[Federal Register: March 14, 2002 (Volume 67, Number 50)]
[Rules and Regulations]               
[Page 11425-11434]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14mr02-15]                         

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 22

[WT Docket No. 01-32; FCC 02-09]

 
Implementation of Competitive Bidding Rules to License Certain 
Rural Service Areas

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission (``the 
Commission''), pursuant to the Balanced Budget Act of 1997, takes 
action to grant initial licenses for certain areas of the country for 
cellular service by allowing all eligible parties to apply for initial 
licenses, licensing markets based on rural service areas (RSAs) under 
part 22 of its rules, and using its part 1 competitive bidding rules to 
auction these licenses.

DATES: Effective April 15, 2002.

FOR FURTHER INFORMATION CONTACT: Katherine M. Harris at (202) 418-0609 
(Wireless Telecommunications Bureau).

SUPPLEMENTARY INFORMATION: This is a summary of the Report and Order 
(``R&O'') in WT Docket No. 01-32, FCC 02-9, adopted January 16, 2002 
and released January 28, 2002. The complete text is available for 
inspection and copying during normal business hours in the FCC 
Reference Center, 445 12th Street, SW, Washington, DC and also may be 
purchased from the Commission's copy contractor, Qualex International, 
445 12th Street, SW, Room CY-B402, Washington, DC 20554. The document 
is also available via the Internet at http://www.fcc.gov/Bureaus/
Wireless/Orders/2001/fcc02-9.pdf.

Paperwork Reduction Act

    1. The R&O contains no proposed information collection.

Synopsis of the Report and Order

    2. In the Notice of Proposed Rule Making in this proceeding (NPRM), 
66 FR 14104 (March 9, 2001), the Commission proposed rules for awarding 
licenses for four cellular Rural Service Areas (RSAs) that remain 
unlicensed because the initial lottery winner was disqualified or has 
otherwise withdrawn its application.
    3. There are currently four cellular RSA markets that remain 
unlicensed because the initial lottery winner was disqualified. These 
markets are: 332A--Polk, AR; 582A--Barnes, ND; 672A--Chambers, TX ; and 
727A--Ceiba, PR. Three additional markets (370A--Monroe, FL; 492A--
Goodhue, MN; and 615A--Bradford, PA) were the subject of recent 
Congressional action in which the Commission was directed to reinstate 
the original lottery winner in each of the three markets to tentative 
selectee status and proceed with processing the selectee's application 
for authority to operate. See District of Columbia Appropriations Act 
of FY 2001, Public Law 106-553, Title X, 1007, 114 Stat. 2762, 
Launching Our Communities' Access to Local Television Act of 2000 
(2000) (D.C. Appropriations Act of FY 2001); Public Notice, Wireless 
Telecommunications Bureau Grants Rural Cellular Licenses, 16 FCC Rcd 
5601 (2001) (not published in the Federal Register), recon. denied, In 
the Matter of Applications of Great Western Cellular Partners, L.L.C., 
Monroe Telephone Services, L.L.C., and Futurewave Partners, L.L.C., 
Memorandum Opinion and Order, DA 01-2443 (CWD rel. Oct. 19, 2001) 
(application for review pending). Under

[[Page 11426]]

the Balanced Budget Act of 1997 (1997 Budget Act), the Commission is 
now required, with certain exceptions not applicable here, to resolve 
mutually exclusive applications for initial licenses by competitive 
bidding. See Balanced Budget Act of 1997, Public Law 105-33, 3002(a), 
111 Stat. 251, 258-60 (1997); 1997 Budget Act, Section 3002(a)(1)(A), 
codified at 47 U.S.C. 309(j)(1), (2); 1997 Budget Act, Section 
3002(a)(2)(B), codified at 47 U.S.C. 309(i)(5). Based on the record 
compiled in this proceeding the Commission has decided to implement the 
proposals put forth in the NPRM, namely, to: (1) Allow all eligible 
parties to apply for these initial licenses; (2) license these markets 
on an RSA basis under our part 22 rules; and (3) use our part 1 
competitive bidding rules to auction these licenses.

Background

    4. The Commission has been awarding cellular licenses since 1982. 
Under the original cellular licensing rules, one of the two cellular 
channel blocks in each market (the B block) was awarded to a local 
wireline carrier, while the other block (the A block) was awarded 
competitively to a carrier other than a local wireline incumbent. After 
awarding the first thirty Metropolitan Statistical Area (MSA) licenses 
pursuant to comparative hearing rules, the Commission adopted rules in 
a 1984 Report and Order, 49 FR 23628 (June 7, 1984), and a 1986 First 
Report and Order, 51 FR 26895 (July 28, 1986), to award the remaining 
cellular MSA and RSA licenses through lotteries. On January 31, 2001, 
the Commission adopted a Notice of Proposed Rulemaking, 66 FR 14101 
(March 9, 2001), acknowledging that in four RSA markets no initial 
licensee had been granted.
    5. In the Omnibus Budget Reconciliation Act of 1993 (1993 Budget 
Act), Congress added Section 309(j) to the Communications Act, 
authorizing the Commission to resolve mutually exclusive applications 
for use of the electromagnetic spectrum by auction. Omnibus Budget 
Reconciliation Act of 1993, Public Law 103-66, Title VI, 6002(a), 107 
Stat. 312, 387-92 (1993). In addition, Section 6002(e) of the 1993 
Budget Act provided that: ``[t]he Federal Communications Commission 
shall not issue any license or permit [by lottery] after the date of 
enactment of this Act unless . . . one or more applications for such 
license were accepted for filing by the Commission before July 26, 
1993.'' This provision left to the Commission's discretion whether to 
use auctions or lotteries for applications filed before July 26, 1993. 
Beginning in 1994, the Commission, in a Memorandum Opinion and Order, 
59 FR 37163 (July 21, 1994), exercised its discretion and used 
lotteries, rather than auctions, to resolve already-pending mutually 
exclusive applications for cellular unserved areas filed prior to July 
26, 1993.
    6. On August 5, 1997, the 1997 Budget Act was signed into law, 
modifying the Commission's auction authority by amending Section 309(j) 
of the Communications Act to require that all mutually exclusive 
applications for initial licenses or construction permits be auctioned, 
with certain exceptions not applicable here. 1997 Budget Act, Public 
Law 105-33, 3002(a), 111 Stat. 251, 258-60 (1997) (amending 47 U.S.C. 
309(j)). The 1997 Budget Act expressly repealed Section 6002(e) of the 
1993 Budget Act, id. at 3002(a)(4), and terminated the Commission's 
authority to award licenses through random selection, even in the case 
of applications filed prior to July 26, 1993, except for licenses for 
noncommercial educational and public broadcast stations, id. at 
3002(a)(2)(B). The Commission had found in the Competitive Bidding 
Second Report and Order that mutually exclusive applications for 
initial licenses to provide cellular service were auctionable under the 
auction authority provided by the 1993 Budget Act. Implementation of 
Section 309(j) of the Communications Act--Competitive Bidding, Second 
Report and Order, 59 FR 22980 (May 4, 1994), (Competitive Bidding 
Second Report and Order). Because the 1997 Budget Act terminated the 
Commission's remaining lottery authority, the Bureau dismissed all 
pending RSA lottery applications. See In the Matter of Certain Cellular 
Rural Service Area Applications, Order, 14 FCC Rcd 4619 (WTB 1999) (not 
published in the Federal Register) (dismissing applications in RSAs 
332A (Polk, AR), 370A (Monroe, FL), 492A (Goodhue, MN), 582A (Barnes, 
ND), 615A (Bradford, PA), and 727A (Ceiba, PR)); In the Matter of 
Certain Cellular Rural Service Area Applications in Market Nos. 599A 
and 672A, Order, DA 99-814 (CWD rel. Apr. 29, 1999) (dismissing 
applications in RSAs 599A (Nowata, OK) and 672A (Chambers, TX)); In the 
Matter of Certain Rural Service Area Applications in Market Nos. 599A 
and 672A, Order on Reconsideration, DA 99-1426 (CWD rel. July 21, 1999) 
(reinstating applications of tentative selectees in those markets--
Zephyr Tele-Link in RSA 599A and Alee in RSA 672A); In the Matter of 
Zephyr Tele-Link Application for a Construction Permit to Establish a 
Cellular System Operating on Frequency Block A in the Domestic Public 
Cellular Radio Telecommunications Service To Serve the Oklahoma 4-
Nowata Rural Service Area, Market No. 599A, Order 15 RCC Rcd 4247 (CWD 
2000) (granting application of Zephyr Tele-Link); In the Matter of 
Application of Alee Cellular Communications for Authorization to 
Construct Nonwireline Cellular System in Texas RSA 21 Market 672, 
Memorandum Opinion and Order, 15 FCC Rcd 2831(2000) (not published in 
the Federal Register) (recon. pending) (dismissing application of Alee) 
(Alee Cellular). Several of the applicants sought reconsideration of 
the Bureau's dismissal of the RSA applicants, and the Bureau declined 
to reconsider its actions. In the Matter of Certain Cellular Rural 
Service Area Applications, Order, 16 FCC Rcd 4619 (WTB 2001) (not 
published in the Federal Register) (affirming dismissals) (March 2, 
2001 Order). Ranger Cellular and Miller Communications, Inc. have 
sought further reconsideration of the Bureau's dismissal of the 
applications, and High Tower Communications, Inc. has sought Commission 
review of the Bureau's action. Consolidated Petition for 
Reconsideration of Ranger Cellular and Miller Communications, Inc. 
(filed Mar. 30, 2001); Application for Review of High Tower 
Communications, Inc. (filed Apr. 2, 2001).
    7. In the first dismissal order cited above, the Bureau also 
dismissed as moot CCPR's Petition requesting that we award licenses for 
the remaining RSA markets through competitive bidding. CCPR's Petition 
specifically requested that market 727A--Ceibo, Puerto Rico, be awarded 
through competitive bidding rather than through a second lottery. 
However, the CCPR Petition raised certain issues concerning the broader 
applicability of the use of competitive bidding for all markets where 
an initial lottery was held and the winner was disqualified. The 
Commission therefore treated the CCPR Petition as a petition for 
rulemaking and requested comment on awarding cellular licenses through 
competitive bidding for all remaining unlicensed RSAs. Although the 
Commission dismissed CCPR's Petition as moot because we are required by 
the 1997 Budget Act to award licenses through competitive bidding, we 
have considered, and are incorporating into the record of this 
proceeding, all comments and reply comments submitted in response to 
the CCPR Petition.
    8. The four markets for which no initial license has been granted 
are:

[[Page 11427]]

332A--Polk, AR; 582A--Barnes, ND; 727A--Ceiba, PR; and 672A--Chambers, 
TX. These four markets are the subject of this Report and Order.

A. Need for and Objectives of the Report and Order

    9. Congress enacted the Balanced Budget Act of 1997, which requires 
the Commission to resolve mutually exclusive applications for initial 
licenses through competitive bidding instead of random selection, with 
certain exceptions not applicable here. Accordingly, the Commission 
initiated this rulemaking in order to adopt rules for the granting of 
initial cellular RSA authorizations by means of competitive bidding. 
The Commission's objective in this rulemaking proceeding is to 
establish, for cellular RSA markets for which a tentative selectee has 
been disqualified, the applicable competitive bidding and licensing 
rules. Such rules are necessary in order to determine the classes of 
eligible entities as well as determine what policies, if any, should be 
adopted to promote participation by small business entities, consistent 
with the Commission's statutory obligation under Section 309 of the 
Communications Act of 1934, as amended, 47 U.S.C. 309.

B. Summary of Significant Issues Raised by Public Comments in Response 
to the IRFA

    10. No comments were submitted specifically in response to the 
IRFA. Some of the comments responding to the proposals contained in the 
NPRM, however, discussed issues that could affect small businesses. Two 
of the three commenters that addressed eligibility for the four 
cellular RSA licenses at issue generally supported permitting all 
eligible entities to apply for the licenses. See Report and Order at Paras.  
8-21. The third commenter opposed such open eligibility (which would 
encompass small businesses), instead arguing that only entities that 
had filed lottery applications for these licenses in 1988 and 1989 and 
had appealed the dismissal of their lottery applications should be 
permitted to apply for these licenses (which would mean only three 
entities would be potentially eligible). See Report and Order at Paras.  
8-21.
    11. One commenter supported the proposals contained in the NPRM to 
provide bidding credits to small businesses to encourage them to bid on 
and win the cellular RSA licenses. See Report and Order at Paras.  27-
33. Another commenter opposed adoption of such bidding credits on the 
basis that such credits would unfairly and uneconomically skew the 
auction in favor of smaller entities. See Report and Order at Paras.  
27-33.
    12. Regarding eligibility for the four cellular RSA licenses, the 
Commission determined in the Report and Order, that any entity 
otherwise qualified under the rules would be permitted to apply for any 
of the four RSA licenses. See Report and Order at Paras.  8-21. As 
explained in greater detail in the Report and Order and in Section E 
infra, the Commission concluded that permitting broad-based eligibility 
would best further the public interest as well as facilitate 
participation by small businesses.
    13. Regarding the adoption of bidding credits for certain 
categories of small businesses, the Commission concluded that including 
such bidding credits as part of the cellular RSA application and 
bidding process would help to promote opportunities for small 
businesses. See Report and Order at Paras.  27-33. As explained in 
greater detail in the Report and Order and Section E infra, 
implementation of bidding credits facilitates the ability of small 
businesses to compete against larger entities and promotes economic 
opportunities for those small businesses.

C. Description and Estimate of the Number of Small Entities To Which 
the Rules Will Apply

    14. The RFA directs agencies to provide a description of, and where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules, if adopted. See 5 U.S.C. 603(b)(3). The 
RFA defines the term ``small entity'' as having the same meaning as the 
terms ``small business,'' ``small organization,'' and ``small 
governmental jurisidiction.'' Id. 601(6). The term ``small business'' 
has the same meaning as the term ``small business concern'' under 
section 3 of the Small Business Act. Id. 601(3) (incorporating by 
reference the definition of ``small business concern'' in 15 U.S.C. 
632). Pursuant to the RFA, the statutory definition of a small business 
applies ``unless an agency, after consultation with the Office of 
Advocacy of the Small Business Administration and after opportunity for 
public comment, establishes one or more definitions of such term which 
are appropriate to the activities of the agency and publishes such 
definition(s) in the Federal Register.'' 5 U.S.C. 601(3). A small 
business concern is one which: (1) Is independently owned and operated; 
(2) is not dominant in its field of operation; and (3) satisfies any 
additional criteria established by the SBA at 15 U.S.C. 632.
    15. A small organization is generally ``any not-for-profit 
enterprise which is independently owned and operated and is not 
dominant in its field.'' 5 U.S.C. 601(4). Nationwide, as of 1992, there 
were approximately 275,801 small organizations. 1992 Economic Census, 
U.S. Bureau of the Census, Table 6 (special tabulation of data under 
contract to Office of Advocacy of the U.S. Small Business 
Administration). ``Small governmental jurisdiction'' generally means 
``governments of cities, counties, towns, townships, villages, school 
districts, or special districts, with a population of less than 
50,000.'' 5 U.S.C. 601(5). As of 1992, there were approximately 85,006 
such jurisdictions in the United States. 1992 Census of Governments, 
U.S. Bureau of the Census, U.S. Department of Commerce. This number 
includes 38,978 counties, cities, and towns; of these, 37,566, or 96 
percent, have populations of fewer than 50,000. The Census Bureau 
estimates that this ratio is approximately accurate for all 
governmental entities. Thus, of the 85,006 governmental entities, the 
Commission estimate that 81,600 (91 percent) are small entities. 
According to SBA reporting data, there were 4.44 million small business 
firms nationwide in 1992.
    16. According to recent telecommunications industry revenue data, 
808 carriers reported that they were engaged in the provision of either 
cellular service or Personal Communications Services (PCS), which are 
placed together in that data. Trends in Telephone Service, Table 19.3 
(March 2000). This data does not indicate how many of these 808 
carriers fall within each of the revenue tiers defined by the 
Commission for the purpose of receiving bidding credits as some form of 
small business or entrepreneur. See Report and Order at Paras. 29-33. 
As described in the Report and Order and Section E infra, the 
Commission defined an ``entrepreneur'' as an entity with average annual 
gross revenues not exceeding $40 million for the preceding three years 
and provided a 15 percent bidding credit; a ``small business'' as an 
entity with average annual gross revenues not exceeding $15 million for 
the preceding three years and provided a 25 percent bidding credit; and 
a ``very small business'' as an entity with average annual gross 
revenues not exceeding $3 million for the preceding three years and 
provided a 35 percent bidding credit.
    17. The Commission is required to estimate in this FRFA the number 
of small entities to which any new rules would apply, provide a 
description of such entities, and assess the impact of the rule on such 
entities. The rules adopted in the Report and Order will

[[Page 11428]]

apply to all entities that seek to obtain the subject licenses, 
including small entities. The number of entities that may apply to 
participate in these future auctions is unknown. Moreover, these 
entities might already be providers of cellular service or PCS or other 
wireless services, or they may have no current involvement in the 
wireless industry. To the extent that existing cellular or PCS 
operators would apply for the subject authorizations, the applicable 
NAICS code is 513322. Existing paging carriers, which might also be 
interested in these authorizations, fall under NAICS code 513321. 
Resellers of paging and cellular services are identified by NAICS code 
51333.
    18. The number of small businesses that have participated in prior 
auctions has varied. Small businesses, as defined under the 
Commission's rules in the context of various auctions for 
authorizations in specific services, have accounted for 1,667 out of a 
total of 2,096 qualified bidders in all prior auctions, not including 
broadcast auctions. As provided in Section 1.2110(c)(1) of the 
Commission's rules, and in conformity with the Small Business Act and 
the regulations of the Small Business Administration, the Commission 
establishes small business definitions for purposes of its auctions on 
a service-specific basis. See 47 CFR 1.2110(c)(1); 15 U.S.C. 
632(c)(2)(c); 13 CFR 121.902(b). Statistics for broadcast license 
auctions are not available, and would be less relevant to the licenses 
at issue here. Given these statistics, the Commission expects a large 
percentage of participants in our auctions program generally to be 
small businesses in the future, although this may not be the case in 
this individual auction.

D. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    19. The Commission imposes no new reporting, recordkeeping, or 
other compliance requirements in the Report and Order. The only 
projected reporting and recordkeeping requirements that will apply in 
any auctions for the four cellular RSA authorizations are those that 
are already established by Commission regulations. Nothing in this 
rulemaking changes those regulations. The Commission will accept new 
license applications and use our general Part 1 competitive bidding 
rules to conduct the auction. These rules require all applicants to 
electronically submit FCC Form 175 in order to participate in the 
auction and, at the conclusion of the auction, all high bidders to 
electronically submit FCC Form 601 to apply for a license. See 47 CFR 
1.2105(a), 1.2107(a). The purposes of these forms are to ensure that 
applicants are eligible to participate in the auction and that high 
bidders are eligible to hold the cellular RSA licenses at issue. The 
Office of Management and Budget has already approved both of these 
forms. FCC Form 175, OMB Control No. 3060-0600 (effective until Apr. 
30, 2004); FCC Form 601, OMB Control No. 3060-0798 (effective until 
Mar. 31, 2002). In addition, under our Part 1 rules, any entity wishing 
to receive a bidding credit for serving qualifying tribal lands must 
comply with 47 CFR 1.2110(f)(3), an obligation also approved by the 
Office of Management and Budget. See 47 CFR 1.2110(f)(3).

E. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered

    20. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities. 5 U.S.C. 603(c)(1)-(4).
    21. In the Report and Order, the Commission adopts rules to permit 
us to grant initial licenses in four cellular RSAs. In adopting these 
rules, the Commission considered the potential significant economic 
impact of the rules on small entities. Specifically, the Commission 
considered the impact of its eligibility definition on the ability of 
small businesses even to apply for the licenses at issue in this 
proceeding and to participate in the associated auctions. The 
Commission also considered the effect of the proposed bidding credits 
for three categories of small businesses on the ability of small 
businesses to compete successfully in the auctions and to build out a 
system should such businesses be awarded any of the licenses. As 
described in the Report and Order and Section E infra, the Commission 
defined an ``entrepreneur'' as an entity with average annual gross 
revenues not exceeding $40 million for the preceding three years and 
provided a 15 percent bidding credit; a ``small business'' as an entity 
with average annual gross revenues not exceeding $15 million for the 
preceding three years and provided a 25 percent bidding credit; and a 
``very small business'' as an entity with average annual gross revenues 
not exceeding $3 million for the preceding three years and provided a 
35 percent bidding credit.
    22. Also, in proposing to apply the Commission's existing Part 1 
competitive bidding rules to any auctions for these licenses, the 
Commission took into account their effect on small businesses.
    23. The rules adopted by the Report and Order will affect all small 
entities that seek to acquire any of the four cellular RSA licenses 
discussed herein. The Commission believes that permitting all eligible 
entities to apply for the four licenses--instead of restricting 
eligibility to three applicants that filed lottery applications in 1988 
and 1989--will promote opportunities for participation by small 
businesses. A greater number of small businesses will have the chance 
to seek the authorizations at issue.
    24. The Commission has sought to promote small business ownership 
by defining three tiers of small businesses for the purposes of 
providing bidding credits to small entities: an ``entrepreneur'' is an 
entity with average annual gross revenues not exceeding $40 million for 
the preceding three years; a ``small business'' is an entity with 
average annual gross revenues not exceeding $15 million for the 
preceding three years; and a ``very small business'' is an entity with 
average annual gross revenues not exceeding $3 million for the 
preceding three years. The Small Business Administration approved these 
proposed small business definitions on January 30, 2001. See Letter 
from Fred P. Hochberg, Acting Administrator, Small Business 
Administration, to Margaret W. Wiener, Chief, Auctions and Industry 
Analysis Division, Wireless Telecommunications Bureau, Federal 
Communications Commission, dated Jan. 30, 2001 (SBA Letter). See also 
Letter from Margaret W. Wiener, Chief, Auctions and Industry Analysis 
Division, Wireless Telecommunications Bureau, Federal Communications 
Commission, to Gary M. Jackson, Assistant Administrator, Small Business 
Administration, dated Sept. 21, 2001. The bidding credits are 15 
percent for entrepreneurs, 25 percent for small businesses, and 35 
percent for very small businesses. The Commission specifically rejected 
arguments in opposition to the use of bidding credits for small 
businesses. As explained in the Report and Order, adoption of bidding 
credits for small businesses provides them with an opportunity to 
compete successfully against larger, well-financed bidders. Report and 
Order

[[Page 11429]]

at para. 32. The Commission believes the bidding credits it has adopted 
will benefit a range of small businesses.
    25. The Commission will apply its Part 1 competitive bidding rules 
equally to all applicants for the licenses, including small businesses. 
Our Part 1 competitive bidding rules have been designed to ensure that 
small businesses are not placed at a disadvantage and have a full and 
fair opportunity to compete in fair auction proceedings. While these 
rules require small businesses to submit application forms in order to 
participate in the auctions for the subject licenses, the Commission 
believes that equitably applying the same rules to all entities helps 
to promote fairness in the process and to ensure that the auction is 
effective. Fair and effective auction proceedings benefit small 
businesses as well as all other participants.

I. Discussion

A. Eligibility for Licenses

    26. Background. In the NPRM, the Commission proposed to allow all 
eligible entities to participate in an auction for the four cellular 
RSA licenses at issue in this proceeding. The Commission noted that the 
competitive bidding program seeks to award each license to the 
applicant that values it most highly and that is, therefore, most 
likely to offer valued service to the public. The Commission explained 
that excluding potential applicants that were not previously lottery 
applicants would be inconsistent with that goal. The Commission also 
recognized that, because nearly twelve years have passed since the 
closing of the original RSA filing window, a number of commenters that 
have expressed interest in participating in RSA auctions would not have 
had the opportunity to file applications, while some applicants that 
did file lottery applications may no longer exist. Finally, the 
Commission reasoned that, to the extent former lottery applicants 
continue to have an interest in applying for these markets, open 
eligibility allows them to do so.
    27. In each of the four unlicensed RSAs, the Commission has granted 
interim operating authority to one or more cellular operators to 
provide cellular service on the Channel A block pending the ultimate 
permanent licensing of these RSAs. The Commission also specifically 
proposed to permit cellular operators that have been granted interim 
operating authority (IOA) in the four unlicensed RSAs to participate in 
the RSA auction. The Commission noted that although IOAs confer no 
interest or expectation of receiving a cellular license, IOA holders 
might have a substantial interest in bidding for permanent 
authorizations in markets where they may have been providing interim 
cellular service.
    28. Discussion. After careful consideration, the Commission 
concludes that it is in the public interest to allow all entities, 
including current IOA holders and former lottery applicants, to 
participate in the RSA auction. In recent years, the Commission has 
generally favored open eligibility because the Commission believes that 
maximizing the pool of auction applicants helps to ensure that licenses 
are awarded to entities that value them most highly and are, therefore, 
most likely to offer prompt service to the public. See, e.g., 
Competitive Bidding Second Report and Order, 59 FR 22980 (May 4, 1994); 
Amendment of the Commission's Rules Regarding the 37.0-38.6 GHz and 
38.6-40.0 GHz Bands, Implementation of Section 309(j) of the 
Communications Act--Competitive Bidding, 37.0-38.6 GHz and 38.6-40.0 
GHz, Report and Order and Second Notice of Proposed Rulemaking, 12 FCC 
Rcd 18600, 18617-20, Paras.  30-35 (1997) (not published in the Federal 
Register); Implementation of Sections 309(j) and 337 of the 
Communications Act of 1934 as Amended, Promotion of Spectrum Efficient 
Technologies on Certain Part 90 Frequencies, Establishment of Public 
Service Radio Pool in the Private Mobile Frequencies Below 800 MHz, 
Report and Order, 15 FCC Rcd 22709, 22736-37, Paras.  54-56 (2000) (BBA 
Report and Order) (not published in the Federal Register). But see, 
e.g., BBA Report and Order, 15 FCC Rcd at 22737, para. 56 (not 
published in the Federal Register) (the Commission has authority to 
restrict eligibility in particular cases if such restrictions are 
consistent with our spectrum management responsibilities under Section 
309(j)). The Commission has found that this approach to auction 
participation best fulfills the public interest objectives set forth in 
Section 309(j)(3) of the Communications Act. 47 U.S.C. 309(j)(3)(A)-
(D). Further, the Commission does not believe that there are any 
compelling reasons to exclude potential participants in the upcoming 
RSA auction.
    29. A number of commenters support open eligibility, particularly 
current IOA holders and entities that did not previously file lottery 
applications. With respect to eligibility, two of the four commenters 
that responded to the Notice support open eligibility. In addition, 
several commenters that responded to the CCPR Petition favored open 
eligibility. Cingular argues that permitting open eligibility will 
ensure that licenses are awarded to applicants that value them the most 
highly. Cingular specifically insists that the Commission allow IOA 
holders in the subject markets to apply for licenses. ALLTEL also 
supports the Commission's proposal to permit open eligibility. BANM 
asserts that open eligibility will expedite cellular service to the RSA 
markets. WWC urges the Commission to give all interested applicants an 
opportunity to provide cellular service in the RSAs. Century contends 
that the number of potential service providers has increased in the 
years since the closing of the original RSA filing window and that 
broadening auction participation would permit the best qualified and 
most highly motivated entities to compete.
    30. Several commenters oppose open eligibility. Some of these 
commenters, such as Ranger and Miller, seek to restrict eligibility to 
former lottery applicants who continue to contest dismissal of their 
applications. One commenter responding to the Notice contends that the 
auction should be restricted to former lottery applicants. Commenters 
in response to the CCPR Petition also argue that the Commission should 
limit the auction to former lottery applicants. Other commenters argue 
that IOA holders should be barred from participating in the cellular 
RSA auction. These commenters generally contend that it is the 
Commission's policy, when it grants a party's application for IOA 
service, to dismiss that party's pending application for permanent 
authority for the subject market. AALA claims that an IOA holder would 
have an advantage over other applicants in an auction because it would 
have a ``unique ability'' to calculate the value of the license. In 
contrast, BANM and CCPR argue that the Commission's policy for 
excluding IOAs was implemented to avoid unfair advantage in the 
comparative hearing process and thus is not relevant when licenses are 
assigned by competitive bidding.
    31. Several commenters cite to Ashbacker Radio Corp. v. FCC, 326 
U.S. 327 (1945). See, e.g., AALA Comments at 14 (to allow one applicant 
to operate in a market under temporary authority poses a severe threat 
to the principles set forth in Ashbacker). We note that short-form 
applications to participate in competitive bidding are governed by 
Section 309(j), and not the procedural requirements of Sections 309(a), 
309(b), or 309(e), or the Ashbacker doctrine, which requires a 
comparative hearing when competing applicants file conflicting license 
or construction

[[Page 11430]]

permit applications for the same authorization. See Elleron Oil Co. and 
WVI Partners, Inc. Petition for Reconsideration of Dismissal of Short-
Form Applications for Interactive Video and Data Service Auction, 
Order, 13 FCC Rcd 17246, 17251-52, para. 9 (WTB 1998) (not published in 
the Federal Register). Section 309(j) does not require the Commission 
to use a notice and cut-off procedure or establish ``cut-off dates'' to 
invite mutually exclusive applications for a particular license. See 
id. at 17250, para. 8.
    32. In determining eligibility for auction participation, the 
Commission is required by Section 309(j)(3) to promote certain public 
interest objectives. Those objectives include rapid deployment of new 
technologies and services to the public, promotion of economic 
opportunity and competition, recovery for the public of a portion of 
the value of the spectrum, and efficient and intensive use of the 
spectrum. 47 U.S.C. 309(j)(3)(A)-(D). The Commission believes that a 
policy of unrestricted eligibility in the RSA auction will best fulfill 
our public interest goals. Here, open eligibility has a higher 
probability of promoting the rapid delivery of services to the public 
than limited eligibility. This is because open eligibility increases 
the likelihood that all entities who have an interest in putting the 
license to use will participate in the auction. Among these, the bidder 
who is willing to pay the most will be highly motivated to rapidly put 
the license to a use that the public finds valuable because only such a 
use will make its investment worthwhile. Importantly, no commenter has 
presented evidence in this case that there are entities with market 
power whose participation might allow them to limit or reduce 
competition by their entry. In such a situation, permitting as many 
qualified bidders as possible allows competition and economic 
opportunity to flourish by reducing one barrier to market entry, 
potentially resulting in a more competitive applicant pool. In the 
absence of evidence of market failure, the market, and not regulation, 
should determine participation in competitive bidding here, and the 
Commission should allow the maximum number and types of bidders to 
participate in the auctions.
    33. An important factor in our decision to permit open eligibility 
is that the licenses at issue in this proceeding will cover rural 
areas. Under Section 309(j)(4)(B), the Commission is required to 
encourage the rapid deployment of services specifically to rural areas. 
47 U.S.C. 309(j)(4)(B). BANM also highlights the need for the provision 
of service in rural markets, stating that, ``[w]hile many urban markets 
have enjoyed cellular service for as long as thirteen years, these 
rural service areas have remained without a permanent nonwireline 
cellular licensee.'' The Commission believes that open eligibility will 
encourage participation in the RSA auction by entities that are most 
likely to be interested in, and capable of, serving rural areas.
    34. Our decision to permit open eligibility in the RSA auction 
includes the participation of current IOA holders in the four 
unlicensed RSAs. The Commission's policy to dismiss applications for 
permanent status filed by IOA holders originated in the context of 
comparative hearings, based on the concern that the decision to grant a 
license in a comparative hearing would be biased in favor of an IOA 
holder because it had incurred substantial expenses in its temporary 
operations. See In re Applications of La Star Cellular Telephone Co. 
and New Orleans CGSA, Inc, Memorandum Opinion and Order, 4 FCC Rcd 3777 
(1989) (not published in the Federal Register), aff'd, 899 F.2d 1233 
(D.C. Cir 1990). See Community Broadcasting Co. v. FCC, 274 F.2d 753 
(D.C. Cir. 1960) (an interim operator's expenditure of sizeable funds 
on its temporary operation would inevitably influence the Commission's 
final decision, no matter how much the Commission tried to eliminate 
this factor). The Commission declines to extend that policy to the 
competitive bidding process. IOA holders will not have an advantage 
over other bidders as they once had over other applicants in 
comparative hearings because, in an auction, licenses are assigned to 
the highest bidder, regardless of prior operating status. See 
Implementation of Section 309(j) of the Communications Act--Competitive 
Bidding for Commercial Broadcast and Instructional Television Fixed 
Service Licenses, Memorandum Opinion and Order, 14 FCC Rcd 8724, 8737-
39, Paras.  23-26 (1999) (not published in the Federal Register) (the 
Commission rejected arguments that holders of interim authority have a 
comparative advantage in an auction process). As the Commission stated 
in the NPRM, although IOAs confer no entitlement to, or expectation of, 
receiving a cellular license, IOA holders may have a substantial 
interest in bidding for permanent authorizations in markets where they 
have been providing interim cellular service. Given our previously 
adopted policies and the record in this proceeding, the Commission 
concludes that current IOA holders should not be excluded from 
participating in the auction of licenses for the unlicensed RSAs on an 
equal basis with other applicants.
    35. Joint commenters Ranger and Miller raise a variety of statutory 
and equitable arguments against open eligibility, none of which the 
Commission find persuasive. First, Ranger and Miller argue that Section 
309(l) of the Communications Act of 1934, as amended, restricts 
eligibility for cellular radio licenses to lottery applicants that 
filed their applications prior to July 1997 and whose applications 
allegedly are ``unresolved.'' Section 309(l) provides in pertinent part 
that, with respect to competing applications for initial licenses for 
``commercial radio and television stations'' that were filed with the 
Commission before July 1, 1997, the Commission shall treat the persons 
filing such applications as the only persons eligible to be qualified 
bidders. Public Law 105-33, 3002(a)(3), 111 Stat. 251, 260 (1997) 
(codified at 47 U.S.C. 309(l)). Ranger and Miller contend that the 
Commission's rules define cellular radio as a ``commercial mobile radio 
service'' and that, therefore, the reference to ``commercial radio'' in 
Section 309(l) includes cellular radio. Cingular disagrees with Ranger 
and Miller, asserting that the Commission should not view ``commercial 
radio'' and ``television stations'' as distinct, unrelated terms. 
Cingular maintains that the term ``commercial'' was intended to exclude 
noncommercial educational radio and television applications from the 
scope of Section 309(l) and from competitive bidding under Section 
309(j)(2)(C).
    36. The Commission agrees with Cingular's interpretation of the 
statutory language, which is plain on its face. The statute does not 
use ``commercial radio'' and ``television stations'' as distinct terms. 
Rather, the reference in the statute to ``commercial radio and 
television stations'' clearly refers to broadcast facilities. Where 
Congress has referred to wireless services like cellular in other 
provisions of the Communications Act of 1934, as amended, it has 
clearly used the term ``commercial mobile services.'' See, e.g., 47 
U.S.C. 253(e), 274(i)(2)(B), 332(c)(1), 332(d)(1). As the Supreme Court 
has explained, ``[w]here Congress includes particular language in one 
section of a statute but omits it in another section of the same Act, 
it is generally presumed that Congress acts intentionally and purposely 
in the disparate inclusion or exclusion.'' Russello v. United States,

[[Page 11431]]

464 U.S. 16, 23 (1983) (internal quotation marks omitted), citing 
United States v. Wong Kim Bo, 472 F.2d 720, 722 (5th Cir. 1972). The 
legislative history also confirms that Section 309(l) applies only to 
commercial broadcast radio and television applications. The Conference 
Report specifically states that ``[n]ew section 309(l) of the 
Communications Act requires the Commission to use competitive bidding 
to resolve any mutually exclusive applications for radio or television 
broadcast licenses that were filed with the Commission prior to July 1, 
1997.'' H.R. Conf. Rep. No. 217, 105th Cong., 1st Sess. at 573 (1997) 
(Conference Report) (emphasis added). The Commission has applied 
Section 309(l) only to pending comparative broadcast licensing cases. 
See Implementation of Section 309(j) of the Communications Act `` 
Competitive Bidding for Commercial Broadcast and Instructional 
Television Fixed Service Licenses, First Report and Order, 63 FR 48615 
(Sept. 30, 1998) (Broadcast First Report and Order); recon. denied, 14 
FCC Rcd 8724 (1999) (not published in the Federal Register); modified, 
14 FCC Rcd 12541 (1999) (not published in the Federal Register); See In 
the Matter of Amendment of Section 73.202(B), FM Table of Allotments, 
FM Broadcast Stations, Memorandum Opinion and Order, 16 FCC Rcd 2272 
(2001) (not published in the Federal Register).
    37. Contrary to the claim of Ranger and Miller, Bachow 
Communications, Inc. v. FCC does not support the notion that Section 
309(l) applies to cellular RSA applications as well as broadcast 
license applications. Bachow Communications, Inc. v. FCC, 237 F.3d 683 
(D.C. Cir. 2001) (Bachow). Bachow's central holding instead is that 
license applications for 39 GHz service filed under a comparative 
hearing licensing scheme could be dismissed when the Commission shifted 
to an auction licensing scheme. Bachow, 237 F.3d at 686-688 
(recognizing the ``Commission's authority to change license assignment 
allocation (sic) procedures midstream'' even though it disrupts 
expectations and alters the competitive balance among applicants). 
Ranger and Miller also cite the D.C. Circuit's opinion in McElroy to 
support their argument that the Commission cannot make the RSA licenses 
available to new applicants. McElroy Electronics Corp. v. FCC, 86 F.3d 
248 (D.C. Cir. 1996) (McElroy). McElroy holds that when the Commission 
decides to process timely-filed applications, it generally may not also 
process competing applications filed out of time. McElroy, 86 F.3d at 
253-259. Because we will permit open eligibility for the subject 
licenses, and all applications to participate in the auction will be 
newly filed, the McElroy decision is inapposite.
    38. Ranger and Miller also offer up a litany of equitable arguments 
that they contend support artificially limiting eligibility. They argue 
that the Commission should limit the RSA applicant pool because the 
number of unresolved lottery applicants is small, the applications have 
been pending for thirteen years, the service rules for RSA licenses 
have not changed, and the lottery applicants did not have notice when 
they filed their applications that competitive bidding, rather than 
lotteries, might be used to assigned licenses. In addition, Ranger and 
Miller oppose open eligibility on the grounds that the Commission did 
not refund their lottery application filing fees, and that open 
eligibility will lead to delay and litigation.
    39. Ranger and Miller fail to show how the public interest would be 
served by limiting the RSA auction to only three former lottery 
applicants. In fact, it is well-established that, regardless of when an 
application is filed, an applicant has no vested right to a 
continuation of the licensing procedures in effect at the time its 
application was filed. See, e.g., Bachow, 237 F.3d at 687-688; Revision 
of Part 22 and Part 90 of the Commission's Rules To Facilitate Future 
Development of Paging Systems, Memorandum Opinion and Order on 
Reconsideration and Third Report and Order, 64 FR 33762 (June 24, 
1999); Broadcast First Report and Order, 13 FCC Rcd at 15937, para. 44 
(not published in the Federal Register); Rulemaking to Amend Parts 1, 
2, 21, and 25 of the Commission's Rules to Redesignate the 27.5-29.5 
GHz Frequency Band, Third Order on Reconsideration, 13 FCC Rcd 4856, 
4941, para. 195 (1998) (not published in the Federal Register), citing 
Chadmoore Communications, Inc. v. FCC, 113 F.3d 235, 240-41 (D.C. Cir. 
1997). Moreover, there is no logical nexus between the length of time 
the applications were pending and the rationale for restricting 
eligibility to bid in the RSA auction. Similarly, the claim that the 
lottery applicants did not have any notice of possible rule changes at 
the time they filed their applications provides no reasonable rationale 
for the proposed narrowing of eligibility. The Commission's action 
declining to refund application filing fees neither gives the 
applications continued ``life'' nor justifies restrictions on 
eligibility. Finally, the Commission necessarily is guided by the 
public interest objectives set forth in Section 309(j)(3)(A)-(D) in 
setting application eligibility and not by concerns over the prospects 
of litigation and appeals. 47 U.S.C. 309(j)(3)(A)-(D).
    40. Ranger and Miller Comments at 9, 12-13. Ranger and Miller argue 
that the Commission should restrict eligibility because Miller helped 
the Commission determine that a cellular RSA licensee was unqualified 
to hold a RSA license. Ranger and Miller Comments at 10-12. We 
disagree. Any action by Miller that may have led the Commission to such 
a determination is irrelevant to our decision whether we should, as a 
general rule, adopt open eligibility with respect to the four cellular 
RSA markets. We are obligated to promote the public interest, not 
individual applicants.
    41. Ranger and Miller totally disregard the equities of other 
parties potentially interested in seeking the subject authorizations, 
as well as equitable considerations relevant to the public interest. As 
the Commission found above, adopting open eligibility--the antithesis 
of the licensing plan promoted by Ranger and Miller--for these licenses 
has a greater probability than limited eligibility of resulting in the 
rapid deployment of new technologies and services to the public, the 
possibility of competition and economic opportunity, and the efficient 
and intensive use of the spectrum. Such a result would promote the 
public interest, and therefore, open eligibility is warranted. In 
addition, it is important to recognize that there may be parties 
interested in providing cellular service in these markets, and 
qualified to do so, that did not even exist at the time the lottery 
applications were filed.
    42. Finally, Ranger and Miller argue that an open eligibility 
policy in this context must necessarily be based on the potential for 
increased revenue to the Treasury. Section 309(j)(7)(B) does not 
preclude the Commission from adopting eligibility rules based on other 
considerations, even though such rules may also result in increased 
federal revenues. The purpose of open eligibility is not to maximize 
the amount of revenues raised in an auction but to ensure that licenses 
are awarded to those that value them most highly and that, therefore, 
will be most likely to provide rapid and efficient service to the 
public. Indeed, by asserting that auction revenues will be greater if 
they are forced to compete with a larger number of bidders, Ranger and 
Miller may be suggesting that they value the RSA licenses less highly 
than their potential competitors. Our determination to permit open 
eligibility in the RSA auction is based on our statutory obligations to 
promote

[[Page 11432]]

competition and rapid deployment of services to rural areas, not to 
enhance the Federal Treasury.

B. Market Areas To Be Auctioned

    43. Background. In the NPRM, the Commission sought comment on 
whether the markets for which licenses are to be awarded through 
competitive bidding should be based on RSAs, or whether alternative 
licensing models should be considered. The Commission received two 
comments that supported licensing the markets on an RSA basis, and no 
party expressed opposition to that proposal.
    44. Discussion. The Commission concludes that the remaining 
unlicensed cellular RSA markets should be licensed on an RSA basis 
under our Part 22 rules. As the Commission observed in the NPRM, the 
initial lotteries for the unlicensed markets were for RSAs as defined 
in 47 CFR 22.909 of our rules. To employ another market model for these 
RSAs would be potentially disruptive to adjacent cellular operations, 
as well as possibly impede the cost-effective buildout of facilities to 
serve the residents of these areas as well as transient users. The 
Commission also will, pursuant to 47 CFR 22.947, subject licenses 
awarded for these markets to the same construction and operational 
rules as licenses granted to prior RSA lottery winners, including the 
exclusive right of the auction winner to expand its system within that 
market for a period of five years. After the expiration of the five-
year expansion period, any areas within the RSA that remained unserved 
would be available for licensing pursuant to 47 CFR 22.949 of our rules 
which governs unserved areas Phase I and Phase II filing procedures.

C. Competitive Bidding Procedures

1. Incorporation by Reference of Part 1 Standardized Auction Rules
    45. Background. In the Part 1 Third Report and Order, the 
Commission streamlined its auction procedures by adopting general 
competitive bidding rules set forth in Part 1, Subpart Q, of the 
Commission's rules applicable to all auctionable services. Amendment of 
Part 1 of the Commission's Rules--Competitive Bidding Procedures, 
Allocation of Spectrum Below 5 GHz Transferred from Federal Government 
Use, Third Report and Order and Second Further Notice of Proposed Rule 
Making, 62 FR 13540 (March 21, 1997) (modified by Erratum, DA 98-419 
(rel. March 2, 1998)) (Part 1 Third Report and Order). The Commission 
clarified and amended these general competitive bidding procedures. 
Amendment of Part 1 of the Commission's Rules--Competitive Bidding 
Procedures, Order on Reconsideration of the Third Report and Order, 
Fifth Report and Order, and Fourth Further Notice of Proposed Rule 
Making, 65 FR 52323 (Aug. 29, 2000) (modified by Erratum, DA 00-2475, 
65 FR 52401 (rel. Aug. 29, 2000)) (Part 1 Order on Reconsideration) 
(recons. pending). More recently, the Commission adopted modifications 
to Section 1.2105(c) of the Commission's rules, the competitive bidding 
``anti-collusion rule.'' Amendment of Part 1 of the Commission's 
Rules--Competitive Bidding Procedures, WT Docket No. 97-82, Seventh 
Report and Order, 66 FR 54447 (Oct. 29, 2001). See also 47 CFR 1.2101 
et seq. In the NPRM, the Commission proposed to conduct the auction of 
cellular RSA licenses in conformity with the general competitive 
bidding rules, including any amendments adopted in the Part 1 Order on 
Reconsideration, Fifth Report and Order, and Fourth FNPRM, 65 FR 52323 
(August 29, 2000) proceeding. Specifically, the Commission proposed to 
employ the Part 1 rules governing competitive bidding design, 
designated entities, application and payment procedures, reporting 
requirements, collusion issues, and unjust enrichment. The Commission 
further stated that winning bidders would be eligible to obtain a 
bidding credit for serving qualifying tribal lands. See 47 CFR 
1.2110(f)(3). A tribal land bidding credit is in addition to, and 
separate from, any other bidding credit for which a winning bidder may 
qualify. Unlike other bidding credits that are requested prior to the 
auction, a winning bidder applies for the tribal land bidding credit 
after winning the auction when it files its long-form application. In 
this regard, we note that only one RSA subject to these proposals--RSA 
582A-Barnes, ND--contains any federally recognized tribal lands. 
Finally, the NPRM contemplated that auction-related procedural matters 
such as the appropriate competitive bidding design for the RSA auction, 
as well as minimum opening bids and reserve prices, would be determined 
by the Bureau pursuant to its delegated authority prior to the start of 
the cellular RSA auction. See 47 CFR 0.131(c), 0.331, and 0.332; see 
also Amendment of Part 1 of the Commission's Rules--Competitive Bidding 
Procedures, Order, Memorandum Opinion and Order, and Notice of Proposed 
Rule Making, 62 FR 13540 (March 21, 1997).
    46. Discussion. The Commission adopts the proposal to conduct the 
auction for initial licenses in the four cellular RSAs in conformity 
with the general competitive bidding rules set forth in Part 1, Subpart 
Q, of the Commission's rules. The Commission believes that this 
decision to conduct the RSA auction in conformity with the standardized 
Part 1 rules will increase the efficiency of the competitive bidding 
process and provide specific guidance to auction participants.
    47. Although the Commission received few comments on this issue, 
none of the commenters opposed the application of the general 
competitive bidding rules. One commenter, Cingular, favors application 
of the general competitive bidding rules to the RSA auction. In its 
comments, Cingular also requests that the bidding design ultimately 
selected not include combinatorial bidding, (Combinatorial bidding 
design allows for bids on combinations or packages of licenses.) 
arguing that it is inappropriate where no ``synergies'' exist among the 
markets in question. As indicated in the NPRM, the Bureau will seek 
comment by Public Notice on auction-related procedural issues, 
including the appropriate competitive bidding design, prior to the 
start of the cellular RSA auction. This approach will provide the 
Bureau with an opportunity to weigh the benefits and disadvantages of 
combinatorial bidding design, among other auction-specific issues.
2. Small Business Definitions and Bidding Credits
    48. Background. In the NPRM, the Commission proposed to adopt 
special provisions for small businesses that participate in the auction 
for cellular RSA licenses. The Commission noted that the markets at 
issue could attract a wide range of entities and the adoption of 
bidding credits will help us meet our Congressional mandate to promote 
competition and to disseminate licenses among a wide variety of 
applicants. Accordingly, the Commission proposed to define an 
entrepreneur as an entity with average annual gross revenues for the 
preceding three years not exceeding $40 million, a small business as an 
entity with average annual gross revenues for the preceding three years 
not exceeding $15 million, and a very small business as an entity with 
average annual gross revenues for the preceding three years not 
exceeding $3 million. The entrepreneur and small business definitions 
are consistent with the small business definitions we established for 
the broadband Personal Communications Services C and F blocks. We also 
proposed the definition of very small business for the RSA

[[Page 11433]]

auction because smaller businesses may be interested in acquiring 
licenses to provide service in these markets. The Small Business 
Administration approved these proposed small business definitions on 
January 30, 2001. See SBA Letter. The Commission further proposed, as 
provided in Section 1.2110(f)(2) of our rules, to offer entrepreneurs a 
bidding credit of 15 percent, small businesses a bidding credit of 25 
percent, and very small businesses a bidding credit of 35 percent.
    49. The Commission sought comment on whether the characteristics 
and capital requirements of cellular service call for a different 
approach. The Commission also asked commenters, to the extent that they 
propose additional provisions to ensure participation by businesses 
owned by minorities and women, to address how such provisions should be 
crafted to meet the relevant standards of judicial review.
    50. Discussion. As the Commission tentatively concluded in the 
NPRM, it will adopt the following small business definitions and 
bidding credits: (1) An ``entrepreneur'' with average annual gross 
revenues for the preceding three years not exceeding $40 million will 
be eligible for a 15 percent bidding credit; (2) a ``small business'' 
with average annual gross revenues for the preceding three years not 
exceeding $15 million will be eligible for a 25 percent bidding credit; 
and (3) a ``very small business'' with average annual gross revenues 
for the preceding three years not exceeding $3 million will be eligible 
for a 35 percent bidding credit.
    51. The Commission is not persuaded that large carriers are 
necessarily better suited to provide cellular RSA service. In any case, 
the Commission does not prescreen applicants' relative qualifications. 
Further, the Commission believes that competition between large and 
small entities will benefit subscribers in the rural markets. Also, the 
Commission is not persuaded that the adoption of bidding credits will, 
in any way, impede service to these areas. To the extent that, as 
ALLTEL suggests, cellular service is a national ``mature'' service 
dominated by large carriers, our decision to adopt bidding credits 
should help eliminate barriers to entry for small businesses, 
consistent with our statutory mandate. See 47 U.S.C. 309(j)(3)(B).
    52. Finally, ALLTEL contends that the auction will be skewed toward 
smaller entities that receive an overly generous bidding credit, which 
will distort market valuation. While the Commission agrees that bidding 
credits provide small businesses with an advantage, Congress, in 
Section 309(j), specifically directed the Commission to promote 
economic opportunities for small businesses. The Commission further 
notes that bidding credits alone do not guarantee success; rather, they 
provide small businesses with an opportunity to successfully compete 
against larger, well-financed bidders. See Revision of Part 22 and Part 
90 of the Commission's Rules to Facilitate Future Development of Paging 
Systems, Implementation of Section 309(j) of the Communications Act--
Competitive Bidding, Second Report and Order and Further Notice of 
Proposed Rulemaking, 62 FR 11616 (March 12, 1997). Because bidding 
credits are the best tool the Commission has to promote these 
opportunities, the Commission concludes that it is appropriate to adopt 
the special provisions for small businesses.
    53. The Commission does adopt special preferences for entities 
owned by minorities or women. As the Commission did not receive any 
comments on this issue, the Commission does not have an adequate record 
to support such special provisions under the current standards of 
judicial review. See Adarand Constructors v. Pena, 515 U.S. 200 (1995) 
(requiring a strict scrutiny standard of review for Congressionally 
mandated race-conscious measures); United States v. Virginia, 518 U.S. 
515 (1996) (applying an intermediate standard of review to a state 
program based on gender classification). The Commission believes the 
bidding credits adopted here for small businesses will further our 
objective of disseminating licenses among a wide variety of applicants. 
Furthermore, minority and women-owned entities that qualify as small 
businesses may take advantage of the special provisions.

D. Disposition of Alee's Argument Concerning Texas 21

    54. In its comments, Alee has requested that RSA 672A (Texas 21--
Chambers) not be included in any upcoming auction pending the outcome 
of its petition for reconsideration of an order denying its application 
in that market. For the reasons stated below, the Commission denies 
Alee's request and includes the Texas 21 RSA authorization among the 
markets to be subject to auction rules.
    55. Alee requests that, if the Commission includes the Texas 21 
authorization in the contemplated auction, the Commission gives notice 
to any potential bidder that any license won in that market would be 
subject to Alee's claim. If Alee ultimately prevails in the hearing 
process, the license will be awarded accordingly. If Alee does not 
prevail, then the Commission will have the necessary licensing rules 
and policies in place for the Texas 21 authorization without having to 
conduct another rulemaking proceeding. The Commission will ensure that 
interested parties are fully informed to the extent that Alee's claim 
remains unresolved.

E. IOA Operations

    56. Background. Under the terms of each of the existing IOAs, the 
IOA operator must cease operations immediately upon initiation of 
service by the new licensee, provided that the new licensee gives at 
least 30 days written notice of its intent to provide service. The IOA 
condition specifically provides that ``[t]he interim operator must 
fully cooperate with the permanent licensee in effectuating a smooth 
transition to the provision of service in the market by the permanent 
licensee without disruption of service to the public. The interim 
operator must cease operations in the market on the date of initiation 
of permanent service or within 30 days of written notice by the 
permanent permittee to the interim operator of the day and time that it 
intends to initiate service, whichever date occurs later.'' In order to 
prevent unnecessary interruption of service to existing cellular 
customers, the Commission proposed in the NPRM that, in the event that 
any of the current IOA holders do not obtain the RSA license for their 
markets, they should be allowed to continue providing service on a 
temporary basis subject to these conditions, i.e., until the auction 
winner provides the required notice and is prepared to commence 
service. Minimizing such interruptions while the auction winner 
establishes its service will also help to retain 911 access in the IOA 
service area. Cingular requests that the Commission clarify its rules 
to provide that interim operators may continue to operate until the 
auction winner is prepared to commence service in that particular part 
of the market where the IOA holder is operating in order to avoid 
disruption in service to the public.
    57. Discussion. Because of the nature of these markets and carrier 
buildout practices, the Commission anticipates the auction winner will 
not initially provide coverage throughout the entire market. As a 
result, the auction winner may or may not initiate service in the area 
where the public currently is receiving service from the IOA holder. 
The Commission will require the IOA holder to ``pull back'' its service 
area boundaries (SAB) to eliminate any overlap with the auction 
winner's own

[[Page 11434]]

SAB, and to terminate service in the RSA upon notice from the auction 
winner that the latter is extending coverage into the area served under 
the IOA. The Commission feels that this will best serve the public 
interest by preventing localized disruptions in service during the 
transition period.

II. Final Regulatory Flexibility Analysis

A. Procedural Matters

1. Final Regulatory Flexibility Analysis
    58. As required by the Regulatory Flexibility Act (RFA), an Initial 
Regulatory Flexibility Analysis (IRFA) was incorporated in the Notice 
of Proposed Rule Making in this docket. See 5 U.S.C. 603. The RFA, see 
5 U.S.C. 601 et seq., has been amended by the Contract with America 
Advancement Act of 1996, Public Law 104-121, 110 Stat. 847 (1996) 
(CWAAA). Title II of the CWAAA is the Small Business Regulatory 
Enforcement Fairness Act of 1996 (SBREFA). The Commission sought 
written public comment on the proposals in the NPRM, including comment 
on the IRFA. The comments received are discussed above. This Final 
Regulatory Flexibility Analysis (FRFA) conforms to the RFA. See 5 
U.S.C. 604.
    59. Pursuant to the Regulatory Flexibility Act, 5 U.S.C. 603, the 
Final Regulatory Flexibility Analysis (FRFA) is set forth above. The 
Commission's Consumer Information Bureau, Reference Information Center, 
will send a copy of this Report and Order, including the Final 
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of 
the Small Business Administration, in accordance with the Regulatory 
Flexibility Act.
    60. Report to Congress: The Commission will include a copy of the 
Report and Order, including this FRFA, in a report to be sent to 
Congress pursuant to the Congressional Review Act. See 5 U.S.C. 
801(a)(1)(A). In addition, the Commission will send a copy of the 
Report and Order, including this FRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration. A copy of the Report and 
Order and FRFA (or summaries thereof) will also be published in the 
Federal Register. See 5 U.S.C. 604(b).

B. Ordering Clauses

    61. Pursuant to 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), Part 22, 47 
CFR is Amended as specified in the rule changes and the auctions for 
Markets 322A--Polk, AR, 592A--Barnes, ND, 727A--Ceiba, PR, and 672A--
Chambers, TX be conducted under Part 1, Subpart Q of the Commission's 
rules, 47 CFR 1.2101 et seq., and that all eligible parties be 
permitted to participate in the bidding.
    62. The rules and policies adopted in this Report and Order shall 
become effective April 15, 2002.
    63. The Commission's Consumer Information Bureau, Reference 
Information Center, shall send a copy of this Report and Order, 
including the Final Regulatory Flexibility Analysis, to the Chief 
Counsel for Advocacy of the Small Business Administration.

List of Subjects in 47 CFR Part 22

    Rural areas.

Federal Communications Commission.
William F. Caton,
Acting Secretary.

Rule Changes

    For the reasons discussed in the preamble, part 22 of title 47 of 
the Code of Federal Regulations is amended as follows:

PART 22--PUBLIC MOBILE SERVICES

    1. The authority citation for part 22 continues to read as follows:

    Authority: 47 U.S.C. 154, 222, 303, 309, and 332.


    2. Section 22.228 is added to Subpart B to read as follows:


Sec. 22.228  Cellular rural service area licenses subject to 
competitive bidding.

    Mutually exclusive initial applications for Cellular Rural Service 
Area licenses are subject to competitive bidding. The general 
competitive bidding procedures set forth in Part 1, Subpart Q of this 
chapter will apply unless otherwise provided in this part.

    3. Section 22.229 is added to Subpart B to read as follows:


Sec. 22.229  Designated entities.

    (a) Eligibility for small business provisions. (1) A very small 
business is an entity that, together with its controlling interests and 
affiliates, has average annual gross revenues not exceeding $3 million 
for the preceding three years.
    (2) A small business is an entity that, together with its 
controlling interests and affiliates, has average annual gross revenues 
not exceeding $15 million for the preceding three years.
    (3) An entrepreneur is an entity that, together with its 
controlling interests and affiliates, has average annual gross revenues 
not exceeding $40 million for the preceding three years.
    (4) A consortium of very small businesses is a conglomerate 
organization formed as a joint venture between or among mutually 
independent business firms, each of which individually satisfies the 
definition in paragraph (a)(1) of this section. A consortium of small 
businesses is a conglomerate organization formed as a joint venture 
between or among mutually independent business firms, each of which 
individually satisfies the definition in paragraph (a)(2) of this 
section. A consortium of entrepreneurs is a conglomerate organization 
formed as a joint venture between or among mutually independent 
business firms, each of which individually satisfies the definition in 
paragraph (a)(3) of this section.
    (5) For purposes of determining whether an entity meets any of the 
definitions set forth in paragraphs (a)(1), (a)(2), (a)(3), or (a)(4) 
of this section, the gross revenues of the entity, its controlling 
interests and affiliates shall be considered in the manner set forth in 
Sec. 1.2110(b) and (c) of this chapter.
    (b) Bidding credits. A winning bidder that qualifies as a very 
small business or a consortium of very small businesses as defined in 
this section may use the bidding credit specified in 
Sec. 1.2110(f)(2)(i) of this chapter. A winning bidder that qualifies 
as a small business or a consortium of small businesses as defined in 
this section may use the bidding credit specified in 
Sec. 1.2110(f)(2)(ii) of this chapter. A winning bidder that qualifies 
as an entrepreneur or a consortium of entrepreneurs as defined in this 
section may use the bidding credit specified in Sec. 1.2110(f)(2)(iii) 
of this chapter.

    4. Section 22.969 is added to Subpart H to read as follows:


Sec. 22.969  Cellular RSA licenses subject to competitive bidding.

    Mutually exclusive applications for initial authorization for the 
following Cellular Rural Service Areas filed after the effective date 
of this rule are subject to competitive bidding procedures as 
prescribed by Sections 22.228 and 22.229: 332A--Polk, AR; 582A--Barnes, 
ND; 672A--Chambers, TX; and 727A--Ceiba, PR.

[FR Doc. 02-6110 Filed 3-13-02; 8:45 am]
BILLING CODE 6712-01-P