[Federal Register: January 7, 2003 (Volume 68, Number 4)]
[Proposed Rules]
[Page 723-730]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07ja03-9]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Chapter 1
[WT Docket No. 02-381; FCC 02-325]
Facilitating the Provision of Spectrum-Based Services to Rural
Areas and Promoting Opportunities for Rural Telephone Companies to
Provide Spectrum-Based Services
AGENCY: Federal Communications Commission.
ACTION: Proposed rule; notice of inquiry.
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[[Page 724]]
SUMMARY: This document seeks comment on the effectiveness of the
Commission's current regulatory tools in facilitating the delivery of
spectrum-based services to rural areas. Specifically, we ask whether
and how the Commission could modify its policies to promote the further
development and deployment of such services to rural areas. In
addition, we request comment on the extent to which rural telephone
companies (``rural telcos'') and other entities seeking to serve rural
areas have opportunities to acquire spectrum and provide spectrum-based
services. This document fulfills a Commission commitment to develop a
record on these matters to determine the extent to which the Commission
has achieved these statutory goals.
DATES: Comments are due on or before February 3, 2003 and reply
comments are due on or before February 18, 2003.
ADDRESSES: All filings must be addressed to the Commission's Secretary,
Office of the Secretary, Federal Communications Commission. Parties
also should send four (4) paper copies of their filings to Robert
Krinsky, Federal Communications Commission, Room 4-B551, 445 12th
Street, SW., Washington, DC 20554. See ``Supplementary Information''
for comment and reply comment filing instructions.
FOR FURTHER INFORMATION CONTACT: Robert Krinsky at (202) 418-0660.
SUPPLEMENTARY INFORMATION: This is a summary of the Notice of Inquiry
released on December 20, 2002. The complete text of the Notice of
Inquiry is available for public inspection and copying during regular
business hours at the FCC Reference Information Center, Portals II, 445
12th Street, SW., Room CY-A257, Washington, DC, 20554. The Notice of
Inquiry may also be purchased from the Commission's duplicating
contractor, Qualex International, Portals II, 445 12th Street, SW.,
Room CY-B402, Washington, DC 20554, telephone (202) 863-2893, facsimile
(202) 863-2898, or via e-mail qualexint@aol.com.
I. Introduction
1. The Notice of Inquiry seeks comment on the effectiveness of our
current regulatory tools in facilitating the delivery of spectrum-based
services to rural areas. Specifically, we ask whether and how the
Commission could modify its policies to promote the further development
and deployment of such services to rural areas, pursuant to section
309(j) of the Communications Act of 1934, as amended (``Communications
Act''). In addition, we request comment on the extent to which rural
telephone companies (``rural telcos'') and other entities seeking to
serve rural areas have opportunities to acquire spectrum and provide
spectrum-based services, pursuant to sections 309(j)(3) and 309(j)(4)
of the Communications Act. The Notice of Inquiry fulfills a Commission
commitment to develop a record on these matters to determine the extent
to which the Commission has achieved these statutory goals. Based on
the record developed in this proceeding, we will determine whether it
would be appropriate to revise existing policies or adopt new policies
to promote more extensive provision of spectrum-based services to rural
areas and the acquisition of spectrum by rural telcos. While satellite
services may, in the future, play a critical role in bringing
telecommunications services to rural America, the Notice of Inquiry
addresses issues related only to the provision of terrestrial wireless
service to rural areas, not the provision of general telecommunications
services to rural areas.
II. Background
2. The Omnibus Budget Reconciliation Act of 1993 added section
309(j) to the Communications Act, authorizing, but not requiring, the
Commission to award licenses for use of the electromagnetic spectrum
through competitive bidding where mutually exclusive applications are
accepted for filing. In 1997, Congress expanded the Commission's
auction authority by requiring it to award mutually exclusive license
applications for initial applications or construction permits by
competitive bidding unless certain specific exemptions apply. Section
309(j) requires the Commission to promote various objectives in
designing a system of competitive bidding. A number of those objectives
focus on the provision of spectrum-based services to rural areas, and
three provisions mention providing the opportunity to rural telcos to
acquire spectrum and provide spectrum-based services. For example,
section 309(j)(3)(A) requires the Commission to encourage the
development and rapid deployment of new technologies, products, and
services for the benefit of the public, ``including those residing in
rural areas.'' Section 309(j)(3)(B) directs the Commission to
disseminate spectrum licenses among a wide variety of applicants,
including ``rural telephone companies.'' Section 309(j)(4)(D) requires
the Commission to ensure that rural telcos are given the opportunity to
acquire spectrum and provide spectrum-based services. In addition to
the rural service objectives mandated by section 309(j), Congress
directed the Commission to pursue other broader public interest goals
in designing a system of competitive bidding. Specifically, section
309(j)(3) requires the Commission to promote efficient and intensive
use of the spectrum, encourage economic opportunity and competition,
and recover for the public a portion of the value of the public
spectrum.
3. In an effort to fulfill the rural service objectives set forth
in section 309(j), the Commission has adopted a number of policies
intended, among other things, to encourage the provision of spectrum-
based services to rural areas and the participation of rural telcos in
the competitive bidding for spectrum licenses. Specifically, these
policies include: (i) The availability of small business bidding
credits; (ii) the designation of various sizes of geographic service
areas for spectrum licenses; (iii) the opportunity to obtain licenses
through service area partitioning and spectrum disaggregation
arrangements with existing licensees; and (iv) the adoption of
construction benchmark performance requirements. In addition, apart
from its obligation under section 309(j), the Commission has expressed
support for the provision of telecommunications services to tribal
lands. The Commission also established the Rural Radiotelephone
Service, which may operate in the paired 152/158 and 454/459 MHz bands,
and Basic Exchange Telephone Radio Systems (``BETRS''), which may
operate in those same bands as well as on 10 channel blocks in the 816-
820/861-865 MHz bands, primarily to facilitate the provision of basic
telephone service to remote and sparsely populated areas where wireline
service is not feasible.
4. In 1994, the Commission adopted small business bidding credits
to encourage broad participation in spectrum auctions. A bidding credit
is a payment discount on a winning bid determined at the conclusion of
the bidding process. Small business bidding credits are available to
businesses -- including rural telcos -- whose gross revenues do not
exceed a specified threshold. These bidding credits are intended to
encourage participation in the competitive bidding process by entities
that otherwise might have difficulty gaining access to capital. Through
the use of small business bidding credits, the Commission has sought to
promote the participation of small businesses, rural telcos, and women-
and minority-owned firms
[[Page 725]]
(collectively referred to as ``designated entities''), thereby
addressing Congress's mandate to ensure diversity in the ownership of
spectrum licenses. The Commission determines on a service-specific
basis whether bidding credits will be offered, the eligibility criteria
for receiving a bidding credit, and the amount of the bidding credit.
5. However, in the Part 1 Fifth Report and Order, 65 FR 52323
(August 29, 2000), the Commission declined to adopt a bidding credit
specifically for rural telcos. Rather, the Commission determined to
continue to make small business bidding credits available to entities,
including rural telcos that meet the requisite revenue criteria. In
2000, the Commission also began offering a tribal land bidding credit,
the size of which is determined by the amount of tribal land area
reached by the service provider. All telcos, including rural operators
that fulfill the requisite criteria may obtain a tribal land bidding
credit.
6. Recent statistics indicate that rural telcos have actively
participated in spectrum auctions and have had some success in winning
licenses. A significant portion of rural telcos that have participated
in spectrum auctions have received small business bidding credits. For
instance, an examination of the 29 auctions completed by the Commission
as of September 18, 2002, that offered small business bidding credits,
reveals that 84 percent of the qualified bidders that identified
themselves as rural telcos and 79 percent of all qualified bidders were
eligible to receive a small business bidding credit. In the
Commission's most recent auction for licenses in the lower 700 MHz
Band, 89 percent of qualified bidders that identified themselves as
rural telcos won licenses. In addition, 77 percent of all winning rural
telco bidders in that auction received a bidding credit.
7. In addition to bidding credits, another way in which the
Commission has sought to enhance rural telco participation in spectrum
auctions is by adopting service areas of varying sizes. Although in
many services we offer licenses that cover geographic areas of only one
size, in a number of services, we license areas of varying sizes,
ranging from small to large, in order to attract a diverse group of
prospective bidders. Larger entities, for instance, may seek to acquire
licenses that cover whole regions of the country, while other entities,
such as rural telcos, may be interested in obtaining licenses to serve
only particular rural areas. After seeking comment, the Commission has
varied the size of the geographic service area depending upon the
nature of the service provided and the likely users. In services for
which we have adopted one size of license area, such areas are usually
larger than Rural Service Areas (``RSAs''). In determining the
appropriate size of a license area, we seek to balance two competing
concerns. On one hand, we seek to adopt service areas of a size that
results in efficient and intensive use of spectrum resources. On the
other hand, we seek to adopt licensing areas that will permit the
dissemination of licenses among a wide variety of applicants. The
smallest of these geographic service areas are RSAs and Metropolitan
Statistical Areas (``MSAs''), of which there are 734 licenses
comprising the United States and its territories. Adopting service
rules that provide for licenses with small geographic areas allows
bidders to target the precise areas they are interested in serving,
rather than having to compete for expansive geographic areas that
encompass smaller, sought-after areas. The Commission has also licensed
spectrum according to Economic Area Groupings (``EAGs''), which make up
six licensing areas for the entire country. Some terrestrial wireless
services, such as narrowband Personal Communications Services (``PCS'')
and 1670-1675 MHz, have geographic service areas that have nationwide
coverage. Other geographic service areas fall along a range of
intermediate sizes between RSAs and nationwide service areas, e.g.,
BTAs, Economic Areas (``EAs''), and Major Economic Areas (``MEAs'').
8. The Commission has also adopted partitioning and disaggregation
policies to enable service providers, including rural telcos, to
acquire spectrum without bidding on licenses that may not be suited to
their particular needs. ``Partitioning'' is the assignment by a
licensee of geographic portions of the license. ``Disaggregation'' is
the assignment by a licensee of discrete portions or ``blocks'' of
spectrum of the license. Where permitted by our rules, licensees may
partition or disaggregate any of their licensed spectrum to other
entities. Obtaining spectrum through partitioning or disaggregation,
rather than competitive bidding, is often appealing to service
providers with limited financial resources, specific service area
needs, or small bandwidth requirements because licenses offered at
auction may be more costly, cover larger geographic areas, and have
greater bandwidth than desired. For instance, the geographic service
area of a license made available at auction may include both urban and
rural areas. A rural telco interested in serving only a rural area may
seek to obtain spectrum post-auction through partitioning or
disagregation, rather than bid for a license covering an area that it
does not intend to serve. In this manner, our partitioning and
disaggregation policies may help service providers, such as rural
telcos, to obtain spectrum tailored to their specialized service area
and financial needs. The Commission's analysis of applications for
geographic partition and spectrum disaggregation reveals that 13.5
percent of all assignees have voluntarily identified themselves as
rural telcos. Our analysis also demonstrates that 13.8 percent of all
assignees (including rural and non-rural telcos) claim they are, or
will be, serving rural areas.
9. The Commission has sought to enhance service to rural areas by
requiring winning bidders of spectrum licensees to meet certain
performance requirements. Section 309(j)(4)(B) of the Act specifically
directs the Commission to prescribe such ``performance requirements''
to ensure prompt delivery of service to rural areas, to prevent
stockpiling of spectrum, and to promote investment in and rapid
deployment of new technologies and services. Performance requirements
include construction benchmarks. Construction benchmarks typically
require licensees to serve either a specific portion of the geographic
service area or a specific percentage of the population in the
geographic service area by a certain period of time. In some instances,
the Commission has adopted a ``substantial service'' requirement as its
construction requirement. Under this approach, licensees are required
to provide ``substantial service'' to either a geographic service area
or to the population within the geographic service area within a
specific period of time. The Commission has defined ``substantial
service'' as ``service that is sound, favorable, and substantially
above a level of mediocre service that would barely warrant renewal.''
The ``substantial service'' requirement was established to assess
meaningful service through a measure not based on population or
geographic metrics. Substantial service was established for
circumstances where the Commission has determined that more flexible
construction requirements rather than fixed benchmarks would more
likely result in the efficient use of spectrum and the provision of
service to rural, remote, and insular areas. The Commission may
consider such factors as whether a licensee's operations serve
[[Page 726]]
niche markets or focus on serving populations outside of areas served
by other licensees. The Commission has indicated that a ``substantial
service'' construction requirement may help foster service to less
densely populated areas. Because this requirement can be met in a
variety of ways, the Commission has stated that it will review
substantial service showings on a case-by-case basis. The Commission
has rarely found that a commercial mobile radio service (``CMRS'')
carrier has failed to meet its performance requirements.
10. Another step the Commission has taken to encourage the
provision of wireless services to rural areas is the retention, in
RSAs, of the cellular cross-interest rule, which is designed to protect
against the cellular incumbents developing cross interests that may
create the incentive and ability to restrict the availability of
services in those areas. The cellular cross-interest rule limits the
ability of parties to have attributable interests in cellular carriers
on different channel blocks in a single geographic area. In its recent
reevaluation of this rule, the Commission determined that the cross-
interest rule was no longer necessary in MSAs because the cellular
duopoly conditions that prompted the rule's adoption no longer existed.
However, the Commission found that in RSAs competition to the incumbent
cellular licensees was not as developed as in MSAs. Accordingly, the
Commission concluded that a combination of interests in cellular
licensees serving RSAs would more likely result in a significant
reduction in competition in these areas. The Commission therefore
decided to retain the cellular cross-interest rule in RSAs, subject to
waiver of the rule based on certain conditions. The Commission noted
that retention of the cross-interest rule in RSAs does not preclude
cellular carriers from obtaining PCS licenses in order to expand
capacity or offer advanced services.
III. Request for Comment
11. Under section 309(j), the Commission has a statutory mandate to
promote the development and deployment of wireless technologies to
rural areas and economic opportunities for rural telcos and other
entities seeking to serve rural areas. Indeed, as discussed, the
Commission has implemented a number of initiatives toward achieving
those goals. We seek to better understand the nature of spectrum supply
and demand and the services currently provided and planned to be
offered in rural areas. We are also interested in developing a record
on whether there are any discrepancies between rural and urban America
in the availability, use and cost of wireless services. Approximately
80 percent of the U.S. population lives in metropolitan areas. However,
our society is increasingly mobile and, therefore, ubiquitous wireless
service is essential, not only for those living in rural areas, but
also for individuals whose business and leisure activities take them to
all parts of the nation. Thus, it is in the larger public interest to
promote seamless wireless service throughout the country. By the Notice
of Inquiry, we seek to broaden our understanding of the effect our
current policies have had on the availability of spectrum-based
services in rural America and on access to spectrum licenses by rural
telcos and other entities seeking to serve rural areas. Further, we are
interested in exploring whether it is appropriate to adopt new
approaches in these areas. We therefore seek comment on the
effectiveness of our current regulatory tools in facilitating the
delivery of spectrum-based services to areas that traditionally may
have been underserved by telecommunications providers and on our
efforts to provide rural telcos with the opportunity to participate in
spectrum auctions. We also invite comment on ways in which the
Commission could modify its policies to best fulfill these statutory
goals.
12. At the outset, we request comment on the types of wireless
services that are currently provided, and that are planned to be
offered, in rural areas. We seek information on the availability of
wireless services in rural areas and the providers of such services. We
ask commenters to identify which service providers, in addition to
rural telcos, are providing wireless services to rural populations. To
the extent possible, we request that commenters provide particularized
data on wireless coverage and provision of services to rural areas. The
more specific data we receive, the better able we will be to tailor our
regulations to meet our rural service goals. We particularly seek
comment from consumer groups, community groups, State Commissions,
local governments and others about any geographic areas that lack
adequate wireless coverage, have inadequate quality of service, or
inequitable pricing. We also ask commenters to identify the obstacles
to providing wireless service in rural areas. In particular, we ask
commenters to address the economic viability of building out in rural
areas. In what ways, if any, can the Commission modify its rules to
promote build-out to rural regions? We also seek comment on whether we
should maintain a Web site that would include information that would be
helpful to entities seeking to provide wireless services to rural
areas. Such a Web site, for instance, could have links to other sites
that contain information about programs and financial incentives that
are available to those seeking to serve rural populations. Should we
maintain a database that would provide information to prospective
service providers, including rural carriers, on the availability of
spectrum for initial licensing or leasing? In addition to the specific
issues identified in the Notice of Inquiry, we also invite comment on
any other issues within the Commission's jurisdiction that may directly
relate to the provision of wireless service in rural areas.
13. Apart from the rural service mandate set forth in section
309(j), Congress also directed the Commission to pursue other public
interest objectives in designing a system of competitive bidding,
including the efficient and intensive use of the spectrum, the
development and rapid deployment of new technologies and services, the
promotion of competition, and the recovery for the public of a portion
of the value of the spectrum. In providing comment on how the
Commission may best fulfill the rural objectives, we ask that
commenters also address how any proposed suggestions would further, or
impede, the Commission's achievement of the other public interest goals
set forth in section 309(j)(3).
14. Finally, we recognize that issues involving spectrum leasing
opportunities are of significant interest to rural telcos. They have
expressed interest in gaining access to spectrum usage rights through
secondary markets. We plan to address these matters in our proceeding
on secondary markets.
15. In addition, we note that rural interests have raised issues
related to the controlling interest standard that the Commission
adopted in the Part 1 Fifth Report and Order. In essence, they argue
that application of this rule will inappropriately disqualify rural
telco cooperative applicants from attaining small business bidding
status and will frustrate the objectives of the Commission's small
business bidding preference program and the mandates of section 309(j).
Because we will respond to petitions for reconsideration of the Part 1
Fifth Report and Order in a subsequent order, as part of the Part 1
rulemaking proceeding, we do not seek comment on, and will not address
these matters in the Notice of Inquiry.
[[Page 727]]
A. Definition of ``Rural Areas''
16. As discussed, sections 309(j)(3) and 309(j)(4) direct the
Commission to promote the development and deployment of spectrum-based
services to ``rural areas.'' The statute, however, does not provide a
definition of what constitutes a ``rural area.'' The federal government
has multiple ways of defining ``rural,'' reflecting the multiple
purposes for which the definitions are used. The Commission has used
RSAs to define ``rural'' in certain instances. In the Seventh Report,
17 FCC Rcd 12985 (2002), the Commission used three different proxy
definitions of ``rural'' for purposes of analyzing the average number
of competitors in rural versus non-rural counties. We compared the
number of competitors in (i) RSA counties versus MSA counties, (ii)
non-nodal EA counties versus nodal EA counties, and (iii) counties with
population densities below 100 persons per square mile versus those
with population densities above 100 persons per square mile. We request
comment on whether and how the Commission should define ``rural area''
for purposes of determining the extent to which the Commission has met
its mandate under section 309(j). In addition, we seek comment on
whether we should adopt different definitions of what constitutes a
``rural area'' depending upon the regulatory initiative for which the
definition is used. Commenters should identify the factors that the
Commission should consider when defining ``rural area.'' In addition,
we are interested in compiling a comprehensive list of the number of
telephone companies that meet the definition of ``rural telephone
company'' as defined in 47 U.S.C. 153(37). The identical definition is
also included in 47 CFR 1.2110(c)(4) and 51.5. We ask that commenters
provide data to assist us in this effort.
B. Bidding Credits
17. As explained, bidding credits are intended to foster broad
participation in the competitive bidding process for licenses. A
bidding credit reduces the amount of the winning bid paid for a license
by a qualifying entity. The Commission requests comment on whether, and
the extent to which, small business bidding credits have facilitated
the participation of rural telcos in competitive bidding and the
delivery of spectrum-based services to rural areas. Our research
demonstrates that rural telcos often qualify as small businesses and
are therefore eligible to receive small business bidding credits. Is
the availability of small business bidding credits effective in
assisting rural telcos to gain access to spectrum? Is the availability
of such credits helpful in promoting the provision of spectrum-based
services to rural areas? Commenters should support their responses to
these questions with data or other empirical information. For instance,
if commenters contend that small business bidding credits are not
helpful in promoting rural telco participation in Commission auctions,
commenters should provide data or statistics supporting that assertion.
If empirical evidence demonstrates that small business bidding credits
are not effective in facilitating the provision of wireless services to
rural areas or the participation of rural telcos in competitive
bidding, should the Commission adopt a bidding credit specifically for
rural telcos or based on the provision of service to rural areas? For
instance, should the Commission adopt a rural service bidding credit
modeled after the tribal lands bidding credit? In responding to these
questions, commenters should discuss why the use of small business
bidding credits is or is not effective in creating opportunities for
rural telcos or in spurring the provision of services to rural areas.
18. If the Commission were to adopt a bidding credit specifically
for rural telcos, what criteria should it use to determine eligibility
for the credit (if it is not based on financial size) and what should
be the size of the credit? Is it appropriate, for instance, to adopt a
bidding credit for all rural telcos irrespective of how large or well-
financed these entities may be? When initially considering the adoption
of a rural telco bidding credit in 1994, the Commission found that
rural telcos do not per se have the same difficulty accessing capital
as other groups, such as small businesses. The Commission stated that
the parties advocating the adoption of a rural telco credit had
``failed to demonstrate a historical lack of access to capital that was
the basis for according bidding credits to small businesses, minorities
and women.'' In subsequent decisions, the Commission has reiterated
that large rural telcos do not appear to have barriers to capital
formation similar to those faced by other designated entities. In
commenting on this issue, parties that advocate the adoption of a
bidding credit specifically for rural telcos should address whether we
should consider access to capital as a factor in determining whether to
adopt such a bidding credit. We note that rural telcos may seek below-
market rate lending through the Department of Agriculture's Rural
Utilities Service (``RUS''). In addition, section 6103 of the recently-
enacted Farm Security and Rural Investment Act of 2002 provides loans
and loan guarantees to construct, improve, and acquire facilities and
equipment to provide broadband service to rural communities with 20,000
or fewer residents. These financing options suggest that rural telcos
may have greater ability than other designated entities to attract
capital. We seek comment on what role these programs should play, if
any, in our consideration of adopting an independent rural telco
bidding credit.
C. Geographic Service Areas
19. The sizes of geographic service areas vary on a service-by-
service basis depending upon such factors as the nature of the service
and the likely users. We seek comment on the extent to which the size
of the geographic service area affects the ability of rural telcos to
acquire spectrum licenses through competitive bidding. In addition,
commenters should discuss whether, and in what ways, the size of the
geographic service area affects the provision of wireless services to
rural areas. Commenters should provide data to support their positions.
20. Does the size of the geographic service area affect the
provision of wireless services to rural areas by entities other than
rural telcos? Large license areas, for instance, may enable nationwide
carriers to compete with local or regional carriers in providing
service to rural areas. Such large areas may also provide opportunities
for new entrants to compete on a wide-area basis in an existing
service. With regard to commercial mobile telephony specifically, there
is considerable industry support for the notion that relatively large
licenses are most efficient. The original geographic scope of cellular,
broadband PCS, and certain SMR licenses was small and, as a result, the
licenses were assigned to a large number of entities. The predominant
trend since then, however, has been for operators progressively to
aggregate licenses and build large geographic footprints. The
Commission has found that these footprint-expanding transfers and
assignments result in important public benefits. Today, six providers
approach nationwide status. However, less than 50 percent of the
geographic area of the country is served by three or more carriers.
Given this evidence, are small license areas inefficient for licenses
of spectrum suitable for provision of mobile voice and data service?
And for such licenses, do the interests of consumers of rural service
diverge from the interests of rural telcos that wish to supply such
service?
[[Page 728]]
Alternatively, does the use of small geographic licensing areas
stimulate competition in the provision of wireless services to rural
populations? Does the adoption of smaller service areas enable rural
telcos to compete more effectively in spectrum auctions? If rural
telcos win licenses covering small geographic service areas, are they
more likely to provide services to those areas than are other service
providers? Is there evidence that smaller geographic areas will result
in more rapid deployment of services? Are rural carriers better
positioned to serve the needs of rural America than nationwide
carriers? Reliance on nationwide licenses assumes that nationwide
carriers and local carriers are equally well positioned to serve rural
consumer needs. Is this correct? On the other hand, are rural
populations better served by carriers that operate on a nationwide
basis as opposed to local carriers? For example, are nationwide
carriers better able to offer lower prices, better roaming capability,
or more services due to economies of scale? If the adoption of smaller
service areas for licenses does enhance the participation and success
of rural telcos in competitive bidding and/or the provision of services
to rural areas, should the Commission adopt varied-sized or small-sized
geographic service areas for all auctionable services? Are there
particular services that are more appropriate for licensing by smaller
geographic areas? If smaller geographic service areas promote
competition, service, and access to spectrum by rural telcos, what size
service areas would be most effective to achieve these benefits? In
addition, we seek comment on whether certain auction designs, such as
combinatorial or ``package'' bidding, facilitate license configurations
that are efficient and likely to foster the provision of wireless
services to rural areas.
D. Partitioning and Disaggregation
21. Partitioning and disaggregation policies and regulations are
designed to facilitate more efficient and intensive use of the
spectrum, including use by rural telcos to serve rural areas. In
paragraph eight, we provide statistics regarding partition and
disaggregation assignees that have identified themselves as rural
telcos, and assignees that claim that they are or will be serving rural
areas. However, because we do not require applicants to identify
themselves as rural telcos when applying for licenses, we cannot with
certainty determine the extent of transactions involving rural telcos
based solely on our licensing records. Therefore, we seek comment on
the extent to which rural telcos have received licenses through
geographic partitioning and spectrum disaggregation. We are interested
in learning whether, and in what ways, partitioning and disaggregation
policies have been helpful in providing rural telcos with access to
spectrum. We also ask for comment on whether, and to what extent,
partitioning and disaggregation rules have enhanced the provision of
services to rural areas. In responding to these questions, commenters
should provide data or other empirical information to support their
positions. We also solicit comment on whether partitioning and
disaggregation policies enhance competition in the provision of
wireless services to rural areas. If partitioning and disaggregation
facilitate the provision of services to rural areas, do sufficient
incentives exist for both winning bidders and prospective licensees to
participate in the spectrum partitioning and disaggregation process?
For instance, to what extent do the potential transaction costs
involved in partitioning and disaggregation discourage licensees from
pursuing such options? We note that some rural interests maintain that
such transaction costs and other factors lead licensees to avoid
pursuing partitioning and disaggregation agreements. If sufficient
incentives do not exist to encourage partitioning of service areas and
disaggregation of spectrum, should the Commission adopt additional
incentives to motivate parties to pursue these options? For example,
should the Commission require that licensees disaggregate or partition
under certain circumstances, such as when there is unused spectrum or
unserved portions of geographic service areas?
E. Performance Requirements
22. Performance requirements, such as construction benchmarks, are
intended to help ensure that licensees promptly provide service to
potential subscribers. The type of construction benchmark the
Commission adopts for a license may determine whether services are
deployed expeditiously to rural areas. For instance, depending on the
level at which it is set, a population-based requirement may be
achievable by a licensee providing service only to the urban areas
covered by its license. In contrast, a geography-based benchmark
targets the delivery of services to a percentage of a geographic area,
rather than to a percentage of the population in an area. Because
population is only rarely distributed uniformly across a geographic
area, the same percentage requirement under a geography-based standard
may result in greater geographic area and population coverage than that
percentage under a population-based requirement.
23. We seek comment on whether and how construction benchmarks may
be utilized to encourage licensees to deliver wireless services to
rural populations. To what extent are our current construction
benchmarks effective in ensuring that spectrum-based services are
provided to rural areas? In what instances, and under what
circumstances, should the Commission adopt a population-based,
geography-based, or substantial service construction benchmark? For
example, in licensing service areas that are predominantly rural,
should the Commission adopt geography-based construction benchmarks?
Are there other types of construction benchmarks that would better
promote service to rural regions? For instance, should we adopt a
separate construction benchmark applicable only to service areas that
constitute rural areas? Alternatively, should we revise our current
construction benchmarks to permit service providers to serve either
smaller portions of the population or service area if they meet a
second construction benchmark applicable to the rural portions of a
licensee's market? If so, commenters should explain what construction
benchmarks we should adopt for the rural portions of the service area?
If, as suggested, we were to require licensees to disaggregate or
partition unused spectrum or unserved portions of geographic service
areas, should the Commission adopt additional construction benchmarks
to implement this requirement? If so, what penalties should the
Commission impose on licensees for failure to timely meet such
additional construction benchmarks? As noted, the Commission has
generally accepted certifications of CMRS carriers that they have met
their construction benchmarks. To what extent are our self-
certification procedures an adequate means of ensuring compliance with
our construction benchmark requirements?
24. In addition to employing varying types of construction
benchmarks for auctioned licenses, the Commission has also utilized
different models with respect to enforcing construction requirements.
In the Cellular Radiotelephone Service, initial licensees are given
five years to construct facilities and begin providing service to their
market. At the end of the initial five-year period the licensee is
allowed to ``keep what it builds'' and the remaining portions of the
market
[[Page 729]]
become available for licensing to other parties via the cellular
``unserved area'' licensing process. In contrast, auctioned services
such as broadband PCS provide for an ``all or nothing'' penalty for
failing to meet the construction benchmarks, i.e., if a licensee does
not meet the five- or ten-year benchmark or make a showing of
substantial service (where applicable) it forfeits the entire license
and does not get to ``keep what it builds.'' With this past experience
in mind, we seek comment on whether these models, a hybrid model, or
some combination of targeted models, may be utilized to facilitate
service in rural areas. We also seek comment on whether the Commission
should adopt performance requirements other than construction
benchmarks to encourage the provision of wireless services to rural
areas.
25. For unserved areas in the Cellular Radiotelephone Service,
should the Commission adopt a different approach to assigning spectrum
usage rights? Specifically, should the Commission adopt a ``commons''
model, which allows unlimited numbers of unlicensed users to share
frequencies, with usage rights that are governed by technical standards
but with no right to protection from interference? In addition, should
the Commission amend the application filing process for cellular
unserved areas to further encourage service providers to operate in
rural areas? Furthermore, should the Commission apply the policy it has
adopted with respect to unserved areas in the Cellular Radiotelephone
Service to other services to promote wireless service in rural areas,
i.e., allow licensees to continue to serve the areas they have built-
out, but make available for licensing to other parties those portions
of a market that are not being served by current licensees? With
respect to our ownership rules for the Cellular Radiotelephone Service,
we seek comment on whether and to what extent our retention of the
cellular cross-interest rule for RSAs advances spectrum-based services
to rural areas. Should the Commission amend this rule to further the
provision of wireless services to rural areas?
26. Finally, it may be economically inefficient, and thus harmful
to customers, to require for each wireless service the same number of
competitors in urban and rural areas. This appears to be true, for
example, with regard to mobile telephony. How should a performance
requirement policy for rural areas address this issue? Economic theory
predicts that where licensees are in competitive markets, and no market
failures exist and transactions costs are sufficiently low, market
forces will drive optimal decisions on what is built, where, and when.
In that setting, build-out rules arguably would distort resource
allocation, or at best be irrelevant. We ask parties to comment on the
application of this economic theory to construction benchmarks that
cover rural areas. In particular, for those services and rural markets
where there is competition, how should we balance the putative
efficiency harm of build-out rules against the potential equity
benefit? Moreover, for those services and rural markets where there is
a lack of competition, e.g., as a result of small market size not being
able to support multiple operators, is it possible that build-out rules
would impose efficiency costs in the form of spending on excess
capacity?
F. Band Manager Licensing
27. A band manager is a licensee that is specifically authorized to
lease its licensed spectrum usage rights for use by third parties
through private contractual agreements without having to seek prior
Commission approval. Band managers may make their licensed spectrum
available to facilitate all types of spectrum use that are consistent
with the technical restrictions adopted for the particular band and in
accordance with certain requirements imposed on the leasing
relationship. The Commission has adopted band manager licensing for
several bands. The band manager may subdivide its spectrum in any
manner it chooses and make it available to any third party, consistent
with the frequency coordination and interference rules specified for
the particular band. Band managers are permitted to apportion spectrum
based on both geographic area and frequency. Such spectrum
apportionment differs from traditional geographic partitioning and
spectrum disaggregation because it does not involve the transfer or
assignment of the band manager's licenses to other parties. Band
manager licensing is an innovative spectrum management approach that
can enable parties to acquire spectrum more readily for varied uses.
The band manager option will also enable small businesses to acquire
spectrum in amounts to serve particular geographic areas, and for
periods of time, that better suit their unique characteristics and
specialized communications needs. We seek comment on whether rural
telcos would be able to obtain more affordable access to spectrum
through a band manager than by acquiring licenses directly at auction
or through partitioning and disaggregation. We also seek comment on
whether rural telcos would be more likely to obtain access to spectrum
that is tailored to their particular needs from a band manager than by
acquiring licenses in an auction or through partitioning and
disaggregation. Comments should also discuss whether band manager
licensing would promote service or enhance the quality of service to
rural areas.
G. Technical and Operational Rules
28. The Commission has developed technical and operational rules
throughout its spectrum-based services in order to facilitate efficient
use of the radio spectrum while minimizing the potential for harmful
interference among licensees. We seek comment on the degree of
flexibility that these regulations afford to providers of spectrum-
based services in rural areas. Are there aspects of these rules that
could be modified or made more flexible to encourage expanded service
to rural areas while ensuring that services remain free of harmful
interference? For example, would increasing permissible power levels be
beneficial for particular types of services in areas where there is
less spectrum congestion? Commenters should explain how their proposed
changes would satisfy the goal of expanded rural service while not
increasing the likelihood of harmful interference to existing
licensees.
29. With respect to the Rural Radiotelephone Service, which
includes BETRS, we note that as of November 2002, there were 67 active
BETRS licenses with facilities in 17 states and 580 active Rural
Radiotelephone licenses with facilities relatively uniformly spread
throughout the continental United States. Of these, only one BETRS and
two Rural Radiotelephone licenses were issued within the last two
years. We seek comment on how we might revise the rules for these
services to further facilitate the provision of wireless service to
rural areas.
H. Unlicensed Spectrum
30. We also seek comment on the extent to which unlicensed spectrum
is being used to provide wireless services to rural communities. We ask
commenters to identify the service providers that are utilizing
unlicensed spectrum and the types of services they are offering.
Further, we seek comment regarding actions the Commission could take to
encourage or facilitate the use of unlicensed spectrum. For example,
unlicensed operation is generally limited to very low power levels in
order to help ensure that the operation does not interfere with
licensed services. However, the interference
[[Page 730]]
potential of unlicensed devices may be low or negligible in rural
communities. Should unlicensed devices be permitted to use higher
output power levels in such environments? If so, what criteria would
have to be met in order to qualify to use the higher power levels?
I. Eligible Telecommunications Carriers
31. The Commission's rules concerning universal service support for
eligible telecommunications carriers (``ETCs'') may impact deployment
of wireless services to rural areas. Under the Communications Act, only
carriers designated as ETCs under section 214(e) may receive federal
universal service support. Under the Commission's rules, wireless
carriers may be designated as ETCs and may receive universal service
support for providing service to consumers that use wireless service as
their only phone service as well as to consumers that also maintain
wireline service. The Commission recently asked the Federal-State Joint
Board on Universal Service (Joint Board) to review the ETC rules and
provide recommendations regarding if and how these rules should be
modified. We anticipate that the Joint Board will develop information
on the impact of the Commission's ETC rules on deployment of wireless
services to rural areas. In this docket, we seek comment generally on
whether the Commission's ETC rules have promoted deployment of wireless
service to rural areas and greater subscribership in these areas. We
also seek to gather factual information. Specifically, we direct the
Universal Service Administrative Corporation to provide us with
information on the number of wireless carriers currently designated as
ETCs, the amount of federal universal service support they have
received, and the number of lines they serve. We ask that commenters
provide any information available on how many of the customers served
by wireless carrier ETCs also maintain wireline phones. How many
customers had no phone service whatsoever until they purchased wireless
service?
IV. Procedural Issues
A. Ex Parte Presentations
32. This is an exempt proceeding in which ex parte presentations
are permitted (except during the Sunshine Agenda period) and need not
be disclosed.
B. Filing of Comments and Reply Comments
33. We invite comment on the issues and questions set forth.
Pursuant to Sec. Sec. 1.415 and 1.419 of the Commission's rules, 47
CFR 1.415, 1.419, interested parties may file comments on or before
February 3, 2003, and reply comments on or before February 18, 2003.
Comments may be filed using the Commission's Electronic Comment Filing
System (ECFS) or by filing paper copies. See Electronic Filing of
Documents in Rulemaking Proceedings, 63 FR 24121 (May 1, 1998).
Commenters that wish confidential treatment of their submissions should
request that their submission, or specific part thereof, be withheld
from public inspection.
34. Comments filed through the ECFS can be sent as an electronic
file via the Internet to <http://www.fcc.gov/e-file/ecfs.html
. Generally, only one copy of an electronic
submission must be filed. If multiple docket or rulemaking numbers
appear in the caption of this proceeding, however, commenters must
transmit one electronic copy of the comments to each docket or
rulemaking number referenced in the caption. In completing the
transmittal screen, commenters should include their full name, U.S.
Postal Service mailing address, and the applicable docket or rulemaking
number. Parties may also submit an electronic comment by Internet e-
mail. To get filing instructions for e-mail comments, commenters should
send an email to ecfs@fcc.gov, and should include the following words
in the body of the message, ``get form.'' A sample form and directions
will be sent in reply. Parties who choose to file by paper must file an
original and four copies of each filing. If more than one docket or
rulemaking number appears in the caption of this proceeding, commenters
must submit two additional copies for each additional docket or
rulemaking number. Filings can be sent by hand or messenger delivery,
by commercial overnight courier, or by first-class or overnight U.S.
Postal Service mail (although we continue to experience delays in
receiving U.S. Postal Service mail). The Commission's contractor,
Vistronix, Inc., will receive hand-delivered or messenger-delivered
paper filings for the Commission's Secretary at 236 Massachusetts
Avenue, NE., Suite 110, Washington, DC 20002. The filing hours at this
location are 8 a.m. to 7 p.m. All hand deliveries must be held together
with rubber bands or fasteners. Any envelopes must be disposed of
before entering the building. Commercial overnight mail (other than
U.S. Postal Service Express Mail and Priority Mail) must be sent to
9300 East Hampton Drive, Capitol Heights, MD 20743. U.S. Postal Service
first-class mail, Express Mail, and Priority Mail should be addressed
to 445 12th Street, SW., Washington, DC 20554. All filings must be
addressed to the Commission's Secretary, Office of the Secretary,
Federal Communications Commission. Parties also should send four (4)
paper copies of their filings to Robert Krinsky, Federal Communications
Commission, Room 4-B551, 445 12th Street, SW., Washington, DC 20554.
V. Ordering Clauses
35. Accordingly, it is ordered that, pursuant to the authority
contained in 47 U.S.C. 151, 4(i), and 303(r) the Notice of Inquiry is
adopted.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 03-219 Filed 1-6-03; 8:45 am]
BILLING CODE 6712-01-P