III. BACKGROUND

6. In the PCS First Report and Order, the Commission provided for the operation of new, narrowband PCS in the 900 MHz band. We broadly defined PCS as mobile and fixed communications offerings that serve individuals and businesses, and can be integrated with a variety of competing networks. In the PCS First Report and Order, we therefore declined to adopt a restrictive definition of narrowband PCS, such as limiting this category of PCS to advanced messaging and paging services, to promote other potential narrowband services." We also adopted a spectrum allocation and channelization plan, licensing rules, and technical standards for narrowband PCS.12 Consistent with Section 309(j) of the Communications Act of 1934, as amended, we have determined that PCS is subject to competitive bidding in the case of mutually exclusive applications."

7. In the Competitive Bidding Second Report and Order, we adopted general competitive bidding rules for auctionable services.14 In the Competitive Bidding Third Report and Order, we established competitive bidding rules specifically for narrowband PCS.' On reconsideration of that Order, we revised certain auction processing rules, expanded special provisions for designated entities in future narrowband auctions, and sought comment on additional designated entity provisions for the upcoming narrowband PCS auction. Of the three MHz of 900 MHz spectrum allocated for narrowband PCS, two one-MHz blocks are currently divided into specific channels for immediate licensing." The remaining one MHz of

6

Amendment of the Commission's Rules to Establish New Personal Communications Services, First Report and Order, GEN Docket No. 90-314, 8 FCC Rcd 7162, 7162, ¶ 1 (1993) (PCS First Report and Order), on recon., Memorandum Opinion and Order, GEN Docket No. 90-314, 9 FCC Rcd 1309 (1993) (PCS MO&O).

:3

Implementation of Section 309(j) - Competitive Bidding, Second Report and Order, PP Docket 93-253, 9 FCC Rcd 2348, 2358, 54 (1994) (Competitive Bidding Second Report and Order).

14 Id. at 2358, ¶¶ 54-58.

Competitive Bidding Third Report and Order, 9 FCC Rcd at 2941, ¶¶ 1-3.

Implementation of Section 309(j) of the Communications Act-- Competitive Bidding, PP Docket No. 93-253, and Amendment of the Commission's Rules to Establish New Narrowband PCS, GEN Docket 90-314, Third Memorandum Opinion and Order and Further Notice of Proposed Rule Making, 10 FCC Rcd 175, 177, ¶ 3 (1994) (Competitive Bidding Third MO&O/Further Notice). The term "designated entity" refers to small businesses, rural telephone companies, and businesses owned by minorities and/or women, collectively.

17

See 47 C.F.R. § 24.129; see also Competitive Bidding Third Report and Order, 9 FCC Rcd at 2944, ¶ 9.

narrowband PCS spectrum currently is reserved to accommodate future development of narrowband PCS.18

8. The Commission thus far has conducted two auctions for narrowband PCS licenses. As a result of these two auctions, ten nationwide narrowband PCS licenses and six regional narrowband PCS licenses in five different regions (totalling 30 regional licenses) have been granted." Auctions have not yet been conducted for the narrowband PCS spectrum currently designated for licensing in 51 Major Trading Areas (MTAs)20 and 493 Basic Trading Areas (BTAs).1 In addition, the 204 MTA licenses and 1,968 BTA licenses designated as unpaired response channels have not been auctioned.22

21

9. In the Competitive Bidding Third MO&O/Further Notice, the Commission proposed to redesignate channels 25 and 26, which currently are licensed on a BTA basis, as regional licenses with the same service areas described in Section 24.102 of the Commission's rules.23 The proposed redesignation of channels 25 and 26 was an outgrowth of our concern that designated entities interested in narrowband PCS licenses may desire service areas larger than MTAs and BTAs. In this connection, we recognized that over half of the bidders who participated in the nationwide auction would have qualified for an entrepreneurs' block license if it had been available.25 Thus, we sought comment on whether we should redesignate some or all of the channels licensed on a BTA basis, including the response channels licensed on a BTA basis, to be licensed on an MTA basis, or take other means to achieve larger license areas. We also permitted MTA and BTA service areas to be aggregated up to and including nationwide coverage." In response to the Competitive Bidding Third MO&O/Further Notice,

26

Is Id.

19

See Visitors Auction Guide, Broadband Personal Communications Services, December 5, 1994 at Tab VIII ("Regional Narrowband PCS Auction Summary, October 26, 1994") (Visitors Auction Guide). The regional narrowband auction began on October 26, 1994 and closed on November 8, 1994 after 105 rounds. The nationwide narrowband auction commenced on July 25, 1994 and closed after 47 rounds of bidding over a five day period.

20

21

Competitive Bidding Third Report and Order, 9 FCC Rcd at 2952, 28. See 47 C.F.R. § 24.102.

23 Competitive Bidding Third MO&O/Further Notice, 10 FCC Rcd at 209, ¶ 77; see also 47 C.F.R. § 24.102.

24 Competitive Bidding Third MO&O/Further Notice, 10 FCC Rcd at 228, ¶ 122.

25 Id.

26 Id.

21 Id.

28

the Commission received 14 comments and 4 reply comments. In addition, in response to a Public Notice seeking additional comments on the Commission's narrowband PCS entrepreneurs' block proposals,29 we received eight comments and three reply comments.

IV. REPORT AND ORDER

A. Service Rules

1. Power and Antenna Height Limits

10. Background. In the PCS MO&O we created regional service areas for narrowband PCS.30 Section 24.132 of our rules, which govern power and antenna height limits, currently applies to MTA and BTA service areas and does not mention regional service areas.31

11. Discussion. We clarify that Section 24.132 of our rules applies to the regional service areas as well as MTA service areas. We amend paragraphs (d) and (e) of Section 24.132 to reflect that these rules apply to regional areas. Regional base stations, in addition to MTA base stations, must operate at reduced heights and power limits near service area borders in order to protect adjacent licensees from interference. In addition, we clarify that a narrowband PCS licensee holding a license for the same channel in an adjacent region or MTA is not required to reduce height and power to protect itself.

2. Canadian Interim Sharing Arrangement

12. Background. On September 22, 1994, the United States and Canada entered into an interim sharing arrangement with respect to use of narrowband PCS channels in border areas.3 32 Under the Canadian Interim Sharing Arrangement ("Sharing Arrangement"), MTA and BTA licensees on certain narrowband PCS channels are not permitted to locate base stations within 75 miles of the U.S./Canadian border. These licensees are further prohibited from operating mobile stations in a manner that causes interference to the primary Canadian

28 Appendix C provides the full and abbreviated names of the parties filing comments and reply comments.

29 See Public Notice, "Additional Comment Sought on the Commission's Narrowband PCS Entrepreneur's Block Proposals," DA 94-1560 (rel. Dec. 21, 1994) (Entrepreneur's Block Public Notice).

33

channels. Because the Sharing Arrangement was not yet finalized before the regional narrowband PCS auction bidder package was released on August 22, 1994, the Sharing Arrangement was not included in the bidder package. However, by Public Notice, the Commission announced the Sharing Arrangement five days prior to the commencement of the regional narrowband PCS auction on October 26, 1994.34 Additionally, a Public Notice released December 21, 1994 invited comment on the effect of the Sharing Agreement on narrowband PCS licensing.

35

13. Comments. In response to the December 21 Public Notice, PCSD asserts that the Commission should give relief to affected parties because the Sharing Arrangement adversely affects the value of the affected licenses.36 No other parties commented on this issue.

14. Discussion. We conclude that special relief for parties affected by the Sharing Arrangement is not necessary. Over the next year the Commission will negotiate vigorously with Canada for full coordination and accommodation of narrowband PCS license winners. Moreover, parties were fully aware of the Sharing Arrangement at the time of the regional auction, given that a Public Notice concerning it was released before the regional narrowband auction commenced.37 We believe that the operating restrictions resulting from the Sharing Arrangement are matters that should have been considered by potential bidders in their valuation of the licenses for competitive bidding purposes.

B. Auction Rules

1. Establishment of Entrepreneurs' Block

15. Background. In authorizing the Commission to use competitive bidding under Section 309(j) of the Act, Congress mandated that the Commission "ensure that small businesses, rural telephone companies, and businesses owned by members of minority groups and women are given the opportunity to participate in spectrum-based services."38 Congress also mandated that we utilize competitive bidding to promote economic opportunity and competition and ensure that the new and innovative technologies are readily accessible to the

33 Id.

34 Id.

35 See Entrepreneur's Block Public Notice, supra, n.29.

36 PCSD Comments at 7-9.

37 The regional narrowband auction commenced October 26, 1994, supra, n.19. See also Canadian Interim Sharing Arrangement Public Notice, supra, n.1.

American people." When deciding which provisions to adopt to encourage designated entity participation in particular services, we have closely examined the specific characteristics of the service and have adopted a mix of provisions designed to balance the objectives of Congress set forth in Section 309(j). Thus, we have adopted measures designed to enhance the ability of designated entities to acquire licenses and to increase competition in the provision of wireless services generally. In narrowband PCS, for instance, we have provided installment payments for small businesses and bidding credits for minority-owned and women-owned businesses. In broadband PCS, we designated certain spectrum blocks for entrepreneurs' block licenses and provided bidding credits and installment plans for certain designated entities. In the 900 MHz Specialized Mobile Radio (SMR) service, we provided bidding credits, installment payments, and reduced down payments for small businesses. Most recently, we adopted provision for bidding credits and installment payments for the paging services.40

16. In the Competitive Bidding Third MO&O/Further Notice, the Commission proposed service-specific modifications to our competitive bidding rules for the award of narrowband PCS licenses with MTA and BTA service areas. In an effort to facilitate designated entity participation in providing narrowband PCS, we proposed to reserve both BTA frequency blocks and up to four MTA frequency blocks for bidding exclusively by entities with annual gross revenues of no more than $125 million in the preceding two years and total assets of no more than $500 million ("entrepreneurs' blocks").41 The entrepreneurs' block proposal would have added channels 21 and 25 to the channels allocated for MTA and BTA licenses for which designated entity provisions applied.42 The Commission later sought additional comment on proposals for establishing narrowband PCS entrepreneurs' blocks in light of: (1) the results of the regional narrowband PCS auction; and (2) the Commission's reconsideration of its broadband PCS entrepreneurs' block rules in the Competitive Bidding Fifth Memorandum Opinion and Order.43

17. Comments. AirTouch and PCIA oppose the establishment of an entrepreneurs' block for narrowband PCS. AirTouch argues that the outcome of the nationwide narrowband

40

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, WT Docket No. 96-18, PP Docket No. 93-253, FCC 97-59 (rel. Feb. 24, 1997), ¶¶ 165-187 (Paging Second Report and Order).

41

Competitive Bidding Third MO&O/Further Notice, 10 FCC Rcd at 208, ¶ 74.

See Competitive Bidding Third Report and Order, 9 FCC Rcd at 2970-71, ¶ 72. A 25 percent bidding credit was already available to businesses owned by women and minorities bidding on, inter alia, all MTA licenses on channels 19, 22, and 24 and all BTA licenses on channel 26. See 47 C.F.R. § 24.129.