Before the
Federal Communications Commission
Washington, D.C.

CC Docket No. 92-297
5. In this Notice we propose the use of competitive bidding to choose among mutually exclusive LMDS and FSS applicants. We are also addressing the 29.5-30.0 GHz band in this docket. It is necessary to consider this band segment simultaneously with the 27.5 - 29.5 GHz band because our band segmentation proposal for the latter band anticipates providing spectrum for geostationary FSS at 29.5 - 30.0 GHz.
14. The LMDS/FSS 28 GHz Band Negotiated Rulemaking Committee met between July 26, 1994 and September 23, 1994; the Report of the Committee, dated September 23, 1994, was presented to the Commission and is included in the docket of this proceeding.
However, we tentatively conclude that the 40 GHz band is not suitable for LMDS as proposed in this docket. Internationally and in the United States the 40.5 to 42.5 GHz band is allocated for fixed services on a secondary basis to broadcast satellite services. In addition, LMDS proponents CellularVision, Texas Instruments and Pacific Telesis state that moving LMDS to the 40 GHz band will result in delays in deployment of LMDS of 12-18 months.
37. Likewise, we tentatively conclude that the 40.5 to 42.5 GHz band is not suitable for the satellite systems as proposed in this docket. This band is not internationally or domestically allocated for fixed satellite service operation. Satellite proponents were also concerned that moving their particular service to 40 GHz would delay implementation of theirservice since technologies have not been fully developed and tested at 40 GHz, as they have been at 28 GHz. We recognize these concerns.

In the matter of:

Rulemaking to Amend Parts 1, 2, 21, and 25 of the Commission's Rules to Redesignate the 27.5 - 29.5 GHz Frequency Band, to Reallocate the 29.5 - 30.0 GHz Frequency Band, to Establish Rules and Policies for Local Multipoint Distribution Service and for Fixed Satellite Services and Suite 12 Group Petition for Pioneer's PP-22 Preference Third Notice of Proposed Rulemaking and Supplemental Tentative Decision Adopted: July 13, 1995 Released: July 28, 1995 Comment Date : August 28, 1995 Reply Comment Date : September 18, 1995 By the Commission: Table of Contents Paragraph I.Introduction 1 II.Background 7 A.Specific Satellite Proposals 17 1. Geostationary Fixed Satellite Service Proposals 19 2. Non-Geostationary Fixed Satellite Service Proposals 23 3. Non-Geostationary/Mobile Satellite Services Feeder Links 25 B. Specific LMDS Proposals 27 1. CellularVision's System 29 2. Texas Instruments' System 31 3. Video/Phone's System 32 III. Band Splitting Proposal 33 A. Co-Frequency Sharing 39 B. Commission Proposal 44 1. Primary LMDS Spectrum 47 2. Primary GSO/FSS Spectrum 54 3. Primary NGSO/FSS Spectrum 56 4. Primary MSS Feeder Link Spectrum 59 a. 29.1 to 29.25 GHz 60 b. 29.25 to 29.50 GHz 64 c. Uplinks for MSS Feeder Links and Downlinks for NGSO and GSO FSS Systems in the 19.3-19.7 GHz Band 65 d. Effect of Decisions at WRC-95 on the Band Segmentation Plan 66 5. Other Allocations in the 28 GHz Band 67 6. Supplemental Tentative Decision on CellularVision's Pioneer Preference Application 68 IV. Local Multipoint Distribution Service 74 A. Spectrum Licensing 75 B. Geographic Service Areas 82 C. LMDS Services and Regulation 92 D. Eligibility 97 1. Telephone Companies 98 2. Commercial Mobile Radio Service Providers 102 3. Cable Television Companies 103 4. Multichannel Multipoint Distribution Service Licensees 107 5. Transfer of Control and Assignment of Licenses 108 E. Regulation of Common Carriers/Preemption 109 F. Construction Requirements 113 G. Technical Rules Proposal 118 1. Frequency Coordination 119 2. Equivalent Isotropically Radiated Power (EIRP 122 3. Spectral Efficiency 124 V. Satellite Services 125 VI. Competitive Bidding Procedures 129 A. Competitive Bidding 129 B. Determining Mutual Exclusivity 134 C. Competitive Bidding Issues 137 1. Competitive Bidding Design 137 a. General Competitive Bidding Principles 137 b. Competitive Bidding Methodology for LMDS Licensees 139 c. GSO/FSS Auction Proposals 143 d. NGSO/FSS Auction Proposals 145 e. MSS/Feeder Links 146 f. Bidding Procedures 148 2. Procedural and Payment Issues 166 a. Upfront Payments 167 b. Down Payment and Full Payment for Licenses Awarded by Competitive Bidding 168 c. Bid Withdrawal, Default, and Disqualification 170 3. Regulatory Safeguards 172 a. Unjust Enrichment Provisions 172 b. Performance Requirements 173 c. Rules Prohibiting Collusion 174 4. Treatment of Designated Entities 176 a. Introduction 176 b. Installment Payments 186 c. Bidding Credits 190 d. Rural Telephone Companies 194 e. Additional Special Provisions 195 VII. Procedural Matters 197 A. Ex Parte Rules -- Non-Restricted Proceeding 197 B. Initial Regulatory Flexibility Analysis 198 C. Comment Dates 205 VIII. Ordering Clauses 207 Appendix A List of Participants on the LMDS/FSS 28 GHz Band Negotiated Rulemaking Committee Appendix B Proposed Rule Amendments I. INTRODUCTION 1. This is the Third Notice of Proposed Rulemaking in our proceeding to establish Local Multipoint Distribution Service (LMDS in the 27.5 - 29.5 GHz (28 GHz frequency band. In this Notice, we propose a band segmentation plan that we tentatively conclude will permit both LMDS and Fixed Satellite Service (FSS systems to operate in the 28 GHz frequency band. We also propose to accommodate feeder links for certain Mobile Satellite Service (MSS systems in this band. 2. The proposal ensures the rapid dissemination of innovative communications services by facilitating the entry of multiple providers into the market. New providers will offer facilities-based competition to each other and traditional cable and telephone carriers -- greatly enhancing customer choice. A wealth of innovative services will include two-way video, teleconferencing, telemedicine, telecommuting, data services and global networks. Flexible service rules will also promote the efficient use of scarce spectrum by allowing providers to adjust and respond to changes in technology and market demand. 3. Developers of LMDS fixed microwave service propose to offer broadband two-way video communications, including video distribution, teleconferencing, telemedicine, telecommuting, and data services using a cellular system design to establish communications links with subscribers. LMDS proponents hope to provide high quality competition to cable operators and local exchange carriers. LMDS' cellular-like capabilities enable it to offer diverse services within the same region. 4. FSS systems, using state of the art technology, propose to offer a range of domestic and international services, including telephone, video, teleconferencing, and interactive data services. The proposal will provide bandwidth to connect seamlessly satellites and terrestrial fiber networks. Feeder links for MSS systems operate in the FSS frequency bands, and are needed to complete the transmission paths to enable these services to be available to mobile users. 6. Finally, we are supplementing our earlier Tentative Decision on CellularVision's request for a Pioneer Preference. This supplement to our earlier proposal is necessitated by events occurring since the issuance of our First Notice of Proposed Rulemaking. II. BACKGROUND 7. The 27.5 - 29.5 GHz frequency band is currently allocated for fixed, fixed-satellite uplinks, and mobile services. 47 C.F.R. § 2.106. Part 21 of the Code of Federal Regulations permits fixed point-to-point use, and Part 25 of the Code of Federal Regulations permits fixed satellite services in this band. Except for experimental work in this band conducted by the predecessor-in-interest of CellularVision of New York, L.P., (hereinafter ``CellularVision'' , which began in 1986, very little fixed demand for the spectrum existed prior to 1991. Similarly, except for NASA's experimental Advanced Communications Technology Satellite (ACTS and Norris Satellite Communications's (Norris 1990 application, little demand for fixed-satellite uplinks appeared to exist. 8. In 1990, Motorola Satellite Communications, Inc. (Motorola applied for feeder links for its non-geostationary mobile satellite (Big-LEO system in this band. On July 16, 1990, Norris filed an application to provide satellite services in the 29.5-30.0 GHz band. In January, 1991, the Commission granted the application of CellularVision's predecessor-in-interest, Hye Crest, Inc., for a license to provide LMDS in the 27.5 - 28.5 GHz frequency band covering the New York City Primary Metropolitan Statistical Area (NYPMSA . The application was granted pursuant to waiver of the point-to-point rules in Part 21 in order to allow a fixed cellular point-to-multipoint operation for video distribution (wireless cable . The CellularVision system is operating in the Brighton Beach area of the NYPMSA, and CellularVision has requested authority to expand within its assigned service area. The licensee is also planning to implement telecommunications service. Approximately 975 applications similar to that of Hye Crest's were filed between February, 1991 and October, 1992 requesting waiver of the point-to-point rules so that point-to-multipoint service could be offered. The Commission implemented a freeze on new applications for the Common Carrier Point-to-Point Service in the band 27.5 - 29.5 GHz in October, 1992. The freeze was intended to stop the filing of waiver applications, and it remains in effect. 9. NASA has invested nearly one billion dollars in the in-orbit NASA Advanced Communications Technology Satellite (ACTS system. The project has demonstrated it is feasible to provide a variety of fixed-satellite services in the Ka-band, including integrated services digital networks (ISDN , supercomputer access, and rural electric power monitoring and operations. Specifically, the ACTS system has provided the opportunity for the Mayo Clinic to diagnose patients in remote locations and the opportunity for the U.S. military to conduct overseas communications during Operation Uphold Democracy in Haiti. NASA is operating ACTS under a frequency usage support agreement from National Telecommunications and Information Administration (NTIA . The agreement is accorded experimental status by the Federal Communications Commission. 10. This rulemaking proceeding was preceded by three petitions for rulemaking concerning the 28 GHz band. Harris Corp-Farinon Div. filed a petition for rulemaking requesting that the Commission channelize the 28 GHz band so that manufacturers of point-to-point equipment could standardize their systems. CellularVision filed a petition for rulemaking to change the point-to-point rules in a manner consistent with its waiver so that point-to-multipoint video distribution service could be offered on a regular basis in the band. In response to CellularVision's petition, Video/Phone Systems, Inc. (Video/Phone filed a petition for rulemaking proposing a broadband-on-demand video telecommunications service. 11. The First NPRM was released January 11, 1993. 8 FCC Rcd. 557. In it, the Commission considered the three petitions for rulemaking. The Commission tentatively concluded that redesignation of the fixed point-to-point use of the band to fixed point-to-multipoint could stimulate greater use of the 27.5 - 29.5 GHz frequency band, and proposed detailed rules (other than technical requirements for implementation of a Local Multipoint Distribution Service. The Commission did not specify what type of service would have to be offered, preferring that the marketplace decide the best use of the spectrum. 12. The Commission proposed two blocks of 1000 MHz each for Local Multipoint Distribution Service. This proposal was based on CellularVision's existing technology. However, because the 27.5 - 29.5 GHz frequency band is allocated on a co-primary basis with the Fixed Satellite Service for uplinks, the Commission also requested comment from satellite entities regarding the effect of redesignation and the proposed rules on any proposed satellite use of the band. 13. In response to the First NPRM , a number of different uses were proposed for terrestrial and satellite licensing. The Commission considered the various proposals for the 28 GHz band and released the Second NPRM on February 14, 1994 (9 FCC Rcd 1391 . In it, the Commission found that the majority of commenters and reply commenters supported the Commission's finding of widespread interest in point-to-multipoint uses of the 28 GHz band, but also found significant interest on the part of the satellite industry in the band. Accordingly, the Commission tentatively concluded that the best interests of the public would be to allow both terrestrial and satellite providers to co-exist in the 28 GHz band, and decided to begin a negotiated rulemaking procedure to develop technical rules for sharing the band. After public notice and opportunity to comment, and with the approval from the Office of Management and Budget and the General Services Administration, the Commission established the LMDS/FSS 28 GHz Band Negotiated Rulemaking Committee (NRMC . 15. The results of the Committee's work indicate that LMDS and FSS service uplinks ( i.e ., the ubiquitous subscriber transceivers are not technically able at this time to reasonably share the same spectrum. However, CellularVision and Motorola were able to reach agreement on technical parameters allowing LMDS and feeder links to non-geostationary satellites operating in the Mobile-Satellite Service to share the same spectrum, subject to feasible sharing criteria. There was some indication that limited sharing could beachieved between FSS gateway stations (either non-geostationary or geostationary orbit and LMDS. 16. In the following text, we describe the characteristics of the particular systems proposed. Each of these systems has particular technical characteristics which may render it more suitable for some types of uses or services than other systems. Each also is, in our view, a potentially critical component of both the national and global information infrastructure. Each system description should be read bearing in mind that our ultimate goal is to accommodate the strengths of systems so that, through private investment, competition and ubiquitous service result. A. Specific Satellite Proposals 17. Permitting satellites to operate in the 28 GHz band will contribute to the national and global information infrastructure by modernizing existing communications infrastructures of local telephone service, providing enhanced wide-area mobile services and access to advanced, digital, broadband communications and video services. These advanced services can potentially be provided to every person in the world, whether in an urban or remote location. As a consequence, satellites have significant potential to stimulate economic growth in the United States and abroad. The United States has led the world in developing and implementing satellite technology and the satellite proposals before us represent an opportunity for the United States to continue its leadership role through enhanced communications infrastructures and services. 18. Three types of satellite system uses have been proposed for the 28 GHz frequency bands. First, the Commission has received applications for geostationary fixed satellite service (GSO/FSS licenses. Second, the Commission has received one application for a non-geostationary fixed satellite service (NGSO/FSS system. Finally the Commission has multiple requests for the assignment of feeder links to be used in conjunction with non-geostationary mobile satellite service (NGSO/MSS systems, including specific requests for assignment of frequencies in the 28 GHz band, as well as conditional requests that 28 GHz frequencies be made available for feeder links in the event feeder link assignments cannot be made in other bands. We address each of these types of satellite uses. 1. Geostationary Fixed-Satellite Service Proposals 19. Hughes Communications Galaxy, Inc. (``Hughes'' submitted an application in December 1993 to construct, launch and operate two domestic fixed-satellites to operate in the Ka-band, a system which it calls ``Spaceway.'' Hughes later amended this application to expand the system to 17 interconnected satellites with global coverage. Four of these satellites are proposed to serve the United States. These four satellites serving the U.S. would use 1000 MHz of spectrum at 29.0 - 30.0 GHz for uplinks. Hughes proposes to provide low-cost, ubiquitous, high-speed data, video, and videotelephony communications services. Spaceway proposes to offer United States domestic service, domestic service within other countries, intra-regional service, and global international services. The services will be available ``on demand'' with an estimated domestic satellite capacity of 21,650 simultaneous duplex 384 Kbs channels and 92,000 such channels system wide. The first satellites in the Spaceway network are scheduled to be operational in 1998. 20. Hughes proposes to co-locate two of the four domestic satellites at 101 degrees W.L. and the other two at 99 degrees W.L. Hughes plans to operate each of the co-located satellites over 500 MHz of spectrum, with one operating in the 29.0-29.5 GHz band and the other in the 29.5-30.0 GHz band. Each proposed satellite will incorporate forty-eight 120 MHz spot beams for uplink and downlink communications, twenty-four in each polarization direction. By proposing multiple satellites at each of the orbital locations, Hughes represents the Spaceway network will be able to use power levels that will allow customers to use small, inexpensive earth terminals. By proposing two satellites at two locations, instead of one satellite at four different locations, more geostationary satellites will be accommodated and spectrum efficiency is enhanced. 21. Loral Aerospace Holdings, Inc. (``LAHI'' filed an application in April 1995, requesting authority to construct, launch, and operate a Ka-band geostationary fixed satellite, ``CyberStar.'' CyberStar would use 1250 MHz at 28.75 GHz to 30.0 GHz for satelliteuplinks, to serve the contiguous United States, Alaska, and Hawaii. LAHI proposes to locate Cyberstar at 110 degrees W.L. LAHI's proposed system will consist of 20 regional high-powered spot beams with cross-polarization, each of which is individually designed for efficient coverage and minimal signal degradation due to rain attenuation. The proposed satellite is specifically designed to provide compressed high data rate digital signals in the Ka-band frequency to both commercial and residential users. Proposed services include video telephony and videoconferencing, medical and technical tele-imaging, computer aided design/computer aided manufacturing (CAD/CAM data, and image transmission. 22. In April 1995, PanAmSat Licensee Corporation (``PanAmSat'' , filed an amendment to its application to construct, launch, and operate a new hybrid geostationary fixed-satellite, PAS-9, as part of its separate international communications satellite system. In this amendment, PanAmSat requests 2500 MHz of the Ka-band, at 27.5-30.0 GHz for satellite uplinks, as a component of its proposed system. PAS-9, which PanAmSat proposes to operate at 58 degrees W.L., is to serve the United States and other countries through movable Ka-band spot beams. Services provided by PAS-9 would include two-way Direct-to-Home (DTH and other advanced VSAT services to small antenna networks. 2.Non-Geostationary Fixed Satellite Service Proposals 23. Teledesic Corporation filed an application in March 1994 for authority to construct, launch, and operate a constellation of low-Earth orbit (LEO satellites in the fixed-satellite service. An amendment to that application was also filed in December 1994. Teledesic proposes to operate a constellation of 840 satellites, with 40 active satellites evenly spaced in each of 21 orbital planes in the 28 GHz band. The system will provide ``constant'' coverage to over 95% of the Earth's surface through a fixed grid of approximately 20,000 160km squares or ``super cells.'' Teledesic requests authority to operate using 400 MHz for service links, 800 MHz for gateway-to-satellite feeder links, and 100 MHz for mobile services. 24. Teledesic's proposed services include: providing universal access, at a cost that is independent of location; ISDN; voice; facsimile; two-way digital data; videoconferencing; interactive multi-media; and other broadband types of services which allow the user to access only the amount of bandwidth needed for a particular application (``Bandwidth on Demand'' . Teledesic offers to dedicate some of the capacity of the Teledesic global satellite system on a non-profit basis for developing countries' needs, such as education and health care. 3.Non-Geostationary/ Mobile Satellite Services (NGSO/MSS Feeder Links 25. Big LEO systems are satellite systems capable of providing on a global basis both voice and data mobile satellite services using handheld terminals. The communications link between the satellite and these mobile terminals is referred to as the service link. Another and integral part of a Big LEO system is its feeder links. These are the transmission links to and from the satellite to a central earth station. The feeder link is needed to interconnect the mobile satellite system with other communications networks or with other user transceivers. Without this link, Big LEO systems will not be able to initiate service. 26. Since the Second NPRM , the Commission has licensed three Big LEO systems. The Commission also found that two other applicants needed additional time to establish they were financially qualified, and deferred further consideration of their applications until January 31, 1996. Another applicant elected to defer its financial showing until January 31, 1996. Two of the licensees proposed to locate feeder links in the Ka-Band, and were granted authority to construct satellites, at their own risk, with feeder links in the band. Specifically, Motorola was conditionally authorized to construct feeder uplinks in the 29.1-29.3 GHz band, and feeder downlinks in the 19.4-19.6 GHz band. Motorola's licensed Big LEO system, Iridium, is under construction and is scheduled for launch in 1996. TRW, another Big LEO licensee, was conditionally authorized to construct feeder uplinks in the 29.7-30.0 GHz portion of the band, and feeder downlinks in the 19.8-20.1 GHz frequency bands. Although proposed as a band for MSS feeder links in the ITU Study Group Process, this band was notlisted as a potential MSS feeder link band in subsequent preparations for the WRC-95. Therefore, we are considering other segments of the Ka band as candidates to accommodate TRW's proposal. Other licensees and applicants have also asked for feeder link spectrum outside the Ka-Band, but have indicated that, depending on the availability of that spectrum worldwide, they may wish to modify their proposals. B. Specific LMDS Proposals 27. LMDS may provide services that compete with local exchange carriers in the provision of local exchange service, and with cable operators in the provision of video programming. LMDS developers and manufacturers, especially CellularVision, have provided for the record complete system designs and descriptions of their proposed services and the projected consumer interest in these services. Very high subscriber capacity for two-way video telecommunications is available through technology developed for use in this frequency band. Hub transceivers create small cells, typically of six miles diameter, which transmit to subscriber locations, and which can receive subscriber transmissions on a return path. Because the cells are small, and arranged in a typical cellular pattern, a very high level of frequency reuse is possible. This pattern, combined with the availability of broadband microwave spectrum, results in sufficient capacity in the proposed LMDS system designs to provide wireless competition to local exchange carriers or cable television systems even in urban areas. Service in competition to cable television providers is now being offered in the Brighton Beach area of New York City, pursuant to a license to CellularVision, Inc. A single cell of six miles diameter is serving 1700 subscribers. 28. LMDS, as developed since the First NPRM was released, joins services traditionally provided by separate communications service providers, such as cable television, telephony, video communications, data transfers, and interactive transactions of all types. In addition, based on the interest generated in LMDS by entrepreneurs in this country, LMDS has attracted attention and support from both developed and developing countries around the world. LMDS manufacturers CellularVision and Texas Instruments have begun video and telephony services in other countries using LMDS technology. At least seven other countries, including Canada and Mexico, have licensed LMDS on an experimental or permanent basis inthe 28 GHz band. LMDS developers offer the prospect for modern wireless telephone systems, video distribution, and other communications services to developing countries which do not have a wireline or cable infrastructure. 1. CellularVision's System 29. CellularVision states that the technology it proposes is ``capable of immediately providing interactive high quality video, voice, and data services. . . .'' It argues that LMDS will help meet the public demand for additional multichannel video programming and for two-way voice and data service. CellularVision argues that the public will benefit from having an ``innovative and competitive two-way interactive communications system'' capable of providing the equivalent of fiber cable service without the need to wire a community, and that LMDS is capable of providing simultaneous telephone service to 75% - 90% of the population of the United States. CellularVision also states that its system is capable of incorporating future technological advances such as high definition television and two-way digital communications. 30. CellularVision has stated that its requirement to compete successfully with cable operators is 1 gigahertz of contiguous spectrum. CellularVision's analog system is a multicell configured distribution system with a return path capability. The video channels (20 MHz are transmitted over 1 gigahertz of spectrum with the same polarization. Two-way communication channels are inserted between the video channels and are transmitted with opposite polarity. The system uses an omni-directional antenna to transmit from the node, or center of the cell. The subscriber's receiver antenna uses a narrow beamwidth to eliminate multipath reception and to obtain sufficient link margin for service. Each cell is designed to be between 6 to 12 miles in diameter, and shadowed areas are served with a repeater or reflector. The system avoids interference between adjacent cells by cross-polarizing the signals and by taking advantage of the discrimination provided by the subscriber receiving antenna. CellularVision states that its system makes exceptionally efficient use of the frequency spectrum. 2. Texas Instruments' System 31. The Texas Instruments LMDS system is a two-way digital system providing video, data and telephony services. The Texas Instruments system is designed to operate using 1 gigahertz, and the company believes that it requires 1 gigahertz of spectrum to be competitive with landline facilities; however, this spectrum need not be contiguous. The system design consists of hubs, customer premise equipment and central office servers for video and data. The system is based on a cellular design with a typical cell size of 3 miles capable of serving 16,000 subscribers. Each hub employs several sector wide-beam antennas and provides 1,000 simultaneous two-way voice channels, 56 video broadcast channels, and 200 video on demand channels per sector. Each subscriber location employs a highly directional antenna and, in addition to its video capability, will have a 64 kbps data port and two telephone lines. Isolation between hub transmissions in adjacent cells is achieved by the directionality of the antennas and cross-polarization isolation. 3. Video/Phone's System 32. Video/Phone believes that its system also requires 1 gigahertz of spectrum to be viable. The record does not contain a statement of whether Video/Phone's technology requires contiguous spectrum. Its architecture incorporates optional modulation techniques to provide a variety of one-way and two-way voice, data and video services. Video/Phone plans new two-way broadband applications such as distance learning, telecommuting, telemedicine, videoconferencing at high-speed data rates, business and professional television, half-duplex database services, and metropolitan area LAN interconnection. Hub density, intended cell coverage radius (0.5 mile , the degree of cell sectorization, Equivalent Isotropic Radiated Power (EIRP levels, and other parameters in a typical Video/Phone deployment will vary according to service demand and interference environment conditions. The system may also employ hub diversity in some configurations to allow users to orient antennas toward multiple hub locations, as well as dynamic channel assignment and other operational capabilities. III. BAND SPLITTING PROPOSAL 33. In the Second Notice of Proposed Rulemaking, the Commission found that if parties were unable to find a technical solution to sharing the 28 GHz band in the Negotiated Rulemaking Committee, the Commission would propose a band plan for public comment. 34. In this Notice, we propose a band segmentation plan. This plan is based on the filings in the proceeding and meetings with individual parties to this proceeding. Furthermore, we have attempted to design a band segmentation plan that will meet our goal, stated in the Second NPRM , of accommodating all the types of proposed services for this frequency band. Although we stated that goal in the context of seeking a technical sharingsolution to the different services proposed, we are convinced that denying one or the other of the proposed services is not in the public interest. Both terrestrial and satellite services bring the promise of competition and new services to the nation's communications infrastructure. 35. In the Second NPRM we stated that we could make our selection among service proposals on the basis of certain factors. Among these factors were economic growth potential and public interest concerns that may not be readily calculable in economic terms. Accordingly, if any party believes that its service requirements are not adequately satisfied by our proposed band segmentation plan, it should also address the factors stated in the Second NPRM . In addition, any commenter asserting that the plan does not provide sufficient capacity for its system, must specify the minimum spectrum required to support its system, supporting this assertion with a concrete technical and economic analysis, and must propose a plan that accommodates the reasonable requirements of all qualified applicants. 36. The Commission contemplated different options for licensing the band and analyzed various sharing proposals submitted in developing our plan. One of the options proposed by parties was to move one service to the 40 GHz band and allow the other service to use the 28 GHz band. The United Kingdom's Radiocommunications Agency believes: ``[t]hat the market conditions and technological developments for MVDS [Multipoint Video Distribution Service] are ripe for deployment at 40 GHz, which is a frequency band clear of other spectrum resource pressures internationally.'' These parties also stated that the cost of moving LMDS operations to the 40 GHz band would result in a cost increase sufficient to make LMDS not commercially viable. 38. Since our proposal accommodates both services at 28 GHz, we need not decide which service would be better suited for operating at 40 GHz. This does not preclude any future determination to allocate spectrum for either service at 40 GHz. A. Co-Frequency Sharing 39. As mentioned previously, we established a Negotiated Rulemaking Committee, with representatives from each proposed service, and the Commission participating, to try to develop a sharing plan that would accommodate LMDS systems, FSS systems, and feeder links for MSS systems. After two months, the negotiations ended without consensus on a technical sharing arrangement that would accommodate all. The Committee concluded that it was not feasible for LMDS stations and the ubiquitous FSS user transceivers to share the same frequencies. There was also an indication that limited sharing could be achieved between gateway access to the FSS (either NGSO or GSO and LMDS. In addition, Motorola, CellularVision, and Texas Instruments developed a technical sharing agreement allowing LMDS and MSS feeder links to share the same spectrum with certain constraints. 40. Bell Communications Research (Bellcore and Geowave each submitted studies, after the conclusion of the meetings held by the Negotiated Rulemaking Committee, that they contend demonstrate that co-frequency sharing between LMDS and FSS systems is possible. Bellcore concluded that co-frequency sharing was feasible with a 99.9% availability for both services, if (1 LMDS systems were modified to increase their interference tolerances; and(2 if the LMDS and FSS operators used a spectrum assignment protocol in which assignments were based upon LMDS operator preferences. 41. MITRE Corporation and NASA submitted filings disputing Bellcore's methodology. Both concluded that sharing is not, in fact, feasible. MITRE and NASA argue that Bellcore's study did not consider, among other things, LMDS systems besides CellularVision and Texas Instruments; FSS systems besides Teledesic and Spaceway; the aggregate interference potential of Teledesic and Spaceway; interference from satellite services into the LMDS subscriber-to-headend link, and interference into adjacent LMDS cells. They also contend that Bellcore's approach obscures the effects of interference on specific LMDS subscribers and appears to be based on ``best-case'' values, not ``worst-case'' as described. Both are also concerned about the impracticality of the proposed spectrum protocol. We tentatively conclude that these concerns are valid. 42. In its study, Geowave proposes a sharing protocol under which digital LMDS hubs activate only when a satellite is not transmitting to that area. According to Geowave, this can be accomplished by including a synchronization mechanism on the LMDS hub transmitters. The timing mechanism would ``turn off'' the LMDS hub when satellite earth stations in the cell area were transmitting to the satellite. This study has been the subject of criticism on the grounds that it has not addressed all interference scenarios, nor does it take into account analog LMDS systems. The sharing methodology, for example, is specific to the Teledesic ``grid'' system. In order to work, the United States would need to be divided into ``cells'' that are an exact match to those being projected on the Earth by Teledesic. Further, LinCom Corporation, in its review of the GeoWave proposal states that adjacent cell interference into LMDS subscribers has not been taken into account. 43. Based on the existing record, we tentatively conclude that co-frequency sharing between NGSO/FSS or GSO/FSS systems and LMDS systems is not feasible at this time. We further tentatively conclude that Bellcore and Geowave studies do not provide a basis for rejecting the conclusion of the Negotiated Rulemaking Committee regarding the infeasibility of sharing. For example, among the issues raised concerning the Bellcore study, we are particularly concerned about whether the study deals adequately with potential interference cases and with the workability of spectrum assignments that may need to accommodate large numbers of LMDS operators and FSS transmitters. We seek comment on these tentative conclusions. Based on these tentative conclusions, we propose in this Notice a band segmentation plan that divides the 27.5-29.5 GHz frequency band into discrete spectrum segments with each segment designated to FSS, MSS feeder links or LMDS, on a primary or co-primary basis. B. Commission Proposal 44. We propose a segmentation scheme for the 28 GHz band that we believe is equitable, allows licensees to operate viable systems, promotes competition within the band, allows the public to receive service as soon as possible, and provides for future growth of both satellite and terrestrial services. The plan also supports the NII and GII, creates competition to cable, LECs, cellular, and PCS, and continues to promote the U.S. as a leader in satellite technology. We believe this spectrum band plan accommodates the expected needs of all of the parties, although it does not reflect their exact requests. We maintain that each proponent can still develop and operate viable systems within the band, and initiate competitive services. Moreover, this proposal allows both terrestrial LMDS and satellite industries to implement services in the near term. 45. Our proposed plan is depicted graphically as follows:

PROPOSED BAND SEGMENTATION PLAN
,

27.5 28.35 28.60 29.1 29.25 29.5 30.0 GHz
46. In proposing this plan, we recognize that proponents submitted other band segmentation plans. Although we do not propose to adopt any of these specific plans, each plan was analyzed and considered in developing our proposal. For example, a group of LMDS proponents submitted a revised plan which proposed co-primary sharing between LMDS and NGSO/FSS systems in 150 MHz of the band.
We do not propose FSS systems sharing on a co-primary basis with LMDS systems for reasons discussed more fully in connection with the discussion on the Bellcore study.
We also note that no service was placed as a secondary user in the 400 MHz of MSS feeder link spectrum due to the co-primary allocations there. Other plans fail to provide adequately for the operational needs of one or more of the proposed systems. For example, a plan submitted by TRW designates 925 MHz to LMDS (200 co-primary with MSS feeder links
, 400 MHz to NGSO/FSS, and 875 MHz to GSO/FSS systems, respectively. We do not believe this is sufficient to support either the LMDS or NGSO services, as discussed below.
Similarly, a plan proposed by satellite proponents and one LMDS proponent designates 1000 MHz for LMDS services using two non-contiguous 500 MHz blocks, which may increase the cost of some analog LMDS system designs.
We do not believe this adequately supports LMDS systems.
1. Primary LMDS Spectrum
47. First, we propose to designate 850 MHz at 27.5 GHz to 28.35 GHz to LMDS, on a primary basis. GSO/FSS or NGSO/FSS systems would be permitted on a secondary basis, with the purpose of providing limited ``gateway'' type services. We also propose to designate to LMDS 150 MHz of bandwidth on a co-primary basis with MSS feeder links, at29.1 to 29.25 GHz.
We believe the planned LMDS services can be supported within this 1000 MHz of spectrum.
48. We have proposed to designate LMDS to the lowest portion of the 28 GHz band because CellularVision is operating a cell at 27.5-28.5 GHz and because LMDS equipment is already manufactured to operate in this frequency range. In doing so, we recognize that some LMDS proponents planning to implement 20 MHz type analog systems sought 1000 MHz of contiguous spectrum at 27.5 to 28.5 GHz. However, Texas Instruments and Hewlett Packard, both LMDS equipment manufacturers, note that a non-contiguous assignment could be used to meet LMDS operators' separate inbound and outbound spectrum needs. Further, we are concerned that designating LMDS more than 850 MHz of contiguous spectrum would not leave sufficient spectrum for other services in the band.
49. Further, although 150 MHz of the 1000 MHz designated for LMDS on a primary basis is shared with MSS feeder links on a co-primary basis, we believe that such co-frequency operations are feasible, as evidenced in part by the fact that parties to the Negotiated Rulemaking Committee were able to reach agreement on sharing between such services.
50. The location of the 150 MHz shared portion, at 29.1 to 29.25 GHz, is dictated by the proposed frequency for Motorola's feeder links. Because we tentatively conclude that we cannot designate more than 850 MHz of contiguous spectrum to LMDS at the low end of the band, we believe that designating the additional 150 MHz requested by LMDS applicants at 29.1 to 29.25 GHz is a reasonable compromise.
51. Harris Corporation-Farinon Division (Harris
and Digital Microwave Corporation (Digital
filed a Petition for Rulemaking ``In the Matter of Amendment of Parts 2, 21 and 94 of the Commission's Rules Concerning Channel Assignments in the 27.5 - 29.5 GHz Band.'' Harris and Digital were represented on the Negotiated Rulemaking Committee and have participated in the entire proceeding of this docket, including the discussions on the band segmentation issues. Harris and Digital have been concerned that the Commission adopt a channelization plan for the 28 GHz band, and that the band be available under Part 94 of the Commission's rules (for private carriers
in addition to its current availability under Part 21 (for common carriers
.
As noted in the
First NPRM
, Harris filed a previous rulemaking petition to make that request. The Commission did not propose to specify any channelization plan in the first NPRM, nor did it propose to maintain any of the spectrum solely for point-to-point use; instead, it proposed to redesignate the 28 GHz band, to the extent that it is used for terrestrial services, for point-to-multipoint services.
52. In this Notice we again decline to dedicate part or all of the 28 GHz band solely to point-to-point services, as requested by Harris and Digital. At this time we believe it is in the public interest to provide terrestrial licensees in the 28 GHz band with the flexibility to offer a variety of services and to develop innovative new services. Harris and Digital have not demonstrated that the public interest in point-to-point services is greater than the interest in the myriad LMDS services proposed by other manufacturers and developers during the course of this proceeding.
53. Entities interested in providing point-to-point services may apply for LMDS spectrum themselves, they may seek geographic partitioning and/or spectrum disaggregation opportunities to the extent that these options are adopted in final LMDS rules, or they may lease spectrum from LMDS operators, to the extent permitted by our rules. Finally, we believe that we have made sufficient point-to-point spectrum available for support of wired and wireless telecommunications systems for the present.
b. Primary GSO/FSS Spectrum
54. Next, we propose to designate 1000 MHz of spectrum on a primary basis to GSO/FSS systems from 28.35 to 28.60 GHz and 29.25 to 30.0 GHz. We also propose to allow NGSO/FSS systems to operate on a secondary basis to GSO/FSS systems in these bands and to allow MSS feeder links to operate on a co-primary basis in the 29.25 to 29.5 GHz band.
This matches the request submitted by Hughes for 1000 MHz for operation of Spaceway, its proposed GSO/FSS system. It is, however, less than the amount of spectrum proposed by two other applicants, specifically PanAmSat and Loral. PanAmSat requests 2500 MHz of spectrum for operation of its proposed satellite, PAS-9, which will also operate in the C and Ku bands, and Loral requests 1250 MHz of spectrum for operation of its satellite system, CyberStar. Moreover, this plan assumes GSO/FSS systems and MSS feeder links can operate in the same band.
55. Several factors contribute to designating 1000 MHz of spectrum for the GSO/FSS systems. First, U.S. satellites currently providing fixed-satellite services in the C (4/6 GHz
and Ku (12/14 GHz
frequency bands are required, for spectrum efficiency, to use full frequency reuse, and to operate across the entire 500 MHz of each frequency band in each transmission direction. In response to the increased demand for satellite services, most FSS systems being built today are hybrid satellites, that is, they operate in both the C and Ku bands, thus utilizing 1000 MHz. Currently, the C and Ku bands are heavily utilized. Second, the GSO/FSS systems proposed for operation in the Ka band are proposing broadbandapplications. Broadband applications require more bandwidth than current data operations. We therefore believe that 1000 MHz of spectrum is needed to support multiple Ka-band GSO/FSS systems. Further, 250 MHz of this 1000 MHz of spectrum will be shared on a co-primary basis between GSO/FSS systems and MSS feeder links, as explained in more detail below.
3. Primary NGSO/FSS Spectrum
56. We propose to designate 500 MHz of spectrum on a primary basis, at 28.60 to 29.1 GHz, to NGSO/FSS systems. We also propose to allow GSO/FSS systems to operate in this segment on a secondary basis. Teledesic has requested 1200 MHz of spectrum for its system. It proposes to operate user terminals over 400 MHz of spectrum and its gateway or high data rate (GigaLink
terminals over 800 MHz of spectrum.
Various technical analyses, submitted to the Commission and to industry preparatory groups for WRC-95, have demonstrated that the ubiquitous deployment of user terminals for a NGSO/FSS system, such as Teledesic's, will receive and cause unacceptable amounts of interference to other satellite users in the frequency band. These same analyses also conclude that the gateway terminals pose fewer problems for coordination than do the user terminals. This means that the user terminals are prime candidates to operate on a primary non-shared basis, and the gateway terminals are prime candidates to operate, for the most part, on a secondary basis in other bands. In particular, we propose secondary NGSO/FSS operations in the 750 MHz of spectrum in the 28.35 to 28.60 GHz and 29.5 to 30.0 GHz bands.
57. We believe designating NGSO/FSS systems to only 400 MHz of primary spectrum, however, could call into question the system's operational ability. Relegating all gateway terminals to secondary status may lead to operational uncertainty. Not only would the gateway terminals bear the burden of coordinating with domestic GSO system operations, but they would be subject to the International Telecommunication Union Radio Regulation 2613, which requires NGSO systems to cease operations if they cause unacceptable interference into a GSO system.
Consequently, we propose to designate NGSO/FSS systems 500 MHz on a primary basis. The additional 100 MHz will ensure that at least some spectrum could be used for gateway terminals, and not be subject to secondary user constraints and RR 2613.
58. Furthermore, the location of the 500 MHz for NGSO/FSS system uplinks at 28.6 to 29.1 GHz is dictated in part by the location of the downlink frequencies contemplated for use. Downlinks at lower frequencies may prove unworkable. Specifically, the downlink spectrum conventionally paired with the 200 MHz immediately below 28.6 GHz,
i.e.
28.4 to 28.6 GHz, is 18.6 to 18.8 GHz. The 18.6 to 18.8 GHz band is currently being used by space science systems which cannot easily co-exist with a NGSO satellite system. However, the downlink spectrum conventionally paired with the frequency band 28.6 to 29.1 GHz is at 18.8 to 19.2 GHz, which is proposed for NGSO/FSS primary operation. Consequently we propose to designate NGSO/FSS in a frequency band with a conventionally paired downlink.
4. Primary MSS Feeder Link Spectrum
59. We propose to designate MSS feeder links and LMDS systems on a co-primary basis in the 29.1 to 29.25 GHz band segment and MSS feeder links and GSO/FSS systems to operate on a co-primary basis at 29.25 to 29.5 GHz. We also propose that MSS feeder links be authorized on a ``reverse band working''
basis in the 19.4 to 19.7 GHz band.
Motorola has applied for 200 MHz of feeder link spectrum at 29.1 to 29.3 GHz for its Iridium system and TRW has applied for 300 MHz of Ka-band spectrum for its Odyssey system. It may be necessary to accommodate MSS feeder links for more than one system in the Ka-band. We propose to accommodate two systems in the band, and rely on other frequency bands to satisfy the requirements of any additional systems.
Time sharing arrangements and geographic diversity, among other mechanisms, could eliminate potential intra-service interference situations.
a. 29.1 to 29.25 GHz (150 MHz
60. The only agreement reached with respect to frequency sharing during the Negotiated Rulemaking included Motorola, CellularVision, and Texas Instruments.
These parties agreed that MSS feeder links and LMDS hub stations and subscriber receivers can operate on the same frequencies subject to certain operating restrictions. The agreement provided that subscriber transceivers would not be permitted to transmit in this shared band. It also permitted the MSS licensee to operate feeder link earth stations in up to eightdesignated metropolitan statistical areas (MSAs
without further coordination. These feeder link stations would be afforded a protection zone within the specified MSA and up to 75 nautical miles from its boundary. That is, LMDS receive stations must accept any interference caused to them by these MSS feeder link earth stations within the specified MSA and up to 75 nautical miles within its boundary. We use this agreement as the basis for our co-frequency sharing plan between these services. Also we request comment on how this band sharing plan would be affected if the Commission adopts its proposal to use BTAs, rather than MSA/RSAs, for LMDS licensing.
61. Because Motorola requested 200 MHz of spectrum for Iridium's feeder links, the agreement envisioned 200 MHz of shared spectrum. Our band plan proposes that only 150 MHz of spectrum, between 29.1 and 29.25 GHz, will be shared by MSS feeder links and LMDS systems. If the MSS operator ultimately assigned to operate in this band requires more than 150 MHz of spectrum, those requirements can be satisfied in another band as proposed below.
62. We specifically propose to limit MSS uplinks in the 29.1-29.25 GHz band to eight feeder link earth stations complexes. We propose to require that these feeder link earth station complexes be identified at least 45 days prior to the commencement of any LMDS auctions by submission of a list of the geographic coordinates of protected feeder link earth station complexes.
These sites must be chosen in accordance with the following requirements: (1
none of the feeder link earth station complexes may be located in any of the top eight MSAs, ranked by population, as defined by the Office of Management and Budget as of June 1993, using estimated population as of December 1992, (2
two feeder link complexes may be located in MSAs 9 through 25, one of which is in Chandler, AZ, (3
two feeder link complexes may be located in MSAs 26 to 50, and (4
two feeder link complexes may be located in MSAs 51 to 100. The two remaining feeder link sites must be at least 75 miles outside the boundaries of an MSA. The additional technical details of the sharing plan are set out in Appendix B of this Notice.
63. Further, while we do not propose it here, we believe it may be possible to permit LMDS subscriber traffic in the 150 MHz of shared spectrum under certain operating conditions. For example,
Texas Instruments says that various methods can be used to reduce interference potential, including designing LMDS customer transceivers to terminate transmissions if not properly oriented or if not signalled by the LMDS hub.
Another method to help reduce interference potential may be to require MSS feeder link stations tooperate at a minimum elevation angle of 7 or 8 degrees, rather than the 5 degree elevation angle proposed by Motorola. We request comment on whether, and the extent to which, these sharing methods and others may be used to permit two-way LMDS operations in the frequency band shared with MSS feeder links. Commenters should support their comments with a complete technical analysis and any economic or operational consequences of this alternative proposal.
b. 29.25 to 29.50 GHz (250 MHz
64. We propose to designate 250 MHz for use on a co-primary basis by MSS feeder links and GSO/FSS satellites, in order to allow MSS feeder link operations in 200 MHz of contiguous spectrum from 29.1 to 29.3 MHz, and to potentially accommodate a second MSS system's feeder links. We request comment on this issue. There may still be the need for coordination between the GSO/FSS systems and the MSS feeder link earth stations in this band. Coordination will be implemented on a first-come-first-served basis. It should be noted that eight feeder link complex locations,
in the 28 GHz band, will be identified before any competitive bidding procedures begin. Based on applicants' stated plans, these complexes are likely to specify 50 MHz of spectrum at 29.25-29.3 GHz.
c.Uplinks for MSS feeder Links and Downlinks for NGSO and GSO FSS Systems in the 19.3-19.7 GHz Band
65. The downlink spectrum conventionally paired with the satellite allocation in the 27.5-29.5 GHz band is at 17.7-20.2 GHz. The conventionally paired downlink spectrum associated with the MSS feeder link uplink spectrum at 29.1-29.5 GHz is at 19.3-19.7 GHz. The Commission has developed proposals concerning both the 29.1-29.5 GHz and 19.3-19.7 GHz band as part of the preparations for the upcoming World Radiocommunication Conference (WRC-95
.
In addition to proposing regulatory changes necessary to facilitate NGSO downlink operations for MSS feeder links in the 19.3-19.7 GHz band, the Commission has also proposed changes to the international allocation at 19.4-19.7 GHz that would facilitate NGSO MSS feeder uplink operations.
If this proposal is adopted at WRC-95, co-frequency sharing between NGSO and GSO operations will be considerably more complicated within this band.
In order to address this possibility, we specifically seek comment on whether we should designate the 18.3-18.55 GHz downlink band for pairing with the GSOuses for which the 29.25-29.5 GHz uplink band is designated. We also seek comment on another alternative of pairing such GSO uplinks with downlinks at 19.3-19.425 and 19.575-19.7 GHz, and designating the entire 19.3-19.7 GHz for NGSO MSS feeder links. We also seek comment on any other issues concerning downlink operations which may affect the workability of the band segmentation plan.
d. Effect of Decisions at WRC-95 on the Band Segmentation Plan
66. The FCC's recommended proposals for the WRC-95 include proposals designed to eliminate a principle regulatory obstacle to NGSO service -- ITU Radio Regulation 2613 -- from applying in Ka-Band uplink and downlink spectrum.
The proposals, if adopted at WRC-95, would facilitate the implementation of the band segmentation plan we propose. However, adoption of different provisions at the WRC-95 could affect the ability to implement the plan. Accordingly, we request comment on what, if any, contingency plans may be appropriate at this stage, and on any other information that develops from the WRC-95 Preparatory process that may be relevant to implementation of the proposed plan.
5. Other Allocations in the 28 GHz band
67. We also recognize that the MSS is allocated on a co-primary basis to the FSS in the 29.5 to 30.0 GHz band. Currently there are no MSS systems operating in the band. However, Norris Satellite Communications, which was licensed to provide FSS services in this band in 1992, initiated the proceeding for the MSS allocation in the 29.5-30 GHz band.
It does not appear that FSS and MSS systems can share the same frequencies. We do not believe Norris's plans to implement MSS in this band should prevent consideration of other proposed systems from going forward and providing the public with needed services as quickly as possible. We request comment on whether we should eliminate the allocation for MSS at 29.5-30.0 GHz or whether to modify the MSS allocation as a secondary allocation to FSS systems at 29.5 - 30.0 GHz.
6.Supplemental Tentative Decision on CellularVision's Pioneer's Preference Application
68. In the Tentative Decision on CellularVision's request for a pioneer's preference, the Commission found that CellularVision is the innovator of LMDS technology. Accordingly, it tentatively found that CellularVision should be awarded a pioneer's preference. CellularVision's specific pioneer's preference request was for the Los Angeles MSA -- it argued that the service it was providing in New York was substantially differentfrom the service for which it requested a pioneer's preference in Los Angeles. The Commission disagreed, however, and determined not to award a pioneer's preference for LMDS in more than one service area. Accordingly, the Commission stated that if a pioneer's preference to CellularVision were to be awarded, that it would ``modify the authorization to [CellularVision] to meet the service area, frequency, and other technical rules developed in this proceeding for the area encompassing [CellularVision's] New York PMSA authorization.''
However, the Commission further stated that if CellularVision were to inform the Commission that it prefers Los Angeles, and if it were to surrender its New York license, the Commission would grant its pioneer's preference for Los Angeles.
69. CellularVision filed comments to the
Tentative Decision
in which it argued that it was entitled to a pioneer's preference in the Los Angeles area without its affiliate Hye Crest being forced to surrender its New York license. Specifically, CellularVision argued that: a
Hye Crest was licensed prior to the adoption of the pioneer's preference rules; b
the proposed 28 GHz service rules are an outgrowth of the work commenced by CellularVision after Hye Crest was authorized and the pioneer's preference rules were adopted; and, c
the service provided by Hye Crest is different than the service for which CellularVision seeks a pioneer's preference.
70. A number of parties supported CellularVision's pioneer's preference arguments in comments and reply comments to the Tentative Decision. However, we note that all of these filings were made prior to the Commission being granted competitive bidding authority by Congress in August 1993.
Due to the fact such authority has drastically altered the pioneer's preference rules by requiring payment from pioneers, and due to the unique circumstances discussed below, we find no further need to consider whether CellularVision is entitled to a preference in Los Angeles. Rather, we propose to change our earlier tentative decision, and grant CellularVision a preference for that portion of the New York BTA (or other geographic service area ultimately adopted
which includes the New York PMSA. The pioneer's preference, covering the portion of the BTA lying outside the PMSA, would be for the portion of the 28 GHz band proposed to be available for LMDS in the Commission's band splitting plan,
infra
i.e.

, 27.5 - 28.35 GHz and 29.1 - 29.25 GHz (or whatever band plan is ultimately adopted by the Commission. We seek comment on these proposals. We note that if a pioneer's preference is awarded for the remainder of the BTA, Section 309(j)(13)(B) of the Communications Act, requiring an 85 percent payment of the value of the pioneer's preference license, would apply only to the portion of the New York BTA not covered by CellularVision's existing license for the PMSA. We seek comment on this tentative conclusion. We also clarify that the rules governing our evaluation of CellularVision'spioneer's preference request are those that were in effect when the Tentative Decision was adopted.(n76)

71. Since our tentative decision on its pioneer's preference request in the First NPRM, CellularVision has begun serving a significant number of customers within its New York license area. Therefore, we do not believe it is in the public interest for us to continue proposing, in the context of a pioneer's preference award, that CellularVision voluntarily discontinue service in New York and turn in its license. Moreover, we believe that CellularVision has made a commitment to providing service in New York, as evidenced by the fact that it has applied for additional cell sites to cover the remainder of the PMSA. We have held that the choice of which geographic area to be awarded as the pioneer's preference license will be the licensee's.(n77) CellularVision's circumstances are unique, however, in that the original license was granted before we established an LMDS service category and adopted regulations to govern the service. Further, the license was granted pursuant to waiver, prior to our adoption of the pioneer's preference rules, and for reasons that are consistent with the underlying objectives of those rules.(n78) These unique circumstances, in our view, warrant our tentative decision to waive our rules on our own motion to the extent they would afford CellularVision the opportunity to choose the geographic area to be awarded as the pioneer's preference license. We seek comment on this proposed approach. We also note, of course, that CellularVision would have the opportunity (as would any interested party) to participate in any competitive bidding procedures we may establish in this proceeding for purposes of licensing LMDS service in the Los Angeles area.

72. It is our intention to accommodate CellularVision's operations within the New York PMSA to the maximum extent possible, while minimizing adverse effects of itsoperations in the 28.35 - 28.5 frequency band on eventual GSO licensees. We propose, if we take favorable action on any renewal application CellularVision files pursuant to its existing license (such a filing would be due in January 1996), to include as a condition of the PMSA license a provision permitting CellularVision to operate on the contiguous 1 GHz for which it is presently licensed for a period of time sufficient to accommodate its operations within the New York PMSA without adversely affecting the eventual GSO licensee. We tentatively conclude that a grandfathering period of 36 months following the release date of the First Report and Order in this proceeding, or until the first GSO satellite is successfully launched, whichever occurs later, is appropriate. We seek comment on this tentative conclusion. We tentatively intend to instruct the Wireless Telecommunications Bureau to condition any such renewed license with a provision specifying that, after the end of the grandfathering period we adopt, the CellularVision license would become subject to our generally applicable rules for the provision of LMDS service. Thus, if the proposed band is adopted, at the end of the grandfathering period CellularVision would be required to cease operation on the 150 MHz allocated for GSO/FSS operations 36 months after release of the First Report and Order in this proceeding or until the first GSO satellite is launched, whichever is later . Simultaneously, CellularVision would be permitted to operate on a co-primary basis on the 150 MHz at 29.1-29.25 GHz. We seek comment on this proposal.

73. Finally, we seek comment on whether it would be appropriate to place conditions on any pioneer's preference license issued to CellularVision, similar to those we placed on other pioneer's preference licensees in PCS. Section 1.402(e) of our rules states that

As a condition of its license grant, a pioneer's preference grantee will be required to construct a system that substantially uses the design and technologies upon which its pioneer's preference award is based within a reasonable time, as determined by the Commission, after receiving its license. Failure to comply with this provision will result in revocation of the pioneer grantee's license, and transfer of the license will be prohibited until this requirement is met.

For the pioneer's preference licenses we have heretofore granted, we placed a condition on the broadband and narrowband PCS licenses that required that they be held for three years or until the construction requirements applicable to the five-year build-out period have been met, whichever is earlier.(n79) We request comment on whether we should place similar restrictions on CellularVision in connection with its proposed pioneer's preference license.

A. Spectrum Licensing

75. LMDS developers and/or manufacturers participating in the Negotiated Rulemaking Committee proposed system plans based on 1 gigahertz of spectrum. LMDS equipment developers have designed and built systems operable on 1 gigahertz of spectrum. In ex parte meetings with staff, these LMDS parties, such as CellularVision, Texas Instruments, and several Bell Operating Companies, have stated that without 1 gigahertz of spectrum, LMDS service is not economically viable.

76. Two LMDS parties stated that for their purposes, less than 1 gigahertz of spectrum is adequate. The University of Texas-Pan American, which hopes to implement distance learning capability to the economically depressed area of the Rio Grande Valley, has indicated that 600 MHz of spectrum dedicated exclusively for distance learning will meet their projected needs. In addition, Gigahertz Equipment Company, which has not developed a discrete technology for use in the 28 GHz Band, but which was an active participant in the Negotiated Rulemaking Committee, has offered a partial band segmentation proposal which, assuming two licensees per geographic service area, requested 1500 MHz of spectrum for LMDS. We appreciate the wide variety of plans for service being made by potential LMDS service providers. The University of Texas-Pan American is not contemplating direct commercial service, however. Under Gigahertz Equipment Company's proposal, the total spectrum availability for LMDS, and hence the services available, would be greater in the aggregate than the proposal we make herein, however, individual licensees would be more restricted. We request comment from these and other parties on the number and size of licenses which we should make available and on the amount of spectrum each licensee should have, see infra, paras. 78-80, and whether our geographic partitioning and spectrum disaggregation proposals will help meet the needs of parties requiring less than 1 GHz.

77. To the extent LMDS systems are used to provide video services, we tentatively conclude that LMDS will be competing in a multichannel video programming distribution (``MVPD'') market, which includes, inter alia, cable operators, DBS providers, wireless cable systems, satellite master antenna television systems, and video dialtone systems. We seek comment on that conclusion. As the Commission recognized last year in its Annual Report on the status of competition in this market, ``cable television remains the dominant mediumfor providing consumers with multichannel video programming.''(n80) On the other hand, the Commission observed that competitive entry of alternative distribution technologies in the coming months and years should significantly affect this market.(n81)

78. Against this backdrop, we seek comment on whether it is advisable, from a competitive standpoint, to license more than one LMDS operator per market and on any competitive concerns raised by the grant of a 1000 MHz block to a single LMDS licensee in each market. While allowing one LMDS provider per market may help ensure the competitive viability of this fledgling service, and thereby maximize the ability of LMDS licensees to provide significant competition to other services, we recognize that digital LMDS is being developed that has the potential to greatly increase the capacity of LMDS systems. For example, Texas Instruments, whose digital LMDS system is being manufactured for use in other countries, estimates that 16,000 telephony subscribers per LMDS cell (of three miles radius) could be served concurrently with about 200 video-on-demand channels.(n82) We seek comment on when digital LMDS technology will be commercially available in this country and the extent to which digital technology will expand the capacity of LMDS systems. We also seek comment on whether the increased capacity associated with digital technology should affect our ultimate decision about the minimum amount of spectrum needed to operate a competitively viable system and the number of LMDS licenses that should be made available in a single market.

79. Possible schemes include issuing only one license per market for the entire 1000 MHz; issuing two licenses, one for the 850 MHz contiguous band of spectrum and one for the 150 MHz co-primary portion; and issuing three licenses, two for 425 MHz and one for the 150 MHz co-primary segment. We seek comment on each of these licensing schemes. If the licensing scheme which we ultimately adopt includes more than one license per market, we seek comment on whether to permit aggregation of licenses within the same geographic service area.

80. Whatever our decision on the final number of LMDS licenses per market, we are aware that continued improvements in technology may eventually make it possible for individual licensees to reduce the amount of spectrum they need for the types of services they propose to provide. Accordingly, we propose to permit spectrum disaggregation of spectrum by LMDS licensees. Commenters favoring disaggregation should address how a licensee would accomplish such disaggregation and what procedural and substantive rules the Commission should promulgate for licensing disaggregated licenses. In addition, we requestcomment on whether designated entity licensees that received bidding credits or permission to make installment payments should be allowed to disaggregate spectrum.

81. Finally, we have noted, supra, para. 77, that there may be significant competition facing LMDS service providers from providers of other services. Accordingly, while we do not propose a restriction on the amount of spectrum which may be held by one licensee, we request comment on the advisability of implementing such a restriction on LMDS licensees, and what form that restriction would take.

B. Geographic Service Areas

82. In the First NPRM, we proposed to use the Rand McNally Commercial Atlas and Marketing Guide Basic Trading Areas (BTAs), which are areas, defined by counties, in which the residents purchase goods. We also asked for comment on whether other geographic areas should be used. A number of parties commenting on the First NPRM suggested that MSA(n83) and RSA(n84) licensing would be preferable to BTAs.(n85) They argued variously that the MSA/RSA definitions are well understood by the Commission and the communications industry, that smaller and medium-sized businesses will have more opportunities to participate if the service areas are smaller than BTAs, that transaction costs are lower for smaller areas, that smaller geographic areas are more conducive to the Commission's proposal to have a short build-out time for LMDS, and that the smaller areas will promote diverse locally- oriented service offerings and expanded rural service options.

83. Other parties commenting on the First NPRM supported the use of BTAs,(n86) arguing that the larger area would result in economies of scale, foster participation by the most providers, facilitate addressing local government concerns in a cohesive manner, lower the cost of interference coordination among LMDS licensees, and increase the potential for larger capital returns due to the larger customer base.

84. Parties disagreed on whether MSA/RSA or BTA licensing is better for speeding service to rural areas. Parties supporting BTA licensing indicate that, with an urban infrastructure, the marginal cost to supply LMDS to the rural portion of a BTA would bemuch less than if that were the only service area.(n87) Others argued that larger areas would necessarily result in delayed service, and that the speediest service would be provided by licensing smaller areas.

85. One party, UTC, argued that the Commission should use local access and transport areas (LATAs), for administrative convenience, and to match more closely customers' perception of their communities of interest. UTC stated that the growing perception of regionalism is evident by the increasing number of requests to state public utility commissions by LECs to increase their service areas to more closely correspond with customers' perceptions of their interest areas.

86. We have not proposed the larger MTA licensing area because few parties commenting on the First NPRM believed that areas larger than BTAs would be appropriate for licensing. For this reason, we also are not proposing Basic Economic Areas (BEAs), which are smaller than MTAs but larger than BTAs. Finally, we believe using MSA/RSAs are inappropriate for LMDS because RSAs tend not to have significant commercial centers. We request comment on these conclusions.

87. We continue to believe that BTAs are the best geographic area for licensing LMDS.(n88) We believe that, based on the record submitted thus far in this proceeding, there is a reasonable likelihood that services provided through use of the LMDS spectrum will have a local focus. BTA service areas, we tentatively conclude, will best approximate the likely scope of the service areas for these services.

88. In the 1995 Commercial Atlas and Marketing Guide, published by Rand McNally, there are 487 Basic Trading Areas listed, which include the 50 States. We propose to use these BTAs, except for the New York BTA. We note that we have already granted a license in the New York PMSA to CellularVision, pursuant to a waiver. Therefore, instead of issuing a license for the New York BTA we propose to issue a license for the geographic area encompassed by the New York BTA minus the New York PMSA. As explained above, if we take favorable action on a CellularVision license renewal application for the New York PMSA, we have proposed to condition the renewed license to ensure that it conforms to our final band plan. In addition, we propose to add individually as additional areas for licensing,the United States territories and possessions over which the FCC has jurisdiction: the Virgin Islands, American Samoa, Guam, Puerto Rico, and the Commonwealth of Northern Marinas.

89. We have undertaken an examination of geographic partitioning in other proceedings, and we wish to consider that issue in this proceeding as well. As used herein, geographic partitioning is the assignment by the licensee of its license in a portion of its service area. We propose that partitioning would be treated as any other assignment situation: the parties would be required to file an application containing the appropriate information for a licensing decision, and the Commission would, upon review, either grant or deny the application.(n89) In the case of broadband PCS licenses, for example, we decided to permit geographic partitioning only for rural telephone companies for purposes of expediting the provision of service in rural areas.(n90) Geographic partitioning is a method for the original licensee to recoup some of its initial licensing and construction costs, while providing a method for entities with specific local concerns or insufficient capital to purchase rights on the entire service area to acquire a portion of the geographic area originally licensed. At the same time, the public, particularly in rural areas, is served sooner than it might otherwise have been if all build-out in a particular geographic area is the responsibility of one licensee.

90. Some aspects of LMDS distinguish it from most PCS services. Construction costs for LMDS may be greater than for PCS; LMDS is not as far developed as is PCS as a service or in equipment capabilities; the higher frequency band in which LMDS operates makes a much shorter transmission path; and the fixed nature of the proposed services limits LMDS customers to those residing within the reach of cell hub transmitters. For these reasons, we tentatively conclude that geographic partitioning for any part of the license area may be appropriate for LMDS licensees.

91. Accordingly, we seek comment on whether the most rapid build-out of LMDS would occur if we permit partitioning of the license pursuant to eligibility and other rules adopted for this service. We seek comment regarding whether geographic partitioning should be established in the case of LMDS licenses, and on the manner in which our proposed build-out requirement would be applied to a partitioned license.

C. LMDS Services and Regulation

92. In the First NPRM, we proposed to allow licensees to determine what services they want to offer. We further suggested in the First NPRM that parties be able to choosewhether they wanted to offer common carrier or private carrier services on a channel-by-channel, cell-by-cell basis.(n91) Many commenters encouraged the Commission to keep as much flexibility as possible for licensees to determine what category of services they would like to offer. Many also suggested that the Commission should ensure that licensees were operating in a manner consistent with their claimed regulatory status. Telephone companies in particular argued that there should be parity with regard to regulatory status of telecommunications services providers. Several parties pointed out that private carriers are barred from offering local exchange service. However, TDS proposed that the Commission have a presumption of common carrier status for LMDS licensees, and make a determination of private carrier status on a case-by-case basis.

93. Based on the system and service descriptions received in the record during this proceeding, especially the Negotiated Rulemaking proceeding, we can predict more accurately than before the First NPRM the types of services likely to be offered in this band. Current proposals for LMDS include video distribution, broadband video telecommunications, and two-way data and voice subscriber-based services. We note that LMDS, when used for video distribution, would not generally be regulated as a cable system under Title VI of the Communications Act, except in certain limited circumstances.(n92) For example, the Commission has held where wires are used to connect buildings that are not under common ownership, control or management the facility will be deemed a ``cable system'' for purposes of the Act.(n93)

94. We request comment on three alternatives for regulating LMDS licensees. One option is that licensees would be presumed to be common carriers subject to Title II regulation to the extent the system is used to provide two-way data, voice, and other telecommunications services, and in the absence of evidence demonstrating that they provide only private carriage. In support of this option, we would find that the core Title II provisions, prohibiting unreasonable discrimination, and unjust and unreasonable rates, and imposing an obligation to serve on reasonable request, serve the public interest by promoting broad availability of services at reasonable and non-discriminatory rates. Under this option, licensees interested in applying for consideration as a private carrier would be required to file a motion with the Commission, setting forth the justification for such treatment. Private wireless service providers would be subject to statutory requirements pertaining to private wireless services, and common carrier providers would be regulated under Title II common carrier rules. We seek comment on the extent to which an LMDS licensee should be subject to Title II regulation, assuming we were to adopt this option, in circumstances where its system is used to distribute video programming. Commenters should address whether thecapacity or technical characteristics of a video distribution system or the extent to which capacity is made available to unaffiliated programmers impact whether an LMDS licensee should be considered a common carrier.

95. The second option we will consider is the same one set forth in the First NPRM.(n94) In their applications, successful bidders would specify the types of services they expect to offer and indicate the regulatory status under which those services would be offered. Licensees would be required to describe their proposed service in sufficient detail for the Commission to confirm that their requested status complies with relevant judicial and/or statutory standards. The Commission would retain oversight of the parties' compliance with the statutory and judicial standards for status based on the type of service offered. See, e.g., National Association of Regulatory Utility Commissioners v. FCC, 525 F.2d 630 (D.C. Cir.) cert. denied 425 US 999 (1976)(NARUC I).

96. The third option we will consider for LMDS licensees is to treat them similarly to the way in which MMDS licensees are treated. MMDS licensees are permitted to provide service as common carriers or private carriers. Under the MMDS rules, however, licensees operating as private carriers must comply with common carriage rules, except for the tariffing requirement. At least to the extent that licensees provide video distribution services, this option would permit LMDS licensees, although presumptively common carriers, to file a notification of intent to operate as a private carrier.

D. Eligibility

97. In the first NPRM, we proposed not to adopt restrictions on the ownership of LMDS licenses. We requested comments on interpretation of the Cable Act with regard to the participation of telephone companies and cable companies in LMDS. In this Notice, we seek additional comment on these issues.

1. Telephone Companies

98. In comments to the First NPRM, parties disagreed on whether the Commission should permit local exchange carriers (LECs) to be LMDS licensees. Parties in favor of allowing telephone company participation said, inter alia, that telephone companies should be given the opportunity to integrate LMDS into their operations; that LECs do not possess any monopoly power with regard to LMDS and that they would have no bottleneck market power through provision of LMDS; that current statutes and regulations do not bar LEC participation; that LECs have resources, expertise and public service commitment that wouldbenefit LMDS; and that imposing restrictions would be ``overreaching'' by the Commission.(n95)

99. Those opposed to permitting LEC participation said that LECs would misuse their resources and market power to preempt competition in both video and telecommunications services; and that the Cable Act bars LECs from being licensed to provide LMDS.(n96)

100. Currently, there are no statutory or regulatory restrictions that prohibit a local exchange carrier from holding an interest in a wireless cable operator or LMDS licensee that does not otherwise meet the statutory definition of a cable system. The statutory cable-telephone cross-ownership restriction, prohibiting LEC provision of ``video programming'' to subscribers within its service area, has been construed to apply only to a LEC's provision of video programming through a wired cable system.(n97) In a 1990 order, the Commission determined that the structure of the statute and its legislative history indicated that Congress intended only to prohibit a LEC's distribution of video programming over a cable system, and that the term ``cable system,'' as used in the 1984 Cable Act, encompassed only ``video delivery systems that employ cable, wire or other physically closed or shielded transmission paths.'' The Commission held that typically, wireless cable systems did not constitute such a system within the meaning of the Act.(n98) The Commission's decision that the cable-telco ban does not extend to a telephone company's acquisition of wireless cable facilities was recently upheld by the Court of Appeals for the D.C. Circuit.(n99) Thus, to the extent that telephone companies acquiring LMDS spectrum use that spectrum to provide video programming to subscribers within a BTA, they would not be subject to the telco-cable cross-ownership ban. We seek comment on this conclusion.

101. We also seek further comment on competitive issues associated with acquisition of a BTA service area by telecommunications providers operating in the same area, assuming that spectrum in the 28 GHz band may be used to provide telephone service. For example, does the potential control by a LEC of 1000 MHz of spectrum in its service area raise competitive concerns? To what extent can this spectrum be used to provide service that iscompetitive with local telephone service, particularly the provision of access services to residential and business subscribers? Would allowing a LEC to acquire LMDS licenses in its service area eliminate a potential and important new source of competition in the local exchange market? Given the LECs' current monopoly status with regard to the provision of local exchange service, would LECs be likely to acquire LMDS spectrum as a means of forestalling competitive entry into the local exchange market, for example, by warehousing spectrum or diverting it to less optimal uses? Would our proposed buildout requirements discussed in paras. 113-116, infra, address this concern? How should any elimination of this potential source of competition to LECs be addressed by the Commission? In particular, should the Commission limit LMDS spectrum that can be acquired by a LEC in its service areas? In addition, given announced LEC plans to offer video service to their telephone subscribers over their wired plant, we seek comment on any competitive issues raised by the acquisition of LMDS spectrum.

2. Commercial Mobile Radio Service Providers

102. We also seek comment on whether we should limit the extent to which an existing Commercial Mobile Radio Service (CMRS) provider can acquire LMDS spectrum in its service area. We tentatively conclude, based on the record in this proceeding, that using current technology, LMDS spectrum cannot be used to provide mobile radio services. Acquisition of LMDS spectrum by a CMRS provider would not affect horizontal concentration or otherwise raise competitive concerns even in a broadly-defined market including all CMRS services. For similar reasons, we see no need to include the acquisition of LMDS spectrum in the Commission's CMRS spectrum caps, which place limits on the amount of spectrum that can be controlled by a carrier in any particular market.(n100) We seek comment on these conclusions.

3. Cable Television Companies

103. Parties commenting in response to the First NPRM disagreed on whether cable television companies should be permitted to participate in LMDS. Some argue that to permit cable television companies to acquire a potentially powerful competitor would detercompetition in video services.(n101) Others argue that the Cable Act prohibits licensing cable companies in wireless cable services.(n102) Parties in favor of permitting cable companies to obtain LMDS licenses argue that a cross-ownership ban unfairly would foreclose cable operators from participation in LMDS in areas much larger than their cable franchises; and that the Cable Act prohibits cable television companies from owning licenses in the Multichannel Multipoint Distribution Service (MMDS), but not in any other wireless cable service, such as LMDS.(n103)

104. We tentatively agree with those commenters who observe that there are presently no statutory or regulatory restrictions that prohibit a cable operator from holding an interest in an LMDS licensee. While Section 613 of the Communications Act does prohibit a cable operator from holding an MMDS license in any portion of the franchise area served by that cable operator's cable system, the language of that provision is limited, on its face, to MMDS.(n104) On the other hand, we note that some of the same policy reasons that might justify imposition of a cable-LMDS cross ownership ban formed the basis for Congress' imposition of the cable-MMDS ban.(n105) We seek comment on our tentative conclusion regarding the scope of the cable-MMDS ban.

105. As we recognized above, however, cable operators continue to dominate the market for multichannel video distribution, and LMDS represents an important new source of competition in that market. Accordingly, we continue to have concerns about cable operator acquisition of this spectrum within the LMDS geographic service area encompassing its cable franchise region, and seek additional comment on whether cable operators should beprohibited from acquiring LMDS licensees for BTAs that cover a cable operator's franchise area. For example, would cable operators acquiring LMDS licenses have the incentive and ability to inhibit the full deployment of LMDS facilities that compete with their wired cable facilities, for example, by warehousing spectrum or diverting it to less optimal uses? Or, given that a cable operator's franchise areas might be significantly smaller than LMDS BTA service areas, would prohibiting a cable operator from holding an LMDS license that covers a larger region than its franchise area be justified? In addition, we request comment on whether we should adopt rules similar to our cellular-PCS cross-ownership rules to address the ownership of LMDS licenses by cable operators.(n106)

106. We also note, on the other hand, that cable operators are emerging as a potentially significant source of competition to LECs in the provision of local telephone services. We seek comment on whether LMDS spectrum might be an important adjunct to cable operator facilities that can be used in the provision of local telephone services in competition with LECs. Under those circumstances, while prohibiting cable operators from acquiring LMDS licenses might increase competition in the MVPD market, would it also impede competitive entry into local telephony? Would our proposed buildout requirements address this concern? We seek comment on how to balance these competing public interest concerns, and on whether and to what extent cable operators should be permitted to acquire LMDS licenses.

4. Multichannel Multipoint Distribution Service Licensees

107. We also seek comment on whether MMDS licensees should be prohibited from acquiring an LMDS license within their service areas. Our recent order establishing MMDS licensees in BTAs and making other changes to the MMDS processing rules are intended to enable these licensees to compete successfully against cable operators. Like cable operators, however, MMDS licensees may find the two-way capacity of LMDS services appropriate for the provision of local telephone services in competition with LECs. Thus, we are reluctant to propose that MMDS licensees be barred from LMDS. However, we request comment on this issue and on the advisability of permitting one licensee to hold two licenses for a significant amount of scarce spectrum in the same service area. In particular, we request parties' comments on whether antitrust issues would be raised by the same entity holding both types of licenses capable of providing wireless cable competition.

5. Transfer of Control and Assignment of Licenses

108. In the First NPRM in this docket, before the Commission obtained the authority to utilize competitive bidding procedures in the case of mutually exclusive applications, we proposed that transfer or assignment of LMDS licenses would not be permitted until the LMDS system had been constructed and was serving the public. Ourreason for this proposal was to dissuade insincere applicants. However, unlike a lottery system, the auction process discourages insincere applicants. Thus, since we are proposing the use of competitive bidding to award LMDS licenses,(n107) we withdraw our proposal to limit transfer or assignment of LMDS licenses, except in the case of licenses awarded to designated entities. Because of the special consideration accorded designated entities in the auction process, we propose that such licenses be restricted in a manner similar to that proposed for Specialized Mobile Radio licenses.(n108) A designated entity would be prohibited from voluntarily assigning or transferring control of its license to any other entity during the three years after license grant. In the fourth and fifth years of the license term, the designated entity would only be able to assign or transfer control of its license to another qualified designated entity, and no unjust enrichment could be gained through the transfer. We request comment on this proposal.

E. Regulation of Common Carriers/Preemption

109. Although we proposed in the First NPRM to forbear from regulating rates of LMDS licensees if regulated as common carriers, subsequent judicial interpretation of the Communications Act forecloses this approach to the extent that LMDS providers operate as common carriers. AT&T v. FCC, 978 F.2d 727 (D.C. Cir. 19 ), Southwestern Bell Corp. v. FCC, 43 F.3d 1515 (D.C. Cir. 1995)(n109) Accordingly, we believe that, to the extent LMDS licensees offer services which are categorized as common carrier offerings that are not within the definition of Commercial Mobile Radio Services (CMRS), we have no alternative but to impose all statutory requirements pertaining to common carriers. In the case of filings required under Section 214 of the Act, we seek comment regarding whether we should consider the development of streamlined filing provisions in the case of LMDS service providers.

110. In the First NPRM, we tentatively concluded that state entry and rate regulation should be preempted for LMDS licensees providing video distribution service on a private carrier basis. We requested comment on whether state regulation of LMDS licensees offering other types of service as private carriers, such as private telecommunications or data services, should also be preempted.

111. With regard to common carriers, we tentatively found in the First NPRM that any video distribution service would be inherently interstate in nature, and hence potentially subject to preemption. We noted that for telecommunications services, we have jurisdiction over interstate portions of those services, and over mixed intrastate and interstate services to the extent that ``intrastate services are not severable from the interstate services, and the state regulations thwart or impede federal law and policies.'' 8 FCC Rcd at 562. We found that the record did not support a determination of whether interstate and intrastate services could be severed, nor whether any particular state regulatory policies would thwart or impede the Commission's efforts to establish the new service.

112. We reiterate our conclusion that we cannot make a determination at this time that preemption of state regulation of common carrier aspects of LMDS is appropriate. However, with regard to private carriage video distribution service, we retain our tentative proposal of the First NPRM. With regard to all other preemption issues, we propose to defer such issues for future consideration as they arise on a case by case basis. We request comment on this proposal.

F. Construction Requirements

113. In the First NPRM, we proposed that LMDS licensees be required to cover 90 percent of their licensed geographic service area within three years. The majority of parties opposed this requirement. They argued, inter alia, that this ``aggressive'' build-out requirement would be impossible to meet because of the time required for the equipment manufacturing process, that at the time there was only one manufacturer of LMDS equipment, and that diversity of technological choices will require more development time. Parties also argued that the size of the proposed geographic service area would make coverage of extensive geographic areas within the short amount of time proposed more difficult.

114. It appears, from the record, that the only potential delays in bringing LMDS services to the public are due to the need to produce the necessary equipment. While some companies have completed much of their research and development processes, it may take time to produce the amount of hub and subscriber equipment needed for LMDS to meet the construction requirement we proposed.

115. It is our intention to foster the most diversity in services and technology possible in provision of LMDS. We are persuaded by parties' arguments that strict build-out requirements may hamper this development by driving licensees to the few existing manufacturers and not allowing room for additional technological development. At the same time, we believe that it may be necessary to ensure that rural areas receive the benefits of LMDS services.

116. The auction procedure may make the need for build-out requirements less necessary. We are aware that equipment prices would be driven up, possibly to anuneconomic level, if we were to require too rapid a build-out. At the same time, the value of the LMDS spectrum might be adversely affected if applicants faced an uneconomic buildout.

117. Accordingly, we tentatively conclude that some build-out requirement is necessary for LMDS, but one which is more moderate than was proposed in our First NPRM. We propose to require licensees to have made service available to a minimum of one-third of the population of their geographic areas within five years from license grant. We propose that licensees will have made service available to a minimum of two-thirds of the population of their geographic areas within ten years from license grant. We request comment on these proposals.

G. Technical rules proposal

118. In the First NPRM, we noted our belief that only limited technical regulations may be needed to ensure adequate interference control and coordination of services at the boundaries of adjacent service areas within each block of spectrum. Thus, we requested specific proposals for power, modulation requirements, channelization, bandwidth, emission characteristics, frequency stability, antenna characteristics, e.g., gain, beamwidth, height and polarization, and spectrum utilization. Commenters requested that we not establish standards for modulation requirements, channelization and bandwidth. They believe imposition of standards for these parameters would hamper the development of LMDS for system designs that are still evolving. Evidence of this was displayed during the Negotiated Rulemaking Committee meetings. During efforts to determine the interference levels between LMDS and satellite systems, LMDS proponents presented a variety of system designs and indicated that other formats are being considered. We tentatively conclude that we need only adopt standards that will facilitate coordination between geographically adjacent LMDS systems and between LMDS and MSS feeder link facilities where they share spectrum. We seek comment on the technical proposals herein.

1. Frequency Coordination

119. Under our proposed regulatory scheme, each licensee will have control over its own facilities within its designated service area and therefore be responsible for minimum service performance and interference levels within its system. We recognize, however, that each licensee may need to coordinate its operation with other entities licensed to provide service in geographically adjacent service areas to avoid interference situations. In other services authorized under Part 21, applicants are required to coordinate frequencies with licensees and other applicants whose facilities are likely to be impacted by the new proposals. This process has proven to be extremely beneficial to the common carrier point-to-point microwave industry and the Commission. Given the success of the process in these other cases, it appears that a similar process would benefit LMDS.

120. As one option, we propose to require that applicants coordinate frequencies among themselves at their service areas boundaries.(n110) We believe that this process will be highly efficient, provide LMDS operators sufficient system engineering flexibility, and result in fewer interference problems. Alternatively, we could set a maximum power flux density (PFD) level at the service area boundaries. In establishing this limit, we would also include a provision permitting parties to exceed this level should they come to an agreement with geographically adjacent licensees. Through this process parties could resolve interference problems without the Commission's involvement, thereby enabling the introduction of services more expeditiously. We request comment on a reasonable PFD in the event that we decide to adopt this alternative.

121. Another measure that might advance the coordination process would be a requirement that LMDS operators employ only orthogonally-polarized signals. Such signals are achievable by using vertical and horizontal polarized antennas. Depending upon the antenna configurations, adjacent LMDS systems configured to use opposite polarized signals can realize cross-polarization isolation levels of at least 20 dB.(n111) If operators were permitted to employ other types of polarizations, e.g., circular, the level of isolation would be significantly less or nil. Theoretically, the isolation between a circular polarized signal and an orthogonal one is 3 dB, although this becomes even less when the signals are depolarized. In the event LMDS and satellite systems are ultimately able to co-frequency share this band, this proposal to limit LMDS to the use of orthogonal polarization, we believe, may be one of the mitigating factors that facilitate co-frequency sharing between LMDS and satellite systems. We request comment on this conclusion. Moreover, in our view, permitting operators to employ other types of polarization would impose some geographical separation requirements on LMDS systems, potentially reducing the size of LMDS service areas and the number of customers who could be served. Our goal is to adopt rules that will maximize LMDS service. Therefore, we request comment on restricting LMDS signal polarizations to vertical and horizontal at the border of each service area.

2. Equivalent Isotropically Radiated Power (EIRP)

122. We note that during the Negotiated Rulemaking Committee, proponents of LMDS described their system characteristics for use in analyzing interference between LMDS and satellite systems. This data revealed differences in LMDS proponents' strategies and system designs, including power levels. For the 28 GHz band, our current rules limit the maximum EIRP to -18 dBW/Hz based on a bandwidth of 20 MHz.(n112) Although this amountof power should increase path reliability, none of the system designs on record contemplates a level of this magnitude. The maximum proposed by any LMDS proponent is -52 dBW/Hz. Perhaps this is an indication that -18 dBW/Hz far exceed the power requirements of LMDS systems and therefore should be reduced to a more reasonable level. LMDS system designs are still evolving, but we recognize that two of the three known designs require power levels substantially less than -52 dBW/Hz. Imposing an EIRP limit more in line with today's designs should reduce the probability of intersystem interference, cause future systems to be more homogenous with today's technology, and improve the chances of future co-frequency sharing agreements which LMDS and satellite licensees in the 27.5 GHz - 28.35 GHz band may choose to undertake.(n113)

123. Therefore, in conjunction with our proposal to require LMDS licensees to coordinate frequencies, we also propose to set the maximum EIRP for LMDS at -52 dBW/Hz for systems that will operate in the 27.5 GHz - 28.35 GHz band. For those systems designed to operate in the LMDS allocation at 29.1 GHz - 29.25 GHz the proposed hub limits are specified in proposed rules §§21.1020 and 21.1021 contained in Appendix 1. These levels are based on the analyses conducted in the NRMC, that demonstrated interference between LMDS systems and MSS feeder links is less likely if LMDS systems maintain an output power within those limits. Based on the present record in this proceeding, we believe these limits provide LMDS systems operators sufficient flexibility and adequate power to meet their needs. No limit is proposed for maximum transmitter output power. This is consistent with our proposal in WT Docket No. 94-148, wherein we proposed to eliminate the limitation on maximum transmitter power and to express power limits in terms of EIRP. In addition, we propose to adopt a 0.001% frequency tolerance for LMDS equipment. We believe that this frequency stability will maximize the use of this spectrum, is within the current state-of-the-art, and can be achieved without significant costs. We request comment on these proposals.

3. Spectral Efficiency

124. Even though we propose to adopt a flexible policy that would allow system designers to subdivide assigned spectrum in a manner that is best for accommodating their service requirements, we seek comment regarding whether there is a need for a measure of modulation spectral efficiency. Currently, the rules require digital modulated systems to comply with a spectral efficiency of 1.0 bps/hz. This standard was adopted many years agoand represented the state-of-the-art at that time. Over the years advanced modulation techniques have been developed and will continue to do so. In light of these developments, we seek comment regarding whether meeting this standard would present any problems to equipment manufacturers. We are aware that the measure represents only one aspect of spectral efficiency of a system. However, our experiences with systems operating in other bands show that it is a reasonable measure and is not an administrative burden. Recognizing that methods of measuring system performance and efficiency standards have advanced along with system designs, we seek comment on whether there is a better gauge of spectral efficiency that would not pose enforcement problems for the Commission. In particular, we request comment on whether the efficiency standards we adopted for Private Land Mobile Radio Services refarming efforts would be appropriate here.(n114)

126. We have existing rules for the GSO/FSS systems in place in Part 25 of the Commission's rules.(n116) These include technical rules, such as 2* orbital spacing and full frequency reuse, and licensee qualification rules, for example, a rigorous financial qualification standard. We propose to apply these rules to GSO/FSS systems that will use the 27.5- 30.0 GHz band. We request comment on this. We also request comment on whether specific rules, such as the financial qualification requirement, should be altered and whether any additional rules should be created. We request specific comment on any technical standards that will facilitate sharing under our band segmentation plan.

127. We also request comment on what sort of rules should be created for the NGSO/FSS systems. For example, what sort of financial qualifications should we adopt for these systems? Should spectrum efficiency or service availability standards be adopted? We request specific comment on any technical standards that should be adopted for NGSO/FSS systems that will facilitate sharing under our band segmentation plan.

128. Satellite Licensing Procedures. Following the release of this Notice, we will place the pending satellite applications on separate Public Notice, and will establish cut-off periods for both the GSO/FSS and NGSO/FSS applications to be considered concurrently with these.(n117) If all qualified applicants in the processing group cannot be accommodated, we propose to use competitive bidding as the procedure to choose among the mutually exclusive applications to provide domestic service within the United States.(n118) We are not auctioning access rights to other countries from either NGSO/FSS or GSO/FSS systems. We are also auctioning access rights to serve the U.S. market only from certain orbit locations for specific frequency bands. We briefly discuss proposals for auctions for GSO/FSS and NGSO/FSS systems. By doing so, we will be in a position to implement an auction as quickly as possible, should we be faced with a mutually exclusive situation, and to ensure that service to the public is not delayed.

129. Section 309(j)(1) of the Communications Act, as amended, 47 U.S.C. § 309(j)(1), permits auctions only where mutually exclusive applications for initial licenses or construction permits are accepted for filing by the Commission and where the principal use of the spectrum will involve or is reasonably likely to involve the receipt by the licensee of compensation from subscribers in return for enabling those subscribers to receive or transmit communications signals. (n119)

130. The Commission has previously determined that auctions are permissible if at least a majority of the use of the spectrum would be for service to subscribers. In making this determination, we looked to classes of licenses and permits rather than to individual licenses.(n120) Based on the service proposals in the extensive record developed in thisproceeding to date, we believe that the principal use of the LMDS spectrum will meet these requirements.

131. With respect to the NGSO and GSO FSS applicants, we tentatively conclude that the principal use of the spectrum will be to provide subscription based services,(n121) even though certain portions of the spectrum will be used for large bandwidth applications through gateway terminals. We request comment on these tentative conclusions, including information from any potential LMDS or satellite applicants on the type of service they contemplate offering.

132. In addition, we tentatively conclude that the use of competitive bidding to award LMDS and satellite licenses will promote the objectives described in Section 309(j)(3) of the Communications Act. These objectives are:

(A)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;

(B)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 telephone companies, and businesses owned by members of minority groups and women;

(C)recovery for the public of a portion of the value of the public spectrum made available for commercial use and avoidance of unjust enrichment through the methods employed to award uses of that resource; and

(D)efficient and intensive use of the electromagnetic spectrum.

133. First, based on our experience conducting PCS auctions, we believe that the use of competitive bidding to award GSO/FSS and NGSO/FSS and LMDS licenses, as compared with other licensing methods, will speed the development and deployment of new technologies, products and services to the public with minimal administrative or judicial delay, and will encourage efficient use of the spectrum as required by Sections 309(j)(3)(A) and (D). Second, use of auctions to assign LMDS and satellite licenses will clearly advance the goals of Section 309(j)(3)(C) by enabling us to recover for the public a portion of the value of the public spectrum.(n122) By using a licensing methodology which ensures that licenses areassigned to those who value them most highly, it follows that such licensees can be expected to make the most efficient and intensive use of the spectrum. Finally, we believe that using auctions will meet the objectives of Section 309(j)(3)(B) because we propose to adopt competitive bidding rules that foster economic opportunity and the distribution of licenses among a wide variety of applicants including small businesses, rural telephone companies and businesses owned by women and minorities (collectively referred to as ``designated entities'') who might otherwise face entry barriers.

B. Determining Mutual Exclusivity

134. As noted above, one of the prerequisites for use of the auction procedures is that applications must be mutually exclusive. The Communications Act states that ``[n]othing in [Section 309(j)], or in the use of competitive bidding, shall . . . be construed to relieve the Commission of the obligation in the public interest to continue to use engineering solutions, negotiation, threshold qualifications, service regulations, and other means in order to avoid mutual exclusivity in application and licensing proceedings. . . .'' 47 U.S.C. § 309(j)(6)(E). With respect to LMDS, we propose to use discrete geographic service areas and spectrum blocks, thus avoiding the possibility of ``daisy chain'' mutual exclusivity among applications. However, because of the great interest shown in LMDS in this proceeding to date, we anticipate that there will be multiple applications filed for each geographic area. Moreover, we tentatively conclude that it would not serve the public interest for the Commission to avoid mutual exclusivity altogether because doing so would greatly circumscribe the geographic service areas and would defeat the Commission's ability to determine the applicants who would put the spectrum to its highest valued use.

135. We propose to determine mutual exclusivity based on the FCC Form 175 application for LMDS licenses. If more than one application is filed for the same LMDS frequency in the same geographic area then mutual exclusivity would be established and the license will be auctioned. As we indicated in the Second Report and Order, if the Commission receives only one application that is acceptable for filing for a particular license, and thus there is no mutual exclusivity, the Commission by Public Notice will cancel the auction for this license and establish a date for the filing of a long-form application, the acceptance of which will trigger the procedures permitting petitions to deny.(n123) We seek comment on this proposal, particularly whether some other type of filing method would be more appropriate for determining whether initial applications are mutually exclusive.

136. With respect to GSO/FSS service and NGSO/FSS systems, it is premature to determine whether mutual exclusivity will occur. We intend to open a new filing period permitting additional parties to apply for this spectrum. If additional entities file applications during this filing period, it is possible, given the limited amount of spectrum available, that we may not be able to accommodate all of the applicants' proposals. Under thesecircumstances the Commission proposes to award these licenses by auction. We seek comment on this proposal.

C. Competitive Bidding Issues

1. Competitive Bidding Design

(a) General Competitive Bidding Principles

137. The Competitive Bidding Second Report and Order,(n124) as modified by the Competitive Bidding Reconsideration O