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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Amendment of the Commission's Rules to ) GN Docket No. 96-228 Establish Part 27, the Wireless ) Communications Service ("WCS") ) REPORT AND ORDER Adopted: February 19, 1997 Released: February 19, 1997 By the Commission: Commissioners Ness and Chong issuing separate statements. TABLE OF CONTENTS Paragraph I. INTRODUCTION AND EXECUTIVE SUMMARY1 II. BACKGROUND. . . . . . . . . . . 10 A. Appropriations Act10 B. Existing Spectrum Allocations and Use11 1. International11 2. Domestic12 III. DISCUSSION. . . . . . . . . . . 13 A. Licensing Plan for WCS13 1. Permitted Services13 2. Spectrum for Each License37 3. Licensed Service Areas47 B. Use of Competitive Bidding61 C. Consideration of Public Safety Needs66 D. Service and Technical Rules80 1. Eligibility80 2. CMRS Spectrum Cap84 3. Disaggregation and Partitioning92 4. License Term104 5. Performance Requirements108 6. Regulatory Status116 7. Out-of-Band Emission Limits123 8. International Coordination145 9. RF Safety151 10 WCS Interference to MDS/ITFS155 11. Field Strength Between Service Areas158 12. Additional Technical Issues160 E. Auction Procedures162 1. Competitive Bidding Design163 2. Bidding Procedures167 3. Procedural and Payment Issues171 4. Anti-Collusion Rules180 5. Treatment of Designated Entities181 IV. PROCEDURAL MATTERS. . . . . . .202 List of Parties Filing Comments and Reply Comments . . Appendix A Final Rules. . . . . . . . . . . . . . . . . . . . . . Appendix B Major Economic Areas (MEAs) and Their Constituent Economic Areas (EAs)Appendix C Regional Economic Area Groupings (REAGs) and Their Constituent MEAsAppendix D I. INTRODUCTION AND EXECUTIVE SUMMARY 1. In this Report and Order, we fulfill the Congressional mandate expressed in Section 3001 of the Omnibus Consolidated Appropriations Act, 1997 ("Appropriations Act") to reallocate and assign the use of the frequencies at 2305-2320 and 2345-2360 megahertz. We consider the proposals set forth in the Notice of Proposed Rule Making ("NPRM") in GN Docket No. 96-228 concerning amendment of the Commission's rules to establish the Wireless Communications Service ("WCS"). We received 55 comments and 38 reply comments in this proceeding. Upon consideration of the extensive record in this proceeding, we take the following actions to implement the directives of the Appropriations Act. 2. We reallocate 2305-2320 and 2345-2360 MHz (2.3 GHz band) and give WCS licensees flexibility to provide wireless services that are consistent with the allocation table and associated international agreements. Any service contained in Part 2 of the Commission's Rules for the subject band will be permitted within a licensee's assigned spectrum and geographic area(s). 3. However, because the reallocated WCS spectrum is located on both sides of the spectrum allocated for the satellite Digital Audio Radio Service ("satellite DARS"), we believe that there is a substantial risk that the out-of-band emission limits we are adopting -- which we believe are necessary to protect prospective satellite DARS licensees from interference from WCS operations -- will, at least in the foreseeable future, make mobile operations in the WCS spectrum technologically infeasible. We will require that all emissions from fixed transmitters be attenuated below the maximum spectral power density (p) by at least 80 + 10 log (p) dBW, and that all emissions from mobile transmitters be attenuated below p by at least 110 + 10 log (p) dBW within the 2320-2345 MHz band. In addition, we will require certain WCS transmitters and devices to routinely perform environmental evaluations with respect to our RF safety limits. 4. We will award two 10 MHz WCS licenses for each of 52 Major Economic Areas (MEAs), and two 5 MHz WCS license for each of 12 Regional Economic Area Groupings (REAGs). All WCS licenses will be awarded by means of a simultaneous, multiple-round, electronic auction. In addition, with respect to public safety communications needs, we note here our expectation that additional spectrum will be made available for public safety use as a result of other proceedings. We also note that new sources of funding for public safety are needed, and believe that approaches such as that taken in recent legislation introduced in Congress would substantially aid public safety agencies. 5. We impose no eligibility restrictions for WCS spectrum, with the exception of the foreign ownership restrictions set forth in Section 310 of the Communications Act, to the extent the restrictions are applicable to the particular service in question. We will not consider WCS spectrum holdings for purposes of the CMRS spectrum cap. Consistent with the Commission's recent decision concerning partitioning and disaggregation by CMRS licensees, we will permit WCS licensees to partition their service areas into smaller geographic service areas and to disaggregate their spectrum into smaller blocks without limitation. 6. We will grant WCS licenses for a term of 10 years; and, they will carry a renewal expectancy similar to that afforded PCS and cellular licensees. Each WCS licensee will be required to provide substantial service in its service area within 10 years. 7. Winning bidders for WCS licenses will designate in their long-form applications the type(s) of WCS service(s) they will provide. Their regulatory treatment will depend on these designations. WCS licensees that provide satellite Digital Audio Radio Service ("satellite DARS") services will be governed by the rules to be adopted in IB Docket No. 95-91. 8. With some exceptions, we adopt the competitive bidding rules set forth in Part 1 of the Commission's Rules for the WCS auction. We will make available on all WCS licenses bidding credits of 25 percent and 35 percent for bidders that qualify as small businesses and very small businesses, respectively, using the revenue standards employed in broadband PCS. We also adopt unjust enrichment restrictions on the transfer of licenses acquired by small businesses similar to those set forth in 47 C.F.R.  24.839(d). 9. The Commission makes no representations or warranties about the use of this spectrum for particular services. Applicants should be aware that an FCC auction represents an opportunity to become an FCC licensee in this service, subject to certain conditions and regulations. An FCC auction does not constitute an endorsement by the FCC of any particular services, technologies or products, nor does an FCC license constitute a guarantee of business success. Applicants should perform their individual due diligence before proceeding as they would with any new business venture. II. BACKGROUND A. Appropriations Act 10. The Appropriations Act directed the Commission to "reallocate the use of frequencies at 2305-2320 megahertz and 2345-2360 megahertz to wireless services that are consistent with international agreements concerning spectrum allocations," to "assign the use of such frequencies by competitive bidding pursuant to Section 309(j) of the Communications Act of 1934." In making these bands of frequencies available for competitive bidding, we were directed to "seek to promote the most efficient use of the spectrum" and "take into account the needs of public safety radio services." The Appropriations Act also requires the Commission to commence the competitive bidding for the assignment of the frequencies made available by this action no later than April 15, 1997, and to conduct the competitive bidding for these frequencies in a manner that ensures that all proceeds of the bidding are deposited in accordance with Section 309(j)(8) of the Communications Act not later than September 30, 1997. In order to make this spectrum available for licensing quickly, the Appropriations Act grants the Commission permission to use expedited administrative procedures. Specifically, the Appropriations Act states that rules governing the frequencies made available by this proceeding will be effective immediately upon publication in the Federal Register. The Appropriations Act further provides that 5 U.S.C. Chapter 6 (regulatory flexibility analysis requirements) and 44 U.S.C.  3507 and 3512 (information collection requirements) will not apply to the rules and competitive bidding procedures governing the frequencies at issue here. Further, the statute provides that the Commission may grant a license application for these frequencies no earlier than seven days following issuance of a public notice of the acceptance for filing of the application or major amendment thereto, despite the 30-day public notice provisions of 47 U.S.C.  309(b). Finally, the statute provides that the Commission may specify a period that is not less than five days following issuance of such public notice for the filing of petitions to deny a license application for these frequencies, despite the 30-day public notice provisions of 47 U.S.C.  309(d)(1). B. Existing Spectrum Allocations and Use 1. International 11. We note, as a general matter, that the member nations of the International Telecommunication Union ("ITU") have adopted radio service allocations that apply to use of the frequencies under consideration in this proceeding in the United States. The 2300-2450 MHz band is allocated to fixed, mobile, and radiolocation services on a primary basis. In addition, the 2310-2360 MHz band is allocated to broadcasting-satellite service (sound) and complementary terrestrial sound broadcasting service on a primary basis in the United States, with this use being limited to digital audio broadcasting. The 2300-2450 MHz band is also allocated to the Amateur Radio Service on a secondary basis. 2. Domestic 12. In the United States, the 2300-2310 MHz band was made available for exclusive non-Government use as of August 10, 1995. Currently, the only non-Government use of this band is by the Amateur Radio Service, which is on a secondary basis. The 2310-2360 MHz band was recently reallocated to non-Government broadcasting-satellite service on a primary basis. The only broadcasting-satellite service permitted in the United States under this allocation is digital audio broadcasting delivered by satellite, commonly known as satellite DARS. In the action allocating this spectrum to satellite DARS, we stated that it would be necessary to accommodate the aeronautical telemetry services now operating in the 2310-2360 MHz band in the 2360-2390 MHz band. The aeronautical telemetry community supported this re-accommodation. Continued use of the 2310-2360 MHz band by aeronautical telemetry and radiolocation users is on a secondary basis. The 2320-2345 MHz band will continue to be available for the Government and non-Government mobile service and Government radiolocation service on a primary basis until such time as a broadcasting-satellite (sound) service has been brought into use in such a manner as to affect or be affected by the mobile and radiolocation services. III. DISCUSSION A. Licensing Plan for WCS 1. Permitted Services 13. Background. In the NPRM, we concluded that the Appropriations Act's reallocation directive means that the Commission may allocate the 2305-2320 and 2345-2360 MHz bands to any or all radio services contained in the International Table of Frequency Allocations applicable to the United States. We proposed to allocate this spectrum to the fixed, mobile, and radiolocation services on a primary basis, which are all the services authorized on a primary basis for these entire bands in the International Table. We also proposed to retain the current primary audio broadcasting-satellite allocation that exists in 45 of the 50 MHz of these bands (2310-2320 and 2345-2360 MHz). We did not propose to change the Amateur Radio Service secondary allocation of the 2300-2310 MHz band, nor the authorization for the 2310-2360 MHz band to be used on a secondary basis by aeronautical telemetry operations. 14. We noted that in our Satellite DARS NPRM we had requested comment on whether we should delay issuing licenses for DARS in the 2310-2320 MHz portion of the DARS allocated spectrum due to the number and type of Canadian fixed service facilities in that band. We also noted that in February 1996, we had informed DARS applicants that previously unknown additional Canadian operations existed in the 2310-2360 MHz band that particularly impacted potential use of the 2345-2360 MHz portion of the band for DARS. Accordingly, we requested comment on the feasibility of satellite DARS in parts of the 2305-2320 and 2345-2360 MHz bands. 15. Comments. We received extensive comment on permitting WCS licensees, subject to proposed specific technical rules, to provide any of the fixed, mobile, radiolocation, or satellite audio services permitted by the International Table. Those commenters who supported this generally argue that: (1) a market-based allocation will enlarge the universe of potential bidders and permit the spectrum to be valued on the basis of the various services; (2) limiting the scope of services that could be provided in the WCS spectrum might unduly limit the number and type of services that could be provided; (3) such an approach is consistent with our treatment of CMRS providers; and (4) there is no compelling record support for any single use. 16. Several of the commenters supporting our proposal also contend that an allocation that permits flexible domestic use of this spectrum will help to ensure that new technologies are developed and deployed. For example, Bellcore states that it is technologically and economically feasible to design and deploy on this band a wireless system tailored to provide portable Internet access over wide areas at data rates comparable to ISDN-type connection. Because the technical characteristics of such a system would differ significantly from those for some other systems that might utilize this band (e.g., PCS), Bellcore urges the Commission to neither restrict the services provided in this band nor dictate technical standards for operation beyond those required to avoid interference and protect the public health. Similarly, Vanguard contends that because the Commission has proposed not to specify any particular use for this spectrum, WCS licensees should be permitted to provide any technically feasible service, rather than only those proposed services enumerated in the NPRM. 17. A majority of commenters oppose our flexible use proposal. These commenters generally argue that: (1) unrestricted spectrum flexibility will harm the public interest because it would restrict competition, discourage innovation, and delay the provision of new services; (2) lack of concrete guidance from the Commission as to the service offerings permitted on WCS spectrum will inhibit manufacturers' production of equipment necessary for new services and adversely affect the associated costs and arrival of such equipment to the marketplace; (3) flexible use of this spectrum cuts against the growing need for worldwide standardized equipment allocations and would hinder manufacturers' efforts to look to the international marketplace for added demand for WCS-appropriate devices; (4) uncertainty over the types of services to be offered by adjacent WCS licensees will adversely affect development of efficient spectrum utilization plans and make coordination between adjacent markets costly and complex, which ultimately may require extensive Commission adjudication where adjacent systems are incompatible; and (5) the Commission must allocate the 2305-2320 MHz and 2345-2360 MHz bands only to services that will not impede the implementation of satellite DARS or impair its usefulness or quality. 18. In addition, six commenters contend that our proposal to permit WCS licensees to provide any fixed, mobile, radiolocation services, or satellite DARS is contrary to the Commission's statutory mandate, under Section 303 of the Communications Act, to allocate frequencies in the public interest. These commenters argue that by permitting winning bidders to determine which type of service will be offered using the WCS spectrum, the Commission has impermissibly delegated to third parties the task of spectrum allocation. 19. In this connection, many commenters recommend that the Commission specify particular services for the WCS spectrum. Lucent cites the General Wireless Communications Service ("GWCS") as an example of a failed past attempt by the Commission to rely on the market to specify the initial use of a spectrum band, contending that, lacking a service definition, the development of GWCS has been neither rapid nor efficient. CTIA asserts that the Commission should, at a minimum, provide a preliminary allocation for the band and permit flexibility after use of the band develops. CTIA states that, subsequent to adequate initial allocation, flexible use has the benefits of minimizing government intervention in a fully competitive market and promoting the objectives of Section 309(j) of the Communications Act. AirTouch states that the Commission should divide the WCS spectrum into bands and assign an exclusive use to each band. 20. Some commenters argue that the WCS spectrum should be allocated for "specialized services," such as wireless cable and wireless and mobile data, including Internet access and e- mail (both for commercial use and for schools, libraries, and hospitals), for which there is developing consumer demand but little access to sufficient spectrum. For example, PCIA, TIA and USIPA recommend that the Commission allocate the WCS spectrum for interactive, high speed, broadband data services, such as wireless Internet access. Similarly, CTIA suggests designating a portion of the WCS spectrum to provide schools and libraries with access to a wireless information network. BellSouth states that such an approach would increase the overall competitive value and availability of wireless cable services as an alternative to incumbent wireline cable operations (the spectrum already allocated for this purpose being limited for technological reasons). 21. Similarly, ADC recommends allocating the 2345-2360 MHz band solely for satellite DARS, and the 2305-2320 MHz band for fixed terrestrial use. Specifically, ADC believes that allocating the 2345-2360 MHz band for satellite DARS will ensure the realization of DARS. ADC also states that preclusion of DARS from the 2305-2320 MHz band will avoid concerns about potential interference with Canadian terrestrial facilities. With regard to the 2305-2320 MHz band, ADC asserts that this portion of the spectrum would provide a necessary and effective wireless return path for interactive services provided by over-the-air video service providers such as broadcast and wireless cable system operators. While ADC does not propose that the 2305-2320 MHz band be restricted to those applications, it does advocate that the allocation for the band be only for fixed terrestrial use. 22. Some commenters argue that the WCS spectrum should be used only to offer new services. For example, 21st Century states that the Commission should not permit fixed and mobile services to be provided using the WCS spectrum because sufficient spectrum already exists for the provision of these services. Rather, 21st Century believes that WCS spectrum should be used to offer "new" services, in particular radiolocation services and/or satellite DARS. Primosphere recommends that the Commission seek additional comment on the suggestions for services for which there may be a public need, including interactive video, wireless fixed local loop, wireless Internet access, high-speed broadband data, and wireless cable. 23. Other commenters argue that WCS licensees should not be permitted to provide CMRS, contending that use of WCS spectrum to provide CMRS would be unfair to existing CMRS licensees because it will result in the devaluation of their licenses when they need additional capital to complete construction of their systems, resulting in a shortage of operating capital and added difficulties in obtaining financing. One commenter argues that these difficulties are more likely given that many current PCS licensees (particularly small businesses) are seen as having overpaid for their PCS licenses. Similarly, some commenters argue that permitting flexible use of spectrum licensed on a nationwide basis would put existing CMRS providers at a competitive disadvantage. Two commenters assert that the Federal Government previously has determined CMRS to already have been allocated sufficient spectrum and that, accordingly, no reasoned basis exists for making the 2.3 GHz band available to CMRS. PCIA believes that permitting WCS licensees to offer CMRS represents an inefficient use of this spectrum. 24. Finally, Primosphere and DSBC oppose our proposal to permit aeronautical telemetry operations to continue in the 2310-2320 and 2345-2360 MHz bands on a secondary basis. They argue that spectrum sharing between satellite DARS and aeronautical telemetry is not technically feasible. AFTRCC, on the other hand, states that there is no basis for precluding secondary flight test use of the 2310-2320 and 2345-2360 MHz bands. In addition, ARRL supports our proposal for continued secondary amateur use of the 2305-2310 MHz band, but suggests that the Commission afford amateurs "the interference protection and stability afforded by a primary allocation at 2300-2305 MHz." 25. Decision. We conclude that under the totality of circumstances presented, the 2310- 2320 and 2345-2360 MHz bands will be allocated on a primary basis for fixed, mobile, radiolocation, and broadcasting-satellite (sound) services without further designations. The 2305-2310 MHz band will be allocated on a primary basis for fixed, mobile except aeronautical mobile, and radiolocation services. WCS licensees themselves will determine the specific services they will provide within their assigned spectrum and geographic areas. The services that can be provided, however, will be subject to specific technical rules we adopt infra to prevent interference to other services. We emphasize that with the current state of technology there is a substantial risk that these rules will severely limit, if not preclude, most mobile and mobile radiolocation uses. Fixed uses will be less severely affected, but still will require equipment that will meet technical standards higher than those used for similar purposes on comparable bands, and therefore may be more costly. 26. We believe that in this instance a flexible use allocation serves the public interest. Permitting a broad range of services to be provided on this spectrum will permit the development and deployment of new telecommunications services and products to consumers. Moreover,WCS licensees will not be constrained to a single use of this spectrum and, therefore, may offer a mix of services and technologies to their customers. 27. We recognize the concerns raised by commenters about the general application of flexible allocations, and it is our intent to address those concerns fully in future proceedings. In this regard, we emphasize that our decision in this instance to adopt a broadly defined service for this spectrum should not be interpreted as a finding on the merits of flexibility as general allocation policy or prejudging the merits of flexibility in any other proceeding before us. Rather, our decision here is based on the totality of the circumstances and facts particular to this proceeding, not the least of which is the short time mandated by Congress to bring this spectrum to auction. Importantly, in this particular instance the record does not convincingly demonstrate how this spectrum should be distributed among particular uses in a manner that would provide maximum benefit to the public. Specific services advocated by commenters span a wide range of potential uses, including interactive, high-speed, broadband data services, such as wireless Internet access; return links for interactive cable and broadcasting service; mobile data; satellite DARS; fixed terrestrial use; new and innovative services; radiolocation; educational applications; and wireless local loop. While individual commenters advocate specific allocations for one or more of these uses, we have no clear basis in the current record to prefer some uses over others. Thus, limiting the use as some have suggested would risk precluding potentially beneficial services. 28. We find that allocating this spectrum for fixed, mobile, radiolocation, and audio broadcasting-satellite services is consistent with the international agreements governing this spectrum, the Appropriations Act, the Communications Act, and Commission precedent. We note that the Appropriations Act specifically directs the Commission to reallocate the WCS frequencies to "wireless services that are consistent with international agreements concerning spectrum allocations." Nothing in this provision or its legislative history restricts the Commission's authority to assign or allocate this spectrum to more than one permissible use. Additionally, our allocation to more than one service is consistent with the Commission's obligations under the Communications Act. Section 303 of the Communications Act does not restrict the Commission's discretion to prescribe the nature of the service to be rendered over radio frequencies or its authority to allocate frequencies to the various classes of stations or assign spectrum to stations for more than one permissible use. With respect to allocation decisions, the courts have accorded "substantial deference" to Commission determinations. 29. Commission precedent also supports the permissibility of allocating spectrum in a manner that allows for a broad range of uses. We noted in the NPRM that the Commission took this approach in establishing GWCS in August of 1995, where we concluded that authorizing a wide variety of services bounded only by international allocations comported with our statutory authority and served the public interest by fostering the provision of a mix of services. Because GWCS licenses have yet to be auctioned, the evidence regarding the benefits of having allocated that spectrum to all uses permitted by our international obligations is inconclusive. 30. We continue to believe that such broad allocations are permitted under the Communications Act, and we note that we also recently permitted CMRS licensees to provide fixed and mobile services. The action we take here is consistent with this precedent. We note also that our service designation decision is not so broad as to allow use of the WCS frequencies for any purpose whatsoever. For example, the international allocation for part of this spectrum is for audio broadcast satellite services, and therefore satellite services will be limited to this type of satellite services. 31. We disagree specifically with those commenters who assert that allocating these frequencies for fixed, mobile, radiolocation and audio broadcasting-satellite services is an impermissible allocation by auction or otherwise inconsistent with Section 309(j). The allocation decision we make herein is based on our finding that under the circumstances presented, including the statutory deadline and the lack of a record that supports a specific allocation, this allocation to fixed, mobile, radiolocation, and audio broadcasting-satellite services comports with the public interest and with our statutory authority. Thus, our decision to allocate this spectrum in this manner is unrelated to our decision to award WCS licenses through competitive bidding. 32. In addition, we disagree with those commenters' arguments that by adopting our proposal we are impermissibly delegating our authority to allocate spectrum and set technical rules to other parties. The allocation we make here is not entirely open-ended, and auction winners will be subject to strict technical rules that are necessary to prevent interference to other services and which also will likely limit the actual services they may be able to offer. As discussed infra, these technical rules are necessary to prevent interference. Therefore, we have not delegated to private parties our responsibility to allocate spectrum and adopt appropriate technical standards. 33. We also agree with commenters such as Lucent, Motorola, Nortel and CTIA who argue that economies of scale in equipment supply are important and recognize that our decision to adopt a flexible allocation may make achieving those economies of scale more difficult. However, we have taken several steps that we hope will assist licensees in achieving economies of scale. For example, we have established relatively large geographic service areas and spectrum block sizes. We also are adopting licensing and auction rules designed to facilitate geographic area and spectrum aggregations that may foster economies of scale and, in developing their bidding and aggregation strategies, bidders can consider the benefits of such economies. We believe that our allocation and service rules adopted herein comply with all legal requirements and, considering the totality of the circumstances, serve the public interest. 34. We do not believe that the public interest will be served by prohibiting use of this spectrum for CMRS. It has been our consistent policy to actively seek to increase competition in telecommunications markets, and our decision here is consistent with that policy. Indeed, in the Omnibus Budget Reconciliation Act of 1993, Congress ordered the transfer of a large amount of government spectrum to our jurisdiction for nongovernmental use. CMRS licensees have no reasonable basis to expect that we would limit the possibility of further entry by withholding spectrum or by unnecessarily restricting the permissible uses of newly allocated spectrum. However, we note that, given the out-of-band emission limits we adopt for WCS, technology will likely severely limit, if not preclude, most mobile services on this spectrum, at least in the near term. 35. Some commenters express concern with difficulties in controlling interference. We are responding to this concern by setting specific limits on field strength at the geographic boundaries between licensees and on emissions outside the assigned spectrum blocks. While we recognize that different system designs have different sensitivities to interference and cause different types and degrees of interference, we believe that these limits provide a reasonable degree of predictability as to the magnitude of interfering signals one can expect from adjacent areas and spectrum blocks. However, we recognize that these out-of-band and out-of-area power limits do not by themselves ensure interference-free operation. They control primary factors that determine the amount of interference a licensee can expect from neighboring areas and blocks, but there are many other factors that affect interference that they do not control and that are not under the receiver owner's direct control. For example, the level of interference caused to a licensee's receivers from transmitters in an adjacent spectrum block may also depend on the number of such transmitters, their location relative to the receivers, their antenna directivity and polarization, their duty cycle, and other factors. Since these factors are not regulated by the Commission, they create uncertainty about the amount of interference a licensee may receive. Licensees can reduce this uncertainty by coordinating with their neighbors, and we encourage them to do so. They also can reduce the risk of interference by properly designing and engineering their receiving systems and by using technologies that reduce their receivers' susceptibility to unwanted signals. Also, bidders can reduce their exposure to interfering signals from neighboring spectrum blocks or areas by aggregating adjoining licenses in the auction or through post-auction transactions. But again we emphasize that interference-free operation is not assured by our limits. Each WCS licensee must ultimately assume responsibility for protecting its own receiving system from interference from transmitters in adjoining blocks and areas that meet our limits, and applicants should understand this before they bid for these licenses. 36. Finally, in the NPRM, we proposed to permit amateurs to continue to use the 2305- 2310 MHz band on a secondary basis. We also proposed to permit continued flight test and vehicle launch use of the 2310-2320 and 2345-2360 MHz bands on a secondary basis. We are adopting these proposals. The effect of this action is that amateurs and aeronautical telemetry operations will be able to continue to use these bands so long as these operations do not interfere with WCS service. In addition, we update and clarify the frequency sharing requirements for amateur use of the 2300-2310 MHz and adjacent bands. We also clarify that footnotes US276 and US339 permit the use of various frequencies for telemetering and associated telecommand operations of launch vehicles "on a co-equal basis by Government and non-Government stations." With respect to Primosphere's request that all flight test operations be precluded from the WCS bands, we find no basis for precluding such operations on a secondary basis. We make clear that if secondary flight test operations cause harmful interference to WCS operations, they must immediately either correct the problem or cease operations. If such operations prove to be a problem, however, we may re-evaluate this issue in the future. 2. Spectrum for Each License 37. Background. In the NPRM, we requested comment on the appropriate amount of spectrum to be provided for each WCS license at 2.3 GHz. We specifically requested comment on whether 5, 10, 15 or 30 MHz is the most suitable amount. We noted that 5 MHz bandwidths would be sufficient for paging, radiolocation, dispatch, or point-to-point backbone operations. We also observed that larger bandwidths, such as 10 to 15 MHz, would allow more direct competition with existing fixed and mobile service providers and may also better support some multi-channel satellite DARS. We also asked for comment on whether a single 30 MHz license would offer the most effective approach for providing new two-way fixed or point-to-multipoint uses, such as interconnection with the Internet and other digital network services. Finally, we requested comment on what size spectrum block could best support, in part or fully, the provision of fixed local loop services. 38. We also sought comment on whether the WCS spectrum should be assigned on a paired or unpaired basis. Alternatively, we requested comment on an approach where spectrum bandwidths or pairing of the spectrum are determined through the competitive bidding process. We noted that the 30 MHz of spectrum could be divided into 5 MHz blocks and the amount of spectrum and the location of the spectrum (i.e., contiguous or paired) for each WCS licensee could be determined through the auction process. We further invited commenting parties to suggest additional alternatives for both the amount of spectrum and the size of service areas for WCS licensees. We noted that the Appropriations Act requires that we conclude initial licensing of this spectrum and the collection of all bidding proceeds no later than September 30, 1997. We stated our belief that licensing the WCS spectrum for service to large areas, with relatively few licenses to be awarded, would speed the WCS licensing process and the collection of bidding proceeds, consistent with the requirements of the Appropriations Act. Whatever initial licensing approach is chosen for WCS, we proposed to permit spectrum and service area aggregation through the auction process, e.g., we would permit parties to bid for more than one license in each geographic area and for multiple areas. 39. Comments. We received extensive comments addressing how this spectrum should be licensed for WCS services. The commenting parties suggest a broad range of options for licensing WCS, from a single 30 MHz license to licenses as small as 1 MHz. Of these options, the proposal to divide the spectrum into three 10 MHz (two 5 MHz paired) channels received a significant amount of support from the commenting parties. These commenters support a 10 MHz channeling plan because: (1) it would allow for the widest range of spectrum use; and (2) 10 MHz is the minimum amount of spectrum needed to compete effectively and provide certain types of services, such as portable Internet access. Pocket supports a 10 MHz channeling plan on the basis that small blocks of spectrum of no more than 10 MHz would be the most flexible channeling approach, permitting operators to bid for no more than the amount of spectrum they need. Some of these commenters also explicitly support use of paired channels. They contend that pairing would accommodate both the provision of two-way data services and of wireless local loop and other voice applications over WCS spectrum. In addition, PPF argues that the use of paired frequency bands generally will increase the range, reduce the cost and improve the outdoor service quality of terrestrial WCS systems. 40. A number of other commenters support licensing WCS spectrum as six 5 MHz unpaired channels. ALLTEL, for example, states that a band plan based on 5 MHz unpaired channels would facilitate the ability of entities to acquire the amount of spectrum most appropriate for their service offerings. Under a flexible use approach, DSBC contends that the best course for ensuring efficient use of WCS spectrum is to distribute the spectrum in small blocks, thereby allowing licensees maximum flexibility to determine the best use of the spectrum. Similarly, Sprint PCS/Sprint states that, to ensure that the market can effectively determine efficient usage for WCS spectrum, WCS should be licensed in 5 MHz blocks. Sprint PCS/Sprint argues that initial licensing of larger spectrum blocks would discourage service innovation and efficient utilization, and would undercut the significant strides the Commission has made in encouraging a robust, competitive CMRS industry. NABOB states that it is much easier to "cure" an underassignment of spectrum than an overassignment in the auction. Further, NABOB argues that 5 MHz channels can be aggregated to create larger frequency blocks if desired, but that the allocation of channels larger than 5 MHz will preclude many minority- owned small businesses from participating in the competitive bidding process and possibly from the provision of WCS. PrimeCo asserts that 5 MHz channels would allow a greater number of potential licensees to participate in WCS than any of the other amounts proposed in the NPRM. In this regard, PrimeCo states that, in the PCS docket, it was noted that a 5 MHz block and the use of digital technology could provide twice the capacity of current analog cellular systems. It further states that 5 MHz is more than twice the total amount of spectrum available for the entire narrowband PCS service and is equal to the amount of spectrum currently available for the entire 900 MHz SMR service. 41. Several commenters support the initial licensing of the WCS spectrum in a single 30 MHz block. APT and Markle support earmarking the WCS spectrum for a nationwide wireless data service and state that WCS licenses should either be for the entire 30 MHz of spectrum or that there should be two 15 MHz unpaired licenses, with the market determining whether they are paired or unpaired. MCI and SOSCO state that a single 30 MHz license is the minimum bandwidth capable of delivering a wide range of digital services, from "wireline" quality voice to high-speed Internet access services. MCI notes that 30 MHz would provide rough parity with the Block A, B, and C broadband PCS licensees and with cellular licensees. MCI and DSC contend that, in order to maximize the potential value of WCS for wireless services, as well as to stimulate direct competition to existing fixed and mobile services, the Commission should avoid dividing the spectrum into smaller frequency blocks. In addition, Markle argues that dividing the spectrum into small slivers would violate Section 706 of the Telecommunications Act of 1996, which requires the Commission to encourage the deployment of advanced telecommunications capabilities to all Americans, and that small spectrum blocks would improperly pose a large barrier to investment and competition. SOSCO also states that in the Gulf of Mexico, where the target population is almost entirely industrial, potential WCS licensees may decide not to make the enormous investment necessary to provide service unless there is sufficient bandwidth to provide the full array of advanced services required by the large, sophisticated businesses present in the Gulf. 42. In addition, there is limited support for various other bandplans. For example, Comcast and Vanguard recommend that the WCS spectrum be assigned in two 15 MHz blocks in order to maximize the potential services that can be offered by licensees. Four parties propose their own bandplans: (1) BellSouth -- one 3 + 3 MHz block and two 6 + 6 MHz blocks; (2) ADC -- three 5 MHz and one 15 MHz unpaired blocks; (3) Omnipoint -- two 5 MHz, two 4 MHz, two 3 MHz, two 2 MHz, and two 1 MHz unpaired blocks; and (4) Sun Microsystems -- five 1 + 1 MHz blocks and two 5 + 5 MHz blocks. 43. Finally, Motorola and ROC raise additional issues concerning channelization of the WCS spectrum. Specifically, Motorola recommends that we allocate 8 + 8 MHz of the WCS band for public safety fixed point-to-point operations, which would provide ten 800 + 800 kHz channels for use in a frequency coordinated manner. ROC requests that two 500 kHz nationwide licenses in the 2345-2360 MHz band be allocated for DARS interactive response links. 44. After the comment period in this proceeding closed, several commenters submitted proposed band plans that they argue would mitigate the effects of the out-of-band emission limits discussed in Section III.D.7, infra, required to protect satellite DARS reception in the 2320-2345 MHz band. Specifically, in its January 10, 1997 filing, Primosphere points out the unique circumstances of a satellite receive band "sandwiched" between two bands proposed for terrestrial services, including possible mobile service. Primosphere suggests that among the various technical and operational feasible means by which WCS licensees could achieve the necessary protection for satellite DARS reception is spectrum planning (such as prohibiting mobile transmissions in the 5 MHz adjacent to the satellite DARS band). Primosphere suggests that a possible frequency plan is three 10 MHz paired channels with a uniform transmit and receive separation. Lucent agrees with Primosphere that the WCS spectrum with satellite DARS in the middle of the band is unique to spectrum management and represents some extraordinary technical challenges. Lucent recommends that the WCS spectrum be initially offered as two 10 MHz paired channels (2305-2310 MHz paired with 2350-2355 MHz and 2310- 2315 MHz paired with 2355-2360 MHz) and two 5 MHz unpaired channels (2315-2320 MHz and 2345-2350 MHz). 45. Decision. We observe that the commenting parties generally support either 5 MHz unpaired channel blocks or 10 MHz paired channel blocks, with the vast majority finding that at least 10 MHz is needed to provide certain WCS services in an efficient and competitive manner. We note, however, that the potential uses of the WCS spectrum will be greatly affected by the out-of-band emission limits, discussed in Section III.D.7 infra, needed to protect satellite DARS reception in the 2320-2345 MHz band. In particular, these limits will have the greatest impact on the portion of the WCS spectrum immediately adjacent to the satellite DARS band, namely, the WCS spectrum at 2315-2320 MHz and 2345-2350 MHz. In order to account for this effect in light of the overall record of this proceeding, and to minimize its impact on WCS operations generally, we find that WCS should be licensed initially as two 10 MHz channel blocks (with 5 MHz of this spectrum from the lower band paired with 5 MHz from the upper band) plus two 5 MHz blocks (those immediately adjacent to the satellite DARS spectrum). We believe that this channelization will permit WCS licensees to offer a wide variety of services. For example, the record suggests that the 10 MHz channel blocks represent the minimum amount of spectrum needed to support certain data and wireless local loop services, including wireless Internet access. In addition, we believe that providing for 10 MHz of spectrum on a paired basis would allow for the introduction of both one-way and two-way services and would facilitate the implementation of a variety of technologies. In the spectrum adjacent to the satellite DARS band, however, we believe that WCS mobile operations may be prohibitively expensive and technologically infeasible for a substantial period of time. Also, the narrow (i.e., 30 MHz) transmit and receive separation between the 2315-2320 MHz and 2345-2350 MHz bands would substantially increase the cost of equipment employing traditional frequency division duplex technology if pairing of these blocks were required. By making this spectrum available initially to WCS licensees as two 5 MHz unpaired channel blocks, the spectrum may have increased utility for satellite DARS and a variety of WCS fixed operations, especially those employing time division duplex technology. Also, we will not preclude WCS licensees from pairing this spectrum on their own initiative, whether through submission of winning bids for each block at auction or through spectrum aggregation in the aftermarket. Another advantage of this overall initial licensing approach is that the offering of only four licenses in each service area will allow the WCS auction to be completed within the timetable contemplated by the Appropriations Act. In this respect, we believe that this licensing plan is superior to other options suggested by the commenters that would involve greater licensing complexity and probably greater delay. The initial channel blocks we have selected are shown in the Table below. Channel Block Frequency Range A 2305-2310 and 2350-2355 MHz B 2310-2315 and 2355-2360 MHz C 2315-2320 MHz D 2345-2350 MHz 46. As discussed in Section III.D.3., infra, we also are allowing for spectrum aggregation and disaggregation, without restriction, so that parties, for example, desiring to employ technology that requires unpaired spectrum or asymmetrically paired spectrum can either disaggregate the channels initially offered or purchase additional needed amounts of spectrum in the after-market. In addition, applicants may bid on all four channel blocks in a service area and, if successful, render the type of services addressed by those commenters supporting the licensing of WCS spectrum in a single 30 MHz block. Thus, the initial offering of WCS spectrum in 5 MHz or 10 MHz blocks does not preclude the offering of services which might require a greater amount of spectrum. Further, the disaggregation flexibility afforded licensees potentially allows provision of WCS services which require less spectrum than contained in the initial blocks. In sum, initially licensing the WCS spectrum according to the channel block plan identified above and allowing for spectrum aggregation and disaggregation will permit a wide variety of applicants to provide services and satisfy the requirements of the Appropriations Act. We also believe that providing for four blocks, along with our spectrum disaggregation rules, will promote the objectives of Section 309(j)(4)(C) of the Communications Act by providing for distribution of licenses and services among geographic areas and providing greater opportunity for a wide variety of applicants, including small businesses and other designated entities, than would be possible under a single 30 MHz block plan. 3. Licensed Service Areas 47. Background. In the NPRM, we stated our belief that licensing WCS spectrum on the basis of large geographic service areas would facilitate operation of the broadest possible range of new communications services in the spectrum and would promote their introduction in the most rapid and efficient manner. We noted that nationwide licensing would facilitate nationwide roaming and interoperability and allow for maximum economies of scale, and requested comment on the appropriate size for WCS licenses. Specifically, we asked whether WCS should be licensed on the basis of the 51 Major Trading Areas ("MTAs") defined for the narrowband and broadband Personal Communications Services ("PCS"), regional service areas similar to the 5 regions adopted for narrowband PCS, or on a nationwide basis. 48. Comments. The record reflects a wide variety of suggested service area definitions, ranging from nationwide licensing to licensing on the basis of the Metropolitan Statistical Areas (MSAs) and Rural Service Areas (RSAs) used for cellular licensing. Some commenters base their suggestions for the geographic scope of WCS licenses on what they perceive to be the likely use of WCS spectrum. For example, APT and Markle support licensing WCS on a nationwide basis because doing so would facilitate creation of a nationwide wireless data network. APT suggests that such a network would further the national goal, expressed in Section 254(b)(2)(A) of the Communications Act, as amended, of enhancing access to advanced telecommunications and information services for all public and nonprofit elementary and secondary school classrooms, health care providers, and libraries. Markle argues that parcelling spectrum out in geographic slivers would foreclose the opportunity for a nationwide system because of the high transaction costs, and that although a nationwide license may be out of their reach, smaller entities will be able to participate in WCS through the proposed disaggregation and partitioning provisions. In addition, MCI believes that nationwide licensing would facilitate construction of an efficient and uniform WCS "infrastructure" that could be used by the licensee and others to provide services and content. ADC and SIA contend that the Commission should license a portion of WCS spectrum, the 2345-2360 MHz band, on a nationwide basis because otherwise DARS proponents will not have an opportunity to secure, at an auction, the national footprint necessary to develop viable DARS service. 49. Commenters opposed to nationwide licensing generally argue that such a plan would restrict the number of entities (especially small businesses) capable of bidding in the WCS auction and providing WCS service. In addition, some contend that nationwide licensing would leave many areas unserved or result in delays in service to rural areas. Others are concerned that nationwide licensing of WCS would undermine the reasonable expectations of MTA- and BTA-based PCS licenses and their investors, making it more difficult for those licensees to obtain financing and continue the build-out of their systems. Finally, some commenters state that an auction of nationwide licenses would decrease auction competition and raise less auction revenue than an auction of smaller area licenses. 50. Use of service areas based on the Major Trading Areas (MTAs) and the Basic Trading Areas (BTAs) designated by Rand McNally received the most support from commenters. For example, BANM states that MTAs and BTAs have proven to be efficient market sizes for CMRS with respect to roaming and interoperability and that larger license areas would not produce any greater efficiencies for WCS. BANM believes that MTAs and BTAs provide the most flexibility, permitting service area aggregation where economically efficient while not forcing carriers to acquire (and potentially not serve) unwanted areas. Supporters of MTA licensing for WCS generally believe that this service area size will: (1) encourage the most diverse group of service providers due to lower costs of participating in the auction and creating a network to provide service; (2) facilitate interoperability and allow for economies of scale that will encourage the development of low cost equipment; (3) result in the broadest flexibility in terms of service offerings by WCS licensees; and (4) be fairer to existing service providers and/or result in greater levels of competition between both new and existing providers. Commenters favoring BTA service areas for WCS contend that BTAs will: (1) promote efficiency by allowing a bidder to acquire licenses for only as much area as required for its prospective service; (2) increase the number of entities able to participate in the auction, particularly small businesses and rural telephone companies ("rural telcos"); (3) improve opportunities for current broadband PCS C and F Block licensees with overlapping BTA networks to lease infrastructure and other support to independent WCS licensees; and (4) ensure the rapid build-out of WCS systems. 51. Some commenters suggest that WCS service areas be based on the 172 Economic Areas ("EAs") developed by the Bureau of Economic Analysis of the U.S. Department of Commerce. These commenters raise arguments similar to those supporting MTAs or BTAs, such as a larger number of entities being able to participate in the service, and use of EAs resulting in increased competition in the industry, particularly from small businesses and rural telcos. One commenter notes, however, that defining WCS service areas based upon EAs would contravene the interests of customers and carriers by confusing and disrupting an already- complex pattern of CMRS service areas (i.e., MSAs and RSAs for cellular, MTAs and BTAs for broadband PCS, and aggregated MTAs for some narrowband PCS services). Finally, one commenter recommends the use of MSAs and RSAs to define service areas for the WCS, noting that the use of these areas assured the rapid deployment of cellular services to rural areas, and afforded smaller entities a realistic chance to participate in the cellular industry. 52. Two commenters propose that we create a WCS service area that will cover the Gulf of Mexico. SOSCO and PetroCom suggest that the increase in exploration and production activity in the Gulf of Mexico has resulted in a growing demand for voice, data and video telecommunications services which telecommunications providers in that area have been unable to meet because the spectrum used to provide such services has not been made available for licensing in the area. Specifically, SOSCO contends that we should license WCS on the basis of MTAs, and issue a single WCS license for the Gulf of Mexico. 53. Decision. In deciding on the appropriate service areas size for WCS licenses, we must balance several factors. We wish to encourage the rapid deployment of new telecommunications technologies and services on WCS spectrum; thus, we must assess the use or uses to which this spectrum is likely to be put and determine the geographic scope that would best facilitate rapid deployment thereof. In addition, we believe that because this spectrum has not heretofore been used to provide commercial services and no equipment has yet been developed for use in this band, consumers would benefit if the WCS band plan enables equipment manufacturers to realize economies of scale that will translate to lower equipment costs to service providers. We also recognize that the Appropriations Act directed us to "assign the use of [WCS] frequencies by competitive bidding pursuant to section 309(j)." Section 309(j) of the Communications Act includes as objectives for competitive bidding the avoidance of excessive concentration of licenses and the dissemination of licenses among a wide variety of applicants. In addition, we are mindful of our statutory obligation to conduct the auction for WCS licenses to ensure that all proceeds are deposited by September 30, 1997, and of our experience in previous auctions, which has shown that simultaneous, multiple round auctions for a larger number of licenses are more complex and take longer to complete than similar auctions involving fewer licenses. Finally, we note that aggregation of both spectrum and service areas through the auction process has proven to be an effective method of allowing bidders to acquire the right amount of spectrum for their business needs. 54. Balancing the various factors noted above, we conclude that WCS will be licensed in two ways. First, with respect to the C and D blocks, WCS will be licensed on the basis of regional areas similar to those used in our narrowband PCS rules. In WCS, however, we will define the regions by aggregating EAs in the continental United States into 6 larger groupings. We will refer to these service areas as Regional Economic Area Groupings (REAGs). In addition, consistent with our approach in other services, we will create separate REAGs covering the five U.S. possessions, as follows: Guam and the Northern Mariana Islands (REAG # 9), Puerto Rico and the U.S. Virgin Islands (REAG # 10) and American Samoa (REAG # 11), as well as separate service areas for Alaska (REAG # 7) and Hawaii (REAG # 8). As discussed more fully infra, we also will create a service area in the Gulf of Mexico (REAG # 12). Second, the A and B blocks will be licensed in smaller areas, by aggregating EAs into 46 areas (to be called Major Economic Areas, or MEAs) in the continental United States and an additional 6 areas covering Alaska (MEA # 47); Hawaii (MEA # 48); Guam and the Northern Mariana Islands (MEA # 49); Puerto Rico and the US Virgin Islands (MEA # 50); American Samoa (MEA # 51); and the Gulf of Mexico (MEA # 52). We believe that this licensing scheme satisfies the various and often conflicting positions raised by the commenters and will best accommodate our objectives under 309(j) of the Communications Act. 55. Specifically, the larger WCS license areas that we will provide for in the C and D blocks will accommodate those commenters who argue that large areas will (1) encourage the rapid development and deployment of innovative service; (2) facilitate interoperability and the setting of standards; (3) allow for economies of scale that will encourage the development of low cost equipment; and (4) facilitate provision of satellite DARS services. Many commenters in this proceeding point out that WCS spectrum can be used effectively to provide wireless local loop, broadband data services and DARS services. At least with respect to these services, there may be significant economic efficiencies that could be realized -- to the ultimate benefit of consumers -- if these services were to be provided with nationwide scope. Licensing the C and D blocks in WCS on a REAG basis may facilitate aggregation of service areas and speed implementation of these new services. 56. In addition, a number of commenters point out that ensuring technical coordination and minimizing interference across geographic areas is very difficult when the exact nature of the services to be provided is unknown and the spectrum may be used to provide a variety of service offerings. AirTouch, for example, argues that under a flexible spectrum use plan, adjacent licensees will have difficulties developing efficient spectrum use plans because the adjacent licensee's service offerings are unknown. The larger service areas in the C and D blocks will speed and simplify the process of interference coordination along geographic boundaries, as well as minimize transaction costs and disputes arising from interference, and facilitate implementation of services that would require roaming capabilities and easy interoperability. In addition, because equipment currently is not available for use in this band, the larger service areas in the C and D blocks also should enable manufacturers to achieve greater economies of scale in production of equipment, thus reducing its per-unit cost and allowing more rapid deployment of services to the ultimate benefit of consumers. 57. While we are mindful of the desire of some parties to have large licenses, we also agree with commenters that contend that smaller businesses will have more difficulty competing in the WCS auction for licenses in the large regions. In this regard, we believe that the creation of smaller MEAs in the A and B blocks (along with the large bidding credits provided for small businesses, see Section III.E.5, infra), will provide greater opportunities for smaller businesses to compete in an auction and participate in the provision of WCS services. We further note that, consistent with views of some commenters, these smaller service areas will: (1) enable a larger number of entities to participate in the provision of services and result in increased competition; (2) encourage a more diverse group of service providers due to the lower costs of participating in the auction; and (3) result in broader flexibility in service offerings by WCS licensees. We also believe that these smaller service areas will encourage efficiencies by making it easy for a bidder to acquire licenses for only as much area as required for its prospective service. 58. We note that some commenters support even smaller BTAs and MSAs/RSAs to facilitate participation in the WCS service by small businesses. We find that service areas based on such smaller areas might compromise our ability to complete the WCS auction within the statutorily mandated time frame. In any event, we note that in addition to the large bidding credits offered to small businesses, our provisions for partitioning and disaggregation (seeSection III.D.3, infra) should work to provide significant opportunities to smaller businesses to participate in the provision of WCS services. 59. As noted above, two commenters, SOSCO and PetroCom, advocate licensing the Gulf of Mexico as a separate service area to help meet the growing communications needs of petroleum and natural gas providers in the area. In light of those requests, we designate a separate REAG and MEA covering the Gulf of Mexico. We determine that land-based license regions abutting the Gulf of Mexico will extend to the limit of the territorial waters of the United States in the Gulf, which is the maritime zone that extends approximately twelve nautical miles from the U.S. baseline. Beyond that line of demarcation, we will create the Gulf of Mexico REAG and MEA, which will extend from that line outward to the broadest geographic limits consistent with international agreements (see maps at Appendices C and D). The limits and coordination of signal strengths at the boundaries of the service areas meeting in the Gulf region will be the same as those that will apply for all service areas. 60. Finally, we note that several commenters argue that their suggested WCS licensed service area sizes will increase auction revenues. We wish to make clear that, consistent with Section 309(j)(7)(A) of the Communications Act, we have considered the communications needs of potential service providers and the American public in developing these service areas. We have not considered anticipated auction revenue. B. Use of Competitive Bidding 61. Background. In the NPRM, we sought comment on our general assessment, based upon the requirements of both the Appropriations Act and Section 309(j) of the Communications Act, that WCS licenses should be awarded by means of competitive bidding. 62. Comments. We received no comments addressing our tentative conclusion that WCS licenses should be awarded through competitive bidding pursuant to Section 309(j). 63. Decision. We will adopt rules providing for the assignment of these frequencies through the use of competitive bidding pursuant to Section 309(j). As we noted in the NPRM, the Appropriations Act directs the Commission to assign licenses to use the 2305-2320 and 2345-2360 MHz bands through competitive bidding pursuant to Section 309(j) of the Communications Act. Section 309(j) provides that auctions may be used to award licenses among mutually exclusive applicants where the principal use of such spectrum will involve, or is reasonably likely to involve, a subscription-based service. We continue to believe that it is reasonable to conclude that the principal use of WCS spectrum will involve, or is reasonably likely to involve, the transmission or reception of communications signals to subscribers for compensation. While we have decided to permit WCS licensees to provide a range of services, the uses of this spectrum most mentioned by commenters appear to involve services that would be provided on a subscription basis. Fixed (and radiolocation) services that could be provided include services similar to the Multichannel Multipoint Distribution Service ("MMDS"), the Location and Monitoring Service ("LMS"), Digital Termination Systems ("DTS"), Digital Electronic Messaging Service ("DEMS"), wireless local loop, and certain of the services provided by Local Multipoint Distribution Service ("LMDS"). Although it may be technologically infeasible to provide mobile services as a WCS offering in the near future due to the necessity for strict technical standards (see Section III.D.7, infra), services that may ultimately be provided include those similar to PCS, cellular, Specialized Mobile Radio ("SMR") and paging. All of these services currently are provided to subscribers for compensation and we believe that it is reasonable to expect that WCS offerings will be provided on a similar basis. In this regard, even if a WCS licensee chooses to offer a satellite DARS service on that portion of the spectrum available for such use, we believe it is likely that such service also will be offered on a subscription basis. 64. Our decision today also advances the objectives contained in Section 309(j) of the Communications Act. Section 309(j)(3)(A) directs the Commission to seek to promote the development and rapid deployment of new technologies, products, and services for the benefit of the public, including those residing in rural areas, without administrative or judicial delays. In this regard, we believe that our service and licensing rules, in conjunction with our allocation plan, will allow for and foster the development of a range of new services and technologies. These policies also will advance the objective, expressed in Section 309(j)(3)(B), of promoting economic opportunity and competition and ensuring that new and innovative technologies are readily accessible to the American people by avoiding excessive concentration of licenses and by disseminating licenses among a wide variety of applicants, including small businesses, rural telcos, and businesses owned by members of minority groups and women. 65. The Appropriations Act states that in making these frequencies available for competitive bidding, the Commission shall seek to promote the most efficient use of the spectrum. As we stated in the NPRM, we believe that our competitive bidding rules will ensure that spectrum is made available to those who value it most highly and therefore are most likely to put it to its most economically efficient use. This outcome will be further assured by our use of a simultaneous, multiple round auction that will allow applicants to aggregate spectrum and service areas into parcels of efficient size and to realize economies of scale and scope without the need for costly and time consuming post-auction transactions. In addition, as indicated above, we have decided to permit the WCS licensee to provide fixed, mobile, radiolocation or satellite DARS services. We believe there are significant competitive alternatives for each of these types of services that will ensure that WCS licensees have incentives to operate in an efficient and effective manner. We therefore believe that there will be sufficient market incentives to promote the most efficient use of the 2305-2320 and 2345-2360 MHz bands, as required by the Appropriations Act and Section 309(j)(3)(D) of the Communications Act. C. Consideration of Public Safety Needs 66. Background. As we discussed in the NPRM, the Appropriations Act instructs the Commission to take into account the needs of public safety radio services in making the WCS spectrum available through competitive bidding. Recognizing that the Appropriations Act marks the first time that Congress has specifically directed us to consider the needs of public safety radio services in connection with licensing a particular spectrum band, we sought comment generally on how we can best effectuate Congressional intent with regard to public safety needs as related to this spectrum. In addition, we noted that in a post-enactment letter, the Chairman and Ranking Member of the House Committee on Commerce suggest that the Commission, consistent with its obligation to promote the public interest, "pay particular attention to how the needs of public safety as well as commercial applicants may best be met in determining how to design this auction." We refered to the recommendations made by the Public Safety Wireless Advisory Committee in its final report, and asked interested parties how our WCS rules should be fashioned so as to benefit the public safety community consistent with those recommendations. Finally, we invited commenters to address a broad array of options, including making an allocation of some portion of the WCS spectrum for public safety entities, assigning the WCS spectrum with an obligation to contribute toward needs identified by the public safety community, and taking steps to encourage the use of WCS spectrum for services useful to public safety entities. 67. Comments. We received wide-ranging comment from diverse sources addressing the issue of public safety. Several commenters assert that public safety entities are unlikely to obtain spectrum through an auction because they lack sufficient resources to compete effectively with interested commercial service providers. APCO contends that state and local governments should never be required to pay the federal government for the right to use radio spectrum for basic governmental activities such as the protection of life and property. 68. Outside of the auction context, several commenters suggest that we consider allocating a portion of the WCS spectrum for use by public safety radio services, or at least afford them higher priority, and some argue that such an allocation would be within our authority under Section 3001(b)(2) of the Appropriations Act. For example, Sprint PCS/Sprint suggests that the Commission set aside at least 10 MHz of spectrum in each licensing area for public safety use. Also, Sprint PCS/Sprint contends that it is not clear from the Appropriations Act that Congress intended that all of the spectrum reallocated for WCS be auctioned. Along similar lines, Pocket suggests allocation of a significant (if not primary) portion of the WCS spectrum for public safety users who have been displaced from other spectrum. APCO contends that any set-aside must include enough spectrum to permit sufficient channel capacity and to stimulate equipment development. APCO contends that any allocation less than 3 MHz would be of not value. In contrast, Vanguard believes that the Appropriations Act does not permit the Commission to allocate a portion of the spectrum for assignment to public safety uses without competitive bidding. While Motorola and APCO believe that WCS spectrum could help provide some important public safety applications (including fixed point-to-point capacity, video and data), they also believe that Congressional clarification that auctions would not be required for some portion of the band would be needed before we could allocate it for public safety needs. Moreover, APCO suggests that because the Appropriations Act requires that the Commission both auction the WCS spectrum and take into account the needs of public safety, the Commission should consult with Congress to determine the best means of achieving these "conflicting statutory objectives." ITA believes that the "revenue-generation objective" of the Appropriations Act requires that any allocation made in this proceeding to accommodate public safety needs would be inconsequential. 69. Other commenters also suggest allocation for both public safety and broader safety- related operational needs. For example, API suggests that the Commission give consideration to the spectrum needs of the petroleum and natural gas industries, classified as "public service providers" in the PSWAC Final Report, in conjunction with the needs of other public safety providers, because the communications infrastructures of those industrial users are similar to those of traditional public safety entities in that they serve public safety needs pursuant to government mandates (e.g., maintenance of redundant communications systems) and provide traditional emergency response functions (e.g., environmental damage control). API believes that public service providers have insufficient spectrum for their needs, and that none of the spectrum accommodations currently under consideration for public service providers offer the favorable propagation characteristics available in the 2 GHz range. AAR asserts that, since the purpose of the fixed and mobile wireless networks operated by the railroad industry is to support the safe and reliable operation of the Nation's freight and passenger rail systems, the needs of those entities also should be included. AAR stresses that, because private users are unable to financially compete against commercial providers at auction, and commercial service providers cannot or will not effectively meet railroads' nationwide operational needs, the railroad industry's increasing spectrum needs can best be met by reserving a portion of the WCS bands for allocation "in the traditional manner," similar to that employed in Parts 101 and 90 of the Commission's Rules, for use on a coordinated, shared basis by and among entities which have safety-related operational missions. AWWA suggests an allocation for operators of public water supplies, identifying several functions of such entities upon which public safety is directly dependent (e.g., fire-fighting, operations of health care facilities, and provision of healthy drinking water). 70. On the other hand, the record also reflects some doubt as to whether the 2.3 GHz band is appropriate for most public safety communications operations. In this connection, Motorola and DigiVox express doubt as to whether the 2.3 GHz band holds significant promise to solve public safety mobile communications needs because of the higher infrastructure costs and greater interoperability problems as compared to the lower frequency bands that are adjacent to those in which public safety entities now operate. DigiVox notes in particular that the PSWAC Final Report did not identify the WCS bands as useful in meeting the public safety community's spectrum requirements. ITA contends that, even if the Commission were to make a specific public safety allocation at 2.3 GHz, it would not significantly assist public safety entities. ITA reasons that because public safety entities do not currently operate in spectrum in or near the 2.3 GHz band, manufacturers would be unable either to produce equipment for a larger customer base or to maximize economies of scale as they are in a more typical spectrum allocation proceeding in which the spectrum for public safety systems is intermingled with, or allocated adjacent to, the bands for private radio services. APCO asserts that the 2.3 GHz band is inappropriate for most public safety communications needs because of the high costs involved in constructing the very small cell sites needed to provide adequate coverage (including critical in-building penetration), and APCO concludes that the 2.3 GHz band is an unlikely home for public safety mobile systems. While expressing some interest in the 2.3 GHz spectrum for video, data and fixed microwave, APCO states that "facilitating possible public safety use of a small portion of the 2.3 GHz band for non-mission critical operations will have little or no impact on the spectrum needs identified by PSWAC. Accordingly, APCO requests that the Commission move forward to allocate at least 24 MHz of spectrum from UHF channels 60-69 to public safety and suggests that the Commission recommend to Congress that it take action to permit a portion of the proceeds from the 2.3 GHz auction to be targeted for funding public safety communications systems in other bands. 71. On the question of whether certain public safety needs might be met by commercial services provided on WCS spectrum, commenters generally expressed the view that, to some degree, commercial services can meet the needs of the public safety community and that the Commission should fashion service rules that will encourage WCS licensees to offer services that are consistent with the needs of public safety. Some commenters support the use of bidding credits for entities that propose a specific plan for satisfying public safety needs, or that make their facilities available to the public safety community on a wholesale basis. One commenter suggests licensing WCS on the basis of service areas (such as EAs) that approximate the areas and jurisdictions in which public safety entities operate, and licensing of the spectrum in blocks that closely approximate the bandwidth requirements of public safety entities, so that bidders looking to provide solely public safety services would not be required to purchase more spectrum than needed for such purposes. AT&T suggests that one 10 MHz block in each service area be designated as a public safety block, for which any bidder may bid but which could be used only for public safety services such as 911, E911 and communications between emergency service personnel. If the Commission declines to reserve a 10 MHz block for public safety uses, AT&T suggests alternatively that the Commission condition the grant of each WCS authorization on the licensee's pledge to meet the needs of the public safety community by dedicating access if the licensee offers CMRS services using the WCS spectrum. Specifically, AT&T's suggests that if the licensee offers CMRS services in this spectrum, it would meet the needs of the public safety community by providing a specified percentage of their capacity for public safety uses on a primary basis. 72. Some commenters believe that it is difficult to determine at this time whether commercial WCS licensees will offer services that will be beneficial to public safety. APCO asserts that, even if the specific commercial uses of the spectrum were known, commercial offerings in the band would satisfy, at most, only a small portion of the public safety community's needs because most of these needs require ubiquitous coverage, reliability, instantaneous access and security that can be provided only by systems owned and operated by public safety agencies. Another commenter contends that permitting public safety users to lease spectrum from commercial users cannot offer the same critical stability to public safety systems as a permanent allocation, and that threat of regulatory sanctions, even financial penalties, would be insufficient to ensure that commercial providers continue to make their services available for public safety uses. 73. In addition, Primosphere and BANM contend that to give full effect to the Congressional mandate to take into account the needs of public safety, we must take action in other pending proceedings. Primosphere argues that award of its pending satellite DARS licenses before licensing the WCS spectrum would address public safety needs because it has proposed a national, unscrambled, free broadcast service that will provide the public with timely public safety information during emergencies. BANM argues that fully accommodating public safety spectrum needs in connection with WCS will allow the Commission to terminate a separate on-going proceeding proposing the adoption of a "Cellular Priority Access System" (WT Docket No. 96-86, Public Notice, April 18, 1996) by obviating the need for priority cellular access. 74. Decision. The Appropriations Act requires that we "take into account the needs of public safety radio services." Therefore, we must consider the communications needs of the public safety community in assigning WCS frequencies. The record compiled in this proceeding and in our public safety proceeding demonstrates that spectrum currently allocated to public safety spectrum is inadequate to meet the public safety community's voice and data needs. In addition, this record suggests that currently allocated spectrum will not permit deployment by public safety agencies of needed advanced data and video systems. The Appropriations Act requires, however, that the use of 30 MHz of spectrum in the 2.3 GHz band be "assign[ed] . . . by competitive bidding pursuant to Section 309(j) of the Communications Act . . . ." We therefore conclude that allocating a portion of the 2.3 GHz spectrum for public safety appears to be inconsistent with the Appropriations Act because, pursuant to our auction authority, we are not permitted to assign spectrum to public safety applicants by competitive bidding. 75. In any case, even if spectrum were to be allocated for assignment only to public safety entities, we do not believe that such an allocation would be the best way to meet those needs. W note that the WCS spectrum was not identified in the PSWAC Final Report as useful in meeting the public safety community's spectrum requirements. In this regard, we believe that it is significant that APCO, the only public safety entity to comment in this proceeding, noted in its recent ex parte filing that "facilitating possible public safety use of a small portion of the 2.3 GHz band for non-mission critical operations will have little or no impact on the spectrum needs identified by PSWAC." In addition, we belive that it is significant that public safety entities do not currently have operations in any spectrum in or near the 2.3 GHz band. Thus, it may be more difficult for public safety entities to avail themselves of equipment economies of scale or to integrate this spectrum into their current communications systems. In addition, even if WCS spectrum were of some use to the public safety community, costly networks would still need to be constructed in order for useful services to be provided. In this regard, we find it significant that, as noted above, several commenters (both public safety entities and others) questioned whether a specific public safety allocation at 2.3 GHz would significantly assist public safety entities given the technical configuration and the financial resources that a 2.3 GHz system would require. 76. The record in this proceeding also demonstrates that public safety agencies require additional funding to enable them to migrate to new spectrum and to upgrade and purchase new equipment. In addition, we note that the PSWAC Final Report found, "the radio systems used by the Public Safety community are laboring under increasing burdens. Equipment is old and funding for new equipment is often scarce." The PSWAC Final Report also found that "[f]unding for acquisition of new spectrum-efficient technologies and/or relocation to different frequency bands is likely to be a major impediment to improving Public Safety wireless systems." The PSWAC Final Report includes recommendations regarding the future operational requirements of public safety agencies, methods for achieving greater interoperability among agencies, the technologies that are and will be available to meet public safety requirements, and the amount of radio spectrum that will be necessary to meet these requirements. Many of these requirements can be met by our allocation of additional spectrum to public safety agencies, and the report examined alternative approaches for obtaining funding to assist public agencies in an orderly migration to new spectrum allocations and advanced technologies. With respect to the funding issue, the Transition Subcommittee of PSWAC suggested that [the Commission] take action to assist federal, state, and local government public safety agencies acquire systems that will provide mechanisms for interoperability among both multi-jurisdictional boundaries and multi-echelons of government. Taking into consideration that the Commission has raised considerable revenue from spectrum auctioning, an initiative should be launched to use some of that money to assist transition into new spectrum. This may require Congressional action to allow the use of auction revenues for distribution to public safety agencies in the form of grants. 77. We believe that, in order for the future needs of public safety wireless communications to be satisfied, new sources of funding will have to be devised. This is true regardless of the amount of spectrum made available for public safety. In this proceeding, we have considered whether funds from the WCS auction could provide a source of funding for public safety agencies. We note, however, that Section 309(j)(8)(A) requires that "all proceeds from the use of a competitive bidding system under this subsection shall be deposited in the Treasury . . . ." The only exceptions to this general rule are contained in Sections 309(j)(8)(B) (providing for retention of revenues as an offsetting collection for developing and implementing the auction program) and 309(j)(8)(C) (providing for deposit of upfront payments in an interest- bearing account, with interest transferred to the Telecommunications Development Fund). Therefore, it appears that legislative action is required before auction revenues can be used to provide a source of funding for public safety agencies to acquire new communications technologies. It is our belief that public safety agencies would benefit greatly from such action. We note that legislation recently introduced by Senator John McCain would provide for a portion of the revenues raised from an auction of spectrum currently used by television broadcast stations operating on channels 60-69 to be earmarked for "funding State and local law enforcement and public safety agencies' mission-related radio communications capabilities." We believe that legislative approaches such as that taken in the McCain bill would substantially aid public safety agencies in their communications needs and thereby improve the safety of all Americans. 78. Though we have concluded that designating 2.3 GHz spectrum for use exclusively by public safety entities is not advisable, we emphasize our continuing commitment to address public safety needs. Specifically, the Commission is considering the operational, technical and spectrum requirements of the public safety community in our Public Safety proceeding. That proceeding examines what spectrum bands could be useful for meeting existing and future communications requirements, including voice, data (such as transmission of fingerprints, building floor plans and medical data), and video for surveillance monitoring. We expect that additional spectrum will be made available for public safety use as a result of that proceeding, and that our decision in that proceeding will address the specific communications requirements and bands identified by PSWAC. In addition, we note that several commenters, including APCO and Motorola, reiterated the public safety community's need for 24 MHz of spectrum at UHF channels 60-69. We believe that their proposal has merit and plan to give it serious consideration in our Digital Television proceeding. We note that legislation recently introduced by Senator McCain would direct the Commission to allocate 24 MHz of the channel 60-69 spectrum to public safety use, and that the Administration's 1998 budget also supports such a reallocation. 79. We decline to adopt special provisions to benefit petroleum and natural gas providers, railway operators and operators of water supply systems. Though we recognize that these entities perform valuable public service functions, we do not believe that Congress intended that they be included in the class of "public safety radio services" that the Appropriations Act directs us to take into account in this proceeding. The Commission's Rules define that term to include "Local Government, Police, Fire, Highway Maintenance and Forestry-Conservation Radio Services." We decline to deviate from this established definition. D. Service and Technical Rules 1. Eligibility 80. Background. In the NPRM, we proposed that there be no restrictions on eligibility for WCS licensees, other than the foreign ownership restrictions set forth in Section 310 of the Communications Act. 81. Comments. Only four commenters specifically addressed the issue of eligibility for WCS. Of these, three support open eligibility, subject to foreign ownership restrictions. CTIA specifically states that it is imperative that existing cellular, PCS and SMR service providers be permitted to bid on WCS licenses to encourage immediate and efficient spectrum use, to provide known, viable competition, and, within the existing service areas, to avoid imposing competitive disadvantages on those entities. In this regard, CTIA notes that excessive concentration of licenses, which is the traditional rationale for excluding existing wireless carriers from auctions, is not a problem in the wireless industry because it is fully competitive. 82. CPI expresses a general concern that the lack of ownership limits (e.g., the CMRS spectrum cap) could undermine the pro-competitive goals established by Congress and the Commission. CPI also is concerned that the only limits on eligibility proposed by the Commission, foreign ownership limitations, appear to be unevenly distributed among the services for which the WCS spectrum may be used. Specifically, CPI questions the Commission's proposal to maintain the restrictions set forth in Sections 310(a) and 310(b)(1) and (2) of the Communications Act, but not 310(b)(3) and (4), "which limit the FCC's authority to grant a license to any corporation with 20% or 25% foreign ownership." CPI asserts that, although the proposed rule Section 27.302 appears to resolve this issue by limiting foreign ownership consistent with all subparts of Section 310(b), proposed Section 27.302 raises another issue by appearing to prohibit foreign ownership of a WCS authorization only with respect to CMRS, and not with respect to broadcast or other common carrier services. 83. Decision. We conclude that, with the exception of the foreign ownership restrictions set forth in Section 310 of the Communications Act, there will be no eligibility restrictions on participation in WCS. As we stated in the NPRM, opening the WCS market to a wide range of applicants will permit and encourage entrepreneurial efforts to develop new technologies and services. We also believe that, given the relatively large amount of spectrum that is available to provide services similar to those that can be operated on the WCS spectrum, providing open eligibility in this instance will not lead to excessive concentration of market power. We agree with CPI that Section 27.302 should ensure that WCS licensees are subject to all of the foreign ownership restrictions set forth in Section 310 of the Communications Act to the extent the restrictions are applicable to the particular service in question. Thus, for example, common carrier services would be subject to the restrictions in Section 310(b). 2. CMRS Spectrum Cap 84. Background. In the NPRM, we sought comment on whether WCS spectrum used to provide commercial mobile radio service ("CMRS") should count against the 45 MHz spectrum cap that applies to certain CMRS licensees. We recognized that applying the spectrum cap could exclude firms with the most experience and innovative technologies from participating in the auction and having the opportunity to use this spectrum to serve the public. At the same time, we noted that if a CMRS provider with the maximum amount of spectrum permitted under our current CMRS spectrum cap were to acquire WCS spectrum, that provider possibly could gain a dominant position in the CMRS marketplace. We therefore requested that commenters address whether the WCS spectrum is likely to be used to provide CMRS services and, if so, whether the current CMRS market is sufficiently competitive that the considerations that gave rise to adoption of the CMRS spectrum cap are inapplicable to the WCS spectrum. In addition, we asked that commenters address the potential costs of applying the cap to the WCS spectrum in terms of lost economies of scale and scope that might exist if CMRS licensees were allowed to acquire this spectrum. Finally, to the extent they believe that the WCS spectrum will be used for CMRS services, we asked commenters to discuss any alternative mechanisms that would be appropriate to protect against the concentration of control of licenses for CMRS spectrum, to ensure vigorous competition in wireless services and to implement the Communications Act. 85. Comments. Commenters addressing the issue of the CMRS spectrum cap fall generally into three categories: (1) those who believe the spectrum cap should apply to WCS; (2) those who believe the spectrum cap should not apply to WCS; and (3) those who believe that this issue requires further analysis by the Commission. Of those who support application of the spectrum cap, the primary argument made is that if WCS is used to provide CMRS, WCS licensees must be placed on comparable footing with current CMRS providers. For example, PCIA states that all competitors in CMRS should be subject to the same service rules in order to permit the marketplace to function equitably and effectively. SNET Mobility states that the spectrum cap is necessary to prevent excessive concentration of licenses. Similarly, Omnipoint contends that if WCS licensees are permitted to offer mobile services without being subject to the spectrum cap, the utility of the cap will be undermined. Omnipoint argues further that not applying the spectrum cap would be unfair to PCS licensees and small businesses since the wealthiest PCS licensees would be able to aggregate 2.3 GHz of spectrum to the detriment of others who relied on the assumption that no new spectrum in the 2 GHz band would be released. Florida Cellular states that allowing WCS licensees to compete with existing cellular and PCS providers without being subject to the same restrictions that now apply to CMRS providers may cause spectrum users and financial backers to lose confidence in our spectrum management process, making them less willing to invest in entities interested in obtaining spectrum and developing services through auctions. Finally, DigiVox contends that, despite arguments to the contrary, the spectrum cap remains necessary at its current 45 MHz limit to enable small businesses and other designated entities to effectively compete for spectrum and to participate in the provision of service. 86. Commenters opposing application of the CMRS spectrum cap to WCS believe that the goals of the spectrum cap -- promoting a vigorous and competitive market for the provision of commercial mobile radio services and ensuring that no single provider is able to aggregate enough spectrum to preclude or significantly reduce the provision of service by effective competitors -- have already been met. Vanguard points to the existence of two cellular and up to six PCS licensees per market, and the presence or anticipated presence of an enhanced SMR provider, and expresses the view that an existing CMRS provider who acquires a WCS license would be in no position to dominate the marketplace. Commenters also state that, in the interest of ensuring that the largest number of entities participate in the auction and in the provision of WCS, current CMRS providers should not be excluded. For example, AT&T states that application of the spectrum cap to WCS may preclude efficient spectrum use by denying CMRS providers, who can speed innovative service to the public, the opportunity to realize economies of scale and scope in the development and deployment of services. AT&T further asserts that application of the cap will discourage participation by many CMRS providers, which would reduce auction revenues through both lack of front-end participation and reduction of post-auction marketability. 87. Decision. The decisional factor in whether to apply the CMRS spectrum cap to any particular service is a balancing of the potential benefits and costs. We believe that, in these unique circumstances where we are allocating spectrum and licensing a wholly new service pursuant to congressional directive, the potential benefits do not outweigh the potential costs. Thus we will not count holdings of WCS spectrum at 2.3 GHz against the CMRS spectrum cap. 88. As we noted in the NPRM, the CMRS spectrum cap was imposed out of concern that "excessive aggregation [of spectrum] by any one of several CMRS licensees could reduce competition by precluding entry by other service providers and might thus confer excessive market power on incumbents." The spectrum cap is intended to promote a vigorous competitive market for the provision of commercial mobile radio services, and to ensure that each mobile service provider (i.e., cellular, PCS or SMR licensee) has the opportunity to obtain sufficient spectrum to compete effectively and that no single provider is able to preclude the provision of service by effective competitors or significantly reduce the number of competitors by aggregating spectrum. 89. As discussed more fully in Section III.D.7, infra, because the spectrum allocated for satellite DARS is situated between the two WCS bands, limitations on out-of-band emissions by equipment operating on WCS spectrum are needed to protect against interference with sensitive satellite DARS reception. We believe that the out-of-band emission limits we are adopting likely will, at least in the near term, make mobile operations in the WCS spectrum technologically infeasible. Hence, there is little likelihood that allowing an incumbent CMRS licensee to acquire enough WCS spectrum that its total CMRS and WCS spectrum holdings exceed the 45 MHz cap would have anticompetitive consequences for mobile services. Application of the CMRS spectrum cap to WCS spectrum is not necessary to guard against excessive concentration in the CMRS market or the accumulation of undue market power. 90. Conversely, even if it is technically feasible to use this spectrum for CMRS-type service, applying the cap and excluding many existing CMRS providers from acquiring WCS licenses would, we believe, carry significant potential costs for consumers. With their existing base station infrastructures, CMRS licensees may be the most efficient users of WCS spectrum because economies of scope may be large in the provision of new services combined with the provision of conventional mobile voice CMRS. For example, it may be that a current CMRS licensee would be able to use its existing infrastructure to provide fixed services in the most cost efficient manner. Site acquisition and zoning approval for new facilities is both a major cost component and a major delay factor in deploying wireless systems. Facilities at existing cellular or PCS sites might accommodate additional equipment for new services or be modified to do so at a significantly lower cost than deploying a whole new cell infrastructure for the new service in a crowded environment. There may be other economies of scope in the provision of different services as well. Applying the CMRS spectrum cap to the WCS spectrum would interfere with the realization of these savings by preventing the direct participation by those entities who own the existing CMRS infrastructure, and consequently, prevent consumers from benefiting from these savings, with little off-setting benefit in competition. 91. We recognize that not applying the cap to WCS spectrum may result in some CMRS licensees acquiring spectrum and, provided that the technical obstacles noted infra can be overcome, that at some point these licensees may use WCS spectrum to compete against other CMRS licensees that have not acquired WCS spectrum. We do not believe, however, that such a circumstance substantially risks impairing competition in the CMRS marketplace. When 30 MHz PCS systems are fully deployed with the minimum number of cells needed for competitive coverage, they will provide a large increase in capacity over what is currently available. According to a recent article, a 30 MHz PCS licensee is likely to use only a twentieth of its startup capacity by the year 2000 and only a tenth by 2005. As for the argument that regulatory parity compels application of the CMRS spectrum cap to WCS spectrum, we disagree. Whether or not the cap is applied, all CMRS providers stand on equal footing with respect to the acquisition of WCS licenses, and any entity using WCS spectrum to provide CMRS services will be regulated in the same manner as all other CMRS providers. 3. Disaggregation and Partitioning 92. Background. In the NPRM, we proposed disaggregation and partitioning rules for WCS licenses to promote the most efficient use of the WCS spectrum and to overcome entry barriers by allowing for the creation of smaller licenses that would require less capital, thereby facilitating greater participation by smaller entities such as small businesses, rural telcos, and businesses owned by minorities and women. We requested comment on what limits, if any, should be placed on a WCS licensee's ability to partition its service area and disaggregate its spectrum. We also noted the then-pending rule making proceeding in WT Docket No. 96-148, which addressed geographic partitioning and spectrum disaggregation by CMRS licensees, and asked for comment on whether the approach proposed in that proceeding should apply to the WCS spectrum. We have since adopted the partitioning and disaggregation approach proposed in WT Docket No. 96-148 for broadband PCS. 93. Comments. The majority of commenters addressing the issue support our proposal to permit partitioning and disaggregation by WCS licensees and propose specific rules. For example, GTE agrees that partitioning and disaggregation should be permitted as long as the technical rules preventing harmful interference are met. Similarly, GTA and ALLTEL believe that disaggregation should be permitted, but only in 5 MHz increments. Finally, BellSouth agrees with the Commission's proposals to the extent that the spectrum is exclusively allocated for the "specialized services" that it recommends, such as wireless cable and wireless data, including Internet access and e-mail (both for commercial use and for schools, libraries and hospitals). 94. Some commenters believe that liberal partitioning and disaggregation rules are not effective substitutes for direct participation in an auction by small businesses, rural telcos, and other designated entities. NextWave argues that if large service areas are employed, disaggregation will not be a reliable means of promoting economic opportunity and competition or avoiding excessive concentration of licenses. Similarly, BellSouth and NextWave note that the need for disaggregation and partitioning may be avoided altogether through the use of BTAs as WCS service areas, the aggregation of which they believe to be more efficient than disaggregation and partitioning of larger service areas. Further, RTG believes that, in order for our partitioning and disaggregation policies to ensure the participation of rural telcos, these entities should be afforded a right of first refusal to partition and aggregate spectrum in areas reasonably related to their wireline service areas. 95. Those commenters that addressed our proposal to permit WCS licensees to lease or franchise portions of their spectrum are largely supportive. For example, two commenters suggest that there should be no minimum amount of spectrum or any particular geographic area limitations for leasing or franchising. BellSouth and SNET Mobility believe, however, that the Commission's proposals for the leasing or franchising of spectrum should be subject to license control requirements and, if CMRS is provided, that the attribution to lessees and franchisees of such interests should be applied for purposes of the CMRS spectrum cap. TDS advocates the articulation of guidelines defining the "ultimate responsibility" of the licensee in the context of proposed rule Section 27.16. TDS regards such guidelines as essential in providing a workable level of certainty for participants in leasing arrangements. Finally, TDS requests the application of such a franchising policy to other CMRS services. 96. Decision. Consistent with the weight of the comments and with the Commission's recent decision to adopt the approach proposed in WT Docket No. 96-148 for broadband PCS, we adopt our proposals for geographic partitioning and spectrum disaggregation. We will permit WCS licensees to partition their service areas into smaller geographic service areas and to disaggregate their spectrum into smaller blocks. We also conclude that the specific rules pertaining to partitioning and disaggregation in WT Docket No. 96-148 shall apply to WCS licensees. In addition, for the purposes of partitioning and disaggregation, we will require that WCS systems be designed so as not to exceed a signal level of 47 dBuV/m at the licensee's service area boundary, unless the affected adjacent service area licensees have agreed to a different signal level. 97. In WT Docket No. 96-148, we decided to permit geographic partitioning by broadband PCS licensees along any service area defined by the partitioner and partitionee. In addition, we decided to permit spectrum disaggregation by broadband PCS licensees without restriction on the amount of spectrum to be disaggregated. We concluded that allowing parties to decide without restriction the amount of spectrum to be disaggregated will encourage more efficient use of the spectrum and permit the deployment of a broader mix of service offerings, both of which will lead to a more competitive wireless marketplace. We believe that this reasoning applies with equal force to WCS. Therefore, subject to the provisions discussed below with respect to licensees who take advantage of bidding credits, once an initial WCS license is granted, licensees will be free to partition their service areas and disaggregate their spectrum. Finally, consistent with PCS and other CMRS services, WCS licensees will be allowed to use management and operational arrangements to permit others to use portions of their spectrum and geographic service areas. We wish to emphasize that the WCS licensee must retain ultimate control over and responsibility for all operations under such arrangements. 98. We conclude that any licensee will be permitted to partition its service area as long as it submits sufficient information to the Commission to maintain our licensing records. Partitioning applicants will be required to submit, as separate attachments to the partial assignment application, a description of the partitioned service area and a calculation of the population of the partitioned service area and licensed market. The partitioned service area must be defined by coordinate points at every 3 degrees along the partitioned service area agreed to by both parties, unless either (1) an FCC-recognized service area is utilized (i.e., Major Trading Area, Basic Trading Area, Metropolitan Service Area, Rural Service or Economic Area) or (2) county lines are followed. These geographical coordinates must be specified in degrees, minutes and seconds to the nearest second of latitude and longitude, and must be based upon the 1927 North American Datum (NAD27). Applicants also may supply geographical coordinates based on 1983 North American Datum (NAD83) in addition to those required based on NAD27. This coordinate data should be supplied as an attachment to the partial assignment application, and maps need not be supplied. In cases where an FCC-recognized service area or county lines are being utilized, applicants need only list the specific area(s) (through use of FCC designations) or counties that make up the newly partitioned area. 99. Similarly, where WCS licensees seek to disaggregate their WCS spectrum, we will not require the disaggregating party to retain a minimum amount of spectrum. We will allow disaggregating parties to negotiate channelization plans among themselves as part of their disaggregation agreements, and we will continue to require that such plans provide the necessary out-of-band emission protections to third party licensees as required by our rules. We are not adopting a limit on the maximum amount of spectrum that licensees may disaggregate. We find no evidence at this time that a maximum limitation for disaggregation is necessary. WCS licensees shall be permitted to disaggregate spectrum without limitation on the overall size of the disaggregation as long as such disaggregation is otherwise consistent with our rules. 100. We decline to adopt RTG's proposal to provide rural telcos with a right of first refusal. Section 254 of the Telecommunications Act of 1996 states that, in seeking to promote its goal of universal service, the Commission should ensure that consumers from all parts of the Nation, including rural areas, have access to telecommunications and information services that is comparable to service in other, more urban areas and at rates that are comparable to the rates available in urban areas. Granting rural telcos a right of first refusal would be at odds with our goals of ensuring that the largest number of entities participate in the WCS marketplace and eliminating barriers to entry for small businesses. As we concluded in WT Docket No. 96-148, we also believe that a right of first refusal would be difficult to administer and could discourage partitioning. For example, an area proposed for partitioning to a non-rural telco may intersect with an area for which a rural telco has a right of first refusal. A further problem would be uncertainty as to whether the rural telco's right of first refusal would continue after the auction winner partitioned the license area to another party. Additionally, a partitioning agreement may be part of a larger assignment transaction. If a rural telco were able to exercise a right of first refusal with respect to a partitioned area, it may not be possible to separate out the partitioning agreement to stand on its own and the entire assignment transaction could not be consummated. 101. If a WCS licensee that received a bidding credit partitions a portion of its license to an entity that would not meet the eligibility standards for a similar bidding credit, we will require that the licensee reimburse the government for the amount of the bidding credit calculated on a proportional basis based upon the ratio of population of the partitioned area to the overall population of the licensed area. If a licensee that received a bidding credit partitions to an entity that would qualify for a lesser bidding credit, we will require that the licensee reimburse the government for the difference between the amount of the bidding credit obtained by the licensee and the bidding credit for which the partitionee is eligible, calculated on a proportional basis based upon the ratio of population of the partitioned area. Similar provisions shall apply where a WCS licensee that receives a bidding credit seeks to disaggregate a portion of its spectrum to an entity that would not have qualified for such a bidding credit. All such unjust enrichment payments will be calculated based upon the ratio of the amount of spectrum disaggregated to the amount of spectrum retained by the original licensee. With respect to disaggregation from one licensee that qualified for a bidding credit to another licensee that would also qualify for a bidding credit, we will adopt an approach similar to that adopted for partitioning. 102. Finally, to allow WCS licensees flexibility to design the types of agreements they desire, we will follow our decision in WT Docket No. 96-148 to permit combined partitioning and disaggregation. For example, a party may obtain a license for a single county with only 5 MHz of WCS block A spectrum. By allowing such combined partitioning and disaggregation, we believe that the goals of providing competitive service offerings, encouraging new market entrants, and ensuring quality service to the public will be advanced. We further conclude that in the event that there is a conflict in the application of the partitioning and disaggregation rules, the partitioning rules should prevail. For the purpose of applying our unjust enrichment provisions relating to bidding credits, when a combined partitioning and disaggregation is proposed, we will use a combination of both population of the partitioned area and amount of spectrum disaggregated to make these pro rata calculations. For example, if a WCS licensee that availed itself of a bidding credit and a non-qualifying partitionee/disaggregatee were to agree on a 20 percent disaggregation of spectrum over 30 percent of the population of the licensed service area, an unjust enrichment payment of 6 percent (.20 x .30) of the bidding credit would be required. 103. We also note that these geographic partitioning and spectrum disaggregation rules, while not a substitute for licensing directly from the Commission, nevertheless will help to eliminate market entry barriers, consistent with Section 257 of the Communications Act, by providing smaller, less capital-intensive areas and spectrum blocks which are more accessible by small business entities. 4. License Term 104. Background. In the NPRM, we proposed to establish a license term of 10 years for services in the 2305-2320 and 2345-2360 MHz bands, with a renewal expectancy similar to that of PCS and cellular licensees. We also proposed that in the event that a WCS license is partitioned or disaggregated, any partitionee/disaggregatee would be authorized to hold its license for the remainder of the partitioner's/disaggregator's original ten-year license term. 105. Comments. Few commenters addressed our proposals regarding the appropriate license term for WCS. SBC and GTE support our proposal that the WCS license term be the same as for current CMRS licensees, and GTE further recommends that if a WCS licensee disaggregates or partitions part of its original license, the party receiving the disaggregated or partitioned portion should have a reasonable expectation of retaining the use of the spectrum for the full term of the WCS licensee's original term. 106. Decision. We will adopt our proposals regarding the term of WCS licenses and the renewal expectancy for both original WCS licensees and potential WCS partitionees/disaggregatees. The WCS license term will be 10 years, with a renewal expectancy similar to that afforded PCS and cellular licensees. We believe that this relatively long license term, combined with a renewal expectancy, will help to provide a stable regulatory environment that will be attractive to investors and, thereby, encourage development of this new frequency band. In the event that a WCS license is partitioned or disaggregated, any partitionee/disaggregatee will be authorized to hold its license for the remainder of the partitioner's/disaggregator's original ten-year license term, and the partitionee/disaggregatee will be required to submit the showings required at the five-year mark and with its renewal application. We believe that this approach, which is similar to the partitioning provisions we recently adopted for the MDS and for current broadband PCS licensees, is appropriate because a licensee, through partitioning, should not be able to confer greater rights than it was awarded under the terms of its license grant. 107. We will require that a WCS licensee's renewal application include at a minimum the following showing to claim a renewal expectancy: (1) a description of current service in terms of geographic coverage and population served or links installed; (2) an explanation of the licensee's record of expansion, including a timetable for the construction of new base sites or links to meet changes in demand for service; (3) a description of the licensee's investments in its system; and (4) copies of any FCC orders finding the licensee to have violated the Communications Act or any FCC rule or policy, and a list of any pending proceedings that relate to any matter described by the requirements for the renewal expectancy. 5. Performance Requirements 108. Background. In the NPRM, we questioned whether, and if so, what type of construction (or "build-out") requirements should be made applicable to WCS licensees. We recognized that in implementing auction procedures, the Commission is required under Section 309(j) of the Communications Act to include "safeguards to protect the public interest in the use of the spectrum" and performance requirements "to ensure prompt delivery of service to rural areas, to prevent stockpiling or warehousing of spectrum by licensees or permittees, and to promote investment in and rapid deployment of new technologies and services." We stated generally that although build-out requirements may help to achieve these goals, we were somewhat uncertain as to whether applying such requirements to the licenses of the WCS spectrum would be the best way to address Congress's concerns. 109. Comments. We received mixed comments on whether build-out requirements should be imposed on WCS licensees. Some commenters feel that this determination should depend upon whether WCS spectrum is used to provide services that also are provided by licensees in other bands who are subject to build-out requirements. If so, they believe that the same regulatory treatment should apply. Several commenters note this regulatory parity issue and advocate applying build-out requirements for WCS to whatever extent they apply for competing services (e.g., PCS or wireless cable) in other bands. Other commenters advocate applying them for reasons of regulatory parity with respect particularly to CMRS, or, more particularly, to PCS. Some commenters argue that build-out requirements should be established simply to advance the traditional goals of performance requirements -- to ensure rapid deployment of services and to prevent spectrum warehousing, to ensure that carriers provide progressively greater and improved service, to assure provision of service to rural areas, and to prevent large service providers and incumbent LECs from impeding competition by buying out all competitors. Two cellular companies believe that reasonable build-out requirements, such as those used for PCS, would not be a significant burden on WCS licensees. Omnipoint proposed that, in lieu of specific build-out requirements, licensees be required to make a showing of substantial service at a five-year benchmark. 110. In contrast, several commenters believe that performance requirements might not be necessary for WCS or that they may even be potentially harmful. PPF asserts that the use of competitive bidding and the broad range of services that may be offered on WCS spectrum ensure that the WCS spectrum will end up in the hands of parties that value it most highly and have the most incentive to develop it. DigiVox contends that build-out requirements would discourage use of the spectrum by low-tier services whose physical infrastructure deployment to cover a geographic area will require relatively long periods of time to build out. PCIA urges the Commission not to adopt performance requirements if the WCS spectrum is used to provide a high-speed data service. In this regard, AT&T contends that, if the Commission finds that build-out requirements are unnecessary for WCS licensees, it should eliminate build-out requirements for all CMRS licensees in the interests of regulatory parity. BellSouth, though generally supportive of build-out requirements, similarly believes that if they are not applied to WCS licensees they also should be eliminated in all competing services. 111. Decision. We have concluded that, considering the unique circumstances in which WCS licenses are being awarded and the strict technical requirements necessary to prevent interference, we will adopt very flexible build-out requirements for WCS. Specifically, we will require licensees to provide "substantial service" to their service area within 10 years. Although WCS licensees will have incentives to construct facilities to meet the service demands in their licensed service area, we believe that minimum construction requirements can promote efficient use of the spectrum, encourage the provision of service to rural, remote and insular areas and prevent the warehousing of spectrum. 112. The build-out requirement that we adopt today is the most liberal construction requirement adopted by the Commission to date. We believe that this liberal build-out requirement is appropriate in the case of WCS for a number of reasons. First, we are providing WCS licensees with the flexibility to offer a range of services using the WCS spectrum. Given the broad range of new and innovative services that the comments lead us to believe might be provided over WCS spectrum, imposing strict construction requirements that would apply over the license term would be neither practical nor desirable as a means of meeting Section 309(j)'s objectives regarding warehousing and rapid deployment. Without knowing the specific type of service or services to be provided, it would be difficult to devise specific construction benchmarks. Further, given the undeveloped nature of equipment for use in this band and the technical requirements we are adopting to prevent interference, we are concerned that strict construction requirements might have the effect of discouraging participation in the provision of services over the WCS spectrum. It may be that a potential licensee could efficiently conduct certain operations on WCS spectrum, but must await further technological developments to do so affordably. Adopting strict construction requirements here could effectively preclude efficient uses of the spectrum. Particularly in light of the technological uncertainties associated with use of WCS spectrum to provide certain services consistent with the interference levels we adopt today, we believe that stringent build-out requirements are not warranted. 113. At the ten year period, we will require all licensees to submit an acceptable showing to the Commission demonstrating that they are providing substantial service. Licensees failing to demonstrate that they are providing substantial service will be subject to forfeiture of their licenses. We note that in the past we have defined substantial service as "service which is sound, favorable, and substantially above a level of mediocre service which just might minimally warrant renewal." For WCS, however, we believe that further elaboration on this standard in the form of examples of what might constitute substantial service is useful. Thus, for a WCS licensee that chooses to offer fixed, point-to-point services, the construction of four permanent links per one million people in its licensed service area at the ten-year renewal mark would constitute substantial service. In the alternative, for a WCS licensee that chooses to offer mobile services,