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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 In the Matter of ) ) Amendment of the Commission's Rules) WT Docket No. 97-81 Regarding Multiple Address Systems) NOTICE OF PROPOSED RULE MAKING Adopted: February 19, 1997 Released: February 27, 1997 Comment Date: April 21, 1997 Reply Comment Date: May 6, 1997 By the Commission: TABLE OF CONTENTS Paragraph I. Introduction 1 II. Executive Summary 2 III. Background 4 IV. Discussion 8 A. Spectrum Allocation 1. Treatment of the 932/941 and 928/959 MHz bands 9 2. Treatment of the 928/952/956 MHz bands 12 B. MAS Licensing Approach 1. Geographic Area Licensing 14 2. Service Area 16 3. Treatment of Incumbent Licensees 19 4. Licensing 21 5. Spectrum Block Size and Aggregation 24 6. Partitioning and Disaggregation 26 7. Mexican and Canadian Border Areas 34 8. Construction/Coverage Requirements 36 9. Technical Flexibility 40 10. Operational Flexibility 41 11. Regulatory Status 43 C. Competitive Bidding Issues 1. Authority to Conduct Auctions 46 2. Disposition of Previously Filed Applications 52 3. Competitive Bidding Provisions 59 D. Frequency Set-Aside for Governmental and Public Safety Entities65 E. Suspension of Acceptance and Processing of Applications68 V. Conclusion 72 VI. Procedural Matters 73 VII. Ordering Clauses 78 I. INTRODUCTION 1. In this Notice of Proposed Rule Making ("Notice") we examine ways to maximize use of spectrum allocated to Multiple Address Systems ("MAS") in the Fixed Microwave Services. MAS operate on spectrum in the middle of the 900 MHz band, where a wide variety of mobile and fixed applications are technically feasible. This action is part of our continuing effort to establish a flexible regulatory framework for spectrum allocations that will, among other things, provide opportunities for continued development of competitive new service offerings by allowing flexible use of spectrum, expedite market entry through modified licensing procedures, and promote technological innovation by eliminating unnecessary regulatory burdens. To meet these objectives, we propose to (1) convert licensing of MAS spectrum, for which the principal use will involve, or is reasonably likely to involve, "subscriber-based" services, from site-by-site licensing to geographic area licensing, (2) simplify and streamline the MAS licensing procedures and rules, (3) increase licensee flexibility to provide communication services that are responsive to dynamic market demands, and (4) employ competitive bidding procedures to resolve mutually exclusive applications for MAS spectrum. In addition, we temporarily suspend the acceptance and processing of some MAS applications. This suspension is effective as of the adoption of this Notice. II. EXECUTIVE SUMMARY 2. Our proposals herein are intended to facilitate the further development and implementation of MAS. The proposals include streamlined licensing procedures that provide licensees sufficient flexibility to use various technologies and offer a broad range of communications services. The following is a synopsis of our major proposals. This Notice:  Tentatively concludes that the 932/941 MHz and 928/959 MHz MAS bands should be designated for subscriber-based services and licensed on a geographic areas basis.  Tentatively concludes that the 928/952/956 MHz MAS bands should be designated exclusively for private use and seeks comment on whether these bands should continue to be licensed on a site-by-site basis or should be licensed on a geographic basis.  Proposes to define service areas based on the U.S. Department of Commerce's Economic Areas.  Seeks comment on whether each license should permit use of 12.5 kHz of spectrum or a larger block of spectrum.  Proposes to simplify and streamline the MAS licensing process.  Proposes liberal construction/coverage requirements for geographic area licensees.  Proposes to allow all licensees to provide mobile and fixed operations on a co-primary basis for point-to-point and point-to-multipoint operations.  Proposes to resolve mutually exclusive applications for 932/941 MHz and 928/959 MHz licenses through competitive bidding.  Proposes to set aside five channel pairs in the 932/941 MHz band, to be licensed on a first-come, first-served basis, for Federal Governmental/Public Safety operations.  Proposes to establish a presumption that MAS 932/941 MHz and 928/959 MHz licensees are telecommunications carriers.  Immediately suspends the acceptance and processing of applications in the 932/941 MHz and 928/959 MHz bands, except certain pending applications, applications for minor modifications, and applications for license assignment or transfer of control, during the pendency of this rulemaking. This suspension does not affect applications for MAS licenses for private operations in the 928/952/956 MHz bands. 3. While our proposals are designed to foster MAS service, the Commission makes no representations or warranties about the use of this spectrum for particular services. Applicants should be aware that an FCC auction represents an opportunity to become an FCC licensee in this service, subject to certain conditions and regulations. An FCC auction does not constitute an endorsement by the FCC of any particular services, technologies or products, nor does an FCC license constitute a guarantee of business success. Applicants should perform their individual due diligence before proceeding as they would with any new business venture. III. BACKGROUND 4. In the early 1980's, the Commission allocated spectrum and established service rules for 900 MHz point-to-multipoint, multipoint-to-point ("point-to-multipoint") operations, commonly referred to as MAS. The rules we adopted permitted both two-way and one-way MAS operations. Two-way operations usually consist of one or more control or base stations (commonly referred to as master stations) and a minimum of four interacting remote stations. A typical one-way operation consists of one or more master stations. To date, these point-to-multipoint systems have been used primarily by the power, petroleum and security industries to satisfy various alarm, control, interrogation and status reporting requirements, and by the paging industry to control multiple paging transmitters in the same general geographic area. 5. In 1981, we allocated twenty 25-kilohertz channel pairs in the 928-929 MHz and 952-953 MHz bands for exclusive, private use by Power Radio Service eligibles for energy distribution automation. We later allocated fourteen 25-kilohertz channel pairs in the same bands and eight 25- kilohertz unpaired channels in the 956 MHz band for private MAS operations by all entities eligible under former Part 94 of our Rules, the Private Operational-Fixed Microwave ("POFM") Service. The Commission also allocated six 25-kilohertz paired channels in the 928 and 959 MHz bands for common carrier Domestic Public Land Mobile ("DPLM") use under Part 22 of our Rules for control of wide-area paging networks. In an effort to facilitate the efficient use of this "pool" approach, we adopted sharing criteria. Specifically, under our current rules, if the MAS channels available under the POFM pool have been licensed in a given geographic area, Part 101 eligibles may apply for MAS channels allocated for DPLM operations, and vice versa. Later, at the request of the MAS community, the Commission further modified the rules and policies governing MAS operations, including establishing a standard mileage separation and reducing the channel spacing from 25 kilohertz to 12.5 kilohertz, in order to increase spectrum efficiency and reduce regulatory burdens. 6. In 1989, the Commission allocated, for both Federal Governmental and non- Governmental point-to-multipoint use, an additional forty 12.5-kilohertz channel pairs in the 932- 932.5 MHz and 941-941.5 MHz bands. Governmental and non-Governmental use was to be coordinated by the Interdepartment Radio Advisory Committee ("IRAC") of the National Telecommunications and Information Administration ("NTIA"). By Public Notice, the Commission stated that it would open five two-day filing windows during January and February 1992, and thereafter license applicants on a first-come, first-served basis. In the event that we received mutually exclusive applications, we indicated that lotteries would be used to select among applicants. In response to the series of filing windows, over 50,000 applications were filed for the available forty 12.5-kilohertz channel pairs in the 932-932.5 MHz and 941-941.5 MHz bands. 7. On August 10, 1993, the Omnibus Budget Reconciliation Act of 1993 ("Budget Act") added Section 309(j) to the Communications Act of 1934, as amended ("Communications Act"). Section 309(j) permits the Commission, for certain classes of radio licenses, to employ competitive bidding procedures to choose among mutually exclusive applications for initial licenses. As a result, in the Competitive Bidding docket we examined various radio services to determine whether they should be subject to competitive bidding. In this connection, as described more fully infra, we determined at that time that POFM MAS did not qualify as subscriber-based and therefore should not be subject to competitive bidding. Therefore, we noted that it would not be appropriate to use competitive bidding to award those POFM MAS licenses for which the 50,000-plus applications were pending, even in the event of mutual exclusivity. Subsequently, we did a preliminary examination of the pending applications and found that the vast majority (over 95 percent) were filed by applicants seemingly proposing to use their licenses principally to provide subscriber-based service. IV. DISCUSSION 8. In light of the substantial number of MAS applications filed in response to the 1992 filing windows and the type of proposed operations indicated, we are concerned that our initial assessment in the Competitive Bidding docket regarding the principal use of POFM MAS spectrum may not accurately reflect existing and future operations. We are aware that it has been eight years since our last comprehensive examination of MAS. Given that the wireless industry, including MAS, has changed dramatically since the 1980's, we believe we must reexamine the current and future uses of and demand for MAS spectrum to determine the appropriate method by which to award the licenses associated with the numerous pending applications. As part of this reexamination, we seek to establish a streamlined regulatory framework which will provide licensees sufficient flexibility to meet the public's current and future MAS needs. We begin with a review of our MAS service rules to determine whether they should be modified -- e.g., whether we should retain a site-specific licensing approach or transition to geographic area licensing. We then address the mechanism by which we might select among mutually exclusive applications for initial licenses. A. Spectrum Allocation 1. Treatment of the 932/941 and 928/959 MHz bands 9. A total of 3.2 megahertz (MHz) of radio spectrum is currently allocated for MAS, and this can be divided into three general categories. The first category, consisting of one megahertz of paired spectrum in the 932-932.5 MHz and 941-941.5 MHz bands (932/941 MHz bands), is available for both Federal Governmental and non-Governmental use. These 12.5 kilohertz channels are used by common carrier and private radio licensees on a co-primary basis. According to the Commission's licensing database, to date, these bands support only two Federal Governmental licensees, one in Alaska and one in Florida, and no non-Federal Governmental users. The second category, consisting of 300 kilohertz of paired spectrum in the 928.85-929 MHz and 959.85-960 MHz bands (928/959 MHz bands), is allocated for, and used primarily by, common carrier licensees under Part 22 of our Rules, and may also be used for private radio licensees pursuant to certain sharing criteria. 10. Given the significant number of applications filed for the 932/941 MHz bands, we seek comment on whether we should modify the spectrum allocation for MAS based on current licensee operations and the applicants' proposed uses. As noted supra, of the over 50,000 applications filed for the 932/941 MHz bands, over 95 percent were filed by entities seemingly proposing to use their licenses principally to provide subscriber-based service. 11. Rather than evaluating the particular use made of these two discrete MAS spectrum groups and then designating them for common carrier or private use, we tentatively conclude that the groups are substitutable and consequently we will consider them as a whole in evaluating the demand for future use of MAS spectrum. As discussed above the majority use of the 928/959 MHz bands is subscriber-based. Similarly, there are over 50,000 applications pending for the 932/941 MHz bands, the overwhelming majority of which were filed by applicants seemingly proposing to use their licenses principally to provide subscriber-based service. One could argue that the substantial number of applications coupled with the subscriber-based use of the 928/959 MHz bands indicates that MAS is evolving into a service where licensees primarily seek to provide subscriber- based services. Thus, we tentatively conclude that the 928/959 MHz bands and the 932/941 MHz bands should be designated for subscriber-based services. We seek comment on this alternative. We encourage commenters to address the feasibility of the above alternative, as well as other possible allocations. If suggesting other spectrum allocations, commenters should include the rationale underlying their proposal. 2. Treatment of the 928/952/956 MHz bands 12. The third category, consisting of 1.7 megahertz of paired spectrum in the 928-928.85 and 952-952.85 MHz bands and 200 kilohertz of unpaired spectrum in the 956.25-956.45 MHz bands (928/952/956 MHz bands), is allocated for, and used primarily by, private radio licensees, and may be used by common carriers pursuant to certain sharing criteria. The Commission's licensing database reveals, however, that the third category of MAS spectrum -- the 928/952/956 MHz bands -- appears currently to be used overwhelmingly for private service. While some of these licensees share some or all of their capacity on a for-profit, third-party, private carrier basis, we estimate from our records that the majority of channels in this group are used by private systems to satisfy internal communication needs. Specifically, we estimate that, of the approximately 7,700 licenses granted for use in this spectrum, about 70 percent have been granted to public safety, business, or industrial entities to satisfy internal communications needs. 13. Because currently the principal use of the band does not appear to involve subscriber- based services, we tentatively conclude that the 928/952/956 MHz bands should be designated exclusively for private, internal use. Under this approach, we would prohibit any further subscriber- based use of these channels by future licensees, whether on a private carrier basis or through sharing with common carrier licensees. We nonetheless would grandfather existing subscriber-based services currently being provided on these MAS frequencies. We ask for comment on whether existing or projected internal communications requirements of private service users justify creation of such a purely private allocation, including empirical analysis of projected private MAS spectrum needs. B. MAS Licensing Approach 1. Geographic Area Licensing 14. As discussed above, MAS spectrum is located in various 900 MHz bands. In addition, the use of the service varies somewhat among the bands. Examples of differences in use include whether the channels are used for private or for common carriage, maximum power limitations, mileage separation requirements for co-channel users, and frequency separation requirements for master and remote station transmit channels. Similarities in use include use of the same type of equipment and mode of operation (point-to-multipoint). Under our current rules, MAS licensees file an application to license each transmitter site in the area they wish to serve. The particular mileage separation between co-channel assignments depends upon the type of operation. We have concluded in other services that licensing based on pre-defined service areas -- geographic area licensing -- poses significant advantages over site-based licensing for entities providing subscriber- based services because of the greater operational flexibility it gives licensees and the greater ease of administration for the Commission. We believe adopting geographic area licensing for any MAS bands for which the principal use will involve, or is reasonably likely to involve, subscriber- based services, would offer the same potential benefits. Therefore, we propose to use geographic area licensing in these bands. Licensing such systems by geographic area would simplify system expansion and reduce administrative burdens on both licensees and the Commission. We also propose herein, see infra paragraph 66, to set aside five channel pairs in the 932/941 MHz bands for Federal Governmental/Public Safety use. Because the principal use of these five channel pairs would therefore not involve the receipt of compensation for providing subscriber-based services, we would exclude them from our geographic licensing proposal. 15. We invite comment on our proposal to employ geographic area licensing in the MAS bands, particularly in the 928/959 MHz bands, where a number of systems are already licensed. We also request comment on whether, in the event that we find that the principal use of the 928/952/956 MHz bands involves, or is reasonably likely to involve, subscriber-based service, geographic area licensing should be employed. Alternatively, if we conclude that the principal use of the 928/952/956 MHz bands is likely to remain private, should the we continue to award MAS licenses in these bands on a site-by-site basis or use a geographic licensing approach? We also seek comment on which rules in this context should be modified even if we retain site-specific licensing on a first- come, first-served basis. Finally, we seek comment on whether the Part 22 rules concerning point- to-multipoint operations should be placed within Part 101. 2. Service Area 16. As part of our geographic area licensing proposal, we must determine the size of the geographic area that would be used to define MAS service boundaries. We have used several different geographic definitions in the past, when employing geographic licensing in the context of other services. For example, the service areas for Cellular Radiotelephone Service ("Cellular") and Interactive Video and Data Service ("IVDS") are based on Metropolitan Statistical Areas ("MSAs") and Rural Service Areas ("RSAs"). We have used Basic Trading Areas ("BTAs"), Major Trading Areas ("MTAs"), Regional Areas, and a nationwide service area for Personal Communications Services ("PCS") licensing. Also, we have used Economic Areas ("EAs") developed by the Bureau of Economic Analysis of the U.S. Department of Commerce ("Department of Commerce") for the General Wireless Communications Service and 800 MHz Specialized Mobile Radio Service (SMR) licensing. We believe that the service area definition should approximate the typical geographic area that an MAS licensee seeks to serve. 17. After careful consideration, we tentatively conclude that EAs constitute the most appropriate geographic area licensing boundaries for MAS operations, and therefore propose that MAS geographic area licenses be based on EAs. We believe MSAs/RSAs are too small to create a viable wide-area service and result in more administrative burdens for the Commission. For the same reasons, we choose not to use BTAs. MTAs, EAs and regional licenses offer the advantage of being large enough to permit viable wide-area service, while also reducing the Commission's administrative burden. Of these three, EAs appear to best mirror the size and development of existing MAS systems. Further, under Sections 309(j) and 257 of the Communications Act of 1934, as amended, the Commission must seek to promote the dissemination of licenses to small businesses, rural telephone companies, and minority- and women-owned businesses, as well as identify and eliminate market entry barriers for entrepreneurs and other small businesses seeking to enter the telecommunications field. EAs are smaller than MTAs and regional licenses and therefore provide a better opportunity for small businesses and the other entities designate by statute to obtain a license. The use of EAs is therefore in the public interest and is consistent with Sections 309(j) and 257. As in other services where we have used EA-based licenses, we propose to use a total of 175 service areas -- the 172 EAs specified by the Department of Commerce plus 3 EA-like areas for Guam and the Northern Marianas, Puerto Rico and the United States Virgin Islands, and American Samoa. We seek comment on both the use of EAs and on other options for defining service areas for MAS operations. 18. Additionally, we note that it has been seven years since we adopted a band plan for the 932/941 MHz bands and the communications marketplace has changed dramatically since that time. For example, we have witnessed a growing demand for regional and nationwide licenses, as evidenced by the success of the narrowband PCS auction. Accordingly, we seek specific comment on whether we should set aside a certain number of channel pairs in the 932/941 MHz bands for regional or nationwide use, and if so, the number of channel pairs that should be set aside. 3. Treatment of Incumbent Licensees 19. In tandem with our geographic area licensing proposal, we must assess the potential impact of the proposal on MAS incumbents currently licensed on a site-by-site basis. We are concerned about the potential effect of our proposal on MAS licensees operating in the 928/959 MHz bands and on those operating in the 928/952/956 MHz bands. We tentatively conclude that, in the event we adopt a geographic area licensing approach, the public interest would be best served by allowing incumbent MAS licensees to continue operating under their current authorization. Under this proposal, geographic area licensees would be required to provide protection to all co-channel systems that are constructed and operating within their geographic service area. Further, we believe that it would be in the public interest to give incumbents the flexibility to modify or augment their systems as long as they do not encroach on co-channel operations of the geographic area licensee. 20. To this end, we propose to define a service area for the protection of incumbent operations. In this regard, we note that incumbent operations must currently abide by a co-channel mileage separation based on an assumed 25-mile service area. Accordingly, one option would be to use this as a basis for an incumbent protected service area. Under this approach, we propose to permit incumbents to make modifications to existing systems and to add new transmitters (e.g., fill in "dead spots") as long as the signal level is not increased beyond this 25-mile area. Incumbents, however, would not be permitted to expand their systems without the consent of the geographic area licensee. This approach should ensure adequate protection of incumbent operations, without hampering the ability of geographic area licensees to construct stations throughout their authorized service area. Further, it is consistent with the rules we adopted in the 800 and 900 MHz SMR Services, and the rules we have proposed for paging systems. We seek comment on these proposals. Further, we seek comment on alternative approaches for defining a protected service area, including a definition specified in terms of signal strength (dBu contour). 4. Licensing 21. Under our proposed geographic area licensing approach, EA licensees would be authorized to construct master stations at any available site within the licensed area and on any channel for which they are licensed provided the operation does not require individual Commission review. All remote stations would be blanket licensed under the EA license. Under our proposal, EA licensees still would be required, however, to individually license any master station that: (1) requires the submission of an Environmental Assessment under 47 C.F.R.  1.1307; (2) requires international coordination (see supra paragraph 34); or, (3) would affect the radio frequency quite zones described in 47 C.F.R.  22.369 and 101.123. Regardless of whether an individual license is required, any MAS antenna structure that requires notification to the Federal Aviation Administration (FAA) must be registered with the Commission prior to construction. It would be the EA licensee's responsibility to decide, in the first instance, whether to apply for an individual license for any given master station. We also propose to allow EA licensees to make system modifications within their service areas, i.e., to add, subtract, move and otherwise modify their master station facilities, without any need for prior Commission consent provided individual Commission review is not required. We tentatively conclude that this simplified approach toward initial licensing and subsequent system modification will (1) increase operational flexibility, resulting in faster, more responsive service to the public, and (2) substantially reduce administrative burdens on both MAS licensees and the Commission. Further, this approach is consistent with how we handle systems in other services licensed on a geographic basis. 22. By proposing an EA licensing approach we must address the issue of co-channel interference protection obligations of EA licensees with respect to other EA licensees, in particular licensees of adjacent areas. We propose to establish interference protection criteria between different service areas at service area borders. Specifically, we propose to prohibit EA licensees from exceeding a signal level of 40 dBu V/m at their service area boundaries, unless the bordering EA licensee agrees to a higher field strength. We also propose to require coordination of frequency use between co-channel adjacent EA licensees and all other affected parties. This approach provides EA licensees with a signal strength level sufficient to operate their systems up to the borders of their EAs, while also providing protection to adjacent operations. We seek comment on these proposals including whether (1) this restriction will further our goal of avoiding harmful interference without being an overly burdensome requirement and (2) we should use a different field strength level for an EA licensee's operations at its service area boundary. 23. In addition, we recognize that the licensing flexibility afforded EA licensees in the 928/959 MHz bands and potentially the 928/952/956 MHz bands may be limited due to the large number of systems already licensed in these bands, particularly in major markets. To assist EA licensees in consolidating spectrum in these bands we propose that: (1) if an incumbent has its license terminated by the Commission or cancels its license, the spectrum covered by the incumbent's authorization will automatically revert to the EA licensee, and (2) if an EA licensee negotiates to acquire an incumbent system by assignment or transfer, the assignment or transfer will presumptively be considered in the public interest. We tentatively conclude that granting these rights to EA licensees would give them greater flexibility in managing the spectrum and establishing wide-area systems. We seek comment on these proposals. 5. Spectrum Block Size and Aggregation 24. We propose herein to assign geographic area licensees on a channel-by-channel basis. This raises the issue of whether we should impose a limit on the number of MAS channels that a single licensee may hold in each geographic area. We have imposed spectrum aggregation limits in a number of other services where we assign licenses on a geographic basis. For example, in the Interactive Video and Data Service ("IVDS"), narrowband PCS and the General Wireless Communications Service ("GWCS"), where there are only a limited number of available channels, we established such spectrum limits. Also, we imposed a 45 megahertz cap on the aggregation of cellular, broadband PCS, and SMR spectrum within a geographic area because of the potential that aggregation in excess of this amount would limit entry by other competitors. 25. The primary purposes of a spectrum aggregation limit are to (1) avoid an excessive concentration of licenses and ensure the dissemination of licenses among a wide variety of applicants (e.g., maximize competition) and (2) prevent licensees from withholding capacity from the market (e.g., minimize warehousing). We tentatively conclude that allowing licensees to aggregate MAS spectrum will not pose a risk of competitive harm. Further, we believe that given the number of channels available and the fact that numerous entities are already licensed and operating there is little risk of competitive harm. The risk of channel warehousing also appears limited; where licenses are subject to competitive bidding, licensees are unlikely to bid for more channels than they actually need or can use. Therefore, we tentatively conclude that a spectrum aggregation limit is unnecessary. We seek comment on these tentative conclusions. We also seek comment on whether it may be appropriate to establish a limit if we ultimately decide to allow mobile operations on a primary basis. We recognize that expanding service options may make these channels similar to others where the Commission has imposed spectrum aggregation limits. 6. Partitioning and Disaggregation 26. We recently proposed a detailed framework for revising the geographic partitioning and spectrum disaggregation rules for broadband PCS. Consistent with the broadband PCS proposals, we propose to make these options available to all qualified MAS licensees. We describe our proposals below, and request comment on these approaches. In addition, as discussed infraregarding the competitive bidding provisions, we propose that, in the event that any such options are provided in the MAS context, their use be restricted for MAS licenses acquired using special provisions. 27. Partitioning. Under the current general competitive bidding rules, the Commission "may permit partitioning of service areas in particular services for eligible designated entities." For MAS, we propose to allow all MAS licensees to partition at any time to any entity eligible for an MAS license. We note that small businesses and others may face certain barriers to entry into the provision of spectrum-based services which, we believe, may be addressed by changes in our partitioning rules. We tentatively conclude that providing MAS licensees with the flexibility to partition their geographic service areas would create smaller areas that could be licensed to small businesses, including those entities which previously may not have had the resources to participate successfully in spectrum auctions. We also tentatively conclude that partitioning may provide a funding source that would enable licensees to construct their systems and provide the latest in technological enhancements to the public. We seek comment on these tentative conclusions. In particular, commenters are invited to address whether the partitioning scheme, discussed infra, will help eliminate market entry barriers for small businesses pursuant to Section 257 of the Communications Act of 1934, as amended. 28. We seek comment on what should be the respective obligations of the participants in a partitioning arrangement. First, with respect to scope of MAS partitioned areas, we tentatively conclude that a flexible approach, similar to the one we adopted for broadband PCS, is appropriate for MAS licenses. Therefore, we propose to permit partitioning of MAS licenses based on any geographic area defined by the parties to a partitioning arrangement. We seek comment on this proposal, and in particular on whether this proposal is consistent with our licensing of MAS spectrum, and whether there are any technical or other issues unique to MAS that might impede the adoption of a flexible approach to defining partitioned license areas. 29. Second, with respect to construction requirements, we seek comment as to which party should be held responsible for satisfying outstanding construction requirements. In this Notice, we have proposed construction requirements for geographic MAS licensees at the five-year and ten-year benchmarks. In the Partitioning Report and Order, we adopted two construction options for partitioning broadband PCS licensees which give the parties the flexibility to choose how to apportion the responsibility to build out the partitioned license areas. We tentatively conclude that a similar approach is appropriate for the MAS context. Thus, we propose two options for meeting the applicable MAS construction requirements in a partitioning arrangement: (1) the partitionee can certify that it will satisfy the same construction requirements as the original licensee with the partitionee meeting the requirements in its partitioned area and the partitioner being responsible for satisfying the requirements in the area it has retained; or (2) the original licensee can certify that it has already met or will meet its five-year construction requirement and that it will meet the 10-year requirement for the entire market involved. Under the second option, because the original licensee retains the responsibility for meeting the construction requirements for the entire license area, the partitionee is permitted to satisfy a substantial service requirement for its partitioned license area at the end of the ten-year license term. We also propose to require that the parties to such partitioning arrangements file supporting documentation showing compliance with the applicable construction requirements. We seek comment on these proposals. We also seek comment on whether, and if so, how the option of partitioning could be extended to incumbent MAS licensees as well. 30. Disaggregation. We also propose to permit disaggregation of MAS spectrum. Thus, an MAS licensee would be allowed to transfer a portion of its spectrum in its service area to another entity. We seek comment on this proposal. We believe that once an initial geographic area MAS license is assigned, the licensee should ordinarily be free to disaggregate spectrum in order to operate in a manner which it determines to be efficient. 31. We seek comment on what should be the respective obligations between parties to a disaggregation arrangement. First, we ask commenters to discuss whether minimum disaggregation standards are necessary if we permit disaggregation of MAS spectrum. We seek comment as to whether we should adopt standards which would be flexible enough to encourage disaggregation while providing a standard which is consistent with our technical rules by which we would be able to track disaggregated spectrum and review disaggregation proposals in an expeditious manner. 32. Second, with respect to construction requirements, we seek comment as to which party should be held responsible for satisfying outstanding construction requirements. We propose to retain the underlying five- and ten-year construction requirements for the MAS license as a whole, but allow either party to the disaggregation agreement to meet the construction requirements with respect to the disaggregated portion of the license. We also propose that parties seeking Commission approval of a disaggregation agreement must certify which party will assume responsibility for complying with the applicable construction requirements, including the option of sharing responsibility for meeting such requirements. We seek comment on our proposals. 33. In addition, we ask commenters to address whether combined partitioning and disaggregation should be permitted for MAS spectrum. By "combined" partitioning and disaggregation, we refer to circumstances in which a licensee would be authorized, for example, to obtain a license for a portion of a MAS licensee's service area on a portion of the spectrum authorized to that licensee. We tentatively conclude that we should permit such combinations in order to provide parties with the optimal flexibility to respond to market forces and demands for services relevant to their particular locations and service offerings. In the context of both partitioning and disaggregation, we propose that our MAS rules should provide that parties obtaining partitioned licenses or disaggregated spectrum hold their license for the remainder of the original licensee's license term. This approach is consistent with our decision in the Partitioning Report and Order. We tentatively conclude that limiting the license term of the partitionee and disaggregatee is necessary to ensure that there is maximum incentive for parties to pursue available spectrum as quickly as practicable and not in a manner which would circumvent our established license rules and unnecessarily delay service to the public. We seek comment on this proposal and whether MAS partitionees and disaggregatees should be afforded the same renewal expectancy as other MAS licensees. In sum, we tentatively conclude that our proposals to permit partitioning and disaggregation in the manner described above would allow the MAS spectrum to be used most efficiently, speed service to unserved or underserved areas, and facilitate competition. We solicit comment on this analysis of the intended effects of our proposals. 7. Mexican and Canadian Border Areas 34. In the Mexican and Canadian border areas, MAS channel availability may be restricted by treaty, and limitations on Effective Radiated Power (ERP) and antenna height may be placed on certain channels. As a result, some MAS channels may not be available in EAs or parts of EAs in border areas, or there may be significant restrictions on ERP or antenna height or both which may make geographic area licenses in these areas less attractive. In other services where we have implemented geographic area licensing, we have decided not to distinguish between border areas and non-border areas. 35. We propose to license all EAs on a uniform basis without regard to whether all or part of the EA is in a border area or a channel is restricted in some fashion. Geographic area licensees would be entitled to use any authorized channels subject to the relevant rules regarding international assignments and coordination of such channels. We believe that applicants are in the best position to assess the affects of any limitations on the use of channels when valuing those geographic areas for competitive bidding purposes. 8. Construction/Coverage Requirements 36. Currently, each MAS master station licensed under Part 101 must be placed in operation within eighteen months from the initial date of grant. In order to be considered in operation, an MAS station must be serving at least four separate active remote stations. These requirements are intended to provide some assurance that spectrum is used effectively and service is implemented promptly. We tentatively conclude that these requirements should be retained for incumbent licensees. Such incumbents operate within existing non-geographic service areas, and we have proposed in this Notice to grandfather these licensees and their operations. 37. We believe, however, that different treatment is appropriate for new licensees that will be operating as proposed here under a geographic area license with flexible service rules. When designing competitive bidding systems, Section 309(j)(3) of the Act states, in part, that "the Commission shall include safeguards to protect the public interest in the use of the spectrum . . . ." In addition, Section 309(j)(4)(B) states that the Commission shall: include performance requirements, such as appropriate deadlines and penalties for performance failures, to ensure prompt delivery of service to rural areas, to prevent stockpiling or warehousing of spectrum by licensees or permittees, and to promote investment in and rapid deployment of new technologies and services. 38. We have previously found that these provisions could be satisfied through construction requirements. In the MAS context, we believe that some coverage requirements may be needed as performance requirements to deter speculation while promoting prompt service to the public. An additional public interest benefit of imposing coverage requirements on geographic MAS licenses is that they would hinder warehousing, promote rapid deployment of new technologies and services and promote service to rural areas. We nonetheless are concerned that strict construction requirements may not be the most suitable and effective means of addressing the statute's concerns given that MAS spectrum may be used to offer a variety of services, including point-to-point, point- to-multipoint, multipoint-to-point, and mobile. As a result, we note that strict construction requirements might result in uneconomic construction: construction in geographic areas different than those that would be served in a competitive environment; deployment at a different rate than would occur in a competitive environment; or deployment of technology and equipment differing from that which competition would dictate. Further, strict construction requirements might have the unintended consequence of causing firms to build first in urban areas where the mandatory benchmarks could be met most cheaply, and thus slow the development of service to rural areas. 39. Balancing all of the above factors, we tentatively conclude that geographic MAS licensees should be subject to liberal construction requirements. We seek comment on this tentative conclusion. Specifically, we propose that geographic MAS licensees must provide coverage to at least one-fifth of the population in their service areas or substantial service within five years of the license grant. In addition, geographic MAS licensees must make a showing of substantial service within ten years of being licensed. We further propose that failure to meet these coverage requirements will result in automatic termination of the geographic MAS license. We note that this approach is consistent with our rules for other services. We seek comment on these proposals and any alternatives thereto. 9. Technical Flexibility 40. The basic channelization in the MAS bands is 12.5 kHz. However, entities currently may be licensed for 25 kHz and 50 kHz operations upon a showing of need. We propose to allow geographic area licensees to combine contiguous channels resulting in bandwidths up to 50 kHz without a showing of need. Permitting licensees to combine channels without a showing of need will enable them to employ the widest variety of technologies to best meet the communications requirements of consumers and reduce regulatory burdens. Geographic area licensees would also be able to subdivide their 12.5 kHz channels. Further, we propose the out-of-band emission rules apply only to the extent necessary to protect operations outside of the licensee's EA and to spectrum inside if used by incumbents. EA licensees, however, would be free to negotiate with adjacent EA licensees concerning interference rights. We also tentatively conclude that it is appropriate to extend the same technical flexibility adopted for EA licensees to incumbent licensees. We seek comment on these proposals. We also seek comment on whether it would be in the public interest to increase the maximum authorized bandwidth beyond the current maximums of 12.5 kilohertz, 25 kilohertz, and 50 kilohertz. For instance, under a geographic area licensing approach, should MAS channel pairs be combined to assign larger frequency blocks? Of the thirty-five channel pairs available in the 932/941 MHz band, we could, for instance, combine channels to make one ten-channel block, two six-channel blocks, four four-channel blocks, four two-channel blocks, and five one-channel blocks. We seek comment on these approaches. 10. Operational Flexibility 41. The current rules governing MAS allow licensees to use certain MAS channels for other types of operations besides point-to-multipoint transmissions. The rules, for instance, allow mobile operations on certain paired channels on a secondary basis. Certain point-to-point operations also are permitted on a secondary basis. Likewise, MAS licensees may transmit ancillary one-way communications on certain paired channels on a case-by-case basis. Our original purpose in adopting limitations on these uses was to ensure that the spectrum would be used primarily to satisfy bona fide point-to-multipoint requirements. 42. We are proposing herein to employ a new geographic area licensing approach for the 932/941 MHz and 928/959 MHz bands. We also ask for comments on extending geographic area licensing to the 928/952/956 MHz bands. We believe that affording MAS licensees additional operational flexibility would offer a number of benefits. For example, lifting the operational restrictions on for-profit third party providers serves to broaden the array of services offered by these licensees and thus benefits the public through increased competition. To compete effectively in today's changing communications marketplace, we believe licensees should have the ability to provide consumers a wide array of services and to have the ability to respond quickly to changing consumer demands. For these reasons, we propose to allow MAS geographic area licensees to utilize both point-to-point and point-to-multipoint operations and to provide fixed and mobile service on a co-primary basis. This approach would continue, however, to prohibit MAS licensees from providing broadcast services. We recognize that permitting point-to-point operations would be a departure from our previous decisions, where we stated that MAS spectrum should be reserved for point-to-multipoint operations. We tentatively conclude, however, that permitting this additional flexibility, along with the flexibility afforded by the option to provide mobile service, is in the public interest, and we seek comment on this approach. Our proposed approach is consistent with current proposals and the policies set forth in the Communications Act. Also, we tentatively conclude that it is appropriate to extend the same operational flexibility proposed for EA licensees to incumbent licensees. We seek comment on this tentative conclusion. We seek comment on the following issues as well: (a) Should the Commission allow the operation of the market to determine the most efficient use of MAS as we have proposed? (b) How will expanding licensee flexibility affect further development of MAS? (c) For mobile operations, should we consider restricting interconnection with the public switched network (PSN)? (d) Given the different operating characteristics of fixed and mobile, should the technical rules be revised to avoid the potential for harmful co-channel interference, and if so, how? 11. Regulatory Status 43. We propose to allow MAS geographic area licensees to provide both fixed and mobile service. Under this approach, geographic area licensees could provide a variety of mobile, fixed, point-to-point and point-to-multipoint services. While our proposal increases operational flexibility, thereby allowing EA licensees to better respond to market demand, it also makes it difficult to determine the regulatory status of each licensee. This process could be further complicated if we adopt rules allowing interconnection with the PSN. 44. For the purposes of this Notice, we propose an approach for determining regulatory status similar to that adopted for the General Wireless Communications Service (GWCS). We propose to rely on applicants to specifically identify the type of service or services they intend to provide and that they include sufficient detail to enable the Commission to determine whether the service will be offered as a commercial mobile radio service, a private land mobile radio service, a common carrier fixed service, or a private fixed service. To simplify the process, we propose to establish a presumption that MAS geographic area licensees be telecommunications carriers regulated as common carrier. Depending upon our final decision in regard to the 928/952 MHz and 956 MHz bands, we may also establish a presumption that those specific bands are private. Any interested party would be able to challenge the regulatory status granted an MAS geographic area licensee. This approach should allow us to carry out our regulatory responsibilities without imposing a hardship upon licensees. We note that the type of radio service provided will depend on our conclusions after reviewing the record in this proceeding. 45. We seek comment on the most efficient manner in which to administer the requirements of the Communications Act and our rules and, at the same time, grant licensees as much operational flexibility as possible. We also request that commenters address whether it is necessary for the Commission to require licensees to notify the Commission if they change the type of service offered using some or all of their licensed spectrum even though the new use would be permissible under our rules. If so, what requirements should be met in effecting notification? We also request comment on whether we should develop a standard long-form license application for MAS on which the applicant would specify its intended regulatory status, an approach we used for the GWCS. Finally, we seek comment on the implications to this analysis of Section 10 of the Communications Act of 1934, as amended, and the extent, if any, to which Section 10 forbearance should apply. C. Competitive Bidding Issues 1. Authority to Conduct Auctions 46. As discussed supra, the Commission is authorized by Section 309(j) of the Communications Act to employ auctions to choose among mutually exclusive applications for initial licenses. Under Section 309(j), in order to employ auctions for a particular service, the Commission must determine that "the principal use of [the] spectrum will involve, or is reasonably likely to involve, the licensee receiving compensation from subscribers." 47. Specifically, the statute permits auctions where: (1) mutually exclusive applications for initial licenses are accepted for filing by the Commission; (2) 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 utilizing the licensed frequencies; and (3) the public interest objectives of Section 309(j) would be served by subjecting mutually-exclusive applications to competitive bidding. 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 resource 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. 48. The Commission requested comment on whether MAS licenses should be subject to competitive bidding in a 1993 Notice of Proposed Rule Making in the competitive bidding docket. At that time, the Commission stated that "we [could not] be certain that the principal use of [the] frequencies [was] reasonably likely to involve the provision of service to subscribers," and tentatively concluded that licenses to provide POFM MAS should not be awarded through competitive bidding. The Commission received three comments arguing that POFM MAS is principally used for private service. Based on this input, the Commission decided to exempt the MAS service (as regulated under the then Part 94) from competitive bidding. The Commission also decided to award licenses for the pending pre-July 26, 1993, mutually exclusive MAS applications for the 932/941 MHz bands by lottery. In the same proceeding, the Commission concluded that mutually exclusive applications in the Part 22 DPLM service would be subject to competitive bidding. Consequently, mutually exclusive applications in the 928/959 MHz and 932/941 MHz bands, if filed under Part 22, are subject to competitive bidding. 49. Based on our review of the over 50,000 applications filed for MAS licenses in the 932/941 MHz bands, it now appears that the proposed use of some of the MAS spectrum has changed since we made our initial determination in the Competitive Bidding Second Report and Order. Of those applications filed for channels in the 932/941 MHz bands, the vast majority (over 95 percent) were filed by entities planning to provide a subscriber-based service. Given this data, we believe it is reasonable to conclude that the principal use of this spectrum would involve, or is reasonably likely to involve, subscriber-based service. Accordingly, we tentatively conclude that the principal use of spectrum in the 932/941 MHz bands is, or will likely be used, to provide subscriber-based services. We request comment on this tentative conclusion. 50. Moreover, we note that Part 22 use of the 928/959 MHz bands is already subject to competitive bidding in the event of mutually exclusive applications. Although some entities licensed in the 928/959 MHz bands use the spectrum to satisfy private or internal communications needs, the principal use of these bands clearly involves the provision of subscriber-based services. As discussed supra at paragraph 12, we also seek comment on how frequencies in the 928/952/956 MHz bands presently are being used. 51. We also now address whether the remaining statutory criteria under Section 309(j) can be met. We observe that the majority of applications presently on file are mutually exclusive. In addition, given the substantial level of interest in providing MAS service (as demonstrated by the more than 50,000 applications that have been filed to date), we anticipate that mutual exclusivity likely would exist if additional applications were accepted for filing. We believe that using competitive bidding as a means of awarding MAS licenses for the 932/941 MHz and 928/959 MHz bands will promote the objectives of Section 309(j)(3). More than any other method of awarding licenses, auctions are likely to foster the rapid deployment of new technologies and products by placing spectrum in the hands of those who value it most highly. It is also our view that, by fostering the rapid deployment of MAS services, auctions will serve Congress' goal of bringing new services as expeditiously as possible to the public, including rural areas. With more than 50,000 pending applications, subjecting these to a lottery process would be time-consuming and complex. Several months would be spent simply establishing chains of mutual exclusivity among the applicants. During a comparable period of time, an auction for the same frequencies could be completed. In this respect, we observe that processing of more than 50,000 220-222 MHz applications using the lottery procedure took more than two years to complete. In addition, unlike lotteries or comparative hearings, auctions will result in recovering for the public a portion of the value of the spectrum. Finally, we believe that the rapid award of licenses through the auction process will promote efficient use of the MAS spectrum. We seek comment on these proposals, as well as on the overall proposal to use competitive bidding to award those licenses for 12.5 kilohertz channel pairs supporting subscriber-based services. 2. Disposition of Previously Filed Applications 52. As noted, we currently have over 50,000 applications for licenses in the 932/941 MHz bands, filed pursuant to filing windows of January-February 1992. Given the fact that these applications were filed before July 26, 1993, we have the discretion to choose to award these licenses by random selection procedures. On the facts before us, we tentatively conclude that the public interest would best be served by using competitive bidding to award the applications for licenses in the 932/941 MHz bands, and we seek comment on this tentative conclusion. We also propose to dismiss without prejudice the pending license applications for the 932/941 MHz bands. 53. In granting the Commission authority to award licenses by auction, Congress specified in Section 309(j), as quoted above, a series of strong public policy reasons supporting the use of auctions. Further, we have designed our auction methodologies to award the licenses rapidly, facilitate the efficient aggregation of licenses, avoid excessive implementation costs and complexity, and award licenses to the parties that value them most highly. Based on our experience, competitive bidding is an extremely efficient method of assuring, with a minimum of regulatory burden, that radio licenses are assigned to those applicants with the greatest desire for the spectrum. The use of lotteries, on the other hand, does not further the public policy goals described above, and in fact has been found to create its own set of problems, such as speculative conduct and a resultant delay in service to the public. 54. Twice in the past, in the context of other services, we have addressed this issue and found that the public interest would best be served by the use of lotteries. In the first instance, approximately 10,900 applications for Cellular Radio Service unserved areas were filed for an available 146 licenses. In the second instance, approximately 100 Multiple Distribution Service (MDS) applications were filed for five available licenses. Our decisions reflected Congressional recognition that equitable considerations and administrative costs may, in some instances, justify the use of lotteries despite the public benefits now recognized to be associated with the use of competitive bidding. Upon balancing the factors on both sides of the issue, we found that the public interest was, in those instances, best served by the use of lotteries. 55. On balance, we tentatively conclude that the factors before us favor resolving the pending mutually exclusive MAS applications through competitive bidding. First, given the large number of pending applications and potential markets, the use of a lottery would result in greater processing costs and a delay in service, when compared to use of an auction. By contrast, in the MDS context, there were relatively few applications and licenses at issue, and a fifth of the number pending in the cellular unserved context. Thus, in the context of MAS, we believe the use of auctions would considerably reduce administrative costs, further efficient licensing, and expedite service the public. 56. Second, based on the fact that we are proposing significant changes to the MAS service rules, we believe that processing the previously filed applications would be inconsistent with our proposed licensing approach for MAS. As noted, for instance, we are proposing to change from a site-by-site licensing approach to a geographic area licensing plan, facilitating wide-area operation and permitting a wider array of services to be provided by MAS licensees. We are also proposing to allow geographic area licensees to provide mobile and fixed operations on a co-primary basis with point-to-multipoint operations. Thus, it appears that the pending applicants would in any case need to substantially rethink their initial plans. This is in contrast to the cellular unserved and MDS services, where we made no changes to the types of services that could be offered by licensees or any other significant changes to the service rules between the time that the applications were filed and the lotteries were held. 57. We concede that the 50,000 applications have, much like cellular unserved, been on file for several years. Significantly, however, these applicants had ample opportunity to carry out their business plans with little additional expenditure by applying for other MAS channels. In this respect, we note that throughout the period the 50,000 MAS applications have been pending, spectrum was available that is substitutable in every respect. In contrast, the pending cellular unserved and MDS applicants had no alternative spectrum for pursuing their business plans. The public interest is, we tentatively conclude, best served by applying the new rules to both previous and new applicants. 58. We recognize that the tentative decision to use competitive bidding for these licenses will be contrary to the expectations of those applicants who, in good faith, expected to participate in a lottery and, if successful, provide MAS service. We nonetheless tentatively conclude that this factor, while significant, does not offset the strong public interest factors favoring the use of auctions. We seek comment on our proposal and tentative conclusions. 3. Competitive Bidding Provisions 59. We anticipate conducting the auction for MAS frequencies in conformity with the general competitive bidding rules in Part 1, Subpart Q of the Commission's Rules, and substantially consistent with the auctions that have been employed in other wireless services. We propose to adopt the simultaneous multiple round competitive bidding design used in the PCS auctions for the MAS auction. Multiple round bidding should provide more information to bidders than single round bidding during the auction about the values of the licenses. We seek comment on this proposal. We also tentatively conclude that the MAS auction will follow the general competitive bidding procedures of Part 1, Subpart Q. We seek comment on this tentative conclusion. 60. Small Business. In the Second Memorandum Opinion and Order in the competitive bidding docket, we indicated that we would establish definitions for "small business" on a service- by-service basis. Commenters should discuss the level of capital commitment that is likely to be required to purchase an MAS license at auction and create a viable business. Our goal, should we adopt a definition and associated special provision(s) for small businesses, will be to ensure the participation of small businesses in the auction and in the provision of service. Thus, we seek comment regarding the establishment of a "small business" definition for MAS. 61. We note that small business provisions offered in other services include installment payment plans and bidding credits. We seek comment on what small business provisions should be offered to MAS small business licensees and what terms should be offered. In other services we also adopted different attribution rules for purposes of determining small business status. We tentatively conclude that for MAS we will attribute the gross revenues of all controlling principals in the small business applicant as well as its affiliates. We seek comment on this tentative conclusion. 62. We also seek comment on whether small business provisions are sufficient to promote participation by businesses owned by minorities, women, or rural telephone companies. To the extent that commenters propose additional provisions to ensure participation by minority-owned or women-owned businesses, we also invite them to address how such provisions should be crafted to meet the relevant standards of judicial review. 63. Partitioning and Disaggregation. We also seek comment on the type of unjust enrichment requirements that should be placed as a condition for approval of an application for a partial transfer (either by partitioning or disaggregation) of a license owned by, e.g., a qualified small business to a non-small business. We tentatively conclude that these unjust enrichment provisions would include accelerated payment of any bidding credit that we may adopt for small businesses, unpaid principal, and accrued unpaid interest, and would be applied on a proportional basis. We seek comment on this tentative conclusion. We also seek comment on how such unjust enrichment amounts should be calculated, especially in light of the difficulty of devising a methodology or formula that will differentiate the relative value of the partitioned areas and the amount of spectrum disaggregated. We propose to use population as the objective measure to calculate the relative value of the partitioned area and the amount of spectrum disaggregated as the objective measure for disaggregation, and we seek comment on this proposal. Finally, in the event that restrictions are placed on the assignment or transfer of "complete" MAS licenses awarded pursuant to special provisions, should we similarly restrict the partitioning of such licenses when the partitionee is not within the definition of an entity eligible for such special provisions? At some point (e.g., a term of years), should such restriction be removed and the unjust enrichment provisions apply on a proportional basis? 64. In the event that we determine that special provisions for small businesses are appropriate for MAS auctions, we tentatively conclude that if we permit a qualified small business licensee to partition or disaggregate to a non-small business entity, the partitioning or disaggregating licensee should be required to repay any benefits it received from the small business special provisions on a proportional basis. This would include accelerated payment of bidding credits, unpaid principal, and accrued unpaid interest. We seek comment on this tentative conclusion. To the extent that we adopt installment payment financing for MAS, we seek comment on how to adjust installment payments owed by partitioning and disaggregating licensees. For example, should a small business licensee that partitions or disaggregates to another small business be required to repay, on an accelerated basis, a portion of the outstanding principal balance owed under an installment payment plan? We seek comment on how this should be calculated. If we do not require payment of any amount of the outstanding principal balance for a license obtained by a small business as a condition for approval of the partitioning or disaggregation application, what other alternative conditions could we impose to ensure that the partitioning licensee continues to meet its financial obligation to the United States Government? We seek comment on whether the partitionee or disaggregatee should be required to guarantee payment of a portion of the obligation incurred by the partitioner or disaggregator (the original licensee). Similarly, in the event that we adopt bidding credits for MAS auctions, we tentatively conclude that if a small business licensee partitions or disaggregates to another qualified small business that would not qualify for the same level of bidding credit as the disaggregating licensee, the disaggregating licensee should be required to repay a portion of the benefit it received. We seek comment on how that amount should be calculated. D. Frequency Set-Aside for Governmental and Public Safety Entities 65. As noted above, we are proposing to use competitive bidding to award licenses in the 932/941 MHz bands. These bands, however, are currently available for both Federal governmental and non-governmental, including public safety, use. Federal governmental and public safety services are exempt from competitive bidding procedures. Furthermore, concerning public safety use, we have long recognized that this community of users has certain unique characteristics that distinguish it from other users of the electromagnetic spectrum. Along these lines, in the Final Report of the Public Safety Wireless Advisory Committee (PSWAC), it was stated that "wireless communications systems are critical to Public Safety agencies' ability to protect lives and property and the welfare of Public Safety officials." The PSWAC Final Report further states that currently allocated public safety spectrum is inadequate to meet the public safety community's current voice and data needs. As part of its recommendations and observations concerning how the public safety community's immediate and future needs can be met, PSWAC's Steering Committee stated that: More flexible licensing policies are desirable. The current approach, focused primarily on continuous narrow banding, does not provide the Public Safety community the flexibility of selecting or obtaining the most efficient technology to meet user-defined needs. Policies should encourage the use of the most spectrally efficient approaches while remaining technology neutral. More sharing and joint use should be encouraged. Some states and regions are experiencing considerable success in pooling spectral and other resources. In many instances, perceived losses in terms of independence of operation are more than offset by improvements in function and efficiency. Policies designed to streamline cooperative use of federal and non-federal spectrum should be adopted. 66. Therefore, we propose to set aside five (5) of the forty (40) channel pairs in the 932/941 MHz band exclusively for Federal governmental and public safety operations. While the PSWAC Final Report did not specify MAS spectrum for a potential new public safety allocation, we believe that this spectrum is feasible for accommodating some of the public safety community's growing demand for narrowband data and paging applications. We also consider this Federal governmental and public safety channel set aside proposal to be a first step towards establishing a policy streamlining cooperative use of Federal and non-Federal spectrum. We seek comment on this proposal. 67. With respect to our licensing approach for these five channel pairs, we take note of PSWAC's request for more flexible licensing policies in the public safety context. As a result, we propose that these channels be available on a first come, first served basis, with licensees having the technical flexibility to offer a variety of services, including point-to-point, point-to-multipoint, fixed, and mobile. We further propose that coordination of operations on these frequencies be accomplished through IRAC using the mileage separation criteria in Part 101 of our rules. In the event of mutually exclusive applications, we propose to use random selection procedures to assign the channels. We seek comment on these proposals. In addition, we ask for comments of whether we should (1) make some of the 5 channel pairs available primarily to either public safety or the Federal government rather than co-primary as proposed, and (2) establish a cutoff date for terminating this set-aside (e.g., make some or all of the 5 channel pairs generally available if they are not used by public safety/Federal government after five years). We also ask commenters on this issue to support their positions, where possible, with data demonstrating the current and projected needs for Federal governmental and public safety licensees. If the above level of proposed spectrum set aside is inadequate or too large, what level would be adequate? E. Suspension of Acceptance and Processing of Applications 68. In light of our actions described above, and effective as of the date of the adoption of this Notice, we will temporarily suspend acceptance of MAS applications for new licenses, amendments, or modifications for the 932/941 MHz bands, the 928/959 MHz bands, and applications to provide subscriber-based service in the 928/952/956 MHz bands, except as provided below. The suspension is effective until further notice and applies to applications received on or after the date of the adoption of this Notice. Any such applications received after that deadline will be returned as unacceptable for filing. We take this action to permit the orderly and effective resolution of the issues in this proceeding. Absent this action, applications for new licenses, amendments, and modifications might limit the effectiveness of the decisions made and the standards developed in this proceeding. We note that this action is consistent with the approach we have taken in all other existing services where we have proposed to adopt geographic area licensing and auction rules. We therefore find that this temporary measure is in the public interest. This suspension, however, does not affect applications for MAS licenses for private, internal communications (Part 101), in the 928/952/956 MHz bands based on our tentative conclusion to designate these bands exclusively for private use. 69. Notwithstanding this temporary suspension, we will continue to process all MAS applications for minor modifications or for license assignment or transfer of control. This exception will also apply to amendments to applications for minor modifications. This exception should permit modifications that can improve the efficiency of incumbent MAS operations without affecting the effective and orderly resolution of the issues in this proceeding. Again, we will continue to accept applications for minor modifications, license assignments, and transfers of control under existing procedures. 70. With respect to MAS applications for new licenses, amendments, or non-minor modifications which were filed prior to the deadline stated above and remain pending, we will process such applications provided that (1) they are not mutually exclusive with other applications as of the deadline stated above, and (2) the relevant period for filing competing applications has expired as of the deadline stated above. We believe that this approach gives the appropriate consideration to those applicants who filed applications prior to our proposed changes and whose applications are not subject to competing applications. Previously filed applications not meeting the above criteria will be held in abeyance until the conclusion of this proceeding. We will determine later, in accordance with such new rules as are adopted, whether to process or return any such pending applications. 71. These decisions are procedural in nature and therefore not subject to the notice and comment and effective date requirements of the Administrative Procedure Act. Moreover, there is good cause for proceeding in this manner: to do otherwise would be impractical, unnecessary, and contrary to the public interest because compliance would undercut the purposes of these interim measures. V. CONCLUSION 72. In this Notice we propose, inter alia, to (1) convert licensing of MAS spectrum for which the principal use will involve, or is reasonably likely to involve, "subscriber-based" services, from site-by-site licensing to geographic area licensing, (2) simplify and streamline the MAS licensing procedures and rules, (3) increase licensee flexibility to provide communication services that are responsive to dynamic market demands, and (4) employ competitive bidding procedures to resolve mutually exclusive applications for MAS spectrum for which the principal use will involve, or is reasonably likely to involve, "subscriber-based" services. In addition, we temporarily suspend the acceptance and processing of MAS applications, except as provided herein. This suspension is effective as of the date of the adoption of this Notice. These actions are intended to establish a flexible regulatory framework for MAS that will, among other things, provide opportunities for continued development of competitive new service offerings by allowing flexible use of the spectrum, expedite market entry through streamlined licensing procedures, and promote technological innovation by eliminating unnecessary regulatory burdens. VI. PROCEDURAL MATTERS A. Ex Parte Rules -- Non-Restricted Proceeding 73. This is a non-restricted notice and comment rule making proceeding. Ex Partepresentations are permitted, except during the Sunshine Agenda period, provided they are disclosed as provided in Commission rules. See generally 47 C.F.R.  1.1202, 1.1203, and 1.1206(a). B. Initial Regulatory Flexibility Analysis 74. With respect to this present Notice, an Initial Regulatory Flexibility Analysis (IRFA), see generally 5 U.S.C.  603, is contained in Appendix A. The IRFA addresses the expected impact on small entities of the proposals made in this document, and requests written comments on these proposals. To fulfill the mandate of the Contract with America Advancement Act of 1996 (Pub. L. No. 104-121, 110 Stat. 847 (1996)) regarding the subsequent Final Regulatory Flexibility Analysis in this proceeding, we ask a number of questions in the IRFA regarding the prevalence of small businesses in the Multiple Address Systems industry. Comments on the IRFA must be filed in accordance with the same filing deadlines as comments regarding this Notice, and must have a separate and distinct heading designating them as responses to the IRFA. The Secretary shall send a copy of this Notice, including the IRFA, to the Chief Counsel for Advocacy of the Small Business Administration in accordance with Section 603(a) of the Regulatory Flexibility Act, Pub. L. No. 96- 354, 94 Stat. 1164, 5 U.S.C.  601 et seq. (1981). C. Initial Paperwork Reduction Act of 1995 Analysis 75. This Notice contains a proposed information collection. As part of the Commission's continuing effort to reduce paperwork burdens, we invite the general public, the Office of Management and Budget (OMB), and other agencies to take this opportunity to comment on the information collections contained in this Notice, as required by the Paperwork Reduction Act of 1995, Pub L. No. 104-13. Public and agency comments are due at the same time as other comments on this Notice; OMB comments are due 60 days after the publication of this Notice in the Federal Register. Comments should address: (a) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission's burden estimates; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on the respondents, including the use of automated collection techniques or other forms of information technology. In addition to filing comments with the Secretary, a copy of any comments on the information collections contained herein should be submitted to both of the following: Dorothy Conway, Federal Communications Commission, Room 234, 1919 M Street, N.W., Washington, D.C. 20554, or via the Internet to dconway@fcc.gov, and Timothy Fain, OMB Desk Officer, 10236 NEOB, 725 -- 17th Street, N.W., Washington, D.C. 20503, or via the Internet to fain t@al.eop.gov. For additional information regarding the information collections contained herein, contact Dorothy Conway, above. D. Comment Dates 76. Pursuant to applicable procedures set forth in Sections 1.415 and 1.419 of the Commission's Rules, 47. C.F.R.  1.415 and 1.419, interested parties may file comments on or before April 21, 1997, and reply comments on or before May 6, 1997. To file formally in this proceeding, you must file an original and four copies of all comments, reply comments, and supporting comments. If you want each Commissioner to receive a personal copy of your comments, you must file an original plus nine copies. You must send comments and reply comments to Office of the Secretary, Federal Communications Commission, Washington, DC 20554. You may also file informal comments by electronic mail. You should address informal comments to bjames@fcc.gov. You must put the docket number of the proceeding on the subject line ("WT Docket No. 97-81"). You must also include your full name and Postal Service mailing address in the text of the message. Formal and informal comments and reply comments will be available for public inspection during regular business hours in the F.C.C. Reference Center of the Federal Communications Commission, Room 239, 1919 M Street, N.W., Washington, DC 20554. 77. For further information, contact Bob James, Private Wireless Division, Wireless Telecommunications Bureau, at (202) 418-0680. VII. ORDERING CLAUSES 78. Authority for issuance of this Notice of Proposed Rule Making is contained in Sections 4(i), 303(r), and 309(j) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 303(r), and 309(j). 79. Accordingly, IT IS ORDERED that, effective as of the date of the adoption of this Notice of Proposed Rule Making, NO NEW APPLICATIONS WILL BE ACCEPTED FOR FILING in the 932-932.5/941-941.5 MHz bands and the 928.85-929/959.85-960 MHz bands, and NO NEW APPLICATIONS WILL BE ACCEPTED FOR FILING for subscriber-based service in the 928- 928.85/952-952.85 MHz bands and the 956.25-956.45 MHz band, except applications for minor modifications or for license assignment or transfer of control. 80. IT IS FURTHER ORDERED that pending applications for licenses in the 928.85- 929/959.85-960 MHz bands, 928-928.85/952-952.85 MHz bands, and the 956.25-956.45 MHz band WILL BE PROCESSED provided that (1) they are not mutually exclusive with other applications as of the date and time of the adoption of this Notice of Proposed Rule Making, and (2) the relevant period for filing competing applications has expired as of the date of the adoption of this Notice of Proposed Rule Making. Pending applications not meeting these criteria, except applications for private, internal communications in the 928-928.85/952-952.85 MHz bands and the 956.25- 956.45 MHz band, WILL BE HELD IN ABEYANCE until the conclusion of this proceeding. We will determine later, in accordance with such new rules as are adopted, whether to process or return any such pending applications. 81. The interim measures described will continue until the Commission announces that the acceptance of the subject applications and the processing of applications held in abeyance (if such is determined) will resume. This action is authorized under Sections 4(i), 4(j), and 303(r) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 154(j), 303(r). FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary APPENDIX A INITIAL REGULATORY FLEXIBILITY ANALYSIS Regulatory Flexibility Act 1. Pursuant to the Regulatory Flexibility Act (RFA), see 5 U.S.C.  603, the Commission has prepared this Initial Regulatory Flexibility Analysis (IRFA) of the expected impact on small entities of the policies and rules proposed in this Notice of Proposed Rule Making (Notice). Written public comments are requested on the IRFA. Comments must be identified as responses to the IRFA and must be filed by the deadlines for comments on the Notice, as described supra in section VI. The Secretary shall cause a copy of this Notice to be sent to the Chief counsel for Advocacy of the Small Business Administration, in accordance with 5 U.S.C.  603(a). A. Reason for Action: 2. This Notice requests public comment on our proposals to maximize the use of spectrum allocated to Multiple Address Systems in the Microwave Service. These proposals include: (1) converting licensing of MAS spectrum for which the principal use will involve, or is reasonably likely to involve, "subscriber-based" services, from site-by-site licensing to geographic area licensing, (2) simplifying and streamlining the MAS licensing procedures and rules, (3) increasing licensee flexibility to provide communication services that are responsive to dynamic market demands, and (4) employing competitive bidding procedures (auctions) to resolve mutually exclusive applications for MAS spectrum for which the principal use will involve, or is reasonably likely to involve, "subscriber-based" services. In addition, by this Notice we temporarily suspend the acceptance and processing of MAS applications, with the exception of applications in a few noted categories. B. Objectives: 3. In attempting to maximize the use of MAS spectrum, we continue our efforts to establish a flexible regulatory framework for spectrum allocations that will, among other things, provide opportunities for continued development of competitive new service offerings by allowing flexible use of spectrum, expedite market entry through modified licensing procedures, and promote technological innovation by eliminating unnecessary regulatory burdens. C. Legal Basis: 4. The authority for this action is contained in Sections 4(i), 303(r), and 309(j) of the Communications Act of 1934, as amended, 47 U.S.C.  154(i), 303(r), and 309(j). See alsoAdministrative Procedure Act, 5 U.S.C.  553. D. Description and Estimate of Small Entities Affected: 5. Pursuant to the Contract with America Advancement Act of 1996, Pub. L. No. 104-121, 110 Stat. 847 (1996), the Commission is required to estimate in its Final Regulatory Flexibility Analysis the number of small entities to which a rule will apply, provide a description of such entities, and assess the impact of the rule on such entities. The Regulatory Flexibility Act defines a "small business" to be the same as a "small business concern" under the Small Business Act unless the Commission has developed one or more definitions that are appropriate to its activities. Under the Small Business Act, a "small business concern" is one that: (1) is independently owned and operated; (2) is not dominant in its field of operation; and (3) meets any additional criteria established by the Small Business Administration (SBA). To assist the Commission in this analysis, commenters are requested to provide information regarding how many MAS entities, total, would be affected by the various proposals on which the Commission seeks comment in this Notice. In particular, we seek estimates of how many affected entities will be considered "small businesses." In this regard, we ask commenters to note that we have requested comment, supra, regarding the establishment of a small business definition for MAS for the purpose of competitive bidding. 6. The proposals in the Notice would effect MAS licensees and applicants for licenses. Such entities fall into two categories: (1) those using MAS spectrum for which the principal use involves, will involve, or is reasonably likely to involve, "subscriber-based" (commercial) services, and (2) those using, or intending to use, MAS spectrum to provide for their own internal communications needs. Theoretically, it is also possible that an entity could fall into both categories. The spectrum uses in the two categories differ markedly. 7. With respect to the first category, neither the Commission nor the Small Business Administration (SBA) has developed a specific definition of small entities applicable to MAS licensees that provide commercial subscription services. The applicable definition of small entity in this instance appears to be the definition under the SBA rules applicable to establishments engaged in radiotelephone communications. This definition provides that a small entity is any entity employing fewer than 1,500 persons. See 13 C.F.R.  121.201, Standard Industrial Classification (SIC) Code 4812. The 1992 Census of Transportation, Communications and Utilities, conducted by the Bureau of the Census, which is the most recent information available, shows that only 12 radiotelephone firms out of a total of 1,178 such firms operated during 1992 had 1,000 or more employees. Therefore, whether or not any or all of these 12 firms are MAS commercial service providers, nearly all MAS commercial service providers are small businesses by the Small Business Administration's definition. The Commission's licensing database indicates that, as of November 8, 1996, there were a total of 8,171 MAS station authorizations. Of these, 1087 authorizations were for common carrier service. 8. Alternatively, under the SBA rules, the applicable definition of small entity for MAS licensees that provide commercial subscription services may also be applicable to establishments primarily engaged in furnishing telegraph and other message communications. This definition provides that a small entity is an entity with annual receipts of $5 million or less. See 13 C.F.R.  121.201, Standard Industrial Classification (SIC) Code 4822. 1992 Census data, which is the most recent information available, indicates that, of the 286 firms under this category, 247 had annual receipts of $ 4.999 million or less. We seek comment on whether the appropriate definition for such MAS licensees is SIC Code 4812, SIC Code 4822, or both. 9. The Commission seeks comment on the number of small entities that currently provide commercial MAS subscription service, and the number of small entities that would anticipate filing applications to provide such service under the various proposals described in the Notice. We seek comment on whether we should conclude, for purposes of the Final Regulatory Flexibility Analysis in this matter, that all MAS commercial communications service providers are small entities. 10. With respect to the second category, which consists of entities that use or seek to use MAS spectrum to provide for their own internal communications needs, we note that MAS serves an essential role in a range of industrial, business, land transportation, and public safety activities. These radios are used by companies of all sizes operating in virtually all U.S. business categories. Because of the array of users, the Commission has not developed (nor would it be possible to develop) a definition of small entities specifically applicable to such MAS users. Nor is there a precise SBA definition. In this context we again seek comment on the whether the appropriate definition of small entity under the SBA rules is that applicable to radiotelephone companies: any entity employing fewer than 1,500 persons. See 13 C.F.R.  121.201, Standard Industrial Classification (SIC) Code 4812. Again, alternatively, we seek comment on the appropriateness of defining such MAS licensees under SIC Code 4822, concerning establishments primarily engaged in furnishing telegraph or other message communications, or perhaps under both Codes 4812 and 4822. For the purpose of determining whether a licensee is a small business as defined by the Small Business Administration, each licensee would need to be evaluated within its own business area. The Commission's licensing database indicates that, as of November 8, 1996, of the 8,171 total MAS station authorizations, 7,084 authorizations were for private radio service, and of these, 426 were for private mobile service. 11. We seek comment on the number of small entities that use MAS spectrum for their internal communications needs. Further, we seek comment on the number of small entities that are likely to apply for licenses, under the various proposals described in the Notice, to obtain spectrum for their own internal communications needs. Because any entity engaged in a business or commercial activity is eligible to hold an MAS license, the proposals in the Notice could prospectively affect any small business in the United States interested in using MAS for its own communications needs. In other words, the universe of prospective or possible MAS users includes all U.S. small businesses. 12. The RFA also includes small governmental entities as a part of the regulatory flexibility analysis. The definition of a small governmental entity is one with populations of fewer than 50,000. There are 85,006 governmental entities in the nation. This number includes such entities as states, counties, cities, utility districts and school districts. There are no figures available on what portion of this number has populations of fewer than 50,000. However, this number includes 38,978 counties, cities and towns, and of those, 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 96 percent, or 81,600, are small entities that may be affected by our rules. 13. Again, we have requested comment, supra, regarding the establishment of a refined small business definition for MAS for the purpose of competitive bidding. This Notice does not propose any specify definition, but merely seeks comment on this issue. E. Reporting, Recordkeeping, and Other Compliance Requirements: 14. If we use competitive bidding to award certain MAS licenses, as proposed, and also establish a small business definition for the purpose of competitive bidding, then all small businesses that choose to participate in these services will be required to demonstrate that they meet the criteria set forth to qualify as small businesses. See generally 47 C.F.R. Part 1, Subpart Q (competitive bidding proceedings). Any small business applicant wishing to avail itself of small business provisions will need to make the general financial disclosures necessary to establish that the small business is in fact small. 15. If this occurs, prior to auction each small business applicant will be required to submit an FCC Form 175, OMB Clearance Number 3060-0600. The estimated time for filling out an FCC Form 175 is 45 minutes. In addition to filing an FCC Form 175, each applicant must submit information regarding the ownership of the applicant, any joint venture arrangements or bidding consortia that the applicant has entered into, and financial information which demonstrates that a small business wishing to qualify for installment payments and bidding credits is a small business. Applicants that do not have audited financial statements available will be permitted to certify to the validity of their financial showings. While many small businesses have chosen to employ attorneys prior to filing an application to participate in an auction, the rules are proposed so that a small business working with the information in a bidder information package can file an application on its own. When an applicant wins a license, it will be required to submit an FCC Form 494 (common carrier) or FCC Form 402 (private radio), which will require technical information regarding the applicant's proposals for providing service. This application will require information provided by an engineer who will have knowledge of the system's design. (Also, the Commission is currently developing a single, consolidated MAS form, FCC Form 415, which will eventually supersede both Form 494 and Form 402.) F. Federal Rules That May Duplicate, Overlap, or Conflict With the Proposals: 16. None. G. Significant Alternatives Minimizing the Impact on Small Entities Consistent with the Stated Objectives: 17. The Notice solicits comment on a variety of proposals, some of which are described below. Any significant alternatives presented in the comments will be considered. As noted, we have requested comment, supra, regarding the establishment of a small business definition for MAS. We also seek comment generally on the existence of small entities in MAS and how many total entities, existing and potential, would be affected by the proposed rules in the Notice. Finally, we request that each commenter identify whether it is a "small business" under either of the two SBA definitions described supra -- either employing fewer than 1500 employees (for radiotelephone communications companies) or having annual receipts of $5 million or less (for telegraph or other message communications companies). 18. The Commission expects that licensing subscriber-based MAS bands by geographic area, as proposed, will assist small businesses. As described supra, such licensing makes expansion of operations easier, and this flexibility assists all licensees, including small business licensees. We also believe that the proposed EA geographic area service area is large enough to support the services contemplated while being small enough to be attractive to small business entities. The Notice also proposes a purely private allocation for licenses using MAS solely for internal uses. In addition, the proposed flexible approach to the build-out of MAS systems will assist licensees, including small business licensees, in designing and implementing their particular business plans, while the partitioning and disaggregation proposals will assist those small businesses that might otherwise be unable to acquire a "full" license as currently configured. Finally, we believe that the proposed spectrum auction will assist small entities desiring to obtain MAS licenses. This approach gets licenses to those most likely to use them most effectively. By contrast, when awarding licenses by lotteries it is only coincidental when the license is awarded to the entity best suited to using the license. Using lotteries, therefore, creates uncertainty for all would-be licensees, including those that are small business. We seek comment on all proposals and alternatives described in the Notice, and the impact that such proposals and alternatives might have on small entities.