NOTICE ********************************************************* NOTICE ********************************************************* This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file how2ftp. File how2ftp (.txt & .wp) is in directory /pub/Bureaus/Miscellaneous/Public_Notices/ ***************************************************************** ******** $//R&O, Plan for Sharing the Costs of Microwave Relocation, FCC 96-196//$ $/ 15.307, Coordination with fixed microwave service/$ $/ 22.602, Transition of the 2110-2130 and 2160-2180 MHz Channel to emerging technologies/$ $/ 24.239, Cost-Sharing Requirements for Broadband PCS/$ FOR RECORD ONLY Before the FEDERAL COMMUNICATIONS COMMISSION FCC 96-196 Washington, D.C. 20554 Amendment to the Commission's Rules ) WT Docket No. 95-157 Regarding a Plan for Sharing ) RM-8643 the Costs of Microwave Relocation) FIRST REPORT AND ORDER AND FURTHER NOTICE OF PROPOSED RULE MAKING Comment Date: May 28, 1996 Reply Comment Date: June 7, 1996 Adopted: April 25, 1996 Released: April 30, 1996 By the Commission: Chairman Hundt and Commissioner Quello issuing separate statements. Table of Contents Paragraph I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 II. EXECUTIVE SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . .2 III. BACKGROUND. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 IV. FIRST REPORT AND ORDER A. Microwave Relocation Rules. . . . . . . . . . . . . . . . . . . 10 1. Voluntary Negotiations. . . . . . . . . . . . . . . . . . . . . 10 2. Mandatory Negotiations. . . . . . . . . . . . . . . . . . . . . 16 3. Involuntary Relocation. . . . . . . . . . . . . . . . . . . . . 23 a. Comparable Facilities . . . . . . . . . . . . . . . . . . . . . 24 b. Relocating Individual Links . . . . . . . . . . . . . . . . . . 35 c. Transaction Expenses. . . . . . . . . . . . . . . . . . . . . . 39 d. Twelve-Month Trial Period . . . . . . . . . . . . . . . . . . . 44 e. Request for Clarification of Involuntary Relocation Procedures. 51 4. Public Safety Certification . . . . . . . . . . . . . . . . . . 53 5. Dispute Resolution. . . . . . . . . . . . . . . . . . . . . . . 58 6. Ten Year Sunset . . . . . . . . . . . . . . . . . . . . . . . 60 B. Cost-Sharing Plan. . . . . . . . . . . . . . . . . . . . . . . 69 1. Overview. . . . . . . . . . . . . . . . . . . . . . . . . . . . 69 2. Dispute Resolution Under the Cost-Sharing Plan. . . . . . . . . 78 3. Administration of the Cost-Sharing Plan . . . . . . . . . . . . 81 C. Licensing Issues. . . . . . . . . . . . . . . . . . . . . . . . 86 D. Application to Other Emerging Technology Licensees. . . . . . . 90 V. FURTHER NOTICE OF PROPOSED RULE MAKING. . . . . . . . . . . . . . . 93 VI. CONCLUSION. . . . . . . . . . . . . . . . . . . . . . . . . . . . .100 VII. PROCEDURAL MATTERS A. Regulatory Flexibility Act. . . . . . . . . . . . . . . . . . .101 B. Ex Parte Rules. . . . . . . . . . . . . . . . . . . . . . . . .106 C. Comment Period. . . . . . . . . . . . . . . . . . . . . . . . 107 D. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . .108 E. Ordering Clauses. . . . . . . . . . . . . . . . . . . . . . . .109 F. Further Information . . . . . . . . . . . . . . . . . . . . . .120 APPENDIX A - Mechanics of the Cost-Sharing Plan APPENDIX B - Final Rules APPENDIX C - List of Commenters APPENDIX D - Initial Regulatory Flexibility Analysis I. INTRODUCTION 1. By this First Report and Order and Further Notice of Proposed Rule Making, we change and clarify certain aspects of the microwave relocation rules adopted in our Emerging Technologies proceeding, ET Docket No. 92-9. We also adopt a plan for sharing the costs of relocating microwave facilities currently operating in the 1850 to 1990 MHz ("2 GHz") band, which has been allocated for use by broadband Personal Communications Services ("PCS"). Our plan establishes a mechanism whereby PCS licensees that incur costs to relocate microwave links receive reimbursement for a portion of those costs from other PCS licensees that also benefit from the resulting spectrum clearance. We condition the cost-sharing plan, however, on selection of one or more entities or organizations to administer the plan. Finally, we seek further comment on whether to adjust the negotiation periods by shortening the voluntary negotiation period and lengthening the mandatory negotiation period for the D, E, and F blocks, and whether the negotiation periods for the C block should be subject to the same adjustment. We also seek comment on whether microwave incumbents should be permitted to seek reimbursement from PCS licensees through participation in the cost-sharing plan. We believe that the rules adopted and proposed herein, along with the implementation of an industry sponsored cost- sharing plan, will expedite the clearing of the 2 GHz band in an equitable and efficient manner. II. EXECUTIVE SUMMARY 2. This Executive Summary summarizes the principal changes and clarifications we are making to the rules we adopted in the Emerging Technologies proceeding, the decisions we have made regarding the cost-sharing plan that we proposed in our Notice of Proposed Rule Making, and the issues on which we seek further comment. The First Report and Order:  requires that, if the parties have not reached an agreement within one year after the commencement of the voluntary period (or, for A and B block licensees, on the effective date of the new rules), the incumbent must allow the PCS licensee to gain access to its facilities so that an independent third party can prepare an estimate of the cost to relocate the incumbent to comparable facilities;  clarifies that, if an agreement is not reached by negotiation, the PCS licensee has no obligation to pay for premiums during an involuntary relocation. "Premiums" could include replacing the analog facilities with digital facilities, paying all of the incumbent's transactions costs, or relocating an entire system as opposed to just the interfering links;  clarifies that, with respect to mandatory negotiations, we will (1) consider common law principles when interpreting the obligation to negotiate in good faith, (2) require the parties to share pertinent information, (3) place the burden on the party alleging bad faith to provide the Commission with cost estimates for comparable facilities, and (4) consider the following factors when evaluating claims of failure to negotiate in good faith: efforts to obtain estimates of the actual cost of relocating the incumbent to comparable facilities, whether either party has withheld information relevant to relocation, the type of premium requested, if any, and the proportionality of such payment requests to actual relocation costs;  clarifies that a facility will be deemed comparable for purposes of involuntary relocation if it is equivalent with respect to (1) communications throughput, (2) system reliability, and (3) operating costs;  limits compensation to incumbents for increased recurring costs associated with the replacement facilities to a five-year time period during an involuntary relocation and limits reimbursement of incumbents' transactional costs during an involuntary relocation to two percent of the "hard costs" involved;  clarifies that the twelve-month trial period in our rules applies only if an involuntary relocation occurs. Therefore, if the parties decide that a trial period should be established for relocations that occur during the voluntary or mandatory period, the trial period must be provided for in the contract;  requires that microwave incumbents still operating in the 2 GHz band ten years after the voluntary period has commenced will be required to pay for their own relocation expenses if an emerging technology licensee requires use of the spectrum;  requires that public safety licensees self-certify that they meet the criteria for extended negotiation periods;  substantially adopts the cost-sharing plan proposed in the Cost-Sharing Notice; the plan is conditioned on selection of an industry administrator to administer the cost-sharing clearinghouse;  adopts our interim licensing policy for 2 GHz microwave systems, which permits a grant of primary status only for the following limited number of minor technical changes: decreases in power, minor changes in antenna height, minor location changes (up to two seconds), any data correction which does not involve a change in the location of the existing facility, reductions in authorized bandwidths, minor changes in structure heights, changes in ground elevation (but preserving centerline height), and changes in equipment; all other modifications will be permitted on a secondary basis, unless (1) the incumbent affirmatively justifies primary status, and (2) the incumbent establishes that the modification would not add to the relocation costs of PCS licensees. The Further Notice of Proposed Rule Making seeks comment on:  whether the negotiation period for the D, E, and F blocks should be adjusted by shortening the voluntary period by one year (i.e., to one year for non-public safety incumbents and two years for public safety incumbents); and lengthening the mandatory negotiation period for these blocks by a corresponding year (i.e., to two years for non-public safety incumbents and three years for public safety incumbents);  whether the negotiation periods for the C block should be subject to the same adjustments as the negotiation periods for the D, E, and F blocks; and  whether microwave incumbents should be permitted to seek reimbursement from PCS licensees through the cost-sharing plan. III. BACKGROUND A. Relocation Rules Established in Emerging Technologies Docket No. 92-9 3. In the First Report and Order and Third Notice of Proposed Rule Making in ET Docket No. 92-9, we reallocated the 1850-1990, 2110-2150, and 2160-2200 MHz bands from private and common carrier fixed microwave services to emerging technology services. We also established procedures for 2 GHz microwave incumbents to be relocated to available frequencies in higher bands or to other media, by encouraging incumbents to negotiate voluntary relocation agreements with emerging technology licensees or manufacturers of unlicensed devices when frequencies used by the incumbent are needed to implement the emerging technology. The ET First Report and Order stated that, should negotiations fail, the emerging technology licensee could request involuntary relocation of the incumbent, provided that the emerging technology service provider pays the cost of relocating the incumbent to a comparable facility. 4. In our 1993 Third Report and Order in ET Docket No. 92-9, as modified on reconsideration by our 1994 Memorandum Opinion and Order, we established additional details of the transition plan to enable emerging technology providers to relocate incumbent facilities. The relocation process consists of two negotiation periods that must expire before an emerging technology licensee may request involuntary relocation. The first is a fixed two-year period for voluntary negotiations -- three years for public safety incumbents, e.g., police, fire, and emergency medical -- commencing with our acceptance of applications for emerging technology services, during which the emerging technology providers and microwave licensees may negotiate any mutually acceptable relocation agreement. Negotiations are strictly voluntary. If no agreement is reached, the emerging technology licensee may initiate a one-year mandatory negotiation period -- or two-year mandatory period if the incumbent is a public safety licensee - - during which the parties are required to negotiate in good faith. 5. Should the parties fail to reach an agreement during the mandatory negotiation period, the emerging technology provider may request involuntary relocation of the existing facility. Involuntary relocation requires that the emerging technology provider (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; and (3) build and test the new microwave (or alternative) system. Once comparable facilities are made available to the incumbent microwave operator, the Commission will amend the 2 GHz license of the incumbent to secondary status. After relocation, the microwave incumbent is entitled to a one-year trial period to determine whether the facilities are indeed comparable, and if they are not, the emerging technology licensee must remedy the defects or pay to relocate the incumbent back to its former or an equivalent 2 GHz frequency. 6. Under these procedures, it is possible for a relocation agreement between a PCS licensee and a microwave incumbent to have spectrum-clearing benefits for other PCS licensees as well. First, some microwave spectrum blocks overlap with one or more PCS blocks, because the spectrum in the 1850-1990 MHz band was assigned differently in the two services. Second, incumbents' receivers may be susceptible to adjacent or co-channel interference from PCS licensees in more than one PCS spectrum block. For example, a microwave link located partially in Block A, partially in Block D, and adjacent to Block B, may cause interference to or receive interference from PCS licensees that are licensed in each of those blocks. Third, because most 2 GHz microwave licensees operate multi-link systems, PCS licensees may be asked to relocate links that do not directly encumber their own spectrum or service area in order to obtain the microwave incumbent's voluntary consent to relocate. Finally, UTAM, Inc., the frequency coordinator for the PCS spectrum designated for unlicensed devices, expects that some licensed PCS providers will have to relocate links in the unlicensed band that are paired with links in licensed PCS spectrum. 7. Because we are licensing PCS providers at different times and multiple PCS licensees may benefit from the relocation of a microwave system or even a single link, the first PCS licensee in the market potentially bears a disproportionate share of relocation costs. Subsequent PCS licensees to enter the market may therefore obtain a windfall. As a result of this potential "free rider" problem, the first PCS licensee in the market might not relocate a link or might delay its deployment of PCS if it believes that another PCS licensee will relocate the link first, thus paying for some or all of the relocation costs. In addition, unless cost- sharing is adopted, PCS licensees might not engage in relocation that is cost-effective if viewed from an industry-wide perspective. For example, a link that encumbers two PCS blocks might not be moved if the cost is greater than the benefit to any single licensee, even though the joint benefit received by two or more licensees exceeds the cost of relocating the link. B. Pacific Bell Petition for Rulemaking 8. In 1994, PCIA proposed a cost-sharing plan to alleviate the free rider problem, which we found to be attractive in theory but dismissed as underdeveloped. On May 5, 1995, Pacific Bell ("PacBell") filed a Petition for Rulemaking. In its petition, PacBell proposed a detailed cost-sharing plan in which PCS licensees on all blocks, licensed and unlicensed, would share in the cost of relocating microwave stations. On May 16, 1995, we requested comment on PacBell's proposal. Most parties that commented on PacBell's Petition for Rulemaking supported the cost-sharing concept, although the comments reflected some differences regarding the details of the proposal. On October 12, 1995, we adopted a Notice of Proposed Rule Making, which sought comment on a modified version of the plan proposed by PacBell. A list of commenters is attached as Appendix C. IV. FIRST REPORT AND ORDER 9. In the Cost-Sharing Notice, we proposed a number of changes and clarifications to the microwave relocation rules adopted in the Emerging Technologies docket. We suggested that additional guidance with respect to certain aspects of our rules would facilitate negotiations, reduce disputes, and expedite deployment of PCS. As explained below, we adopt many of the changes and clarifications we proposed, along with some suggestions made by commenters. By adopting these rule changes and clarifications, as well as the cost-sharing plan discussed in Section B, infra, we intend to expedite the clearing of the 2 GHz band and the introduction of PCS to the public, while protecting the rights of incumbents. We seek to promote an efficient and equitable relocation process, which minimizes transaction costs and maximizes benefits for all parties, including incumbents, PCS licensees, and the public. A. Microwave Relocation Rules 1. Voluntary Negotiations 10. Background. In the ET Third Report and Order, we established a voluntary period during which parties are encouraged to negotiate and reach agreement on relocation but are not required to do so. As we stated in the Cost-Sharing Notice, negotiations are strictly voluntary during this period and are not defined by any parameters. We also observed that the existing relocation procedures for microwave incumbents adopted in the Emerging Technologies docket were the product of extensive comment and deliberation prior to the initial licensing of PCS. Thus, we stated that our intent was not to reopen that proceeding, because we believe that the general approach to relocation in our existing rules is sound and equitable. Nevertheless, we sought comment on whether additional information about the value of the incumbent's 2 GHz system and the anticipated cost of relocation would help to facilitate negotiations. For example, we suggested that two independent cost estimates -- prepared by third parties not associated or otherwise affiliated with either the incumbent licensee or the PCS provider -- could be filed with the Commission by parties that have not reached an agreement within one year after the commencement of the voluntary negotiation period. 11. Comments. Despite the fact that we did not propose to alter the basic structure or length of the relocation negotiation periods in the Cost-Sharing Notice, some PCS licensees request that we shorten or dispose of the voluntary period. They argue that incumbents are abusing the relocation process by demanding large premium payments or refusing to negotiate, and that the deployment of PCS is being delayed as a result. Microwave incumbents, on the other hand, dispute that such actions are widespread and argue that we should not make the changes requested by PCS licensees because, inter alia, any such changes would be beyond the scope of this proceeding. 12. In response to our inquiry about whether independent cost estimates should be required during the voluntary period, PCS licensees express their support and contend that such a requirement would facilitate stalled negotiations. PCIA states that independent cost estimates that are disaggregated by link would give the parties an independent basis around which to come to an agreement, which would reduce the need to utilize dispute resolution procedures. Western Wireless Corporation asserts, however, that requiring such estimates during the voluntary period as it now stands would be an exercise in frustration, because the parties are not even obligated to negotiate in good faith during the voluntary period. Microwave incumbents argue that adopting such a requirement would impose an affirmative obligation on the parties during the voluntary period, which contradicts the voluntary nature of this period. 13. Discussion. We agree with commenters who argue that the public interest would not be served by changing the rules regarding the voluntary period for the A and B blocks at this time. First, the A and B block licensees who are now negotiating with incumbents were on notice of the voluntary period when they bid for their licenses, and they presumably have factored the length of the period and the potential cost of relocation into their bids. They have offered no persuasive justification to shorten the period now. Second, we note that many voluntary agreements have already been reached or are now being negotiated between A and B block licensees and incumbents. We are concerned that altering the voluntary period could inadvertently delay the deployment of PCS, because negotiations are likely to be interrupted while parties reassess their bargaining positions. Nevertheless, we agree with PCS licensees that changing the negotiation period for blocks other than the A and B blocks may not raise the same concerns, because negotiations in these blocks have not commenced. Therefore, in the Further Notice of Proposed Rule Making below, we seek comment on the possibility of adjusting the voluntary and mandatory negotiation periods for the D, E, and F blocks. We also seek comment on whether the same adjustments should be made to the negotiation periods for the C block. 14. Whether or not the negotiation periods are changed, we also agree with PCS licensees that additional information about the value of an incumbent's system, the estimated amount of time it would take to relocate the incumbent, and the anticipated cost of relocation may help facilitate negotiations during the voluntary period, as we suggested in the Cost-Sharing Notice. Therefore, we require that, if the parties have not reached an agreement within one year after the commencement of the voluntary period, the incumbent must allow the PCS licensee, if the PCS licensee so chooses, to gain access to the microwave facilities to be relocated so that an independent third party can examine the incumbent's 2 GHz system and prepare an estimate of the cost and the time needed to relocate the incumbent to comparable facilities. The PCS licensee must pay for any such cost estimate. Because the one-year anniversary of the commencement of the voluntary period for A and B block licensees has already passed, this requirement shall become effective for the A and B block on the effective date of the rules adopted in this proceeding. We disagree with incumbents that a cost estimate paid for by the PCS licensee changes the nature of the voluntary period, because participation in negotiations remains voluntary. 15. Finally, although we are not altering the basic structure or length of the voluntary period for A and B block PCS licensees, we emphasize that our rules provide incentives for voluntary agreements. We have stated in the past that PCS licensees may choose to offer incumbents premiums to relocate quickly. "Premiums" could include: replacing the analog facilities with digital facilities, paying all of the incumbent's transactions costs, or relocating an entire system as opposed to just the interfering links. These incentives are available only to microwave incumbents who consent to relocation by negotiation. By contrast, PCS licensees are not obligated to pay for such premiums during an involuntary relocation, which is discussed in Section IV(A)(3), infra. 2. Mandatory Negotiations 16. Background. If a relocation agreement is not reached during the voluntary period, the PCS licensee may initiate a mandatory negotiation period. Like the voluntary period, the mandatory period is intended as a period of negotiation between the parties resulting in a contractual relocation agreement. The major difference between the voluntary period and the mandatory period is that (1) an incumbent may not refuse to negotiate once the mandatory period has commenced, and (2) the parties are required to negotiate in good faith. 17. PCS licensees have requested that we provide guidance with respect to what constitutes good faith in the context of mandatory negotiations. In the Cost-Sharing Notice, we proposed that, for purposes of the mandatory period, an offer by a PCS licensee to replace a microwave incumbent's system with comparable facilities would be considered a good faith offer; whereas, failure on the part of an incumbent to accept an offer of comparable facilities would create a rebuttable presumption that the incumbent is not acting in good faith. We also sought comment on the appropriate penalty to impose on a licensee who does not negotiate in good faith during the mandatory period. 18. Comments. PCS licensees support clarification of how the term good faith will be applied during the mandatory negotiation period, because they believe that additional guidance will facilitate negotiations. CTIA also encourages us to establish rules which declare that demands by microwave incumbents that exceed twice the cost of comparable facilities are prima facie unreasonable and are evidence of bad faith during the mandatory period. Furthermore, many PCS licensees argue that they should not have to pay to relocate an incumbent that does not negotiate in good faith. CTIA recommends that microwave incumbents who fail to negotiate in good faith should have their licenses revoked and should lose their right to be relocated to new spectrum. PCIA suggests that, if the incumbent fails to negotiate in good faith, the relocating PCS provider should only be required to tender a cash payment to the incumbent in an amount not to exceed the greater of two independent appraisals of what constitutes comparable replacement facilities. U.S. Airwaves contends that it is premature to decide what penalty to apply if either party refuses to negotiate in good faith. 19. By contrast, microwave incumbents argue that the clarification we proposed reflects an improper level of government management of negotiations and has no rightful place in the Commission's rules. They also claim that enforcement of such a standard would be administratively burdensome on the Commission and may delay the relocation process. Moreover, they assert that clarification of the term good faith is unnecessary, because local, state, and federal laws and regulations already govern how the term is applied in the context of contract negotiations. Commenters also express uncertainty and confusion over how our proposed clarification of the term good faith would apply in practice. For example, incumbents voice concern over whether a counteroffer by an incumbent would constitute an act of bad faith. In addition, incumbents claim that the proposed clarification is one-sided. They suggest that, if the provision is retained, a reciprocal obligation of good faith should be imposed on PCS licensees, which would require them to accept the incumbent's assessment of what constitutes comparable facilities. Finally, microwave incumbents emphasize that the same penalties that apply to them should also be imposed on PCS licensees who fail to negotiate in good faith. 20. Discussion. As the comments on this issue demonstrate, the question of whether parties are negotiating in good faith typically requires consideration of all the facts and circumstances underlying the negotiations, and thus is likely to depend on the specific facts in each case. We are concerned that creating a presumption that a party is acting in good or bad faith, as proposed in the Cost-Sharing Notice, may slow down resolution of disputes by prompting parties to bring claims of "bad faith" to the Commission prematurely rather than focusing on resolving the underlying disputes through the negotiation process. For these reasons, we decline to adopt our proposal creating a presumption that a party who declines an offer of comparable facilities is acting in bad faith. Instead, we conclude that good faith should be evaluated on a case-by-case basis under basic principles of contract law. Nevertheless, we agree with those commenters who suggest that guidance with respect to the factors we will consider if a dispute arises over good faith would be helpful. 21. First, we believe that good faith requires each party to provide information to the other that is reasonably necessary to facilitate the relocation process. For example, upon request by a PCS licensee, we expect incumbents to allow inspection of their facilities by the PCS licensee and to provide any other information that the PCS licensee needs in order to evaluate the cost of relocating the incumbent to comparable facilities. Second, when evaluating claims that a party has not negotiated in good faith, we will consider, inter alia, the following factors: (1) whether the PCS licensee has made a bona fide offer to relocate the incumbent to comparable facilities; (2) if the microwave incumbent has demanded a premium, the type of premium requested (e.g., whether the premium is directly related to relocation, such as system-wide relocations and analog-to-digital conversions, versus other types of premiums) and whether the value of the premium as compared to the cost of providing comparable facilities is disproportionate (i.e., whether there is a lack of proportion or relation between the two); (3) what steps the parties have taken to determine the actual cost of relocation to comparable facilities; and (4) whether either party has withheld information requested by the other party that is necessary to estimate relocation costs or to facilitate the relocation process. 22. To ensure that parties do not bring frivolous bad faith claims, we will also require any party alleging a violation of our good faith requirement to provide an independent estimate of the relocation costs of the facilities in question. Independent estimates must include a specification for the comparable facility and a statement of the costs associated with providing that facility to the incumbent licensee. These cost estimates are similar to the cost estimates that we require if a dispute arises over comparable facilities during the involuntary relocation period. We believe that requiring such estimates will assist us in determining whether the parties are negotiating in good faith. Finally, we agree with those commenters who argue that penalties for failure to negotiate in good faith should be imposed on a case-by-case basis. We emphasize, however, that we intend to use the full realm of enforcement mechanisms available to us in order to ensure that licensees bargain in good faith. 3. Involuntary Relocation 23. If no agreement is reached during either the voluntary or mandatory negotiation period, a PCS licensee may initiate involuntary relocation procedures. Under involuntary relocation, the incumbent is required to relocate, provided that the PCS licensee meets the conditions under our rules for making the incumbent whole, such as providing the incumbent with comparable facilities. a. Comparable Facilities 24. Background. Our rules require PCS licensees to provide microwave incumbents with comparable facilities as a condition for involuntary relocation. In the Emerging Technologies docket, we stated that, in any case brought to us for resolution, we would require that facilities be equal to or superior to existing facilities to be considered comparable. To determine comparability, we said that we would consider, inter alia, system reliability, capability, speed, bandwidth, throughput, overall efficiency, bands authorized for such services, and interference protection. PCS licensees subsequently urged us to specify the elements that constitute a comparable facility in order to remove ambiguity and expedite negotiations. 25. In the Cost-Sharing Notice, we proposed to clarify the definition of comparable facilities by using the following three factors to determine when a facility is comparable: communications throughput, system reliability, and operating cost. We defined communications throughput as the amount of information transferred within the microwave system for a given amount of time, system reliability as the amount of time it takes for information to be accurately transferred within the system, and operating cost as the cost to operate and maintain the system. Thus, we proposed that a replacement facility would be presumed comparable if the new system's communications throughput and reliability are equal to or greater than that of the system to be replaced, and the operating costs of the replacement system are equal to or less than those of the existing system. We also suggested that comparable replacement facilities could be provided by "trading off" system parameters, which would permit the PCS licensee to compensate for certain factors by substituting others, provided that overall comparability is achieved in the three essential areas we have identified. 26. Comments. Overall, microwave incumbents, PCS licensees, and other commenters agree that the three factors we identified are the most critical for purposes of determining comparability. PCS licensees support clarification as a means of adding certainty to the process, facilitating negotiations, and reducing the number of disputes that may otherwise arise. Although microwave incumbents generally agree that we have identified the three most important factors of comparability, they express concern that permitting PCS licensees to trade off system parameters will allow them to compromise on certain aspects of comparability by attempting to compensate with other factors. More specifically, incumbents argue that PCS licensees should not be permitted to cut corners on one aspect of comparability, such as reliability, and make up for it in another aspect, such as operating costs or throughput. UTC contends that PCS licensees do not have sufficient knowledge or expertise regarding the incumbent's operational requirements to dictate appropriate trade-offs. By contrast, PCS licensees emphasize that permitting parties to trade-off system parameters promotes flexibility. They stress that comparability should be defined in terms of functionality and performance, rather than whether an offer is made to provide identical equipment. 27. Discussion. We conclude that the factors we identified -- communications throughput, system reliability, and operating costs -- will be the three factors used to determine when a facility is comparable. As we stated in the Cost-Sharing Notice, we believe that providing guidance with respect to the term comparable facilities will facilitate negotiations and reduce disputes. The record in this proceeding also supports adoption of the factors we have identified. Each factor is discussed in more detail below. 28. Throughput. We define communications throughput as the amount of information transferred within the system in a given amount of time. For analog systems the throughput is measured by the number of voice channels, and for digital systems it is measured in bits per second ("bps"). Therefore, if analog facilities are being replaced by analog facilities, the PCS licensee will be required to provide the incumbent with an equivalent number of 4 kHz voice channels. If an existing digital system is being replaced by digital facilities, the PCS licensee will be required to provide the incumbent with equivalent data loading bps in order for the system to be considered comparable. We agree with commenters that the more difficult issue will be determining equivalent throughput when analog equipment is being replaced with digital equipment, which can be like comparing "apples with oranges." If disputes arise, we will determine on a case-by-case basis whether comparable throughput has been achieved. For guidance, we plan to refer to other parts of our rules where analog-digital comparisons have been made, such as the minimum channel loading requirements for fixed point-to-point microwave systems in Section 21.710(d). 29. We also conclude that, during involuntary relocation, PCS licensees will only be required to provide incumbents with enough throughput to satisfy their needs at the time of relocation, rather than to match the overall capacity of the system, as some microwave incumbents suggest. For example, we will not require that a 2 GHz incumbent with 5 MHz of bandwidth be relocated to a 5 MHz bandwidth, 6 GHz location when its current needs only justify a 1.25 MHz bandwidth system. If a dispute arises, we will determine what an incumbent's needs are by looking at actual system use rather than total capacity at the time of relocation. We expressly adopted channelization plans for the 6 GHz band with bandwidth requirements ranging from 400 kHz to 30 MHz to increase the efficiency of use by point-to-point microwave operations. Although we recognize that this policy may affect an incumbent's ability to increase its capacity over time, we agree with PCS licensees that the public interest would not be served if spectrum is automatically held in reserve for all incumbents with the expectation that some may require additional capacity in the future. Our goal is to foster efficient use of the spectrum, which would be thwarted if all incumbents are relocated to systems with capacity that exceeds their current needs. Also, limiting spectrum to current needs serves the public interest, because we believe that it will promote the development of spectrum-efficient technology capable of increasing capacity without increasing bandwidth. 30. Reliability. We define system reliability as the degree to which information is transferred accurately within the system. As stated in the Cost-Sharing Notice, the reliability of a system is a function of equipment failures (e.g., transmitters, feed lines, antennas, receivers, battery back-up power, etc.), the availability of the frequency channel due to propagation characteristic (e.g., frequency, terrain, atmospheric conditions, radio-frequency noise, etc.), and equipment sensitivity. We define comparable reliability as that equal to the overall reliability of the incumbent system, and we will not require the system designer to build the radio link portion of the system to a higher reliability than that of the other components of the system. For example, if an incumbent system had a radio link reliability of 99.9999 percent, but an overall reliability of only 99.999 percent because of limited battery back-up power, we require that the new system have a radio link reliability of 99.999 percent to be considered comparable. For digital data systems this would be measured by the percent of time the bit error rate ("BER") exceeds a desired value, and for analog or digital voice transmissions this would be measured by the percent of time that audio signal quality met an established threshold. If an analog voice system is replaced with a digital voice system the resulting frequency response, harmonic distortion, signal-to-noise ratio, and reliability would be the factors considered. We decline to adopt AUE's request that we include a "system age" component that takes into account how the age of a given system can affect system reliability, because we do not have enough information to determine how age will affect a given system. Moreover, we believe that older equipment of high quality may be as reliable as newer equipment of low quality. 31. Operating Costs. We define operating costs as the cost to operate and maintain the microwave system. These costs fall into several categories. First, the incumbent must be compensated for any increased recurring costs associated with the replacement facilities (e.g., additional rental payments, increased utility fees). Although we originally proposed that recurring costs should be limited to a ten-year license term, we are persuaded by PCS licensees that a five-year time period -- which is the length of a microwave license in the 1850-1990 MHz band -- is a more appropriate time frame, because it strikes an appropriate balance between the burden placed on PCS licensees who must relocate many incumbents, and the burden placed on incumbents that are being forced to relocate. Furthermore, we believe that the five-year time period is not unfair to incumbents because, by five years from now, many incumbents would have been forced to bear some of these costs themselves -- such as increased rents -- if they had not already been relocated by PCS licensees. Moreover, we are also persuaded that a five-year time period provides incumbents with sufficient time for budget planning and resource allocation to meet such expenses once the five-year period expires. Finally, we conclude that a PCS licensee is permitted but not required to satisfy its obligation by making a lump-sum payment based on present value using current interest rates, as suggested by some incumbents. 32. Second, increased maintenance costs must be taken into consideration when determining whether operating costs are comparable. As several commenters point out, maintenance costs associated with analog systems are frequently higher than the costs for equivalent digital systems, because manufacturers are producing mostly digital equipment and analog replacement parts can be difficult to find. We decline to adopt API's suggestion that "serviceability"-- which would require that access to those elements essential to restoration of service be equal to or greater than the original system -- should be adopted as a fourth element, however, because we believe that the ease of servicing the equipment will affect repair costs, which will be factored into operating costs. Furthermore, we agree with incumbents that, in some instances, the operating costs of 6 GHz analog equipment might be so high that analog replacement facilities would not qualify as comparable. On the other hand, if an available analog replacement system would provide equivalent technical capability without increasing the incumbent's operating costs or sacrificing any of the other factors we have identified, we agree with PCS licensees that such an analog system would be acceptable. In sum, our goal is to ensure that incumbents are no worse off than they would be if relocation were not required, not to guarantee incumbents superior systems at the expense of PCS licensees. 33. Trade Offs. We also conclude that comparable replacement facilities may not be provided by trading off any of the system parameters discussed above. Thus, we agree with incumbents that PCS licensees should not be permitted to compromise on one aspect of comparability, such as system reliability, by compensating with another factor, such as increased throughput. Based on the record in this proceeding, we believe that the factors we have identified are central to the concept of comparability, and therefore the replacement system provided to an incumbent during an involuntary relocation must be at least equivalent to the incumbent's existing system with respect to system reliability, throughput, and operating costs. However, other aspects of the system (e.g., bandwidth) do not have to be equivalent to the incumbent's original 2 GHz system. As PCS licensees point out, it might be possible to achieve comparability with respect to the three main factors, even though all of the features on the replacement equipment are not identical to those of the original system. Other media, such as land lines, would also be acceptable, provided that comparability is achieved. 34. Depreciation. In the Cost-Sharing Notice, we also sought comment on whether and how depreciation of equipment and facilities should be taken into account, and whether it would be appropriate for a PCS licensee to compensate an incumbent only for the depreciated value of the old equipment. Some PCS licensees contend that depreciation should be taken into account during the mandatory period as a means of encouraging incumbents to accept offers during the voluntary period. We are persuaded by incumbents, however, that compensation for the depreciated value of old equipment would not enable them to construct a comparable replacement system without imposing costs on the incumbent, which would be inconsistent with our relocation rules. We therefore conclude that the depreciated value of old equipment should not be a factor when determining comparability. b. Relocating Individual Links 35. Background. In the Emerging Technologies docket, we concluded that PCS licensees are obligated to pay to relocate incumbents to comparable facilities when the PCS systems pose an interference problem to the incumbents' microwave links. In the Cost-Sharing Notice, we stated that, while we encourage PCS licensees to relocate an entire microwave system at once -- including non-interfering links outside the PCS licensee's particular service area -- we do not regard this as a requirement under involuntary relocation. With respect to those links that do cause interference, however, PCS licensees must provide incumbents with a seamless transition from the old facilities to the replacement facilities. Thus, it may be both more efficient and more cost- effective in many instances for the parties to relocate all of the links in a system at once, rather than to relocate only a few links and provide the necessary equipment for the microwave incumbent to operate in two different bands simultaneously. 36. Comments. Microwave incumbents strongly oppose the relocation of a single link if the link is part of a larger, multi- link system. They argue that selected link-by-link relocation will destabilize the integrity of microwave systems, reduce manageability, impair throughput, and increase operational costs. Although UTC agrees that a PCS licensee's relocation obligation extends only to those specific microwave paths to which the PCS licensee causes interference, it argues that the obligation to provide a seamless transition may require the PCS licensee to relocate additional links or pay the additional costs associated with integrating replacement links in different bands. By contrast, PCS licensees contend that incumbents' concerns are overstated. PCS PrimeCo, for example, points out that incumbents who are phasing in digital technology are voluntarily converting a few links at a time, which necessarily involves a network comprised of a combination of analog and digital links. 37. Discussion. We affirm our decision in Emerging Technologies docket that PCS licensees are obligated to pay to relocate incumbents to comparable facilities only with respect to the specific microwave links for which their systems pose an interference problem. Thus, we clarify that PCS licensees are not under an obligation to move an incumbent's entire system at once, unless all of the links in the incumbent's system would be subject to interference by the PCS licensee. Although system- wide relocations may be preferable and less disruptive to the incumbent, we conclude that it would be inappropriate to increase a PCS licensee's monetary obligation, e.g., by requiring it to pay to relocate links that it never intended to move, after the licenses have already been auctioned. In fact, several commenters -- particularly those bidding in the C block auction -- have stated in their comments that they are intentionally designing their systems in such a way that existing links will not have to be relocated. Moreover, incumbents are not harmed by this policy because, as PCS licensees point out, many incumbents already operate networks that consist of both 2 GHz and 6 GHz links or a combination of digital and analog technology. Furthermore, our rules protect microwave operations by requiring PCS licensees to provide incumbents with a seamless transition from their old facilities to the replacement facilities. Thus, if providing a seamless transition requires it, PCS licensees must relocate additional links or pay for additional costs associated with integrating the new links into the old system, such as employing a different modulation technique to preserve the system's overall integrity. If problems arise, the PCS licensee is required under our rules to remedy the situation. 38. To ease the burden on incumbents, we have adopted a cost-sharing plan to promote the relocation of all links in a system at the same time, which is discussed in Section IV(B), supra. By enabling PCS licensees to collect reimbursement from subsequent licensees that benefit from the relocation, we believe that our cost-sharing plan will promote a larger number of system-wide relocations. c. Transaction Expenses 39. Background. In the Emerging Technologies docket, we stated on several occasions that emerging technology providers will be required to pay all costs associated with relocation. In the Cost-Sharing Notice, however, we sought comment on whether we should narrow this rule by requiring that reimbursement for relocation costs should be limited to the actual costs associated with providing a replacement system, e.g., equipment and engineering expenses. We proposed to exclude extraneous expenses, such as fees for attorneys and consultants, that are incurred by the incumbent without the advance approval of the PCS relocator. We sought comment on whether such extraneous expenses should be considered "premium payments" that are not reimbursable after the voluntary negotiation period has concluded. 40. Comments. Microwave incumbents argue that they should be reimbursed for all expenses they incur as a result of relocation, and that they should not be required to seek the PCS licensee's prior approval. They contend that the exclusion of such expenses contradicts the principle of full compensation for relocation costs that was adopted in the ET Third Report and Order. According to incumbents, relocation negotiations are highly technical, and the exclusion of such fees would deprive them of the ability to contribute meaningfully and effectively to the negotiation process. In addition, APCO asserts that incumbents, especially public safety licensees with limited budgets, should be entitled to reimbursement for reasonable internal expenses as well. As an example, APCO states that an incumbent may choose to commit the time of its own engineers and attorneys (rather than hiring outside experts) and, in such circumstances, the incumbent should be reimbursed for that overhead, based on standard accounting principles. Nonetheless, some incumbents recognize the potential for abuse if fees for attorneys and consultants are fully reimbursable without limitation. As a way to contain such expenses, CIPCO suggests that we impose a cap, such as $5,000 per link for legal expenses. Cox & Smith suggest that maximum fees could be established based on the number of paths being relocated or on a percentage of the total "hard" costs involved in the relocation (e.g., equipment, new towers, site acquisition). 41. PCS licensees insist that they should not have to pay for attorney and consultant fees incurred by incumbents. They argue that some incumbents are hiring costly consultants in an effort to extract premiums from PCS licensees, and that they should not be required to pay such fees for incumbents that view the relocation process as a profit-making business opportunity. As a solution, Sprint Telecommunications Venture proposes that PCS licensees be responsible for paying only those costs which can be legitimately and reasonably tied to the relocation process. BellSouth suggests that legal and consulting fees be recoverable only if an agreement is reached during the voluntary period, so that incumbents will have an incentive to reach an agreement prior to the mandatory period. 42. Discussion. We conclude that incumbents should be reimbursed only for legitimate and prudent transaction expenses that are directly attributable to an involuntary relocation, subject to a cap of two percent of the "hard" costs involved (e.g., equipment, new towers, site acquisition). Although we proposed in the Cost-Sharing Notice that PCS licensees should not be required to reimburse incumbents for any "extraneous" expenses, such as fees for attorneys and consultants, we are persuaded by commenters that some reimbursement for outside assistance is necessary, because not all incumbents have expertise in these fields within their organizations. We conclude that PCS licensees are not required to pay incumbents for internal resources devoted to the relocation process, however, because such expenses are difficult to determine and would be too hard for a PCS licensee to verify. Moreover, the benefits incumbents receive as a result of relocation, such as superior equipment, are likely to outweigh any internal costs they incur. 43. To prevent abuses, PCS licensees will not be required to reimburse incumbents for transaction costs that exceed two percent of the hard costs associated with an involuntary relocation. Rather than adopt a cap on the dollar amount that can be spent on transaction expenses, we believe that a percentage of the total hard costs, as suggested by Cox & Smith, is more appropriate. Therefore, if complicated and costly actions, such as land acquisition, are required to accomplish relocation, the permissible amount of reimbursement for transaction costs would be higher. We also believe that a two-percent cap is reasonable and strikes a fair balance between the concerns of PCS licensees and microwave incumbents. We derived two percent from CIPCO's suggested cap of $5,000 per link, which is two-percent of $250,000 -- the amount we have determined to be the average cost of relocating a link. Furthermore, PCS licensees will not be required to pay for transaction costs incurred by incumbents during the voluntary or mandatory negotiation periods once an involuntary relocation is initiated, nor will they be required to pay for fees that cannot be legitimately tied to the provision of comparable facilities, such as consultant fees for determining how much of a premium payment PCS licensees would be willing to pay. We agree with PCS licensees that they should not have to reimburse incumbents for such fees, because it would encourage incumbents to view the relocation process as a business opportunity. Furthermore, requiring PCS licensees to pay such fees does not serve the public interest, because added expenses are likely to be passed on to the public in the form of increased PCS subscriber fees. d. Twelve-Month Trial Period 44. Background. Our existing rules provide a twelve-month period for relocated microwave incumbents to ensure that their new facilities are comparable. If the new facility is found not to be comparable during the first twelve months of operation, our rules provide that the PCS licensee must either cure the problem, restore the incumbent to its original frequency, or relocate it to an equivalent 2 GHz frequency. The purpose of the twelve-month trial period is to ensure that microwave incumbents have a full opportunity to operate their new systems under real-world operating conditions and to obtain redress from the PCS licensee if the new system does not perform comparably to the old system or pursuant to agreed-upon terms. In the Cost- Sharing Notice, we proposed to clarify that this period should begin when the incumbent starts using its new system. We also tentatively concluded that the right to a twelve month trial period resides with the incumbent as a function of our relocation rules, regardless of whether the incumbent has previously surrendered its license. If the incumbent has retained its 2 GHz authorization during the twelve-month trial period, however, it should surrender the license at the conclusion of that period. 45. Comments. Most commenters agree with our proposals, but suggest that some rules need further clarification. A number of commenters request that we clarify that the twelve-month trial period only applies if an involuntary relocation occurs and that, during the voluntary period, the parties may agree to any length trial period or none at all. PCIA, UTAM, and others also argue that we should not hold PCS providers responsible for the performance of relocated systems which they did not construct. Some PCS licensees argue that our current rules may unduly delay or inhibit the deployment of PCS and, therefore, suggest rule changes such as (1) reducing the trial period to one month, or (2) clarifying that, if the new facilities are not comparable, the PCS licensee may provide comparable service by some means other than relocation back to 2 GHz spectrum. 46. Microwave incumbents oppose reduction of the twelve-month trial period. They argue that microwave facilities can be affected by both climate and vegetation, so a full year trial period is necessary to determine whether any foliage or weather changes affect the operation of the replacement system. Incumbents also contend that, if a problem arises, the twelve-month trial period should either freeze or begin again after the problem is resolved to ensure that the problem does not arise again. In addition, the Kansas Department of Transportation asks that we clarify whether the PCS licensee is obligated to remedy a problem after the twelve-month period has expired if the problem was reported prior to the end of the twelve-month period. 47. Discussion. As a preliminary matter, we clarify that the twelve-month trial period is only automatic if an involuntary relocation occurs. Therefore, if the parties decide that a trial period should be established for relocations that occur during the voluntary and mandatory period, they must provide for such a period in the relocation contract. 48. Because our proposed clarifications to the twelve-month trial period received broad record support, we adopt the following clarifications to Section 94.59(e) of our rules: (1) the trial period will commence on the date that the incumbent begins full operation (as opposed to testing) on the replacement link; and (2) an incumbent's right to a twelve-month trial period resides with the incumbent as a function of our relocation rules, regardless of whether the incumbent has previously surrendered its license. If, however, a microwave licensee has retained its 2 GHz authorization during the trial period, it is required to return the license to the Commission at the conclusion of that period. We decline to adopt the suggestion that the twelve-month trial period should be extended or begin again if a problem arises. We conclude that incumbents are adequately protected without such an extension because, by the end of the twelve month period, our rules require that they be operating on facilities that are comparable. If at the end of the twelve months the PCS licensee has still failed to meet this requirement, it must relocate the incumbent back to its former or equivalent 2 GHz frequencies. Thus, the expiration of the twelve-month period does not leave the incumbent without further recourse. 49. As a related matter, we clarify that, even after the PCS licensee has initiated the involuntary relocation process, a mutually acceptable agreement will still be permissible. If the parties do sign an agreement specifying their own terms, we will treat the agreement in the same manner as we treat agreements that are consummated during the voluntary and mandatory periods, and the parties will be bound by contract rather than our rules. We agree with commenters that neither incumbents nor PCS licensees are harmed by such a policy, because neither party is obligated to enter into such an agreement. If the agreement falls through, however, the incumbent will be subject to involuntary relocation. 50. Finally, we decline to reduce the trial period to one month as suggested by PCS licensees. We agree with incumbents that twelve months is an appropriate time period, because it gives the incumbent the opportunity to ensure that the facilities function properly during changes in climate and vegetation. We also take this opportunity to clarify that PCS licensees are not required to leave the incumbent's former 2 GHz spectrum vacant during the twelve-month trial period. We agree with PCIA that requiring PCS licensees to hold this spectrum in reserve would delay the deployment of PCS for at least one year, which does not serve the public interest. We also clarify that, if the microwave incumbent demonstrates that the new facilities are not comparable to the former facilities, the PCS licensee must remedy the defects or pay to relocate the microwave licensee to one of the following: its former or equivalent 2 GHz channels, another comparable frequency band, a land-line system, or any other facility that qualifies as comparable. e. Request for Clarification of Involuntary Relocation Procedures 51. Background. In an ex parte letter submitted on April 15, 1996, AT&T Wireless and six other PCS licensees urge the Commission to clarify or amend its rules governing involuntary relocation. These parties contend that "the Commission's procedures are vague with respect to the procedures to be followed at the end of the mandatory negotiation period." They note that under our existing rules, a PCS licensee requesting an incumbent to relocate involuntarily must guarantee payment of relocation costs, complete all activities necessary to place the new facilities into operation, and build and test the replacement system. They further note, however, that the rules do not specify whether the parties must agree on relocation costs, what constitutes an adequate relocation system, or the time frame in which relocation is to occur. AT&T Wireless, et al., express concern that the lack of specific procedures for involuntary relocation may create incentives for microwave incumbents to prolong negotiations beyond the expiration of the mandatory negotiation period and cause further delays in the relocation process. Therefore, AT&T Wireless, et al., request that the Commission either (1) require microwave incumbents to vacate their 2 GHz frequencies by the end of the mandatory negotiation period, or (2) automatically convert microwave licenses to secondary status immediately upon expiration of the mandatory negotiation period. 52. Discussion. We believe that AT&T Wireless, et al., have raised legitimate issues regarding the procedures for implementing involuntary relocation at the conclusion of the mandatory negotiation period. The issues raised in their letter, however, were not included in the Cost-Sharing Notice, nor were they raised in any of the regularly filed comments or reply comments in this proceeding. Because of the relative lateness of the parties' ex parte filing and the lack of opportunity for other parties to comment, we decline to address these issues at this time. Nevertheless, we encourage the parties to the April 15 letter or any other interested parties to file a petition for rulemaking on the issues raised in the letter. 4. Public Safety Certification 53. Background. In the ET Third Report and Order, we concluded that a select group of public agencies should qualify for extended voluntary and mandatory negotiation periods under our rules. Section 94.59 of our rules limits the privilege of extended negotiation periods to the following licensees: Part 94 facilities currently licensed on a primary basis under the eligibility requirements of Section 90.19, Police Radio Service; Section 90.21, Fire Radio Service; Section 90.27, Emergency Medical Radio Services; and Subpart C of Part 90, Special Emergency Radio Services, provided that the majority of communications carried on those facilities are used for police, fire, or emergency medical services operations involving safety of life and property. Licensees of other Part 94 facilities licensed on a primary basis under the eligibility requirements of Part 90, Subparts B and C, are permitted to request similar treatment upon demonstrating that the majority of the communications carried on those facilities are used for operations involving safety of life and property. 54. PCIA requested that we allow PCS licensees access to information essential to confirm that a microwave licensee qualifies for the extended transition period reserved for emergency public safety uses. In the Cost-Sharing Notice, we agreed with PCIA that PCS licensees should have a readily available means of confirming a microwave licensee's public safety status for purposes of our relocation rules. We proposed that the public safety licensee should be required to establish: (1) that it qualifies as a service listed in Section 94.59(f) of our rules (see classifications listed in previous paragraph), (2) that it is a licensee in one or more of these services, and (3) that the majority of communications carried on the facilities involve safety of life and property. We also proposed that the public safety licensee should be required to provide such documentation to the PCS licensee promptly upon request. If the incumbent failed to provide the PCS licensee with the requisite documentation, we proposed that the PCS licensee would be permitted to presume that special treatment is inapplicable to the incumbent. 55. Comments. APCO, which represents numerous public safety incumbents, argues that PCS licensees should not be allowed to force government agencies to meet burdensome reporting requirements regarding the nature of their communications traffic. The City of San Diego further states that our proposal is unworkable, because there is no objective, quantitative measure for making a satisfactory public safety demonstration. To address these concerns, the City of San Diego suggests that we should allow public safety entities to self-certify that they meet the appropriate criteria. PacBell urges us to reject the self-certification method, however, because it contends that self-certification places the determination in the hands of a party that is biased in favor of claiming public safety status. PacBell suggests that a public safety licensee's capacity should be determined by the initial channel loading contained in the incumbent's Form 402 application, and that the incumbent should only qualify for extended relocation if over half of those channels carry communications involving the safety of life or property. AT&T proposes that we require public safety licensees to petition the Commission immediately to obtain public safety status, and that the public safety licensee be required to certify to the PCS licensee that it has obtained such status as soon as the petition is granted. As a related matter, PCIA argues that, in addition to requiring appropriate documentation, the Commission should narrow the definition of public safety by requiring those incumbents seeking longer negotiation periods to establish that substantially all -- rather than a majority -- of the communications carried on their facilities involve safety of life and property. PCIA claims that narrowing the definition even further is appropriate because the extended relocation periods can delay the deployment of PCS. 56. Discussion. We agree with PCS licensees that certification is necessary to ensure that only those public safety incumbents meriting special status are allowed the advantages of extended negotiation periods. We also agree with incumbents, however, that self-certification is appropriate, because self-certification will not burden public agencies with time-consuming reporting requirements. We decline to adopt the suggestion made by AT&T that all public safety incumbents should be required to apply to the Commission for certification, because such a requirement would be administratively burdensome for the Commission and could delay negotiations. Furthermore, we believe that PacBell's concerns about biased public agencies are overstated, because we do not believe public agencies will be inclined to falsify the certification. 57. We conclude that, in order for a public safety licensee to qualify for extended negotiation periods under our rules, the department head responsible for system oversight must certify to the PCS licensee requesting relocation that: (1) the agency is a licensee in the Police Radio, Fire Radio, Emergency Medical, Special Emergency Radio Services, or that it is a licensee of other Part 94 facilities licensed on a primary basis under the eligibility requirements of Part 90, Subparts B and C; and (2) the majority of communications carried on the facilities at issue involve safety of life and property. A public safety licensee must provide certification within 30 days of a request from a PCS licensee or the PCS licensee may presume that special treatment is inapplicable to the incumbent. If an incumbent falsely certifies to a PCS licensee that it qualifies for the extended time periods, the incumbent will be in violation of our rules and subject to appropriate penalties. Such an incumbent would also immediately become subject to the non-public safety time periods. 5. Dispute Resolution 58. Because relocations that occur pursuant to agreements arrived at during the voluntary and mandatory period are relocations pursuant to private contracts, we anticipate that parties will pursue common law contract remedies if a dispute arises. Thus, if parties do not agree to use alternative dispute resolution techniques, we expect that they will file suit in a court of competent jurisdiction. 59. To the extent that disputes arise over violation of the Commission's rules (e.g., the good faith requirement, involuntary relocation procedures), we have stated that parties are encouraged to use ADR techniques. Commenters agree that resolution of such disputes entirely by our adjudication processes would be time consuming and costly to all parties. Therefore, we continue to encourage parties to employ ADR techniques when disputes arise. 6. Ten Year Sunset 60. Background. In the initial Notice of Proposed Rule Making in the Emerging Technologies docket, adopted on January 16, 1992, we proposed to allow unrelocated microwave incumbents to continue to occupy their 2 GHz frequency for a fixed period of time -- possibly 10-15 years -- at which time they would be converted to secondary status. We suggested a 10-15 year time frame, because we estimated that most 2 GHz equipment would be completely amortized or need replacement by the time the period expired. In the ET Third Report and Order, we decided not to make incumbent facilities secondary on a fixed date, but we reserved the option of revisiting the issue in the future. 61. In the Cost-Sharing Notice, we sought comment on whether we should place some time limit on a PCS licensee's obligation to provide comparable facilities. As an example, we cited to our decision in GEN Docket 82-334, which gave private operational fixed microwave stations in the 12 GHz band five years to relocate their facilities, after which time they became secondary to the Direct Broadcast Satellite ("DBS") Service. In the Cost-Sharing Notice, we tentatively concluded that microwave incumbents should not retain primary status indefinitely on spectrum licensed for PCS and, therefore, microwave incumbents that are still operating in the 1850-1990 MHz band on April 4, 2005, should be made secondary on that date. 62. Comments. We received a considerable number of comments on this issue, particularly from incumbents with microwave links in rural areas. They argue, inter alia, that such a policy will encourage PCS licensees to "wait out" incumbents, and will increase the likelihood that incumbents will have to assume the costs of their own relocation. Many incumbents point out that the deployment of PCS is likely to be delayed in rural areas and, therefore, the sunset date is likely to penalize those entities with extensive rural networks. APCO also argues that some incumbents (including public safety licensees) may still be operating links in urban areas after 2005, because 6 GHz and other replacement bands may not be able to accommodate all of the current 2 GHz licensees. Moreover, incumbents contend that such a policy is not "spectrum efficient," because microwave incumbents might be forced to vacate frequencies that PCS licensees may never need or use. As an alternative, incumbents suggest that, if clearing the band is a priority, the Commission should modify its proposal by imposing a requirement that all 2 GHz licensees must offer to relocate all incumbents in their frequency block before the year 2005. Assuming that we adopt such a sunset, UTC points out that the 2005 date unfairly impacts those incumbents in the C, D, E, and F bands, which have not yet been licensed for PCS, because those incumbents will have less than ten years to negotiate or plan for relocation. 63. One microwave incumbent, CIPCO, agrees that a ten-year period is adequate to complete relocation from 2 GHz. CIPCO submits that, even if all paths are not relocated by that time, it should be able to determine potential exposure and schedule any necessary non-reimbursed relocations. Furthermore, CIPCO anticipates that, given the rural nature of its service territory, it will be able to operate some paths on a secondary basis indefinitely. 64. PCS licensees support our proposal to convert the remaining incumbents operating in the 2 GHz band to secondary status in the year 2005. BellSouth argues that microwave incumbents would not be harmed significantly by such a conversion, because their equipment should be fully amortized by the year 2005. UTAM also supports our proposal, arguing (1) that the entire unlicensed spectrum band must be cleared of all microwave incumbents in order to have full deployment of unlicensed PCS devices -- particularly nomadic devices, and (2) that ten years is ample time for necessary relocations to take place. Other PCS licensees agree with the ten-year time period, but assert that incumbents should be converted to secondary status sooner if no agreement is reached by the end of the mandatory negotiation period, or if the incumbent negotiates in bad faith. 65. Discussion. As we stated in the Cost-Sharing Notice, we continue to believe that an emerging technology licensee's obligation to relocate 2 GHz microwave incumbents should not continue indefinitely; however, we are also persuaded by incumbents that immediate conversion to secondary status in the year 2005 may not be necessary, especially with respect to rural links that would not interfere with any PCS systems. To strike a fair balance between these competing interests, we conclude that 2 GHz microwave incumbents will retain primary status unless and until an emerging technology licensee requires use of the spectrum, but that the emerging technology licensee will not be obligated to pay relocation costs after the relocation rules sunset, i.e., ten years after the voluntary period begins for the first emerging technology licensees in the service (which is April 4, 2005, for PCS licensees and unlicensed PCS). Once the relocation rules sunset, an emerging technology licensee may require the incumbent to either cease operations or pay to relocate itself to alternate facilities, provided that the emerging technology licensee intends to turn on a system within interference range of the incumbent, as determined by TIA Bulletin 10-F or any standard successor thereto. Notification must be in writing, and the emerging technology licensee must provide the incumbent with no less than six months to vacate the spectrum. After the six-month notice period has expired, the incumbent will be required to turn its 2 GHz license back into the Commission, unless the parties have entered into an agreement which allows the incumbent to continue to operate on a mutually agreed upon basis. We conclude that our decision promotes spectrum efficiency, because it allows microwave incumbents to continue to operate in the 2 GHz band until their spectrum is needed by an emerging technology licensee. 66. We believe that a sunset date for our microwave relocation rules serves the public interest, because it provides certainty to the process and prevents the emerging technology licensee from being required to pay for relocation expenses indefinitely. Moreover, we agree with commenters that ten years provides incumbents with sufficient time (1) to negotiate a relocation agreement or (2) to plan for relocation themselves. In fact, well over ten years will have passed since we first announced our intention to reallocate 2 GHz spectrum to foster the introduction of emerging technologies services in 1992. In other services, we have provided incumbents with even less time to complete relocation. For example, private operational fixed microwave stations in the 12 GHz band received only five years to relocate their facilities before they became secondary to the Direct Broadcast Satellite ("DBS") Service. 67. We also believe that adopting a sunset date is important, because it will provide 2 GHz microwave incumbents with an incentive to relocate to other bands when it comes time to change or replace their equipment. At the current time, our licensing records indicate that most 2 GHz microwave incumbents use analog equipment. APCO contends that operating 2 GHz analog microwave systems is becoming infeasible, because analog systems are now outdated and replacement parts will soon be difficult, if not impossible, to find. APCO also states that most incumbents have long-term plans to replace their analog systems with digital systems once the useful life of current equipment has expired and/or adequate funding has been found. As BellSouth points out, by the time the sunset date arrives, much of the microwave equipment operating today at 2 GHz is likely to be either fully amortized or in need of replacement. We believe that informing 2 GHz incumbents that they will have to cover their own relocation expenses after ten years will encourage incumbents to relocate to another band when they replace existing equipment. By contrast, if emerging technology licensees are required to pay to relocate incumbents regardless of when the relocation occurs, incumbents will have little incentive to make such a transition to an alternate band voluntarily. For similar reasons, we reject the argument by incumbents that PCS licensees should be required to make relocation offers prior to the sunset date to all incumbents located within their market area. Again, incumbents would have no incentive to change out their own systems voluntarily if they knew that PCS licensees would be required to cover the expenses for them at a later date. Furthermore, even if we had not reallocated the spectrum, these incumbents would have had to plan ahead for repair costs, replacement equipment, and infrastructure improvement. Given that most incumbents will incur significant expenses in any event when they replace their analog system with digital equipment, we believe that providing an incentive to incumbents to relocate voluntarily at the same time they purchase new equipment serves the public interest. In sum, we believe that the benefits of imposing a sunset date outweigh the burdens, if any, that such a date may impose. 68. Finally, we believe that six months is a reasonable amount of time for most incumbents to relocate their facilities, especially because they will have been on notice for ten years that they might be requested to move. Nevertheless, we acknowledge that special circumstances might warrant an extension of the six-month period in some instances to enable the incumbent to complete relocation activities. If the incumbent is unable to move or cannot complete relocation in time, we encourage the parties to negotiate a mutually acceptable solution. In the event that the parties cannot agree on a schedule or an alternative arrangement, we will entertain extension requests on a case-by-case basis. However, we intend to grant such extensions only if the incumbent can demonstrate that: (1) it cannot relocate within the six-month period (e.g., because no alternative spectrum or other reasonable option is available), and (2) the public interest would be harmed if the incumbent is forced to terminate operations (e.g., if public safety communications services would be disrupted). B. Cost-Sharing Plan 1. Overview 69. Background. In the Cost-Sharing Notice, we proposed a cost-sharing plan that would allow PCS licensees that relocate microwave links outside their license areas to receive reimbursement from later-entrant PCS licensees that benefit from the clearing of their spectrum. Under the proposal, PCS licensees would receive "reimbursement rights" once they sign a relocation agreement with a microwave incumbent. Subsequent PCS licensees that would have caused harmful interference to relocated links would be required to reimburse the holder of the reimbursement rights for a pro rata share of the actual cost of relocating microwave facilities. The pro rata share that each new PCS provider pays would be calculated according to a cost- sharing formula that considers, among other things, the date that the PCS licensee begins service, the amount paid to relocate the link, and the number of licensees that have previously contributed to paying the relocation cost of the link. We also proposed that a non-profit clearinghouse be established to administer the cost-sharing plan. 70. Comments. Most commenters, including microwave incumbents, A and B block PCS licensees, and potential bidders in future PCS auctions, generally support our proposed cost-sharing plan, although each group suggested minor modifications. A and B block PCS licensees ask, among other things, that we clarify that private cost-sharing agreements unrelated to the plan adopted by the Commission are permissible. Microwave incumbents request permission to be included in the cost-sharing plan in order to collect reimbursement from subsequent PCS licensees if they choose to relocate their own links. A few potential bidders for future PCS licenses argue that the benefit of being first in the marketplace far outweighs the burden of bearing the costs of relocation, and that such costs should not be passed on to subsequent licensees. 71. Discussion. We adopt our proposed plan with a few modifications suggested by commenters. We believe that cost- sharing serves the public interest because (1) it will distribute relocation costs more equitably among PCS licensees, and (2) it will promote the relocation of entire microwave systems at once, which will benefit microwave incumbents. We also believe that cost-sharing will accelerate the relocation process for the PCS band as a whole, thus promoting more rapid deployment of service to the public. Furthermore, we conclude that the benefits of cost-sharing outweigh the costs that may be incurred by licensees who become subject to reimbursement obligations. Under the plan, these licensees will be required to pay reimbursement obligations only when they have benefitted from the spectrum-clearing efforts of another party. Moreover, as discussed in greater detail below, we are adopting limits on reimbursement to ensure that licensees subject to the plan do not bear a disproportionate cost. We conclude that these provisions amply protect the interests of such licensees. 72. Under our cost-sharing plan, a PCS licensee obtains reimbursement rights for a particular link on the date that it signs a relocation agreement with the microwave incumbent operating on the link at issue. Within ten business days of the date the agreement is signed, the PCS licensee submits documentation of the agreement to a non-profit clearinghouse, which will be selected by the Wireless Telecommunications Bureau ("Bureau") as discussed in Section IV(B)(3), infra. If the clearinghouse has not yet been selected, the PCS relocator will be responsible for submitting documentation of a relocation agreement within ten business days of the date that the Bureau announces that the clearinghouse has been established and has begun operation. 73. Prior to commencing commercial operation, each PCS licensee is required to send a prior coordination notification ("PCN") to all existing users in the area. At the same time, each PCS licensee shall file a copy of the PCN with the clearinghouse. The clearinghouse will then apply an objective test to determine whether the proposed base station would have posed an interference problem to the relocated link. If the test shows that the proposed base station is close enough to have posed an interference problem, the clearinghouse will notify the subsequent licensee that it is required to reimburse the PCS relocator under the cost-sharing formula for a portion of the expenses the relocator incurred to move the link. UTAM will be required to reimburse PCS relocators who relocate microwave links that were operating in the unlicensed PCS band. 74. The clearinghouse will determine the amount that the subsequent PCS licensee must pay the relocator through the use of a cost-sharing formula. The formula takes into consideration such factors as the actual amount paid to relocate the link and the number of PCS licensees that would have interfered with the link. All calculations will be done an a per-link basis. The reimbursement amount also decreases over time to reflect the fact that the initial PCS relocator has received the benefit of being first to market, and to ensure that the PCS relocator pays the largest amount, which we believe will provide an incentive to the relocator to limit relocation expenses. As an additional protection for later-entrants, we have imposed a cap of $250,000 per link, with an additional $150,000 if a new or modified tower is required, on the amount that a PCS relocator may recoup for the relocation of each individual microwave link. PCS relocators are entitled to full reimbursement, up to the cap, for relocating non- interfering links fully outside their market area or licensed frequency band. Also, costs that are incurred prior to the selection of a clearinghouse will be reimbursable after a clearinghouse is established. 75. Once a PCS licensee receives written notification from the clearinghouse of its reimbursement obligation, it must pay the entire amount owed within thirty days, with the exception of those small businesses that qualify for installment payments under our auction rules. UTAM will be required to reimburse a PCS relocator once a county is cleared of enough microwave links to enable unlicensed PCS devices to operate. Because UTAM receives its funding in small increments over an extended period of time, UTAM will be permitted to satisfy its reimbursement obligation by making quarterly installment payments to the PCS relocator over a period of five years, at an interest rate of prime plus three percent. The following time line provides an overview of the cost-sharing process: 76. A detailed discussion of the mechanics of our cost-sharing plan is attached as Appendix A, which is incorporated by reference into this First Report & Order. The cost-sharing plan will sunset for all PCS licensees ten years after the date that voluntary negotiations commenced for A and B block licensees, on April 4, 2005. However, the sunset date will not eliminate the existing obligations of PCS licensees that are paying their portion of relocation costs on an installment basis. Those licensees must continue their payments until the obligation is satisfied. Finally, while we conclude that the cost-sharing plan is in the public interest, we are conditioning our adoption of these rules on a approval of an entity or organization to administer the plan, as discussed further in Section IV(B)(3), infra. Once an administrator is selected, the cost-sharing rules will take effect. 77. Participation in Cost-Sharing Plan. By this Report and Order, we mandate that all PCS licensees benefitting from spectrum clearance by other PCS licensees must contribute to such relocation costs. As we emphasized in the Cost-Sharing Notice, however, PCS licensees remain free to negotiate alternative cost-sharing terms. We also agree with commenters that allowing PCS licensees to enter into such private agreements serves the public interest, because it adds flexibility to the cost- sharing process and may enable such parties to save both time and the administrative expense of seeking reimbursement from a clearinghouse. We therefore conclude that licensees are not required to participate in our cost-sharing plan if they enter into alternative cost-sharing agreements. We also agree with commenters that all parties to a separate agreement will still be liable under the cost-sharing plan to other PCS licensees that incur relocation expenses. Finally, we conclude that parties to a private cost-sharing agreement may also seek reimbursement through the clearinghouse from PCS licensees that are not parties to the agreement. 2. Dispute Resolution Under the Cost-Sharing Plan 78. Background. In the Cost-Sharing Notice, we proposed that disputes arising out of the cost-sharing plan should be brought, in the first instance, to the clearinghouse for resolution. To the extent that disputes cannot be resolved by the clearinghouse, we stated that parties should be encouraged to use ADR procedures, such as binding arbitration, mediation, or other ADR techniques. We also asked whether parties should be required to submit independent appraisals of the incumbent's system to the clearinghouse at the time such disputes are brought to the clearinghouse for resolution. Finally, we sought comment on the appropriate penalty for failure to comply with cost-sharing obligations. 79. Comments. Commenters offer different views concerning the appropriate method of dispute resolution. Some licensees believe that the clearinghouse should resolve disputes to the extent possible and, if the dispute cannot be resolved, ADR should be required. However, BellSouth disagrees that the clearinghouse should be required to attempt to resolve disputes and argues instead that all disputes should proceed immediately to ADR. US Airwaves believes that dispute resolution should be flexible: first, use of the clearinghouse should be required, then use of ADR, and finally use of the court system. Also, US Airwaves argues that failure to comply with cost-sharing obligations should not be considered by the Commission when deciding renewal and/or transfer and assignment cases. 80. Discussion. We agree with those commenters who argue that disputes arising out of the cost-sharing plan, such as disputes over the amount of reimbursement required, should be brought to the clearinghouse first for resolution. At the time the dispute is brought to the clearinghouse, the parties will be required to submit appropriate documentation, e.g., an independent appraisal of the equipment expenses at issue, to support their position. To the extent that disputes cannot be resolved by the clearinghouse, we encourage parties to use expedited ADR procedures, such as binding arbitration, mediation, or other ADR techniques. At this time, we do not designate a specific penalty for failure to comply with cost-sharing requirements; however, we emphasize that we intend to use the full realm of enforcement mechanisms available to us in order to ensure that reimbursement obligations are satisfied. 3. Administration of the Cost-Sharing Plan 81. Background. In our proposal, we recommended that an industry-supported clearinghouse be established to administer the cost-sharing proposal. The clearinghouse would maintain all of the cost and payment records related to the relocation of each link and would determine the cost-sharing obligation of subsequent PCS licensees. We sought comment on such issues as how the clearinghouse should be funded and whether records should be kept confidential. 82. Comments. A number of microwave incumbents support the establishment of a non-profit clearinghouse, but voice concerns about the confidentiality of the information filed with the clearinghouse. AAR believes that all microwave incumbents should be allowed to inspect and verify information pertaining to their systems, but SoCal argues that unless strict limitations are placed on access to the information filed with the clearinghouse, the confidentiality of PCS relocation agreements will be breached. AAR suggests that initial rules concerning the clearinghouse should be established in an open process, which incorporates the comments and balances the needs of all interested parties. PCS licensees also generally support the concept of an industry-supported clearinghouse. BellSouth recommends that the organization selected as clearinghouse should present a viable business plan for equitably securing start-up expenses and on-going funding, that it should have demonstrable experience with spectrum management, and that it should be fully operational 90 days from the date of selection. Sprint agrees with the concept of a clearinghouse, provided that the entity does not make any engineering decisions and serves only an administrative function. Some commenters suggest that PCS licensees with private agreements should not be required to fund the clearinghouse's activities, except to the extent that they use the clearinghouse to obtain reimbursement from licensees that are not parties to the private agreement. 83. On September 6, 1995, PCIA first stated its desire to serve as the clearinghouse administrator, a desire which it reiterated in comments filed on November 30, 1995. PCIA states that it has the necessary qualifications and resources, and that it has extensively explored the structure and functions of the clearinghouse. Chester Telephone, et al., PacBell, and Sprint support designation of PCIA as the clearinghouse. UTC opposes PCIA as the clearinghouse, stating that a PCS trade industry association is not a neutral third party. In an ex parte presentation, filed April 18, 1996, ITA states that it also stands willing and able to serve as the designated clearinghouse administrator. ITA urges the Commission to solicit proposals from all entities having an interest in serving as the clearinghouse administrator, which would provide organizations with the opportunity to propose innovative procedures and safeguards that would promote the reimbursement process. 84. Discussion. We agree with those commenters who suggest that the clearinghouse administrator should be selected through an open process. We also believe it is essential for the plan to be administered by industry to the fullest extent possible. Therefore, before we implement the plan, we will seek specific proposals from parties who wish to act as administrator and will request public comment on any such proposals. 85. We delegate to the Wireless Bureau the authority to select one or more entities to create and administer a neutral, not- for-profit clearinghouse. Selection shall be based on criteria established by the Bureau. The Bureau shall publicly announce the criteria and solicit proposals from qualified parties. Once such proposals have been received, and an opportunity has elapsed for public comment on them, the Bureau shall make its selection. When the Bureau selects an administrator, it shall announce the effective date of the cost-sharing rules. C. Licensing Issues 86. Background. In the Cost-Sharing Notice, we stated that allowing additional primary site grants in the 2 GHz band now that relocation negotiations are ongoing will unnecessarily impede negotiations and may add to the relocation obligations of PCS licensees. Nevertheless, we recognized that some minor technical changes to existing microwave facilities may be necessary for incumbents' continued operations. We also stated that we do not believe that these minor technical modifications will significantly increase the cost to a PCS licensee of relocating a particular link. Thus, while the rulemaking proceeding was pending, we continued to accept applications for primary status; however, we processed only minor modifications that would not add to the relocation costs of PCS licensees. Specifically, we granted primary status for the following limited number of minor technical changes: decreases in power, minor changes in antenna height, minor coordinate corrections (up to two seconds), reductions in authorized bandwidths, minor changes in structure heights, changes in ground elevation (but preserving centerline height), and changes in equipment. Any other modifications were permitted only on a secondary basis, unless (1) a special showing of need justified primary status, and (2) the incumbent was able to establish that the modification would not add to the relocation costs of PCS licensees. In addition, we stated that we would carefully scrutinize any applications for transfer of control or assignment to establish that our microwave relocation procedures are not being abused, and that the public interest would be served by the grant. 87. Comments. PCS licensees generally agree with our licensing policy, although some continue to argue that we should not grant any more 2 GHz licenses to incumbents either on a primary or a secondary basis. By contrast, microwave incumbents argue that our licensing policy is too restrictive, and that all modifications that do not add to the relocation costs of PCS licensees should receive primary status. Commenters also request clarification regarding how licenses with secondary status will be treated for purposes of relocation. PacBell suggests that we establish a procedure for dealing with secondary microwave incumbents who fail to cease operations on their secondary links at the appropriate time. 88. Discussion. As of the effective date of the new rules, we will grant pending and newly filed applications for all major modifications and all extensions to existing 2 GHz microwave systems on a secondary basis. We will grant primary status for the following limited number of technical changes: decreases in power, minor changes in antenna height, minor location changes (up to two seconds), any data correction which does not involve a change in the location of an existing facility, reductions in authorized bandwidths, minor changes in structure heights, changes in ground elevation (but preserving centerline height), and changes in equipment. All other modifications will be permitted on a secondary basis, unless (1) the incumbent affirmatively justifies primary status, and (2) the incumbent establishes that the modification would not add to the relocation costs of PCS licensees. We decline to adopt the suggestion made by PCS licensees that no modifications should be allowed even on a secondary basis, because some incumbents might not need to relocate for several years, and they should be permitted to make modifications to their systems during that time period. We also disagree with incumbents that our licensing policy should be expanded, because we believe that limiting primary site grants is necessary to protect the interests of PCS licensees. In sum, we believe that granting secondary site authorizations serves the public interest, because it balances existing licensees' need to expand their systems with the goal of minimizing the number of microwave links that PCS licensees must relocate. 89. Furthermore, we clarify that secondary operations may not cause interference to operations authorized on a primary basis, and they are not protected from interference from primary operations. Thus, an incumbent operating under a secondary authorization must cease operations if it poses an interference problem to a PCS licensee. However, prior to commencing operations, PCS licensees are obligated to provide all incumbents that are operating within interference range, regardless of whether an incumbent is operating under a primary or a secondary site authorization, with thirty days notice that they will be commencing operations in the vicinity. Finally, PCS licensees are under no obligation to pay to relocate secondary links that exist within their market area and frequency block. D. Application to Other Emerging Technology Licensees 90. Background. The microwave relocation rules that we adopted in the Emerging Technologies proceeding apply to all emerging technologies services. In the Cost-Sharing Notice, we requested comment on whether the changes and clarifications we proposed should also apply to all emerging technology services, including non-PCS services (e.g., 2110-2150 and 2160-2200 GHz) that have not yet been licensed. 91. Comments. AT&T contends that the rules that we adopt in this proceeding should also apply to other emerging technology licensees, even though the services in the 2110-2.150 and 2160-2200 GHz have not yet been licensed. Other commenters argue that each service should have a service-specific rulemaking proceeding to take into account the unique technical, financial, and other considerations presented by each service. 92. Discussion. We agree with AT&T that the cost-sharing plan and rule clarifications adopted in this proceeding should apply to all emerging technology services, including those services in the 2110-2150 and 2160-2200 GHz band that have not yet been licensed, because the microwave relocation rules already apply to all emerging technology services. For the same reasons that these changes will facilitate the deployment of PCS, we believe these changes will also facilitate the deployment of other emerging technology services. For example, these changes and clarifications will provide additional guidance and help to accelerate negotiations between the parties. However, as new services develop, we may review our relocation rules and make modifications to these rules where appropriate. In addition, while we conclude that cost-sharing should apply to all emerging technology services, we do not adopt specific cost-sharing rules for new services at this time, but will develop such rules in future proceedings. V. FURTHER NOTICE OF PROPOSED RULE MAKING 93. In this Further Notice of Proposed Rule Making, we seek comment on whether to shorten the voluntary negotiation period and lengthen the mandatory negotiation period for the D, E, and F blocks. We also seek comment on whether the negotiation periods for the C block should be subject to the same adjustment. Finally, we propose that microwave incumbents be permitted to relocate some of their own links and obtain reimbursement rights pursuant to the cost-sharing plan adopted in the First Report and Order. A. Voluntary and Mandatory Negotiation Periods For C, D, E, and F Blocks 94. Background. As noted in Section IV(A)(1), supra, many PCS licensees have urged the Commission to shorten or eliminate the voluntary negotiation period. In the First Report and Order, we decline to alter the negotiation timetable currently applicable to the A and B Block licensees, because these licensees were on notice of the current rules when they bid for their licenses, and because negotiations between microwave incumbents and A and B block licensees are ongoing. 95. Discussion. We agree with commenters, however, that changing the negotiation timetable for PCS blocks other than the A and B blocks may not raise the same concerns. In the case of the D, E, and F blocks, bidding has not commenced and there are no ongoing negotiations between PCS licensees and incumbents. Therefore, we believe it is appropriate to consider whether the relocation process in these blocks would benefit from adjusting the negotiation periods. Specifically, we seek comment on whether to adjust the negotiation periods for the D, E, and F blocks by shortening the voluntary negotiation period by one year and lengthening the mandatory period by one year. Under this approach, non-public safety incumbents would have a one-year negotiation period instead of the two-year negotiation period provided under current rules, and the mandatory negotiation period would be lengthened from one to two years. Similarly, public safety incumbents would have a two-year voluntary negotiation period instead of a three-years period, and a three-year mandatory negotiation period instead of a two-year period . 96. This approach could potentially accelerate the development of PCS in the D, E, and F blocks by speeding up the negotiation process and creating additional incentives for incumbents to enter into early agreements. At the same time, while incumbents would be required to commence mandatory negotiations sooner than under the existing rules, they would have the same total amount of time for negotiations provided under the existing rules before they become subject to involuntary relocation. We seek comment on whether this adjustment would effectively balance the interests of PCS licensees in bringing service to the public quickly and the interest of microwave incumbents in making a smooth transition to relocated facilities. 97. Finally, we seek comment on whether to make the same changes discussed above to the voluntary and mandatory negotiation periods applicable to C block. We note that C block is in a different posture from the D, E, and F blocks because the C block auction is ongoing and possibly near conclusion, and bidding has been based on the current rules. At the same time, the voluntary negotiation period for C block has not yet commenced, so unlike A and B blocks, there are no ongoing negotiations currently taking place in reliance on the current rules. We seek comment on whether shortening the voluntary period and lengthening the mandatory negotiation period for C block would facilitate the development of PCS in this band and what effect it would have on negotiations between C block licensees and microwave incumbents. B. Microwave Incumbent Participation in Cost-Sharing Plan 98. Background. Several commenters to our Cost-Sharing Notice suggest that microwave incumbents who relocate links themselves should be permitted to collect reimbursement in accordance with our cost-sharing plan. They argue that microwave incumbents may wish to pay to relocate some of their own links so that they can relocate their entire system at once, instead of waiting for PCS licensees to relocate links one at a time as the need arises. Thus, commenters urge the Commission to allow microwave incumbents to participate in the cost-sharing plan and obtain the reimbursement rights for their respective links. 99. Discussion. We tentatively conclude that microwave incumbents that relocate themselves should be allowed to obtain reimbursement rights and collect reimbursement under the cost-sharing plan from later-entrant PCS licensees that would have interfered with the relocated link. We agree with incumbents that allowing incumbent participation might facilitate system-wide relocations and could potentially expedite the deployment of PCS. We are concerned, however, about what the incentive would be for an incumbent to minimize costs, if the incumbent knows in advance that it may be able to recover some of its expenses from PCS licensees. We seek comment, therefore, on how subsequent PCS licensees could be protected from being required to pay a larger amount to an incumbent that relocates itself than to another PCS licensee who has an incentive to minimize expenses. In addition, we also question whether a large number of incumbents would avail themselves of such an option, given that our rules require PCS licensees to pay for the entire cost of providing incumbents with comparable facilities. Assuming we allow incumbent participation, we seek comment on whether, for purposes of the cost-sharing formula, we should treat incumbents as if they were the initial PCS relocator. VI. CONCLUSION 100. We believe that the rules adopted in this Report and Order and Further Notice of Proposed Rule Making will promote the public policy goals set forth by Congress. The cost-sharing formula adopted herein will facilitate the rapid relocation of microwave facilities operating in the 2 GHz band, and will allow PCS licensees to offer service to the public in an expeditious manner. VII. PROCEDURAL MATTERS A. Regulatory Flexibility Act 101. As required by Section 603 of the Regulatory Flexibility Act, an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Notice of Proposed Rule Making in WT Docket No. 95-157, RM-8643. The Commission has prepared a Regulatory Flexibility Analysis of the expected impact on small entities of the proposals suggested in this document. Written comments were requested. The Commission's final analysis is as follows: 102. Need for and purpose of the action: This rulemaking proceeding has implemented Congress' goal of encouraging emerging technologies and bringing innovative commercial wireless services to the public in an efficient manner. The cost- sharing plan will promote the efficient relocation of microwave licensees by encouraging PCS licensees to relocate entire microwave systems rather than individual microwave links. A cost-sharing plan is necessary to enhance the speed of relocation and provide an incentive to PCS licensees to negotiate system-wide relocation agreements with microwave incumbents. This action will result in faster deployment of PCS and delivery of service to the public. We have also clarified some terminology regarding certain aspects of the Commission's rules for microwave relocation contained in the Commission's Emerging Technologies proceeding, Docket No. 92-9. 103. Issues raised in response to the IRFA: The American Public Power Association ("APPA") states that conversion of 2 GHz microwave systems to secondary status in the year 2005 would have a particularly severe impact on the limited budgets of small, non-profit public utility systems. 104. Significant alternatives considered and rejected: Although we have decided not to convert microwave incumbents to secondary status automatically as we proposed in the Cost-Sharing Notice, they will be required to pay for their own relocation costs after the sunset date. We have considered the impact of the ten year sunset date, and we have determined that the benefits of imposing a sunset date outweigh the burdens such a date may impose on these incumbents. For further discussion, see Section IV(A)(6), supra. 105. With respect to this Further Notice of Proposed Rule Making, an Initial Regulatory Flexibility Analysis is contained in Appendix D. As required by Section 603 of the Regulatory Flexibility Act, the Commission has prepared an IRFA of the expected impact on small entities of the proposals suggested in this document. Written public comments are requested on the IRFA. These comments must be filed in accordance with the same filing deadlines as comments on the rest of the Further Notice, but they must have a separate and distinct heading designating them as responses to the Initial Regulatory Flexibility Analysis. The Secretary shall send a copy of this Further Notice, including the IRFA, to the Chief Counsel for Advocacy of the Small Business Administration in accordance with paragraph 603(a) of the Regulatory Flexibility Act. B. Ex Parte Rules - Non-Restricted Proceeding 106. This is a non-restricted notice and comment rulemaking proceeding. Ex parte presentations are permitted except during the Sunshine Agenda period, provided they are disclosed as provided in Commission rules. C. Comment Period 107. Pursuant to applicable procedures set forth in Sections 1.415 and 1.419 of the Commission's rules, interested parties may file comments on or before May 28, 1996, and reply comments on or before June 7, 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 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 Reference Center of the Federal Communications Commission, Room 239, 1919 M Street, N.W., Washington, D.C. 20554. A copy of all comments should also be filed with the Commission's copy contractor, ITS, Inc., 2100 M Street, N.W., Suite 140, (202) 857-3800. D. Authority 108. Authority for issuance of this Report and Order and Further Notice of Proposed Rule Making is contained in the Communications Act, Sections 4(i), 7, 303(c), 303(f), 303(g), 303(r), and 332, 47 U.S.C.  154(i), 157, 303(c), 303(f), 303(g), 303(r), 332, as amended. E. Ordering Clauses 109. Accordingly, IT IS ORDERED that Part 15 of the Commission's rules is amended as set forth in Appendix B and will become effective 60 days after publication in the Federal Register. 110. IT IS FURTHER ORDERED that Part 22 of the Commission's rules is amended as set forth in Appendix B and will become effective 60 days after publication in the Federal Register. 111. IT IS FURTHER ORDERED that Part 24 of the Commission's rules is amended as set forth in Appendix B. 112. IT IS FURTHER ORDERED that the cost-sharing plan is conditioned on approval by the Wireless Telecommunications Bureau of an entity (or entities) to administer the plan, as described in Section IV(B)(3), supra. 113. IT IS FURTHER ORDERED that Part 24 rule changes will become effective on the date that the Wireless Telecommunications Bureau selects a clearinghouse to administer the cost-sharing plan. 114. IT IS FURTHER ORDERED that Part 94 (new Part 101, effective August 1, 1996) of the Commission's rules is amended as set forth in Appendix B and will become effective 60 days after publication in the Federal Register. 115. IT IS FURTHER ORDERED that rules requiring Paperwork Reduction Act approval shall become effective upon approval by the Office of Management and Budget pursuant to the Paperwork Reduction Act of 1995, Pub. L. No. 104-13; 116. IT IS FURTHER ORDERED THAT, as of the effective date of the new rules, the Commission will only grant primary status to applications for minor modifications that would not add to the relocation costs of PCS licensees, as described in Section IV(C) supra. 117. IT IS FURTHER ORDERED THAT, as of the effective date of the new rules, the Commission will grant applications for major modifications and extensions to existing 2 GHz microwave systems only on a secondary basis, as described in Section IV(C) supra. 118. IT IS FURTHER ORDERED that the Regulatory Flexibility Analysis, as required by Section 604 of the Regulatory Flexibility Act, and as set forth in Section VII(A) is ADOPTED. 119. IT IS FURTHER ORDERED that the Secretary shall send a copy of this First Report and Order and Further Notice of Proposed Rule Making to the Chief Counsel for Advocacy of the Small Business Administration. F. Further Information 120. For further information concerning this proceeding, contact Linda Kinney, Legal Branch, Commercial Wireless Division, Wireless Telecommunications Bureau at (202) 418-0620. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary APPENDIX A MECHANICS OF THE COST-SHARING PLAN Contents Paragraph A. Reimbursement Rights . . . . . . . . . . . . . . . . . . . . . . . . .1 1. Pro Rata Reimbursement Under the Cost-Sharing Formula . . . . . . . .1 2. Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 3. Full Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . 13 4. Compensable Costs . . . . . . . . . . . . . . . . . . . . . . . . . 18 5. Reimbursement Cap . . . . . . . . . . . . . . . . . . . . . . . . . 24 B. Triggering a Reimbursement Obligation. . . . . . . . . . . . . . . . 29 1. Licensed PCS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 2. Unlicensed PCS. . . . . . . . . . . . . . . . . . . . . . . . . . . 35 C. Payment Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 1. Timing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 2. Eligibility for Installment Payments. . . . . . . . . . . . . . . . 40 D. Termination of Cost-Sharing Obligations. . . . . . . . . . . . . . . 45 A. Reimbursement Rights 1. Pro Rata Reimbursement Under the Cost-Sharing Formula 1. Background. Under the plan proposed in our Cost-Sharing Notice, PCS licensees would be entitled to reimbursement based on a cost-sharing formula. The formula is derived by amortizing the cost of relocating a particular microwave link over a ten-year period, to reflect the total number of PCS licensees that benefit from the microwave relocation and the relative time of market entry. The proposed formula takes into consideration the amount paid to relocate the link, the number of PCS licensees that would have posed an interference problem to the link, and the number of months that have passed since the relocator obtained its reimbursement rights. 2. Comments. The overwhelming majority of the commenters support adoption of the proposed formula, although some commenters suggest minor modifications. BellSouth suggests combining two factors into one, as discussed in more detail below, which will render the same result but simplify the calculation. Only a few commenters expressed opposition to our proposal. UTC states that mandating the use of the proposed formula would be inflexible and inequitable, because it will be difficult to apply in certain situations. For example, UTC states that some parties are negotiating compensation packages that include non- cash items, such as participation in a joint-venture, that do not fit easily into the formula. Also, UTC contends that some parties are negotiating relocation agreements for multi-link systems that do not designate a per-path amount. Thus, UTC suggests that the proposed cost-sharing formula should be used as a guideline for determining compensation, but its use should not be mandated. 3. Discussion. Because the formula we proposed in the Cost-Sharing Notice received widespread support from commenters, we adopt the proposed formula along with a few minor modifications. We believe that the formula provides an effective and straightforward means of determining a subsequent PCS licensee's reimbursement obligation. This formula is essential to make cost-sharing administratively feasible, particularly in light of the number of links that will require relocation and the number of PCS licensees potentially involved. We also believe that the formula strikes an appropriate balance between equitable allocation of relocation costs and ease of administration. The new formula is: RN = C x [120 - (Tm)] N 120 RN equals the amount of reimbursement. C equals the actual cost of relocating the link (up to the reimbursement cap). N equals the number of PCS licensees that would have interfered with the link. For the PCS relocator, N = 1. For the next PCS licensee that would have interfered with the link, N = 2, and so on. Tm equals the number of months that have elapsed between the month the PCS relocator obtains reimbursement rights and the month that the clearinghouse notifies a later-entrant of its reimbursement obligation. 4. This formula is derived by amortizing the cost of relocating a particular microwave link over a 10-year period, which is represented by the value 120. As suggested by BellSouth, we have eliminated the T1 variable proposed in the Cost-Sharing Notice, which represented the month that the first PCS licensee obtained reimbursement rights, and the Tn variable, which represented T1 plus the number of months that have passed since the PCS relocator obtained its reimbursement rights. Instead of the Tn - T1 calculation, we substitute a Tm variable, which represents the number of months that have passed since the PCS relocator obtained its reimbursement rights. We agree with BellSouth that combining two variables into one renders the same result but simplifies the calculation. 5. The following is an example of how the formula will work: In January 1996, PCS Licensee A pays $210,000 to relocate microwave Link X and obtain reimbursement rights. Thus, C = $210,000, which is the amount paid to relocate the link. In January 1997, PCS Licensee B files a copy of its PCN with the clearinghouse for a system that would have caused interference to Link X. As a result, Tm = 12, because twelve months have elapsed between the month the PCS relocator obtained reimbursement rights and the month that a later-entrant's reimbursement obligation attaches. Because Licensee B is the second PCS provider to commence operations that benefit from the relocation of Link X, N = 2. The calculation of Licensee B's reimbursement payment is as follows: R2 = 210,000 x [120 - 12] = $ 94,500 2 120 Thus, Licensee B pays $94,500 to Licensee A, while Licensee A remains unreimbursed for $115,500 of its original cost. The $21,000 difference is due to the depreciation factor in the formula, and reflects the fact that Licensee A benefited from the relocation of Link X a year before Licensee B. 6. In January 1998, Licensee C files a copy of its PCN with the clearinghouse for a system that would have caused interference to Link X. Twenty-four months have elapsed since the PCS relocator obtained its reimbursement rights, so Tm = 24. Because Licensee C is the third licensee to benefit from the relocation of Link X, N now increases to 3. Licensee C pays $56,000 under the formula as follows: R3 = 210,000 x [120 - 24] = $ 56,000 3 120 The $56,000 payment is divided equally between Licensees A and B. Thus, the net payment by Licensee A is now reduced by $28,000 to $87,500 and the net payment by Licensee B is similarly reduced to $66,500. Licensee C's share is lower than either because of the additional year of depreciation that has occurred before Licensee C entered the market. The formula can be applied in the same manner to subsequent PCS licensees that interfere with Link X. 7. All calculations must be done on a per-link basis. Therefore, if PCS relocators agree to move a multi-link system, they must do an accounting for each individual link if they want to collect reimbursement under our cost-sharing plan. We believe that calculating reimbursement on a per-link basis is the most equitable way to distribute reimbursement obligations, and that the benefits outweigh the difficulties UTC believes parties will experience in allocating certain costs to certain links. Furthermore, as we proposed in the Cost-Sharing Notice, PCS licensees remain free to negotiate alternative cost-sharing terms or agreements. Therefore, if PCS relocators enter into unique relocation agreements that cannot be easily converted into monetary terms, they may choose to negotiate an alternative cost-sharing agreement with subsequent PCS licensees. We believe that such flexibility addresses UTC's concerns about rigid application of the formula. 2. Depreciation 8. Background. Because the formula is derived by amortizing the cost of relocating a link over a ten-year period, the amount that the PCS relocator receives in reimbursement "depreciates" over time. In the Cost-Sharing Notice, we proposed that the date from which the reimbursement amount begins to depreciate should be the date that the PCS relocator receives its reimbursement rights. Reimbursement rights would be created on the date that a relocation agreement is signed. We also sought comment on whether depreciation should start on a uniform date for all licensees, such as the date the voluntary negotiation period began for the A and B block licensees. 9. Comments. Many commenters agree with our proposal that depreciation should start on the date that the PCS relocator obtains reimbursement rights, which should be the date that a relocation agreement is signed. BellSouth, however, recommends that reimbursement rights be acquired on the day that the microwave incumbent ceases operations, because reliance on a contract execution date would overlook the practicality of a phased-in approach to relocation. Other PCS licensees argue that depreciation should begin on the date that a PCS licensee places its systems in operation, rather than the date it obtains reimbursement obligations via the clearinghouse, because many months may pass between the time a PCS licensee registers with the clearinghouse and the date when service is actually offered. Furthermore, AT&T argues that depreciation begins for the initial PCS relocator when it acquires reimbursement rights from the clearinghouse, but that the depreciation clock stops for later- entrant PCS licensees when they place their facilities into operation, and that this disparity should be eliminated. Several commenters contend that the date a licensee commences operations may be difficult to ascertain, and that requiring confirmation of such date may add to the administrative burden of the clearinghouse. PacBell suggests that cost-sharing rights and obligations should go into effect 60 days after the clearinghouse assigns reimbursement obligations to the PCS licensee, because such a date is easy to confirm. On the other hand, a few small businesses that anticipate bidding for future PCS licenses support a uniform, early date from which depreciation would be calculated, rather than the variable one suggested. These commenters argue that the depreciation start date should be an early date to ensure that later entrants, such as designated entities, pay lower relocation costs due to their limited financial assets. 10. Discussion. We agree with those commenters that suggest that tying depreciation to the acquisition of reimbursement rights is administratively simple and easy to confirm. Therefore, depreciation shall begin on the date that the PCS relocator signs a relocation agreement with a microwave incumbent. Within ten business days of the date the agreement is signed, the PCS licensee shall submit documentation of the agreement to the clearinghouse. If the clearinghouse has not yet been selected, the PCS relocator will be responsible for submitting documentation of a relocation agreement within ten business days of the date that the Wireless Bureau issues a public notice announcing that the clearinghouse has been established and has begun operation. 11. We disagree with those commenters who argue that depreciation should begin when the PCS relocator begins operations. As we stated in the Cost-Sharing Notice, we are concerned that, in some instances, a PCS relocator might place its system in operation after a subsequent licensee has started service, as a result of delays in construction, inadequate equipment supplies, technical difficulties, etc. Such a scenario would make the cost-sharing formula difficult to administer, because the Tm variable would become a negative number. Furthermore, starting depreciation on the date that the PCS relocator signs a relocation agreement will mean that the PCS relocator will always pay the largest portion of relocation costs associated with the link. We believe that PCS relocators will therefore have an additional incentive to negotiate the lowest possible relocation costs. We also agree with those commenters who point out that the date a relocation agreement is signed is easier to identify than the date that the PCS relocator actually begins service. 12. Finally, we are not persuaded by those commenters who argue that a uniform, early start date, such as the date that the voluntary negotiation period began for A and B block licensees, is preferable. Although a uniform date may be the simplest alternative from an administrative perspective, we believe that it will distort the amount of reimbursement that PCS licensees would be entitled to receive. For example, if a PCS licensee decides not to relocate a microwave system in a rural part of its market area until five years after it receives its license, then it would be entitled to only a portion of the reimbursement it would be entitled to if depreciation begins on the date that the relocation agreement is signed. In sum, we believe that starting depreciation on the date that parties sign the relocation agreement for a particular link balances the interests of both current and future PCS licensees. 3. Full Reimbursement 13. Background. In the Cost-Sharing Notice, we tentatively concluded that, under some scenarios, PCS relocators should be entitled to full reimbursement of compensable costs, up to the cap, for relocating links that do not pose an interference problem to their own systems and which benefit other PCS licensees. Links can be non-interfering in the following two ways: (1) the link is fully outside of the PCS relocator's geographic market area, or (2) the link is fully outside of its licensed frequency band. We tentatively concluded that a PCS relocator should be entitled to full reimbursement, subject to the reimbursement cap, for relocating links with both endpoints outside of its licensed service area. We expressed concern, however, about allowing full reimbursement for all links that are fully outside a PCS relocator's frequency band, because such links might pose an adjacent- channel interference problem to the PCS relocator, and therefore would not be truly non-interfering. 14. Comments. Most commenters agree that PCS relocators should be entitled to full reimbursement for relocation of links outside of their geographic market area. However, several commenters propose the following modification: in a situation where a link is located fully within the relocator's channel block, but with an endpoint in each of two geographic markets, one of the PCS licensees should relocate the link and then split the cost equally with the other PCS licensee. With respect to links fully outside of the PCS relocator's licensed frequency band, a majority of commenters argue that full reimbursement is appropriate whether or not the link is truly non-interfering. They assert that determining whether the link posed an adjacent channel interference problem may be difficult and would unduly complicate the cost-sharing plan. 15. Additionally, several commenters suggest that, when a PCS provider relocates a link wholly outside its service area and/or spectrum block, it should be entitled to 100 percent reimbursement, up to the cap, but such costs should not be subject to depreciation, as proposed in the Cost-Sharing Notice. These commenters argue that this policy is advisable because applying depreciation to this situation might encourage PCS providers to delay their required relocations in the hope that other PCS entities in their block will relocate links before them, because the longer they delay the relocations, the higher the amount of reimbursement. 16. Discussion. We agree with the majority of commenters that PCS relocators should be entitled to full reimbursement of compensable costs, up to the cap, for relocating non-interfering links that are either fully outside their market area or their licensed frequency band. Even though a PCS licensee might be relocating a link because it poses an adjacent channel interference problem, we agree with commenters that trying to determine whether the link is truly non-interfering would be administratively burdensome. For administrative convenience, therefore, we will allow full reimbursement of compensable costs, up to the cap, if the PCS relocator relocates a link that is fully outside its licensed frequency band. In addition, we do not agree with commenters that, in situations in which a PCS licensee relocates a microwave link with only one endpoint in its market on its frequencies, the relocation costs for both ends of the link should be aggregated and then split between the relocator and the co-channel adjacent market PCS licensee. We believe that this suggestion would unduly complicate the cost-sharing plan. Reimbursement, therefore, works as follows (changes from our original proposal are shaded): 17. In addition, we also agree with PCIA that when a PCS provider relocates a link wholly outside its service area and/or spectrum block -- which would entitle it to full reimbursement of compensable costs up to the cap -- that such reimbursement should not be depreciated under the cost-sharing plan. We believe that this addition to our original proposal will encourage PCS licensees not to delay relocations in the hope that other PCS entities will relocate these links. 4. Compensable Costs 18. Background. Relocation costs fall into roughly two categories: (1) the actual cost of relocating a microwave incumbent to replacement facilities, and (2) payments above the cost of providing comparable facilities, also referred to as "premium payments." We proposed in the Cost-Sharing Notice that premium payments should not be reimbursable, because such payments are likely to be paid by PCS licensees to accelerate relocation so that the PCS relocator can be first to market. Therefore, we tentatively concluded that only actual relocation costs should be compensable. 19. Comments. Many PCS licensees agree with our tentative conclusion that premium payments should be excluded from reimbursement under the cost-sharing plan. Furthermore, commenters generally approve of the list of compensable costs proposed in the Cost-Sharing Notice, which are discussed in more detail below. However, microwave incumbents suggest that such a list be illustrative, not exhaustive, due to their concern that legitimate expenses incurred to date will not be included in such calculations and that limitations on reimbursement will ultimately affect them. They also argue that attorney and consultant fees are a necessary part of a seamless and smooth microwave relocation, and that such costs should qualify as reimbursable. CIPCO states that reasonable legal costs should be eligible for reimbursement, but capped at $5,000 per link. AT&T believes that PCS relocators should be eligible for cost-sharing with respect to any payments made to or on behalf of a microwave incumbent, subject to the reimbursement cap, without regard to the "reasonableness" of such payment. 20. Discussion. We adopt our proposal that premium payments should not be reimbursable, because such payments are likely to be paid by PCS licensees to accelerate relocation in order to be the first licensee in the market area to offer PCS services. We agree with commenters that later market entrants should not be required to contribute to premium payments, because they will not receive the corresponding advantage of being first to market. Therefore, we limit reimbursable costs to actual relocation costs. Because our proposed list of compensable costs received broad record support, we conclude that the PCS relocator may seek reimbursement for items such as: radio terminal equipment (TX and/or RX - antenna, necessary feed lines, MUX/Modems); towers and/or modifications; back-up power equipment; monitoring or control equipment; engineering costs (design/path survey); installation; systems testing; FCC filing costs; site acquisition and civil works; zoning costs; training; disposal of old equipment; test equipment (vendor required); spare equipment; project management; prior coordination notification under Section 21.100(d) of the Commission's rules; site lease renegotiation; required antenna upgrades for interference control; power plant upgrade (if required); electrical grounding systems; Heating Ventilation and Air Conditioning (HVAC) (if required); alternate transport equipment; and leased facilities. We also agree with those commenters who suggest that this list should be illustrative, not exhaustive, because some actual relocation expenses might not fit neatly into one of these categories. 21. For administrative convenience and simplicity, we believe that the bulk of compensable costs should be tied as closely as possible to actual equipment costs, such as those listed in the previous paragraph. Based on this goal, we conclude that subsequent PCS licensees should only be required to reimburse PCS relocators for incumbent transaction expenses that are directly attributable to the relocation, subject to a cap of two percent of the "hard" costs involved. This restriction on the reimbursement of transaction fees corresponds to the restriction we adopted with respect to PCS reimbursement of incumbent transaction expenses during an involuntary relocation, as discussed in Section IV(3), infra. For purposes of cost-sharing, however, such transaction expenses would be reimbursable for relocations that occur during any time period -- voluntary, mandatory, or involuntary. 22. Additionally, several commenters stated that they have made lump-sum payments to microwave incumbents so that the incumbents may design and construct their own replacement systems. PCS licensees request that such payments be reimbursable under our cost-sharing plan. We agree with commenters that they should be entitled to some reimbursement for such payments; however, we conclude that only those costs attributable to the cost of purchasing a replacement system will be reimbursable. Therefore, the PCS relocator will be required to submit a cost allocation, which itemizes the approximate cost of replacement facilities based on the allowable compensable expenses listed above. If the entire lump sum either cannot be accounted for, or exceeds the reimbursement cap discussed in Section A(5), infra, the remaining amount will not be eligible for reimbursement. 23. We also tentatively concluded in the Cost-Sharing Notice that PCS licensees should be permitted to seek reimbursement for any relocation costs incurred after the voluntary negotiation period for A and B block licensees began on April 5, 1995, but prior to the adoption of a cost-sharing plan. Commenters concurred with our tentative conclusion. We agree with commenters that PCS licensees who have already relocated microwave links should receive the same reimbursement benefit as those PCS licensees who relocate microwave systems after adoption of the cost-sharing plan. Therefore, once the new rules are effective and a clearinghouse is established, receipts or expenses for compensable microwave relocation costs incurred since April 5, 1995 should be submitted to the clearinghouse for accounting purposes. 5. Reimbursement Cap 24. Background. In the Cost-Sharing Notice, we proposed a $250,000 cap on the reimbursement amount that a PCS licensee may obtain from subsequent licensees for the relocation of each individual microwave link. We also proposed a supplemental reimbursement cap of $150,000 for situations in which a licensee is required to pay for a new tower to effectuate the relocation of the microwave incumbent. 25. Comments. Many microwave incumbents oppose the imposition of a reimbursement cap. They argue that the cap would place an artificial ceiling on the price of relocating a link, force them to contribute to the cost of their own relocation, and reduce their ability to obtain comparable facilities. Some incumbents also assert that a reimbursement cap may force microwave incumbents to bear some of the cost of relocation themselves. AAR disputes whether relocation costs will average $250,000, although CIPCO states that the proposed cap is reasonable and adequate. By contrast, most PCS licensees approve of the caps. Some PCS licensees suggest, however, that the cap should only be a cap on premium payments, assuming such payments are reimbursable under the cost-sharing plan. They argue that, if reasonable relocation costs exceed the cap, then the cap should be flexible enough to allow reimbursement of such costs. Other PCS licensees oppose flexible caps. They contend that it is difficult to differentiate between actual costs and premiums, and that a cap will help to keep costs down. Moreover, they argue that rigid caps are likely to reduce the number of disputes that arise over which costs are "actual" relocation costs. Several commenters express concern that PCS licensees will average costs over numerous relocated links in order to receive the maximum reimbursement allowed per link, regardless of actual costs incurred. 26. In addition, some commenters suggest that the $150,000 cap for new towers should also apply to tower modifications, because such modifications can be very costly and may require that a large portion of the proposed $250,000 cap be allocated to structural reinforcement, and so on. They argue that failure to include tower modifications as part of the additional $150,000 cap may discourage modifications, even though modifications may be simpler, more economical, and may face fewer local zoning challenges than new construction. BellSouth also requests us to specify that the $150,000 cap applies to the construction and modification of all towers related to the link, and that it is not a separate cap of $150,000 for each tower associated with a link. 27. Discussion. We adopt a cap of $250,000 on the actual cost of relocating the link (represented by variable C in the cost-sharing formula), with an additional $150,000 if a new or modified tower is required. We believe that a reimbursement cap enables participants in future PCS auctions to assess the value of a license more accurately, because these applicants would be able to determine in advance the maximum amount they may be required to contribute towards relocation costs. In addition, we believe that such a cap protects future PCS licensees, who have no opportunity to participate in the negotiations, from being required to contribute to excessive relocation expenses. We agree with those commenters who argue that a rigid cap will reduce disputes over relocation expenses, because we believe that such a cap will prevent subsequent licensees from being forced to contribute to astronomical expenses that may include hidden premiums. We also agree with those incumbents who suggest that raising the cap will result in a larger number of disputes. As we stated in the Cost-Sharing Notice, we believe that a $250,000 cap plus $150,000 for towers is sufficient to cover the average cost of relocating a link. Furthermore, we emphasize that the cap does not limit payments to microwave incumbents, because it is a cap on the amount that subsequent licensees must pay to the PCS relocator, not a cap on the amount the PCS relocator may pay to the microwave incumbent to vacate the spectrum. The cap does not relieve PCS licensees from the responsibility of providing incumbents with replacement systems, so adopting a cap should not force incumbents to pay for their own relocation expenses. We also emphasize that PCS licensees will not be permitted to average costs over numerous links; rather, they must submit verification and receipts for actual expenses incurred for each individual relocated link, as discussed in Appendix Section A(4), supra. 28. Finally, we agree with BellSouth that the additional $150,000 cap permitted for new towers should also encompass costs associated with modifications to existing towers. Thus, PCS licensees that modify an existing tower may claim them under the $150,000 tower cap. We believe that adding such flexibility will promote tower modifications, which may be simpler, more economical, and result in fewer local zoning challenges than new tower construction. We also agree with BellSouth that the $150,000 cap should apply to the construction and modification of all towers related to the link, and that it is not a separate cap of $150,000 for each tower associated with a link. B. Triggering a Reimbursement Obligation 1. Licensed PCS 29. Background. In the Cost-Sharing Notice, we proposed that later-entrant PCS licensees would be obligated to contribute to the cost of relocation if their PCS link would have caused interference to a microwave link previously relocated by another PCS licensee. To determine whether interference would have occurred to a link that no longer exists, we proposed to use the criteria set forth in the TIA Telecommunications Systems Bulletin 10-F, "Interference Criteria for Microwave Systems," May 1994 ("Bulletin 10-F"), or some other industry-accepted standard. However, we stated that, because the procedures set forth in Bulletin 10-F permit the use of different propagation models and allow alternative technical parameters to be employed, Bulletin 10-F may not provide a clear standard for determining interference in some situations Thus, we asked for comment on whether Bulletin 10-F should be limited in scope for reimbursement purposes. We also asked for comment on whether another standard could be more easily applied for determining interference for reimbursement purposes. 30. Comments. A number of commenters support the use of Bulletin 10-F for determining interference which then triggers a cost-sharing obligation. However, some commenters allege that Bulletin 10-F does not address propagation loss due to irregular terrain, and thus is an inaccurate measure of interference. SBMS states that Bulletin 10-F does not address adjacent channel interference or differences in terrain, but it supports the use of Bulletin 10-F for lack of a better standard. BellSouth and PCIA argue that the Commission should adopt the Longley-Rice Irregular Terrain Model to determine propagation loss. 31. On the other hand, a number of A and B block PCS licensees who have entered into their own private cost-sharing agreement suggest that we use an alternative method for determining interference, which they call the "Proximity Threshold" test. Supporters of the Proximity Threshold test, which is described in more detail below, argue that it provides a bright-line test to determine when the cost-sharing reimbursement is triggered, which simplifies the process of determining when an obli gati on to sha re cos ts aris es. In repl y comments, many commenters express support for the use of the Proximity Threshold test as a method for determining cost- sharing obligations. Several of the supporters stress that if adopted, we should clarify that the Proximity Threshold test would not be used to determine actual PCS-to-microwave interference, but rather would only be used to determine when a PCS licensee has an obligation to participate in the cost-sharing plan. A few commenters oppose the Proximity Threshold test. SBMS opposes the Proximity Threshold test because it is contrary to standard engineering practice for determining actual interference, and it monetarily disadvantages PCS providers whose innovative system technologies are designed to work around microwave incumbents. GO also opposes the Proximity Threshold standard as being too broad in imposing reimbursement obligations, because it is based solely on geographic location. GO and Omnipoint both claim that licensees should not have to pay for unnecessary relocations when interference could be avoided. Tenneco opposes the Proximity Threshold test because it believes such a test will change the actual interference protection afforded microwave incumbents. 32. Discussion. We agree with the majority of commenters that the Proximity Threshold test is an acceptable alternative to Bulletin 10-F to determine interference for purposes of our cost-sharing plan, and we adopt its use. Under the Proximity Threshold test, cost sharing obligations are triggered if, for any microwave link, (1) all or part of the microwave link was initially co-channel with the PCS band(s) of any subsequent PCS entity; (2) a PCS relocator has paid the relocation costs of the microwave incumbent; and (3) the subsequent PCS entity is preparing to turn on a fixed base station at commercial power and the fixed base station is located within a rectangle described as follows: The length of the rectangle shall be x where x is a line extending through both nodes of the microwave link to a distance of 48 kilometers (30 miles) beyond each node. The width of the rectangle shall be y where y is a line perpendicular to x and extending for a distance of 24 kilometers (15 miles) on both sides of x. Thus, the rectangle would be represented as follows: 33. We agree with those commenters that argue that this test will be less expensive and easier to administer than Bulletin 10-F. The Proximity Threshold test does not require extensive engineering studies or analyses, and it yields consistent, predictable results by eliminating the variations which can be associated with the use of Bulletin 10-F. A PCS base station will either fall inside the reimbursement "box" or out of it. Additionally, use of the Proximity Threshold test will permit existing and prospective PCS providers to project their cost sharing obligations more accurately. We are cognizant of concerns raised by a few commenters that use of the Proximity Threshold test may limit a licensee's ability to engineer around the transmission of the former microwave link to avoid relocation reimbursement obligations. However, we believe that the benefits that the Proximity Threshold provides in terms of ease of administration outweigh any harm that use of the test will impose on later-entrant PCS licensees. We also believe that many fewer disputes will arise over application of the Proximity Threshold than if we mandated use of Bulletin 10-F for cost-sharing purposes. 34. As noted above, we also conclude that only co-channel interference will be considered for purposes of determining a cost-sharing obligation, which is what we proposed in the Cost-Sharing Notice. We exclude adjacent-channel interference as a trigger for cost-sharing, because we agree with those commenters who argue that excluding adjacent-channel interference for cost- sharing purposes greatly simplifies our cost-sharing plan and eliminates many possible disagreements over whether a PCS system would have caused or experienced adjacent channel interference. We emphasize, however, that the exclusion of adjacent- channel interference for cost-sharing purposes will not affect the way that PCS-to-microwave interference is determined, as some incumbents fear. Rather, microwave incumbents remain protected from both adjacent and co-channel interference under Section 24.237 of our rules. 2. Unlicensed PCS 35. Comments. UTAM points out that the trigger for cost-sharing obligations should be different for unlicensed PCS services, because their services and procedures are different than licensed PCS services. UTAM suggests that, for unlicensed PCS services, reimbursement obligations should be linked to its deployment plan for unlicensed PCS devices. UTAM designates individual areas, usually counties, as Zone 1 or Zone 2 areas, depending on the number of microwave links yet to be relocated. In Zone 1 areas, early unlicensed PCS deployment is allowed, because few microwave incumbent systems still operate. As the aggregate power level is approached in which interference would be caused to incumbent microwave licensees, UTAM restricts further unlicensed PCS device deployment until the affected microwave link is relocated. In Zone 2 areas, it is necessary to coordinate the site of each unlicensed PCS systems to a relatively large number of still-operating microwave links. UTAM proposes that its reimbursement obligation should be triggered when a county is cleared of microwave links in the unlicensed allocation, and UTAM invokes a Zone 1 power cap as a result of third party relocation activities; or a county is cleared of microwave links in the unlicensed allocation and UTAM reclassifies a Zone 2 county to a Zone 1 status, which could not have been done without third party relocation activities. Those commenters that discuss UTAM's cost-sharing obligations agree with its proposal. 36. Discussion. We agree with UTAM that the trigger for cost-sharing obligations should be different for unlicensed PCS, because their services and procedures are different than licensed PCS services. We therefore adopt UTAM's suggestion that, for unlicensed PCS, reimbursement obligations should be linked to its deployment plan for unlicensed PCS devices. UTAM's reimbursement responsibilities will be triggered when (1) a county is cleared of microwave links in the unlicensed allocation, and UTAM invokes a Zone 1 power cap as a result of third party relocation activities, or (2) a county is cleared of microwave links in the unlicensed allocation and UTAM reclassifies a Zone 2 county to Zone 1 status, which could not have been done without third party relocation activities. C. Payment Issues 1. Timing 37. Background. We proposed in the Cost-Sharing Notice that a PCS licensee entering a previously-cleared band would be responsible for reimbursement payment under the cost-sharing proposal at the time the PCS licensee initiates service and such service would have interfered with the microwave link that has been relocated. Alternatively, we requested comment on whether fulfillment of the cost-sharing obligation should be treated as part of the frequency coordination process, and that licensees should not be permitted to initiate service until their payments are made in full. 38. Comments. PCS licensees generally agree that cost-sharing obligations should attach when the PCS licensee offers service that would have interfered with the relocated microwave link. DCR requests that we clarify that the cost-sharing obligation begins when commercial service is offered, not during the twelve-month trial period. Western opposes this proposal and advocates a payment date of at least 10 days after the clearinghouse notifies the PCS licensees that a payment obligation exists. UTAM suggests that the trigger mechanism for unlicensed PCS providers should occur when (1) UTAM imposes a Zone 1 power cap as a result of third party relocation activities, or (2) a county is cleared of microwave links in the unlicensed allocation and UTAM reclassifies a Zone 2 county to Zone 1 status. 39. Discussion. We agree with the majority of commenters that payment should be due when a subsequent licensee commences commercial operation, but we modify our proposal slightly for administrative convenience. Thus, on the day that a PCS licensee files its PCN, it must file a copy of the PCN with the clearinghouse. Once the clearinghouse receives the PCN, it will determine if any reimbursement obligation exists. The clearinghouse will then notify the PCS licensee in writing of its repayment obligation, if any. Once the PCS licensee receives a written copy of such obligation, it must pay directly to the PCS relocator the amount owed within thirty days, with the exception of those businesses that qualify for installment payments, as discussed in Appendix Section C(2), infra. A business that qualifies for an installment payment plan must make its first installment payment within thirty days of notice from the clearinghouse. This procedure will thus require PCS licensees to satisfy their repayment obligations at approximately the same time that service is commenced, without requiring the clearinghouse to actually ascertain or confirm that service has begun. We also concur with UTAM that procedures for unlicensed PCS need to be different. We therefore adopt UTAM's suggestion that its first payment will be due thirty days after (1) UTAM imposes a Zone 1 power cap as a result of third party relocation activities, or (2) a county is cleared of microwave links in the unlicensed allocation and UTAM reclassifies a Zone 2 county to Zone 1 status. 2. Eligibility for Installment Payments. 40. Background. Under our proposal, PCS licensees that are entitled to make installment payments under our auction rules would also be allowed to pay their share of relocation costs in installments. Under our auction rules for the PCS C block, three different installment payment plans are currently available to C Block licensees. The first installment payment plan is available to applicants with gross revenues in excess of $75 million but less than $125 million. This plan provides for the payment of interest based on the ten-year U.S. Treasury rate, plus 3.5 percent with payment of principal and interest amortized over the term of the license. The second installment plan is available to those applicants with gross revenues between $40 and $75 million. This plan provides for the payment of interest equal to the ten-year Treasury rate plus 2.5 percent. The applicants eligible for this plan may pay interest only for one year, with the principal and interest amortized over the remaining nine years of the license term. The third installment plan is available to small businesses with gross revenues under $40 million. Under the third plan, small businesses are permitted to pay for their licenses in installments at the rate for ten-year U.S. Treasury obligations applicable on the date the license is granted. Small businesses may make interest-only payments for the fist six years, with payments of principal and interest amortized over the remaining four years of the license term. We also proposed that UTAM be allowed to utilize installment payments, because UTAM will be funding relocation costs with fees that will be collected over time. 41. Comments. Most PCS licensees that commented on this proposal supported the adoption of installment payments for any cost-sharing obligation incurred by entities eligible for installment payments under our rules. The one exception came from Iowa L.P., a potential bidder in a future PCS auction, who suggests that small businesses be exempt from all microwave relocation requirements and all potential cost-sharing obligations, due to small businesses' limited financial resources. Many commenters also approve of some type of special provision for UTAM, but several argue that UTAM should not receive preferential interest rates. BellSouth argues that UTAM should have a separate payment plan that requires quarterly payments over a period of five years at an interest rate equivalent to prime plus three percent. PacBell argues that UTAM should be permitted to make installment payments under the cost-sharing plan, but that UTAM financing should be done at its underlying cost of funds. PCIA suggests that UTAM payments be spread out over a five year period, with payments due on a quarterly basis and interest applied to UTAM's share of the relocation costs. Western argues that UTAM should not be entitled to pay its cost-sharing obligations under an installment plan that was tailored to C and F block license holders because it has not been accorded special treatment by Congress. Western argues that if the Commission does allow UTAM the benefit of an installment plan, any such plan should have a much shorter time frame than ten years, and be at an interest rate based on commercial money markets. 42. In its reply comments, UTAM points out that its revenues are completely dependent on the sales of unlicensed PCS products, and thus its ability to pay relocation agreements is dictated by the timing and success of its members' equipment sales. UTAM proposes two different payment plans: under the Commission's proposal, UTAM could pay interest only for the first six years of its cost-sharing obligation, and principal and interest amortized over the next four years. Alternatively, if upon incurring a cost sharing obligation, UTAM does not believe it has sufficient funds to meet this schedule, it could have the option of choosing to dedicate the clearing fees raised from the additional product deployment enabled by the third party's relocation activities to pay its cost-sharing obligation. Additionally, UTAM suggests that its trigger mechanism for cost-sharing obligations should be modified, as discussed in Appendix Section (B)(2), supra. API asks that we clarify that UTAM must pay microwave incumbents immediately for all relocation costs, or as stipulated in its agreement with the incumbent, and that only the cost-sharing reimbursement be remitted on an installment basis. 43. Discussion. We conclude that PCS licensees that are allowed to pay for their licenses in installments under our designated entity rules should have the same option available to them with respect to payments under the cost-sharing formula, because allowing such payments will significantly ease the burden of cost-sharing for these entities. The specific terms of the installment payment mechanism, including the treatment of principal and interest, would be the same as those applicable to the licensee's auction payments described above. Thus, if a licensee is entitled to pay its winning bid in quarterly installments over ten years, with interest-only payments for the first year, it would pay relocation costs under the same formula. We also specify that if an entity is allowed installment payments but such payments extend beyond the life of the clearinghouse, the entity must continue to make such payments directly to the PCS licensee that holds the reimbursement rights pursuant to the cost-sharing plan specified by the clearinghouse. If, for any reason, the entity eligible for installment payments is no longer eligible for such installment payments on its license, that entity is no longer eligible for installment payments under the cost-sharing plan. 44. UTAM, a not-for-profit corporation, exists only to assist with relocation and spectrum management issues of the 1910- 1930 MHz band. Most of its revenues will be received through clearing fees collected from manufacturers for each unlicensed PCS transmitter. Because UTAM exists only to assist with spectrum management and receives its funding in small increments over an extended period of time, we conclude that it should also be allowed to pay for its cost-sharing obligations in installments over a period of time. Based on the comments received, we therefore adopt the proposal suggested by several commenters that UTAM be allowed to make quarterly payments over a five-year period with an interest rate of prime plus 2.5 percent. We note that such rate is consistent with other Commission regulations, in which we have used the rate for U.S. Treasury Obligations. Our general installment payment rules are also based on U.S. Treasury Notes. Assuming that the prime rate is what UTAM would be able to obtain if private financing is sought, this rate will benefit UTAM, which will avoid the higher interest rates and other transactional costs associated with using private sources to finance their repayment obligation. We note that UTAM may negotiate separate arrangements with other parties. 4. Termination of Cost-Sharing Obligations 45. Background. In the Cost-Sharing Notice, we proposed that the cost-sharing plan should sunset for all PCS licensees ten years after the date that voluntary negotiations commenced for A and B block licensees, which means that cost-sharing would cease on April 4, 2005. We stated that we believe that it is important to set a date certain on which the clearinghouse will be dissolved. 46. Comments. Most commenters agree that the cost-sharing proposal should sunset on April 4, 2005, ten years after the start date of the A and B block voluntary negotiation period. However, BellSouth argues that the industry, not the Commission, should determine when the clearinghouse should be dissolved. API argues that such a sunset provision unfairly penalizes those entities involved in subsequent negotiations, because it shortens the period during which parties may secure reimbursement. Finally, commenters request us to clarify that, if the clearinghouse is dissolved, any subsequent licensees that are paying their portion of relocation costs on an installment basis must continue the payments until the obligation is satisfied. 47. Discussion. Because most commenters expressed support for our proposal, we conclude that the cost-sharing plan should sunset for all PCS licensees on April 4, 2005, which is ten years after the date that voluntary negotiations commenced for A and B block licensees. We believe that a sunset date is necessary, because the clearinghouse will operate as a non-profit entity that exists for a limited purpose and should be dissolved on a date certain. Furthermore, we conclude that this time period is sufficient for all licensees to complete most relocation agreements, including those in the C, D, E, and F blocks licensees which will be licensed in the near future. This ten-year period also roughly coincides with the initial PCS license terms and the ten-year depreciation period built into the cost-sharing formula. We also believe that the vast majority of links will need to be relocated before the ten-year sunset date in order for PCS licensees to meet their coverage requirements. However, the sunset date will not eliminate the existing obligations of PCS licensees that are paying their portion of relocation costs on an installment basis. We agree with those commenters who argue that such licensees should be required to continue making payments directly to the PCS relocator until the obligation is satisfied. Finally, we clarify that reimbursement obligations will be subject to the same formula, i.e., depreciation will not be accelerated, even if the link is relocated shortly before the sunset date. APPENDIX B 1. Part 15 of Chapter 1 of Title 47 of the Code of Federal Regulations is amended as follows: PART 15 -- RADIO FREQUENCY DEVICES 2. The authority citation for Part 15 is revised to read as follows: Authority: Secs. 4, 302, 303, 304, 307 and 624A of the Communications Act of 1934, as amended, 47 U.S.C.  154, 302, 303, 304, 307 and 544A. 3. Section 15.307 is amended by revising paragraphs (a), (f) and (g) to read as follows:  15.307 Coordination with fixed microwave service. (a) UTAM, Inc. is designated to coordinate and manage the transition of the 1910-1930 MHz band from the Private Operational-Fixed Microwave Service (OFS) operating under Part 101 of this chapter to unlicensed PCS operations, * * * * * * * * (f) At such time as the Commission deems that the need for coordination between unlicensed PCS operations and existing Part 101 Private Operational-Fixed Microwave Services ceases to exist, the disabling mechanism required by paragraph (e) of this section will no longer be required. (g) Operations under the provisions of this subpart are required to protect systems in the Private Operational-Fixed Microwave Service operating within the 1850-1990 MHz band until the dates and conditions specified in  101.69 through 101.73 of this chapter for termination of primary status. Interference protection is not required for Part 101 stations in this band licensed on a secondary basis. * * * * * 4. Part 22 of Chapter 1 of Title 47 of the Code of Federal Regulations is amended as follows: PART 22 -- PUBLIC MOBILE SERVICES 5. The authority citation for Part 22 is revised to read as follows: Authority: 47 U.S.C.  154, 303, unless otherwise noted. 6. Section 22.602 is amended to read as follows:  22.602 Transition of the 2110-2130 and 2160-2180 MHz channels to emerging technologies. The microwave channels listed in  22.591 have been allocated for use by emerging technologies (ET) services. No new systems will be authorized under this part. The rules in this section provide for a transition period during which existing Paging and Radiotelephone Service (PARS) licensees using these channels may relocate operations to other media or to other fixed channels, including those in other microwave bands. For PARS licensees relocating operations to other microwave bands, authorization must be obtained under Part 101 of this chapter. (a) Licensees proposing to implement ET services may negotiate with PARS licensees authorized to use these channels, for the purpose of agreeing to terms under which the PARS licensees would - (1) Relocate their operations to other fixed microwave bands or other media, or alternatively, (2) Accept a sharing arrangement with the ET licensee that may result in an otherwise impermissible level of interference to the PARS operations. (b) PARS operations on these channels will continue to be co-primary with other users of this spectrum until two years after the FCC commences acceptance of applications for ET services, and until one year after an ET licensee initiates negotiations for relocation of the fixed microwave licensee's operations. (c) Voluntary Negotiations. During the two year voluntary negotiation period, negotiations are strictly voluntary and are not defined by any parameters. However, if the parties have not reached an agreement within one year after the commencement of the voluntary period, the PARS licensee must allow the ET licensee (if it so chooses) to gain access to the existing facilities to be relocated so that an independent third party can examine the PARS licensee's 2 GHz system and prepare an estimate of the cost and the time needed to relocate the PARS licensee to comparable facilities. The ET licensee must pay for any such estimate. (d) Mandatory Negotiations. If a relocation agreement is not reached during the two year voluntary period, the ET licensee may initiate a mandatory negotiation period. This mandatory period is triggered at the option of the ET licensee, but ET licensees may not invoke their right to mandatory negotiation until the voluntary negotiation period has expired. Once mandatory negotiations have begun, a PARS licensee may not refuse to negotiate and all parties are required to negotiate in good faith. Good faith requires each party to provide information to the other that is reasonably necessary to facilitate the relocation process. In evaluating claims that a party has not negotiated in good faith, the FCC will consider, inter alia, the following factors: (1) whether the ET licensee has made a bona fide offer to relocate the PARS licensee to comparable facilities in accordance with Section 101.75(b); (2) if the PARS licensee has demanded a premium, the type of premium requested (e.g., whether the premium is directly related to relocation, such as system-wide relocations and analog-to-digital conversions, versus other types of premiums), and whether the value of the premium as compared to the cost of providing comparable facilities is disproportionate (i.e. whether there is a lack of proportion or relation between the two); (3) what steps the parties have taken to determine the actual cost of relocation to comparable facilities; (4) whether either party has withheld information requested by the other party that is necessary to estimate relocation costs or the facilitate the relocation process. Any party alleging a violation of our good faith requirement must attach an independent estimate of the relocation costs in question to any documentation filed with the Commission in support of its claim. An independent cost estimate must include a specification for the comparable facility and a statement of the costs associated with providing that facility to the incumbent licensee. (e) Involuntary period. After the periods specified in paragraph (b) of this section have expired, ET licensees may initiate involuntary relocation procedures under the Commission's rules. ET licensees are obligated to pay to relocate only the specific microwave links to which their systems pose an interference problem. Under involuntary relocation, a PARS licensee is required to relocate, provided that: (1) The ET applicant, provider, licensee or representative guarantees payment of relocation costs, including all engineering, equipment, site and FCC fees, as well as any legitimate and prudent transaction expenses incurred by the PARS licensee that are directly attributable to an involuntary relocation, subject to a cap of two percent of the hard costs involved. Hard costs are defined as the actual costs associated with providing a replacement system, such as equipment and engineering expenses. ET licensees are not required to pay PARS licensees for internal resources devoted to the relocation process. ET licensees are not required to pay for transaction costs incurred by PARS licensees during the voluntary or mandatory periods once the involuntary period is initiated or for fees that cannot be legitimately tied to the provision of comparable facilities; (2) The ET applicant, provider, licensee or representative completes all activities necessary for implementing the replacement facilities, including engineering and cost analysis of the relocation procedure and, if radio facilities are involved, identifying and obtaining, on the incumbents behalf, new channels and frequency coordination; and, (3) The ET applicant, provider, licensee or representative builds the replacement system and tests it for comparability with the existing 2 GHz system. (f) Comparable Facilities. The replacement system provided to an incumbent during an involuntary relocation must be at least equivalent to the existing PARS system with respect to the following three factors: (1) Throughput. Communications throughput is the amount of information transferred within a system in a given amount of time. If analog facilities are being replaced with analog, the ET licensee is required to provide the PARS licensee with an equivalent number of 4 kHz voice channels. If digital facilities are being replaced with digital, the ET licensee must provide the PARS licensee with equivalent data loading bits per second (bps). ET licensees must provide PARS licensees with enough throughput to satisfy the PARS licensee's system use at the time of relocation, not match the total capacity of the PARS system. (2) Reliability. System reliability is the degree to which information is transferred accurately within a system. ET licensees must provide PARS licensees with reliability equal to the overall reliability of their system. For digital data systems, reliability is measured by the percent of time the bit error rate (BER) exceeds a desired value, and for analog or digital voice transmissions, it is measured by the percent of time that audio signal quality meets an established threshold. If an analog voice system is replaced with a digital voice system, only the resulting frequency response, harmonic distortion, signal-to-noise ratio and its reliability will be considered in determining comparable reliability. (3) Operating Costs. Operating costs are the cost to operate and maintain the PARS system. ET licensees must compensate PARS licensees for any increased recurring costs associated with the replacement facilities (e.g. additional rental payments, increased utility fees) for five years after relocation. ET licensees may satisfy this obligation by making a lump-sum payment based on present value using current interest rates. Additionally, the maintenance costs to the PARS licensee must be equivalent to the 2 GHz system in order for the replacement system to be considered comparable. (g) The PARS licensee is not required to relocate until the alternative facilities are available to it for a reasonable time to make adjustments, determine comparability, and ensure a seamless handoff. (h) Twelve-Month Trial Period. If, within one year after the relocation to new facilities, the PARS licensee demonstrates that the new facilities are not comparable to the former facilities, the ET applicant, provider, licensee or representative must remedy the defects or pay to relocate the PARS licensee to one of the following: its former or equivalent 2 GHz channels, another comparable frequency band, a land-line system, or any other facility that satisfies the requirements specified in paragraph (f) of this section. This trial period commences on the date that the PARS licensee begins full operation of the replacement link. If the PARS licensee has retained its 2 GHz authorization during the trial period, it must return the license to the Commission at the end of the twelve months. (i) After April 25, 1996, all major modifications and extensions to existing PARS systems operating on channels in the 2110-2130 and 2160-2180 MHz bands will be authorized on a secondary basis to future ET operations. All other modifications will render the modified PARS license secondary to future ET operations unless the incumbent affirmatively justifies primary status and the incumbent PARS licensee establishes that the modification would not add to the relocation costs of ET licensees. Incumbent PARS licensees will maintain primary status for the following technical changes: (1) decreases in power; (2) minor changes (increases or decreases) in antenna height; (3) minor location changes (up to two seconds); (4) any data correction which does not involve a change in the location of an existing facility; (5) reductions in authorized bandwidth; (6) minor changes (increases or decreases) in structure height; (7) changes (increases or decreases) in ground elevation that do not affect centerline height; (8) minor equipment changes. (j) Sunset. PARS licensees will maintain primary status in the 2110-2130 and 2160-2180 MHz bands unless and until an ET licensee requires use of the spectrum. ET licensees are not required to pay relocation costs after the relocation rules sunset (i.e. ten years after the voluntary period begins for the first ET licensees in the service). Once the relocation rules sunset, an ET licensee may require the incumbent to cease operations, provided that the ET licensee intends to turn on a system within interference range of the incumbent, as determined by TIA Bulletin 10-F or any standard successor. ET licensee notification to the affected PARS licensee must be in writing and must provide the incumbent with no less than six months to vacate the spectrum. After the six-month notice period has expired, the PARS licensee must turn its license back into the Commission, unless the parties have entered into an agreement which allows the PARS licensee to continue to operate on a mutually agreed upon basis. If the parties cannot agree on a schedule or an alternative arrangement, requests for extension will be accepted and reviewed on a case-by-case basis. The Commission will grant such extensions only if the incumbent can demonstrate that: (1) it cannot relocate within the six-month period (e.g., because no alternative spectrum or other reasonable option is available), and; (2) the public interest would be harmed if the incumbent is forced to terminate operations (e.g., if public safety communications services would be disrupted). 7. Part 24 of Chapter 1 of Title 47 of the Code of Federal Regulations is amended as follows: PART 24 -- PERSONAL COMMUNICATIONS SERVICES 8. The authority citation for Part 24 is revised to read as follows: Authority: 47 U.S.C.  154, 301, 302, 303, 309 and 332, unless otherwise noted. 9. Section 24.5 is amended by adding the definitions for "PCS Relocator" and "UTAM" in alphabetical order to read as follows:  Definitions. * * * * * PCS Relocator. A PCS entity that pays to relocate a fixed microwave link from its existing 2 GHz facility to other media or other fixed channels. UTAM. The Unlicensed PCS Ad Hoc Committee for 2 GHz Microwave Transition and Management, which coordinates relocation in the 1910-1930 MHz band. 10. Section 24.237 is amended by revising paragraph (c) to read as follows:  24.237 Interference protection. * * * * * (c) In all other respects, coordination procedures are to follow the requirements of  101.103(d) of this chapter to the extent that these requirements are not inconsistent with those specified in this part. * * * * * 11. Subpart E is amended by adding a new heading following Section 24.238 to read as follows: POLICIES GOVERNING MICROWAVE RELOCATION FROM THE 1850-1990 MHz BAND 12. A new Section 24.239 is added to Subpart E to read as follows:  24.239 Cost-Sharing Requirements for Broadband PCS. Frequencies in the 1850-1990 MHz band listed in  101.147(c) have been allocated for use by PCS. In accordance with procedures specified in  101.69 through 101.81, PCS entities (both licensed and unlicensed) are required to relocate the existing Fixed Microwave Services (FMS) licensees in these bands if interference to the existing FMS operations would occur. All PCS entities who benefit from spectrum clearance by other PCS entities must contribute to such relocation costs. PCS entities may satisfy this requirement by entering into private cost-sharing agreements or agreeing to terms other than those specified in  24.243. However, PCS entities are required to reimburse other PCS entities that incur relocation costs and are not parties to the alternative agreement. In addition, parties to a private cost-sharing agreement may seek reimbursement through the clearinghouse (as discussed in  24.241) from PCS entities that are not parties to the agreement. The cost-sharing plan is in effect during all phases of microwave relocation specified in  101.69. 13. A new Section 24.241 is added to Subpart E to read as follows:  24.241 Administration of the Cost-Sharing Plan. The Wireless Telecommunications Bureau, under delegated authority, will select an entity to operate as a neutral, not-for- profit clearinghouse. This clearinghouse will administer the cost-sharing plan by, inter alia, maintaining all of the cost and payment records related to the relocation of each link and determining the cost-sharing obligation of subsequent PCS entities. The cost-sharing rules will not take effect until an administrator is selected. 14. A new Section 24.243 is added to Subpart E to read as follows:  24.243 The Cost-Sharing Formula. A PCS relocator who relocates an interfering microwave link, i.e. one that is in all or part of its market area and in all or part of its frequency band, is entitled to pro rata reimbursement based on the following formula: RN = C x [120 - (Tm)] N 120 (a) RN equals the amount of reimbursement. (b) C equals the actual cost of relocating the link. Actual relocation costs include, but are not limited to, such items as: radio terminal equipment (TX and/or RX - antenna, necessary feed lines, MUX/Modems); towers and/or modifications; back-up power equipment; monitoring or control equipment; engineering costs (design/path survey); installation; systems testing; FCC filing costs; site acquisition and civil works; zoning costs; training; disposal of old equipment; test equipment (vendor required); spare equipment; project management; prior coordination notification under Section 101.103(d) of the Commission's rules; site lease renegotiation; required antenna upgrades for interference control; power plant upgrade (if required); electrical grounding systems; Heating Ventilation and Air Conditioning (HVAC) (if required); alternate transport equipment; and leased facilities. C also includes incumbent transaction expenses that are directly attributable to the relocation, subject to a cap of two percent of the "hard" costs involved. C may not exceed $250,000 per link, with an additional $150,000 permitted if a new or modified tower is required. (c) N equals the number of PCS entities that would have interfered with the link. For the PCS relocator, N = 1. For the next PCS entity that would have interfered with the link, N=2, and so on. (d) Tm equals the number of months that have elapsed between the month the PCS relocator obtains reimbursement rights and the month that the clearinghouse notifies a later-entrant of its reimbursement obligation. A PCS relocator obtains reimbursement rights on the date that it signs a relocation agreement with a microwave incumbent. 15. A new Section 24.245 is added to Subpart E to read as follows:  24.245 Reimbursement under the Cost-Sharing Plan. (a) Registration of Reimbursement Rights. To obtain reimbursement, a PCS relocator must submit documentation of the relocation agreement to the clearinghouse within ten business days of the date a relocation agreement is signed with an incumbent. If the clearinghouse has not yet been selected, the PCS relocator will be responsible for submitting documentation of the relocation agreement within ten business days of the date that the Wireless Telecommunications Bureau issues a public notice announcing that the clearinghouse has been established and has begun operation. (b) Documentation of Expenses. Once relocation occurs, the PCS relocator must submit documentation itemizing the amount spent for items listed in paragraph (b) of  24.243. The PCS relocator must identify the particular link associated with appropriate expenses (i.e., costs may not be averaged over numerous links). If a PCS relocator pays a microwave incumbent a monetary sum to relocate its own facilities, the PCS relocator must estimate the costs associated with relocating the incumbent by itemizing the anticipated cost for items listed in paragraph (b) of  24.243. If the sum paid to the incumbent cannot be accounted for, the remaining amount is not eligible for reimbursement. A PCS relocator may submit receipts or other documentation to the clearinghouse for all relocation expenses incurred since April 5, 1995. (c) Full Reimbursement. A PCS relocator who relocates a microwave link that is either fully outside its market area or its licensed frequency band may seek full reimbursement through the clearinghouse of compensable costs, up to the reimbursement cap as defined in 24.243(b). Such reimbursement will not be subject to depreciation under the cost-sharing formula. 16. A new Section 24.247 is added to Subpart E to read as follows:  24.247 Triggering a Reimbursement Obligation. (a) Licensed PCS. The clearinghouse will apply the following test to determine if a PCS entity preparing to initiate operations must pay a PCS relocator in accordance with the formula detailed in  24.243: (1) all or part of the relocated microwave link was initially co-channel with the licensed PCS band(s) of the subsequent PCS entity; (2) a PCS relocator has paid the relocation costs of the microwave incumbent; and (3) the subsequent PCS entity is preparing to turn on a fixed base station at commercial power and the fixed base station is located within a rectangle (Proximity Threshold) described as follows: The length of the rectangle shall be x where x is a line extending through both nodes of the microwave link to a distance of 48 kilometers (30 miles) beyond each node. The width of the rectangle shall be y where y is a line perpendicular to x and extending for a distance of 24 kilometers (15 miles) on both sides of x. Thus, the rectangle is represented as follows: If the application of the Proximity Threshold test indicates that a reimbursement obligation exists, the clearinghouse will calculate the reimbursement amount in accordance with the cost-sharing formula and notify the subsequent PCS entity of the total amount of its reimbursement obligation. (b) Unlicensed PCS. UTAM's reimbursement obligation is triggered either: (1) when a county is cleared of microwave links in the unlicensed allocation, and UTAM invokes a Zone 1 power cap as a result of third party relocation activities; or (2) a county is cleared of microwave links in the unlicensed allocation and UTAM reclassifies a Zone 2 county to Zone 1 status. 17. A new Section 24.249 is added to Subpart E to read as follows:  24.249 Payment Issues. (a) Timing. On the day that a PCS entity files its prior coordination notice (PCN) in accordance with 101.103(d), it must file a copy of the PCN with the clearinghouse. The clearinghouse will determine if any reimbursement obligation exists and notify the PCS entity in writing of its repayment obligation, if any. When the PCS entity receives a written copy of such obligation, it must pay directly to the PCS relocator the amount owed within thirty days, with the exception of those businesses that qualify for installment payments. A business that qualifies for an installment payment plan must make its first installment payment within thirty days of notice from the clearinghouse. UTAM's first payment will be due thirty days after its reimbursement obligation is triggered as described in  24.247(b). (b) Eligibility for Installment Payments. PCS licensees that are allowed to pay for their licenses in installments under our designated entity rules will have identical payment options available to them with respect to payments under the cost-sharing plan. The specific terms of the installment payment mechanism, including the treatment of principal and interest, are the same as those applicable to the licensee's installment auction payments. If, for any reason, the entity eligible for installment payments is no longer eligible for such installment payments on its license, that entity is no longer eligible for installment payments under the cost-sharing plan. UTAM may make quarterly payments over a five-year period with an interest rate of prime plus 2.5 percent. UTAM may also negotiate separate repayment arrangements with other parties. 18. A new Section 24.251 is added to Subpart E to read as follows:  24.251 Dispute Resolution Under the Cost-Sharing Plan. Disputes arising out of the cost-sharing plan, such as disputes over the amount of reimbursement required, must be brought, in the first instance, to the clearinghouse for resolution. To the extent that disputes cannot be resolved by the clearinghouse, parties are encouraged to use expedited ADR procedures, such as binding arbitration, mediation, or other ADR techniques. 19. A new Section 24.253 is added to Subpart E to read as follows:  24.253 Termination of Cost-Sharing Obligations. The cost-sharing plan will sunset for all PCS entities on April 4, 2005, which is ten years after the date that voluntary negotiations commenced for A and B block PCS entities. Those PCS entities that are paying their portion of relocation costs on an installment basis must continue the payments until the obligation is satisfied. 20. Part 101 of Chapter 1 of Title 47 of the Code of Federal Regulations is amended as follows: PART 101 -- FIXED MICROWAVE SERVICES 21. The authority citation for Part 101 is revised to read as follows: Authority: 47 U.S.C.  154, 303, unless otherwise noted. 22. Section 101.3 is amended by adding the definition for "Secondary Operations" in alphabetical order to read as follows:  101.3 Definitions. * * * * * Secondary Operations. Radio communications which may not cause interference to operations authorized on a primary basis and which are not protected from interference from these primary operations. * * * * * 23. Subpart B is amended by adding a new heading following Section 101.67 to read as follows: POLICIES GOVERNING MICROWAVE RELOCATION FROM THE 1850-1990 AND 2110-2200 MHZ BANDS 24. Section 101.69 is amended by revising the title and the text to read as follows:  101.69 Transition of the 1850-1990 and 2110-2200 MHz bands from the Fixed Microwave Services to Personal Communications Services and emerging technologies. Fixed Microwave Services (FMS) frequencies in the 1850-1990 and 2110-2200 MHz bands listed in  101.147(c), (d) and (e) have been allocated for use by emerging technology (ET) services, including Personal Communications Services (PCS). The rules in this section provide for a transition period during which ET licensees may relocate existing FMS licensees using these frequencies to other media or other fixed channels, including those in other microwave bands. (a) ET licensees may negotiate with FMS licensees authorized to use frequencies in the 1850-1990 and 2110-2200 MHz bands, for the purpose of agreeing to terms under which the FMS licensees would - (1) Relocate their operations to other fixed microwave bands or other media, or alternatively, (2) Accept a sharing arrangement with the ET licensee that may result in an otherwise impermissible level of interference to the FMS operations. (b) FMS operations in the 1850-1990 and 2110-2200 MHz bands, with the exception of public safety facilities defined in  101.77, will continue to be co-primary with other users of this spectrum until two years after the FCC commences acceptance of applications for ET services (voluntary negotiation period), and until one year after an ET licensee initiates negotiations for relocation of the fixed microwave licensee's operations (mandatory negotiation period). In the 1910-1930 MHz band allocated for unlicensed PCS, FMS operations will continue to be co-primary until one year after UTAM, Inc. initiates negotiations for relocation of the fixed microwave licensee's operations. Public safety facilities defined in  101.77 will continue to be co-primary in these bands until three years after the Commission commences acceptance of applications for an emerging technology service (voluntary negotiation period), and until two years after an emerging technology service licensee or an emerging technology unlicensed equipment supplier or representative initiates negotiations for relocation of the fixed microwave licensee's operations (mandatory negotiation period). If no agreement is reached during either the voluntary or mandatory negotiation periods, an ET licensee may initiate involuntary relocation procedures. Under involuntary relocation, the incumbent is required to relocate, provided that the ET licensee meets the conditions of  101.75. 24. A new Section 101.71 is added to Subpart B to read as follows:  101.71 Voluntary Negotiations. During the two or three year voluntary negotiation period, negotiations are strictly voluntary and are not defined by any parameters. However, if the parties have not reached an agreement within one year after the commencement of the voluntary period, the FMS licensee must allow the ET licensee (if it so chooses) to gain access to the existing facilities to be relocated so that an independent third party can examine the FMS licensee's 2 GHz system and prepare an estimate of the cost and the time needed to relocate the FMS licensee to comparable facilities. The ET licensee must pay for any such estimate. 26. A new Section 101.73 is added to Subpart B to read as follows:  101.73 Mandatory Negotiations. (a) If a relocation agreement is not reached during the two or three year voluntary period, the ET licensee may initiate a mandatory negotiation period. This mandatory period is triggered at the option of the ET licensee, but ET licensees may not invoke their right to mandatory negotiation until the voluntary negotiation period has expired. (b) Once mandatory negotiations have begun, an FMS licensee may not refuse to negotiate and all parties are required to negotiate in good faith. Good faith requires each party to provide information to the other that is reasonably necessary to facilitate the relocation process. In evaluating claims that a party has not negotiated in good faith, the FCC will consider, inter alia, the following factors: (1) whether the ET licensee has made a bona fide offer to relocate the FMS licensee to comparable facilities in accordance with Section 101.75(b); (2) if the FMS licensee has demanded a premium, the type of premium requested (e.g., whether the premium is directly related to relocation, such as system-wide relocations and analog-to-digital conversions, versus other types of premiums), and whether the value of the premium as compared to the cost of providing comparable facilities is disproportionate (i.e. whether there is a lack of proportion or relation between the two); (3) what steps the parties have taken to determine the actual cost of relocation to comparable facilities; (4) whether either party has withheld information requested by the other party that is necessary to estimate relocation costs or to facilitate the relocation process. (c) Any party alleging a violation of our good faith requirement must attach an independent estimate of the relocation costs in question to any documentation filed with the Commission in support of its claim. An independent cost estimate must include a specification for the comparable facility and a statement of the costs associated with providing that facility to the incumbent licensee. 27. A new Section 101.75 is added to Subpart B to read as follows:  101.75 Involuntary Relocation Procedures. (a) If no agreement is reached during either the voluntary or mandatory negotiation period, an ET licensee may initiate involuntary relocation procedures under the Commission's rules. ET licensees are obligated to pay to relocate only the specific microwave links to which their systems pose an interference problem. Under involuntary relocation, the FMS licensee is required to relocate, provided that the ET licensee: (1) Guarantees payment of relocation costs, including all engineering, equipment, site and FCC fees, as well as any legitimate and prudent transaction expenses incurred by the FMS licensee that are directly attributable to an involuntary relocation, subject to a cap of two percent of the hard costs involved. Hard costs are defined as the actual costs associated with providing a replacement system, such as equipment and engineering expenses. ET licensees are not required to pay FMS licensees for internal resources devoted to the relocation process. ET licensees are not required to pay for transaction costs incurred by FMS licensees during the voluntary or mandatory periods once the involuntary period is initiated, or for fees that cannot be legitimately tied to the provision of comparable facilities; (2) Completes all activities necessary for implementing the replacement facilities, including engineering and cost analysis of the relocation procedure and, if radio facilities are used, identifying and obtaining, on the incumbents' behalf, new microwave frequencies and frequency coordination; and (3) Builds the replacement system and tests it for comparability with the existing 2 GHz system. (b) Comparable Facilities. The replacement system provided to an incumbent during an involuntary relocation must be at least equivalent to the existing FMS system with respect to the following three factors: (1) Throughput. Communications throughput is the amount of information transferred within a system in a given amount of time. If analog facilities are being replaced with analog, the ET licensee is required to provide the FMS licensee with an equivalent number of 4 kHz voice channels. If digital facilities are being replaced with digital, the ET licensee must provide the FMS licensee with equivalent data loading bits per second (bps). ET licensees must provide FMS licensees with enough throughput to satisfy the FMS licensee's system use at the time of relocation, not match the total capacity of the FMS system. (2) Reliability. System reliability is the degree to which information is transferred accurately within a system. ET licensees must provide FMS licensees with reliability equal to the overall reliability of their system. For digital data systems, reliability is measured by the percent of time the bit error rate (BER) exceeds a desired value, and for analog or digital voice transmissions, it is measured by the percent of time that audio signal quality meets an established threshold. If an analog voice system is replaced with a digital voice system, only the resulting frequency response, harmonic distortion, signal-to-noise ratio and its reliability will be considered in determining comparable reliability. (3) Operating Costs. Operating costs are the cost to operate and maintain the FMS system. ET licensees must compensate FMS licensees for any increased recurring costs associated with the replacement facilities (e.g. additional rental payments, increased utility fees) for five years after relocation. ET licensees may satisfy this obligation by making a lump-sum payment based on present value using current interest rates. Additionally, the maintenance costs to the FMS licensee must be equivalent to the 2 GHz system in order for the replacement system to be considered comparable. (c) The FMS licensee is not required to relocate until the alternative facilities are available to it for a reasonable time to make adjustments, determine comparability, and ensure a seamless handoff. (d) Twelve-Month Trial Period. If, within one year after the relocation to new facilities, the FMS licensee demonstrates that the new facilities are not comparable to the former facilities, the ET licensee must remedy the defects or pay to relocate the microwave licensee to one of the following: its former or equivalent 2 GHz channels, another comparable frequency band, a land-line system, or any other facility that satisfies the requirements specified in paragraph (b) of this section. This trial period commences on the date that the FMS licensee begins full operation of the replacement link. If the FMS licensee has retained its 2 GHz authorization during the trial period, it must return the license to the Commission at the end of the twelve months. 28. A new Section 101.77 is added to Subpart B to read as follows:  101.77 Public Safety Licensees in the 1850-1990 and 2110-2200 MHz bands. (a) Public safety facilities are subject to the three-year voluntary and two-year mandatory negotiation period. In order for public safety licensees to qualify for extended negotiation periods, the department head responsible for system oversight must certify to the ET licensee requesting relocation that: (1) the agency is a licensee in the Police Radio, Fire Radio, Emergency Medical, Special Emergency Radio Services, or that it is a licensee of other Part 101 facilities licensed on a primary basis under the eligibility requirements of Part 90, Subparts B and C; and (2) the majority of communications carried on the facilities at issue involve safety of life and property. (b) A public safety licensee must provide certification within thirty (30) days of a request from a ET licensee, or the ET licensee may presume that special treatment is inapplicable. If a public safety licensee falsely certifies to an ET licensee that it qualifies for the extended time periods, this licensee will be in violation of the Commission's rules and will subject to appropriate penalties, as well as immediately subject to the non-public safety time periods. 29. A new Section 101.79 is added to Subpart B to read as follows:  101.79 Sunset provisions for licensees in the 1850-1990 and 2110-2200 MHz bands. (a) FMS licensees will maintain primary status in the 1850-1990 and 2110-2200 MHz bands unless and until an ET licensee requires use of the spectrum. ET licensees are not required to pay relocation costs after the relocation rules sunset (i.e. ten years after the voluntary period begins for the first ET licensees in the service). Once the relocation rules sunset, an ET licensee may require the incumbent to cease operations, provided that the ET licensee intends to turn on a system within interference range of the incumbent, as determined by TIA Bulletin 10-F or any standard successor. ET licensee notification to the affected FMS licensee must be in writing and must provide the incumbent with no less than six months to vacate the spectrum. After the six-month notice period has expired, the FMS licensee must turn its license back into the Commission, unless the parties have entered into an agreement which allows the FMS licensee to continue to operate on a mutually agreed upon basis. (b) If the parties cannot agree on a schedule or an alternative arrangement, requests for extension will be accepted and reviewed on a case-by-case basis. The Commission will grant such extensions only if the incumbent can demonstrate that: (1) it cannot relocate within the six-month period (e.g., because no alternative spectrum or other reasonable option is available), and; (2) the public interest would be harmed if the incumbent is forced to terminate operations (e.g., if public safety communications services would be disrupted). 30. A new Section 101.81 is added to Subpart B to read as follows:  101.81 Future licensing in the 1850-1990 and 2110-2200 MHz bands. After April 25, 1996, all major modifications and extensions to existing FMS systems in the 1850-1990 and 2110-2200 MHz bands will be authorized on a secondary basis to ET systems. All other modifications will render the modified FMS license secondary to ET operations, unless the incumbent affirmatively justifies primary status and the incumbent FMS licensee establishes that the modification would not add to the relocation costs of ET licensees. Incumbent FMS licensees will maintain primary status for the following technical changes: (a) decreases in power; (b) minor changes (increases or decreases) in antenna height; (c) minor location changes (up to two seconds); (d) any data correction which does not involve a change in the location of an existing facility; (e) reductions in authorized bandwidth; (f) minor changes (increases or decreases) in structure height; (g) changes (increases or decreases) in ground elevation that do not affect centerline height; (h) minor equipment changes. 31. Section 101.147 is amended by adding footnote 20 to the entries for frequency ranges 1,850 - 1,990, 2,130 - 2,150, 2,150 - 2,160 and 2,180 - 2,200 MHz and revising footnote 20 to read as follows:  101.147 Frequency assignments. (a) * * * 1,850 - 1,990 MHz /20/ * * * 2,130 - 2,150 MHz /20/ /22/ 2,150 - 2,160 MHz /20/ /22/ * * * 2,180 - 2,200 MHz /20/ /22/ * * * /20/ New facilities in these bands will be licensed only on a secondary basis. Facilities licensed or applied for before January 16, 1992, are permitted to make modifications and minor extensions in accordance with 101.77 and still retain primary status. * * * /22/ Frequencies in these bands are for the exclusive use of Private Operational Fixed Point-to-Point Microwave Service (Part 101). * * * APPENDIX C LIST OF PARTIES SUBMITTING COMMENTS COMMENTS Alcatel Network Systems, Inc. (ANS Comments), November 30, 1995 Alexander Utility Engineering, Inc. (AUE Comments), November 30, 1995 American Gas Association (AGA Comments), November 30, 1995 American Petroleum Institute (API Comments), November 30, 1995 American Public Power Association (APPA Comments), November 30, 1995 Association of American Railroads (AAR Comments), November 30, 1995 Association of Public-Safety Communications Officials-International, Inc. (APCO Comments), November 30, 1995 AT&T Wireless Services, Inc. (AT&T Comments), November 30, 1995 BellSouth Corporation (BellSouth Comments), November 30, 1995 Carolina PCS I Limited Partnership (Carolina PCS I), November 30, 1995 Central Iowa Power Cooperative (CIPCO Comments), November 13, 1995 City of San Diego (City of San Diego Comments), November 30, 1995 County of Los Angeles Sheriff's Department and Internal Services Department (County of LA Comments), November 30, 1995 Cox & Smith, Inc. (Cox & Smith Comments), November 30, 1995 DCR Communication, Inc (DCR Comments), November 30, 1995 East River Electric Power Cooperative (East River Comments), November 30, 1995 GO Communications Corporation (GO Comments), November 30, 1995 GTE Service Corporation (GTE Comments), November 30, 1995 Industrial Telecommunications Association, Inc. (ITA Comments) November 30, 1995 Interstate Natural Gas Association of America (INGAA Comments), November 30, 1995 Infocore Wireless, Inc. (Infocore Comments), November 30, 1995 InterCel, Inc. (InterCel Comments), November 30, 1995 Iowa, L.P. (Iowa L.P. Comments), November 30, 1995 Kansas Department of Transportation (Kansas DOT Comments), November 30, 1995 Maine Microwave Associates (Maine Microwave Comments), November 30, 1995 Minnesota Equal Access Network Services, Inc. (MEANS Comments), November 30, 1995 National Rural Electric Cooperative Association (NRECA Comments), November 30, 1995 Omnipoint Communications Inc. (Omnipoint Comments), November 30, 1995 Pacific Bell Mobil Services (PacBell Comments), November 30, 1995 PCS PrimeCo., L.P. (PCS PrimeCo Comments), November 30, 1995 Personal Communications Industry Association (PCIA Comments), November 30, 1995 South Carolina Public Service Authority (Santee Cooper Comments), November 30, 1995 Southern California Gas Company (SoCal Comments), November 30, 1995 Southern Company (Southern Comments), November 30, 1995 Southwestern Bell Mobile Systems, Inc. (SBMS Comments), November 30, 1995 Sprint Telecommunications Venture (Sprint Comments), November 30, 1995 Telecommunications Industry Association (TIA Comments), November 30, 1995 Tenneco Energy (Tenneco Comments), November 30, 1995 U.S. Airwaves, Inc. (AirWaves Comments), November 30, 1995 UTAM, Inc. (UTAM Comments), November 30, 1995 UTC (UTC Comments), November 30, 1995 Valero Transmission, L.P. (Valero Comments), November 30, 1995 Western Wireless Corporation (Western Comments), November 30, 1995 Williams Wireless, Inc. (WWI Comments), November 30, 1995 LATE-FILED COMMENTS Cellular Telecommunications Industry Association (CTIA Comments), December 1, 1995 REPLY COMMENTS Alcatel Network Systems, Inc. (ANS Reply Comments), January 11, 1996 Alexander Utility Engineering, Inc. (AUE Reply Comments), January 11, 1996 American Petroleum Institute (API Reply Comments), January 11, 1996 American Public Power Association (APPA Reply Comments), January 11, 1996 Association of American Railroads (AAR Reply Comments), January 16, 1996 AT&T Wireless Services, Inc. (AT&T Reply Comments), January 11, 1996 BellSouth Corporation (BellSouth Reply Comments), January 11, 1996 Brazos Electric Cooperative (Brazos Reply Comments), January 11, 1996 Chester Telephone Co., et. al. (Chester Telephone Reply Comments), January 16, 1996 Colorado Springs Utilities (CSU Reply Comments), January 11, 1996 COMSAT Corporation (COMSAT Reply Comments), January 11, 1996 Comsearch (Comsearch Reply Comments), January 11, 1996 Cooperative Power (Cooperative Power Reply Comments), January 11, 1996 County of Los Angeles Sheriff's Department and Internal Services Department (County of Los Angeles' Comments), January 11, 1996 DCR Communication, Inc (DCR Reply Comments), January 11, 1996 Duke Power Company (Duke Power Reply Comments), January 11, 1996 Entergy Services, Inc. (Entergy Reply Comments), January 11, 1996 GO Communications Corporation (GO Reply Comments), January 16, 1996 Keller and Heckman (Keller and Heckman Reply Comments), January 11, 1996 National Rural Electric Cooperative Association (NRECA Reply Comments), January 16, 1996 Omaha Public Power District (Omaha Public Power Reply Comments), January 11, 1996 Omnipoint Communications Inc. (Omnipoint Reply Comments), January 11, 1996 Pacific Bell Mobil Services (PacBell Reply Comments), January 11, 1996 Personal Communications Industry Association (PCIA Reply Comments), January 11, 1996 PCS PrimeCo., L.P. (PrimeCo Reply Comments), January 11, 1996 Southern California Gas Company (SoCal Reply Comments), January 16, 1996 Southern Company (Southern Reply Comments), January 11, 1996 Southwestern Bell Mobile Systems, Inc. (SBMS Reply Comments), January 11, 1996 Sprint Telecommunications Venture (Sprint Reply Comments), January 11, 1996 SRI PCS Resources, Inc. (SRI Reply Comments), January 11, 1996 Telecommunications Industry Association (TIA Reply Comments), January 11, 1996 Tenneco Energy (Tenneco Reply Comments), January 16, 1996 UTAM, Inc. (UTAM Reply Comments), January 11, 1996 UTC (UTC Reply Comments), January 16, 1996 Western Wireless Corporation (Western Reply Comments), January 11, 1996 Wireless Telephone Company of America (WTCA Reply Comments), January 11, 1996 Williams Wireless, Inc. (WWI Reply Comments), January 11, 1996 LATE-FILED REPLY COMMENTS City of Dallas (City of Dallas Reply Comments), January 18, 1996 Note: Ex parte filings are available on the Commission's Record Imaging Processing System. APPENDIX D INITIAL REGULATORY FLEXIBILITY ANALYSIS As required by Section 603 of the Regulatory Flexibility Act, the Commission has prepared an Initial Regulatory Flexibility Analysis (IRFA) of the expected impact on small entities of the policies and rules proposed in this Further Notice of Proposed Rule Making (Further Notice). Written public comments are requested on the IRFA. Reason for Action: This rulemaking proceeding was initiated to secure comment on whether the negotiation period for the D, E, and F block PCS licensees should be adjusted by shortening the voluntary period by one year (i.e., to one year for non- public safety incumbents and two years for public safety incumbents) and lengthening the mandatory negotiation period for these blocks by a corresponding year (i.e., to two years for non-public safety incumbents and three years for public safety incumbents); whether the negotiation periods for the C block should be subject to the same readjustments as the negotiation periods for the D, E, and F blocks; and whether microwave incumbents should be permitted to seek reimbursement from PCS licensees through the cost-sharing plan. This proposal would facilitate negotiations between the parties and promote the efficient relocation of microwave licensees by encouraging microwave incumbents to relocate their own microwave systems, thus bringing PCS services to the public in an speedy manner. Objectives: Our objective is to facilitate negotiations between PCS licensees and microwave incumbents. This proposal would also enable microwave incumbents who pay to relocate their own links to collect reimbursement from PCS licensees that benefit from the relocation. Cost-sharing is necessary to enhance the speed of relocation and provide an incentive to incumbents to move their own links. This action would result in faster deployment of PCS and delivery of service to the public. Legal Basis: The proposed action is authorized under the Communications Act, Sections 4(i), 7, 303(c), 303(f), 303(g), 303(r), and 332, 47 U.S.C.  154(i), 303(c), 303(f), 303(g), 303(r), 332, as amended. Reporting, Recordkeeping, and Other Compliance Requirements: Under the proposal contained in the Further Notice, microwave incumbents who relocate their own links would be required to document the relocation costs paid and report them to a central clearinghouse. Later PCS market entrants would then be required to file a Prior Coordination Notification with the clearinghouse and, if necessary, reimburse the incumbent for relocation expenses. Federal Rules Which Overlap, Duplicate or Conflict With These Rules: None. Description, Potential Impact, and Number of Small Entities Involved: This proposal would benefit small PCS licensees by facilitating negotiations with microwave incumbents and allowing them to bring their services to market sooner. This proposal would also benefit small microwave incumbents by enabling them to relocate their entire system at once and collect reimbursement from PCS licensees who benefit from the resulting clearance of the spectrum. Such incumbents would therefore benefit from the reduced time and administrative inconvenience involved with relocating links at different times. The 2 GHz fixed microwave bands support a number of industries that provide vital services to the public. We are committed to ensuring that the incumbents' services are not disrupted and that the economic impact of this proceeding on the incumbents is minimal. We must further take into consideration that not all of the incumbent licensees are large businesses, particularly in the bands above 2 GHz, and that many of the licensees are local government entities that are not funded through rate regulation. We believe that this proceeding would further our policy of encouraging rapid deployment of PCS and system-wide relocations of microwave incumbents. After evaluating comments filed in response to the Further Notice, the Commission will examine further the impact of all rule changes on small entities and set forth its findings in the Final Regulatory Flexibility Analysis. Significant Alternatives Minimizing the Impact on Small Entities Consistent with the Stated Objectives: We have reduced burdens wherever possible. The regulatory burdens we have retained are necessary in order to ensure that the public receives the benefits of innovative new services in a prompt and efficient manner. We will continue to examine alternatives in the future with the objectives of eliminating unnecessary regulations and minimizing any significant economic impact on small entities. 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 comment deadlines set forth in this Further Notice. April 25, 1996 Statement of Chairman Reed Hundt Re: Amendment to the Commission's Rules Regarding a Plan for Sharing the Costs of Microwave Relocation (FCC 96- 196) The record in this proceeding indicates that in the vast majority of cases PCS licensees and incumbent fixed microwave licensees are successfully negotiating fair and equitable relocation agreements. There is, however, some evidence that in a small minority of cases negotiations are being stalled by incumbent microwave licensees demanding unreasonable premiums as a condition of relocation. The amendments and clarifications we adopt in this Report and Order and Further Notice of Proposed Rule Making are designed to add certainty to the relocation process and facilitate negotiations for early, efficient and equitable relocation of incumbent 2 GHz licensees. I am confident that the action we take today will facilitate the rapid introduction of PCS to the public by expediting the relocation of fixed microwave incumbents without causing any disruption or harm to incumbent operations. In order to encourage voluntary negotiations for early relocation we have taken the following steps:  We adopt a cost sharing plan that will encourage system-wide relocation by providing for reimbursement of relocation costs from future PCS licensees.  One year after the initiation of the voluntary negotiation period, we require microwave incumbents to provide access to their facilities so that an independent estimate can be made of the actual cost of relocating the incumbent to comparable facilities.  We clarify that in evaluating claims of failure to negotiate in good faith during the mandatory negotiation period we will consider the type of payment demands being made and the proportionality of such payment demands to actual relocation costs.  We clarify that PCS licensees seeking involuntary relocation must provide facilities that are "comparable" in terms of (1) communications throughput, (2) system reliability, and (3) operating costs.  We clarify that microwave incumbents still operating in the 2 GHz band ten years after the voluntary period has commenced will be required to pay their own relocation expenses if a PCS licensee requires use of the spectrum. The relocation rules we adopted in 1993 in ET Docket No. 92-9, established procedures for emerging technology licensees in the 2 GHz band to relocate incumbent microwave licensees to available frequencies in higher bands. This relocation process consists of a two-year voluntary negotiation period (three years for public safety incumbents) and a one-year mandatory negotiation period (two years for public safety), after which the incumbent becomes subject to involuntary relocation provided the PCS licensee pays all cost of relocation to comparable facilities. Our existing rules provide that during the voluntary negotiation period parties are encouraged but not required to negotiate the terms of relocation. Following the expiration of this fixed period, emerging technology licensees may initiate a one-year period for mandatory negotiations, during which time the parties are required to negotiate in good faith. After the expiration of the mandatory negotiation period, involuntary relocation may be sought by the emerging technology licensee, provided such licensee pays all the costs of relocating the incumbent to comparable facilities. We adopted this relocation process after receiving extensive input by all interested parties and from a number of members of Congress. The framework was designed to balance carefully the needs of new emerging technology licensees for early access to the spectrum with those of the microwave incumbents for a smooth and seamless transition to new facilities in higher spectrum bands. We concluded that a process that relied primarily on voluntary negotiations, would provide the best balance between the ensuring orderly and fair relocation of incumbent microwave facilities and the national interest in facilitating the development of new technologies and services. Although I strongly support the measures we have taken today to clarify our rules and to provide incentives for early relocation, I have concerns about the questions raised in the Further Notice relating to whether we should shorten the voluntary negotiation period for the C, D, E and F PCS spectrum blocks. In the Further Notice we seek comment on whether we should shorten the voluntary negotiation period by one year, and lengthen the mandatory negotiation period by one year, for PCS licensees in the D, E and F blocks. We also ask whether the Commission should adjust the negotiation periods for the C block. I question whether the public interest would be served by adjusting these negotiation periods and altering the expectations of the parties at this time. Because auctions for the D, E, and F block have not commenced and relocation negotiations are not underway, changes to these relocation rules may be less disruptive. However, unlike the D, E, and F blocks, the C block auction is underway and is in its final stage. C block applicants had advance notice of the relocation rules and have presumably taken them into account in their bidding. In addition, incumbents located on the C block have relied on the existing relocation rules. In considering whether to shorten the period for voluntary negotiations for the C, D, E and F blocks, we should be mindful of the fact that the 2 GHz fixed microwave bands support communications of incumbent police, fire and emergency medical licensees, as well as public utilities and others that provide essential services to the public. It is critical that these licensees be able to rely on established rules and that the relocation process not cause disruption or harm to their communications services. I am confident that in most cases in which relocation is necessary, voluntary negotiations will continue to be successful and will result in the least disruptive means for accommodating new emerging technology services in this spectrum. Cost sharing will also encourage system-wide relocation that will minimize disruption to incumbent microwave facilities, while more rapidly facilitating the deployment of PCS. Nevertheless, while adjusting the negotiation periods may facilitate more rapid deployment of PCS by further expediting the relocation process, parties should comment upon how any changes to the voluntary and mandatory negotiation periods will affect incumbents' operations. Our relocation rules must provide adequate time for incumbent licensees to prepare for relocation and must continue to prevent the disruption of existing 2 GHz services. Separate Statement of Commissioner James H. Quello April 25, 1996 Re: Amendment of the Commission's Rules Regarding a Plan for Sharing the Costs of Microwave Relocation, WTB Docket No. 95 - 157; RM - 8643 This Report and Order and Further Notice of Proposed Rule Making clarifies some aspects of the relocation rules applicable when emerging technologies displace incumbent licensees. In the instant matter, the microwave relocation rules continue to be the most controversial part of our PCS regulatory scheme. Although the majority of the negotiations are proceeding as intended, in several instances the negotiation process has broken down. These disputes appear to be more than "hard ball" negotiations; they appear to be instances of "gaming" some unintended ambiguities in the rules. We, therefore, adopt some "fine-tuning" of this Commission's relocation rules to clarify this Commission's intent. First and foremost, we adopt a cost sharing plan that will facilitate the relocation of the microwave incumbents and the roll-out of PCS, with detriment to neither. I do not want this significant achievement to get lost in the minutiae of wrangling over legal terms of art in this contentious proceeding. Indeed, the proposal for a cost sharing mechanism was the basis for opening this rule making. The focus should be on achieving the overarching goal of the relocation rules, viz., to provide comparable facilities to the incumbents that are paid for by the new entrants. This process must be based on verifiable data for actual costs of demonstrably comparable facilities. The microwave incumbents are to be made whole. They were to be no worse off after the relocation than before. That is, their communications system should have the same (i.e., "comparable") performance criteria. These amendments reiterate that this Commission will not tolerate instances of over-reaching by permitting demands for more than comparable facilities. I noted at the NPRM stage that the virtue of the relocation procedures -- their inherent flexibility -- can also be the source of some difficulties. That is always the situation when the Commission correctly decides to rely on negotiations between the parties rather than heavy- handed governmental intrusion into what should be private contractual matters. This Commission wisely built in this give-and-take to accommodate the needs of both the displaced incumbents and the new entrants. While I believe that some fine-tuning is in order, I want to reiterate my support for the relocation procedures and urge the parties to negotiate forthrightly. I find it somewhat surprising that we would need to explicitly require our licensees, whether they are incumbents or new entrants, to negotiate in good faith. I believe that good faith behavior is required at all times. Some negotiations, however, have floundered significantly. These instances, although a minority, nevertheless threaten the rapid and rational deployment of PCS. Therefore, in addition to more explicitly defining such terms as "comparable facilities" my colleagues also wish to define what constitutes "good faith". I myself believe that this definition will at best be proven superfluous once the other elements of the Further Notice are in place. These will assist the parties in achieving a fair result that fulfills our goal to facilitate emerging technologies by refocusing the negotiation on the fundamental issue of determining the actual costs of relocating the interfering microwave links.