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INTRODUCTION p>"(# 1 X\II. EXECUTIVE SUMMARY p>"(# 2 X\III. BACKGROUND p>"(# 3 X\IV. DISCUSSION  XX` ` A. Geographic Licensing for NonNationwide Channels ` p>"(# 7 XX` ` X ` ` 1. Overview p>"(# 7  e iXX` ` X ` ` 2. Geographic Area Licensing for Exclusive 929 MHz and 931 MHz Bands p!(# 10  e iaXX` ` X ` ` 3. Geographic Area Licensing for Common Carrier Paging in the 3536 MHz, 4344 MHz, 152159 MHz, and 454460 MHz Bands p"(# 20"]&0*o(o(qq$"Ԍ XX` ` X X a. Common carrier paging services in the 3536 MHz, 4344 MHz, 152159 MHz, and 454460 MHz bands p"(# 20 XX` ` X X b. Other services in the 152159 MHz and 454460 MHz bands p"(# 26 XX` ` X ` ` 4. Shared PCP Channels p"(# 37 XX` ` X ` ` 5. Exempting Certain Incumbents from Competitive Bidding p"(# 44 XX` ` B. Geographic Area Licensing for Nationwide Channels ` p"(# 46 XX` ` C. Protection for Incumbents ` p"(# 55 XX` ` D. Coverage Requirements ` p"(# 59 XX` ` E. CoChannel Interference Protection ` p"(# 66 XX` ` X ` ` 1. CoChannel Interference Protection Incumbent Licensees p"(# 66  e iXX` ` X ` ` 2. CoChannel Interference Protection Adjacent Geographic Licensees p"(# 70 XX` ` X ` ` 3. Maximum Power and HeightPower Limits p"(# 74 XX` ` F. Licensing in Mexican and Canadian Border Areas ` p"(# 80 XX` ` G. Eligibility to Participate in Competitive Bidding ` p`"(#83 XX` ` H. Channel Aggregation Limit ` p"(# 86 XX` ` I. Competitive Bidding Issues ` p"(# 89 XX` ` X ` ` 1. Competitive Bidding Design p"(# 89 XX` ` X X a. Bidding methodology p"(# 89 XX` ` X X b. License grouping p"(# 93 XX` ` X X c. Bidding procedures p"(# 98 XX` ` X ` ` 2. Procedural and Payment Issues p!(# 117 XX` ` X a. Preauction application procedures(# p!(#117 XX` ` X b. Shortform applications p!(# 122 XX` ` X X c. Amendments and modifications p!(# 129 XX` ` X X d. Upfront payments p!(# 132 XX` ` X X e. Down payments p!(# 137 XX` ` X X f. Bid withdrawal, default, and disqualification p!(# 141 XX` ` X X g. Longform applications p!(# 147 XX` ` X X h. Petitions to deny and limitations on settlements p!(# 150 XX` ` X ` ` 3. Regulatory Safeguards p!(# 151 XX` ` X X a. Anticollusion rules p!(# 151 XX` ` X X b. Transfer disclosure requirements p!(# 160 XX` ` X ` ` 4. Treatment of Designated Entities p!(# 163 XX` ` X X a. Overview and objectives p!(# 163  X4XX` ` X X b. Small businesses p!(# 165 XX` ` X X c. Minority and womenowned businesses p!(# 169 XX` ` X X d. Bidding credits p!(# 174 XX` ` X X e. Installment payments and down payments p!(# 182 XX` ` X X f. Partitioning p!(# 188 XX` ` X X g. Unjust enrichment provisions for full transfers p!(# 196 XX` ` X X h. Spectrum setaside p!(# 200"Q%0*&&qqe#"ԌV. FURTHER NOTICE OF PROPOSED RULEMAKING XX` ` A. Coverage Requirements for Nationwide Channels ` p!(# 203 XX` ` B. Partitioning and Disaggregation ` p!(# 204 XX` ` C. Shared Channels ` p!(# 220 VI. CONCLUSIONp!(#222 X\VII. PROCEDURAL MATTERS and ORDERING CLAUSES p!(#223 APPENDIX A: Final Rules APPENDIX B: List of Commenters  X 4APPENDIX C: Final Regulatory Flexibility Analysis (Second Report and Order)  X 4APPENDIX D: Initial Regulatory Flexibility Analysis (Further Notice of Proposed Rulemaking)" 0*&&qq\ "  X4,7 I. INTRODUCTION ă  X4 "1. In this Second Report and Order (Order) we adopt rules governing geographic area  xlicensing of Common Carrier Paging (CCP) and 929 MHz Private Carrier Paging (PCP), and  xVcompetitive bidding procedures for auctioning mutually exclusive applications for these licenses.  xWe also allow geographic area paging licensees to partition their license area. In this Further  Xa4 xVNotice of Proposed Rulemaking (Further Notice) we seek comment on (1) whether we should  xadopt coverage requirements for nationwide licenses, (2) various issues related to geographic  xpartitioning by paging licensees and whether spectrum disaggregation is appropriate for paging, and (3) whether to revise the application procedures for shared channels.  X 4 II. EXECUTIVE SUMMARY ă  X 4 "2. In the Notice,  yO;' "8 ԍRevision of Part 22 and Part 90 of the Commission's Rules to Facilitate Future Development of Paging  {O'Systems, WT Docket No. 9618, Notice of Proposed Rulemaking, 11 FCC Rcd 3108 (1996) (Notice). we proposed a transition to geographic area licensing for CCP and PCP  xchannels, and competitive bidding procedures for resolving mutually exclusive applications for  xythese licenses. We received 83 comments and 17 reply comments to the issues raised in the  X4 xNotice.H" yOR' " ԍAppendix B provides the full and abbreviated names of the parties filing comments and reply comments.  x In the case of joint comments we have used the name of the first party listed on the joint comments. In addition  {O' x3 to comments filed in response to the issues raised in the Notice regarding the final rules, we also received 76  x comments and 36 reply comments (denoted here as "interim comments" or "interim reply comments") to the interim  {Ot' xQ licensing proposals. The interim rules are set forth in the First Report and Order in this docket. See Revision of  x Part 22 and Part 90 of the Commission's Rules to Facilitate Future Development of Paging Systems, WT Docket  {O' xD No. 9618, First Report and Order, 11 FCC Rcd 16570 (1996) (First Report and Order); reconsideration in Order  {O'on Reconsideration of First Report and Order, 11 FCC Rcd 7409 (1996) (Reconsideration Order). After considering the record of this proceeding, we are adopting geographic area licensing and competitive bidding procedures for paging, as follows:  X<4 "XAll mutually exclusive applications for nonnationwide 931 MHz channels and exclusive  "nonnationwide 929 MHz channels will be subject to competitive bidding for geographic  X4 "[area licenses for 51 Major Trading Areas (MTAs).B2  yO' " ԍRand McNally organizes the 50 states and the District of Columbia into 47 MTAs and 487 Basic Trading  x Areas (BTAs). Rand McNally is the copyright owner of the MTA/BTA Listings, which list the counties contained  x in each BTA/MTA, as embodied in Rand McNally's Trading Area System BTA/MTA Diskette and geographically  {OI"' xQ represented in the map contained in Rand McNally's Commercial Atlas & Marketing Guide. Rand McNally has  xU licensed the use of its copyrighted MTA/BTA Listings and maps for certain services such as PCS, 800 MHz and 900  x MHz Specialized Mobile Radio (SMR), and Local Multipoint Distribution Services. A paging authorization grantee  x who does not obtain a copyright license (either through a blanket license agreement or some other arrangement) from  x! Rand McNally for use of the copyrighted material may not rely on grant of a Commission authorization as a defense"k%0*&&`%" to any claim of copyright infringement brought by Rand McNally against such grantee. In addition to the 47 Rand McNally"X0*&&qqL"  "hMTAs, we are adding three MTAs for the U.S. territories of (1) Guam and the Northern  "Mariana Islands, (2) Puerto Rico and the U.S. Virgin Islands, and (3) American Samoa. We are also licensing Alaska as a single area separate from the Seattle MTA.(#  X4 "XNationwide 931 MHz and 929 MHz geographic area licenses will be granted for the  "nationwide channels. The three nationwide CCP channels are those identified in 47  "C.F.R.  22.531(b). The 23 nationwide 929 MHz channels are those channels where a  "0licensee had sufficient authorizations as of February 8, 1996 to qualify for nationwide  "exclusivity under 47 C.F.R.  90.945. The nationwide geographic area licenses will not be subject to competitive bidding.(#  X 4 "XAll remaining CCP channels (i.e., 3536 MHz, 4344 MHz, 152159 MHz, and 454460  "MHz) will be subject to competitive bidding for geographic area licenses in 172 Economic  X 4 "Areas (EAs)y X yO' "E ԍThe Bureau of Economic Analysis of the Department of Commerce has divided the U.S. into 172 EAs,  x effective April 10, 1995, to facilitate regional economic analysis. Each EA consists of one or more economic nodes  x ԩ metropolitan areas or similar areas that serve as centers of economic activity and the surrounding counties that  xD are economically related to the nodes. Final Redefinition of the BEA Economic Areas, Department of Commerce, Docket No. 950302064506401, 60 Fed. Reg. 13,114 (Mar. 10, 1995). y for each channel. The Rural Radiotelephone Service, including Basic  X 4 "Exchange Telecommunications Radio Service (BETRS),  yOy' " ԍBETRS are radio loops that can take the place of expensive wire or cable to remote areas, and are a part  x7 of intrastate basic exchange service. Basic Exchange Telecommunications Radio Service, CC Docket No. 86495,  {O ' xt Report and Order, 3 FCC Rcd 214, 217,  27 (1987). Only local exchange carriers that have been state certified  x to provide basic exchange telephone service (or others having state approval to provide such service) in the pertinent area are eligible to hold authorizations for BETRS. 47 C.F.R.  22.702. is included in the geographic  "~area licensing and the competitive bidding process on paging channels for which these  "Nservices are also eligible. Rural Radiotelephone Service and BETRS operators may also obtain additional facilities on a secondary basis.(#  XM4 "9XShared Part 90 paging channels will not be subject to geographic area licensing or competitive bidding. (#  X4 " XAfter receiving an MTA or EA license for a channel, licensees will be subject to the  "following coverage requirements: for each MTA or EA, the licensee must provide  "coverage to onethird of the population within three years of the license grant, and to two "thirds of the population within five years of the license grant. In the alternative, the MTA  "Nor EA licensee may provide substantial service to the geographic license area within five years of license grant.(# "~ 0*&&qq`"Ԍ X4 "XIf the MTA or EA licensee fails to meet the above coverage requirements, the geographic  "4area license will be terminated and subject to auction. The licensee may retain any sites  "that were authorized, constructed, and operating at the time the geographic area license was granted.(#  X4 "AXFor cochannel interference protection (with respect to incumbent licensees) we will use  "Wthe fixed distances in Tables E1 and E2 in Section 22.537 of the Commission's rules  "dfor the exclusive 929 MHz and 931 MHz channels. The formulas for determining the service and interference contours for the remaining CCP channels will not be changed.(#  X 4 "AXAll pending mutually exclusive applications for paging licenses filed with the Commission  X 4 "on or before the adoption date of this Order will be dismissed. All nonmutually  "Sexclusive applications filed with the Commission on or before July 31, 1996 will be  " processed. All applications (other than applications on nationwide and shared channels) filed after July 31, 1996 will be dismissed. (#  X' Further Notice of Proposed Rulemaking  Xd4 "XIn the Further Notice, we seek comment on coverage requirements for nationwide  "licensees, partitioning of paging licenses by small businesses, the feasibility of  "disaggregating paging spectrum, and modifying the application process for shared channels to reduce or eliminate paging license application fraud.(# f*****  " The Commission makes no representations or warranties about the use of this spectrum  x@for particular services. Applicants should be aware that an FCC auction represents an opportunity  xto become an FCC licensee in this service, subject to certain conditions and regulations. An FCC  x/auction does not constitute an endorsement by the FCC of any particular services, technologies  xor products, nor does an FCC license constitute a guarantee of business success. Applicants  xshould perform their individual due diligence before proceeding as they would with any new business venture.  X$4A9 III. BACKGROUND ă  "3. In this proceeding we examine our paging regulations for Part 22 and Part 90 paging  xservices pursuant to the statutory objective for regulatory symmetry for all Commercial Mobile  xRadio Services (CMRS) set forth in the Omnibus Budget Reconciliation Act of 1993 (1993  X!4 xBudget Act). ! yO*$' " ԍOmnibus Budget Reconciliation Act of 1993, Pub. L. No. 10366 (1993 Budget Act), Title VI   {O$'6002(b)(2)(A), (B), 107 Stat. 312 (largely codified at 47 U.S.C.  332 et seq.).  The 1993 Budget Act mandated that substantially similar mobile services receive  X"4 xVcomparable regulatory treatment. In the CMRS Second Report and Order, we held that PCP"""0*&&qq "  X4 xcservices offered for profit were subject to reclassification as CMRS as of August 10, 1996.L {Oy' " ԍImplementation of Section 3(n) and 332 of the Communications Act, GN Docket No. 93252, Second Report  {OC' xx and Order, 9 FCC Rcd 1411, 1452,  97 (1994) (CMRS Second Report and Order). The CMRS Second Report and  {O ' x Order discussed the reclassification of PCP as CMRS, noted that there are no longer any real differences between  {O' x private carrier and common carrier paging systems, and concluded that PCPs should be reclassified as CMRS. CMRS  {O' x Second Report and Order, 9 FCC Rcd at 145253,  97. The Commission noted that the CMRS classification is not  x extended to notforprofit, noninterconnected paging systems, which would be presumptively classified as private  {O3' xQ mobile radio services (PMRS). Id. Therefore, we are not revising the rules governing the nonreclassified PMRS  x systems in this proceeding. To the extent that a PMRS provider may use or wish to obtain an exclusive channel for  x which we are establishing geographic licensing and competitive bidding, the geographic licensing and competitive bidding rules adopted herein will apply.L In  X4 xour Further Notice of Proposed Rulemaking, we tentatively concluded that these paging services,  x8CMRS and former PMRS reclassified as CMRS, should be deemed substantially similar for  X4 x/statutory purposes.$l  yO ' " ԍImplementation of Sections 3(n) and 332 of the Communications Act, GN Docket No. 93252, Further  {O'Notice of Proposed Rulemaking, 9 FCC Rcd 2863, 2868,  19 (1994) (Further Notice of Proposed Rulemaking).$ In the CMRS Third Report and Order, we concluded that all CMRS are  X4 xsubstantially similar services.g \  yO' "_ ԍImplementation of Sections 3(n) and 332 of the Communications Act, Regulatory Treatment of Mobile  {O' xM Services, GN Docket No. 93252, Third Report and Order, 9 FCC Rcd 7988, 8007, 8035  35, 78 (1994) (CMRS  {O'Third Report and Order).g We noted, however, that not all substantially similar services must  xhave identical technical and operational rules, especially if the imposition of such identical rules  xlwould require carriers to reconfigure their services in ways that would adversely affect their  Xc4 xcability to compete. \c {O' " ԍCMRS Third Report and Order, 9 FCC Rcd at 8036,  79. We deferred further action to modify the rules  x governing paging services, stating that we would examine the paging rules in a future proceeding to determine  {O'whether further conforming of the rules is feasible. Id. at 8053,  122. We also stated that our goal is to give carriers offering substantially similar  XL4services the flexibility to compete in whatever manner they choose.L L {O 'ԍId. at 8036,  79.L  X54  X 4 "'4. In our Notice, we proposed a transition from sitebysite licensing to geographic area  X 4 xlicensing for all exclusive, nonnationwide paging services.[  {OZ'ԍNotice, 11 FCC Rcd at 3113,  21.[ We also proposed to adopt  X 4 xNcompetitive bidding rules for the geographic area licenses.S 2 {O!'ԍId. at 3123,  7172.S We stated that a goal in this  X 4 xuproceeding is to ensure that our rules for paging services are consistent with our rules for"  0*&&qq "  X4 xcompeting services, such as narrowband Personal Communications Services (PCS),\ yOy' "8 ԍNarrowband PCS is defined as PCS services operating in the 901902 MHz, 930931 MHz, and 940941  {OA' x MHz bands. 47 C.F.R.  24.5. See Amendment of the Commission's Rules to Establish New Narrowband Personal  {O 'Communications Services, GEN Docket No 90314, First Report and Order, 8 FCC Rcd 7162,  1 (1993). so that  X4competitive success is dictated by the marketplace, rather than by regulatory distinctions.Z {O'ԍNotice, 11 FCC Rcd at 3109,  2.Z  X4 "5. Due to the fundamental changes we proposed in the Notice, we suspended acceptance  X4 x"of new applications for paging channels as of February 8, 1996.~ {O ' " ԍId. at 313637,  139143. The nationwide channels were excluded from the interim licensing freeze. Id. at 3137,  142. We observed that continuing  X4 x&to accept new applications after releasing the Notice with the proposed rule changes would impair  Xz4 x[the objectives of this proceeding.Oz {O'ԍId. at 3136,  139. O Subsequently, we partially lifted the paging freeze for  xincumbent licensees by allowing incumbents to file applications for additional sites within 65  XL4 x kilometers (40 miles) of operating sites in the First Report and Order in this docket.v^Lj  {Og' "_ ԍSee First Report and Order at  25. Additionally, the First Report and Order exempted BETRS, Rural  {O1' x Radiotelephone Service, and Special Emergency Radio Service (SERS) from the interim paging freeze. First Report  {O'and Order at  36.v We stated  xthat the Bureau would process all paging applications filed by July 31, 1996 for additional sites  X 4under the interim rules.  {Oa' " ԍFCC Clarifies Processing of License Applications Under Interim Paging Rules, Public Notice, DA 96930 (released June 10, 1996).  X 4 "J6. In this Order we adopt final rules governing licensing of paging systems, including  xa transition to geographic area licensing for exclusive, nonnationwide channels in the 3536  x[MHz, 4344 MHz, 152159 MHz, 454460 MHz, 929930 MHz, and 931932 MHz bands  xlallocated for paging; competitive bidding rules for granting the mutually exclusive geographic  xparea nonnationwide licenses; and a standard methodology for providing protection to incumbent  X4 xlicensees from cochannel interference for the 929930 MHz and 931932 MHz paging bands.  Xj4 xDue to the transition to geographic area licensing in this Order, all pending mutually exclusive  XU4 xppaging applications will be dismissed, including those filed under the interim rules. Nonmutually  xcexclusive paging applications filed on or before July 31, 1996 will be processed. All applications  xfiled after July 31, 1996 will be dismissed (other than applications for nationwide or shared  xchannels) and, other than for the shared channels, no additional sitebysite applications will be  xaccepted (with the exception of applications filed pursuant to Sections 22.369 and 90.177,  xapplications filed for coordination with Mexico and Canada, and applications required under"0*&&qqT"  X4 x"Section 1.1301 et seq.) The Bureau will also release a Public Notice setting forth the deadlines and instructions for filing the FCC Form 175 for geographic area licenses.  X4 D IV. DISCUSSION ă  X' A. Geographic Licensing for NonNationwide Channels  Xa' 1. Overview  X34 "'7. Common Carrier Paging. Under our current rules, all CCP channels are assigned on  X 4 xan exclusive basis.Q  {O 'ԍSee 47 C.F.R.  22.351.Q Licensees must apply for additional transmitter locations on a siteby site  X 4 x<basis when expanding their systems.r Z {O'ԍSee 47 C.F.R.  22.3, 22.105, 22.123(e), and 22.567.r On CCP applications for the paging channels below 931  X 4 xMHz, the applicant specifies a channel. Any timely filed applications for the same channel in  X 4 xthe same area are considered mutually exclusive.9X  yOt' " ԍPart 22 defines applications as mutually exclusive if (1) more than one application is pending, and (2) the  xD grant of one application would preclude the grant of the other(s) under applicable Commission rules. 47 C.F.R.  22.131.9 A paging license applicant may request a  xparticular channel in the 931 MHz band, but the Commission has the discretion to assign a  xchannel different from the one requested. Mutually exclusive CCP applications are subject to  X4 x}selection by competitive bidding; however, competitive bidding procedures had not been adopted  X{4prior to commencement of this proceeding.\^{  {O8' " ԍSee Implementation of Section 309(j) of the Communications Act Competitive Bidding, PP Docket No.  {O' x 93253, Second Report and Order, 9 FCC Rcd 2348, 2359,  61 (1994) (Competitive Bidding Second Report and  {O'Order).\  XM4 "8. Private Carrier Paging. Under the rules in effect when the Notice was adopted,  xpapplicants for all non929 MHz Part 90 paging channels and five of the forty 929 MHz channels  x"submit their applications to a frequency coordinator who recommends a channel to be assigned  X 4 xby the Commission.QX 2  yO' " ԍThe 929930 MHz channels available on an exclusive basis are listed in Section 90.494(a). 47 C.F.R.   x 90.494(a). The shared 929930 MHz channels, 929.0375, 929.0625, 929.0875, 929.1625, and 929.2625, are listed in 90.494(b). 47 C.F.R.  90.494(b).Q In the PCP Exclusivity Order, we established a mechanism for exclusive  X4 xVlicensing on thirtyfive of the forty 929 MHz channels in order to encourage the development of" R 0*&&qqj"  X4 xwidearea paging systems. yOy' " ԍAmendment of the Commission's Rules to Provide Channel Exclusivity to Qualified Private Paging Systems  {OA' x at 929930 MHz, PR Docket No. 9335, Report and Order, 8 FCC Rcd 8318 (1993) (PCP Exclusivity Order). We  {O ' x declined to reconsider our rules defining regional exclusivity for 929 MHz regional systems. See Amendment of  x the Commission's Rules to Provide Channel Exclusivity to Qualified Private Paging Systems at 929930 MHz, PR  {O' xQ Docket No. 9335, Memorandum Opinion and Order, 11 FCC Rcd 3091 (1996) (PCP Exclusivity Reconsideration  {Og'Order). We allowed licensees to earn exclusivity on a local, regional, or  X4 xnationwide basis by constructing multitransmitter systems meeting certain minimum criteria.sH {O'ԍPCP Exclusivity Order, 8 FCC Rcd at 832123,  915. s  X4 xIncumbent 929 MHz systems that met the new criteria were granted immediate exclusivity.L {O] 'ԍId. at 8329,  31.L  xApplications for the exclusive PCP channels were to be submitted to a frequency coordinator and  X4processed on a firstcome, firstserved basis.Ll  {O'ԍId. at 8326,  23.L  Xv4 "W9. Notice of Proposed Rulemaking. In the Notice, we explained that in other CMRS  xuservices, such as cellular, PCS, and Specialized Mobile Radio (SMR), we recognized that  xlicensing based on predefined service areas has significant advantages over sitebysite licensing  X34 xVbecause of the greater flexibility it gives licensees and the greater ease of administration.3  {O' " ԍNotice, 11 FCC Rcd at 3113,  19. For example, in the CMRS Third Report and Order, we stated that  x geographic area licensing should be used for 800 MHz SMR service because it will be easier to administer, will  xk provide licensees and the public with greater certainty about what area is covered by each authorization, and will  {O<' x^ make it easier to resolve conflicts between applicants seeking to provide service to a common area. CMRS Third  {O'Report and Order, 9 FCC at 8044,  98. We  xtentatively concluded that the public interest would be served by converting to geographic area  X 4 xlicensing for exclusive, nonnationwide paging channels.e  {Oj'ԍNotice, 11 FCC Rcd at 311315,  1932.e We also observed that geographic area  xlicensing may be advantageous in the paging industry because paging has evolved from singlesite  x"systems toward multisite systems, regulatory symmetry between paging and narrowband PCS  X 4 xwould be enhanced, and inefficiencies in the paging licensing process would be eliminated.L F {O'ԍId. at 3113,  19.L We  xproposed that incumbent systems would be entitled to continue to operate under current  X4 xauthorizations with full protection from cochannel interference.:  {O#'ԍId.: Parties were invited to  x}comment on our geographic licensing proposals. We asked the commenters to address whether  x/geographic licensing would be practicable on all bands, and the appropriate geographic area for such licensing."M j 0*&&qq7"Ԍ X'ԙ 2. Geographic Area Licensing for Exclusive 929 MHz and 931 MHz Bands  X4 " 10. Comments. The commenters, including the Personal Communications Industry  xAssociation (PCIA) and the Federal Trade Commission (FTC), generally support the proposal to  X4 xconvert to geographic area licensing for 931 MHz and 929 MHz exclusive channels.! {O' "c ԍSee, e.g., AT&T Wireless Comments at 4; AirTouch Comments at 7; Arch Comments at 3; API Comments  xQ at 3; A+ Communications Comments at 2; MTel Comments at 5; Metrocall Comments at 5; Huffman Comments at  xg 1; Diamond Comments at 12; FTC Comments at 2 (supporting geographic area licensing through competitive  xp bidding in general); PCIA Comments at 9; ProNet Comments at 3; Priority Comments at 3; Paging Partners  xZ Comments at 23; PageNet Comments at 56; Pacific Comments at 2; Source One Comments at 2; TeleBEEPER Comments at 1.  AT&T  xlWireless, MTel, PageNet, and Source One observe that the regulatory flexibility afforded by  xgeographic area licensing will enable paging operators to react quickly to modify their systems  xto meet the demands of customers, and will facilitate further buildout of widearea paging  XH4 x/systems."HB yO;' "/ ԍAT&T Wireless Comments at 4; MTel Comments at 5; PageNet Comments at 56; Source One Comments at 2. PCIA contends that geographic area licensing for 931 MHz systems would provide  xlgreater flexibility for the paging operators in these frequencies, reduce the number of license  xfilings, minimize processing delays, provide greater parity with narrowband PCS licensees, and  X 4 x[strengthen the carriers' ability to obtain capital.D#  yON'ԍPCIA Comments at 9.D PCIA states that it reluctantly supports  X 4transitioning to geographic licensing for the exclusive frequencies in the 929 MHz band.J$X *  yO' " ԍPCIA Comments at 1011 (contending that although the adoption of geographic area licensing for exclusive  x 929 MHz channels would be highly disruptive, the expeditious resolving of the licensing rules and policies will best serve the public interest).J  X 4 "W 11. The FTC supports geographic area licensing to combat paging license application  X 4 xfraud.C% J  yO'ԍFTC Comments at 1.C According to the FTC, this fraud is of two types: (1) application mills that sell  xapplication preparation services for a fee of several thousand dollars per license; and (2) buildout  xschemes in which investors are sold interests in limited liability companies or partnerships that  Xb4 xRclaim they will acquire licenses and build and operate telecommunications systems.E&b yO 'ԍFTC Comments at 4. E These  XK4 x<schemes are carried out by deceiving consumers about the profitability of the paging licenses.E'Kj yOf#'ԍFTC Comments at 45.E  x<The FTC notes that geographic licensing, combined with the use of auctions to select licensees,  xwill reduce the volume of applications on which application mills depend and will make it more" '0*&&qq"  X4 x~difficult for speculators to deceive unsophisticated investors with offers of "free" (i.e., unauctioned) licenses.  X4 " 12. Not all the commenters support geographic area licensing for the exclusive 929 MHz  X4 x<and 931 MHz channels.(" {O' "A ԍSee, e.g., Ameritech Comments at 79; Ameritel Comments at 23; Balkenhol Comments at 1; Coles  x Comments at 1; Duncan Comments at 1; Elliot Comments at 1; MobileMedia Comments at 812; Muzzio Comments  x& at 1; Neal Comments at 1; PagePrompt Comments at 2; Radiofone Comments at 1; Sarrat Comments at 1; Von Duerring Comments at 1; Word Comments at 3. Ameritech argues that the FTC's concern consumer fraud does  X4 xnot justify disrupting a multibillion dollar industry.Q) yO 'ԍAmeritech Reply Comments at 45.Q Ameritel and Ameritech contend that the  Xx4 xcompetitive bidding process will not stop consumer fraud. *xB yOk ' "y ԍAmeritel Reply Comments at 56; Ameritech Reply Comments at 4 (observing that the application mills would probably not have difficulty adjusting to the auction format by pooling the resources of consumers).  Word argues that geographic area  xElicensing would be disruptive to existing licensees, as well as to the public, without promising  XJ4any overriding benefit.D+J yO'ԍWord Comments at 6.D  " 13. PCIA and several of the larger paging companies support the use of MTAs for  X 4 xRgeographic area licensing.," *  {O' " ԍSee, e.g., AT&T Wireless Comments at 5; AirTouch Comments at 15; Arch Comments at 6; API Comments  x at 3; A+ Communications Comments at 3; MTel Comments at 6; PCIA Comments at 18; Pacific Comments at 2;  xx ProNet Comments at 67; PageNet Comments at 7; TeleBEEPER Comments at 1 (suggesting licensing on an MTA or statewide basis). These commenters contend that geographic licensing of paging  xsystems using MTAs would offer substantial administrative benefits to both the Commission and  X 4 xthe paging licensees, as well as service benefits to customers.-  {O' " ԍSee, e.g., Pacific Comments at 2; AT&T Wireless Comments at 5; AirTouch Comments at 15; MTel Comments at 6. Some commenters, however,  xpdisagree with the proposal to use MTAs, and offer other suggestions for appropriate geographic  X 4areas for these channels, such as BTAs or EAs.\.B n {O' " ԍSee, e.g., Ameritech Comments at 11 (contending that incumbent licensees should define their own  xx geographic area license by submitting a map of the area in which they are entitled to exclusive use of a frequency  x because of their existing sites and applications); Ameritel Comments at 9 (suggesting state boundaries for 929 MHz  x^ and 931 MHz bands); Caraway Comments at 5 (suggesting using both BTAs and MTAs); Huffman Comments at  x 2 (suggesting EAs); Metrocall Comments at 57 (suggesting BTAs); MobileMedia Comments at 1920 (suggesting  x BTAs); Paging Partners Comments at 3 (suggesting MSA/RSAs or BTAs); Source One Comments at 2 (suggesting  x BTAs). Metrocall observes that the vast majority of paging operators disagree with the Commission's premise that  x MTAs would form the most appropriate geographic area boundaries for paging systems. Metrocall Reply Comments"B%-0*&&7%" at 2.\" X.0*&&qq "Ԍ  X4 " 14. Discussion. In the Notice we stated that geographic licensing may be particularly  X4 x<appropriate for exclusive 929 MHz and 931 MHz paging channels because of the large number  X4 xof widearea systems in these bands.^/X {O'ԍNotice, 11 FCC Rcd at 311314,  24.^ We noted that the two services are virtually identical, and  xthat the differences in regulatory treatment are due to the pre1993 Budget Act dichotomy  X4 xbetween common carrier and private paging services.:0 {O* 'ԍId.: Our recent revisions to the rules for 929  Xx4 xIMHz and 931 MHz channels, in the PCP Exclusivity Order and the Part 22 Rewrite Order,1x| yO ' " ԍRevision of Part 22 of the Commission's Rules Governing the Public Mobile Services, CC Docket No. 92 {Om '115, Report and Order, 9 FCC Rcd 6513 (1994) (Part 22 Rewrite Order). recognized that paging in these bands has evolved from singlesite to multisite systems.  "015. The commenters contend, and we agree, that geographic area licensing provides  xflexibility for licensees and ease of administration for the Commission, facilitates further buildout  x_of widearea systems, and enables paging operators to act quickly to meet the needs of their  x&customers. We find, therefore, that converting the 931 MHz channels and the exclusive 929 MHz  x"channels to geographic area licensing will further our goal to give carriers offering substantially  xsimilar services more flexibility to compete, and will enhance regulatory symmetry between  xIpaging and narrowband PCS. Exclusive 929 MHz and 931 MHz licensees will be extended the  x"same flexibility as narrowband PCS licensees in terms of the location, design, construction, and modification of their facilities throughout their geographic areas.  XO4 "N16. In the Notice we stated that the geographic definition should correspond as much as  x possible to the geographic area that paging licensees seek to serve, and we proposed using MTAs  X#4 xas the market areas.^2# {O'ԍNotice, 11 FCC Rcd at 311516,  33.^ We conclude that MTAs form an appropriate geographic area for most of  xthe paging systems because they are economicallydefined regions that appear to best mirror the  xsize and development of existing paging systems. We are implementing geographic area licensing  x"in lieu of the current sitebysite licensing, with MTAs as the geographic area for the 931 MHz  xand exclusive 929 MHz channels. We are licensing these channels using 51 MTA geographic  xareas. In addition to the 47 Rand McNally MTAs, we are adding three MTAs for the U.S.  xterritories of (1) Guam and the Northern Mariana Islands, (2) Puerto Rico and the U.S. Virgin  X4 xcIslands, and (3) American Samoa. We are also licensing Alaska as a single area separate from  x&the Seattle MTA. The concerns raised by Ameritech, Ameritel, Metrocall, Source One, and other"k h 20*&&qqq"  X4 xcommenters that MTAs are not the appropriate size for geographic area licensing, can be  X4alleviated by geographic partitioning.3 {Ob' " ԍSee Section IV.I(4)(f) for a discussion of geographic partitioning; see also Section V, Further Notice of  {M,'Proposed Rulemaking.  "d17. Geographic area licensees will have the flexibility to construct transmitters at any  x/place within their license area, subject to the cochannel interference rules discussed in Section  xE, and will not be required to file applications with the Commission for additional sites or  Xv4 xmodifications.4\v" yOI ' " ԍIn general, geographic area licensees may add or modify sites within the geographic area without filing site  {O ' x specific applications consistent with this Order; however, geographic area licensees must file applications with the  {O 'Commission if such filing is required by Sections 22.369, 90.177, or 1.1301 et seq. Geographic area licensees will be able to act quickly to add sites or make  xmodifications of existing sites to meet the needs of their customers. Due to the prevalence of  x_widearea paging systems on these channels and the flexibility geographic area licensing will  xafford paging licensees, we believe that geographic area licensing for exclusive 929 MHz and 931  xMHz channels, with MTAs as the geographic area, is consistent with the public interest,  xconvenience and necessity, and the purposes of the Communications Act of 1934, as amended  x(Communications Act). We believe that our rules for geographic area licensing for exclusive 929  xMHz and 931 MHz channels, with MTAs as the geographic area, fulfill the objectives of Section  xl309(j)(4)(C) because a wide variety of applicants, including small businesses, rural telephone  x8companies, and businesses owned by members of minority groups and women may have an  xVopportunity to successfully compete against larger, wellfinanced bidders for MTAs through the  Xy4use of bidding creditsN5yF {Op'ԍSee paragraphs 174181.N and installment payments.N6y {O'ԍSee paragraphs 182187.N  G6! 18. We conclude that spectrum within a geographic area recovered by the Commission  |$Awill revert automatically to the geographic area licensee. We will consider transfers and  |$ assignments between a geographic area licensee and incumbents operating in the geographic area  |$/presumptively to be in the public interest. We conclude that granting these rights to geographic  |$+area licensees will give them greater flexibility in managing their spectrum, establish greater  |$consistency with our cellular and PCS rules, and reduce the regulatory burdens on both licensees  X4 |$and the Commission with respect to future management of the spectrum.p7j  {O!'ԍCMRS Third Report and Order, 9 FCC Rcd at 8162,  398.p We also eliminate  |$finders' preferences immediately for paging services. All pending finders' preference requests  |$"are dismissed, and we will no longer accept finders' preference requests following the adoption  X|4of this Second Report and Order. "g 70*&&qqq"Ԍ G6!m19. Mutually exclusive applications for geographic area licenses will be processed  |$pursuant to the competitive bidding rules set forth below in Section IV.I. The incumbent (non |$Vgeographic) paging licensees will continue to operate under their existing authorizations with full  |$protection from cochannel interference, and will not be required to file applications for additional  |$cinternal sites. Incumbents will not be permitted to expand their composite interference contours  |$unless the incumbent and the geographic licensee have reached agreement on such modifications.  X_' |$n" H3. Geographic Area Licensing for Common Carrier Paging Services in the 3536 MHz, 43 XH444 MHz, 152159 MHz, and 454460 MHz Bands  X ' G6!X a. Common carrier paging services in the 3536 MHz, 4344 MHz, 152159 MHz,  X 4and 454460 MHz bands (#  X 4  X 4 G6!20. Comments. Many commenters, including the smaller and mediumsized paging  |$ccompanies, the Organization for the Promotion and Advancement of Small HTelecommunications  |$Companies (OPASTCO), and Small Business in Telecommunications (SBT), are generally  |$opposed to geographic area licensing for the 3536 MHz, 4344 MHz, 152159 MHz, and 454 |$c460 MHz paging channels and contend that geographic area licensing will prevent the continued  Xb4 |$ growth of small paging businesses presently using these channels.8b b {O' G6! ԍSee, e.g., Ace Comments at 2; ATS Comments at 4; Ameritel Comments at 56; Benkelman Comments at  |$  4; Baldwin Comments at 4; Baker Comments at 4; Chequamegon Comments at 4; CSS Comments at 4; CCMS  |$I Comments at 45; Datafon Comments at 2; Fine Comments at 1; HEI Comments at 4; Hiort Comments at 4;  |$ Huffman Comments at 2; Mashell Comments at 4; Metamora Comments at 4; Mihm Comments at 1; Mobilfone  |$ Comments at 4; Neal Comments at 1; Olympic Radio Comments at 1; OPASTCO Comments at 2; Pass Word  |$k Comments at 47; PAI Comments at 4; Perry Comments at 1; Pigeon Comments at 4; Porter Comments at 4; Rinker  |$g Comments at 4; Radiofone Comments at 2; Reaves Comments at 1; Rule Comments at 6 (contending that rural  |$7 paging or twoway mobile radio operators will not be able to bid for an entire MTA, and that rural companies are  |$& the only companies that will bring service to rural towns); SBT Comments at 11; Shelly Comments at 1; SMR  |$g Comments at 2 (contending that the geographic licensing proposal will shut out the small carriers); Supercom  |$ Comments at 4; Teletouch Comments at 1; Total TelePage Comments at 12; Wenski Comments at 1; Wilkinson Comments at 4; Western Radio Services Comments at 2. These commenters state that  |$the Commission has not shown that geographic licensing is needed, that regulatory symmetry  |$among CMRS is necessary or practical, or that our proposals, if adopted, would provide such  X4 |$"regulatory symmetry.9  {O' G6!@ ԍSee, e.g., Ameritech Comments at 7 (contending that the costs associated with geographic area licensing will outweigh the benefits); SBT Comments at 4. Commenters observe that once the geographic license is auctioned, an  |$incumbent (nongeographic) licensee will not be able to expand the range of its paging system  X4 |$beyond the existing interference contour.D:ZL  {O#' G6!< ԍSee, e.g., OPASTCO Comments at 4; Ace Comments at 2 (contending that the Commission should not let  |$ the small carriers get crushed by the large carriers by allowing auctions on the existing channels currently in use in a geographic area).D Commenters note that the paging spectrum is heavily"n:0*&&qq)"  |$"licensed, and that while sites are needed for fillin purposes, much of the application processing  X4 |$has already been accomplished so that the administrative savings will be minimal.; {Ob'ԍSee, e.g., Ameritel Comments at 23; Datafon Comments at 2; Western Radio Comments at 2. Commenters  |$contend that geographic area licensing may make sense for a new service, but in paging it would  X4impede rather than facilitate service in the industry.[<ZZ {O' G6! ԍSee, e.g., Datafon Comments at 23; Rule Comments at 6 (stating that it is too late now to convert to  |$ geographic licensing for 150 and 450 MHz bands); Total TelePage Comments at 1 (contending that competitive bidding will wipe out the small paging companies).[  X4 G6!q21. Some commenters, however, support geographic area licensing for these bands.=| {O 'ԍSee, e.g., ProNet Comments at 3; PCIA Comments at 13; TeleBEEPER Comments at 1.  Xv4 |$PCIA states that it previously opposed implementation of geographic licensing in these bands  |$because overlaying a geographic area licensing scheme on existing operations would be highly  |$Ecomplex and would have reduced regulatory benefits for licensees, the Commission, and the  X14 |$Epublic.E>1 yO'ԍPCIA Comments at 13.E PCIA now endorses the Commission's proposal to transition these paging bands to  X 4 |$pgeographic area licensing because it has determined that the industry is better served by a quick  |$resolution of this rulemaking proceeding, permitting licensees to understand new processing  X 4policies and resuming the filing of applications for necessary authorizations.?  yO;' G6!Z ԍPCIA Comments at 13. Ameritel observes that PCIA does not represent the industry consensus on the issue of geographic area licensing. Ameritel Reply Comments at 23.  G6!d22. Several commenters suggest that if geographic area licensing is implemented, the  X 4 |$3Commission should use BTAs or EAs for the VHF and UHF bands{@  yON'ԍThe VHF band is 30 MHz to 300 MHz and the UHF band is 300 MHz to 3000 MHz.{ instead of MTAs.[AZ  {O' G6!< ԍSee, e.g., Ameritel Comments at 9 (suggesting BTAs); CCMS Comments at 89 (suggesting BTAs); Pass  |$k Word Comments at 7 (suggesting EAs); Rule Comments at 1314 (suggesting countybycounty geographic area licensing); SBT Comments at 16 (suggesting EAs or BTAs).[ Sunbelt  X4 |$}suggests that incumbent licensees should be able to aggregate their licenses into one license that  |$@covers the entire geographic area, and should be allowed to expand on a transmitterbytransmitter  Xb4 |$}basis.GBb yO!'ԍSunbelt Comments at 3.G PCIA, however, contends that MTAs should apply to all of the paging bands where the  XK4Commission decides to implement geographic licensing.ECK8 yO4$'ԍPCIA Comments at 18.E "4C0*&&qq"Ԍ X4 G6!023. Discussion. We believe that the advantages of geographic licensing flexibility,  |$enhanced regulatory symmetry with other CMRS, and eliminating the inefficiencies in the  |$licensing process are applicable to these channels, particularly for regional and widearea  |$paging services. One of our goals in this proceeding is to revise the paging rules so that  |$substantially similar mobile services receive comparable regulatory treatment, to the extent  |$feasible, in a manner consistent with the public interest, convenience, necessity, and the purposes  |$of the Communications Act. We note that paging providers on these CCP channels generally  |$+have smaller paging systems than the 931 MHz band paging services, and therefore smaller  |$market areas would be more appropriate than MTAs for these bands. Most commenters  |$addressing this issue contend that MTAs do not mirror their geographic areas, primarily because  |$}MTAs are too large for the numerous small and medium sized paging systems on these bands.  |$The United States is organized into 487 BTAs, some of which are smaller than counties, and we  |$believe that BTAs, suggested by several commenters, would be too small for most paging  |$&systems. EAs, which are larger than BTAs, would be an appropriate size for geographic licensing  |$on these bands. The Bureau of Economic Analysis of the Department of Commerce has divided  X 4 |$/the United States into 172 EAs.D  {O ' G6! ԍSee Final Redefinition of the BEA Economic Areas, Department of Commerce, Docket No. 950302064506401, 60 Fed. Reg. 13,114 (Mar. 10, 1995). Each EA consists of metropolitan areas or similar areas that  |$@serve as centers of economic activity and the surrounding counties that are economically related  |$to the nodes. Allowing licensees to operate over EAs, instead of smaller BTAs, will enhance  |$their ability to construct widearea systems. Consequently, we adopt EAs as the geographic area  XK4for these paging bands, a suggestion offered by commenters.EK" {O' G6!< ԍSee Pass Word Comments at 7; SBT Comments at 16. See also Huffman Comments at 2 (suggesting EAs  |$ for the 929 MHz and 931 MHz bands). We have also proposed to use EAs for the assignment of 60 channels in the  {O' |$7 220 MHz band.  See Amendment of Part 90 of the Commission's Rules to Provide for the Use of the 220222 MHz  {Oz' |$ Band by the Private Land Mobile Radio Service, Second Memorandum Opinion and Order and Third Notice of  {OD' |$p Proposed Rulemaking, PR Docket No. 89552, 11 FCC Rcd 188, 219224,  5969 (1995) (220 MHz Second  {O'Memorandum Opinion and Order).   X4 G6!24. We agree with the commenters that the geographical definition used should  |$correspond as much as possible to the geographic area that the paging licensees seek to serve.  |$EAs, which are smaller than MTAs, will facilitate the ability of paging operators of smaller  |$Esystems to participate in geographic area licensing. Geographic area licensees will have the  X4 |$[flexibility to construct transmitters at any place within their EA, subject to the cochannel  X4 |$interference rules discussed in Section IV.E.F$ yO!' G6! ԍIn general, geographic area licensees may add or modify sites within the geographic area without filing site  {O"' |$ specific applications consistent with this Order; however, geographic area licensees must file applications with the  |$^ Commission if such filing is necessary for coordination with Mexico or Canada, or is required by Sections 22.369,  {OY$'90.177, or 1.1301 et seq. Our rules for geographic area licensing for these  |$channels, with EAs as the geographic area, will fulfill the objectives of Section 309(j)(4)(C)" F0*&&qq"  |$cbecause a wide variety of applicants, including small businesses, rural telephone companies, and  |$businesses owned by members of minority groups and women may have an opportunity to  X4 |$successfully compete against larger, wellfinanced bidders for EAs through the use of bidding  X4 |$'creditsNG {O4'ԍSee paragraphs 174181.N and installment payments.NHZ {O'ԍSee paragraphs 182187.N These smaller market areas will also provide more opportunities for the entry of new applicants into the paging market.  Xv4 G6!25. The EA geographic area licenses will be assigned pursuant to the competitive bidding  |$rules set forth below in Section IV.I. Incumbent (nongeographic) paging licensees will continue  |$to operate under their existing authorizations with full protection from cochannel interference,  X14 |$_and will not be required to file applications for additional internal sites.I1 yO ' G6! ԍLicensees will be required to file applications if such filing is necessary for coordination with Mexico or  {O'Canada, or required under Sections 22.369, 90.177, or 1.1301 et seq. Incumbents will not  |$be permitted to expand their composite interference contour, as suggested by Sunbelt, unless the incumbents and the geographic licensee have reached agreement on such modifications.  X 'X b. Other services in the 152159 MHz and 454460 MHz bands (#  X 4 G6!26. Background. Rural Radiotelephone Service and twoway mobile telephone service  |$8also use the paired channels allocated to paging services. BETRS, licensed under the Rural  Xy4 |$Radiotelephone Service,]JyF {Op'ԍSee 47 C.F.R.  22.757, 22.759.] is a fixed service and by definition is not CMRS.BK(y {O' G6!} ԍSee Implementation of Sections 3(n) and 332 of the Communications Act, Regulatory Treatment of Mobile  {O' |$ Services, Second Report and Order, GN Docket No. 93252, 9 FCC Rcd 1411, 1455,  102 (1994) (CMRS Second  {O' |$ Report and Order). In the First Report and Order, we stated that BETRS and Rural Radiotelephone Service  {O`'applications were not subject to the interim freeze. First Report and Order at  38.B BETRS uses these  |$ channels to provide basic exchange telephone service to rural areas where it would be impractical  XK4 |$&to provide wireline telephone service.LK  yO' G6!< ԍWe note that under Section 90.621(h) certain channels in the 800 MHz band are available on a coprimary  |$ basis to BETRS. Due to the limited amount of BETRS licensing on these channels, the Commission is no longer  {OT ' |$ accepting BETRS applications for those frequencies. See Amendment of Part 90 of the Commission's Rules to  {O!' |$g Facilitate Future Development of SMR Systems in the 800 MHz Frequency Band, PR Docket No. 93144, First  {O!' |$ Report and Order, Eighth Report and Order, and Second Further Notice of Proposed Rulemaking, 11 FCC Rcd 1463, 1588,  287288 (1995). Only local exchange carriers (LECs) that have been state  |$ccertified to provide basic exchange telephone service, or others having state approval to provide  |$csuch service, are eligible to hold authorizations for BETRS. Conventional Rural Radiotelephone  |$Service is provided on the channels listed in Section 22.725. These channels are also allocated"FL0*&&qqf"  X4 |$for assignment for paging services. In the Notice, we stated that it is important to ensure that any  |$changes to our paging rules do not prevent BETRS from providing service to areas that otherwise  X4 |$/would lack basic telephone service.[M {OM'ԍNotice, 11 FCC Rcd at 3115,  30.[ We noted that new wireless services, such as PCS, may  X4eventually provide telecommunications service to remote areas.:NZ {O'ԍId.:  X4 G6!27. Comments. Commenters disagree with our observation that new mobile technologies  |$such as PCS may be widely available in the near future to serve sparsely populated or remote  Xa4 |$areas.Oa {O ' G6! ԍSee, e.g., Border Comments at 45; NuclaNaturita Comments at 67; Pacific Comments at 3; SBT Comments at 78. Rule contends that there is substantial demand for twoway mobile telephone service in  XJ4 |$rural America and in the western United States.NPJF yOA'ԍRule Interim Comments at 45.N Rule notes that the carriers providing twoway  |$mobile telephone service are unlike paging operators in that they do not license a common  |$frequency over a wide area; instead they operate on numerous radio channels within a frequency  X 4 |$band.LQ  yO'ԍRule Interim Comments at 6.L Rule recommends that we continue licensing on a sitebysite basis, but suggests that the  X 4 |$paired channels be licensed on a countybycounty basis if geographic area licensing is imposed.ER f  yO'ԍRule Comments at 14.E  G6!h28. The United States Telephone Association (USTA) and other commenters argue that  |$Nit is not in the public interest to use competitive bidding to select between applications for  X4 |$BETRS and paging, as this may leave some rural areas without any local exchange service.4SZ  {O9' G6! ԍSee, e.g., Border Comments at 24; InterDigital Comments at 3; OPASTCO Comments at 23; SBT  |$ Comments at 7; USTA Comments at 2; Puerto Rico Telephone Comments at 9; Rule Comments at 24; Emery Telephone Reply Comments at 2.4  |$Commenters observe that requiring LECs to bid for BETRS spectrum would defy the 1996  Xd4 |$Telecommunications Act'sTd yO- ' G6!= ԍTelecommunications Act of 1996, Pub. L. 104104, 110 Stat. 56 (1996) (1996 Act), amending the  {O 'Communications Act of 1934, as amended, 47 U.S.C.  151, et seq. requirements for universal service and jeopardize the Commission's  XM4goal to increase subscriber penetration.%UZMr {Op#' G6!y ԍSee, e.g., Border Comments at 34; NuclaNaturita Comments at 4; OPASTCO Comments at 78; Pacific  |$ Comments at 3; Puerto Rico Telephone Comments at 7; USTA Comments at 3; Emery Telephone Reply Comments at 4.% "6U0*&&qq."Ԍ X4 G6!29. In ex parte comments filed on July 24, 1996, Puerto Rico Telephone contends that  |$}if BETRS channels are subject to competitive bidding, BETRS will no longer be a costeffective  X4 |$Vmeans for providing rural service.V\ {OM' G6! ԍPuerto Rico Telephone July 24, 1996 ex parte Comments at 2. According to Puerto Rico Telephone, the  |$ telephone service penetration rate in Puerto Rico is below 75 percent, and due to the mountainous terrain in Puerto  {O'Rico it is cost prohibitive to provide wireline service in most areas. Id.ĕ Puerto Rico Telephone argues that an auction would result  X4 |$/in additional costs imposed on the BETRS operator.@W {OZ'ԍId. at 3.@ Additionally, access to spectrum needed  X4 |$for BETRS expansion could be blocked by the geographic area license winner.:X~ {O 'ԍId.: Puerto Rico  |$"Telephone contends that the practical result of this would be to deny basic telephone service to  Xx4 |$"rural areas.@Yx {O9'ԍId. at 4.@ Puerto Rico Telephone argues that under Section 307(b) of the Communications  Xa4 |$ActGZa yO'ԍ47 U.S.C.  307(b).G the Commission must take into the account the needs of rural communities, like those in  XJ4 |$Puerto Rico.r[J2  {O-'ԍPuerto Rico Telephone July 24, 1996 ex parte Comments at 4.r Puerto Rico Telephone suggests that instead of requiring BETRS operators to bid  |$at auction for a geographic area license, the Commission should allow BETRS operators to apply  |$for additional licenses on a sitebysite basis; additionally (1) BETRS operators would have  |$preferential treatment over paging operators for mutually exclusive applications (on a sitebysite  |$}basis), and (2) the Commission should designate a frequency block from reallocated frequencies  X 4 |$solely for BETRS use.B\  {OL'ԍId. at 47.B According to Puerto Rico Telephone, this proposal will preserve the  |$status of BETRS licensees and provide for the future opportunity for telecommunications carriers  X 4to expand service in rural areas.@] V  {O'ԍId. at 7.@  X{4 G6!'30. In ex parte comments filed on September 6, 1996, Puerto Rico Telephone observes  |$Rthat BETRS technology is a costeffective means to provide basic telephone service to rural  XO4 |$areas.v^O {O!'ԍPuerto Rico Telephone September 6, 1996 ex parte Comments at 2.v Puerto Rico Telephone explains that on the island of Puerto Rico, BETRS and paging  |$Msites that serve different constituencies are located in the same geographic licensing area, and may  X!4 |$peven have adjacent interference contours.:_!z {OL%'ԍId.: Puerto Rico Telephone contends that a geographic"! _0*&&qq "  |$area licensee should not be able to charge a fee to the BETRS operator if it is necessary to  X4 |$<expand the existing interference contour to extend telephone service.:` {Ob'ԍId.: Puerto Rico Telephone  |$proposes that consent from the geographic area licensee should not be required to permit changes  |$in the BETRS licensee's interference contour if (1) the BETRS provider can demonstrate that  |$ change in its service area will enable the provision of basic telephone service to an unserved area,  X4or (2) the geographic area licensee has not met its buildout requirement.BaZ {O'ԍId. at 23.B  G6!431. In reply to the comments filed by the parties, Arch and AirTouch contend that there  XH4 |$cis no need to provide special considerations for BETRS operators, and that alternatives exist for  X14 |$providing telephone service to remote areas, such as PCS, cellular, and mobile satellite services.mb1 yO 'ԍArch Reply Comments at 16; AirTouch Reply Comments at 1718.m  |$SBT charges that the commenters fail to explain with particularity how the Commission could  X 4reasonably continue to offer BETRS while auctioning widearea UHF licenses.Ic | yO0'ԍSBT Reply Comments at 8.I  X 4 G6!32. Discussion. In order to discuss the implementation of geographic area licensing for  |$paging systems on these channels, we must define the rights of BETRS and Rural Radiotelephone  X 4 |$Service operators to obtain spectrum within each area. In the Competitive Bidding Second Report  X4 |$and Order, we stated that we would not conduct auctions to resolve mutual exclusivity between  X}4 |$Jinitial BETRS or rural radiotelephone applications and common carrier mobile service  Xf4 |$applications.df  {O#'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2356,  46. We noted that it would not serve the public interest for the Commission to  |$establish services such as BETRS as a potential less costly alternative to wireline service, and  |$then require the BETRS applicant to bid against a radio common carrier applicant for those  X!4 |$gfrequencies.:e! {Op'ԍId.: Since the release of the Competitive Bidding Second Report and Order we have  |$expanded our rules to allow CMRS licensees the flexibility to provide fixed or mobile services,  X4 |$por a combination of the two, over spectrum allocated for CMRS services.f^0  {O ' G6!< ԍSee Amendment of the Commission's Rules to Permit Flexible Service Offerings in the Commercial Mobile  {O!' |$. Radio Services, WT Docket No. 966, First Report and Order and Further Notice of Proposed Rulemaking, 11 FCC  {Oj"'Rcd 8965, 8977,  24 (1996) (CMRS Flex Report and Order). In the CMRS Flex  X4 |$Report and Order we observed that fixed wireless services could be used to provide wireless local  |$}loop as an alternative to endtoend wiring by the carrier from the switch to the end user in rural"V f0*&&qqK"  X4 |$areas.wg {Oy'ԍXCMRS Flex Report and Order, 11 FCC Rcd at 8974,  19.(#w Thus the local exchange service currently offered by BETRS could be offered by  |$Ewireless or wireline providers in the future. In such a potentially competitive environment, it may not be logical to continue to exempt BETRS from geographic area licensing and auctions.  X4 G6![ 33. BETRS operators argue that they should be exempted from the geographic licensing  |$Eprocess and from competitive bidding so that they will be able to obtain authorizations to use  |$these channels regardless of whether a paging operator has acquired the geographic area license.  |$Two paging operators, Arch and AirTouch, disagree and argue that BETRS operators should be  |$required to obtain licenses under the same rules and procedures applicable to paging licensees.  G6!!34. We conclude that BETRS and Rural Radiotelephone Service licensees can participate  |$in the geographic area licensing framework we are adopting for paging, but we will also allow  |$them to obtain site licenses on a secondary basis. We do not believe it is necessary to exempt  |$BETRS from geographic area licensing or adopt the plan proposed by Puerto Rico Telephone.  |$In terms of auctionability, we see no basis for distinguishing BETRS from other services that use  |$<radio spectrum to provide commercial communications service to subscribers and are therefore  |$auctionable under Section 309(j) of the Communications Act. We are aware that BETRS  |$ primarily serves rural, mountainous, and sparsely populated areas that might not otherwise receive  |$basic telephone service. Our decision to apply geographic licensing to BETRS will not deprive  |$rural areas of local exchange service or result in higher costs to BETRS customers. All existing  |$BETRS systems will remain in place and will be fully protected from interference by geographic  |$carea licensees. We also note that there has been only limited demand for expansion by BETRS  X4 |$into new areas in recent years.h Z yO' G6!8 ԍAccording to our records, there are currently approximately 315 Rural Radiotelephone licensees. The  |$ Commission receives approximately 40 applications each year from Rural Radiotelephone licensees; most of the  |$ applications are for additional channels. BETRS licensees use two to twenty channel pairs, depending on the community served. Thus, it does not appear that geographic licensing of paging systems will significantly preempt growth of BETRS.  G6!"35. To the extent that demand for expanded Rural Radiotelephone Service or BETRS  |$exists or arises in the future, our geographic area licensing and partitioning rules are tailored to  |$uaccommodate any potential expansion. The channels for which BETRS is eligible will be  |$licensed using EAs rather than MTAs, creating more opportunities for licensing of smaller  |$markets to BETRS. In addition, our partitioning rules allow BETRS licensees to enter into  |$partitioning agreements with geographic area licensees both before and after geographic licensing  |$occurs. Finally, we will allow the Rural Radiotelephone Service or BETRS licensee to obtain  |$Asite licenses and operate facilities on a secondary basis. If any geographic area licensee  |$subsequently notifies the Rural Radiotelephone or BETRS licensee that a secondary facility must  |$+be shut down because it may cause interference to the paging licensee's existing or planned"Bh0*&&qq"  |$facilities, the Rural Radiotelephone or BETRS licensee must discontinue use of the particular channel at that site no later than six months after such notice.  G6!W#36. With respect to mobile telephone service on the twoway channels under Section  |$22.561, we do not believe these licensees should be exempt from the geographic area licensing  |$process and competitive bidding. Twoway service primarily serves rural areas in the western  |$"part of the country, and typically does not conflict geographically with paging service. It would  |$pnot be feasible to license the service on a countybycounty basis, as one commenter suggested,  |$instead of EAs. It would be difficult to license twoway mobile radiotelephone service by  |$/counties and paging services by EAs, when both services use the same channels. Additionally,  |$counties are too small in many states to be a practical geographic area for paging services which  |$ precludes using counties instead of EAs as the geographic area for all services on these channels.  |$ITherefore, twoway mobile telephone operators on these channels will be subject to geographic  X 4area licensing on the same basis as paging operators.pp"(#p  X ' 4. Shared PCP Channels  Xy4 G6!$37. Background. In the Notice we tentatively concluded that if we were to convert to  |$'exclusive licensing of shared paging channels, a geographic licensing approach would be  XM4 |$appropriate.[iM {O'ԍNotice, 11 FCC Rcd at 3115,  31.[ We asked for comment on whether we should (1) convert lower band shared  |$channels to exclusive use and implement geographic area licensing; (2) issue only a certain  X4 |$number of licenses per shared channel and use competitive bidding to choose among mutually  X4exclusive applications once the limit is reached; or (3) retain the status quo.LjZ {O'ԍId. at 3115,  32.L  X4 G6!%38. Comments. Most of the commenters addressing this issue are opposed to geographic  |$Rarea licensing for the shared channels and request that the Commission maintain the present  X4 |$ulicensing process.k {OK' G6! ԍSee, e.g., A+ Network Comments at 15; Page Hawaii Comments at 12; Pass Word Comments at 9; PCIA  |$ Comments at 14; ProNet Comments at 3 (ProNet also contends that geographic area licensing is not appropriate for  |$p Special Emergency Radio Services (SERS)); OPASTCO Comments at 5; SBT Comments at 810; Teletouch  {O' |$ Comments at 2; Total TelePage Comments at 12; Teletouch December 6, 1996 ex parte Comments at 3; Advanced  {Oo 'Electronics December 31, 1996 ex parte Comments at 2. Commenters contend that the Commission lacks authority to impose  X4 |$competitive bidding for these channels because mutual exclusivity, i.e., the grant of one  X4 |$application that would preclude the grant of another, cannot occur.clZ {O#' G6! ԍSee, e.g., PCIA Comments at 14; Page Hawaii Comments at 5; Teletouch December 6, 1996 ex parte  |$ Comments at 4. Motorola contends that the private, internal use paging systems operating on the shared channels  |$ are not mutually exclusive systems and cannot be licensed through competitive bidding rules, and therefore these"g%k0*&&u%"  {O'licensees should not be included in the paging application freeze. Motorola August 13, 1996 ex parte Comments.c OPASTCO opposes"Zl0*&&qqz"  |$geographic area licensing for shared channels and contends that geographic area licensing for  |$<these channels would have a crippling effect on taxi cabs and ambulances and the communities  X4 |$they serve if they are "frozen" and cannot expand beyond the existing interference contour.GmZ yO'ԍOPASTCO Comments at 5.G  X4 |$Teletouch contends that the policy considerations set forth in the Notice such as enhancing  |$lsymmetry between paging and narrowband PCS do not apply to the shared PCP channels  X4 |$because oneway paging is fundamentally different from narrowband PCS.nZ yO* ' G6!p ԍTeletouch Comments at 56. Teletouch observes that the incumbent carriers are not protected by specific  |$Z interference contours and therefore the market area licensee could exert its power to make the shared channel  {O 'unusable by the incumbent licensees. Teletouch December 6, 1996 ex parte Comments at 67. Teletouch explains  |$that narrowband PCS users can use the service for twoway response paging as well as sending  |$&email, data, and documents, whereas shareduse paging licensees generally provide only a simple,  XJ4 |$low cost paging service.IoJ  yO'ԍTeletouch Comments at 6.I In addition, Teletouch, along with Page Hawaii, observe that  |$&auctioning the shared channels to combat speculation and consumer fraud is unwarranted because  |$ the harm from consumer fraud pales in comparison with the harm to the industry and its  X 4customers that will result from geographic area licensing.RpX  yOR' G6!& ԍPage Hawaii Reply Comments at 8; Teletouch Reply Comments at 7 (suggesting that less drastic steps, such  |$ as public service announcements and warnings on applications regarding construction requirements and prohibitions against trafficking, should be taken).R  G6!d&39. Several commenters suggest that certain shared channels with extensive regional  X 4 |$coverage should be subject to exclusivity and geographic area licensing.q  {O-' G6!p ԍSee, e.g., AirTouch Comments at 13 (advocating that 152.480 MHz should be converted to exclusive use);  |$ A+ Network Comments at 1115; PCIA Comments at 15 (suggesting that the Commission adopt rules allowing  |$< earned exclusivity for 152.480 MHz, 157.740 MHz, and seven of the channels on the 460 MHz band); SBT  |$ Comments at 1011; PNI Comments at 6; TeleBEEPER Comments at 2 (suggesting that PCP channels be converted  |$ to exclusive use, and incumbent operators prior to 1993 should be given the first opportunity for exclusive use on these channels). A+ Network states  |$/that if auctions are adopted for the exclusive channels, there will be a "stampede" to the shared  |$channels, and urges the Commission to protect the commercial incumbents with some form of  X{4 |$exclusivity.r{6 {Ob"'ԍA+ Network Reply Comments at 34. See also AirTouch Reply Comments at 1920. PNI suggests that the Commission impose a cap on the number of licensees which  Xd4 |$may operate on a shared channel in a geographic area.sd {O$'ԍPNI Comments at 910. See also Page Hawaii Reply Comments at 5; Teletouch Reply Comments at 5. ProNet, on the other hand, opposes"dZs0*&&qq&"  |$such a licensing cap, and argues that the shared channels should continue to be licensed under  X4current procedures.Ft yOb'ԍProNet Comments at 5.F  X4 G6!N'40. Discussion. While it is theoretically possible to convert shared channels to exclusive  |$pchannels and to license them using competitive bidding, we conclude that the cost and disruption  |$that would be entailed by such a transition outweighs any benefits that would be achieved. Only  |$a relatively small amount of paging spectrum approximately 10 percent is licensed on a  |$shared basis. The comments indicate that these channels are heavily used by incumbent systems,  |$many of whom have entered into timesharing or interconnection arrangements to avoid  |$interference with one another. Most of these systems provide service on a local, rather than a  |$pregional or nationwide basis. In addition, many of the systems on these channels are licensed to  X 4 |$businesses, hospitals, and other entities for private, internal use rather than for provision of  |$<service to commercial subscribers. For example, SERS, a limited eligibility service restricted to  X 4 |$lemergency service providers,zu X {O' G6! ԍSee 47 C.F.R.  90.33 90.55. SERS covers the licensing of the radio communications of medical  |$ services, rescue organizations, veterinarians, handicapped persons, disaster relief organizations, school buses, beach  |$3 patrols, establishments in isolated places, communications standby facilities, and emergency repair of public  |$M communications facilities. 47 C.F.R.  90.33. Other entities may be licensed in the SERS to provide service to SERS eligibles on the frequencies listed in Section 90.53.z may be offered on shared channels in bands listed in Section  X 4 |$90.53v  {Oy'ԍThese SERS channels were not listed in the Notice as part of our proposals for geographic area licensing. and also may be offered on the PCP channels. The SERS operators provide essential  |$lifesaving services in localized areas, and sharing of the SERS channels and PCP channels is working effectively.  G6!(41. We believe that it is unlikely that creating geographic overlay licenses on these  |$channels would significantly improve efficiency of spectrum use. Because of the heavy existing  |$puse of the channels on a shared basis, granting "exclusive" rights to a geographic licensee would  |$have little practical value: the geographic licensee would either have to share the channel with  |$incumbents throughout most of its licensed area, or it would have to buy out all existing  |$incumbents in order to use the channel on an exclusive basis. The conversion process would also  |$be highly disruptive to existing incumbents, many of whom operate small, private systems and  |$have no need for or interest in obtaining geographic area licenses. As several commenters point  |$<out, these incumbents would not benefit from receiving interference protection for their existing  |$service areas, because systems on shared channels have not developed based on a protected  X|4 |$cservice area model.w\| yO#' G6!I ԍWe also note that each licensee would have to provide the Commission with the exact station parameters  {O$' |$ in order to determine the interference contours, which could be an expensive and time consuming process. See  {O[%'Advanced Electronics December 31, 1996 ex parte Comments at 3. Thus, the primary impact on incumbents would be to preclude them from"| w0*&&qqz"  |$ladding to or modifying their systems even though such additions or modifications would have  X4been allowed in a shareduse environment.x {Ob' G6! ԍWe note that in the Refarming FNPRM, which addresses rechannelization of private land mobile spectrum,  |$; we have proposed to replace shared use of channels with marketbased incentives such as exclusivity with the right  |$ of resale, spectrum fees, and competitive bidding. Replacement of Part 90 by Part 88 to Revise the Private Land  {O' |$ Mobile Radio Services and Modify the Policies Governing Them, PR Docket No. 92235, Report and Order and  {O' |$ Further Notice of Proposed Rulemaking, 10 FCC Rcd 10076 (1995) (Refarming FNPRM). For several reasons,  |$ however, we do not believe our decision in this proceeding to retain shared licensing on the shared Part 90 paging  {O' |$ channels is inconsistent with the proposals in the Refarming FNPRM. The Refarming FNPRM is directed towards  |$ rechannelization of spectrum used primarily for private twoway services. In paging we are not rechannelizing any  {O ' |$ of the bands used for paging service. Additionally, the Refarming FNPRM is geared toward consolidating 20 private  |$ radio services containing over 500,000 licensees and over 12 million mobile units, whereas there are only 18 shared paging channels addressed in this proceeding.  G6![)42. We also decline to adopt a "cap" on licensing of shared channels, or to convert some  |$but not all shared channels to exclusive licensing. The difficulty with a licensing cap, as noted  |$by several commenters, is that it is the amount of time a paging channel is used and the  |$transmission equipment and protocol used, not the number of licensees, that determine the  |$capacity limits of a paging channel. Thus, closing off licensing of a channel after a particular  |$number of licenses have been granted would not necessarily ensure efficient spectrum use. We  |$are also concerned that picking certain shared channels to be designated as exclusive would only  X 4 |$"cause greater pressure on the remaining shared channels and could limit opportunities for entry by smaller systems.  G6!q*43. While we conclude that the existing shared paging channels should continue to be  |$"licensed on a shared basis, we are concerned about the consumer fraud and license application  |$speculation issues raised in the comments filed by the FTC. Therefore, in order to ensure that  X4 |$Vthese channels are not susceptible to speculative applications, we seek comment in our Further  X{4 |$Notice on changes in our license application and frequency coordination procedures. Pending  Xf4 |$resolution of the issues raised in the Further Notice, we will retain our interim licensing rules for  |$these channels, which limit applications to incumbent licensees seeking to expand their current  |$systems. We will, however, eliminate the 40mile requirement for new sites; thus incumbents  |$may file for new sites at any location. Additionally, we will allow new applicants to file  X 4 |$applications for private, internaluse systems.y 2  yO'ԍWe will not grant applications proposing to modify such authorizations to convert them to commercial use. We do not believe that granting private licensees'  |$applications for sites will encourage speculative applications, because these systems cannot be  |$loperated on a commercial basis. SERS providers will also remain exempt from the licensing  X4freeze and may continue to file applications on shared channels under the existing rules.z  {O:$' G6! ԍThe First Report and Order exempted SERS from the interim paging freeze. First Report and Order at  36. "z0*&&qq"Ԍ X' 5. Exempting certain incumbents from competitive bidding  X4 G6!d+44. Comments. Commenters contend that the Commission should adopt a procedure  |$cwhereby channels already extensively used by an existing carrier be exempted from the auction  |$procedure. For example, several commenters suggest that the Commission should award  |$cgeographic area licenses without competitive bidding to any incumbent providing coverage to 70  Xv4 |$8percent or more of the population in the license area.~{v {O' G6!y ԍSee, e.g., AirTouch Comments at 40 (suggesting that the Commission allow licensees to certify that 70  |$ percent of the population within an MTA is encompassed within applicable service area contours); Ameritech  |$U Comments at 13 (suggesting exemption from competitive bidding if 70 percent of the population within the licensee's  |$ interference contours); Arch Comments at 2021; A+ Communications Comments at 8; MobileMedia Comments at 21; PCIA Comments at 28; Paging Partners Comments at 3; Source One Comments at 3.~ Other commenters suggest that the  |$Commission award geographic area licenses without competitive bidding if the incumbent covers  XH4 |$/twothirds of the population of the geographic area.Y|ZHz {Os' G6! ԍSee, e.g., Ameritel Comments at 8 (suggesting that incumbent licensees should be exempt from competitive  |$ bidding if twothirds of the population is within their interference contours); Metrocall Comments at 89; Pacific Comments at 5; PageNet Comments at 40.Y SBT contends that if a designated entity  |$provides service to onethird or greater of the population, or onehalf or greater of the geographic  X 4 |$area, it should be awarded a dispositive preference for the widearea license.}  yOg' G6!p ԍSBT Comments at 16 (suggesting that if more than one designated entity qualified, only those designated entities should be eligible to participate in the auction). Priority states  |$that auctions are unnecessary where incumbents already provide substantial service in their  |$markets and that geographic area licenses should be issued to incumbents providing substantial  X 4 |$service.~  {Oz' G6! ԍPriority Comments at 4. See also Ace Comments at 3 (contending that incumbents should automatically receive the geographic area license where they provide service). Pass Word contends that auctions should not be held where, in the geographic area  |$Ainvolved, the relevant channel is serving at least 50 percent of that area or the population  X 4therein.w N  {O'ԍPass Word Comments at 8. See also ProNet Reply Comments at 78.w  Xy4 G6!,45. Discussion. We are not persuaded by the commenters that channels already  |$Iextensively used by an incumbent should be exempt from the competitive bidding procedures or  |$that eligibility should be restricted to incumbent licensees. We believe that all otherwise qualified  |$paging applicants should be eligible to bid for any geographic area license. We note that if an  |$incumbent already has a significant presence in a geographic area, other potential applicants may  |$uchoose not to bid for that geographic area. Nevertheless, we believe that the market, not  |$yregulation, should determine participation in competitive bidding for geographic area licenses.  |$We believe that open eligibility for paging licenses will result in a more competitive auction and potentially will result in further widearea coverage of paging services."0*&&qq"Ԍ X'ԙ B. Geographic Area Licensing for Nationwide Channels  X4 G6!-46. Background. Three 931 MHz channels, 931.8875, 931.9125, and 931.9375, ("CCP  |$}nationwide channels") were allocated for nationwide network paging, and have been assigned to  X4 |$licensees on a nationwide basis.` {O'ԍSee 47 C.F.R.  22.531(b), 22.551.` The three CCP nationwide channels have been exclusively  |$allocated for nationwide network paging for over ten years. We have recently allowed 929 MHz  |$licensees to earn nationwide exclusivity under Section 90.495 by constructing networks of at least  X_4 |$300 transmitters that meet certain criteria for coverage of major markets and regional areas.G_Z yOj 'ԍ47 C.F.R.  90.495.G  XH4 |$In the Notice, we proposed to grant nationwide geographic area licenses, without competitive  |$bidding, for the three CCP nationwide channels and the PCP channels for which licensees had  X 4 |$}met the construction requirements for nationwide exclusivity as of February 8, 1996.[  {O'ԍNotice, 11 FCC Rcd at 3114,  26.[ We also  |$asked for comment on MTel's request to have its 931.4375 MHz channel designated a nationwide  X 4channel.L | {O'ԍId. at 3114,  27.L  X 4 G6!4.47. Comments. Some commenters contend that our proposal would be anticompetitive  |$because nationwide licensees offer local and regional service on the nationwide channels as well  |$Eas nationwide service and directly compete with licensees that will be subject to competitive  X{4 |$bidding.{ {O:'ԍSee, e.g., Ameritech Comments at 13; Ameritel Comments at 910; Radiofone Comments at 6. PCIA, PageNet, Arch, and MTel, on the other hand, contend that channels already  |$authorized on a nationwide basis should be awarded nationwide geographic area licenses and  XM4 |$ excluded from competitive bidding.M yO'ԍPCIA Comments at 11; Arch Comments at 4; PageNet Comments at 8; MTel Comments at 5. Several commenters argue that licensees who had obtained  X64 |$sufficient authorizations to be eligible for conditional nationwide exclusivity prior to the Notice  |$[should also receive nationwide geographic area licenses and be exempt from competitive  X 4 |$bidding.\ 0  yO' G6!3 ԍAirTouch Comments at 16 and TSR Comments at 2 (PCP licensees who have not yet completed construction  {O ' |$ of the authorized systems as of February 8, 1996 should receive nationwide geographic area licenses). See also PCIA  |$ Comments at 1213 (929 MHz channels with time remaining to construct their systems under Section 90.495 should  |$ be permitted to construct pursuant to their authorizations, and retain nationwide exclusivity), United Paging Resources Comments at 3. \ TSR argues the Commission's only justification for including the conditional  |$}nationwide channels in geographic area licensing is to increase revenues from auctions, which is"0*&&qq"  X4 |$in violation of Section 309(j)(7)(A) of the Communications Act.G yOy'ԍTSR Comments at 2021.G SBT contends that if the  |$_Commission exempts nationwide channels from competitive bidding it would be consistent to  |$lexempt all local paging systems that serve a substantial portion of an MTA from competitive  X4bidding for that MTA.EX yO'ԍSBT Comments at 67.E  X4 G6! /48. MTel contends that 931.4375 MHz is operated by SkyTel, in concert with 931.9375  Xv4 |$MHz, to provide nationwide paging service.Dv yO 'ԍMTel Comments at 9.D MTel argues that 931.4375 MHz should be  |$redesignated on a nationwide basis to promote the Commission's goal of creating regulatory  |$Rparity among CCP and PCP providers, and notes that no other party is licensed on 931.4375  X14 |$MHz.G1x yOZ'ԍMTel Comments at 910.G MTel argues that if the Commission does not designate this as a nationwide channel,  X 4SkyTel would be at a disadvantage compared to its PCP competitors.E  yO'ԍMTel Comments at 11.E  X 4 G6!049. MobileMedia contends that it also operates de facto nationwide channels, 931.8125  X 4 |$and 931.8625 MHz, that have more transmitters than MTel's channel and that its channels  X 4 |$therefore should also be awarded nationwide geographic licenses and be exempt from geographic  X 4 |$clicensing.O  yO'ԍMobileMedia Comments at 2122.O PageNet opposes the treatment of MTel's second channel as a nationwide channel  X4 |$and states that unless the Commission is willing to consider other substantially constructed 931  |$MHz local channels as eligible for nationwide geographic area licenses, it should not grant  Xd4 |$931.4375 MHz a nationwide geographic area license.Kd(  yO='ԍPageNet Comments at 5253.K TeleBEEPER contends that 931.4375  XM4 |$<MHz should not be designated a nationwide channel, and states that MTel has only constructed  X64on this channel in urban areas.I6  yO'ԍTeleBEEPER Comments at 1I  X4 G6!z150. Discussion. At the time the Notice was adopted, licensees on three 931 MHz  |$Nchannels and on eighteen 929 MHz channels had constructed sufficient stations to obtain  X4 |$nationwide exclusivity under our prior rules.H  {O$' G6! ԍThe Part 22 nationwide channels are: 931.8875, 931.9125, and 931.9375 MHz. See 47 C.F.R.  22.531(b), 22.551. As we proposed in the Notice, we will award"0*&&qq"  |$nationwide licenses for these channels and exclude them from competitive bidding adopted for  |$nonnationwide channels. In our view, it would not serve the public interest or be fair to take  |$away exclusivity rights that these licensees earned before the commencement of this proceeding.  |$&The record indicates that they have developed successful and efficient nationwide networks under  |$<the preexisting rules in fact, in most cases they have substantially exceeded the construction  |$thresholds required to earn nationwide exclusivity under those rules. Thus, we do not believe  |$imposition of competitive bidding is needed to further the goal of developing competitive nationwide paging networks on these channels.  G6!251. We also grant nationwide geographic area licenses, without competitive bidding, to  |$"those 929 MHz paging licensees with sufficient authorizations as of February 8, 1996 to qualify  |$pfor nationwide exclusivity on a conditional basis. Our records indicate that four licensees Tri |$State Radio Co., Inc. (929.2125 MHz), AirTouch (929.4875 MHz), PageMart II, Inc. (929.7625),  |$hand Communications Innovations Corp. (929.8125 MHz) had conditionally qualified for  |$Inationwide exclusivity under our rules, although they had not completed construction at the time  X 4 |$the Notice was adopted. All of these licensees have since met this condition by constructing the  |$required number of transmitters to earn permanent nationwide exclusivity. We agree with the  |$commenters that licensees who had obtained sufficient authorizations to be eligible for conditional  Xd4 |$nationwide exclusivity prior to the Notice, and have since constructed nationwide systems, should  |$also receive nationwide geographic area licenses and be exempt from competitive bidding. These  |$licensees have sufficient operating sites to now qualify for nationwide exclusivity, and we see no reason to treat them differently than the licensees who had built out as of February 8, 1996.  G6!352. We are also granting the request of Nationwide 929.8875 LLC ("Nationwide") for  |$hnationwide exclusivity on the frequency 929.8875 MHz. Nationwide is jointly owned and  |$_controlled by AirTouch and Arch who are in the process of securing Commission consent to  |$assign their respective exclusive regional system licenses to Nationwide. AirTouch and Arch  |$have regional exclusivity under Section 90.495(a)(2) on 929.8875 MHz for four regional systems.  |$AirTouch and Arch are parties to an agreement to operate their 929.8875 MHz facilities on an  |$/integrated basis to provide nationwide service. On November 22, 1995, prior to the adoption of  XR4 |$Ethe Notice, AirTouch and Arch requested nationwide exclusivity on 929.8875 MHz for their  |$}combined systems. AirTouch and Arch certify that they had more than 300 transmitters in over  |$40 states as of February 8, 1996 for the combined systems to meet the nationwide exclusivity  X4 |$criteria under Section 90.495(a)(3). yO ' G6! ԍAirTouch Paging and Arch Communications, Inc., Amendment to Request for Nationwide Exclusivity, filed November 19, 1996. We find that the public interest is served by granting a nationwide geographic area license to Nationwide.  G6!453. We decline to extend nationwide exclusivity rights to MTel's 931.4375 MHz channel.  |$Although MTel has been extensively licensed on this channel for some time, we did not recognize  |$/it as having nationwide exclusive rights at the time this proceeding commenced. Thus, granting"" 0*&&qq "  |$MTel exclusivity would confer benefits that it did not expect or earn under the old rules, and that  |$it would not be otherwise eligible for under our geographic licensing rules. For the same reasons,  |$we decline to confer nationwide exclusivity on MobileMedia's 931 MHz channels. We recognize  |$uthat many paging carriers, including MTel and MobileMedia, have built out extensively on  |$channels that are not specifically designated as nationwide channels. We decline to award  |$presumptive nationwide exclusivity on this basis, however, because these licensees had no expectation that nationwide exclusivity would result from their buildout.  G6!554. With respect to licensees who are granted nationwide geographic area licenses by  |$Ivirtue of this order, we will issue single nationwide licenses for each channel. In addition, while  |$we conclude that nationwide licenses should not be subject to competitive bidding, we believe  |$that the longterm rules governing development of nationwide paging systems warrant further  |$notice and comment. Our existing Part 90 and Part 22 requirements for construction of  |$nationwide systems are not consistent, and both sets of requirements differ from the construction  |$}and coverage requirements applicable to nationwide narrowband PCS licensees. Therefore, we  X 4 |$3seek comment in our Further Notice below on possible changes to our rules governing nationwide  X4paging channels.R {O 'ԍSee Section V, infra.R  Xd' C. Protection for Incumbents  X64 G6!655. Background. In the Notice, we tentatively concluded that the public interest would  |$/be served by allowing all incumbent paging licensees to either continue operating under existing  |$authorizations, or trade in their sitespecific licenses for a single systemwide license, demarcated  |$[by the aggregate of the service contours around each of the incumbents' contiguous sites  X4 |$operating on the same channel.[Z {O'ԍNotice, 11 FCC Rcd at 3116,  37.[ We also tentatively concluded that the incumbent licensees  |$would be able to continue to operate, and the geographic licensee would be required to provide  X4 |$protection to all cochannel systems operating within their service areas.: {OK'ԍId.: The incumbent  |$licensees would not, however, be allowed to expand beyond their existing interfering contours  X4without the consent of the geographic licensee.:~ {O 'ԍId.:  XR4 G6!756. Comments. Several commenters agree that incumbent licensees should not be  |$permitted to expand beyond their interference contours without the consent of the geographic";0*&&qq+"  X4 |$licensee. {Oy' G6!  ԍSee, e.g., Pacific Comments at 4; PCIA Comments at 1920; AirTouch Comments at 1617; Priority Comments at 3; PageNet Comments at 911. Other commenters contend that if widearea licensing is adopted it would be contrary  |$to the public interest to lock in nongeographic licensee incumbents within their present  |$interference contour, and that paging carriers must be able to add to or modify their systems in  X4 |$ response to the customers' needs." {O' G6! ԍSee, e.g., PagePrompt Comments at 2; Western Radio Comments at 3; CCMS Comments at 9; Metrocall Comments at 11; Rule Comments at 17. CCMS contends that the geographic licensee could interfere  X4 |$with the incumbent's signal, and drive the incumbent's customers away.D| yO 'ԍCCMS Comments at 6.D CCMS offers two  |$}proposals: (1) incumbents should be allowed to move into unserved areas after having given the  |$geographic licensee fair opportunity to provide service; and (2) the Commission should declare  X_4 |$all contiguous unserved areas to be immediately and continually available to the incumbent.z_  {O' G6!/ ԍCCMS Comments at 10. See also ProNet Comments at 11 (contending that incumbents should be able to  |$ expand when necessitated by unanticipated events and should be able to complete buildout in areas where the  |$Q geographic licensee would be unable to provide coverage); Caraway Comments at 3 (contending that an existing  |$k licensee must be permitted to expand the interference contour as a matter of right to the extent it can demonstrate  |$; that no other licensee can provide service to 130 square kilometers (50 square miles) of area which is already served  |$ by the other licensee or which is unserved; to the extent that an auction winner does not provide coverage throughout a market, adjacent incumbent licensees should have the right to provide such expanded service).  |$pWestern Radio Services suggests that incumbents should be permitted to add stations so long as  |$50 percent or more of the proposed coverage of the new facility overlapped the coverage  X 4 |$&provided by the existing station.X N  yO'ԍWestern Radio Services Comments at 34.X Ameritech proposes that incumbent (nongeographic) licensees  |$be allowed to expand their systems after the auction under the following criteria: (1) each  |$additional site is located within 40 miles of one of the incumbent's previously authorized  |$transmitter sites; or (2) the area to be served by the additional site is surrounded by the  |$Eincumbent's authorized cochannel transmitters within 70 miles, forming a pocket around the  X 4proposed site.  {O6'ԍAmeritech Comments at 1718. See also Ameritel Comments at 2021; ProNet Reply Comments at 19.  Xy4 G6!857. Discussion. In the CMRS Third Report and Order we discussed cochannel  |$interference protection for incumbents and stated that incumbent 900 MHz SMR systems are  |$_entitled to full cochannel interference protection for existing facilities, but are not allowed to  X64 |$expand beyond existing service areas unless they obtain the MTA license for the relevant"6 p0*&&qq"  X4 |$channels. {Oy' G6! ԍCMRS Third Report and Order, 9 FCC Rcd at 8052,  118. See also Amendment of Parts 2 and 90 of the  |$ Commission's Rules to Provide for the Use of 200 Channels Outside the Designated Filing Areas in the 896901  {O ' |$ MHz and the 935940 MHz Bands Allotted to the Specialized Mobile Radio Pool, PR Docket No. 89553, Second  {O' |$D Report and Order and Second Further Notice of Proposed Rulemaking, 10 FCC Rcd 6884, 6900  45 (1995) (900  {O'MHz Second Report and Order). Ē In the 900 MHz Second Report and Order we explained that our objective is to  |$allow 900 MHz SMR incumbents to continue existing operations without harmful interference  |$4and to give them the flexibility to modify or augment their systems so long as they do not  X4 |$lencroach on the MTA licensee's operations.t {O 'ԍ900 MHz Second Report and Order, 10 FCC Rcd at 6901,  47.t We believe that in paging services the public  |$interest would be served by allowing incumbent (nongeographic) paging licensees to continue  |$to operate under their existing authorizations with full protection from cochannel interference,  |$yand similarly protecting the geographic area licensees from cochannel interference from the  |$Vincumbent licensees. Therefore, consistent with our rules for 900 MHz SMR, we will not allow  |$incumbent (nongeographic) licensees to expand beyond their composite interference contour unless the incumbents and the geographic licensee have reached agreement on such modifications.  G6!N958. We believe that the public interest would be served by allowing all incumbent paging  |$licensees to either continue operating under existing authorizations or trade in their sitespecific  |$glicenses for a single systemwide license demarcated by the aggregate of the interference contours  |$paround each of the incumbents' contiguous sites operating on the same channel. The incumbent  X 4 |$(nongeographic) licensees may add or modify sites without filing site specific applications;&  yOl' G6!" ԍIn general, licensees may add or modify sites without filing site specific applications consistent with this  {O4' |$D Order and Commission rules and policies; however, licensees must file applications with the Commission if such  {O' |$ filing is necessary for coordination with Mexico or Canada, or is required by Sections 22.369, 90.177, or 1.1301 et  {O'seq.  |$however, they cannot expand their existing interfering contours without the consent of the geographic licensee.  XM' !D. Coverage Requirements  X4 G6!:59. Background. In the Notice, we requested comment on whether geographic paging  X 4 |$licensees should be subject to minimum coverage requirements as a condition of licensing.[   {O 'ԍNotice, 11 FCC Rcd at 3118,  40.[ We  |$<!observed that we have imposed coverage requirements on licensees in other services to ensure  |$that spectrum is used effectively and service is implemented promptly. We tentatively concluded  |$_that the geographic area licensees should be required to provide coverage to onethird of the  |$population within their licensing areas within three years of the license grant, and to twothirds"! 0*&&qq"  |$of the population within five years, or that in the alternative, they provide substantial service to  X4the geographic license area within five years of the license grant.L {Ob'ԍId. at 3118,  41.L  X4 G6!N;60. Comments. Several commenters agree with the coverage requirements proposed in  X4 |$gthe Notice.Z {O'ԍSee, e.g., Pacific Comments at 5; ProNet Comments at 67; MTel Comments at 7. Most commenters, however, contend that more stringent coverage requirements are  |$needed to deter speculation while promoting prompt service to the public. For example, some  |$pcommenters suggest that we should require licensees to construct facilities covering ten percent  Xa4 |$of the population of the geographic area within one year of the license grant.a {O ' G6! ԍSee, e.g., PageNet Comments at 32; AirTouch Comments at 18; Arch Comments at 78; API Comments at 34; PCIA Comments at 22. TeleBEEPER  |$Zproposes that geographic licensees be required to cover 75 percent of the geographic area covered  X34 |$pby the license in the first five years.J3F yO*'ԍTeleBEEPER Comments at 1.J Rule suggests that licensees be required to place at least  |$one transmitter in operation within six months, that at least 25 percent of the unserved population  |$Ishould receive service within the first year, and that 50 percent of the population should receive  X 4 |$service within the second year.mZ  {Ou' G6!/ ԍRule Comments at 21. See also Metrocall Comments at 14 (suggesting that the geographic licensee must  |$. have one transmitter operating in the license area within one year); A+ Communications Comments at 5 (suggesting that the geographic licensee initiate service within one year).m AT&T Wireless proposes that geographic licensees cover one X 4 |$qthird of the population within one year of licensing, rather than three years.M  yO'ԍAT&T Wireless Comments at 8.M Several  |$commenters oppose allowing a geographic licensee to meet its construction requirement by  |$showing it provided substantial service to the area, contending that this standard is too vague and  X4would allow geographic area licensees to block expansion of competitors' systems."  {O' G6! ԍSee, e.g., AT&T Wireless Comments at 8; AirTouch Comments at 1819; Ameritech Comments at 19; Arch  |$ Comments at 8; PCIA Comments at 22; PageNet Comments at 33; ProNet Reply Comments at 1112; Puerto Rico  |$ Telephone Comments at 7 (contending that the proposed buildout requirements would allow the auction winner to skew the service offering to more populated areas).  G6!<61. Commenters propose that if a geographic licensee fails to meet the coverage  |$requirements, the cancellation of the geographic license should be automatic, without public  X64 |$notice or correspondence from the Commission.6r {OY$'ԍSee, e.g., A+ Communications Comments at 5; AirTouch Comments at 2122; PCIA Comments at 2223. Additionally, ProNet suggests that the  |$Commission reinstate all operational sites held prior to auction and those constructed pursuant""0*&&qq"  X4 |$to the geographic area license.F yOy'ԍProNet Comments at 9.F PageNet proposes that if an incumbent licensee acquires a  |$Rgeographic license and fails to meet its coverage requirements, it should be allowed to retain  |$}constructed sites licensed prior to the auction on a sitespecific basis. PageNet further suggests  |$&that additional facilities constructed under the geographic license would be converted to secondary  X4status pending relicensing of the geographic area.HX yO'ԍPageNet Comments at 33.H  Xv4 G6!=62. Discussion. Section 309(j)(3) of the Communications Act states in part that, when  |$designing competitive bidding systems, "the Commission shall include safeguards to protect the  XH4 |$public interest in the use of the spectrum . . . ."JH yO 'ԍ47 U.S.C.  309(j)(3).J In addition, Section 309(j)(4)(B) states that  |$the Commission shall include performance requirements, such as appropriate deadlines and  |$penalties for performance failures, to ensure prompt delivery of service to rural areas, to prevent  |$stockpiling or warehousing of spectrum by licensees or permittees, and to promote investment  X 4in and rapid deployment of new technologies and services.M x yO'ԍ47 U.S.C.  309(j)(4)(B).M  G6!l>63. We agree with the commenters that coverage requirements are needed as performance  |$requirements to deter speculation while promoting prompt service to the public. Coverage  |$requirements are also necessary to prevent warehousing, promote rapid deployment of new  |$ytechnologies and services, and promote service to rural areas. We believe that the coverage  Xb4 |$requirements proposed in the Notice will be sufficient performance requirements: for each MTA  |$Vor EA, the geographic area licensee must provide coverage to onethird of the population within  |$three years of the license grant, and to twothirds of the population within five years of the  |$license grant. In the alternative, the MTA or EA licensee may provide substantial service to the  |$geographic license area within five years of license grant. Substantial service is defined as  |$service that is sound, favorable, and substantially above a level of mediocre service, which would  X4barely warrant renewal.p {O'ԍSee CMRS Third Report and Order, 9 FCC Rcd at 8157 n.712.p  G6!'?64. The failure to meet these coverage requirements will result in automatic termination  X4 |$of the geographic area license. This is consistent with our rules for broadband PCS,  {O"' G6!8 ԍSee Amendment of the Commission's Rules to Establish New Personal Communications Service, GEN  {O#'Docket No. 90314, Second Report and Order, 8 FCC Rcd 7700, 7754,  134 (1993).  900 MHz"# 0*&&qq"  X4 |$<SMR services,~ {Oy'ԍSee 900 MHz Second Report and Order, 10 FCC Rcd at 6899,  43.~ and Multipoint Distribution Services (MDS).^Z {O ' G6!E ԍSee Amendment of Parts 21 and 74 of the Commission's Rules with Regard to Filing Procedures in the  {O' |$^ Multipoint Distribution Service and in the Instructional Television Fixed Service, MM Docket No. 94131, Report  {O'and Order, 10 FCC Rcd 9589, 9613,  43 (1995) (MDS Report and Order). We will reinstate any licenses  |$that were authorized, constructed, and operating at the time of termination of the geographic area license.  G6!+@65. We also note that paging licensees remain subject to performance standards elsewhere  X4 |$ in our rules. In the CMRS Third Report and Order, we adopted a uniform tenyear license term  Xx4 |$and renewal expectancy for all CMRS providers, including paging providers.tx {O 'ԍSee CMRS Third Report and Order, 9 FCC Rcd at 8157,  386.t Under this  |$provision, a CMRS licensee will be entitled to a renewal expectancy if it demonstrates that it has  |$}provided substantial service during the license term and has complied with the Commission rules  X34 |$and policies, and the Communications Act.:3 {O'ԍId.: This renewal expectancy standard provides  |$additional incentive for licensees to provide service, thereby promoting investment in and rapid  |$Rdeployment of new technologies and services in compliance with Section 309(j)(4)(B) of the Communications Act.  X '_ E. CoChannel Interference Protection  X' 1. CoChannel Interference Protection Incumbent Licensees  Xd4 G6!'A66. Background. Under our current rules, exclusive paging systems are protected from  |$Icochannel interference by a variety of rules that govern transmitter height and power, distance  |$<_between transmission stations, the licensee's protected service area, and/or the field strength of  X4 |$the licensee's service and interfering signals.[ {Ot'ԍNotice, 11 FCC Rcd at 3119,  46.[ The purpose of the cochannel interference rules  |$is to protect the service of each licensee's facilities from interference caused by the operation of  X4 |$cochannel facilities of other licensees.t6  {O 'ԍSee CMRS Third Report and Order, 9 FCC Rcd at 8060,  139.t We believe that it is necessary to have a uniform  |$pmethodology to determine the service and interference contours of incumbent licensees to allow  |$them to make minor modifications without exceeding the interference contour and causing  |$<interference to the geographic licensee. We also need a uniform methodology to determine the  |$&service and interference contours of the geographic area licensee to allow the geographic licensee to construct a paging system without causing interference to an incumbent licensee. "~$ 0*&&qq"Ԍ G6! ԙB67. For the CCP channels below 931MHz, we currently use formulas to determine the  |$distance from each transmitting antenna site to its service and interference contours along the  X4 |$eight cardinal radials from the transmitter site. We proposed in the Notice that we would  |$&continue to use these formulas for interference protection purposes if we adopted geographic area  X4 |$ylicensing for these bands.L {O'ԍId. at 3119,  48.L For the 931 MHz channels, the rules contain two tables of fixed  |$radii, Tables E1 and E2, rather than formulas, to establish the distance to the service and  Xx4 |$+interference contours.QxZ {O 'ԍSee 47 C.F.R.  22.537.Q For the 929 MHz exclusive channels, assignments are made using  |$/geographic separation rules that agree with the separations which result from the application of  XJ4 |$the fixed radii for 931 MHz.WJ {O 'ԍSee 47 C.F.R.  90.495(b)(2).W In the Notice, we proposed to adopt formulas to determine the  |$cservice and interference contours for the exclusive 929MHz and the 931 MHz channels similar  X 4to the formulas used in the lower bands.e ~ {OM'ԍNotice, 11 FCC Rcd at 311920,  4950.e  X 4 G6! C68. Comments. Commenters addressing this issue strenuously object to the proposal to  |$}change the method by which service and interference contours are determined for the exclusive  |$ 929 MHz and 931 MHz facilities, and state that the proposed method of computing these contours  |$could require incumbents to reduce coverage or be required to accept interference from  X4 |$geographic licensees." {OU' G6!u ԍSee, e.g., AT&T Wireless Comments at 10; Ameritech Comments at 3; Comp Comm Comments at 1  |$^ (contending that the required signal strengths in the proposed formula are flawed); Liberty Comments at 4; PCIA  |$c Comments at 25; ProNet Comments at 15; Priority Comments at 7; PageAmerica Comments at 1; PageMart Comments at 2; PageNet Comments at 11; Radiofone Comments at 78; Word Comments at 1215. Ameritech notes that adoption of the formulas, and subsequent  |$degradation of existing service, could threaten public safety because many of Ameritech's  Xf4 |$pcustomers are medical, police, and fire personnel.If  yO'ԍAmeritech Comments at 4.I PCIA, and other commenters, suggest that  |$"the Commission use the Tables E1 and E2 in Section 22.537 for both 929 MHz and 931 MHz  X84 |$@because these standards generally provide appropriate levels of interference protection.8  {Os ' G6! ԍSee, e.g., AirTouch Comments at 26; Arch Comments at 1314; Metrocall Comments at 10; PCIA Comments at 25; ProNet Comments at 15; Pacific Comments at 4; Source One Comments at 34. Several  |$commenters suggest that we should consider all exclusive 929 MHz and 931 MHz as having a  |$circular service contour radius of 20 miles and a circular interference contour radius of 50  X4miles. {O%'ԍSee, e.g., MTel Comments at 9; PageNet Comments at 3; API Reply Comments at 12. "%v0*&&qq"Ԍ X4 G6!ԙD69. Discussion. We proposed using the specified formulas in the Notice for the 929 MHz  |$Rand 931 MHz channels because we believed that these formulas would produce service and  |$@interference contours that would better reflect actual coverage. The formulas would be a function  |$cof the technical parameters actually used rather than of the maximum technical parameters that  |$could be used for a given set of radii. Additionally, using these formulas would provide licensees  |$with flexibility to establish transmitter sites nearer the periphery of their systems by adjusting the  |$effective antenna height and transmitting power, instead of having to obtain written consent from  |$Mcochannel licensees. After review of the record, however, we are persuaded that the advantages  |$3of adopting the proposed formulas are outweighed by the disadvantages noted by the commenters.  |$ As the commenters observed, changing from Tables E1 and E2 to the proposed formulas would,  |$in most cases, reduce the service area and composite interference contour that incumbent licensees  |$have relied on in developing their systems to date. Additionally, the proposed formulas may  |$underestimate the actual reliable coverage of the paging systems. Using the fixed distances in  |$Tables E-1 and E-2 in Section 22.537 for the 929 MHz and 931 MHz channels would maintain  X 4 |$cthe status quo for 931 MHz channels and conform 929 MHz channels to the current procedure  |$"for 931MHz. Therefore, we are adopting the fixed distances in Tables E-1 and E-2 in Section  |$822.537 for the exclusive 929 MHz and 931 MHz channels. Geographic area licensees must  |$}provide cochannel protection to all incumbent licensees, including incumbents on the nationwide  |$channels and incumbents in other geographic areas. We will allow geographic and incumbent  XO4 |$licensees to use shortspaced locations pursuant to mutual written consent.O {O' G6! ԍCurrent rules provide that short-spaced locations (i.e., locations where the interfering contour of one licensee  |$ overlaps the service contour of another licensee) may be used if the service contour licensee agrees to accept any  |$ interference that may result in the overlap area. Because contours for the 929 and 931 MHz channels will be based  |$ on fixed radii, any short-spacing of transmitters on those channels would require the acceptance of interference by  {O'both parties. See 47 C.F.R.  22.537, 22.567. As we proposed in  X84the Notice, we will continue to use the current formulas for the CCP channels below 931MHz.  X ' 2. CoChannel Interference Protection Adjacent Geographic Licensees  X4 G6!'E70. Background. In the Notice we discussed the interference obligations of geographic  |$licensees with respect to neighboring geographic licensees, and proposed that interference  |$protection should be provided by (1) reducing the signal level at the service area boundary or (2)  X4negotiating a mutually acceptable agreement with the neighboring geographic licensees.[| {O'ԍNotice, 11 FCC Rcd at 3121,  62.[(#(#1  Xm4 G6!F71. Comments. Pacific contends that licensees should have the option of providing  |$interference protection either by reducing the signal strength or negotiating some other agreement  X?4 |$}with those affected.G? yO$'ԍPacific Comments at 6.G Ameritech and Ameritel contend that the Commission should require the  |$Zgeographic licensee to give advance notice to cochannel incumbents before activating transmitters"(&0*&&qq"  |$that are located less than 70 miles from existing facilities, and should comply with a request by  X4 |$Rthe incumbent for interference testing prior to operation.f yOb'ԍAmeritech Comments at 17; Ameritel Comments at 1920.f PCIA supports the proposal that  |$pgeographic licensees should provide interference protection either by reducing the signal level at  |$the service area boundary by positioning directional antennas, or some other mutually acceptable  X4agreement.FXX yO' G6!E ԍPCIA Comments at 26. In "Supplemental Reply Comments" filed on May 31, 1996, PCIA recommends  |$ that in the absence of negotiated provisions, the Commission limit the signal strength at MTA borders to no more  yO= 'than 33 dBV/m.F  G6!G72. PageNet contends that paging licensees should have the flexibility to reach the best  |$solution for the carrier's business goals and for service to the public, and that licensees should  |$"be given wide latitude in permissible sharing and other arrangements geared toward eliminating  X14 |$gharmful interference in the border areas.H1x yOZ'ԍPageNet Comments at 35.H PageNet suggests that in the absence of an agreement  |$with the adjacent cochannel licensees, the geographic licensee should employ technical solutions,  X 4 |$such as directional antennas, to reduce the signal level at the service area boundary.H  yO'ԍPageNet Comments at 36.H PageNet  |$contends that the Commission should only entertain complaints regarding border area transmitters  |$in this situation if the complaining geographic licensee is able to demonstrate actual harmful  X 4interference to its operations.H  yO'ԍPageNet Comments at 36.H  X4 G6!H73. Discussion. We note that the cochannel interference protection discussed above  |$ requires incumbents and geographic licensees to provide interference protection to each other, but  |$does not apply to interference between geographic licensees. Geographic licensees generally are  |$not required to file applications with the Commission, therefore it is possible that a geographic  |$licensee with a transmitter at or close to the border of the MTA or EA could unknowingly cause  |$interference to a neighboring geographic licensee. It is in the interest of the geographic licensees  |$lto find mutually beneficial ways to accommodate their needs in providing service within their  |$respective MTAs and EAs. Instead of specifying a minimum distance a geographic licensee's  |$transmission site must be from the geographic border, which may result in unserved areas, we  |$are allowing geographic licensees to negotiate mutually acceptable agreements with all adjacent  |$"geographic area licensees if the interfering contour of one geographic area licensee will extend  |$into the adjacent geographic area or areas. Adjacent geographic area licensees have a duty to  |$negotiate with each other in good faith regarding cochannel interference protection. We believe  |$that informal negotiations between parties in determining mutually agreeable arrangements  |$"between adjacent MTAs and EAs will achieve the most expeditious and effective resolution of"N'( 0*&&qqh"  |$cochannel interference. The lack of adequate service to the public due to failure to negotiate  |$reasonable solutions to cochannel interference problems with adjacent geographic area licensees could reflect negatively on licensees seeking renewal.  X' 3. Maximum Power and HeightPower Limit  Xv4 G6!I74. Background. Under our existing rules, the maximum effective radiated power (ERP)  X_4 |$limit for 931MHz, nationwide 929MHz, and narrowband PCS facilities is 3500Watts ERP.s_ {O'ԍSee 47 C.F.R.  22.535(a), 24.132(c), and 90.494(g). s  XH4 |$In the Part 22 Rewrite Order, we concluded that a maximum power limit of 3500Watts ERP is  |$appropriate for paging facilities in the 931MHz band, because it allows for the use of high power  |$Vfacilities where needed, yet provides sufficient protection from intermodulation interference and  X 4 |$receiver desensitization.L Z {O' G6! ԍSee Part 22 Rewrite Order, 9 FCC Rcd at 6513,  7282. Intermodulation interference can occur where  {O' |$ a number of base stations (transmitters and receivers) operate in close proximity to each other, i.e., on the same or  |$ immediately adjacent roof tops, mountain peaks, etc. Under such conditions, strong signals from adjacent transmitters  |$7 may interact with each other in the receiver of a neighboring base station to produce interfering signals on other  {O4' |$ frequencies, including that of the mobile station being received. See Frequency Allocations, Docket No. 13847,  {O' |$ Further Notice of Proposed Rule Making, 10 FCC 2d 885, 88687,  4 (1967). Receiver desensitization occurs where  {O' |$M a strong signal causes a receiver to not detect other low level signals. See, e.g., Amendment of Part 87 of the  {O'Commission's Rules, PR Docket No. 93199, Notice of Proposed Rule Making, 8 FCC Rcd 4763, 4763 n.4 (1993). For example, high power facilities might be needed in areas where  |$shadowing or building penetration is a problem, for high speed data transmission, or where the  X 4 |$use of several smaller facilities would not be economical. In the PCP Exclusivity Order, we  |$established the ERP limit of 1000 Watts for local and regional 929 MHz systems, and 3500 Watts  X 4 |$for nationwide systems.Y n  {O'ԍSee 47 C.F.R.  90.494(f), (g).Y In the PCP Exclusivity Reconsideration we allowed nonnationwide  |$929 MHz PCP systems to operate sites within their existing service area at up to 3500 Watts  |$+ERP, provided that such operation would not increase the minimum geographical separation  Xh4applicable to cochannel systems under Section 90.495(b)(2).th  {O'ԍPCP Exclusivity Reconsideration, 11 FCC Rcd at 3094,  21.t  X:4 G6!,J75. In the Notice, we tentatively concluded that the maximum ERP limit for non |$ynationwide 929 MHz PCP systems should be raised to a maximum of 3500Watts in order to  |$bring the rules governing nonnationwide 929 MHz facilities into conformity with those for 931  X4 |$8MHz, nationwide 929 MHz, and narrowband PCS facilities.[  {O:#'ԍNotice, 11 FCC Rcd at 3121,  57.[ We observed that this would  |$provide 929 MHz licensees with the benefits of higher power operation without unduly increasing"($0*&&qq:"  X4 |$the risk of interference.: {Oy'ԍId.: We proposed to retain the current maximum ERP limits for the  X4 |$various CCP lower band paging channels.\Z {O'ԍSee 47 C.F.R  22.535, 22.565.\ These limits were increased in 1989 after careful  X4consideration, and we believe that the limits adopted in that proceeding remain appropriate. {Oo' G6! ԍSee Height and Power Increases in the Public Mobile Service, CC Docket No. 88135, Report and Order,  {O9'4 FCC Rcd 5303 (1989), modified, Order on Reconsideration, 5 FCC Rcd 4604 (1990).  G6!WK76. Heightpower limits serve to limit the service and interfering range of a facility to  |$a constant distance. If a facility is modified to raise the antenna height, the power must be  |$Vlowered so that the service and interfering ranges remain essentially unchanged. Heightpower  |$limits are useful when cochannel assignments are made on a sitebysite basis using a single  |$fixed minimum geographical separation distance requirement, because they allow licensees  |$Aflexibility to employ various combinations of antenna height and transmitting power while  X 4 |$maintaining the validity of the fixed separation method. H yO' G6! ԍBoth 929MHz and 931 MHz paging facilities originally were licensed on a single minimum geographical separation distance of 70 miles between transmitters. Heightpower limits are also useful  |$for limiting the area that can be covered by a single facility. In the 931 MHz band, we  |$peliminated the heightpower limit, because most systems in that band are multitransmitter wide |$Varea systems covering large areas. We concluded that it is more costeffective for licensees to  X 4 |$Ecover a large area with a high power facility than with numerous smaller facilities.m  {O'ԍSee Part 22 Rewrite Order, 9 FCC Rcd at 6528,  74.m In the  X 4 |$Notice, we proposed to eliminate the heightpower limit for 929 MHz licensees, because many  |$of the paging systems in the 929MHz band are also multitransmitter widearea systems. We  |$<proposed to maintain the current heightpower limits for the lower band CCP channels because  Xd4most of these channels are occupied by smaller systems.[d2  {OG'ԍSee, e.g., 47 C.F.R.  22.535(c).[  X64 G6! L77. Comments. Pacific agrees with our proposal to eliminate the heightpower limit for  |$929 MHz systems, and argues that we should also eliminate the heightpower requirement for the  X4 |$Ilower band channels.G  yO}!'ԍPacific Comments at 2.G Rule contends that the existing height/power requirements for 150 and  |$450 MHz should be changed, and observes that the Part 90 licensees do not have such  X4 |$requirements.ET  yO$'ԍRule Comments at 22.E AirTouch agrees that the Commission should retain the current maximum ERP  |$_limit for the lower bands, and should conform the 929 MHz heightpower and power rules to")0*&&qqe"  X4 |$those for the 931 MHz band.I yOy'ԍAirTouch Comments at 27.I PCIA, PageMart, and Caraway support the Commission's  |$proposal to increase the maximum power for 929 MHz nonnationwide facilities to 3500 watts,  X4 |$and to eliminate the heightpower limit for 929 MHz.yX yO'ԍPCIA Comments at 2526; PageMart Comments at 78; Caraway Comments at 2.y PageNet and TeleBEEPER contend that  X4 |$the nonnationwide 929 MHz carriers should be able to operate their facilities at up to 3500 watts  X4effective radiated power.b yO= 'ԍPageNet Comments at 34; TeleBEEPER Comments at 3.b  Xv4 G6!AM78. Discussion. One of our goals in this proceeding is to promote technical parity within  |$the paging industry, when feasible. Paging systems operating on the 929 MHz band are virtually  |$"identical to those operating on the 931MHz band and should be subject to the same power and  |$8heightpower rules. We also note that conforming these rules will allow paging operators to  |$"design their systems in the most economical manner, particularly when integrating two systems  |$where one operates in the 931MHz band and the other operates in the 929MHz band. Most of  |$the commenters addressing this issue contend that the Commission should eliminate the disparity  X 4 |$between the rules governing the 931 and those governing the 929MHz channels, and conform  |$Ithe ERP limit and the heightpower limit in these two bands. We agree with these commenters  |$that carriers operating on 929 MHz and 931 MHz should operate with the same power and  |$cheightpower rules. Therefore, we are eliminating the heightpower limit for 929 MHz systems,  |$to conform them to the 931 MHz systems. We are also increasing the maximum permitted ERP  |$for all 929 MHz systems to 3500 Watts, to conform these systems with the nationwide 929MHz systems and the 931MHz systems.  G6!N79. With respect to the CCP bands below 931MHz, we proposed to retain the current  |$Wmaximum ERP limits for these channels. In CCDocket No.88-135, we completed a  X4 |$/comprehensive evaluation of our power and heightpower rules governing these channels.x {O' G6!d ԍSee Height and Power Increases in the Public Mobile Service, 4FCCRcd5303(1989), modified 5FCCRcd4604(1990). In  |$that proceeding, we developed an extensive record and considered many technical factors,  |$including cochannel and adjacent channel interference potential, interference to TV reception,  |$Raccuracy limitations of propagation prediction tools, blanketing interference and service area  |$gains. As a result of our evaluation in that proceeding, we increased the power limits for certain  |$&frequency bands, declined to increase them for other frequency bands, adopted certain geographic  |$Rseparations to protect adjacent channel Public Safety and other private radio operations, and  |$"provided for averaged heightpower limits instead of radialbyradial limits. These power limits  |$and other rules were incorporated without substantial change into the power limit and technical  X 4 |$channel assignment criteria rules we adopted subsequently in the Part22 Rewrite Order. There" *0*&&qq"  |$have been no substantial technological changes to the systems operating on these channels since  |$the existing power limits were adopted. Accordingly, we believe that the carefully considered  |$power and heightpower limits adopted in the aforementioned proceedings remain appropriate.  |$Discarding the results of our previous analysis and increasing the maximum ERP limits again for  |$the sake of sameness, without a more detailed record analyzing the possible consequences, could  |$pose an unacceptable increased risk of interference to other CMRS, public safety and private  |$radio systems and television reception. Therefore, we are maintaining the current power and heightpower limits for the CCP bands below 931MHz.  X1' F. Licensing in Mexican and Canadian Border Areas  X 4  X 4 G6![O80. Background. In the Mexican and Canadian border areas, paging channel availability  X 4 |$Imay be restricted by international agreement, and there may be limitations on ERP and antenna  X 4 |$_height.HZ  {ON' G6! ԍSee 47 C.F.R.  1.955, 22.169, 90.175(e). We have a December 19, 1995 Letter of Understanding with  |$x Mexico related to the temporary use of 929932 MHz channels for paging services within 120 kilometers (75 miles) of the common border.H In other services where we have converted to geographic area licensing, we have  X 4 |$/decided not to distinguish between border areas and nonborder areas for licensing purposes.  {OY'ԍSee, e.g., 900 MHz Second Report and Order, 10 FCC Rcd at 6908,  6263.  X 4 |$In the Notice, we proposed that geographic licensees be entitled to use any available borderarea  |$channels, subject to the relevant rules regarding international assignment and coordination of such  X{4channels.[{| {O'ԍNotice, 11 FCC Rcd at 3122,  64.[  XM4 G6!P81. Comments. Commenters agree that border areas should be treated like any other  X64 |$geographic area for licensing purposes.6 {O'ԍSee, e.g., Pacific Comments at 6; AirTouch Comments at 28; PageNet Comments at 3637. Ameritech observes that the lower CCP bands still  X4 |$crequire sitebysite coordination with Canada.M yOp'ԍAmeritech Comments at 1920.M PageNet contends that the Commission should  |$/continue the practice of allowing the placement of transmitters by the U.S. geographic licensee  |$pon the U.S. side of the border if the U.S. licensee has consent from the foreign licensee and the  X4 |$appropriate foreign regulatory authority.H0  yO!'ԍPageNet Comments at 37.H PageNet states that this cooperation is vital to the  X4development of international roaming service offerings and will serve the public interest.H  yO4$'ԍPageNet Comments at 37.H "+P 0*&&qq("Ԍ X4 G6!Q82. Discussion. Commenters agree with our proposal that border areas should be treated  |$like any other area for licensing purposes and carriers can determine whether spectrum is usable  |$in border areas under applicable treaties and protocols. Therefore, we will not distinguish  |$+between border and nonborder areas in geographic licensing. We note that the geographic  |$licensees will be responsible for advising the Commission of any transmitter site changes or additions if sitebysite coordination is required by Canada or Mexico.  X_' G. Eligibility to Participate in Competitive Bidding  X14 G6!'R83. Background. In the Notice we tentatively concluded that both incumbents and new  |$entrants could apply for geographic area licenses, without restrictions on eligibility, and that the  X 4marketplace should determine the level of demand for licenses.  {O~ ' G6!V ԍNotice, 11 FCC Rcd at 3122,  66. We note that open eligibility requirements were also adopted in the 800  {OH ' |$ MHz SMR service. See Amendment of Part 90 of the Commission's Rules to Facilitate Future Development of SMR  {O' |$H Systems in the 800 MHz Frequency Band, PR Docket No. 93144, First Report and Order, Eighth Report and Order,  {O' |$ and Second Further Notice of Proposed Rulemaking, 11 FCC Rcd 1463, 1531,  126 (1995) (800 MHz First Report  {O'and Order).   X 4 G6!S84. Comments. PageNet and AirTouch contend that eligibility should not be restricted.<X  yO ' G6!V ԍPageNet Comments at 36; ProNet Comments at 10; AirTouch Comments at 2930 (contends that licensees  |$ who meet very high current construction thresholds should not be subjected to competing applications on their fully developed channels).<  |$AT&T Wireless suggests that short form applications should be filed only by entities that already  X 4 |$provide coverage to 70 percent of the geographic area.Q  yO'ԍAT&T Wireless Comments at 7 n.5.Q Ameritel contends that the Commission  |$should restrict eligibility to existing carriers or entities with applications pending as of February  X{4 |$8, 1996, the date of the Notice.I{2  yO^'ԍAmeritel Comments at 10.I Priority suggests that eligibility to bid on 931 MHz spectrum  |$should be limited to incumbents already providing service on the particular channel to ensure that  XO4the high bidder is a serious applicant intending to provide paging service to the public.HO  yO'ԍPriority Comments at 6.H  X!4 G6!~T85. Discussion. We believe that it is important to allow all parties to participate in the  |$competitive bidding process for geographic area licenses, and accordingly, apart from foreign  X4 |$ownership limitations, we will not restrict eligibility.R  yO#' G6! ԍForeign ownership in common carrier paging licensees is subject to certain restrictions in Section 310 of the Communications Act. 47 U.S.C.  310. We believe that nonincumbents should  |$be allowed to bid for available spectrum, or to enter into joint ventures with incumbents for",0*&&qqT"  |$purposes of bidding in a geographic area. The competitive bidding process itself should deter  |$speculation by those not genuinely interested in providing service to the public. In addition, we  |$believe that the open eligibility for the geographic area licenses will be procompetitive and potentially will result in a diverse group of entities providing paging services to the public.  X'X H. Channel Aggregation Limit  Xv4   X_4 G6!U86. Background. In the Notice, we requested comment on whether a channel aggregation  XJ4 |$ylimit would be appropriate for the paging channels, and if so, what the limit should be.[J {O 'ԍNotice, 11 FCC Rcd at 3123,  69.[ We  X34noted that significant aggregation of paging channels has not occurred.:3Z {O> 'ԍId.:  X 4 G6!V87. Comments. The commenters addressing this issue generally argue that we should not  X 4 |$impose a channel aggregation limit or spectrum cap for paging channels.RZ  {O' G6! ԍSee, e.g., Ameritech Comments at 15; Arch Comments at 15; API Comments at 5; AirTouch Comments at  |$ 30; Ameritel Comments at 17; Metrocall Comments at 18; MobileMedia Comments at 23; PageNet Comments at 39; ProNet Comments at 1011; PCIA Comments at 27.R Ameritech Xnotes that  |$<incumbents should not be limited in the number of paging channels they hold because they have  |$already developed existing paging operations and may have to bid at auction to defend the  X 4 |$integrity of such systems.J  yOh'ԍAmeritech Comments at 15.J PageNet observes that broadband carriers have a spectrum cap of  X4 |$45 MHz, and a paging channel is 25 kHz, which is 1/40 of 1 MHz.H yO'ԍPageNet Comments at 38.H AirTouch contends that  |$no carrier is remotely close to having the channel position or market power to dominate the  Xd4 |$paging industry, therefore channel aggregation limits would not be in the public interest.Id.  yOC'ԍAirTouch Comments at 30.I  |$Additionally, notes AirTouch, cellular and PCS licensees are allowed to and do provide paging  |$services, and it would be unfair to arbitrarily limit paging carriers when they are competing  X4 |$against broadband licensees.I  yO 'ԍAirTouch Comments at 30.I TeleBEEPER supports aggregation limits insofar as an applicant  |$would not be permitted to have a 929 MHz and a 931 MHz license in the same geographic  X4area.JN  yO#'ԍTeleBEEPER Comments at 2.J  X4"-0*&&qq"Ԍ X4 G6!SW88. Discussion. In the CMRS Third Report and Order, we imposed a spectrum  |$aggregation cap of 45 MHz as the total amount of combined PCS, cellular, and SMR spectrum  |$/classified as CMRS in which an entity may have an attributable interest in any geographic area  X4 |$at any point in time. {O6' G6!+ ԍCMRS Third Report and Order, 9 FCC Rcd at 8109,  263. See also Amendment of Parts 20 and 24 of  |$! the Commission's Rules Broadband PCS Competitive Bidding and the Commercial Mobile Radio Service Spectrum  {O' |$D Cap, WT Docket No. 9659, Report and Order, 11 FCC Rcd 7824, 7869,  9495 (1996) (D, E, and F Block Report  {O' |$ and Order) (the 45 MHz CMRS spectrum cap is necessary to promote competition and prevent anticompetitive horizontal concentration in the CMRS business). We declined to include narrowband radio services in the spectrum cap,  |$noting that it is highly unlikely that one entity could ever accumulate as much as 5 MHz in any  X4 |$given geographic market.p~ {O 'ԍCMRS Third Report and Order, 9 FCC Rcd at 8111,  267.p For similar reasons, we conclude that a channel aggregation limit  |$is unnecessary for paging. The record indicates that the paging market is highly competitive and  |$diversified, making it unlikely that any one licensee could accumulate sufficient spectrum to  |$/dominate the paging market, much less the CMRS market as a whole. There are between 500  X34 |$and 600 paging carriers in the United States today.3 {O' G6! ԍImplementation of Section 6002(B) of the Omnibus Budget Reconciliation Act of 1993, First Report, 10  {O'FCC Rcd 8844, 8854,  30 (1995) (Annual Report). Fifteen large companies account for  X 4 |$approximately sixty percent of the paging customers.b l  {O9'ԍAnnual Report, 10 FCC Rcd at 8854,  30.b In most markets, paging service is  |$provided by several competing carriers, and large metropolitan areas typically have twelve or  X 4 |$more carriers.:  {O'ԍId.: There has been some merger activity among large paging carriers in recent  |$years, but these mergers have been geographic market extension mergers for the most part, and  |$Vno showing has been made that these mergers have increased horizontal concentration to levels  |$that are significant for purposes of competitive analysis. Therefore, we do not find any evidence  |$that excessive channel aggregation has occurred in the paging industry; to the contrary, paging  |$channel use is highly dispersed among numerous competing licensees. Additionally, we anticipate  |$that many applicants for geographic area paging licenses will be incumbents seeking to obtain  |$geographic area licenses where their existing facilities reside. Thus, we do not believe that  |$geographic area licensing is likely to increase market concentration in the paging industry.  |$Finally, we believe that a cap could arbitrarily limit a carrier's capacity to provide services that  |$may require multiple channels. Therefore, we are not imposing a spectrum or channel  X4aggregation cap on paging licenses at this time. ". 0*&&qq:"Ԍ X'J I. Competitive Bidding Issues  X4  X' 1. Competitive Bidding Design  X' a. Bidding methodology   Xv4 G6!X89. Background. In the Notice we sought comment on which auction methodology  |$should be used to award paging licenses. We noted that we had conducted simultaneous Jmultiple  |$cround auctions for broadband and narrowband PCS, 900 MHz SMR, and Multipoint Distribution  |$Service (MDS), observing that this is the preferred auction design where licenses have strong  X 4 |$&value interdependencies.[  {O 'ԍNotice, 11 FCC Rcd at 3124,  76.[ We also noted, however, that a large number of paging licenses might  |$be auctioned. Given this large number, we sought comment on whether simultaneous multiple  |$Rround bidding might be too burdensome administratively, and whether another bidding design  X 4would be more appropriate for auctioning paging licenses.H Z {O'ԍId. at  77. H  X 4 G6!dY90. Comments. A number of commenters support the use of a simultaneous multiple  X4 |$round auction design for paging licenses." yO/' G6!N ԍAPI Comments at 5; Pacific Comments at 6; PageNet Comments at 41; ProNet Comments at 1718;  {O' |$^ AirTouch Comments at 3132 and ex parte at 2; Arch Comments at 16. See also AT&T Wireless Comments at 10  |$| (suggesting series of servicespecific simultaneous multiple round auctions); Ameritech Comments at 14 (supporting multiple round auctions). ProNet, for example, asserts that this design will give  |$bidders maximum information about license values and result in bids that reflect licenses' true  Xd4value.Jd yO'ԍProNet Comments at 1718.J  G6!Z91. A number of commenters suggest other approaches to competitive bidding for paging  |$licenses. For instance, A+ Communications proposes that each available market or frequency be  X4 |$/auctioned separately.Sf  yO'ԍA+ Communications Comments at 9. S Other commenters propose that auctions be held only after competing  |$applications are filed. Thus, when two or more parties seek a particular license, an auction would  X4 |$lbe held, limited to these interested parties.x  {O"' "p ԍMetrocall Comments at 20; Supercom Comments at 6 n.8. See also Wilkinson Comments at 6 n.8; Baldwin  x Comments at 67 n.8; ATS Comments at 6 n.8; Chequamegon Comments at 6 n.8; Benkelman Comments at 67 n.8;  x CSS Comments at 6 n.8; Baker Comments at 6 n.8, and 10; Hiort Comments at 6 n.8; HEI Comments at 6 n.8;  x Metamora Comments at 67 n.8; Mashell Comments at 4 n.5; Pigeon Comments at 6 n.7; Porter Comments at 67 n.8; Mobilfone Comments at 67 n.8; PAI Comments at 6 n.8; Rinker Comments at 67 n.8. x An open outcry auction or a sealed bid auction"/0*&&qq:"  |$would, these commenters contend, be most appropriate to then resolve mutual exclusivity among  X4 |$applicants. {Ob'ԍSee, e.g., Pigeon Comments at 6 n.7 (sealed bid); Metrocall Comments at 20 (oral outcry). Ameritel disagrees with the use of sealed bidding, contending that it would force  X4 |$small businesses to overbid or risk losing the license to speculators.dZ yO'ԍAmeritel Comments at 17 and Reply Comments at 11. d Instead, Ameritel supports a sequential multiple round auction on a frequencybyfrequency basis.  X4 G6![92. Discussion. Based on the record in this proceeding and our successful experience  Xv4 |$conducting simultaneous multiple round auctions for other CMRS services and MDS, we believe  |$pthis type of auction is most appropriate for paging licenses. We believe that, for certain bidders,  |$ these licenses will be significantly interdependent because of the desirability of aggregation across  |$spectrum blocks and geographic areas and because some licenses are likely to be substitutes.  |$Given such interdependence, simultaneous multiple round bidding generates more information  |$about license values during the course of the auction and provides bidders with more flexibility  |$yto pursue backup strategies than if the licenses were auctioned separately or through sealed  |$hbidding. We likewise expect the value of these licenses to be sufficiently high to warrant  |$+simultaneous multiple round bidding. Our experience in running simultaneous multiple round  |$auctions shows that they can be run very efficiently and the aggregate value of the large number  |$of licenses is likely to justify the use of this system. We will retain the discretion, however, to  |$8use a different methodology if that proves to be more efficient administratively. Prior to the auction, we will provide information about the bidding design to be used.  X4'8 b. License grouping  X4 G6!\93. Background. In the Notice, we sought comment on how paging licenses should be  X4 |$lgrouped for competitive bidding purposes.b {O'ԍNotice, 11 FCC Rcd at 3125,  7879.b We sought comment on the benefits of 8various  |$ possible license groupings, including, but not limited to the grouping of all paging licenses  |$together for a single simultaneous multiple round auction and the grouping of licenses on a  X4channelbychannel basis by geographic license area.F| {O'ԍId. at  79.F  X~4 G6!]94. Comments. Most commenters support grouping licenses by frequency bands. For  |$Vexample, API, AirTouch, Arch, and PageNet propose that the licenses in the 929 and 931 MHz  |$bands be auctioned together, followed by auctions, if appropriate, of the lower band paging  X94 |$frequencies.9 {O$' G6! ԍAPI Comments at 5; AirTouch Comments at 3234 and ex parte Comments of August 15, 1996 at 2; Arch Comments at 1617; PageNet Comments at 41; PageNet Reply Comments at 1314.1. The best method for striking the balance between making substitutable channels"90h 0*&&qq+"  |$Eavailable simultaneously while avoiding auctioning too many licenses at the same time, these  |$}commenters contend, is achieved by grouping the 929 and 931 MHz licenses together in a single  |$auction. They also state that auctioning the 900 MHz licenses together would ensure that  |$technically similar services would be auctioned at the same time and those licenses most in  X4demand would be auctioned first.d yO'ԍAirTouch Comments at 3234; Arch Comments at 1617.d  G6!^95. ProNet proposes a single simultaneous multiple round auction for all paging licenses  |$with no license grouping. Under this framework, ProNet contends, participants will have access  |$to the maximum amount of information available concerning the paging market. In the event this  X14 |$[approach proves unwieldy, ProNet prefers auctioning by band.L1X yO: 'ԍProNet Comments at 1718. L API states that should  |$auctioning of the 900 MHz licenses as a group prove administratively burdensome, licenses  X 4 |$/should be grouped, to the maximum extent feasible, based upon frequency or channel blocks.D  yO'ԍAPI Comments at 5. D  |$IMetrocall expresses the concern that license grouping would favor bidders for one service over  X 4bidders for other services.J x yO'ԍMetrocall Comments at 21.J  G6!_96. A+ Communications proposes a separate auction for each frequency by license  X4 |$areas.Q yOI'ԍA+ Communications Comments at 9.Q Rule argues against auctioning the smaller markets last, noting that such a license  |$grouping may encourage speculators, unsuccessful in prior auctions, to bid prices up in order to  Xb4have something to promote investor sales.Gb yO'ԍRule Comments at 25. G  X44 G6!`97. Discussion. Although it may be desirable to hold a single simultaneous multiple  |$round auction for all paging licenses, such an auction is not currently feasible from an operational  |$_standpoint because there will be more than 15,000 paging licenses available for auction. We  |$"agree with API, AirTouch, Arch, and PageNet that there is significant interdependence among  |$licenses in the 929 and 931 MHz services, and similar interdependency among the licenses of the  |$_lower band paging services. We also think that grouping interdependent licenses and putting  |$them up for bid at the same time promotes awarding licenses to bidders who value them most  |$highly by providing bidders with information about the prices of complementary and substitutable  |$licenses during the course of an auction and by facilitating back up strategies. We therefore will  |$Eaward the paging licenses in a series of simultaneous multiple round auctions, grouping them"e1( 0*&&qq"  |$based on interdependency and operational feasibility. We reserve the discretion to decide on specific license groupings as administrative circumstances dictate.  X' c. Bidding procedures  X'` ` i. Bid increments and tie bids  X_4 G6!a98. Background. In a multiple round auction the bid increment is the amount or  |$percentage by which the bid must be raised above the previous round's high bid in order to be  X14 |$Naccepted as a valid bid in the current bidding round.1 {O 'ԍSee, e.g., Competitive Bidding Second Report and Order, 9 FCC Rcd at 2369,  124. The application of a minimum bid  |$increment speeds the progress of the auction and, along with activity and stopping rules, helps  X 4 |$}to ensure that the auction comes to closure within a reasonable period of time.: Z {O'ԍId.: In the Notice,  X 4 |$ we sought comment on appropriate minimum bid increments for paging auctions.[  {O'ԍNotice, 11 FCC Rcd at 3125,  81.[ We proposed  |$to adopt a minimum bid increment of five percent of the high bid for the previous round, or  X 4 |$ $0.01 per activity unit, whichever was greater.q ~ {O'ԍFor an explanation of activity units, see infra note 287. q In addition, we proposed to retain the discretion  |$to vary the minimum bid increments for individual licenses or groups of licenses at any time  |$<before or during the course of the auction, based on the number of bidders, bidding activity, and  X{4the aggregate high bid amounts.]{ {O<'ԍNotice, 11 FCC Rcd at 3125,  82. ]  XM4 G6!b99. Comments. Commenters generally support the use of a minimum bid increment for  |$paging licenses. AirTouch agrees that a minimum bid increment of five percent of the high bid  |$in the previous round or $0.01 per activity unit, whichever is greater, is the appropriate formula  |$"for paging license auctions, and also believes that the Commission should have the discretion to  X4 |$vary the minimum bid increment.K yOD'ԍAirTouch Comments at 34. K PageNet proposes an increment of 10 percent of the high  X4 |$bid, with no minimum bid for the first round.M2  yO!'ԍPageNet Comments at 4445. M Rule asserts there should be no minimum bid  X4amount.E  yO6$'ԍRule Comments at 25.E "2R 0*&&qqB"Ԍ X4 G6!c100. Discussion. The Commission will announce, by Public Notice prior to the auction,  |$general guidelines for minimum bid increments. Minimum bid increments for individual paging  |$licenses or groups of licenses may vary over the course of the auction and will be announced  |$before or during the auction. In the case of a tie bid, the high bidder will be determined by the  X4order in which the bids are received by the Commission. {O'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2369,  125.  Xv'` ` ii. Stopping rules  XH4 G6!d101. Background. In the Notice, we indicated that if a simultaneous multiple round  |$Rauction design is used for the paging licenses, we believed a marketbymarket stopping rule  X 4 |$&would be most appropriate.^ Z {O' 'ԍNotice, 11 FCC Rcd at 312526,  83.^ We noted that a marketbymarket stopping rule would be the least  |$"complex approach from an administrative perspective. We also sought comment on whether a  |$lstopping rule is needed should the Commission elect not to use a simultaneous multiple round  X 4 |$<auction design. We further proposed to retain the discretion to declare when the auction would  X 4end.:   {O]'ԍId.:  X4 G6!e102. Comments. The majority of commenters agree that a marketbymarket, frequency |$byfrequency or licensebylicense stopping rule is most appropriate for the paging services  |$+because such a rule would avoid prolonging the auction, and thus facilitate more expeditious  XM4 |$service to the public.H ZM~ yO|' G6! ԍAPI Comments at 5; PageNet Comments at 43; Arch Comments at 1718; AirTouch Comments at 3435;  {OD' |$E AirTouch Ex parte Comments of August 15, 1996 at 3, 9; MobileMedia Comments at 27. See also A+ Communications Comments at 910.H Second, they argue that such a rule would bring an earlier end to the  |$}auction by reducing the complexity of the auction and permitting the earlier close of uncontested  X4 |$markets.j  {Op'ԍAirTouch Ex parte Comments of August 15, 1996 at 9.j Commenters also assert that a marketbymarket stopping rule will reduce the  X4 |$likelihood that speculators will bid on all markets indiscriminately 2  yO' G6! ԍA+ Communications Comments at 910; Ameritech Reply Comments at 13; Ameritel Reply Comments at 11; Arch Reply Comments at 15; AirTouch Reply Comments at 1617. and will permit bidders  |$interested in applying for only a limited number of licenses to more easily manage their  X4 |$participation in the auction.G   yO$'ԍArch Comments at 18. G Several commenters suggest that bidding on a market or a license  |$Mclose after a specified number of rounds pass without any acceptable bids. The suggested number"3 0*&&qqK"  X4 |$<of rounds ranged from two to ten.dZ yOy' G6! ԍAmeritech Reply Comments at 13; AirTouch Comments at 3536; Arch Comments at 1819; PageNet  {OA' |$ Comments at 43 and Reply Comments at 14. AirTouch, in an ex parte presentation on September 13, 1996, suggested a license close after 510 rounds without activity. d They contend that such a rule would provide bidders with  |$a last clear opportunity to bid for a license and a safety valve to avoid inadvertent failure to  X4 |$bid.o yOm'ԍArch Comments at 1819 and n.45; AirTouch Comments at 3536. o AirTouch also noted that a licensebylicense stopping rule might be implemented only  |$Ein Stages II or III of the auction to preserve more of the simultaneous quality of the auction.  |$They also argued that back up strategies are likely to be far less important in this auction than  |$for PCS because pagers are tuned to specific channels and because highly encumbered licenses  Xv4 |$may have little value except to incumbents.vz {O ' G6! ԍAirTouch ex parte presentation, September 13, 1996 (oral remarks by Preston McAfee, consultant to AirTouch). ProNet, on the other hand, strongly prefers use  X_4 |$Iof a simultaneous stopping rule.I_ yO'ԍProNet Comments at 18. I MobileMedia, however, states that the use of a simultaneous  XH4 |$stopping rule encourages "bid parking" (i.e., placing bids solely for the purpose of maintaining  X34bidding eligibility) and leads to prolonged auctions.L3d  yOH'ԍMobileMedia Comments at 27.L  X 4 G6!if103. Discussion. With more than ten times the largest number of licenses the  |$Commission has ever auctioned simultaneously, there is an increased risk of an excessively  |$prolonged auction if a significant proportion of the licenses are auctioned simultaneously using  |$a simultaneous stopping rule. To reduce this risk and to promote expeditious service to the  |$public, while at the same time preserving most of the efficiency benefits of a simultaneous  |$stopping rule, we adopt a hybrid simultaneous/licensebylicense stopping rule. The hybrid rule  |$has three phases. During Phase I, which lasts one month, or 100 rounds, whichever comes later,  |$lwe will employ our standard simultaneous stopping rule whereby bidding will remain open on  |$/all licenses until bidding stops on every license. The auction will close after one round passes in  X64 |$which no new valid bids or proactive activity rule waivers are submitted.{Z6  {O' G6!/ ԍSee paragraph 112. In any event, we retain discretion to keep an auction open even if no new acceptable  |$ bids and no proactive waivers are submitted in a single round. In the event that we exercise this discretion, the effect will be the same as if a bidder has submitted a proactive waiver.{ This provides  |$}bidders some protection against the risk that bidding on a license will be closed before they have  |$sufficient information to start bidding on it as a back up strategy. In Phase II, the Wireless  |$uTelecommunications Bureau will assess the extent to which bidders are pursuing back up  |$strategies and implement a licensebylicense stopping rule if the Bureau determines that the use  |$of back up strategies is minimal. Under the licensebylicense stopping rule, bidding on a license  |$lwill close whenever 10 consecutive rounds pass with no new valid bids for that license. The"40*&&qq"  |$+remaining licenses will close according to the standard simultaneous stopping rule when a  |$cround passes with no new valid bids on any license. Phase III begins after two months and 100  X4 |$rounds have passed.9X yOK' G6! ԍThere would be no second phase if it takes more than two months to complete 100 rounds. In that case,  |$. we would move directly to the third phase in which there would be a strong presumption to use a licensebylicense closing rule. 9 If the auction has not closed by then, the Commission intends to  |$implement the licensebylicense stopping rule that is discretionary in the second phase. This  |$approach balances concerns about the time to complete the paging auction and the benefits of  |$preserving back up strategies which give bidders the flexibility to acquire licenses that are  |$consistent with their business plans. We reserve the discretion not to employ this hybrid stopping  |$rule in future paging auctions based on our experience in this auction and depending on the  |$Zcircumstances in future auctions with respect to factors such as the number of licenses and degree that licenses are encumbered.  G6!g104.ؠ We further retain the discretion, in Phase III, to declare after 200 rounds that the  |$"auction will end after some specified number of additional rounds. If we choose to employ this  |$Vmethod, bids will be accepted only on licenses where the high bid has increased in the last three  X 4 |$}rounds.3  {OW' G6! ԍImplementation of Section 309(j) of the Communications ActCompetitive Bidding, Fifth Report and Order,  {O!'PP Docket No. 93253, 9 FCC Rcd 5532, 55515552,  48 (1994) (Competitive Bidding Fifth Report and Order).3 This will provide the Commission with a mechanism to end the auction in the unlikely  |$event that a small number of bidders are continuing to bid on a few low value licenses solely to  |$delay the closing of the auction. It also will enable the Commission to end the auction when it  |$+determines that the benefits of terminating the auction and issuing licenses exceed the likely  |$ybenefits of continuing to allow bidding. The disadvantage of declaring an imminent end to an  |$auction, however, is that the procedure may result in a far less efficient allocation of licenses than  X44 |$cif the auction closed under either the hybrid or the simultaneous stopping rule.h^4D {O)' G6!c ԍImplementation of Section 309(j) of the Communications ActCompetitive Bidding, Fourth Memorandum  {O' |$ Opinion and Order, PP Docket No. 93253, 9 FCC Rcd 6858, 6862,  20 (1994) (Competitive Bidding Fourth  {O'Memorandum Opinion and Order).h Therefore, we will declare the imminent end of the auction only in the case of extremely dilatory bidding.  X'` ` iii. Revealing bidders' identities  X4 G6!h105. In the Competitive Bidding Second Memorandum Opinion and Order, because of  |$cthe advantages of providing more information to bidders, and the difficulties involved in ensuring  |$that bidder identities remain confidential, the Commission determined that it generally would  X~4 |$release the identities of bidders before each auction.~j  {O$'ԍSee Competitive Bidding Second Memorandum Opinion and Order, 9 FCC Rcd at 7252,  42. However, we retained the flexibility to  |$conceal bidder identities if further experience showed that it would be feasible and desirable to"g5 0*&&qqq"  |$do so. Consequently, we reserved the option to withhold bidder identities on an auctionby  X4auction basis.< {Ob'ԍId. <  G6!i106. In the case of the upcoming paging auctions, we have determined that the  |$advantages of limiting information disclosed to the bidders outweigh the disadvantages of this  |$'approach. Given the large number of licenses involved, we believe that shielding certain  |$information from the bidders will help to speed the bidding along since there will be less of an  |$opportunity for strategic gaming practices to occur. We will announce by Public Notice prior  |$to the auction the precise information that will be revealed to bidders during the auction. This  |$linformation may be limited to the high bids (no identities of bidders) and may also include the  |$ltotal number of bids on each license. We note also that limiting information is likely to speed  |$the pace of the auction by reducing the time the Commission needs to report round results, and  |$_reducing the time that bidders need to analyze the data. The loss of efficiency from denying  |$bidders the identities of likely winners of adjacent licenses should be minimal because, in contrast  X 4 |$"to broadband PCS, for paging there is no roaming and little uncertainty about technologies (i.e., GSM versus CDMA technology).  X4 ` `   X{'` ` iv. Activity rule  XM4 G6!j107. Background. In the Notice, we tentatively concluded that it would not be necessary  |$<to adopt an activity rule for paging auctions because of our proposal to use a marketbymarket  |$stopping rule. We sought comment on this tentative conclusion, and also asked commenters to  |$address what activity rules, if any, would be appropriate if an alternative stopping rule was  X4adopted.]Z {O'ԍNotice, 11 FCC Rcd at 3126,  84. ]  X4 G6!k108. Comments. Most commenters agree that there is no need for an activity rule if a  X4 |$marketbymarket stopping rule is used. {OK'ԍSee, e.g., AirTouch Comments at 37; Arch Comments at 18 n.42; PageNet Comments at 43. API, however, disagrees, proposing that an activity  X4 |$}rule still be used in order to guard against opportunistic bidders seeking to prolong the auction.G~ yO'ԍAPI Comments at 56. G  |$API proposes the use of the MilgromWilson activity rule with percentages of 60 percent for  Xi4 |$+Stage I, 80 percent for Stage II, and 95 percent for Stage III.Bi {O(#'ԍId. at 6. B Having supported use of a  |$simultaneous stopping rule, ProNet urges adoption of the MilgromWilson activity rule to prevent"R60*&&qqh"  X4 |$a protracted auction.I yOy'ԍProNet Comments at 18. I A+ Communications proposes that the Commission severely limit the  X4number of waivers an applicant may utilize in each auction.YX yO'ԍA+ Communications Comments at 10 n.17. Y  X4 G6!zԠl109.ؠ Discussion. We will employ the MilgromWilson activity rules for the paging  |$Eauctions. These rules discourage delay by bidders and expedite simultaneous multiple round  |$_auctions in which a simultaneous stopping rule is used. Under the MilgromWilson rules, the  |$auction is divided into three stages and the minimum required activity level, measured as a  |$fraction of the bidder's eligibility in the current round, will increase during the course of the  |$auction. We establish the following minimum required activity levels for each stage of the auction:  X 4 G6!XIn each round of Stage One, a bidder that wishes to maintain its current eligibility is  G6!required to be active on licenses encompassing at least 60 percent of the activity units for  G6!which it is currently eligible. Failure to maintain the requisite activity level will result  G6!Win a reduction in the amount of activity units upon which a bidder will be eligible to bid  G6!Nin the next round of bidding (unless an activity rule waiver, as defined in X"n paragraph paragraphs 111 G6!113, is used). During Stage One, if bidding activity is below the required minimum level,  G6!eligibility in the next round will be calculated by multiplying the current round activity  G6!'by fivethirds (5/3). Eligibility for each applicant at the start of the auction is determined  G6!by the amount of the upfront payment received and the licenses identified in its auction  X44application.Z4 yO' G6!8 ԍThe number of activity units for a given license in the paging auction is calculated by multiplying the  |$D amount of spectrum (in MHz) by the population of the market. A bidder's eligibility is determined by multiplying  {O]'the activity units by a specified monetary figure. See discussion beginning at paragraph 134. (#  X4 G6!XIn each round of Stage Two, a bidder that wishes to maintain its current eligibility is  G6!required to be active on at least 80 percent of the activity units for which it is eligible in  G6!Wthe current round. During Stage Two, if activity is below the required minimum level,  G6!eligibility in the next round will be calculated by multiplying the current round activity by fivefourths (5/4). (#  X|4 G6!XIn each round of Stage Three, a bidder that wishes to maintain its current eligibility must  G6!be active on licenses encompassing at least 98 percent of the activity units for which it  G6!is eligible in the current round. In Stage Three, if activity in the current round is below  G6!\98 percent of current eligibility, eligibility in the next round will be calculated by  G6!`multiplying the current round activity by fifty forty-ninths (50/49). We believe that  G6!dstarting at this level in Stage Three, a higher activity level for this stage than that used" 7 0*&&qq"  G6!in previous auctions, will encourage bidders to bid more of their eligibility in each round and thus make the auction more efficient. (#  X4 G6!uXWe reserve the discretion to set and, by announcement before or during the auction, vary  G6!the requisite minimum activity levels (and associated eligibility calculations) for each  G6!~auction stage. Retaining this flexibility will improve the Commission's ability to control  G6!Nthe pace of the auction and help ensure that the auction is completed within a reasonable period of time. (#  G6!Wm110.ؠ For paging auctions, we will use the following general transition guidelines. The  |$auction will start in Stage One and typically will move to Stage Two when the auction activity  |$level is below ten percent for three consecutive rounds in Stage One. In general, the auction will  |$move from Stage Two to Stage Three when the auction activity level is below ten percent for  |$three consecutive rounds in Stage Two. In no case can the auction revert to an earlier stage.  |$However, we retain the discretion to determine and announce during the course of an auction  |$when, and if, to move from one auction stage to the next. These determinations will be based  |$"on a variety of measures of bidder activity including, but not limited to, the auction activity level  |$defined above, the percentage of licenses (measured in terms of activity units) on which there are new bids, the number of new bids, and the percentage increase in revenue.  G6!,n111.ؠ To avoid the consequences of clerical errors and to compensate for unusual  |$}circumstances that might delay a bidder's bid preparation or submission in a particular round, we  |$will provide bidders with five activity rule waivers that may be used in any round during the  |$course of the auction. If a bidder's activity level is below the required activity level, a waiver  |$automatically will be applied. That is, if a bidder fails to submit a bid in a round, and its activity  |$Alevel from any standing high bids (high bids at the end of the bid withdrawal period in the  |$previous round) falls below its required activity level, a waiver automatically will be applied.  |$A waiver will preserve current eligibility in the next round, but cannot be used to correct an error  |$in the amount bid. An activity rule waiver applies to an entire round of bidding and not to a particular service area.   G6!o112.ؠ Bidders will be afforded an opportunity to override the automatic waiver mechanism  |$_when they place a bid, if they wish to reduce their bidding eligibility and do not want to use a  X 4 |$Vwaiver to retain their eligibility at its current level.   {O 'ԍCompetitive Bidding Fourth Memorandum Opinion and Order, 9 FCC Rcd at 6861,  15. If a bidder overrides the automatic waiver  |$mechanism, its eligibility permanently will be reduced (according to the formulas specified  |$8above), and it will not be permitted to regain its bidding eligibility from a previous round. An  |$automatic waiver invoked in a round in which there are no valid bids will not keep the auction  |$8open. Bidders will have the option to proactively enter an activity rule waiver during the bid"!8Z 0*&&qq "  |$submission period. If a bidder submits a proactive waiver in a round in which no other bidding  X4activity occurs, the auction will remain open.! yOb' G6! ԍA proactive waiver is a waiver submitted by a bidder during the bid submission period and acts as a bid for purposes of keeping the auction open.  X4 "'p113.ؠ We retain the discretion to issue additional waivers during the course of an auction  xfor circumstances beyond a bidder's control. We also retain the flexibility to adjust, by Public  xcNotice prior to an auction, the number of waivers permitted, or to institute a rule that allows one  Xv4waiver during a specified number of bidding rounds or during specified stages of the auction."v  {OG 'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2373,  145.  XH'` ` v. Duration of bidding rounds  X 4 "q114. Background. In the Notice, we proposed to retain the discretion to vary the duration  X 4 xof bidding rounds or the interval at which bids are accepted (e.g., run two or more rounds per  X 4day rather than one), in order to move the auction toward closure more quickly.`#  {OS'ԍNotice, 11 FCC Rcd at 312627,  87. `  X 4 "r115. Comments. Commenters support our proposal to retain the discretion to vary the  X 4 xVduration of bidding rounds and the interval between rounds.j$ D yO'ԍAirTouch Comments at 36 n.86; Arch Comments at 18 n.43. j AirTouch and Arch suggest that  xwe permit bidding on an everyotherday basis during the first week or so of the auction, with  xthe expectation of running one or two rounds a day relatively soon after the auction  Xf4 xcommences.:%f {O'ԍId.: PageNet suggests that we conduct one round a day for the first few rounds, noting  xthat, if other commenters prefer, it would accept bidding on an everyotherday basis. After two  xweeks of Monday, Wednesday and Friday bidding, PageNet continues, we should implement one  xround per day and then assess whether more than one round a day would be more appropriate  X 4 xfor the remaining licenses.M& f  yO!'ԍPageNet Comments at 4445. M PCIA urges us to ensure that bidders have adequate time between  xhrounds for review of bids, verification of bid accuracy, and decision making about bidding  X4strategy.J'  yO"'ԍPCIA Comments at 3233. J  X4 "s116. Discussion. We retain the discretion to vary the duration of the bidding rounds or  xthe interval at which bids are accepted in order to move the auction to closure more quickly. The": '0*&&qq"  x}duration of and intervals between bidding rounds will be announced either by Public Notice prior to the auction or by announcement during the auction.  X' 2. Procedural and Payment Issues  X' a. Preauction application procedures  X_4 "t117. Background. In the Notice, we proposed to follow the procedural and payment rules  XJ4 xestablished in the Competitive Bidding Second Report and Order, with certain minor  X54modifications designed to address the particular characteristics of the paging services.[(5 {O 'ԍNotice, 11 FCC Rcd at 3128,  95.[  X 4 "uu118. Comments. PCIA, for the most part, supports imposition of the competitive bidding  X 4 x}rules that have been generally applied in the context of a number of other services.G) Z yO'ԍPCIA Comments at 29. G The FTC  xsuggests, however, that our application and competitive bidding procedures should require that  xbidding agents and application preparers disclose material information about paging license  xregulations to their customers potential licensees and real partiesininterest. A fundamental  xproblem in FCC licenserelated fraud cases, the FTC contends, has been that the consumer  x<licensees do not have adequate information about FCC licenses when they make an investment  Xf4decision.F*f yO'ԍFTC Comments at 14. F  X84 "v119. Discussion. We will use the preauction application procedures established in the  X!4 xCompetitive Bidding Second Report and Order for the paging services.+!z {OL'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2376,  164165; 47 C.F.R.  1.2105(a)(1). A Public Notice  xannouncing the auction will specify the licenses to be auctioned and the time and place of the  xauction in the event that mutually exclusive applications are filed. The Public Notice will also  X4specify, inter alia, the shortform filing deadline.  X4 "Ww120. We will adopt the same general bidding procedures used for the PCS, 900 MHz  x}SMR, and MDS auctions. Under these procedures, bidders will be able to submit bids remotely,  xeither electronically or by telephone. We have established a schedule of fees that participants in  xthe competitive bidding process will be assessed for certain online computer services, bidding  XV4 xsoftware, and Bidder Information Packages.{,\V  {O$' " ԍSee Assessment and Collection of Charges for FCC Proprietary Remote Software Packages, OnLine  x Communications Services Charges, and Bidder's Information Packages in Connection With Auctionable Services,  {O%'Report and Order, WT Docket No. 9569, 10 FCC Rcd 10769 (1995).{ However, bidders will be permitted to bid"V;0 ,0*&&qq["  x_electronically only if they have filed a shortform application electronically. Bidders who file their shortform applications manually may bid only telephonically.  X4 ",x121. Like the FTC, we are greatly concerned about reports of consumer fraud in  xconnection with the acquisition of FCC licenses. Indeed, the Commission has taken a number  xof initiatives to combat fraud. For example, in 1995 the Commission released a Consumer Alert  xwarning consumers about the existence of scams and providing information to enable them to  X_4 xevaluate investment proposals. -_ yO' " ԍIn October 1996, this Consumer Alert, entitled "Warning to Potential Investors in Telecommunications Services," was updated and posted on the Wireless Telecommunications Bureau's web page on the Internet.  In addition, FCC staff operating call centers have been trained  xto answer consumer investment inquiries and provide information about specific investment  X14 xproposals to the FTC, SEC, and the National Fraud Information Center..1  yO ' " ԍSince 1994, the Commission has maintained a liaison with the SEC, FTC, and other state and federal  xk regulatory and enforcement agencies to assist them in bringing appropriate actions against entities attempting to  xk perpetrate telecommunications investment fraud. The Commission also works with groups such as the American  xb Association of Retired Persons and the Consumer Federation of America to provide Commission staff and resources  x^ in public outreach activities designed to alert and educate the public to protect them against telecommunications  x fraud. In addition, the Commission has assisted the FTC in the preparation of a series of consumer alerts designed  xx to advise the general public of various forms of fraud in connection with license acquisition. The "Alert for SMR  x; and Paging Licensees," jointly written and published by the FCC and the FTC, alerted consumers who had obtained SMR and paging licenses of fraudulent proposals by unscrupulous businesses and individuals.  We also now include  xEa warning about the seriousness of false certifications in applications and signs of fraudulent  X 4 xbusiness opportunities in public notices announcing auctions./  {O' "c ԍSee Public Notice, FCC Issues Procedures, Terms and Conditions for January 13, 1997 Auction of Cellular Unserved Phase I and Phase II Service Areas, DA 961850 (released November 8, 1996) at 4.  Finally, our auction bidder  xpackages include strong language alerting potential bidders in the auctions to guard against  X 4 xunscrupulous fraudulent conduct in connection with the acquisition of licenses.0 J  {O'ԍSee, e.g., Bidder Information Package, Broadband PCS (DEF Blocks), August 26, 1996, p. 34. We believe the  xforegoing safeguards will serve to greatly reduce the likelihood of deceptive conduct in the  x/paging license auction process. We will also take the FTC's suggestions under advisement and  xwill consider implementing stricter safeguards in conjunction with our Further Notice of Proposed  xRule Making, which seeks comment on revising our application procedures to help reduce fraud.  X4' b. Shortform applications  X4 "ly122. Background. In the Competitive Bidding Second Report and Order, we determined  xythat we should require only a shortform application (FCC Form 175) prior to an auction, and  xthat only winning bidders should be required to submit a longform license application (FCC"<00*&&qq "  X4 xForm 600) after the auction.1 {Oy'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2376,  165. In the Notice, we proposed to require applicants for paging  X4licenses to file an initial shortform application in order to qualify for competitive bidding.[2Z {O'ԍNotice, 11 FCC Rcd at 3128,  98.[  X4 "z123. Comments. Several commenters suggest that we require bidders to identify all of  X4 xthe licenses for which they intend to bid on the shortform application.3 yOC ' "< ԍPCIA Comments at 30; Arch Comments at 2224; PageNet Comments at 4142 and Reply Comments at 14;  {O 'A+ Communications Comments at 910; AirTouch Ex parte Comments of August 15, 1996 at 2. Otherwise, these  xcommenters assert, bidders will apply for all markets, including markets they are not interested  Xx4 xin acquiring.4xF yOo ' " ԍPCIA Comments at 30; A+ Communications Comments at 910 (applicants should not be able to bid for all licenses without matching upfront payment for each license area); Ameritech Reply Comments at 13. In this connection, they argue that permitting "blanket" applications will  Xa4 xcartificially create mutual exclusivities where none actually exist,_5a yO'ԍPCIA Comments at 30; Arch Comments at 2224. _ will delay carriers' good faith  XJ4 xefforts to expand,_6J.  yO)'ԍArch Comments at 23; PageNet Comments at 42. _ and will allow speculators to "gridlock" or "game" the system.R7J  yO'ԍAmeritech Reply Comments at 13. R PageNet  xyalso argues that blanket bidding produces "bid jumping," a technique that may have had utility  xdwhen the spectrum was fungible, but is inappropriate in the highly encumbered paging  X 4 xIspectrum.8 N  yO' "< ԍPageNet Comments at 42. Bid jumping refers to the technique of maintaining eligibility in the later stages of an auction by shifting bids from markets of primary interest to inactive markets. Certain commenters propose that applicants make separate upfront payments and  X 4maintain separate eligibility for each license.9  yOE' " ԍArch Comments at 2324; PageNet Comments at 43 and Reply Comments at 14; A+ Communications Comments at 910.  X 4 "{124. The FTC suggests that applicants should be required to disclose the real partyin xcinterest on the shortform application, such as the general partners, and whether the company is  xa limited partnership or limited liability corporation. The FTC likewise suggests that applicants  xcertify before the auction that they will comply with transfer rules and performance requirements  Xd4for paging licenses.D:d yO$'ԍFTC Comments at 13.D "M=:0*&&qqQ"Ԍ X4 "|125. Discussion. Section 309(j)(5) of the Communications Act provides that no person  xmay participate in an auction unless such bidder "submits such information and assurances as the  X4 xCommission may require to demonstrate that such bidder's application is acceptable for filing."J; yOK'ԍ47 U.S.C.  309(j)(5).J  xMoreover, "[n]o license shall be granted to an applicant selected pursuant to this subsection unless  xthe Commission determines that the applicant is qualified pursuant to [Section 309(a)] and  X4 xSections 308(b) and 310" of the Communications Act.:<X {O'ԍId.: The legislative history also explains that  x}the Commission may require that bidders' applications contain all information and documentation  xsufficient to demonstrate that the application is not in violation of Commission rules and that  XH4 xapplications not meeting those requirements may be dismissed prior to the competitive bidding.`=H {O 'ԍSee H. R. Rep. No. 103111 at 258 (1993).`  xlWe will, therefore, dismiss applications not meeting the requirements of our rules prior to the  X 4auction.> | {OG'ԍSee Competitive Bidding Second Report and Order, 9 FCC Rcd at 2377,  167.  X 4 "}126. We disagree with commenters who state that we should no longer permit bidders  xto apply for all market areas by checking the "all" markets box on their FCC Form 175. While  xa party may not intend to bid for every license offered, we believe bidders should have the  xflexibility to pursue backup strategies if they are unable to obtain their first choice of licenses.  xIndeed, without flexibility, we believe the true value of individual licenses may not be reflected  xlin the ultimate bid price. Moreover, any potential problems associated with socalled blanket  xbidding will be cured through our eligibility rules and the submission of a corresponding upfront  xpayment. We have seen no evidence that "bid jumping" or other "gaming" has had an adverse  x/impact upon previous auctions. Finally, because we have permitted incumbents to expand their  X4 xsystems pending the commencement of the auction, as described in the interim Orders,? {O' " ԍSee First Report and Order, 11 FCC Rcd at 1658316585,  2529; Recon Order, 11 FCC Rcd at 7420,  4. we  xVbelieve current application rules will have no impact on planned expansions by incumbents. We therefore see no reason to change our current application procedures at this time.  X4 "m~127. If we receive only one application that is acceptable for filing for a particular  xmarket, and thus there is no mutual exclusivity, we will issue a Public Notice cancelling the  xauction for that license and establish a date for the filing of a longform application, the  xhacceptance of which will trigger the procedures permitting petitions to deny, as discussed  Xe4below.@eh  {O~%'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2376,  165. "e> @0*&&qq"Ԍ X4 "Sԙ128. Finally, we agree with the FTC's concerns about ensuring that bidders in our  xauctions are serious about providing service to the public. As discussed above, we have taken  xsteps to educate bidders and the public about fraudulent practices in connection with acquiring  xFCC licenses, and we will consider taking other antifraud measures in the context of our Further  x}Notice of Proposed Rule Making. We therefore decline at this time to add further requirements to our shortform applications.  X_'6  c. Amendments and modifications  X14 "F129. Background. In the Notice, to encourage maximum bidder participation, we  xproposed to provide applicants for paging auctions with an opportunity to correct minor defects  X 4in their shortform applications prior to the auction.^A  {O~ 'ԍNotice, 11 FCC Rcd at 3129,  102. ^  X 4 "130. Comments. The comments received support the approach outlined in the Notice.^B Z yO'ԍPCIA Comments at 29; AirTouch Comments at 43.^  x<AirTouch notes that the public interest is served by the proposal to give applicants 6 a reasonable  xchance to correct their shortform applications before the auction. The harsh results experienced  X4by applicants for cellular licenses, AirTouch contends, should not be repeated.KC yO/'ԍAirTouch Comments at 43. K  Xf4 "4131. Discussion. We will adopt the procedures proposed in the Notice for amendments  xto and modifications of shortform applications in the paging services. Upon reviewing the short xform applications, we will issue a Public Notice listing all defective applications. Applicants with  xminor defects in their applications will be given an opportunity to cure them and resubmit a corrected version.  X' d. Upfront payments  X4 "132. Background. In the Notice, we proposed to require paging license auction  xparticipants to tender in advance a substantial upfront payment. Specifically, we proposed to  xrequire an upfront payment of $2,500.00 or $0.02 per MHzpop, whichever is greater, for the  xulargest combination of MHzpops on which a bidder anticipates bidding in any round, as a  x[condition of bidding. We tentatively concluded that, regardless of bidding methodology, a  X?4minimum upfront payment of $2,500.00 should be required._D?z {Oj#'ԍNotice, 11 FCC Rcd at 312930,  104._ "(? D0*&&qq"Ԍ X4 "133. Comments. Commenters unanimously agree that a minimum upfront payment  xamount should be established for participation in paging license auctions. A number of  xEcommenters suggest an upfront payment for each license in order to ensure that bidders are  X4 xsincere, deter speculation and, to some extent, ensure that bidders are qualified.EZ yO4' "V ԍAPI Comments at 67; Arch Comments at 2224 and Reply Comments at 15; AirTouch Comments at 4345,  {O' x Reply Comments at 16, and Ex parte Comments of May 15, 1996 at 10; PCIA Comments at 3031 (an upfront payment would help to ensure only legitimate bidders participate in auction); A+ Communications Comments at 910. With respect  xto amount, PageNet proposes that applicants for the top ten markets pay $10,000, and that  xVapplicants for markets 11 through 51 pay $5,000. Because an applicant would have specifically  xidentified each license it intends to bid on, and would have paid a specific upfront payment for  xeach license, PageNet contends, the application of activity units to determine eligibility for  XH4 xbidding is unnecessary.IFH yO 'ԍPageNet Comments at 43. I API proposes a $10,000 upfront payment amount for the top ten  X14 xmarkets and $5,000 for all other markets.KG1z yO\'ԍAPI Reply Comments at 2. K AirTouch and Arch contend that the upfront  xpayment amount should be $10,000 for the top ten markets, $5,000 for markets 11 to 30, and  X 4 x$2,500 for all other markets.H  {O' " ԍAirTouch Reply Comments at 16 n.52, and Ex parte Comments of May 15, 1996 at 9; Arch Reply Comments at 15 n.48. PCIA notes that the upfront payment level should be set high  xenough to ensure that all participants are serious about constructing and operating a paging  xWsystem, but, at the same time, not so high as to prevent smaller paging operators from  x4participating in the auction and bidding for the license areas in which they currently have  X 4 xfacilities.HI d  yO'ԍPCIA Comments at 3031.H AirTouch notes that a separate upfront payment for each license would avoid  X4phantom mutual exclusivity.WJ  {O5'ԍAirTouch Ex parte Comments at 9.W  Xb4 " 134. Discussion. We believe the upfront payment should bear a relation to the value of  xthe licenses to be awarded. We likewise agree with commenters that a specific upfront payment  xamount should be established for each license upon which bids are to be made. We further  x"believe it is important, as commenters point out, to deter speculation and ensure, to the greatest extent practicable, that only sincere bidders participate in the auction.  X4 "135. Accordingly, we delegate to the Bureau the authority and discretion to determine  xan appropriate upfront payment for each license being auctioned, taking into account such factors  xas the population and the approximate amount of unencumbered spectrum in each geographic  X4 xlicense area. We expect that the Bureau will follow the guidelines laid out in the Competitive"@ J0*&&qq"  X4 xBidding Second Report and Order and establish upfront payments equal to approximately five  X4 xppercent of the expected amounts of winning bids for the various licenses.K {Od'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 23782379,  171177. In no event will the  X4 xVupfront payment for any license be less than $2,500, the minimum suggested in the Competitive  X4 xBidding Second Report and Order, and the Bureau will retain the flexibility to modify this minimum if experience demonstrates that a higher amount would better deter speculative filings.  X|4 "~136. Prior to a paging license auction, the Bureau will issue a Public Notice listing the  xpupfront payment amounts corresponding to the licenses to be auctioned. The number of activity  XN4 xcunits determines the amount of the upfront payment for a license.{LNZ {OY 'ԍFor an explanation of the term "activity units," see supra note 287.{ A prospective bidder must  xIsubmit an upfront payment equal to the largest combination of activity units on which the bidder  xanticipates being active in any single round. Although a bidder may file applications for every  xlicense being auctioned, the total upfront payment submitted by each applicant will determine the  xcombinations on which the applicant will actually be permitted to be active in any single round  xIof bidding. Upfront payments will be due by a date specified by Public Notice, but generally no later than 14 days before the scheduled auction.  X' e. Down payments  Xh4 "4137. Background. In the Notice, we proposed to require the winning bidders for paging  x4licenses (with the exception of winners that are small businesses, as discussed below) to  xpsupplement their upfront payments with a down payment sufficient to bring their total deposit up  X%4 xto 20 percent of their winning bid. As proposed in the Notice, such a down payment would be due within five business days of the Public Notice announcing winning bidders.  X4 "138. Comments. Commenters support the requirement of a down payment from winning  X4 xbidders.yM {Oh'ԍSee, e.g., FTC Comments at 8; MobileMedia Reply Comments at 1314.y PageNet suggests that winning bidders have 45 days to pay the remainder of their  X4 xwinning bid.KN~ yO'ԍPageNet Comments at 4344.K Diamond urges a down payment requirement of only five percent, with 95  x<percent of the winning bid deferred and amortized over a tenyear period at the applicable U.S.  X4Treasury instrument rate, plus one percent.GO yOE"'ԍDiamond Comments at 4.G  XX4 "W139. Discussion. We conclude that winning bidders (including winners that are small  x"businesses, as discussed below) must supplement their upfront payments with a down payment  xsufficient to bring their total deposits up to 20 percent of their winning bid(s). If the upfront"*AO0*&&qq""  x}payment amount on deposit is greater than 20 percent of the winning bid amount after deducting  xany bid withdrawal and default payments due, the additional monies will be refunded. If a bidder  xhas withdrawn a bid or defaulted, but the amount of the withdrawal or default payment cannot  xyet be determined, the bidder will be required to make a deposit of up to 20 percent on the  X4 xcamount bid on such licenses.P {O' " ԍSee Competitive Bidding Fifth Report and Order, 9 FCC Rcd at 5563 and 5564,  73, n.51, and  76;  {O'Competitive Bidding Second Report and Order, 9 FCC Rcd at 23822383,  197. When it becomes possible to calculate and assess the payment,  xany excess deposit will be refunded. Monies on account will be applied to bid withdrawal and  xdefault payments due before being applied toward the bidder's down payment on licenses the  X_4bidder has won and seeks to acquire.TQ_$ {O4 'ԍSee 47 C.F.R.  1.2104(g).T  X14 "J140. We will require winning bidders, except small businesses, to submit the required  xdown payment by cashier's check or by wire transfer to our lockbox bank within 10 business  x/days following release of a Public Notice announcing the close of bidding. All auction winners,  xexcept those that qualify for installment payments, will be required to make full payment of the  xbalance of their winning bids within 10 business days following Public Notice that licenses are  X 4ready for grant.R  {O%'ԍSee infra paragraph 187 regarding payment deadlines for small businesses.  X' f. Bid withdrawal, default, and disqualification  Xb4 "141. Background. In the Notice, we proposed to adopt bid withdrawal, default, and  xIdisqualification rules for the paging services, based on the procedures established in our general  X64competitive bidding rules.\S6H {O/'ԍNotice, 11 FCC Rcd at 3130,  107.\  X4 "142. Comments. Commenters support our proposal to adopt rules regarding the  X4 x8withdrawal of bids, defaults, and disqualifications.`T yO|'ԍAirTouch Comments at 45; PCIA Comments at 29. ` A+ Communications urges us to adopt  xsevere penalties both for any high bid withdrawal and for default on a winning bid. These  xpprocedures, A+ Communications concludes, will discourage indiscriminate speculation in bidding  xand require bidders to determine the viability of their business plans for each license area in  X4 xadvance.TUj  yO#'ԍA+ Communications Comments at 10. T However, Ameritel states that without the ability to correct obvious typographical"B U0*&&qq"  xbidding errors, bidders are potentially liable for huge withdrawal or default payments as the result  X4of minor keying mistakes.IV yOb'ԍAmeritel Comments at 19.I  X4 " 143. Discussion. We will apply our general bid withdrawal, default, and disqualification  X4 xIrules in paging license auctions.YWX yO'ԍ47 C.F.R.  1.2104(g) and 1.2109.Y If a license is reoffered by auction, the "winning bid" refers  xto the high bid in the auction in which the license is reoffered. If a license is reoffered in the  xsame auction, the "winning bid" refers to the high bid amount made subsequent to the withdrawal  xin that auction. If a license which is the subject of withdrawal or default is offered to the highest  xRlosing bidders in the initial auction, as opposed to being reauctioned, the "winning bid" refers  xto the bid of the highest bidder who accepts the offer. In the unlikely event that there is more  xthan one bid withdrawal on the same license, we will hold each withdrawing bidder responsible  xfor the difference between its withdrawn bid and the amount of the winning bid the next time the licenses are offered for auction.  X 4 "144. If a license winner defaults or is otherwise disqualified after an auction is closed,  x8the Commission must exercise its discretion to hold a new auction or offer the license to the  xEsecond highest bidder. In exercising our discretion, we will evaluate the particular facts and  Xy4 xcircumstances of the particular case.Xy {O'ԍCompetitive Bidding Third Report and Order, 9 FCC Rcd at 2962,  5152. For example, in the context of paging licenses it may be  xthat defaults or disqualifications occur on only a very small number of relatively low value  x"licenses. In such a case, we might choose to offer the license(s) to the highest losing bidder(s)  xbecause the cost of conducting an auction might exceed the benefits of an auction. On the other hand, there may be countervailing reasons for choosing to re-auction such licenses.  X4 "145. If a default or disqualification involves gross misconduct, misrepresentation or bad  xfaith by an applicant, the Commission may declare the applicant and its principals ineligible to  xbid in future auctions, and may take any other action that it deems necessary, including institution of proceedings to revoke any existing licenses held by the applicant.  X|4 "146. We agree with Ameritel that further steps are necessary to reduce the possibility of  xpmistaken bids. The Bureau has recently instituted an additional procedure that warns bidders of  xthe possibility of a mistaken bid, and this procedure will be utilized in the paging license  X74auctions.Y$7z yOb#' " ԍWe also recently addressed the issue of how our bid withdrawal payment provisions apply to bids that are  x mistakenly placed and withdrawn in a decision involving the 900 MHz SMR and the broadband PCS C block  {O$' x auctions. See Atlanta Trunking Associates, Inc. and MAP Wireless L.L.C. Request to Waive Bid Withdrawal  {O%' x Payment Provisions, FCC 96203, Order (released May 3, 1996) (summarized in 61 Fed. Reg. 25,807 (May 23,"%X0*&&%"  {O'1996)), recon. pending."7CZY0*&&qq"Ԍ  X'8 g. Longform applications  X4 "l147. Background. In the Competitive Bidding Second Report and Order, we established  X4 xprules requiring winning bidders to submit a longform application.ZZ {O'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2383,  199. In the 8Notice, we proposed  X4to apply these rules to paging auctions.\[ {O. 'ԍNotice, 11 FCC Rcd at 3130,  108.\  Xc4148. Comments. All responsive comments support our proposal.a\c~ yO 'ԍAirTouch Comments at 4546; PCIA Comments at 29.a  X54 "149. Discussion. We will follow these procedures, which are set forth in  1.2107 of our  X 4rules, if the winning bidder makes the down payment in a timely manner.@]  yO'ԍ 47 C.F.R.  1.2107.@  X ' h. Petitions to deny and limitations on settlements  X 4 "150. As we indicated in the Notice, the petition to deny procedures in Sections 22.130  xNand 90.163 of our rules will apply to the paging services. A party filing a petition to deny  xagainst a paging license application will be required to demonstrate standing and meet all other  xapplicable filing requirements. Sections 90.162 and 22.129 of our rules prevent the filing of  Xh4 xspeculative applications and pleadings for purposes of extracting money from paging applicants.\^h {O'ԍNotice, 11 FCC Rcd at 3130,  109.\  xNThus, we will limit the consideration that an individual or entity is permitted to receive for  xagreeing to withdraw an application or petition to deny to the legitimate and prudent expenses  X#4 x}of the withdrawing applicant or petitioner. In the Notice, we proposed to amend Section 22.129  X4 xVto prohibit settlements between applicants after the deadline for filing shortform applications.L_0  {O'ԍId. at 3127,  89.L  xyWe believe that, to the extent Sections 22.129 and 90.162 conflict with Section 1.2105 of our  x<rules, these provisions should not apply to paging licenses awarded through competitive bidding.  xTherefore, we will amend these provisions to prohibit agreements to withdraw mutually exclusive  xapplications, or pleadings filed by one applicant against another applicant for a license in the same geographic area, after the deadline for filing shortform applications. "D _0*&&qq"Ԍ X' x3. Regulatory Safeguards  X' a. Anticollusion rules  X4 "R151. Background. In the Competitive Bidding Second Report and Order, as modified by  X4 xthe Competitive Bidding Reconsideration Order, we adopted special rules prohibitingx collusive  Xz4 xconduct in the context of competitive bidding.`&z {O' " ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 238688,  22126; Implementation of  {O' x Section 309(j) of the Communications Act Competitive Bidding, Second Memorandum Opinion and Order, PP  {O ' x Docket No. 93253, 9 FCC Rcd 7245, 725354,  4853 (Competitive Bidding Reconsideration Order), Erratum, PP Docket No. 93253 (released October 19, 1994). In the Notice, we proposed to apply these rules  Xe4to paging license auctions.gae {O 'ԍNotice, 11 FCC Rcd at 31273128,  8994.g  X74 "152. Comments. Commenters generally support the adoption of anticollusion rules for  X 4 xpaging license auctions.b H yO' " ԍAirTouch Comments at 3740 (need safeguards against collusion); Arch Comments at 1920 (safeguards are necessary against collusion); PageNet Comments at 53. However, PageNet contends that, given the large number of  x<incumbents, the Commission should fully consider whether an absolute prohibition on discussing  X 4 xthe auction with other auction participants would serve a legitimate purpose.Sc  yOC'ԍPageNet Reply Comments at 1617. S Several  xcommenters request that we establish rules that do not have a chilling effect on publicly  xEbeneficial business acquisitions. Under the current rules, they contend, discussions between  xbidders for the same license area regarding a business merger or acquisition may be construed  xas discussions of bidding or bidding strategy thus violating the anticollusion rules. They  xpropose that we grant a safe harbor for such situations, permitting mergers and acquisitions to  Xh4 xproceed during the period in which the anticollusion rules are applicable.dh0  {OI' " ԍAirTouch Comments at 3740; Arch Comments at 1920. See also MobileMedia Comments at 26; Metrocall Comments at 2122. AirTouch and Arch  xhpropose a system in which respective paging company personnel certify that they are not  xdiscussing bidding strategy or otherwise divulging bidder information to each other in violation  xof the anticollusion rules. They contend that, absent a showing that a certification is false,  X 4 xymergeracquisition discussions should be permitted during the course of the auction.`e   yOG"'ԍAirTouch Comments at 39; Arch Comments at 20. ` They  x/argue that a failure to so modify the anticollusion rules that were used in previous auctions will"Ee0*&&qqw"  xcsubstantially injure the paging industry an industry that is mature and is currently experiencing  X4a period of consolidation.}f yOb'ԍArch Comments at 19; AirTouch Comments at 3738; MobileMedia Comments at 26.}  X4 "153. Several commenters request that we establish a safe harbor for discussions between  x<adjacent paging operators, or cochannel licensees, who have entered into socalled intercarrier  xRarrangements. Cochannel licensees with such cooperative arrangements, they assert, must  xcommunicate regularly in order to provide service to the public. They argue that the anti x'collusion rules should not prohibit discussion in connection with these agreements so that  XH4intercarrier arrangements may continue in the ordinary course of business.gHX yOQ 'ԍAmeritech Comments at 16; AirTouch Comments at 3940; Arch Comments at 20 n.46.  X 4 "d154. PageNet requests that the Commission clarify that the term "applicant" does not  X 4 xinclude incumbents who are not participating in the auction.Hh  yO'ԍPageNet Comments at 54.H PageNet also proposes that the  X 4 xNanticollusion rules not apply to applicants once they have withdrawn from the auction.:i x {O'ԍId.:  xFinally, PageNet suggests that all consortia and all other applicants should be required to disclose  X 4on their shortform application whether they are incumbents.<j  {Oy'ԍId. <  X4 "155. Discussion. We will require paging licensees to meet the reporting requirements and  Xy4 xIrules prohibiting collusion embodied in Sections 1.2105 and 1.2107 of the Commission's rules.Vky yO'ԍ47 C.F.R.  1.2105 and 1.2107.V  x"Thus, after the FCC Form 175 filing deadline, applicants may not discuss the substance of their  xybids or bidding strategies with other applicants, other than those identified on their shortform  X44 xlapplications, that are bidding in the same license areas,Nl4,  yO'ԍ47 C.F.R.  1.2105(c)(1). N even if they are not bidding for the  X4same spectrum blocks.m  {O 'ԍCompetitive Bidding Fourth Memorandum Opinion and Order, 9 FCC Rcd at 6868,  55, n.128.  X4 "[156. We decline to amend the anticollusion rules to create a safe harbor for discussions  xVof business mergers or acquisitions, or intercarrier agreements, during periods in which the anti xcollusion rules are in effect. We do not believe that we have a sufficient record at this time to"FN m0*&&qqe"  xmake such a decision. We intend to conduct a general review of our auction rules in the near future, and we will then have an opportunity to thoroughly examine this issue.  X4 "157. We continue to believe that, even when an applicant has withdrawn its application  xlafter the shortform filing deadline, it should not be allowed to enter into a bidding agreement  X4 xwith another applicant bidding on licenses in the geographic area(s) from which it withdrew.n {O'ԍCompetitive Bidding Fourth Memorandum Opinion and Order, 9 FCC Rcd at 6867,  51.  xWe therefore decline to exclude a withdrawn bidder from the definition of applicant for purposes  x8of the anticollusion rules as recommended by PageNet. We believe application of the anti xRcollusion rules to withdrawn applicants is necessary in order to safeguard the integrity of the  xauction process by preventing the sharing of information and other collusive conduct among  xbidders for the same geographic licenses. A withdrawn bidder, as a former participant in the  xauction process, would otherwise be able to share valuable insights regarding its bidding strategy, including the reason(s) for its cessation of bidding.  X 4 "158. We further note that where specific instances of collusion in the competitive bidding  xprocess are alleged during the petition to deny process, we may conduct an investigation or refer  xsuch complaints to the United States Department of Justice for investigation. Bidders who are  x'found to have violated the antitrust laws, in addition to any penalties they incur under the  xpantitrust laws, or who are found to have violated the Commission's rules in connection with their  xVparticipation in the auction process, may be subject to a variety of sanctions, including forfeiture  xhof their down payment or their full bid amount, revocation of their license(s), and possible  X4prohibition from participating in future auctions.oZ {O('ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2388,  226.  X4 "S159. Finally, we disagree with PageNet that bidders should be required to identify  xcthemselves or members of bidding consortia as incumbents. In our view, a bidder's status as an  xincumbent is irrelevant for purposes of the auction process. We, therefore decline to adopt PageNet's suggestion.  X|' b. Transfer disclosure requirements  XN4 "160. Background. In Section 309(j)(4)(E) of the Communications Act, Congress directed  xthe Commission to "require such transfer disclosures, antitrafficking restrictions and payment  xschedules as may be necessary to prevent unjust enrichment as a result of the methods employed  X 4 xto issue licenses and permits."Mp  yO#'ԍ47 U.S.C.  309(j)(4)(E).M In the Notice, we proposed to adopt the transfer disclosure" G|p0*&&qq"  xcrequirements contained in Section 1.2111(a) of our rules for all paging licenses obtained through  X4the competitive bidding process.\q {Ob'ԍNotice, 11 FCC Rcd at 3131,  112.\  X4 "161. Comments. The commenters differ on whether transfer disclosure rules should apply  xuto paging licenses awarded through competitive bidding. The FTC, for example, supports  xuapplication of a transfer disclosure requirement, noting it would inhibit telemarketers from  x/winning licenses at auction and then "flipping" them through transfers to unsuspecting coalitions  X_4 x+of unqualified buyers at inflated prices.Hr_Z yOj 'ԍFTC Comments at 1213. H Several commenters disagree, contending such a  xdisclosure requirement would chill legitimate transactions, and force incumbents that do not raise  X14 xtrafficking concerns to meet burdensome disclosure requirements.s1 yO 'ԍArch Comments at 2425; AirTouch Comments at 4647; Metrocall Comments at 2223. Metrocall points out that  x8incumbents who win geographic licenses are in the business of providing paging service, not  X 4speculating on future profits from reselling paging licenses.Jt z yO.'ԍMetrocall Comments at 22.J  X 4 "h162. Discussion. We will apply Section 1.2111(a) to all paging licenses obtained through  xythe competitive bidding process. While we are concerned about requiring auction winners to  xproduce information that might increase their cost of doing business, we doubt whether any  x license transfer in the marketplace would occur without the preparation of the contracts and other  xdocuments enumerated in Section 1.2111(a) in the ordinary course of business. Thus, we see  xlnothing disruptive in requiring the disclosure of this information. Moreover, we believe these  xdisclosure requirements are necessary to the enforcement of our unjust enrichment provisions.  xWe also agree with the FTC that speculation in connection with the acquisition of paging licenses  xis a major concern. By enabling us to monitor license transfers, we believe that the disclosure  xrequirements of Section 1.2111(a), which implements  309(j)(4)(E) of the Communications Act,  xwill assist in eliminating the problem of speculation while providing safeguards to those who  x4might otherwise fall victim to deceptive practices used to induce them to invest in paging licenses.  X'v 4. Treatment of Designated Entities  Xe' a. Overview and objectives  X74 "163. Section 309(j) of the Communications Act provides that, in developing competitive  xpbidding procedures, the Commission shall fulfill various statutory objectives and vconsider several  xalternative methods for achieving them. The statute provides that in establishing eligibility" H t0*&&qq"  X4 x[criteria and bidding methodologies the Commission shall, inter alia, "promot[e] economic  xopportunity and competition and ensur[e] that new and innovative technologies are readily  xaccessible to the American people by avoiding excessive concentration of licenses and by  xdisseminating licenses among a wide variety of applicants, including small businesses, rural  X4 xytelephone companies, and businesses owned by members of minority groups and women."Mu yO'ԍ47 U.S.C.  309(j)(3)(B).M  xVSmall businesses, rural telephone companies and businesses owned by minorities and/or women  Xx4 xare collectively referred to as "designated entities."vxX {O 'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2388,  227. Section 309(j)(4)(A) provides that in order  xto promote such objectives, the Commission shall "consider alternative payment schedules and  x}methods of calculation, including lump sums or guaranteed installment payments, with or without  xroyalty payments, or other schedules or methods . . . and combinations of such schedules and  X 4 xmethods."Mw  yO'ԍ47 U.S.C.  309(j)(4)(A).M Section 309(j)(4)(D) also requires the Commission to "ensure that small businesses,  xrural telephone companies, and businesses owned by members of minority groups and women are  X 4 xpgiven the opportunity to participate in the provision of spectrumbased services."Mx z yO'ԍ47 U.S.C.  309(j)(4)(D).M Establishing  x/opportunities for small businesses, minority and womenowned businesses, and rural telephone  x}companies is likewise consistent with Section 257 of the Communications Act, which directs the  xCommission to take steps to identify and to eliminate market entry barriers for entrepreneurs and  xother small businesses in the provision and ownership of telecommunications services and information services.  XM4 "q164. To meet the statutory objective of providing opportunities for designated entities,  xwe have employed a wide range of special provisions and eligibility criteria in other spectrum xbased services. In the 900 MHz SMR service, for example, we established a twotier bidding  xcredit system a 15 percent bidding credit for small businesses with average annual gross  xrevenues of not more than $3 million and a 10 percent bidding credit for small businesses with  X4 x+average annual gross revenues of not more than $15 million.<y$  {O' " ԍSee Competitive Bidding Seventh Report and Order, 11 FCC Rcd at 27052706,  164. See also D, E, &  {O_' x F Block Report and Order, 11 FCC Rcd at 7849,  54 (entities with average gross revenues of not more than $15  x million for the past three years are eligible for a 25 percent bidding credit and entities with average gross revenues of not more than $40 million for the past three years are eligible for a 15 percent bidding credit).<#XP\  P6Q9XP# These measures have been  xdesigned to help designated entities overcome barriers to accessing capital and increase the  xlikelihood that designated entities who win licenses in the auctions become strong competitors  X4 xin the provision of wireless services. In the Notice, we sought comment on the type of"I y0*&&qq"  x/designated entity provisions that should be incorporated into our competitive bidding procedures  X4for paging services.iz {Ob'ԍNotice, 11 FCC Rcd at 31323133,  117123.i  X' b. Small businesses  X4 "165. In the Notice, we asked commenters to specifically address (1) the capital  xrequirements of the paging services in comparison with other wireless services, (2) the degree to  xwhich designated entities currently provide paging service, and (3) whether designated entities  xyand small businesses in particular face barriers to entry into paging services based on lack of  X34 xaccess to capital or other factors.<{3Z {O> 'ԍId. < We tentatively concluded that it was appropriate to establish  X 4special provisions in our paging rules for competitive bidding by small businesses.O|  {O'ԍId. at 3132,  118. O  X 4 "4166. Comments. Commenters differ on whether special provisions for small businesses  xare necessary to satisfy the congressional mandate of Section 309(j). Diamond and Ameritel  xpcontend that special provisions for small businesses, while helpful, do not sufficiently ensure that  X 4 x4such entities will be able to participate.J}X ~ yO' " ԍDiamond Comments at 23; Ameritel at 18 (such benefits are unlikely to make meaningful difference, but  x that does not justify putting small businesses at further disadvantage by denying them the few meager benefits available in the auction format). J Several commenters disagree, contending that  xnumerous designated entities and small businesses currently participate in the paging industry and,  X{4 xeven without such preferences, will succeed in the auctions.~~{ yO'ԍArch Comments at 2526; AirTouch Comments at 4748; PCIA Comments at 3334. ~ PageNet concurs with this view,  xadding that such provisions will only assist application mills to "sell chances" for entry into the  XM4 xpaging industry.JM.  yO,'ԍPageNet Comments at 44. J PageNet notes that there are no regulatory barriers to entry, and thus it would  xbe inappropriate for the Commission to adopt designated entity provisions. To adopt such  xprovisions, PageNet argues, would add fuel to the application mills' ability to sell chances to  x'participate in the auction process and may create artificial incentives that will encourage  X4designated entities to bid up the prices of spectrum and harm incumbents.R  yO`"'ԍPageNet Reply Comments at 1415. R  X4 "167. Discussion. Congress specifically cited the needs of small businesses in enacting  xSection 309(j) directing the Commission to promote economic opportunities for small businesses. "JN 0*&&qq5"  x8Thus, while we agree that a number of small businesses are successfully participating in the  xpaging industry, we conclude that it is appropriate to establish special provisions in our paging  xIrules for competitive bidding by small businesses. Construction of a paging system may require  x/a significant amount of capital, and the barriers small businesses face in acquiring financing are often difficult to overcome.  Xv4 "m168. Congress made specific findings with regard to access to capital in the Small  xBusiness Credit and Business Opportunity Enhancement Act of 1992, that "small business  x concerns which represent higher degrees of risk in financial markets than do large businesses, are  X14 xVexperiencing increased difficulties in obtaining credit."1 yO ' " ԍSmall Business Credit and Business Opportunity Enhancement Act of 1992, Pub. L. No. 102366, 331(a)(3), 106 Stat. 1007. These findings are consistent with the  xcomments supporting small business provisions, such as those of Diamond, which asserts that  X 4 xcmany small paging companies have difficulties raising capital.G  yO'ԍDiamond Comments at 3.G As a result of such difficulties,  xpCongress resolved to consider carefully legislation and regulations "to ensure that small business  xconcerns are not negatively impacted" and to give priority to passage of "legislation and  X 4 xregulations that enhance the viability of small business concerns."  yO' " ԍSmall Business Credit and Business Opportunity Enhancement Act of 1992, Pub. L. No. 102366,  331(b)(2), (3), 106 Stat. 1007. For these reasons, we  xbelieve that small businesses applying for paging licenses should be entitled to some type of  xhbidding credit and should be allowed to pay their bids in installments. We believe that the  x"provision of bidding credits, an installment plan, as well as geographic area partitioning will help  xVto eliminate market entry barriers for small businesses in the paging industry pursuant to section  XK4257 of the Communications Act.DK yO'ԍ47 U.S.C.  257.D  X' c. Minority and womenowned businesses  X4 "169. Background. In Adarand Constructors, Inc. v. Pe9a,I yO8'ԍ115 S. Ct. 2097 (1995). I the Supreme Court held that  X4 x}"all racial classifications . . . must be analyzed by a reviewing court under strict scrutiny."\(  {O!'ԍAdarand, 115 S. Ct. 2097, 2113.\ As  X4 x a result of the Adarand decision, any federal program that makes distinctions on the basis of race  xmust serve a compelling governmental interest and must be narrowly tailored to serve that interest"K 0*&&qq"  X4 xin order to pass constitutional muster.: {Oy'ԍId.: Genderbased programs must satisfy intermediate  X4 xscrutiny.oZ {O'ԍ United States v. Virginia, 116 S. Ct. 2264 (1996).o Under this standard, there must be an "exceedingly persuasive justification" for a  xgenderbased government provision and such a provision is constitutional if it serves an important  X4 xgovernmental objective and is substantially related to achievement of that objective. {OX' " ԍId. at 22742275. See also J.E.B. v. Alabama ex. rel T.B., 511 U.S. 127 (1994); Mississippi University for  {O" 'Women v. Hogan, 458 U.S. 718 (1982). In the  X4 xNotice, we emphasized that we had not concluded that race and genderbased measures are  x"unconstitutional or otherwise inappropriate for spectrum auctions we will hold in the future. At  x_a minimum, however, we stated that we must build a thorough factual record concerning the  xparticipation of minorities and women in spectrumbased services to support race and gender xbased measures. We expressed our belief that a sufficient factual record does not exist with  xrespect to spectrumbased services generally or paging services specifically to sustain such  X 4 x measures under strict scrutiny.^ H {O'ԍNotice, 11 FCC Rcd at 3132,  121. ^ In light of these considerations, we proposed to limit designated  X 4entity provisions for paging services to small businesses.M  {O'ԍId. at 3133,  122.M  X 4 "170. We requested comment, however, on the possibility that in addition to small  xbusiness provisions, separate provisions for women and minorityowned entities should be  xadopted for paging services. We asked commenters to discuss whether the capital requirements  xlof paging pose a barrier to entry by minorities and women and whether assisting women and  xminorities to overcome such a barrier, if it exists, would constitute a compelling government  xinterest. In particular, we sought comment on the actual cost of acquisition, construction and  x/operation of paging systems and the proportion of existing paging businesses that are owned by  xwomen or minorities. We also sought comment on the analytical framework for establishing a  x history of past discrimination in the paging industry and urged parties to submit evidence  x(statistical, documentary, anecdotal or otherwise) about patterns or actual cases of discrimination  x<in this and related communications services. Assuming that a compelling governmental interest  xis established, we sought comment on whether separate provisions for women and minorities are  xnecessary to further this interest and whether such provisions can be narrowly tailored to satisfy  X4the strict scrutiny standard.Ol  {O"'ԍId. at 3133,  123. O  X~4 "E171. Comments. Few comments were received on these issues. SBT states that, although  xthe Commission is fully aware that the level of participation and the ownership of"gL 0*&&qq"  x}telecommunications services by women and minorities has been historically low, the chance that  xany commenting party will have the opportunity to provide a comprehensive study of the past  xcor present circumstances which might provide a reasoned basis for genderbased or racebased  xincentives for such affected parties is so slim as to be impossible. SBT notes that the burden for  xdetermining whether such incentives are required is upon the Commission in meeting its mandate  X4 xunder 309(j) of the Act, not on commenting parties.J yO'ԍSBT Comments at 17 n.6. J SBT states that the PCS and the 900 MHz  xcSMR auctions have demonstrated an acute need for greater protection for designated entities in  X_4 xupcoming auctions.I_X yOh 'ԍSBT Reply Comments at 3.I According to PageNet, designated entity provisions are unnecessary  XH4because there are no barriers to entering the paging industry.QH yO 'ԍPageNet Reply Comments at 1415.Q  X 4 "172. Discussion. In the paging service, as in other auctionable services, we are  x=committed to meeting the statutory objectives of promoting economic opportunity and  xVcompetition, of avoiding excessive concentration of licenses, and of ensuring access to new and  xinnovative technologies by disseminating licenses among a wide variety of applicants, including  xbusinesses owned by members of minority groups and women. Commenters failed to provide  xrecord evidence sufficient to support special provisions for minorities under the strict scrutiny  X4 xstandard. Adarand makes clear that only a record of discrimination against a particular racial  xcgroup would support remedial measures designed to help that group. A record of discrimination  xagainst minorities in general may not be sufficient. We are also concerned that our record would  XM4 x/not support genderbased provisions under intermediate scrutiny.Mx {Ov' " ԍSee Telephone Electronics Corp. v. FCC, No. 951015, 1995 WL 364043 (D.C. Cir.) (order granting stay);  {O@'United States v. Virginia, 116 S. Ct. at 2275. Balancing our obligation to  xprovide opportunities for women and minorityowned businesses to participate in spectrumbased  xAservices against our statutory duties to facilitate the rapid delivery of new services to the  xpAmerican consumer and promote efficient use of the spectrum, we conclude that we should not  xhdelay the paging service auction for the amount of time it would take to adduce sufficient  xevidence to support race and genderbased provisions. Moreover, we believe that most minority  xand womenowned businesses will be able to take advantage of the specific provisions that we  X4adopt for small businesses, as discussed infra.N {O1!'ԍSee paragraphs 174185.N "Mf 0*&&qq"Ԍ X4 "173. We note too that we have initiated a separate inquiry to gather information regarding  X4 xbarriers to entry faced by minority and womenowned firms as well as small businesses. yOb' " ԍSection 257 Proceeding to Identify and Eliminate Market Entry Barriers for Small Businesses, GN Docket  {O*'No. 96113, Notice of Inquiry, 11 FCC Rcd 6280 (1996). We  xwill also continue to track the rate of participation in our auctions by minority and womenbased  xfirms and evaluate this information with other data gathered with the goal of developing a record  xlto support race and genderbased provisions that will satisfy judicial scrutiny. If a sufficient  xIrecord can be adduced, we will consider race and genderbased provisions for future auctions.  xFinally, we are looking for other ways to reduce barriers to entry for women and minority xcowned businesses, such as allowing partitioning and disaggregation of licenses to entities that do  xnot currently qualify, an adjustment to our rules that may be helpful to small businesses  X14generally.W1" {O 'ԍSee paragraphs 188194, 203218.W  X ' d. Bidding credits  X 4 "174. Background. In the Notice we proposed to establish two levels of bidding credits:  xa 10 percent bidding credit for all small businesses and a 15 percent credit for small businesses  xcthat meet a more restrictive gross revenue threshold. These two levels of bidding credits would  X4not be cumulative.h {O'ԍNotice, 11 FCC Rcd at 3134,  127 and n.242. h  Xd4 "175. In conjunction with this proposal, we proposed to establish two small business  xdefinitions (1) an entity with not more than $15 million in average gross revenues for the  xprevious three years; and (2) an entity with not more than $3 million in average gross revenues  x/for the previous three years. We also sought comment on the degree to which the revenues of  xaffiliates, major investors, and controlling principals should be considered in determining small  X4 x+business eligibility.^F {O'ԍNotice, 11 FCC Rcd at 3134,  130. ^ We also sought comment, alternatively, on which attribution threshold  x should be applied to paging applicants seeking to qualify as small businesses. We asked  xhcommenters to address whether our proposed small business definitions were sufficiently  xrestrictive to protect against businesses benefiting from special provisions when in fact they do  X4not need them.O {O"'ԍId. at 3134,  129. O  Xg4 "176. Comments. Commenters sharply disagree on whether the Commission should adopt  xbidding credits for paging license auctions. AirTouch and Arch contend that bidding credits  xoffered to only certain bidders may be pernicious, and that participants in previous auctions bid"9Nj 0*&&qqE"  xaway their discounts by paying a higher price for their licenses than did those bidders without  X4 x<discounts.h yOb'ԍAirTouch Comments at 4849; Arch Comments at 26 n.56. h PCIA opposes use of bidding credits, stating they do not advance the goals of the  xNCommission and distort the competitive bidding process, particularly if the recipient is the  x"competitor of another bidder for the market. PCIA argues that these problems are particularly  X4 xacute where the service being auctioned is encumbered, as is the case with the paging spectrum.GX yO'ԍPCIA Comments at 34. G  x PageNet likewise opposes the use of bidding credits, contending that bidding credits and  xinstallment payments would allow designated entities to bid up the prices of the licenses in the  X_4auction, thereby hurting incumbents.S_ yO 'ԍPageNet Reply Comments at 1415. S " X14 ""177. Ameritel, however, contends that a bidding credit for small businesses, competing  xhead on with larger companies for the same frequency block, would be beneficial to small  X 4 xbusinesses. x yO,' " ԍAmeritel Reply Comments at 1213. Ameritel points out that the same problem occurred in the narrowband PCS auction because the preferences were available for only certain frequency blocks. Bidding credits may not always make a meaningful difference, Ameritel contends,  xbut denying small businesses their use is not justified because this would put them at a further  X 4 xdisadvantage.I  yOV'ԍAmeritel Comments at 18.I SBT also supports the use of bidding credits and other special provisions, but  x+only if some finetuning occurs because 10 or 15 percent bidding credits are far too small to  X 4 xmake any meaningful difference to small businesses.] `  yO'ԍSBT Comments at 19; SBT Reply Comments at 8.] SBT proposes (1) for entities with  xaverage revenues of less than $10 million, a 10 percent bidding credit; (2) for entities with  xaverage revenues of less than $5 million, a 15 percent bidding credit; (3) for entities with  xhaverage revenues of less than $3 million, a 30 percent bidding credit; (4) for entities with  xaverage revenues of less than $1 million, a 60 percent bidding credit; and (5) if the designated  X44 xentity is an incumbent operator, an additional 10 percent bidding credit. F4  yO'ԍSBT Comments at 20. F These discounts,  x"coupled with an installment payment plan, are necessary, SBT argues, to offset the advantages  xalready enjoyed by large corporations and thus avoid overconcentration of spectrum in the hands  X4 xof a few big businesses.F  yO #'ԍSBT Comments at 21. F Diamond proposes a 25 percent discount on the winning bid.I yO$'ԍDiamond Comments at 4. I  xcDiamond states that raising capital remains a problem for paging service operators and urges us"O0*&&qq"  x not to attribute the gross revenues and assets of investors who hold less than a 49 percent interest  X4in the applicant.K yOb'ԍDiamond Comments at 34. K     X4 "178. Discussion. We believe that bidding credits are appropriate as a special provision  xpfor designated entities in the paging license auctions. While bidding credits do not guarantee the  xsuccess of small businesses, we believe that they at least provide such bidders with an opportunity  xuto successfully compete against larger, wellfinanced bidders. We also conclude that it is  xappropriate to adopt tiered bidding credits for paging auction participants based on the size of the  xpsmall business. Such an approach, we believe, furthers our mandate under Section 309(j) of the Communications Act to disseminate licenses to a variety of applicants.  X 4 " 179. We therefore will define a small business as either (1) an entity that, together with  xcits affiliates and controlling principals, has average gross revenues for the three preceding years  xof not more than $3 million, or (2) an entity that, together with affiliates and controlling  xprincipals, has average gross revenues for the three preceding years of not more than $15 million.  X 4 xhWe will give small businesses that, together with affiliates and controlling principals, have  xaverage gross revenues for the three preceding years of not more than $3 million, a 15 percent  x4bidding credit. We will give small businesses that, together with affiliates and controlling  xprincipals, have average gross revenues for the three preceding years of not more than $15  xmillion, a bidding credit of 10 percent. These bidding credits are the same as those offered to  X44 xsmall businesses in the 900 MHz SMR auction.4X {O='ԍCompetitive Bidding Seventh Report and Order, 11 FCC Rcd at 27052706,  164 (15 and 10 percent). As with 900 MHz SMR, we believe that these  x tiered bidding credits take into account the difficulties smaller businesses have in accessing capital  xcand their differing business strategies. We also think that bidding credits at these levels achieve  xa reasonable compromise between the arguments of commenters advocating greater credits and  xthose of commenters advocating no credits. We believe that to cumulate bidding credits or to  xcreate an even more graduated bidding credit structure, as proposed by SBT, would unduly  xcomplicate the competitive bidding process both for bidders and for the Commission. In sum,  x8we believe that, as was the case in the 900 MHz SMR auction, small businesses will have a  X|4reasonable opportunity of successful participation.| yO' "l ԍWe note that 60 small businesses won a total of 263 licenses, constituting 25.78 percent of all licenses available, in the 900 MHz SMR auction.  XN4 "180. For purposes of the definitions adopted here, we will consider the gross revenues  xof the small business applicant, its affiliates, and certain investors in the applicant. Specifically,  xwe will attribute the gross revenues of all controlling principals in the small business applicant  xas well as the gross revenues of affiliates of the applicant. We choose not to impose specific  x}equity requirements on the controlling principals that meet our small business definition. We will"PB0*&&qq"  xstill require, however, that in order for an applicant to qualify as a small business, qualifying  X4 x/small business principals must maintain both de jure and de facto control of the applicant. For  xthis purpose, we will borrow from certain Small Business Administration (SBA) rules that are  X4 xused to determine when a firm should be deemed an affiliate of a small business.R {O6'ԍSee 13 C.F.R.  121.401.R Typically,  X4 xcde jure control is evidenced by ownership of 50.1 percent of an entity's voting stock. De facto  xcontrol is determined on a casebycase basis. An entity must demonstrate at least the following  Xz4 xuindicia of control to establish that it retains de facto control of the applicant: (1) the entity  xconstitutes or appoints more than 50 percent of the board of directors or partnership management  xcommittee; (2) the entity has authority to appoint, promote, demote and fire senior executives that  xEcontrol the daytoday activities of the licensee; and (3) the entity plays an integral role in all  X 4 xmajor management decisions. Z {O+ 'ԍSee Competitive Bidding Fifth Memorandum Opinion and Order, 10 FCC Rcd at 403, 447,  80 (1994). We caution that while we are not imposing specific equity  xprequirements on small business principals, the absence of significant equity could raise questions  X 4about whether the applicant qualifies as a bona fide small business.  X 4 "181. As in the broadband PCS context, we will permit eligible small businesses to form  X 4 xconsortia and not aggregate their gross revenues.[  {OL'ԍSee, e.g., 47 C.F.R.  24.720(b).[ Additionally, a small corporation that has  xdispersed voting stock ownership and no controlling affiliates will not be required to aggregate  X4 xwith its own revenues the revenues of each shareholder for purposes of small business status. ~ {O' "y ԍSee, e.g., Competitive Bidding Fifth Memorandum Opinion and Order, 10 FCC Rcd at 44445,  74; 24 C.F.R.  24.720(m) (defining "publicly traded corporation with widely dispersed voting power").   xcThus, we clarify that such an applicant may qualify even in the absence of identifiable control being held by particular investors.  X%' e. Installment payments and down payments  X4 "182. Background. In the Notice, we proposed to adopt an installment payment option  x"for small businesses that successfully bid for paging licenses. We proposed that licensees who  xqualify for installment payments would be entitled to pay their winning bid amount in quarterly  xinstallments over the tenyear license term, with interest charges to be fixed at the time of  x3licensing at a rate equal to the rate for tenyear U.S. Treasury obligations plus 2.5 percent. Under  xour proposal, small businesses with not more than $3 million in average gross revenues for the  xpreceding three years would make interestonly payments for the first five years of the license  xterm, while small businesses with not more than $15 million in average gross revenues for the  XA4 xpreceding three years would make interestonly payments during the first two years.^A {O%'ԍNotice, 11 FCC Rcd at 3135,  132. ^ In"AQj 0*&&qq+"  xaddition, we tentatively concluded that small businesses eligible for installment payments may  xpay a reduced down payment. We likewise sought comment on the need, if any, for a reduced  X4upfront payment for entities qualifying as a small business.O {OK'ԍId. at 3135,  133. O  X4 "q183. Comments. Commenters support the use of installment payment plans for small  X4 x"businesses.JZ yO'ԍDiamond Comments at 3. J Diamond proposes a five percent down payment, with the remaining 95 percent  xyof the winning bid price deferred and amortized over a tenyear period at the applicable U.S.  X_4 xyTreasury rate plus 1 percent.N_ yO 'ԍDiamond Comments at 4. N PageNet proposes a five business day window in which the  XH4winning bidder would be required to submit its down payment for the license.MHz yOs'ԍPageNet Comments at 4344. M   X 4 "184. Discussion. We will adopt installment payments for winners in the paging license  x<auctions. We recognize that small businesses, including those owned by women and minorities,  xface capital access difficulties not encountered by other firms. Thus, they require special  xEmeasures to ensure their participation in the paging service. Licensees who qualify as small  xcbusinesses in paging license auctions will be entitled to pay their winning bid amount in quarterly  xinstallments over the term of the license, with interest charges to be fixed at the time of licensing  xcat a rate equal to the rate for tenyear U.S. Treasury obligations plus 2.5 percent. The rate for  xtenyear U.S. Treasury obligations will be determined by taking the coupon rate of interest on  xthe tenyear U.S. Treasury notes most recently auctioned by the Treasury Department before  x/licenses are conditionally granted. These licensees will be able to make interestonly payments  x}for the first two years of the license term. Timely payment of all installments will be a condition  x<of the license grant, and failure to make such timely payments will be grounds for revocation of  xpthe license. As we have noted previously, allowing installment payments reduces the amount of  x@private financing needed by prospective small business licensees and therefore mitigates the effect  X4of limited access to capital by small businesses.  {O'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2389,  23132.  X4 "185. We decline to adopt a second installment payment plan with a longer interestonly  xperiod for small businesses with average gross revenues of not more than $3 million. We believe  xcthat the twoyear interestonly period in the single plan we adopt here provides small businesses  Xe4 xwith the appropriate level of financing to overcome difficulties in attracting capital.ue {O$'ԍSee D, E, and F Report and Order, 11 FCC Rcd at 7845,  44.u Given that"eR. 0*&&qq"  xwe are making additional financial assistance available to very small businesses in the form of a 15 percent bidding credit, we do not think a longer interestonly period is needed.  X4 "186. We also conclude that we should provide for late payment fees in connection with  X4 xour installment payment plan for paging licensees. As we stated in the Notice, timely payment  X4 xof all installments would be a condition of the award of the license.\ {O'ԍNotice, 11 FCC Rcd at 3135,  132.\ Therefore, when licensees  xyare more than fifteen days late in their scheduled installment payments, we will charge a late  xpayment fee equal to 5 percent of the amount of the past due payment. For example, if a  x$50,000 payment is due on June 1, then on June 16 $2,500 is due in addition to the payment.  xAs we explained in adopting a late payment fee provision for broadband PCS F block auction  xwinners, without such a fee licensees may not have adequate financial incentives to make  x/installment payments on time and may attempt to maximize their cash flow at the government's  X 4 xuexpense by paying late.u Z {O'ԍSee D, E, and F Report and Order, 11 FCC Rcd at 7846,  48.u We note too that enhancing the fiscal accountability of entities  xreceiving installment payment benefits is consistent with the purpose of the recently enacted Debt  X 4 x0Collection Improvement Act of 1996.  {O]' " ԍSee Chap. 10 of the Omnibus Consolidated Rescissions and Appropriation Act of 1996, Pub. L. No. 104134, 110 Stat. 1321358 (April 26, 1996). The 5 percent payment we adopt here is an  xapproximation of late payment fees applied in typical commercial lending transactions. Payments will be applied in the following order: late charges, interest charges, principal payments.  Xd4 "187. We believe that small businesses should be required to pay a down payment of 20  xpercent, as we required in our broadband PCS F block auction. We believe that such a  xrequirement is consistent with ensuring that winning bidders have the financial capability of  X4 xbuilding out their systems and will provide us with stronger assurance against default than a 10  xpercent down payment. Increasing the amount of the bidder's funds at risk in the event of default  x}discourages insincere bidding and therefore increases the likelihood that licenses are awarded to  x<parties who are best able to serve the public. We also believe that a 20 percent down payment  x[should cover the required payments in the unlikely event of default. Thus, small business  xlicensees will be required to bring their deposit up to ten percent of the winning bid within ten  xbusiness days of the close of the auction. Prior to licensing, they will be required to pay an  X~4 xadditional ten percent. Specific procedures for payment will be provided in a Public Notice  xNissued by the Bureau. Finally, we will not adopt reduced upfront payment rules for small  xbusinesses participating in the paging license auction. We believe a uniform upfront payment  xprovision for all bidders in the auction is necessary in order to deter speculation and to ensure that only sincere bidders participate in the auction. " SF0*&&qq"Ԍ X' f. Partitioning  X4 "4188. Background. In the Notice, we proposed a partitioning scheme for rural telephone  X4 xcompanies similar to the one that had been adopted for broadband PCS. {O6' " ԍNotice, 11 FCC Rcd at 3136,  137 (citing Competitive Bidding Fifth Report and Order, 9 FCC Rcd at 55975598,  150). Partitioned areas  xNwould be required to conform to established geopolitical boundaries and would include all  xportions of the wireline service area of the rural telephone company that lie within the service  Xx4 xarea.:x" {OK 'ԍId.: In addition, we sought comment on whether we should extend geographic partitioning  Xa4and channel disaggregation to all licensees.Ma {O 'ԍId. at 3136,  138.M  X34 "=189. Comments. Several commenters suggest permitting partitioning of market area  xpaging licenses by rural telephone companies, small businesses and BETRS operators in order  X 4 xto expand their geographic areas.z F {O' "y ԍSee, e.g., Ameritel Comments at 21 (the Commission should allow rural telephone companies and small  x businesses to partition portions of an MTA in order to expand their paging service, twoway mobile radio service,  xQ and/or BETRS systems, which would further help to mitigate the harmful impact of market area licensing on small  xD entities); NuclaNaturita Comments at 1012 (the Commission should provide rural telephone companies with the  x; right to require the market area licensee to partition those portions of the market that are required to provide BETRS,  x at no cost; and the market area licensee should notify the BETRS licensee of any modifications, and test the facility  yO'before putting it into service); USTA Comments at 3. NuclaNaturita, while opposing the auctioning of BETRS  xfrequencies, urges us to adopt mandatory partition rights at no cost for providers of BETRS. This  xRmandatory right to partition would extend to the perimeters of the rural telephone company's  x&BETRS central office station and in no event could the partitioned area exceed the rural telephone  X 4 xcompany's certificated local exchange area.kX  yO' "E ԍNuclaNaturita Comments at 11. The only exception, NuclaNaturita contends, would be to the extent  x necessary to ensure that any BETRS central office station located within the rural telephone company's certificated area would not receive or cause harmful cochannel interference. k USTA agrees that rural telephone companies  X4should have partitioning rights.D yO'ԍUSTA Comments at 3.D  Xd4 "W190. Ameritel proposes permitting rural telephone companies and small businesses to  xpartition their geographic license areas in order to expand their paging service and improve  X64 xpmobile telephone service and the BETRS.K68 yO%'ԍAmeritel Comments at 21. K Ameritel states that partitioning would also help to"6T0*&&qq"  X4 xmitigate the harmful impact of market area licensing.< {Oy'ԍId. < Priority, Metrocall, and AirTouch  xypropose partitioning for incumbents, especially when more than one incumbent is located in a  X4 xIparticular geographic area.^Z {O' "V ԍPriority Comments at 6; Metrocall Comments at 1415; AirTouch Comments at 40 n.91.  But see AirTouch  {O' x ex parte at 78 (while supporting flexible partitioning, AirTouch notes it supports limiting partitioning to an existing  {Oq'presence in an MTA on the subject frequency and only along well recognized boundaries, e.g., county lines).  Puerto Rico Telephone supports geographic partitioning, but asks  x[us to clarify whether partitioning will be available only to rural telephone companies or, in  X4 xaddition, to BETRS providers.U yO 'ԍPuerto Rico Telephone Comments at 8.U Arch and ProNet support broad partitioning rights for license  X4 xwinners.~ yON 'ԍArch Reply Comments at 9; ProNet Comments at 8 and Reply Comments at 1011. ~ PCIA supports broad partitioning rights and, when technically feasible, spectrum  Xv4disaggregation.Jv yO'ԍPCIA Comments at 18 n.34.J MobileMedia also supports partitioning by license winners.Ov0  yOW'ԍMobileMedia Comments at 1314.O  XH4 "191. Border questions the practical usefulness of partitioning, asserting that license  xwinners in the PCS auctions had little desire to negotiate geographic partitioning arrangements  X 4 xwith small LECs that sought to serve sparsely populated remote areas.H  yO'ԍBorder Comments at 3. H Ameritel, while  xsupporting partitioning, asserts that, because negotiations are required with the auction winner,  xRpartitioning may not be a complete solution for problems facing rural telephone companies in  X 4 x0paging auctions, nor will it alleviate the disruption caused by market area licensing.d P  yO'ԍAmeritel Comments at 21 and Reply Comments at 15. d  x&InterDigital contends that the proposal to partition and therefore require rural telephone companies  xVto pay for BETRS spectrum runs counter to the objective of reducing the overall access cost of  X4the network.N yO!'ԍInterDigital Comments at 4. N  Xb4 "q192. Discussion. Based on the strong support expressed by commenters for granting  xbroad partitioning rights to paging licensees, we will permit all MTA and EA paging licensees  X44 xto partition to any party eligible to be a paging licensee.IX4p yOU$' " ԍWe have previously adopted expanded partitioning rights for broadband PCS. Geographic Partitioning and  xD Spectrum Disaggregation by Commercial Mobile Radio Services Licensees; Implementation of Section 257 of the  x Communications ActElimination of Market Entry Barriers, WT Docket No. 96148, GN Docket No. 96113, FCC"%0*&&%"  {O'96474, Report and Order (released December 20, 1996) ("PCS Partitioning Report and Order"). I We have decided to take this action"4UZ0*&&qq"  xwith respect to partitioning because of our conclusion that allowing holders of paging licenses  xto partition their geographic service areas will facilitate the provision of services in small markets  xhand rural areas. Partitioning will also furnish providers of paging service with operational  xuflexibility that will serve to promote the most efficient use of the spectrum and encourage  X4 xparticipation by a wide variety of service providers. In the PCS Partitioning Report and Order,  xwe decided to allow partitioning of broadband PCS licenses along any service area defined by  xthe parties. We concluded that allowing the parties to define the partitioned PCS service area  xwould allow licensees to design flexible and efficient partitioning agreements which would permit  xmarketplace forces to determine the most suitable service areas. We also found that requiring  xPCS partitioning along county lines was too restrictive and might discourage partitioning. We  xbelieve that a similarly flexible approach to partitioned areas is appropriate for paging. We  xtherefore will permit partitioning of paging licenses awarded through competitive bidding based on any license area defined by the parties.  X 4 " 193. However, due to the paucity of comments on the subject, and because we are  xuncertain whether it is technically feasible, we will not, at this time, authorize spectrum  xdisaggregation for the paging services. Instead, we will seek information regarding the technical  X{4 xfeasibility and appropriateness of spectrum disaggregation for the paging services in the Further  Xf4Notice of Proposed Rulemaking.  X:4 "194. Providers of paging service will be permitted to acquire partitioned licenses in either  xEof two ways: (1) by forming bidding consortia to participate in auctions, and then partitioning  xthe licenses won among consortium members; or (2) by acquiring partitioned licenses from other  xllicensees through private negotiation and agreement either before or after the auction. Each  xmember of a consortium will be required to file a longform application, following the auction,  xfor its respective mutually agreedupon geographic area. With regard to partitioning by small  X4 x businesses, we will seek comment in the Further Notice of Proposed Rulemaking regarding the  xtreatment of bidding credits and installment payments. In the event we receive applications  xrequesting FCC consent to partitioning transfers from small businesses to nonsmall businesses  xor to small businesses that qualify for less favorable bidding credits, action on such applications  x'will be deferred until the adoption of rules governing the treatment of bidding credits and installment payments. v  X' g. Unjust enrichment provisions for full transfers  X4 "W195. Background. The Commission's unjust enrichment provisions are integral to the  xsuccess of the special provisions for designated entities in the various auctionable services. In  X!4 xIvthe Competitive Bidding Second Report and Order, we outlined unjust enrichment provisions  xapplicable specifically to designated entities. We established these provisions to deter speculation""VZ0*&&qq "  xand participation in the licensing process by those who do not intend to offer service to the  xpublic, or who intend to use our provisions to obtain a license at a lower cost than they otherwise  X4 xcwould have to pay, and later to sell it for profit. {OK'ԍCompetitive Bidding Second Report and Order, 9 FCC Rcd at 2394,  258259; 47 C.F.R.  1.2111. In the Notice, we sought comment regarding  xthe appropriate approach in the paging services to prevent unjust enrichment. We asked whether  x"an approach to unjust enrichment similar to that adopted for narrowband PCS, in which bidding  xcredits and installment payments immediately become due upon transfer to an ineligible entity,  x/or the 900 MHz SMR service, in which a holding period was imposed, would be optimal for the  Xa4paging services.daZ {Ol 'ԍNotice, 11 FCC Rcd at 3135,  134135.d  X34 "196. Comments. SBT supports restricting assignments of licenses by small businesses  xthat receive bidding credits or qualify for installment payments until the full price has been paid  xfor the spectrum. However, SBT states that assignments to entities that are ineligible for bidding  x8credits should not be prohibited as long as such entities pay the Commission the value of the  X 4 x}bidding credits.F  yOt'ԍSBT Comments at 21. F Metrocall and A+ Communications, while opposing antitrafficking provisions  X 4 x~for incumbents,q | yO'ԍMetrocall Comments at 2223; A+ Communications Comments at 11. q note that such provisions may be an appropriate means of deterring  X 4speculators.R  yOf'ԍMetrocall Reply Comments at 12. R  X{4 "=197. Discussion. We believe it is appropriate to align our unjust enrichment rules for  xpaging with our narrowband PCS and 900 MHz SMR unjust enrichment rules as they relate to  xNbidding credits. These rules provide that, during the initial license term, licensees utilizing  xybidding credits and seeking to assign or transfer control of a license to an entity that does not  xmeet the eligibility criteria for bidding credits will be required to reimburse the government for  x+the total value of the benefit conferred by the government, that is, the amount of the bidding  xcredit, plus interest at the rate imposed for installment financing at the time the license was  xawarded, before the transfer will be permitted. If a licensee that utilizes bidding credits seeks to  xEmake any change in ownership structure that would render the licensee ineligible for bidding  xcredits, or eligible only for a lower bidding credit, the licensee must first seek Commission  xapproval and reimburse the government for the amount of the bidding credit, or the difference  xbetween its original bidding credit and the bidding credit for which it is eligible after the  xownership change, plus interest at the rate imposed for installment financing at the time the  xlicense was awarded. The amount of this payment will be reduced over time as follows: (1) a  x/transfer in the first two years of the license term will result in a forfeiture of 100 percent of the  x/value of the bidding credit; (2) in year three of the license term the payment will be 75 percent;""W0*&&qq""  x(3) in year four the payment will be 50 percent, and (4) in year five the payment will be 25  xVpercent, after which there will be no required payment. These payments will have to be paid to the U.S. Treasury as a condition of approval of the assignment or transfer.  X4 "198. In addition, if a licensee that qualifies for installment payments seeks to assign or  xtransfer control of its license during its term to an entity that does not meet the small business  xdefinition, we will require payment of the remaining principal and any interest accrued through  x/the date of assignment as a condition of the license assignment or transfer. Also, if an investor  x_subsequently purchases an interest in the business and, as a result, the gross revenues of the  xbusiness exceed the applicable financial caps, these unjust enrichment provisions will apply. We  xwill apply these payment requirements for the entire license term to ensure that small businesses  xlook first to other small businesses when deciding to transfer their licenses. However, we will not impose a holding period or other transfer restrictions on these licensees.  X ' h. Spectrum setaside  X4 "199. Background. In the Competitive Bidding Fifth Report and Order, we established  xbroadband PCS entrepreneurs' blocks on which only qualified entrepreneurs, including designated  Xd4 xVentities, could bid.d {O'ԍCompetitive Bidding Fifth Report and Order, 9 FCC Rcd at 55805586,  113123. In the Notice, we tentatively concluded that it was not necessary to adopt  XO4an entrepreneurs' block for paging license auctions.^OZ {OZ'ԍNotice, 11 FCC Rcd at 3133,  124. ^  X!4 "200. Comments. Most commenters oppose the creation of an entrepreneurs' block or  x"other form of spectrum setaside for paging license auctions. AirTouch and Arch contend that  xset asides are inherently contrary to the open eligibility concepts endorsed by the Commission,  X4 x/and can prevent licenses from getting into the hands of carriers who value them most highly.k yOy'ԍAirTouch Comments at 48 n. 105; Arch Comments at 25 n. 54.k  xEPCIA and Ameritel concur, noting that an entrepreneurs' block is not feasible for the paging  xfrequencies because such frequencies are highly encumbered. They further argue that setting  xaside certain frequencies would potentially preclude incumbents from bidding on frequencies they  xcurrently hold. They also contend that the only solution to such problems would be to relocate  xincumbents, which would involve expensive system modifications and otherwise unnecessary  XR4 xinvestment.cR| yO"'ԍPCIA Comments at 3334; Ameritel Comments at 12. c SBT, on the other hand, asserts that a frequency setaside for designated entities  xis appropriate for the paging services. Because capital costs are low enough for small businesses";X 0*&&qq+"  xto be able to meet construction requirements, SBT argues, small businesses should not have to  X4compete directly with large entities to acquire licenses.F yOb'ԍSBT Comments at 18. F  X4 "d201. Discussion. We will not adopt an entrepreneurs' block for paging licenses. The  x_large number of licenses of different sizes that will be available in the paging auctions should  xallow for extensive participation of small businesses without an entrepreneurs' block. Moreover,  xwe believe that the special provisions for small businesses that we adopt here, including  xqinstallment payments and tiered bidding credits, will give small businesses a significant opportunity to acquire paging licenses through our auctions.  X 4  V. FURTHER NOTICE OF PROPOSED RULEMAKING ă  X ' A. Coverage Requirements for Nationwide Channels  X 4 "202. In the Second Report and Order, we concluded that the three 931 MHz nationwide  xchannels and twentythree 929 MHz nationwide channels will not be subject to competitive  xbidding. We are not imposing coverage requirements based on geographic area or population for  xthese nationwide paging licenses. MTA and EA licensees, who are not exempt from competitive  xbidding, are required to provide coverage to onethird of the geographic area population within  xthree years of the license grant, and to twothirds of the geographic area population within five  xyears of the license grant. In the alternative, the MTA or EA licensee may provide substantial  xservice to the geographic area within five years of license grant. We seek comment on whether  xwe should also impose coverage requirements for nationwide paging licenses, and the appropriate  xcoverage area. For example, should the coverage be on a per MTA basis or a nationwide basis?  xWe also seek comment on whether the Commission should reauction the entire nationwide license, or just a portion of the license, if the licensee fails to meet the coverage requirements.  X' l B. Partitioning and Disaggregation  Xg' 1. Partitioning  X9' a. In general  X 4 "203. In the Second Report and Order, we adopted geographic partitioningoZ X yO"' " ԍPartitioning is the assignment of geographic portions of the geographic area paging license along geopolitical  {O"' x or other boundaries. In the Second Report and Order we permit partitioning of geographic area paging licenses along any service area defined by the parties.o provisions  X4 xfor MTA and EA geographic area paging licensees. In this Further Notice we seek l comment on  xwhether nationwide paging licensees should be permitted to partition their license area. "Yz0*&&qqx"  xCommenters should note that the three 931 MHz nationwide channels and twentythree 929 MHz  x nationwide channels are not subject to competitive bidding, whereas the MTA and EA geographic area licenses are subject to competitive bidding.  X4 "204. We believe that partitioning can be an effective means of providing paging licensees  x=with the flexibility they need to tailor their service offerings to meet market demands.  xPartitioning may be used to create smaller licenses and thus also facilitate greater participation  xVby small businesses and rural telephone companies. We did not, however, seek comment in the  XH4 xNotice on the treatment of MTA and EA geographic area paging licensees that receive  xcompetitive bidding benefits, the license term of partitioned licenses, or buildout requirements. We address these issues below with respect to partitioning geographic area paging licenses.  X ' b. Licensees with competitive bidding benefits  X 4 "205. Providing licensees with the flexibility to partition their geographic service areas will  X 4 xcreate smaller areas that can be licensed to small businesses,{  yO"'ԍSmall business is defined in Section 22.223(b). 47 C.F.R.  22.223(b).{ including those entities without  xthe resources to participate successfully in spectrum auctions. Our competitive bidding rules for  X{4 xpaging include provisions for installment payments and bidding credits for small businesses.]{X {O'ԍSee 47 C.F.R.  22.217, 22.219.]  xWe also adopted rules to prevent unjust enrichment by small businesses seeking to transfer  XM4 xIlicenses obtained with installment payments or bidding credits.cM {O'ԍSee 47 C.F.R.  22.217(b), 22.219(c).c We seek comment on how to  xadjust installment payments owed by partitioning licensees. Parties are invited to comment on  xwhether a small business partitioner should be required to repay, on an accelerated basis, a  xportion of the outstanding principal balance owed under an installment payment plan. We seek  x'comment on how this payment should be calculated. We seek comment on whether the  xpartitionee should be required to guarantee payment of a portion of the partitioner's obligation.  X4 "0206. We tentatively conclude that partitionees that would qualify as small businesses  X~4 x/should be permitted to pay their pro rata share of the remaining government obligation through  xinstallment payments. We seek comment on this tentative conclusion. Commenters should  xaddress the mechanisms for apportioning the remaining government obligation between the  xcparties. We propose using population as the objective measure to calculate the relative value of the partitioned area, and we seek comment on this proposal.  X4 "~207. We propose applying unjust enrichment rules to small businesses that partition to  xnonsmall businesses or to small businesses qualifying for a lower bidding credit. We seek"Z|0*&&qq"  xcomment on this proposal. These unjust enrichment provisions would include accelerated  xppayment of bidding credits, unpaid principal, and accrued unpaid interest. We seek comment on  xchow such unjust enrichment amounts should be calculated. Commenters should address how to  x}calculate unjust enrichment amounts and how to enforce unjust enrichment payments. We seek  x8comment on whether we should consider the price paid by the partitionee in determining the  xMpercentage of the outstanding principal balance to be repaid. Commenters should address whether  xthe unjust enrichment payments should be calculated on a proportional basis, using population of the partitioned area as the objective measure.  X14 "z208. We seek comment on whether each party to a partitioning transfer should be  x_required to guarantee all or a portion of the partitioner's original auctionsrelated obligation in  xthe event of default or bankruptcy by any of the parties to the partitioning transfer. We seek  xcomment on whether the partitioner (the original licensee) should continue to be responsible, with respect to the auctionsrelated obligation, for the entire initial geographic area.  X ' c. Buildout requirements  Xy4 "209. In the Second Report and Order, we adopted coverage requirements for MTA and  Xd4 xEA geographic area licensees.Td {O'ԍSee 47 C.F.R.  22.503(k).T Specifically, we require each MTA or EA geographic area  xlicensee to provide coverage to onethird of the geographic area population within three years of  xlthe license grant, and to twothirds of the geographic area population within five years of the  xlicense grant. In the alternative, the MTA or EA licensee may provide substantial service to the  x[geographic area within five years of license grant. We tentatively conclude that both the  xpartitioner and the partitionee should be subject to coverage requirements that ensure that both  xVportions of the license area will receive service. We propose that a partitionee will be obligated  xto satisfy the same buildout requirements as the original licensee within its partitioned area,  xregardless of when the license was acquired. A partitionee of an MTA or EA would provide  xcoverage to onethird of the population in its partitioned area within three years of the license  xgrant, and to twothirds of the population within its partitioned area within five years of the  xlicense grant. In the alternative, the partitionee may provide substantial service to the partitioned  xgeographic area within five years of license grant. Parties are invited to comment on this  xlproposal. Commenters should also address buildout requirements for partitioned nationwide  xlicenses. Commenters are also invited to address what buildout requirements should apply where a licensee partitions a portion of its license area after the initial tenyear license term has expired.  X' d. License term " [Z0*&&qq."Ԍ X4 "210. A geographic area paging licensee is authorized to provide service for no more than  X4 xten years from the date of license grant.T {Ob'ԍSee 47 C.F.R.  22.144(a).T A licensee may submit an application to renew the  xlicense for an additional license term, and is afforded a renewal expectancy if it can demonstrate  xthat it has provided substantial service during the past license term and has substantially complied  X4 xwith the applicable Commission rules, policies, and the Communications Act.tZ {O'ԍSee CMRS Third Report and Order, 9 FCC Rcd at 8157,  386.t Substantial  xIservice is service which is sound, favorable, and substantially above a mediocre level of service  Xv4which might just minimally warrant renewal.Dv {O 'ԍId. at n.712.D  X_4 ",211. We propose that a partitionee (including a nationwide license partitionee) be  xauthorized to hold its license for the remainder of the partitioner's original tenyear term. We  xtentatively conclude that this approach is reasonable because a partitionerlicensee should not be  xIable to confer greater rights than it was awarded under the terms of its license grant. We seek  x<comment on this tentative conclusion. We also propose that a partitionee be afforded the same  xrenewal expectancy as a geographic area licensee. We propose to grant a partitionee a preference  xat a renewal proceeding if it can demonstrate that it has provided substantial service during its  xpast license term and has substantially complied with the applicable Commission rules, policies, and the Communications Act. We seek comment on these proposals.  Xy' 2. Disaggregation  XK' a. In general  X4 "=212. In the Notice we asked parties to comment on whether we should allow paging  X4 xspectrum disaggregation.~ yO7' " ԍDisaggregation is the assignment of discrete portions or "blocks" of spectrum licensed to a geographic area licensee. We did not receive sufficient comment on this issue to adopt  xRdisaggregation for paging services. We seek further comment on the feasibility of spectrum  xdisaggregation for paging. Commenters should provide technical justifications and other relevant  xsupport in responding to this issue. Commenters should address whether minimum disaggregation  x@standards are necessary for paging services. Commenters should also address whether we should permit nationwide licensees to disaggregate spectrum.  Xg' b. Licensees with competitive bidding benefits  X94 "213. We also seek comment on what the respective obligations of the participants in a  xRdisaggregation transfer should be, and whether each party should be required to guarantee a""\0*&&qq"  xproportionate amount of the disaggregator's original auctionsrelated obligation in the event of  xdefault or bankruptcy by any of the parties to the disaggregation transfer. We seek comment on  xwhether the disaggregator (the original licensee) should have a continuing obligation with respect  xto the entire initial license. Alternatively, should the parties have available a choice of options,  xMranging from an accelerated payment based on purchase price to a guarantee for a larger payment  xby one party in the event another party defaults? Parties are invited to comment on whether the  xdisaggregating parties should be able to determine which party has a continuing obligation with respect to the original license area.  X14 "214. We propose to allow all small business licensees to disaggregate to similarly  xEqualifying parties as well as parties not eligible for small business provisions. We tentatively  xconclude that if we permit a qualified small business licensee to disaggregate to a nonsmall  xbusiness entity, the disaggregating licensee should be required to repay any benefits it received  xWfrom the small business special provisions on a proportional basis. This would include  x<accelerated payment of bidding credits, unpaid principal, and accrued unpaid interest. We seek  xlcomment on how such repayment amounts should be calculated. We also seek comment on  xwhether we should consider the price paid by the disaggregatee in determining the percentage of the outstanding principal balance to be repaid.  XK4 "A215. We tentatively conclude that if we permit a small business licensee to disaggregate  xto another qualified small business that would not qualify for the same level of bidding credit as  x/the disaggregating licensee, the disaggregating licensee should be required to repay a portion of  xthe benefit it received. We seek comment on how that amount should be calculated. Finally, we  x_seek comment on what provisions, if any, we should adopt to address the situation of a small business licensee's disaggregation followed by default in payment of a winning bid at auction.  X' c. Buildout requirements  X|4 "216. We require each MTA or EA geographic area licensee to provide coverage to one x<third of the geographic area population within three years of the license grant, and to twothirds  xof the geographic area population within five years of the license grant. In the alternative, the  xMTA or EA licensee may provide substantial service to the geographic area within five years of  xlicense grant. We propose adopting a flexible approach for construction requirements on both  xtthe disaggregator and disaggregatee for their respective spectrum portions. We propose that either  xlthe disaggregator or the disaggregatee entering the geographic market should be obligated to  xyprovide coverage to onethird of the population within three years of the license grant, and to  xtwothirds of the population within five years of the license grant. In the alternative, either the  xdisaggregator or the disaggregatee may provide substantial service to the geographic area within  xfive years of license grant. We seek comment on this proposal. Parties should also comment on  x8the appropriate buildout requirements for the parties to disaggregation of nationwide paging  xlicenses. We propose that if a licensee fails to meet the construction requirements, the license reverts back to the Commission. We seek comment on this proposal."Q%]0*&&qqe#"Ԍ  X' d. License term  X4 "217. We propose a similar license term for disaggregation as we have for partitioning,  X4 xi.e., a disaggregatee would be authorized to hold its license for the remainder of the  xdisaggregator's original tenyear license term. We propose that a disaggregatee would be  xafforded a renewal expectancy if it can demonstrate that it has provided substantial service during  xthe past license term and has substantially complied with the applicable Commission rules,  xpolicies, and the Communications Act. We seek comment on these proposals, and on how to  xapply the renewal standard in cases where the disaggregatee has acquired the disaggregated license near the end of the license term.  X ' 3. Combination of Partitioning and Disaggregation  X 4 "218. We tentatively conclude that, if disaggregation is feasible, we should permit  xVcombinations of partitioning and disaggregation, subject to the rules we have proposed for each.  xWe seek comment on this proposal. Commenters should address any conflicts in the partitioning  xand disaggregation rules and whether we should implement the partitioning rules in such cases.  xCommenters should also address whether we should allow the combination of partitioning and disaggregation for nationwide paging licenses.  X' C. Shared Channels  X4 "219. The issue of paging license application fraud was initially raised in the comments  xfiled by the Federal Trade Commission (FTC). According to the FTC, telecommunications  xinvestment frauds are of two basic types: (1) "application mills," where telemarketers sell  xapplication preparation services for wireless licenses for thousands of dollars to consumers, by  xclaiming that telecommunications businesses will seek to lease or sell the licenses for many times  xthe telemarketers' applications fees; and (2) "buildout" schemes, where telemarketers sell, again  xfor thousands of dollars, interests in limited liability companies or partnerships that supposedly  xuwill acquire wireless licenses, build and operate telecommunications systems, and pay the  xconsumers high dividends. The FTC argued that awarding licenses on a geographic basis through  x#competitive bidding would likely reduce the incidence of "application mills" for paging  X 4 xlicenses.C  yO 'ԍFTC Comments at 1.C The FTC explained that awarding licenses on an unlimited, shared basis is especially  xNprone to abuse, because the constant availability of such licenses allows telemarketers to  x"guarantee licenses to unsuspecting consumers. The transition of the exclusive paging channels  xto geographic area licensing might make the shared channels even more inviting to the fraudulent application mills. Therefore, we seek comment on how to eliminate or reduce this problem. ""^X0*&&qq "Ԍ X4 "220. Specifically, we seek comment on how the current Form 600 application could be  xrevised to provide applicants with information regarding the risks of telecommunications  xinvestment and warning signs of possible investment fraud. In addition, we seek comment on  x<whether application preparation services should be required to sign the Form 600, and to certify  xVthat the applicant has received in writing pertinent information regarding the Commission's rules  x<and the obligations of licensees. Commenters are also invited to address whether PCIA should  x/be required to implement additional procedures in the coordination process to reduce fraudulent or speculative applications.  X14}? VI. CONCLUSION ă  X 4 "221. In this Second Report and Order, we adopt geographic area licensing and  xcompetitive bidding rules for paging services in the exclusive 929930 MHz, 931932 MHz, 35 x36 MHz, 4344 MHz, 152159 MHz, and 454460 MHz bands, to facilitate future development  x<of paging systems and foster competition between paging and other CMRS in general. We are  xgranting nationwide geographic area licenses for 26 nationwide channels, and excluding those  xlicenses from competitive bidding. We also are adopting the fixed distances in Tables E1 and  xlE2 in Section 22.537 for the exclusive 929 MHz and 931 MHz channels for determining co Xd4 xIchannel interference protection for incumbent licensees. Additionally, in the Further Notice of  XO4 x8Proposed Rulemaking, we are seeking comment on coverage requirements for nationwide  xgeographic area licensees, geographic partitioning, spectrum disaggregation, and modifying the application process for the shared private carrier paging channels.  X4x. VII. PROCEDURAL MATTERS ă  X' A. Ordering Clauses  X4 "222. Authority for issuance of this Further Notice of Proposed Rulemaking is contained  x+in Sections 4(i), 257, 303(r), and 309(j) of the Communications Act of 1934, asx amended, 47 U.S.C.  154(i), 257, 303(r), and 309(j).  X?4 "223. Accordingly, IT IS ORDERED that, pursuant to the authority of Sections 4(i),  x303(g), 303(r), and 332(a) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i),  x303(g), 303(r), and 332(a), Part 22 of the Commission's Rules, 47 C.F.R. Part 22, IS AMENDED as set forth in Appendix A below.  X 4 "224. IT IS FURTHER ORDERED that, pursuant to the authority of Sections 4(i), 303(g),  x303(r), and 332(a) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 303(g),  x303(r), and 332(a), Part 90 of the Commission's Rules, 47 C.F.R. Part 90, IS AMENDED as set forth in Appendix A below. "p$_0*&&qq""Ԍ X4 "225. IT IS FURTHER ORDERED that the rules adopted in this Second Report and Order  X4 xRand Further Notice of Proposed Rulemaking will be effective sixty days after the date of publication in the Federal Register.  X4 " 226. IT IS FURTHER ORDERED that, pursuant to 47 U.S.C.  155(c), the Chief,  xtWireless Telecommunications Bureau, IS GRANTED DELEGATED AUTHORITY to implement  x<and modify auction procedures in the Part 22 and Part 90 paging services, including the general  xdesign and timing of an auction, the number and grouping of authorizations to be offered in any  xparticular auction, the manner of submitting bids, the amount of minimum opening bids and bid  x/increments, activity and stopping rules, and application and payment requirements, including the  X 4amount of upfront payments, and to announce such procedures by Public Notice.  X 4 "227. IT IS FURTHER ORDERED that, pursuant to 47 U.S.C.  155(c), the Chief,  xWireless Telecommunications Bureau, IS GRANTED DELEGATED AUTHORITY to dismiss  X 4 xall mutually exclusive paging applications filed as of the adoption date of this Order and grant  xor dismiss all nonmutually exclusive paging applications filed as of the adoption date of this  V4Order.  Xj4 B. Ex Parte Rules NonRestricted Proceeding  X=4 "228. This is a nonrestricted notice and comment rule making proceeding. Ex parte  x[presentations are permitted except during the Sunshine Agenda period, provided they are  X4 xydisclosed as provided in Commission rules. See generally 47 C.F.R.  1.1201, 1.1203, and 1.1206(a).  X' C. Comment Dates  "229. Pursuant to applicable procedures set forth in Sections 1.415 and 1.419 of the  xCommission's rules, 47 C.F.R.  1.415 and 1.419, interested parties may file comments to the  Xr4 xQFurther Notice of Proposed Rulemaking on or before April 17 X"n 0 , 1997 , and reply comments on or  X]4 xybefore May 1 X"n , 1997 . To file formally in this proceeding, you must file an original and four  x~copies of all comments, reply comments, and supporting comments. If you want each  xCommissioner to receive a personal copy of your comments, you must file an original plus nine  x_copies. You should send comments and reply comments to Office of the Secretary, Federal  xCommunications Commission, Washington, D.C. 20554. Comments and reply comments will  xVbe available for public inspection during regular business hours in the FCC Reference Center of  xthe Federal Communications Commission, Room 239, 1919 M Street, N.W., Washington, D.C. 20554.  X#' D. Initial Paperwork Reduction Act of 1995 Analysis "w$`0*&&qq""Ԍ X4 "l230. This Further Notice of Proposed Rulemaking contains either a proposed or modified  xinformation collection. As part of its continuing effort to reduce paperwork burdens, we invite  xpthe general public and the Office of Management and Budget (OMB) to take this opportunity to  X4 xcomment on the information collections contained in this Further Notice of Proposed Rulemaking,  xas required by the Paperwork Reduction Act of 1995, Pub. L. No. 10413. Public and agency  X4 xcomments are due at the same time as other comments on this Further Notice of Proposed  X|4 xZRulemaking; OMB comments are due 60 days after the date of publication of this Further Notice  Xg4 xcof Proposed Rulemaking in the Federal Register. Comments should address: (a) whether the  xproposed collection of information is necessary for the proper performance of the functions of  xthe Commission, including whether the information shall have practical utility; (b) the accuracy  xIof the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the  xinformation collected; and (d) ways to minimize the burden of the collection of information on  xthe respondents, including the use of automated collection techniques or other forms of information technology.  X ' E. Regulatory Flexibility Act  X4 "4231. The Final Regulatory Flexibility Analysis pursuant to the Regulatory Flexibility Act,  xE5 U.S.C. Section 604 is contained in Appendix C. The Initial Regulatory Flexibility Analysis pursuant to the Regulatory Flexibility Act, 5 U.S.C. 603, is contained in Appendix D. ` `  FEDERAL COMMUNICATIONS COMMISSION ` `  William F. Caton ` `  Acting Secretary