******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect or Word to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Amendment to the Commission's Rules ) WT Docket No. 95-157 Regarding a Plan for Sharing ) RM-8643 the Costs of Microwave Relocation ) MEMORANDUM OPINION AND ORDER ON RECONSIDERATION Adopted: April 5, 2000 Released: July 19, 2000 By the Commission: Table of Contents Paragraph Number I. INTRODUCTION . . . . . . 1 II. BACKGROUND . . . . . . . 2 III. DISCUSSION . . . . . . . 5 A. Petitions Concerning the First Report and Order . . . . . . 5 1. Background. . . . . . . . . . . . . . . . . . . . . . . . . . .5 2. Discussion. . . . . . . . . . . . . . . . . . . . . . . . . . .6 B. Petitions Concerning the Second Report and Order. . . . . .11 1. Reimbursement of Self-Relocating Microwave Incumbents for Relocations Occurring Prior to the Effective Date of the Second Report and Order . . . . . . 12 2. Reimbursement of Self-Relocating Microwave Incumbents for Relocations to Leased Facilities. . . . . . . . . . . . . . . . . . . . . . . . 17 3. Depreciation of Amount Reimbursable to Self-Relocating Microwave Incumbents . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 4. Deadline for Self-Relocating Microwave Incumbents to Submit Documentation of a Relocation to the Clearinghouse . . . . . . . . . . . . . . 27 5. The "N" Variable in the Cost-Sharing Formula. . . . . . . . . 29 IV. CONCLUSION . . . . . . .31 V. PROCEDURAL MATTERS . . . . . 32 A. Regulatory Flexibility Act. . . . . . .32 B. Paperwork Reduction Act . . . . . 33 VI. ORDERING CLAUSES . . . . . . 34 Appendix A List of Petitions, Comments, and Replies Appendix B Final Rules Appendix C Supplemental Final Regulatory Flexibility Analysis I.INTRODUCTION 1. In this Memorandum Opinion and Order on Reconsideration (MO&O), we address petitions for reconsideration and/or clarification of, and a petition for declaratory ruling concerning, the Commission's rules governing the relocation of microwave facilities from the 1850-1990 Megahertz (MHz) band. We clarify certain aspects of these rules, as discussed below, and deny the remaining requests in the petitions. II.background 3. In 1992, the Commission reserved 220 MHz of spectrum, including the 1850-1990 MHz band, for reallocation from private and common carrier fixed microwave services (microwave incumbents) to services using emerging technologies. The Commission also established procedures for microwave incumbents to be relocated to available frequencies in higher bands or to other media, including procedures governing the compensation of microwave incumbents by providers of emerging technology services. In 1994, the Commission allocated the 1850-1990 MHz band to Personal Communications Services (PCS), one of the emerging technology services. This allocation included 20 MHz of spectrum, in the 1910-1930 MHz range, for unlicensed PCS devices. 4. In the First Report and Order in this proceeding, the Commission changed and clarified certain aspects of its microwave relocation procedures and adopted a plan for sharing the costs of relocating microwave facilities operating in the 1850-1990 MHz band (the "cost- sharing plan"). Under the Commission's cost-sharing plan, PCS licensees and manufacturers of unlicensed PCS devices that incur costs for relocating an interfering microwave link (together, "PCS relocators") are eligible to receive reimbursement from later-entrant PCS licensees and later-entrant manufacturers of unlicensed PCS devices that benefit from the clearing of their spectrum (together, "later-entrant PCS entities"). The cost-sharing plan is administered by two private clearinghouses designated by the Wireless Telecommunications Bureau (Bureau) -- the Personal Communications Industry Association (PCIA) and the Industrial Telecommunications Association, Inc. (ITA) using the cost-sharing formula adopted by the Commission. In the Second Report and Order in this proceeding, the Commission, among other things, modified its cost-sharing rules to permit microwave incumbents who relocate their own microwave links and pay their own relocation expenses ("self-relocating microwave incumbents") to collect reimbursement in accordance with the cost-sharing plan adopted in the First Report and Order, subject to certain conditions. 5. Ten parties filed petitions for reconsideration and/or clarification of the First Report and Order, one party filed a petition for declaratory ruling concerning the First Report and Order, and three parties filed petitions for reconsideration and/or clarification of the Second Report and Order. In addition, we received and have considered a number of ex parte communications in this proceeding, although we do not list them individually. In this MO&O, we deny the petitions for reconsideration and/or clarification and the petition for declaratory ruling of the First Report and Order, and we grant in part and deny in part petitions for reconsideration and/or clarification of the Second Report and Order. VI.discussion A. Petitions Concerning the First Report and Order 1. Background 7. The MSS Coalition filed a petition seeking clarification that the cost-sharing rules adopted in the First Report and Order do not apply to mobile-satellite service providers in the 2 Gigahertz (GHz) band. A number of parties also filed petitions for reconsideration of various cost-sharing rules adopted in the First Report and Order. In addition, AT&T Wireless Services, in combination with a number of other wireless providers, filed a petition for reconsideration or, in the alternative, for rulemaking, regarding the Commission's decision not to address in the First Report and Order certain involuntary relocation procedures recommended by these providers. Furthermore, Powertel PCS, Inc. (Powertel), a PCS "A" block licensee that received notification that it owes reimbursement to a PCS relocator, filed a petition seeking a declaratory ruling that no cost-sharing obligation is owed for the relocation of a microwave incumbent's link that is wholly outside of a PCS licensee's Major Trading Area (MTA) or Basic Trading Area (BTA). 1. Discussion 8. MSS Coalition Petition for Clarification. We find it unnecessary to reconsider or clarify the Commission's microwave relocation rules for the non-PCS emerging technology bands and the cost-sharing rules adopted in the First Report and Order as they apply to 2 GHz mobile-satellite service providers, as urged by the MSS Coalition. In the First Report and Order, the Commission stated that the "microwave relocation rules already apply to all emerging technology services" but that "as new services develop, we may review our relocation rules and make modifications to these rules where appropriate." Moreover, the Commission stated that "while we conclude that cost-sharing should apply to all emerging technology services, we do not adopt specific cost-sharing rules for new services at this time, but will develop such rules in future proceedings." We recently established rules that provide for the relocation of incumbent Broadcast Auxiliary Service and Fixed Service microwave licensees from the 2 GHz band in order to clear spectrum for MSS. In doing so, we generally followed the same principles that governed the relocation of fixed microwave incumbents to clear spectrum for PCS, but in some cases the rules we adopted for MSS reflected unique characteristics of the rollout of MSS. The concerns raised by the MSS Coalition on reconsideration regarding the applicability of the microwave relocation and cost-sharing rules to the 2 GHz bands allocated to MSS were raised and considered in the MSS proceeding, and further discussion here is unnecessary. 9. Petitions for Reconsideration. We also decline to reconsider or clarify the various cost-sharing rules adopted in the First Report and Order. For example, the Commission was petitioned to reconsider extending the 10-year period for microwave incumbent relocations, raising the $250,000 cap on reimbursable relocation costs, and eliminating the installment payment plan for designated entity reimbursement obligations, among other requested amendments to the rules. We find that making the requested rule changes at this time would not be in the public interest. 10. The cost-sharing rules have been in effect since 1996. They generally have served to promote an efficient and equitable relocation process, one of the goals of the First Report and Order. Moreover, changing the cost-sharing rules mid-stream could undermine the integrity of the rules that PCS relocators, later-entrant PCS entities, and microwave incumbents have relied on to effect the relocation from these bands. It could lead to confusion and uncertainty among PCS entities and microwave incumbents who must comply with the modified rules. We conclude, therefore, that none of the suggested changes to the Commission's cost-sharing rules would significantly advance our goal of promoting an efficient and equitable relocation process as to outweigh the risks associated with such rule changes. 11. Similarly, we conclude that the changes to the Commission's involuntary relocation rules suggested by AT&T Wireless Services and its joint petitioners would not significantly advance our goal of promoting an efficient and equitable relocation process as to outweigh the risks discussed above. 12. Powertel Petition for Declaratory Ruling. Powertel asserts that a chart in Appendix A of the First Report and Order dictates that a later-entrant PCS licensee is not obligated to reimburse a PCS relocator for the cost of relocating a link that is entirely within the PCS relocator's MTA or BTA, regardless of whether the location of the later-entrant PCS licensee's base station is within the Proximity Threshold rectangle described in Section 24.247(a) of the Commission's rules. We disagree. We do not believe that there is an inconsistency between the chart in Appendix A of the First Report and Order and the Proximity Threshold test adopted by the Commission in that Order. Thus, we find that the Proximity Threshold test set forth in Section 24.247 controls when a reimbursement obligation exists for a later-entrant PCS licensee arising from the relocation of interfering links. As the Commission stated in the First Report and Order, the Proximity Threshold test is administratively convenient for the clearinghouses to apply and generally permits existing and prospective PCS providers to project their cost-sharing obligations accurately. A. Petitions Concerning the Second Report and Order 13. In this section, we consider the following issues raised in petitions for reconsideration or clarification of the Second Report and Order: (1) whether to permit microwave incumbents who self-relocated prior to the effective date of the Second Report and Order to obtain reimbursement from PCS entities under the cost-sharing plan; (2) whether to permit self- relocating microwave incumbents to collect reimbursement under the cost-sharing plan even if they relocate to leased microwave facilities rather than to purchased facilities; (3) whether the reimbursement amount to which microwave licensees are entitled under the cost-sharing formula should be subject to "depreciation;" (4) the deadline by which self-relocating microwave incumbents must submit documentation of a relocation to the clearinghouse; and (5) how the cost-sharing formula applies to the first PCS entity that has a cost-sharing obligation to a relocating microwave incumbent. 1. Reimbursement of Self-Relocating Microwave Incumbents for Relocations Occurring Prior to the Effective Date of the Second Report and Order 14. Background. Under the Commission's cost-sharing plan that was adopted in the First Report and Order and became effective on August 12, 1996, PCS relocators seeking reimbursement for costs incurred in relocating microwave links are permitted to register their reimbursement rights with the clearinghouse for relocation expenses incurred since April 5, 1995, the date that the voluntary negotiation period for relocation of microwave incumbents by A and B block licensees began. Under amendments to the cost-sharing plan that were adopted in the Second Report and Order and became effective on May 19, 1997, self-relocating microwave incumbents seeking reimbursement for costs incurred in relocating microwave links are permitted to register reimbursement rights with the clearinghouse for relocation expenses incurred prospectively from the effective date of the amended rules. Neither the Second Report and Order nor the amended rules explicitly address whether self-relocating microwave incumbents are permitted to register reimbursement rights with the clearinghouse for relocation expenses incurred prior to the effective date of the amended rules. 15. On reconsideration, API, Santee Cooper, and UTC argue that microwave incumbents that self-relocated their links prior to the effective date of the Second Report and Order should be entitled to register reimbursement rights with the clearinghouse for expenses incurred after April 5, 1995. These petitioners argue that such reimbursement is appropriate because microwave incumbents that relocated their own links prior to arrangements with PCS entrants helped to facilitate the Commission's goal of rapidly clearing the 1850-1990 MHz band for use by broadband PCS. In addition, these petitioners argue that such reimbursement is equitable, given the Commission's decision to permit PCS licensees to obtain reimbursement for relocation costs incurred prior to the Commission's adoption of cost-sharing in the First Report and Order. 16. Discussion. We decline to extend reimbursement rights to microwave incumbents that self-relocated links between April 5, 1995 and May 19, 1997 because we find that the petitioners have not demonstrated that such reimbursement is warranted. First, we note that microwave incumbents that self-relocated links during this time period should not have had any expectation that they would be reimbursed by later-entrant PCS entities because no Commission rule was in effect to permit such reimbursement. Second, microwave incumbents that self- relocated links during this time period were not obligated to do so by our rules; indeed, for most of this time period, these incumbents were not obligated to negotiate with PCS entities over relocation. Thus, it is likely that microwave incumbents that self-relocated links during this time period did so for independent business reasons, such as gaining more options for obtaining alternative spectrum or exercising more control over the relocation process, and petitioners have not demonstrated to the contrary. Even in those cases where microwave incumbents self- relocated certain links contemporaneously with other links subject to an agreement with a PCS entity, as part of a system-wide replacement, the incumbents were under no obligation to do so. 17. In addition, we are concerned about the ability of independent third party appraisers to collect reliable cost data from microwave incumbents that self-relocated links prior to May 19, 1997, sufficient to verify the actual cost of relocation to comparable facilities. The Second Report and Order made clear that reliable independent verification of a microwave incumbent's relocation costs was necessary as a safeguard to determine the compensation reimbursable under the cost-sharing plan. Petitioners have not demonstrated how or even if this safeguard could work in practice if applied retrospectively. 18. Thus, for these reasons, we find that it would not be in the public interest to grant the petitioners' request. We distinguish our decision here from our decision to permit PCS relocators to obtain reimbursement for costs incurred in relocating microwave links between April 5, 1995 and August 12, 1996, the effective date of the cost-sharing rules adopted in the First Report and Order. First, PCS licensees that negotiated relocation agreements with microwave incumbents during this time period expressly did so for the purpose of clearing the 1850-1990 MHz band for use by PCS, thus facilitating this important Commission goal. Second, these agreements provide objective evidence of the negotiated costs for relocation, and thus are not subject to the difficulties in obtaining reliable cost data years after the relocation occurred, as discussed above. Third, if the Commission did not permit PCS relocators to obtain reimbursement for costs incurred in relocating microwave links during this time period, later- entrant PCS entities that benefited from the clearance of this spectrum would have received a significant competitive advantage against PCS relocators in the market. 1. Reimbursement of Self-Relocating Microwave Incumbents for Relocations to Leased Facilities 19. Background. The Commission's microwave relocation cost-sharing formula, set forth in Section 24.243 of the Commission's rules, allocates reimbursement to PCS relocators or self- relocating microwave incumbents based on the actual costs of relocation, subject to certain factors. Section 24.243(b) of the Commission's rules lists "leased facilities" as an actual relocation cost to be included in the cost-sharing formula. API encourages the Commission to permit self-relocation to leased facilities because it will encourage prompt clearing of the 1850- 1990 MHz band. 20. Discussion. We clarify that the cost-sharing formula set forth in Section 24.243 permits either PCS relocators or self-relocating microwave incumbents to include the actual costs of leasing replacement facilities as a compensable cost under the formula. We believe that self- relocating microwave incumbents and PCS relocators should be able to choose the most efficient method of relocation, whether it involves the purchase of replacement facilities or the leasing of replacement facilities. Although this clarification is opposed by PCIA and UTAM, we find that PCIA and UTAM have not adequately explained why self-relocating microwave incumbents should be treated differently than PCS relocators on this issue. We also do not agree with the contention of PCIA and UTAM that the costs of microwave incumbents relocating to leased facilities will be difficult to verify. If either a microwave incumbent or a PCS relocator submits relocation costs based on leased facilities, the clearinghouse can determine whether the leased facilities represent comparable facilities and can calculate the present value of the lease payments. In addition, such relocation costs are subject to independent verification by a third party appraiser and to the monetary caps established by the Commission. 1. Depreciation of Amount Reimbursable to Self-Relocating Microwave Incumbents 21. Background. The reimbursement obligation of later-entrant PCS entities that is derived from the cost-sharing formula adopted in the First Report and Order decreases over a ten-year period, so that the amount that the PCS relocator receives in reimbursement is reduced, i.e., depreciates, over time. Thus, with the exception of the "full reimbursement" category described below, the PCS relocator's reimbursement for a given link is reduced for every month that elapses between the date that the PCS relocator obtains reimbursement rights for that link and the date that a later-entrant PCS entity incurs a reimbursement obligation for that link. The PCS relocator obtains reimbursement rights on the date it signs an agreement with a microwave incumbent for the relocation of the link. The Commission stated in the First Report and Order that this decrease in reimbursement over time reflects the fact that the PCS relocator has received the benefit of being first to market, and to ensure that the PCS relocator pays the largest amount, which would provide an incentive to the relocator to limit relocation expenses. The Commission also determined, though, that PCS relocators should be entitled to full reimbursement, not subject to depreciation, for relocating non-interfering links that are either fully outside their market area (e.g., MTA, BTA) or their licensed frequency band (e.g., A block, B block). The rationale for this exception to the application of the depreciation factor is to provide further incentive for a PCS relocator to relocate an entire system of a microwave incumbent, rather than singling out links that interfere solely with the PCS relocator's own operations. 22. In the Second Report and Order, the Commission determined that the reimbursement of self-relocating microwave incumbents should be subject to depreciation. The Commission explained that depreciation ensures that incumbents pay for benefits that result from early relocation on a voluntary basis: more options for obtaining alternative spectrum; more control over the relocation process; and reduced uncertainty about further operations. The Commission also concluded that the application of a depreciation factor to the reimbursement formula for self- relocating microwave incumbents provides an incentive for the incumbent to minimize costs because its own share of the costs is not depreciated. 23. Petitioners challenge the Commission's decision to depreciate the amount reimbursable to a self-relocating microwave incumbent under the cost-sharing formula, arguing that incumbents have other incentives to minimize relocation costs, that incumbents do not receive the same type of "first-to-market" benefits that PCS relocators receive, and that Commission's decision treats microwave incumbents differently than PCS relocators. 24. Discussion. We find that the petitioners do not raise any arguments that warrant our reconsideration of the decision in the Second Report and Order to depreciate the amount reimbursable to a self-relocating microwave incumbent under the cost-sharing formula. Under the Commission's cost-sharing plan, depreciation applies equally to reimbursement of self- relocating microwave incumbents and to reimbursement of PCS relocators, except for PCS relocators that move non-interfering links that are either fully outside their market area or their licensed frequency band. As discussed above, the rationale for applying depreciation to reimbursement under the cost-sharing formula is the same for both self-relocating microwave incumbents and PCS relocators. Both receive benefits from the costs they incur for early relocations that should reduce reimbursement obligations of later-entrant PCS entities: microwave incumbents, for example, gain more options for obtaining alternative spectrum; and PCS relocators are the first to market. Moreover, both self-relocating microwave incumbents and PCS relocators are in a position to minimize relocation costs. 25. Although the Commission did permit PCS relocators that relocate out-of-market or out-of-band links to receive full reimbursement, not subject to depreciation, that exception reflects an analysis by the Commission that such PCS relocators need additional incentive to relocate these links. The Commission did not find in the Second Report and Order that such additional incentives were necessary for microwave incumbents to self-relocate links, and we see no reason to reconsider that decision here. 26. We do, however, amend Section 24.243(d) of our rules to clarify the date on which the depreciation factor begins to apply to the amount reimbursable to a self-relocating microwave incumbent under the cost-sharing formula. As discussed above, the amount reimbursable to a PCS relocator under the cost-sharing formula begins to depreciate on the date that the relocator signs an agreement with the microwave incumbent. In the First Report and Order, the Commission found that the use of the signed agreement date was easily verifiable. In the case of a self-relocating microwave incumbent, the self-relocating incumbent is, by definition, relocating before the existence of an agreement with a PCS relocator. 27. We find that, in the case of a self-relocating microwave incumbent seeking reimbursement for the relocation of links in the 1850-1990 MHz band, a reasonable substitute for the signed agreement date is the date that the incumbent notifies the Commission that it intends to discontinue, or has discontinued, the use of these links, pursuant to Section 101.305 of the Commission's rules. We find that, similar to a signed agreement date, this date is easily verifiable and thus will not result in significant administrative burden for self-relocating incumbents or the clearinghouses. We also find that this date can be applied to incumbent relocations to microwave networks or wireline networks (e.g., fiber optic) because in either case the incumbent must notify the Commission of the discontinuance of its displaced facilities under Section 101.305. We note that the use of this date is supported by ITA, and that no party has challenged its use in the record. 28. Thus, we conclude that the date that the depreciation factor begins to apply to the amount reimbursable to a microwave incumbent for its self-relocated links is the date that the incumbent notifies the Commission that it intends to discontinue, or has discontinued, the use of these links, pursuant to Section 101.305 of the Commission's rules. We emphasize that the obtainment of reimbursement rights by a fixed microwave incumbent is contingent upon the incumbent's compliance with Section 101.305 of the Commission's rules. We amend Section 24.243(d) of the Commission's rules accordingly. We also make a related amendment to Section 24.245(a)(2) of the Commission's rules in Section III.B.4 below, regarding when a self- relocating microwave incumbent must submit documentation of the relocation to the clearinghouse. 1. Deadline for Self-Relocating Microwave Incumbents to Submit Documentation of a Relocation to the Clearinghouse 29. Background. Under Section 24.245(a)(2) of the Commission's rules, a self-relocating microwave incumbent seeking reimbursement must submit documentation to the clearinghouse within ten business days of the date that "relocation occurs." The rule does not define when relocation occurs. In the case of a PCS relocator seeking reimbursement, relocation occurs (i.e., the PCS relocator obtains reimbursement rights) on the date that the relocator signs an agreement with an incumbent for the relocation of the incumbent's links. 30. Discussion. Microwave incumbents request that the Commission clarify whether the relocation of a self-relocating microwave incumbent occurs on the date that the incumbent's links are decommissioned, the date that the replacement facilities are fully implemented, or some other date. In Section III.B.3 above, we found that depreciation begins to apply to the amount reimbursable to a microwave incumbent for its self-relocated links on the date that the incumbent notifies the Commission that it intends to discontinue, or has discontinued, the use of these links, pursuant to Section 101.305 of the Commission's rules. We see no reason why this date should not also serve as the date that triggers the obligation of the incumbent to file documentation with a clearinghouse. The date that the relocation agreement is signed serves as the date that triggers a PCS relocator's obligation to submit documentation to the clearinghouse and the date when the depreciation factor begins to apply to the amount reimbursable to a PCS relocator. Thus, we find that in order to obtain reimbursement for the relocation of links in the 1850-1990 MHz band, a self-relocating microwave incumbent must submit documentation of the relocation to the clearinghouse within ten business days of the date that the incumbent notifies the Commission that it intends to discontinue, or has discontinued, the use of these links, pursuant to Section 101.305 of the Commission's rules. We modify Section 24.245(a)(2) accordingly. 1. The "N" Variable in the Cost-Sharing Formula 31. Background. Under the Commission's cost-sharing formula, the amount of reimbursement owed to the PCS relocator or self-relocating microwave incumbent by later- entrant PCS entities is calculated by: (1) determining the actual costs of reimbursement; (2) dividing by the variable "N," which represents the number of PCS entities that would have interfered with the incumbent's link; and (3) applying a depreciation factor. Under Section 24.243(c) of the Commission's rules, N equals 1 for the PCS relocator, N equals 2 for the next PCS entity that would have interfered with the link, and so on. 32. Discussion. As requested by API and UTC, we clarify that when the cost-sharing formula is applied in the case of a self-relocating microwave incumbent, N equals 1 for the first PCS entity that would have interfered with the relocated link, and we amend Section 24.243(c) accordingly. If N were to equal 2 when the cost-sharing formula is applied to the case of a self- relocating microwave incumbent, the incumbent's reimbursement would be reduced by half, a result that is inconsistent with the Commission's goal of encouraging self-relocation. We note that no party opposes this clarification. XXXIII.conclusion 34. As discussed above, in this MO&O we clarify that: (1) the Proximity Threshold test set forth in Section 24.247 of the Commission's rules controls when a reimbursement obligation exists for a later-entrant PCS licensee; (2) microwave incumbents that self-relocated links between April 5, 1995 and May 19, 1997 are not entitled to reimbursement; (3) microwave incumbents are permitted to relocate to leased facilities, as well as purchased facilities; (4) the date that the depreciation factor begins to apply to the amount reimbursable to a microwave incumbent for its self-relocated links is the date that the incumbent notifies the Commission that it intends to discontinue, or has discontinued, the use of these links, pursuant to Section 101.305 of the Commission's rules; (5) the deadline for self-relocating microwave incumbents to file documentation of the relocation with the clearinghouse shall be within ten business days of the date referred to in the preceding clause; and (6) under the cost-sharing formula as applied to self- relocating microwave incumbents, the variable N equals 1 for the first PCS entity that would have interfered with the relocated link. We deny the remaining requests in the petitions for reconsideration and/or clarification of the First Report and Order and Second Report and Order in this proceeding. XXXV.PROCEDURAL MATTERS A. Regulatory Flexibility Act 36. Appendix C contains a Supplemental Final Regulatory Flexibility Analysis, in accordance with the Regulatory Flexibility Act. A. Paperwork Reduction Act 37. This MO&O contains no new or modified information collections subject to the Paperwork Reduction Act of 1995, Public Law 104-13. XXXVIII.Ordering clauseS 39. Accordingly, IT IS ORDERED, pursuant to Section 1.106 of the Commission's rules, 47 C.F.R.  1.106, that the petitions for reconsideration and/or clarification of the First Report and Order filed by the American Petroleum Institute, the Association of American Railroads, the Association of Public-Safety Communications Officials-International, Inc, AT&T Wireless Services, Inc. (jointly with GTE Mobilnet, PCS PrimeCo, L.P., Pocket Communications, Inc., Western PCS Corporation and the Cellular Telecommunications Industry Association), the MSS Coalition, Omnipoint Communications, Inc., the Personal Communications Industry Association, Small Business in Telecommunications, Tenneco Energy, and UTC/The Telecommunications Association ARE DENIED, as discussed in Section III.A supra. 40. IT IS FURTHER ORDERED, pursuant to Section 1.2 of the Commission's rules, 47 C.F.R.  1.2, that the petition for declaratory ruling concerning the First Report and Order filed by Powertel PCS, Inc. IS DENIED, as discussed in Section III.A supra. 41. IT IS FURTHER ORDERED, pursuant to Section 1.106 of the Commission's rules, 47 C.F.R.  1.106, that the petitions for reconsideration and/or clarification of the Second Report and Order filed by American Petroleum Institute, UTC/The Telecommunications Association, and the South Carolina Public Service Authority ARE GRANTED IN PART and DENIED IN PART, as discussed in Section III.B supra. 42. IT IS FURTHER ORDERED that Sections 24.243 and 24.245 of the Commission's rules, 47 C.F.R.  24.243, 24.245, ARE AMENDED as set forth in Appendix B, effective 30 days after publication in the Federal Register. 43. IT IS FURTHER ORDERED that the Commission's Consumer Information Bureau, Reference Information Center, SHALL SEND a copy of this Memorandum Opinion and Order on Reconsideration, including the Supplemental Final Regulatory Flexibility Analysis set forth in Appendix C, to the Chief Counsel for Advocacy of the Small Business Administration. FEDERAL COMMUNICATIONS COMMISSION Magalie Roman Salas Secretary APPENDIX A LIST OF PETITIONS, COMMENTS, AND REPLIES First Report and Order Petitions for Reconsideration, Clarification, and/or Rulemaking (received July 12, 1996, unless otherwise noted) American Petroleum Institute (API) Association of American Railroads Association of Public-Safety Communications Officials-International, Inc. (APCO) AT&T Wireless Services, Inc.; GTE Mobilnet; PCS PrimeCo, L.P.; Pocket Communications, Inc.; Western PCS Corporation; and Cellular Telecommunications Industry Association (AT&T et al.) Celsat America, Inc., COMSAT Corporation, Hughes Space and Communications International, ICO Global Communications, and Personal Communications Satellite Corporation (collectively, the MSS Coalition) Omnipoint Communications, Inc. (Omnipoint) Small Business in Telecommunications (May 28, 1996) Personal Communications Industry Association (PCIA) Tenneco Energy UTC, the Telecommunications Association (UTC) Comments/Oppositions (received August 8, 1996) American Petroleum Institute (API) Association of American Railroads Association of Public-Safety Communications Officials-International, Inc. (APCO) AT&T Wireless Services, Inc. Omnipoint Communications, Inc. Pacific Bell Mobile Services Personal Communications Industry Association (PCIA) UTC, the Telecommunications Association (UTC) Replies (received August 19, 1996, unless otherwise noted) American Petroleum Institute (API) Association of American Railroads AT&T Wireless Services, Inc.; GTE Mobilnet; PCS PrimeCo, L.P.; Pocket Communications, Inc.; Western PCS Corporation; and the Cellular Telecommunications Industry Association (AT&T et al.) (August 21, 1996) MSS Coalition (August 21, 1996) Omnipoint Communications, Inc. (Omnipoint) Personal Communications Industry Association (PCIA) Tenneco Energy Petition for Declaratory Ruling (received September 26, 1997) Powertel PCS, Inc. Response to Petition for Declaratory Ruling (received October 24, 1997) PCIA Microwave Clearinghouse Second Report and Order Petitions for Reconsideration and/or Clarification (received April 17, 1997, unless otherwise noted) American Petroleum Institute (API) (April 16, 1997) South Carolina Public Service Authority (Santee Cooper) UTC, the Telecommunications Association (UTC) Comments/Oppositions (received May 20, 1997) Pacific Bell Mobile Services Personal Communications Industry Association (PCIA) Southern Company UTAM, Inc. UTC, the Telecommunications Association (UTC) Replies (received May 30, 1997, unless otherwise noted) American Petroleum Institute (API) Personal Communications Industry Association (PCIA) South Carolina Public Service Authority (Santee Cooper) (June 4, 1997) UTAM, Inc. APPENDIX B FINAL RULES Part 24 of Title 47 of the Code of Federal Regulations is amended as follows: 1. Section 24.243 is amended by revising subsections (c) and (d) as follows:  24.243 The cost-sharing formula. * * * * * (c) N equals the number of PCS entities that would have interfered with the link. For the PCS relocator, N = 1. For the next PCS entity that would have interfered with the link, N = 2, and so on. In the case of a voluntarily relocating microwave incumbent, N=1 for the first PCS entity that would have interfered with the link. For the next PCS entity that would have interfered with the link, N = 2, and so on. (d) Tm equals the number of months that have elapsed between the month the PCS relocator or voluntarily relocating microwave incumbent obtains reimbursement rights for the link and the month that the clearinghouse notifies a later-entrant of its reimbursement obligation for the link. A PCS relocator obtains reimbursement rights for the link on the date that it signs a relocation agreement with a microwave incumbent. A voluntarily relocating microwave incumbent obtains reimbursement rights for the link on the date that the incumbent notifies the Commission that it intends to discontinue, or has discontinued, the use of the link, pursuant to Section 101.305 of the Commission's rules, 47 C.F.R.  101.305. 2. Section 24.245 is amended by revising subsection (a)(2) as follows:  24.245 Reimbursement under the Cost-Sharing Plan. (a) * * * (2) To obtain reimbursement, a voluntarily relocating microwave incumbent must submit documentation of the relocation of the link to the clearinghouse within ten business days of the date that the incumbent notifies the Commission that it intends to discontinue, or has discontinued, the use of the link, pursuant to Section 101.305 of the Commission's rules, 47 C.F.R.  101.305. * * * * * APPENDIX C SUPPLEMENTAL FINAL REGULATORY FLEXIBILITY ANALYSIS 1. As required by the Regulatory Flexibility Act (RFA), see 5 U.S.C.  603, an Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the Notice of Proposed Rulemaking (Notice) in WT Docket No. 95-157. The Commission sought written public comment on the proposals in the Notice, including the IRFA. A Final Regulatory Flexibility Analysis (FRFA) was incorporated in the First Report and Order in WT Docket No. 95-157. The First Report and Order also included a Further Notice of Proposed Rulemaking (Further Notice), and thus incorporated an IRFA on the additional proposals in the Further Notice. The Commission sought written public comment on the additional proposals in the Further Notice, including the IRFA. A FRFA on the additional proposals in the Further Notice was incorporated in the Second Report and Order in WT Docket No. 95-157. This present Supplemental Final Regulatory Flexibility Analysis in this Memorandum Opinion and Order on Reconsideration (MO&O) supplements the FRFAs in the First Report and Order and Second Report and Order, and conforms to the RFA, as amended. I. Need for, and Objectives of, the Rules 2. This MO&O addresses petitions for reconsideration and/or clarification of, and a petition for declaratory ruling concerning, the Commission's plan for PCS market entrants to share the costs of relocating microwave facilities from the 1850-1990 MHz band. Under the Commission's cost-sharing plan, PCS licensees and manufacturers of unlicensed PCS devices that incur costs for relocating an interfering microwave link (together, "PCS relocators") are eligible to receive reimbursement from later-entrant PCS licensees or later-entrant manufacturers of unlicensed PCS devices that benefit from the clearing of their spectrum (together, "later- entrant PCS entities"). In addition, the cost-sharing plan permits microwave incumbents who relocate their own microwave links and pay their own relocation expenses ("self-relocating microwave incumbents") to collect reimbursement from later-entrant PCS entities that benefit from the clearing of the spectrum, subject to certain conditions. This MO&O clarifies certain aspects of this cost-sharing plan, as discussed in Section IV below, and denies the remaining requests in the petitions, including a request to eliminate the installment payment plan for designated entity reimbursement obligations. These clarifications will facilitate the efficient relocation of fixed microwave incumbents from the 1850-1990 MHz band in order to clear the band for the provision of PCS service. 3. In particular, the MO&O clarifies that: (1) the Proximity Threshold test set forth in Section 24.247 of the Commission's rules, 47 C.F.R.  24.247, controls when a reimbursement obligation exists for a later-entrant PCS licensee; (2) microwave incumbents that self-relocated links between April 5, 1995 and May 19, 1997 are not entitled to reimbursement; (3) microwave incumbents are permitted to relocate to leased facilities, as well as purchased facilities; (4) the date that the depreciation factor begins to apply to the amount reimbursable to a microwave incumbent for its self-relocated links is the date that the incumbent notifies the Commission that it intends to discontinue, or has discontinued, the use of these links, pursuant to Section 101.305 of the Commission's rules, 47 C.F.R.  101.305; (5) the deadline for self- relocating microwave incumbents to file documentation of the relocation with the clearinghouse shall be within ten business days of the date referred to in the preceding clause; and (6) under the cost-sharing formula as applied to self-relocating microwave incumbents, the variable N equals 1 for the first PCS entity that would have interfered with the relocated link. II. Summary of Issues Raised in Response to the FRFAs 4. None of the petitions filed on the First Report and Order and Second Report and Order, or comments filed on these petitions, were specifically in response to the FRFAs in those orders. Several of the petitions and comments regarding the First Report and Order, though, raised issues that may impact small entities, and were considered by the Commission, as discussed in Section V below. In particular, Tenneco Energy argues that the Commission should eliminate the payment plan that permits PCS providers that are designated entities (a small business classification used for Commission spectrum auctions) to make reimbursement payments in installments over time, as set forth in Section 24.249(b) of the Commission's rules. Omnipoint and PCIA oppose Tenneco's argument. Moreover, Omnipoint contends that, although it does not qualify as a designated entity under the Commission's rules, it should be permitted to make reimbursement payments according to the installment plan schedule set forth in Section 24.249(b). 5. Small Business in Telecommunications (SBT) argues that the Commission should refine its definitions of communications throughput and network reliability in evaluating whether a microwave incumbent's new system is comparable to the old one, and that the Commission should require PCS providers to compensate microwave incumbent's for internal resources devoted to the relocation process. Other fixed microwave incumbents, such as the Association of American Railroads, support a refinement of the definitions of throughput and reliability, whereas PCS providers such as AT&T, Omnipoint, and Pacific Bell, oppose such a refinement. In addition, AT&T opposes SBT's suggested modification to include internal resources in compensation. III. Description and Estimate of the Number of Small Entities to Which the Rules Will Apply 6. The RFA directs agencies to provide a description of and, where feasible, an estimate of the number of small entities that may be affected by the proposed rules, if adopted. The RFA generally defines the term "small entity" as having the same meaning as the terms "small business," "small organization," and "small governmental jurisdiction." In addition, the term "small business" has the same meaning as the term "small business concern" under the Small Business Act. A small business concern is one which: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (SBA). A small organization is generally "any not-for-profit enterprise which is independently owned and operated and is not dominant in its field." Nationwide, as of 1992, there were approximately 275,801 small organizations. "Small governmental jurisdiction" generally means "governments of cities, counties, towns, townships, villages, school districts, or special districts, with a population of less than 50,000." As of 1992, there were approximately 85,006 such jurisdictions in the United States. This number includes 38,978 counties, cities, and towns; of these, 37,566, or 96 percent, have populations of fewer than 50,000. The Census Bureau estimates that this ratio is approximately accurate for all governmental entities. Thus, of the 85,006 governmental entities, we estimate that 81,600 (96 percent) are small entities. Below, we further describe and estimate the number of small entity licensees and regulatees that will be affected by the rule clarifications adopted in this MO&O. 7. The rule clarifications adopted in this MO&O will affect small entities that participate in the microwave relocation process in the 1850 MHz to 1990 MHz band: providers of broadband personal communications service (PCS); providers of fixed microwave services; and manufacturers of unlicensed PCS devices. 8. Broadband Personal Communications Service (PCS). The broadband PCS spectrum is divided into six frequency blocks designated A through F, and the Commission has held auctions for each block. The Commission defined "small entity'' for Blocks C and F as an entity that has average gross revenues of less than $40 million in the three previous calendar years. For Block F, an additional classification for "very small business" was added and is defined as an entity that, together with their affiliates, has average gross revenues of not more than $15 million for the preceding three calendar years. These regulations defining "small entity'' in the context of broadband PCS auctions have been approved by the SBA. No small businesses within the SBA-approved definition bid successfully for licenses in Blocks A and B. There were 90 winning bidders that qualified as small entities in the Block C auctions. A total of 93 small and very small business bidders won approximately 40% of the 1,479 licenses for Blocks D, E, and F. However, licenses for Blocks C through F have not been awarded fully; therefore, there are few, if any, small businesses currently providing PCS services. Based on this information, we estimate that the number of small broadband PCS licensees will include the 90 winning C Block bidders and the 93 qualifying bidders in the D, E, and F blocks, for a total of 183 small entity PCS providers as defined by the SBA and the Commission's auction rules. 9. Fixed Microwave Services. The Commission has not yet defined a small business with respect to microwave services. For purposes of this IRFA, we will utilize the SBA's definition applicable to radiotelephone companies -- i.e., an entity with no more than 1,500 persons. The Commission's Office of Engineering and Technology developed a study in 1992 that provides statistical data for all microwave incumbents in 1850 to 1990 MHz band. Specifically, the study finds that in the 1850 MHz to 1990 MHz band, local governments, including public safety entities, have 168 licenses; petroleum companies have 67 licenses; power companies have 164 licenses; railroad companies have 18 licenses; and all other microwave incumbents in this band have 143 licenses. However, the Commission does not have specific statistics that determine how many of these companies are small businesses. We therefore are unable to estimate the number of fixed microwave service providers that qualify under the SBA's definition. 10. Manufacturers of Unlicensed PCS Devices. The Commission has not yet developed a definition of small entities applicable to manufacturers of unlicensed PCS devices. Therefore, the applicable definition of small entity is the definition under the SBA applicable to the "Communications Services, Not Elsewhere" category -- an entity with less than $11.0 million in annual receipts. The Census Bureau estimate indicate that of the 848 firms in the "Communications Services, Not Elsewhere" category, 775 are small businesses. The Commission does not have specific statistics, though, on how many of these 775 small businesses are manufacturers of unlicensed PCS devices. IV. Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements 11. This MO&O does not contain any additional reporting or recordkeeping requirements. The MO&O does clarify several aspects of the Commission's cost-sharing plan for microwave relocation, as discussed in Section I above, but these clarifications do not create new compliance obligations. V. Steps Taken to Minimize Significant Economic Impact on Small Entities, and Significant Alternatives Considered 12. This MO&O clarifies certain aspects of the Commission's plan for PCS market entrants to share the costs of relocating microwave facilities from the 1850-1990 MHz band, as discussed in Section I above. Under the Commission's cost-sharing plan, PCS relocators and self-relocating fixed microwave incumbents that pay for the relocation of microwave links are entitled to reimbursement from later-entrant PCS entities that benefit from the clearing of the spectrum. A number of the clarifications set forth in this MO&O will affect the amount of reimbursement that a PCS relocator or self-relocating microwave incumbent is entitled to receive under the plan and, conversely, the amount of reimbursement that a later-entrant PCS entity is obligated to pay. In some cases, the clarifications will result in an increase in reimbursement, to the benefit of the PCS relocator or self-relocating microwave incumbent; in other cases, the clarifications will result in a decrease in reimbursement, to the benefit of the later-entrant PCS entity. Because some entities on both sides of the reimbursement equation are small businesses, we do not believe that, on the whole, these clarifications to the cost-sharing plan will have a significant economic impact on small businesses. We do believe that these clarifications will make it easier for the affected regulated entities to comply with our cost-sharing rules and, to some extent, reduce the staff resources needed to handle compliance, a result that is especially beneficial for small businesses. 13. The MO&O also denies the remaining requests in the petitions (retaining the status quo), including the requests by Tenneco, Omnipoint, and SBT set forth in Section II above. We believe that the remaining requests would require changes in the cost-sharing rules that might undermine the integrity of the rules that PCS relocators, later-entrant PCS entities, and microwave incumbents have relied on since 1996 to effect the relocation from these bands. Thus, as discussed in paragraph 8 of the MO&O, we conclude that granting these remaining requests would not significantly advance our goal of promoting an efficient and equitable relocation process as to outweigh the risks associated with such rule changes. Report to Congress. The Commission will send a copy of this MO&O, including this Supplemental FRFA, in a report to be sent to Congress pursuant to the Small Business Regulatory Enforcement Fairness Act of 1996, see 5 U.S.C.  801(a)(1)(A). In addition, the Commission will send a copy of this MO&O, including this Supplemental FRFA, to the Chief Counsel for Advocacy of the Small Business Administration. A copy of this MO&O and this Supplemental FRFA (or summaries thereof) will also be published in the Federal Register. See 5 U.S.C.  604(b).