Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) SOUTHERN COMPANY ) ) Request for Waiver of ) Section 90.629 of the Commission's Rules) MEMORANDUM OPINION AND ORDER Adopted: December 3, 1998 Released: December 4, 1998 By the Chief, Wireless Telecommunications Bureau: I. INTRODUCTION 1. On February 20, 1998, Southern Company (Southern) submitted a request for a waiver of Section 90.629 of the Commission's Rules to extend the implementation period for a wide-area Specialized Mobile Radio (SMR) network that incorporates Business and Industrial/Land Transportation (I/LT) channels. Although Southern received a five-year extended implementation period to construct its wide-area SMR network, Southern now requests a construction extension of five years, or until the Commission makes these 800 MHz Business and I/LT channels available for auction, pursuant to the Balanced Budget Act of 1997. At the request of the Wireless Telecommunications Bureau (Bureau), Public Safety and Private Wireless Division, Licensing and Technical Analysis Branch, Southern provided supplemental information regarding the construction status of its licensed channels on April 22, 1998. The waiver request was placed on Public Notice on April 28, 1998. We received thirty-six comments and two reply comments. Based on the record in this proceeding, we conclude that Southern's request should be granted in part and denied in part. Specifically, we grant Southern an extension to continue construction of the originally authorized wide-area SMR network until the effective date of final rules implementing the Balanced Budget Act of 1997 with respect to the licensing of 800 MHz Business and I/LT frequencies. II. BACKGROUND 2. Southern, a public utility holding company, operates a digital SMR system in parts of Mississippi, Alabama, Florida, and Georgia on 800 MHz Business and I/LT channels for which it was initially licensed in 1993. The system provides internal communications for Southern's operating companies, and serves a growing external customer base that includes federal, state, and local governments, and emergency management agencies such as sheriff's departments and ambulance services. The system provides voice dispatch service, full-duplex telephone interconnection, messaging service (similar to alphanumeric paging), and data transmission capabilities. 3. While 800 MHz Business and I/LT channels are no longer available for SMR use, Southern states that it relied upon the Commission's former inter-category sharing rule to convert its Business and I/LT channels to SMR use. Under the former rule, inter-category sharing was permitted only when no channels were available in the category for which the applicant was eligible. 4. Under the Commission's rules, Business and I/LT channels ordinarily must be put into operation within eight months of license grant or the authorization cancels automatically. However, pursuant to the extended implementation rule then in effect, on June 8, 1994, Southern obtained a five-year extended implementation period, until June 8, 1999. Southern states that it has constructed all 392 base stations for which it is licensed, but has not constructed every channel at every base station. Specifically, Southern represents that it has constructed sixty-five percent of the licensed channels, and that its system covers more than ninety percent of the population in its 120,000-square-mile service area, which includes the most rural areas of the South. 5. In 1995, the Commission amended its rules for the upper 200 SMR channels in the 800 MHz band to provide for geographic licensing, and adopted a construction requirement for geographic licensees of coverage to one-third of the population of their licensing area, and construction of at least half the channels in their licensed spectrum block in at least one location, within three years of initial license grant; and coverage to two-thirds of the geographic area's population within five years. Incumbent licensees that chose not to successfully bid for a geographic license could retain their site-based licenses, but would not receive the added flexibility and particular rights held by the geographic licensee. 6. When the Commission adopted the 800 MHz SMR rules, it also eliminated SMR licensees' eligibility for extended implementation authority, and concluded that the termination date of all extended implementation authorizations previously granted to 800 MHz SMR incumbents should be accelerated. The Commission also concluded that incumbents should be required to rejustify the need for extended time to construct their facilities, and that incumbents that rejustified their extended implementation authority would be afforded a construction period of the shorter of two years or the remainder of their current extended implementation period, unless the incumbent demonstrated that it needed more than two years. The Commission was concerned that allowing licensees to retain extended implementation authority for up to five years after the adoption of geographic area licensing would impinge upon the construction requirements imposed upon geographic area licensees, because geographic licensees were estopped not only from directly utilizing encumbered but unconstructed channels, but also from acquiring them from the holder of the authorization due to the Commission's general prohibition against the transfer of unconstructed facilities. In addition, licensees and commenters contended that extended implementation grants had resulted in spectrum warehousing. On May 20, 1997, the Bureau, pursuant to authority delegated by the Commission, concluded that Southern had justified a two-year (but not longer) continuation of its extended implementation authority, to May 20, 1999. Southern filed an application for review of this decision, which remains pending. 7. The 800 MHz SMR rules were adopted as part of the implementation of Section 309(j)(2) of the Communications Act of 1934 (Act), which then provided that mutually exclusive applications for initial licenses or construction permits were auctionable if the principal use of the spectrum was for subscriber-based services, and competitive bidding would promote the Act's expressed objectives. The Commission determined pursuant to this statutory provision that SMR channels were auctionable, but Business and I/LT channels were not. The auction for the upper 200 800 MHz SMR channels, which were divided into three blocks (a 120-channel block, a 60-channel block, and a 20-channel block) in each Economic Area (EA), closed on December 8, 1997. Southern submitted the high bid for the smallest block in seven of the twenty-two EAs wholly or partly within its service area. Southern received seven EA license grants on March 10, 1998. 8. After the 800 MHz SMR rules were adopted, the Balanced Budget Act of 1997 (Balanced Budget Act) extended and expanded the Commission's competitive bidding authority by amending Section 309(j) to mandate that the Commission use competitive bidding to resolve all mutually exclusive applications for initial licenses or construction permits, with certain limited exceptions. As a result, we noted in the Public Notice in this proceeding, the Balanced Budget Act raises the issue of whether competitive bidding and geographic area licensing are appropriate for mutually exclusive Business and I/LT channels. The Commission will soon commence a rule making proceeding to implement the Balanced Budget Act. At this time, the impact of this upcoming rule making on the future licensing rules for mutually exclusive applications for Business and I/LT channels is unclear. III. DISCUSSION 9. Section 90.629 of the Commission's Rules provides that an 800 MHz SMR operator is entitled at most to the two-year extended implementation period that Southern received in 1997. Southern requests that we waive that rule, and extend the implementation period for its Business and I/LT channels for the shorter of five years or until the Commission makes those frequencies available for auction so that it may bid on the geographic license areas that correspond to its current license areas. To obtain a waiver of the Commission's Part 90 rules, a petitioner must demonstrate that its circumstances are unique, and that there is no reasonable alternative solution within the existing rules. Further, a waiver of the Commission's Rules is, in general, appropriate only if the waiver request serves the public interest. We find that Southern has met this burden in part, warranting grant of a waiver of Section 90.629 of the Commission's Rules, but not for the full period requested. Our basis for this determination is set forth below. 10. Unique Circumstances. Southern argues that its circumstances are unique because no other 800 MHz SMR system licensed on a site-by-site basis has such a large footprint, and thus is so burdened by the site-based construction requirement. The Personal Communications Industry Association (PCIA), a trade association representing the interests of commercial mobile radio service and private mobile radio service users and businesses, and Forest Industries Telecommunications (FIT), an organization of land mobile radio users in the forest products industry, argue that Southern is indistinguishable from all the other SMR operators that had to rejustify their extended implementation periods, none of whom received more time than Southern to construct their systems. We, however, believe that the provision of service over an unusually large area to a substantial number of public safety users that rely on the system to meet their growing communications needs can be a unique circumstance. The Commission strives to avoid unnecessary disruption of critical state, federal, and local governmental public safety functions, and has repeatedly given special recognition to the protection of services that are integral to public safety needs. 11. Lack of Reasonable Alternatives. Southern argues that it has no reasonable solution within the existing rules. Small Business in Telecommunications (SBT), an association of small businesses trading throughout the telecommunications marketplace, maintains that, given Southern's financial resources, Southern had the alternative of bidding more aggressively in the recent auction of 800 MHz channels, but simply chose not to compete with Nextel Communications, Inc. (Nextel). Southern states that the auction of the upper 200 channels "offered virtually no opportunity for competitors to acquire significant amounts of new spectrum" because Nextel's incumbent status discouraged others from bidding for the encumbered spectrum. With respect to this matter, we conclude that what Southern might have done in a past auction does not constitute a current alternative. 12. FIT, PCIA, and SBT argue that Southern can construct its I/LT and Business channels within the current implementation period. SBT contends that, under Commission precedent, Southern's assertion that "this immediate expenditure would not be rational from a business perspective" because the demand in rural areas does not yet merit a complete build-out does not make this alternative unreasonable. As an initial matter, we note that the cited cases deal with the question of whether the construction delay was beyond the licensee's control, warranting an extension pursuant to Section 319(b) of the Act, while the issue at hand is whether there is no reasonable alternative, warranting a waiver pursuant to Section 90.151 of the Commission's Rules. Moreover, as discussed above, there are three planned or pending proceedings that may ultimately result in Southern's current time-based construction requirement being modified. Thus, we find that Southern has no reasonable alternative within the existing rules to an extension of its implementation period. 13. Public Interest. Comments were received from a number of Southern's SMR subscribers, urging us to grant the Waiver Request so that Southern may continue to meet their communications needs. Many of Southern's subscribers are public safety agencies that have determined that they can best and most economically meet their communications needs by using Southern's wide-area, digital radio network, rather than each constructing their own system. Southern states that its system is well-suited for public safety communications, because, in order to meet the internal communications needs of Southern's operating companies, the system is designed to provide uninterrupted service even in the wake of natural disasters. In addition, Southern's system provides interoperability among participating agencies, which the Commission has recognized as one of the most important public safety communications needs. We conclude that the public interest would be served by a waiver that promotes reliable, state-of-the-art wide-area public safety communications and promotes interoperability. 14. We also note that Southern's system serves rural areas, where wireless communications are particularly important due to the distances that must be covered and the relative scarceness of wireline communications facilities. Southern states, however, that without an extension of its implementation period, economic realities will compel it to concentrate on constructing channels in urban areas, where there is higher demand, and to relinquish unbuilt channels in rural areas, which will leave Southern unable to meet rural needs when demand grows in those areas. Nor does it appear that any other SMR operator will immediately meet such needs, as we previously have noted that 800 MHz digital SMR providers are unlikely to begin serving small cities and rural areas in the near future. Thus, the public interest would be served by a waiver that promotes the expeditious delivery of service to rural areas. 15. Several commenters argue in a conclusory manner that unassigned 800 MHz Business and I/LT spectrum is scarce, so the public interest requires that Southern's Waiver Request be denied and any channels that it fails to construct be made available to Business and I/LT eligibles. We agree with Southern's reply that there is no evidence in the record of any Business or I/LT eligibles in Southern's service area being unable to acquire spectrum. 16. After consideration of the record in this proceeding we conclude that the public interest will be served by granting Southern a limited waiver of the Commission's Rules. We find that the public interest would be served by preserving Southern's ability to meet the communications needs of a substantial number of public safety users, particularly in rural areas, and that it would not be served by needlessly disrupting critical public safety communications now or in the immediate future. While our current rules do contemplate the return of unused Business and I/LT channels to their pools for reassignment, rather than allow them to be retained for SMR service, the record before us suggests that the public interest would not be best served by such a decision. The record before us contains primarily conclusory statements about the spectrum needs of particular categories of users. In contrast, the upcoming proceeding to implement the Balanced Budget Act will examine the future licensing of these pools and provide commenters with the opportunity to present fact-based proposals for meeting the spectrum needs of the Business and I/LT community. Therefore, we will extend Southern's implementation period until final rules regarding licensing of the Industrial/Land Transportation frequencies in the context of the Commission's rulemaking proceeding to implement the Balanced Budget Act take effect, or until the Commission takes action pursuant to Southern's other related pending requests. In this connection, we conclude that those stations constructed and placed in operation by the end of the waiver period may be retained by Southern on a site-by-site license basis, but licenses for channels that remain unconstructed at that time will cancel automatically. 17. Confidentiality Request. Southern requested that the supplemental information it provided be withheld from public inspection pursuant to Sections 0.457(d) and 0.459 of the Commission's Rules. The materials provide information about system use and the construction status of each frequency and call sign within Southern's system, organized by EA. A request that information be withheld from public inspection shall be granted when the applicant presents a case for non-disclosure consistent with the Freedom of Information Act (FOIA). What is commonly known as "Exemption 4" to the FOIA allows for the withholding of "trade secrets and commercial or financial information obtained from a person and privileged or confidential." "Commercial" is broader than information regarding basic commercial operations, such as sales and profits; it includes information about work performed for the purpose of conducting a business's commercial operations. Because Southern's list of sites and construction information sufficiently relates to its commercial activities in the communications field, we conclude that it satisfies this portion of the test. Information provided voluntarily satisfies the "confidential or privileged" prong of Exemption 4 "if it is of a kind that the provider would not customarily release to the public." Because other businesses could use this comprehensive data to Southern's competitive disadvantage, we accept Southern's claims that it is market sensitive data, and we conclude that this is information that Southern would not customarily release to the public. Accordingly, we will withhold the supplemental information from public inspection. IV. CONCLUSION 18. We find that Southern has met the burden for limited waiver of Section 90.629 of our Rules. This Memorandum Opinion and Order grants Southern's request for waiver to extend the implementation period for its Business and I/LT channels, but only to the extent discussed herein. The action taken herein serves the public interest in that it will provide improved opportunities for interoperable communications by the public safety community, and encourage the provision of SMR service to rural areas that might otherwise go unserved. V. ORDERING CLAUSES 19. IT IS ORDERED that, pursuant to Sections 4(i) and 303(r) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i) and 303(r), and Section 90.151 of the Commission's Rules, 47 C.F.R.  90.151, Southern Company's Request for Waiver of Section 90.629 of the Commission's Rules to extend Southern's implementation period IS GRANTED IN PART and DENIED IN PART, to the extent indicated herein. 20. This action is taken under delegated authority pursuant to Sections 0.131 and 0.331 of the Commission's Rules, 47 C.F.R.  0.131, 0.331. 21. For further information, contact Scot Stone, Public Safety and Private Wireless Division, at (202) 418-0680. FEDERAL COMMUNICATIONS COMMISSION Daniel B. Phythyon Chief, Wireless Telecommunications Bureau