԍSee 220 MHz Second Memorandum Opinion and Order, 60 Fed. Reg. 46,564 at  162.  X 4390. Comments.  Few commenters addressed whether special provisions should be provided for businesses owned by minorities and/or women in the 800 MHz SMR auctions.  X 4With respect to bidding credits, Morris, Pittencrief, DCL Associates, Dru Jenkinson et al. and the SBA support the Commission's proposal to provide bidding credits for such entities.  X4DCL Associates, Dru Jenkinson, et al., and the SBA support a forty percent bidding credit for  X4minority and womenowned entities for widearea licenses.G6  {Oj'ԍMorris Comments at 4; Pittencrief Comments at 19; DCL Associates Comments at 8; Dru Jenkinson, et al. Comments at 1112; SBA Comments at 12. The SBA further supports affording minority and womenowned entities a twentyfive percent bidding credit for local  XU4SMR licenses.;HU  yO'ԍSBA Comments at 12.; Other commenters, however, oppose giving such entities any type of  X>4bidding credit.I>  yO"'ЍAMI Comments at 10; AMTA Reply Comments at 32; Dial Call Reply Comments at 13. AMI opines that a bidding credit would be inappropriate, based on the  X'4uncertainty of the value of widearea licenses at auction.;J' yO$'ԍAMI Comments at 10.; Dial Call opposes bidding credits, contending the questionable constitutionality of such provisions only would serve to delay the"@J0*((r"  X4ultimate resolution of the proceeding.GK yOy'ԍDial Call Reply Comments at 13.G   X4391. 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  X 4restrictive 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.   X4392. 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 twentyfive percent or more in the applicant, but we do not attribute the gross revenues of investors who hold less than a twentyfive percent interest in the applicant unless they are members of the  X4applicant's control group.bLX {O'ԍSee, e.g.,  24.720(j)(1);  24.320(b)(2)(iv).b 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?  X4393. We propose to make the small business bidding credit available on all lower 80 and General Category Channels that are licensed on a marketarea 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  XN4our PCS rules in which bidding credits are available only on designated channels.MN yO 'ԍIn both narrowband PCS and broadband PCS we limited the channel blocks on which bidding credits were  {O!'available to designated entities. Competitive Bidding Third Report and Order, 9 FCC Rcd 2941 at  72  {O{"'(narrowband PCS); Competitive Bidding Fifth Report and Order, 9 FCC Rcd 5532 at  131 (broadband PCS). In IVDS, we permitted the use of bidding credits on both available channels, but imposed a limit of one bidding  {O $'credit per service area. See Implementation of Section 309(j) of the Communications Act Competitive Bidding,  {O$'Fourth Report and Order, PP Docket No. 93253, 9 FCC Rcd 2330, 2337,  39 (1994). 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. " j M0*((r"Ԍ X' ` ` X d.Installment Payments (#   X4 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  X4payment schedules) to other classes of designated entities.    Xa4395. Comments.   AMI, CellCall, DCL Associates, Genesee, Pittencrief, and the SBA  XJ4support the proposal that small businesses be eligible for installment payments.NJ yO 'ԍAMI Comments at 10; CellCall Comments at 30; DCL Associates Comments at 8; Genesee Comments at 5; Pittencrief Comments at 14; SBA Comments at 12. AMI opines that the availability of installment payments may prove useful in facilitating the participation  X 4of small operators in the 800 MHz SMR auctions.;O  yO 'ԍAMI Comments at 10.; In addition, CellCall, DCL Associates, and Morris advocate that the Commission afford small businesses reduced upfront  X 4payments.tP  yOO'ԍCellCall Comments at 30; DCL Associates Comments at 8; Morris Comments at 5.t 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  X 4provisions.DQ @ yO'ԍTelecellular Comments at 15.D   X{4396.   DCL Associates strongly supports the availability of installment payments for  Xd4minority and/or womenowned businesses.ERd yO'ԍDCL Associates Comments at 7.E Pittencrief does not object to offering installment payments as a means to encourage participation of designated entities in the  X64auctions for widearea licenses.  CS6`  yOG'ԍPittencrief Comments at 20.C  X4397.ؠ 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  X4the Competitive Bidding Second Report and Order, allowing installment payments reduces the amount of private financing needed by prospective small business licensees and therefore  X4mitigates the effect of limited access to capital by small businesses.T  {OO$'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2389,  231232. Under this proposal, licensees who qualify for installment payments would be entitled to pay their winning bid amount in quarterly installments over the tenyear license term, with interest charges to be fixed at the time of licensing at a rate equal to the rate for tenyear U.S. Treasury obligations"i T0*((r"  X4plus 2.5 percent.U {Oy'ԍSee, e.g., Competitive Bidding Fifth Report and Order, 9 FCC Rcd 559394,  139. 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 interestonly payments for the first five years of the license term, while small businesses with $15 million or less in gross revenues would make interestonly payments during the first two years. We believe that this installment payment structure, which is consistent with our approach in 900 MHz SMR and the upper 200 channels, will enable entities with less immediate access to capital to increase their chances of obtaining licenses. Timely payment of all installments would be a condition of the license grant and failure to make timely payment would be grounds for revocation of the license. We seek comment on this proposal.  X ' ` `  e.SetAside Spectrum  X 4398. Background. In the Eighth Report and Order, we determined that designation of  X 4an entrepreneur's block for the upper 200 channels was not feasible. In the Further Notice, we indicated that an entrepreneurs' block could be feasible for the lower 80 channels which we contemplated would be used primarily by smaller SMR operators.  Xf4399. Proposal. We tentatively conclude that the lower 80 and the General Category Channels should be designated as an entrepreneurs' block. Such a designation would ensure that smaller SMR operators would have opportunities to maintain competitive and viable systems and also to pursue widearea licensing strategies should they desire to do so. In our broadband PCS rules where we have authorized entrepreneurs' block licenses, we have required entrepreneurs to comply with financial caps based on gross revenues and total assets over a certain period of time. Because the 800 MHz SMR service is less capitalintensive than PCS, we believe that the entrepreneurs' block financial caps in the 800 MHz SMR service should be set at a lower level than those in broadband PCS. We seek comment on the feasibility of designating the lower 80 and General Category channels as an entrepreneurs' block. We also ask commenters to discuss what would be appropriate financial caps for such  Xi4entrepreneurs' block.  X` ` (#  X;' ` `  f.Unjust Enrichment Provisions  X$'  X 4400. 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  X!4license grant.eV!Z {O%'ԍId. at 23842388, 23942395,  210226, 258265.e In addition, the ineligible transferee would not have the benefit of installment"!V0*(( r"  X4payments, and principal and accrued interest would come due.1W {Oy'ԍId.1 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.  X4In 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  Xa4of their licenses.vXaZ {Ol 'ԍCompetitive Bidding Fifth Report and Order, 9 FCC Rcd at 5588,  128.v  X34401. 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  X 4enrichment to repayment of bidding credits or installment payments.zY  {O'ԍCompetitive Bidding Third Report and Order, 9 FCC Rcd at 29752976,  80.z 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.   X' X` `  g.Partitioning (#  X{4  Xd4402. The Communications Act directs the Commission to ensure that rural telephone  XM4companies have the opportunity to participate in the provision of spectrumbased services.>ZM~ yO|'ԍ47 U.S.C.  309(j).> 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  X4likelihood of rapid introduction of service into rural areas.[ {O'ԍSee Competitive Bidding Fifth Report and Order, 9 FCC Rcd at 55985599, 150; see also 900 MHz  {OL 'Second Report and Order, 60 Fed. Reg. 21,987,  144145. 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.   XP4403.ؠ 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"9j [0*((Er"  X4channels.{\ {Oy'ԍCompetitive Bidding Fifth Report and Order, 9 FCC Rcd at 55975598,  150.{ 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  X4service area could be served by other providers.1]Z {O'ԍId.1 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  X_4agreement either before or after the auction.=^_ {O 'ԍId.at  151.= We also would require that partitioned areas conform to established geopolitical boundaries, include all portions of the wireline service area of the rural telephone company applicant, and be reasonably related to the rural telephone  X 4company's wireline service area.^_Z ~ {OI'ԍId. 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.^ We also propose to use the definition for rural telephone  X 4companies 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  X 4or fewer access lines, including all affiliates.>`  {O('ԍId. at  193.> We seek comment on this proposal. We also seek comment on whether we should extend partitioning options to entities other than rural  X 4telephone companies, as we did in MDSfa 2  {O'ԍSee MDS Report and Order, 10 FCC Rcd at 9666,  180. f and as we proposed for the upper 200 channels in  X4this service.Yb  {O'ԍSee discussion at  25153, supra.Y  Xd4  #Xj\  P6G;XP#VII.CONCLUSION   X64404. We believe that the service and auction rules adopted in this First Report and  X!4Order and Ninth Report and Order will promote the public policy goals set forth by Congress.  X 4We believe that the service and auction proposals set forth in the Second Further Notice of  X4Proposed 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 widearea 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"V b0*((r" 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.  X4VIII.PROCEDURAL MATTERS  X_4405. 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  X34(IRFA) was incorporated in the Further Notice of Proposed Rule Making in PR Docket No. 93144. Written comments on the IRFA were requested. The Commission's final analysis is as follows:  X 4406. 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).  Xf4407. Issues raised in response to the IRFA. No comments were submitted in response to the IRFA.  X!4408. Significant alternatives considered and rejected. All significant alternatives have  X 4been addressed in the First Report and Order in PR Docket No. 93144, the Third Report and  X4Order in GN Docket No. 93252, and the Ninth Report and Order in PP Docket No. 93253.  X4409. 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  XX4accordance with the same filing deadlines as comments on the remainder of the Second  XC4Further Notice of Proposed Rule Making, but they must have a separate and distinct heading  X.4designating them as responses to the IRFA. The Secretary shall send a copy of this Second  X4Further 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  X4Regulatory Flexibility Act. Pub. L. No. 96354, 94 Stat. 1164, 5 U.S.C.  601 et seq. (1981).  X!4410. This is a nonrestricted notice and comment rule making proceeding. Ex parte presentations are permitted except during the Sunshine Agenda period, provided they are  X#4disclosed as provided in Commission rules. See generally 47 CFR  1.1202, 1.1203, and 1.1206(a).  XR&4411. 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";'b0*((%r" 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.  X14412. Authority for issuance of this First Report and Order, Eighth Report and Order,  X 4and 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).  X 4413. Accordingly, IT IS ORDERED that Part 90 of the Commission's Rules is amended as set forth in Appendix A.  X}4414. 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).  X 4415. 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.  X4416. IT IS FURTHER ORDERED that upon the adoption of this First Report and  X4Order, 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).  X?4See 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.  X 4417. IT IS FURTHER ORDERED that upon the adoption of this First Report and  X!4Order, 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  Xv$4comment and effective date requirements of the Administrative Procedure Act (APA). See  Xa%4Kessler 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"5'b0*((%r" compliance would undercut the purposes of this action.  X4418. 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.  Xv4419. 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.  X 4420. 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  X 4Making to the Chief Counsel for Advocacy of the Small Business Administration.  X 4421. For further information concerning this proceeding, contact D'wana R. Speight (Legal Branch, Commercial Wireless Division, Wireless Telecommunications Bureau) at (202) 4180620. ` `  hhCqFEDERAL COMMUNICATIONS COMMISSION ` ` hhCqWilliam F. Caton ` ` hhCqActing Secretary  X4#XP\  P6QXP#U APPENDIX A ă Part 90 of Chapter 1 of Title 47 of the Code of Federal Regulations is amended as follows:  X;4  PART 90 PRIVATE LAND MOBILE RADIO SERVICES ă  X 4 1. 1. i.(1)(a)(i) 1) a) I. 1. 1. a.(1)(a) i) a) 422. ` `  The authority citation for Part 90 revised to read as follows:  X' Authority: 47 U.S.C.  154, 303, and 332, unless otherwise noted. " b0*((;r"Ԍ X4i 423. ` `  Section 90.7 is amended by adding the definitions for "EA license" and "Economic Areas (EA)" in alphabetical order to read as follows:  X4  90.7` ` Definitions . ln* * * * *  X_4EAbased 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.  X 4Economic 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. 13,11418 (March 10, 1995)) defined as of February 1995, with the following exceptions:  XO4(1)` ` Guam and Northern Mariana Islands are licensed as a single EAlike area(#`  X!4(2)` ` Puerto Rico and the U.S. Virgin Islands are licensed as a single EAlike area(#`  X4(3)` ` American Samoa is licensed as a single EAlike area(#` ln* * * * * i  Xi4 424. ` ` Section 90.155 is amended by revising paragraph (a) to read as follows:  X;4 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. ln* * * * *  Xl$4 425. ` ` Section 90.173 is amended by revising paragraph (k) introductory text and adding a new paragraph (l) to read as follows:  X'''  90.173 Policies governing the assignment of frequencies. "''b0*((`%r"Ԍ ln* * * * * (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. ln* * * * * (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.  "}0*0*0*@"Ԍ Y-M 5. ` ` Section 90.210 is amended by adding a new footnote 3 against the frequency range "806821/851866" 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:  Y-  90.210 Emission Masks . ln* * * * *  Y3-806821/8518663 hhCBqppG ln* * * * *  Y -3XEquipment used in this band licensed to EA systems shall comply with the emission mask provisions of Section 90.691.(# ln* * * * * M"d0*0*0*"Ԍ Y-  6. ` ` Section 90.609 is amended by modifying paragraphs (c) and (d) to read as follows:  X-  90.609 Special limitations on amendment of applications for assignment or transfer of  X-authorizations for radio systems above 800 MHz. nl* * * * *\(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.  Y- 7. ` ` Section 90.611 is amended by modifying paragraphs (a) and (c) and by removing and reserving paragraph (d) to read as follows:  Xg-  90.611 Processing of applications. ln* * * * *   (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. ln* * * * * (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] ln* * * * * "(0*0*0*0*"Ԍ Y-ԙe 8. ` ` Section 90.615 is revised in its entirety to read as follows:  X-  90.615 Frequencies available in Spectrum Block D in the 800 MHz SMR service  X-(formerly General Category).  Y-(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 reallocated 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) NonSMR stations that were authorized to transmit on these frequencies prior to  Y - [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. e  Y7-c 9. ` ` 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:  X-  90.617` ` Frequencies in the 809.750824/854.750869 MHz, and 896901/935940 MHz bands available for trunked or conventional system use in nonborder areas. (#`  Y- ln* * * * * (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 intercategory sharing as indicated in  90.621(g).  X -  Y!-nl * * * * * cŐ\  Y#- (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 intercategory sharing as indicated in  90.621(g). "(0*0*0*0*"Ԍln* * * * * (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 EAbased service areas in accordance with Section 90.681. SMR licensees licensed on  Yv-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 sitespecific 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  Y -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 401600 will be assigned in blocks as outlined in Table 4C.  Table 4A-SMR Category 806-821/851-866 MHz Band Channels  Y{-EABased SMR Category Systems (200 channels)  YM-Spectrum Block hhCChannel No.  Y-A.................................hhC401420  Y-B.................................hhC421480  Y-C.................................hhC481600   Y- SMR Category  (230 channels)  Y-Spectrum Block hhCChannel No.  Yg-D.................................hhC1150  YP-E................................. hhC201208, 221228, 241248, 261268, 281288, 301308, 321-328, 341348, 361368, 381388(#h ln* * * * *  "0*0*0* "Ԍ Y-  10. ` ` 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:  X-  X- 90.619` ` Frequencies available for use in the U.S./Mexico and U.S/Canada border areas. (#`  Y- (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  Y -be accepted for these channels after [effective date of these rules] . ln* * * * * (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 intercategory sharing.  TABLE 4A - UNITED STATES-MEXICO BORDER AREA, SMR CATEGORY 806-821/851-866 MHZ BAND (95 CHANNELS):  Y-EABased SMR Category (30 Channels) Spectrum Block Offset Channel No.  Y~-A............................hhCNone  Yg-B............................ hhC429, 431, 433, 435, 437,439, 469, 471, 473, 475, 477, 479(#h  Y9-C............................ hhC509, 511, 513, 515, 517, 519, 549, 551, 553, 555, 557, 559, 589, 591, 593, 595, 597, 599(#h  " 0*0*0*"Ԍ Y- SMR Category (65 Channels)  Y-Spectrum Block Offset Channel No.  Y-D............................hhCNone  Y-E............................hhCNone  Yv-Other............................ hhC228240, 268280, 308320, 348360, 388400(#h ln* * * * *   (b)* * * (8)* * * TABLE 12SMR CATEGORY95 Channels [Regions 1, 4, 5, 6]  Y4-EABased SMR Category (90 Channels)  Y-Spectrum Block hhCChannel No.  Y-A............................hhCNone  Y-B............................ hhC463480(#h  Y-C............................ hhC493510, 523540, 553570, 583600(#h  Ye-SMR Category (5 Channels)  Y7-Spectrum Block hhCChannel No.  Y -D............................hhC30, 60, 90, 120, 150  Y-E............................hhCNone " 0*0*0*!"Ԍ4(9)* * * TABLE 16--SMR CATEGORY--60 Channels [Region 2]  Yv-EABased SMR Category (55 Channels)  YH-Spectrum Block hhCChannel No.  Y -A............................ hhCNone(#h  Y -B............................ hhCNone(#h  Y -C............................ hhC518528, 536546, 554564, 572582, 590600(#h  Y -SMR Category (5 Channels)  Y-Spectrum Block hhCChannel No.  Yb-D............................ hhC18, 36, 54, 72, 90(#h  YK-4E............................hhCNone (10)* * * TABLE 20SMR CATEGORY--135 Channels [Region 3]  Y|-EABased SMR Category  (120 Channels)  YN-Spectrum Block hhCChannel No.  Y -A............................ hhC417420(#h  Y -B............................ hhC421440, 457480(#h  Y-C............................ hhC497520, 537560, 577600(#h  Y -SMR Category (15 Channels)  Y"-Spectrum Block hhCChannel No.  Yh$-D............................ hhC38, 39, 40, 78, 79, 80, 118, 119,120(#h  YQ%-E............................hhCNone  Y:&-Other............................ hhC158, 159, 160, 198, 199, 200(#h  "( 0*0*0*0*"Ԍ (11)* * * TABLE 24(REGIONS 7, 8) SMR CATEGORY-190 Channels  Y-EABased SMR Category (80 Channels)  Yv-Spectrum Block hhCChannel No.  YH-A............................ hhCNone(#h  Y1-B............................ hhC425440, 465480(#h  Y -C............................ hhC505520, 545560, 585600(#h   Y - SMR Category (110 Channels)  Y -Spectrum Block hhCChannel No.  Y-D............................ hhC3540, 7580, 115120(#h  Yy-E............................hhC225228, 265268, 305308, 345348, 385388  Yb-Other............................ hhC155160, 195200, 229240, 269280, 309320, 349360, 389400(#h  ln* * * * * " 0*0*0*"Ԍ Y-(  11. ` ` 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:  X-  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 nonSMR 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.  ln* * * * * (b) Stations authorized on frequencies listed in this Subpart, except for those stations authorized pursuant to paragraph (g) of this section and EAbased and MTAbased 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: ln* * * * * (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. nl* * * * *\ (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: ln* * * * * (2) [Reserved] (3) [Reserved] (4) [Reserved]( ln* * * * *"( 0*0*0*0*"Ԍ Y-ԙ   12. ` ` Section 90.629 is amended by adding a new paragraph (e) to read as follows:  X-  90.629` ` Extended implementation period. ln* * * * *  Yw-(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  YJ-licensees that are operating under extended implementation authority as of [effective date of  Y4-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 sixmonth period will terminate automatically.  Y-  13. ` ` 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)"  X<-  90.631 Trunked systems loading, construction and authorization requirements. ln* * * * * (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. * * * ln* * * * * "m$ 0*0*0*%"Ԍ Y-   14. ` ` Subpart S is amended by adding a new heading following Section 90.671 to read as follows:  X- POLICIES GOVERNING THE LICENSING AND USE OF EABASED SMR SYSTEMS IN THE 816821/861866 BAND.  Yw-  15. ` ` A new section 90.681 is added to Subpart S to read as follows:  XJ-  90.681` ` EAbased SMR Service Areas.  Y - EA licenses for SMR spectrum blocks in the 816821/861866 band listed in Table 4A of Section 90.617(d) are available in 175 Economic Areas (EAs) as defined in Section 90.7.   Y -3 16. ` ` A new Section 90.683 is added to Subpart S to read as follows:  X -  90.683 EABased SMR System Operations. (a) EAbased 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:  Y7- (1) The EA licensee affords protection, in accordance with  90.621(b), to all previously 3authorized cochannel 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  Y-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.  Y<- (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 (FAAForm7460-1) and file a request for antenna height clearance and obstruction marking and lighting specifications (FCCForm854) with the FCC, WTB, Support Services Branch, Gettysburg, PA 17325.  Y - (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 cochannel station within the EA licensee's spectrum block is terminated or revoked, the EA licensee's cochannel 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. "( 0*0*0*@)"Ԍ Y-a 17. ` ` A new Section 90.685 is added to Subpart S to read as follows:  Y-  90.685 Authorization, Construction and Implementation of EA Licenses.  Y- (a) EA licenses in the 816821/861866 MHz band will be issued for a term not to exceed ten years. Additionally, EA licensees generally will be afforded a renewal expectancy only afor those stations put into service after August 10, 1996. (b) EA licensees in the 816821/861866 band will be permitted five years to construct their stations. This fiveyear period will commence with the issuance of the EAbased 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 preexisting 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 onethird of the population of its EAbased service area. Further, each EA licensee must provide coverage to at least twothirds of the population of the EAbased service area within five years. (d) Channel Use Requirement. In addition to the population coverage requirements described  Y-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 EAbased 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.  Y9-  18. ` ` A new Section 90.687 is added to Subpart S to read as follows:  Y -  90.687 Special provisions regarding assignments and transfers of authorizations for incumbent SMR licensees in the 816-821/861-866 MHz band.  Y - 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.  "''0*0*0*P("Ԍ Y-  19. ` ` A new Section 90.689 is added to Subpart S to read as follows:  X-  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 EAbased 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 cochannel protection to incumbent licensees pursuant to 90.621(b), the requirements of Section 90.621(b) shall prevail.   Y- 20. ` ` A new Section 90.691 is added to Subpart S to read as follows:  Xd-  90.691 Emission Mask Requirements for EAbased Systems. (a) Outofband 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  Yipower (P) in watts by at least 116Log10(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  YPiby 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  Y"-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.  ""0*0*0*$"Ԍ Y-3 21. ` ` A new section 90.683 is added to Subpart S to read as follows:  Y-  90.693` ` Grandfathering provisions for incumbent licensees in spectrum blocks A, B, and C.  Y- (a) These provisions apply to "incumbent licensees", all 800 MHz SMR licensees who  Yx-obtained licenses or filed applications on or before December 15, 1995 . An incumbent licensee's service area shall be defined by its originallylicensed 40 dBu field strength contour 3and its interference contour shall be defined as its originallylicensed 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 shortspacing 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  Y-for each of their external base sites after the close of the 800 MHz SMR auction.  Y-` 22. ` ` A new Section 90.699 is added to Subpart S to read as follows:  Xh-  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 8`00 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."(0*0*0*0*"Ԍ(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 twoyear 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. 23. A new Subpart V is added with a heading to read as follows:  XN- SUBPART V COMPETITIVE BIDDING PROCEDURES FOR 800 MHz  X7-SPECIALIZED MOBILE RADIO SERVICE 24. A new Section 90.901 is added to Subpart V to read as follows:  X-  90.901 800 MHz SMR spectrum subject to competitive bidding.  Y - 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. 25. A new Section 90.902 is added to Subpart V to read as follows:  X (-  90.902 Competitive bidding design for 800 MHz SMR licensing.  Y(- "(0*0*0*0*"ԌThe 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. 26. A new Section 90.903 is added to Subpart V to read as follows:  X_-  90.903 Competitive bidding mechanisms.  Y1-(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.  Y -(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.  Yy-(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.  Y-(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.  Y-(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. 27. A new Section 90.904 is added to Subpart V to read as follows:  X -  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. 28. A new Section 90.905 is added to Subpart V to read as follows:  XQ%-  90.905 Withdrawal, default and disqualification payments.  Y#'- (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."(0*0*0*0*"Ԍ Y-ԙ(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.  Y_-(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. 29. A new Section 90.906 is added to Subpart V to read as follows:  X-  90.906 Bidding application (FCC Form 175 and 175S Shortform).  Y- 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 175S 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 minorityowned entity and/or a womenowned entity, as defined in  90.912(e). 30. A new Section 90.907 is added to Subpart V to read as follows:  X#-  90.907 Submission of upfront payments and down payments.  YQ%- (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  Y#'-Chapter. (b) Winning bidders in a 800 MHz SMR auction for Spectrum Blocks A, B, and C must"(0*0*0*0*" 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. "0*0*0*"  Y-31. A new Section 90.908 is added to Subpart V to read as follows:  X-  90.908 Longform applications.  Y- Each winning bidder will be required to submit a longform application on FCC Form 600  Yv- 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.  Y -32. A new Section 90.909 is added to Subpart V to read as follows:  X-  90.909 License grant, denial, default, and disqualification for spectrum blocks A, B,  Xy-and C.  YK-(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.  33. A new Section 90.910 is added to Subpart V to read as follows:  X-  90.910 Installment payments for licenses for spectrum blocks A, B, and C.  Y - (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  Yh$-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:"(0*0*0*0*"Ԍ (1) An eligible licensee qualifying as a small business under Section 90.912(b)(1)(i) may make interestonly 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 interestonly 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.  Y1-(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  Y-become effective immediately upon transfer. !34. A new Section 90.911 is added to Subpart V to read as follows:  Y-    90.911 Procedures for partitioned licenses  in spectrum blocks A, B, and C.  Y~- (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 shortform 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 shortform application all parties to agreement(s) with or among other entities to partition the license pursuant to this section,  Y"-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 longform application for its respective, mutually agreedupon 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 (longform initial application or partial"(0*0*0*0*" 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  Y -requirements in its area set forth in  90.685.  Y -"35. A new Section 90.912 is added to Subpart V to read as follows:  X -  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.  Yb-(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.  Y - (c) Rural Telephone Company. A rural telephone company is a local exchange carrier having  Y!-100,000 or fewer access lines, including all affiliates.  Y"- (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 predecessorininterest or, if there is no identifiable predecessorininterest, unaudited financial statements certified by the applicant as accurate.  Y(- (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"(0*0*0*0*" 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.  Y - (f) Members of Minority Groups. Members of minority groups includes Blacks, Hispanics,  Y -American Indians, Alaskan Natives, Asians, and Pacific Islanders.   Y- (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.  Y-(h) Affiliate.  Y- (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:  Ym- (i) Directly or indirectly controls or has the power to control the applicant, or  YV- (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  Y- (iv) Has an "identity of interest" with the applicant.  Y- (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.  Y"- 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")0*0*0*0*" 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.  Yv- 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.  Y - (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.  Yi-(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.  Y&-(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.  YY%- 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.  Y(- (4) Affiliation through stock ownership."(0*0*0*0*"Ԍ(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.  Y - (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.  YM- 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.  Y- 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.  Y&- 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.  Y- (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"(0*0*0*0*" purpose regardless of whether it is or is not recognized within the appropriate jurisdiction.  Y- (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.  Y- (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.  Y - (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.  Y - (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. #36. A new Section 90.913 is added to Subpart V to read as follows:  X-  90.913 Eligibility for small business status for spectrum blocks A, B, and C.  YV- (a) ShortForm Applications: Certifications and Disclosure.  YA-Each applicant for an EA license for Spectrum Blocks A, B, or C which qualifies as a small  Y,-business or  consortium of small businesses shall append the following information as an exhibit to its shortform application (FCC Form 175):  Y- (1) The identity of the applicant's affiliates, persons or entities that hold attributable  Y-interests in such entity, and their affiliates, and, if a consortium of small businesses, the members of the joint venture; and  Y!- (2) The applicant's gross revenues, computed in accordance with  90.912.  Y"-(b) LongForm Applications: Certifications and Disclosure. In addition to the requirements in subpart V of this part, each applicant submitting a long Y~$-form application for license(s) for Spectrum Blocks A, B, or C and qualifying as a small  Yi%-business shall, in an exhibit to its longform application:  YT&- (1) Disclose separately and in the aggregate the gross revenues, computed in accordance  Y?'-with  90.912, for each of the following: the applicant, the applicant's affiliates, the  Y*(-applicant's attributable investors, affiliates of its attributable investors, and, if a consortium  Y)-of small businesses, the members of the joint venture; ")0*0*0*0*"Ԍ (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  Y-applicant's eligibility as a small business under  90.910 and 90.911, including the  Y-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.  Y - (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  Y -information, including any document necessary to establish eligibility as a small business  Y -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.  Y -(d) Audits.  Y- (1) Applicants and licensees claiming eligibility as a a small business and/or consortium of  Y-small businesses under  90.910 and 90.911 shall be subject to audits by the Commission, using inhouse 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 shortform application (FCC Form 175). Such consent shall include consent to the audit of the applicant's or licensee's books, documents and other material (including accounting procedures and practices) regardless of form or type, sufficient to confirm that such applicant's or licensee's representations are, and remain, accurate. Such consent shall include inspection at all reasonable times of the facilities, or parts thereof, engaged in providing and transacting business, or keeping records regarding licensed 800 MHz SMR service and shall also include consent to the interview of principals, employees, customers and suppliers of the applicant or licensee.  Yu-(3) Definitions. The terms affiliate, attributable interests, consortium of small businesses,  Y`-gross revenues, small business used in this dection are defined in  90.912. "40*0*0*"  Xv- [ APPENDIX B ă  YH-  INITIAL REGULATORY FLEXIBILITY ANALYSIS ă 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  Y -Making. Written public comments are requested on the IRFA.  Y - Reason for Action : This rule making proceeding was initiated to secure comment on  Y-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  YP-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,  Y-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.  Y- 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 noncontiguous 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  Y -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.  YZ%- Legal Basis : The proposed action is authorized under the Budget Act, Pub. L. No. 10366, 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. ")0*0*0*0*"Ԍ Y- Reporting, Recordkeeping, and Other Compliance Requirements : Under the  Y-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  Y-"designated entities" may also be subject to reporting and recordkeeping requirements to demonstrate compliance with our competitive bidding rules.  Yz-    Yc- Federal Rules Which Overlap, Duplicate or Conflict With These Rules : None.  Y9- 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  Y -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  Y -their existing authorizations. The competitive bidding proposals contained in the Second Further Notice of Proposed Rule Making also could affect small entities seeking initial  Y-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.  Yn-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  Y@-and set forth its findings in the Final Regulatory Flexibility Analysis.  U- Significant Alternatives Minimizing the Impact on small Entities Consistent with the  Y-Stated Objectives : This Second Further Notice of Proposed Rule Making solicits comment on a variety of alternatives. Any additional significant alternatives presented in the  Y-comments will also be considered.  Y- 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  YM-Notice of Proposed Rule Making. "0*0*0*"  X- APPENDIX C  Y-6#Xj9 xOG;X#LIST OF COMMENTERS  Yz-#Xj\  P6G;[hXP#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) AnheuserBusch Companies, Inc. (AnheuserBusch) Applied Technology Group, Inc. (Applied Technology) Bill Ashby Association of PublicSafety Communications OfficialsInternational, Inc. (APCO) Atlantic Cellular Company L.P. (Atlantic Cellular) Automated Business Communications (ABC) B & C Communications (B & C) BisMan Mobile Phone, Inc. (BisMan) 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)  Y>&-Dru Jenkinson, Inc., (Dru Jenkinson, et al.) Jana Green, Inc. Shelly Curttright, Inc. Eden Communications, Inc. (Eden)"(0*0*0*0*"ԌE.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)  Y -Parkinson Electronics Company, Inc., (Parkinson, et al.) Banks Tower Communications, Ltd. SpeedNet 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. (ProTec) Radio Communications Center (RCC) Raserco, Inc. (Racerco) Rayfield Communications, Inc. (Rayfield)"( 0*0*0*0*"ԌRuss 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)"!0*0*0*"  Y-8#Xj9 xOG;X#LIST OF REPLY COMMENTERS  Y-#Xj\  P6G;[hXP# 4X Corporation Advanced MobileComm, Inc. American Mobile Telecommunications Association AnheuserBusch 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."("0*0*0*0*"ԌCoast Communications, Inc. Graybill Electronics, Inc. Elder's Radio Communications Lee's TwoWay Radio, Inc. Electronic Specialists, Inc. Radio Communications of Cary, Inc. Hinds & Campbell Properties, Inc. Almar Communications, Inc. ThreeWay 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 PortaPhone (Phipps) Pittencrief Communications, Inc. Polar Communications Mutual Aid Corporation (Polar) ProTec Mobile Communications, Inc. Qualicom Systems, Inc. (Qualicom) Racom, Inc. et al. Racom, Inc. Parkinson Electronics Company, Inc. Banks Tower Communications, Ltd. SpeedNet"(#0*0*0*0*"ԌPeacock's Radio and Wild's Computer Service, Inc. Mobile Relays, Inc. Rayfield Communications, Inc. North Sight Communications, Inc. TriCommunications, 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. TenFour 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)"$0*0*0*P"  Y-  LIST OF EX PARTE COMMENTERS ă  Y- American Mobile Telecommunications Association, Inc. (filed Feb. 23, 1995) American Mobile Telecommunications Association, Inc. (filed Sept. 29, 1995) AutoComm Engineering Corporation (filed Feb. 10, 1995) AutoComm 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 A1A 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 BranDex 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 "(%0*0*0*0*"ԌAir 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 VAKY 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)"(&0*0*0*0*"ԌLouisville TwoWay 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) "'0*0*0*"  Y< O  7#G6X@`7w@# SEPARATE #x6X@`7wX@# #G6X@`7w@# STATEMENT 8zOF COMMISSIONER ANDREW C. BARRETT #x6X@`7wX@#Re: Amendment of Part 90 of the Commission's Rules to Facilitate  ?<Future Development of SMR Systems in the 800 MHz Frequency Band (#(#  ?a< #x6X@`7wX@# 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 decisionmaking 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  ?I#<cellular service and PCS.  U Wj  U Wj