. Report WT 97-26 WIRELESS TELECOMMUNICATIONS ACTION June 23, 1997 FCC AMENDS 800 MHZ SPECIALIZED MOBILE RADIO RULES TO FACILITATE AUCTIONS AND THE RAPID DEPLOYMENT OF SERVICES TO THE PUBLIC The Commission today adopted its Second Report and Order in PR Docket No. 93-144 to facilitate the auction of 800 MHz Specialized Mobile Radio (SMR) licenses and the deployment of 800 MHz SMR service to the public. The 800 MHz SMR service rules and competitive bidding rules for the upper 200 channels were originally adopted on December 15, 1995, in a First Report and Order, Eighth Report and Order and Second Further Notice of Proposed Rule Making, FCC 95-501. This Second Report and Order addresses proposals in the Second Further Notice of Proposed Rule Making. In the Second Report and Order, the Commission made the following changes to its rules: Lower 230 Channel Service Rules  The lower 80 SMR channels and 150 General Category channels will be licensed on a geographic basis using EA service areas.  The lower 80 SMR channels will be licensed in sixteen non-contiguous five-channel blocks. The 150 General Category channels will be licensed in three contiguous fifty- channel blocks.  No aggregation limit will be adopted on the number of lower 230 frequencies that can be licensed to a single applicant. Aggregation remains limited by the 45 MHz CMRS spectrum aggregation limit. Rights and Obligations of Lower 230 Channel Licensees  EA licensees will have the right to provide service anywhere within their EAs, provided that they afford protection to incumbents as required.  EA licensees have the right to recover spectrum licensed to incumbents within their EAs where the incumbent's license cancels automatically or where there is discontinuation of spectrum use by the incumbent. -2-  An EA licensee must provide "substantial service" to its geographic service area within five years of the grant of its license. Licensees can also meet this requirement by providing coverage to at least one-third of the population of their geographic service area within three years of license grant and two-thirds population within five years.  Incumbents on the lower 230 channels will be allowed to operate within their 18 dBæV/m interference contours, provided that all affected co-channel incumbent licensees consent to such operation. EA licensees will be required to afford protection to all incumbents based on the incumbents' 36 dBæV/m contours. The "Industry Proposal" is therefore not adopted.  To facilitate relocation and geographic licensing, restrictions against transfer of incumbent licenses prior to construction will be temporarily waived on the lower 230 channels.  Incumbent licensees on the lower 230 channels will not be subject to mandatory relocation. All incumbent licensees (both SMR and other incumbents) may continue to operate on these channels under their existing authorizations. Mandatory Relocation of Incumbents From the Upper 200 Channels  An incumbent licensee on the upper 200 channels who receives notice from an EA licensee that such EA licensee intends to relocate that incumbent may compel the EA licensee to negotiate, and may compel simultaneous negotiations with all EA licensees who have so notified the incumbent.  EA licensees who notify the incumbent licensee of an intention to relocate them will share, pro rata, the costs of relocating the incumbent. An EA licensee's pro rata share will be determined by the number of the incumbent's channels in an EA licensee's spectrum block compared with the total number of channels in the incumbent's system.  Procedures are established for EA licensees who relocate incumbents to obtain pro rata reimbursement from other EA licensees who benefit from the relocation.  Criteria are established for defining "comparable facilities," which the EA must provide to an incumbent as a precondition of mandatory relocation. We identify four factors -- system, capacity, quality of service, and operating costs -- that are relevant to determining comparable facilities. Partitioning and Disaggregation for 800 MHz and 900 MHz Licensees  Geographic area licensees in the 800 MHz and 900 MHz SMR services may partition their license areas or disaggregate spectrum to other eligible entities. -3-  Partitioning of geographic area licenses is permitted for any geographic area defined by the parties, and disaggregation is allowed for any amount of spectrum.  The original geographic area licensee and the partitionee/disaggregatee may choose between flexible coverage and channel usage requirements that are consistent with the underlying requirements for the respective 800 MHz and 900 MHz channel bands.  Designated entity licensees that partition or disaggregate to those who are not designated entities will be required to compensate the Federal government through an unjust enrichment payment, calculated on a proportionate basis. Auction Rules for the Lower 230 Channels  Selection among mutually exclusive applications for the lower 80 and General Category channels will be through competitive bidding.  Simultaneous multiple round bidding and a simultaneous stopping rule will be used as well as the Milgrom-Wilson activity rule.  Bidding credits will be available on a tiered basis for eligible small businesses. Small businesses with average gross revenues that do not exceed $3 million for the preceding three years would receive a 35 percent bidding credit, while small businesses with average gross revenues that do not exceed $15 million for the preceding three years would receive a 25 percent bidding credit.  The Commission will defer its decision on whether to adopt installment payment plans for the lower 230 channels until the resolution of the general competitive bidding proceeding (Part 1). The Commission found that these changes to its rules would not only eliminate a cumbersome and outdated SMR regulatory scheme, but also promote competition and provide SMR licensees with the flexibility to deploy multiple technologies in response to a changing marketplace and further the Congressional mandate of establishing regulatory symmetry between SMR licensees and other competing providers of Commercial Mobile Radio Service. In addition, the Commission simultaneously released its Memorandum Opinion and Order which resolved the remaining issues from its First Report and Order and Eighth Report and Order which concerned geographic area licensing for the upper 200 channel blocks of the 800 MHz SMR service. In that document, the Commission:  Reversed its prior decision to redesignate the General Category for SMR-only service. The Commission determined that private users should continue to be eligible for General Category channels. The Commission reaffirmed, however, its determination that General Category licenses should be geographically based and awarded through competitive bidding where mutually exclusive applications are filed. -4-  Reduced the mandatory relocation negotiation period from two years to one year. The negotiation periods for relocating incumbents is now one year for voluntary negotiations and one year for mandatory negotiations.  Similar to the approach adopted for the lower 230 channels, bidding credits will be available on a tiered basis for eligible small businesses in the upper 200 channels. Small businesses with average gross revenues that do not exceed $3 million for the preceding three years would receive a 35 percent bidding credit, while small businesses with average gross revenues that do not exceed $15 million for the preceding three years would receive a 25 percent bidding credit.  Reversed its decision to adopt installment payments for the upper 200 channel blocks, and modified its rules to delegate authority to the Wireless Telecommunications Bureau to set bid increments before or during the auction. Actions by the Commission, June 23, 1997, by Second Report and Order (FCC 97-223) and Memorandum Opinion and Order (FCC 97-224). Chairman Hundt, Commissioners Quello, Chong, and Ness. - FCC - News Media Contact: Audrey Spivack at (202) 418-0654. Wireless Telecommunications Bureau Contacts: (Policy and Rules Branch)Shaun A. Maher at (202) 418-7240 Michael Hamra at (202) 418-7240 (Auctions Division)Thomas Horan at (202) 418-0660