Commercial Spectrum Enhancement Act and Modernization of the Commission's Competitive Bidding Rules and Procedures, 6992-6999 [06-1290]
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Federal Register / Vol. 71, No. 28 / Friday, February 10, 2006 / Proposed Rules
proposed rule would clarify that bad
debts are not allowable for entities paid
under a reasonable-charge or fee
schedule methodology.
This notice announces an extension of
the timeline for publication of a final
rule responding to comments on the
above proposed rule. Section
1871(a)(3)(B) of the Social Security Act
(the Act) requires us generally to
publish a Medicare final rule no later
than 3 years after the publication date
of the proposed rule. To meet this 3-year
timeframe, the final rule at issue here
would have to be published by February
10, 2006.
Section 1871(a)(3)(B) also provides,
however, that under ‘‘exceptional
circumstances’’ the Secretary may
extend the initial targeted publication
date of a final regulation, if the
Secretary provides public notice of this
extension, including a brief explanation
of the justification for the variation, no
later than the regulation’s previously
established proposed publication date.
This notice extends the timeline
based on the following exceptional
circumstances, which we believe justify
such an extension in this case. On
February 1, 2006, the Congress
completed action on final legislation (S.
1932) that affects the provisions that
would be modified under the proposed
rule at issue here. Section 5004 of this
bill, also known as the Deficit Reduction
Act (DRA), generally provides for a 30
percent reduction in bad debt
reimbursement to Skilled Nursing
Facilities (SNFs), but only with respect
to debt attributable to non-dual
eligibles. Bad debt payment for dual
eligibles would remain at 100 percent.
By contrast, the proposed rule applied
the 30 percent reduction to all providers
other than hospitals, and had no
exception for debt attributable to dualeligibles.
If we were to finalize the SNF bad
debt provisions of the proposed rule at
issue here before the enactment of
section 5004 of the DRA, these
provisions could be superseded by
contrary legislation very shortly after
publication. This would require a new
round of rulemaking to address the
impact of the new legislation. By
extending the deadline for publication
of a final rule, we would hope to avoid
needless and duplicative rulemaking,
and confusion of the public, by
responding to comments on this
proposed rule, and addressing the
effects of section 5004 of the DRA on the
proposed rule, in one rulemaking
document.
In order to allow time for the
President to act on the DRA, and for us
to fully assess the impact of this
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legislation on the provisions in the
proposed rule, we are extending the
timeline for this rulemaking for up to
one year, and intend to publish the final
rule no later than February 10, 2007. As
required under section 1871(a)(3)(D), we
will include a discussion of this
extension in a report to Congress.
Authority: Section 1871 of the Social
Security Act (42 U.S.C. 1395hh).
(Catalog of Federal Domestic Assistance
Program No. 93.774, Medicare—
Supplementary Medical Insurance Program)
Dated: February 3, 2006.
Ann C. Agnew,
Executive Secretary to the Department.
[FR Doc. E6–1821 Filed 2–9–06; 8:45 am]
BILLING CODE 4120–01–P
FEDERAL COMMUNICATIONS
COMMISSION
47 CFR Part 1
[WT Docket No. 05–211; FCC 06–8]
Commercial Spectrum Enhancement
Act and Modernization of the
Commission’s Competitive Bidding
Rules and Procedures
Federal Communications
Commission.
ACTION: Proposed rule.
AGENCY:
SUMMARY: In this Further Notice of
Proposed Rule Making the Commission
considers whether it should modify its
general competitive bidding rules
governing benefits reserved for
designated entities (i.e., small
businesses, rural telephone companies
and businesses owned by women and
minorities). The Commission has
reached a tentative conclusion that it
should modify its part 1 rules to restrict
the award of designated entity benefits
to an otherwise qualified designated
entity where it has a material
relationship with a large in-region
incumbent wireless service provider,’’
and the Commission seeks comment on
how it should define the elements of
such a restriction. The Commission also
seeks comment on whether it should
restrict the award of designated entity
benefits where an otherwise qualified
designated entity has a ‘‘material
relationship’’ with a large entity that has
a significant interest in communications
services.
DATES: Comments due February 24,
2006 and Reply Comments due March 3,
2006. Written comments on the
Paperwork Reduction Act proposed
information collection requirements
must be submitted by the public, Office
of Management and Budget (OMB), and
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other interested parties on or before
April 11, 2006.
ADDRESSES: You may submit comments,
identified by WT Docket No. 05–211;
FCC 06–8 by any of the following
methods:
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions for submitting comments.
• Federal Communications
Commission’s Web Site: https://
www.fcc.gov/cgb/ecfs/. Follow the
instructions for submitting comments.
• People with Disabilities: Contact
the FCC to request reasonable
accommodations (accessible format
documents, sign language interpreters,
CART, etc.) by e-mail: FCC504@fcc.gov
or phone: 202–418–0530 or TTY: 202–
418–0432.
In addition to filing comments with
the Secretary, a copy of any comments
on the Paperwork Reduction Act
information collection requirements
contained herein should be submitted to
Judith B. Herman, Federal
Communications Commission, Room 1–
C804, 445 12th Street, SW., Washington,
DC 20554, or via the Internet to
PRA@fcc.gov, and to Kristy L. LaLonde,
OMB Desk Officer, Room 10234 NEOB,
725 17th Street, NW., Washington, DC
20503, via the Internet to Kristy L.
LaLonde@omb.eop.gov, or via fax at
202–395–5167.
For detailed instructions for
submitting comments and additional
information on the rule making process,
see the SUPPLEMENTARY INFORMATION
section of this document.
FOR FURTHER INFORMATION CONTACT:
Brian Carter or Gary Michaels, Auctions
and Spectrum Access Division, Wireless
Telecommunications Bureau, (202) 418–
0660. For additional information
concerning the Paperwork Reduction
Act information collection requirements
contained in this document, contact
Judith B. Herman at 202–418–0214, or
via the Internet at PRA@fcc.gov.
SUPPLEMENTARY INFORMATION: Pursuant
to §§ 1.415 and 1.419 of the
Commission’s rules, 47 CFR 1.415,
1.419, interested parties may file
comments and reply comments on or
before the dates indicated on the first
page of this document. All filings
related to this Further Notice of
Proposed Rule Making should refer to
WT Docket No. 05–211. Comments may
be filed using: (1) The Commission’s
Electronic Comment Filing System
(ECFS), (2) the Federal Government’s
eRulemaking Portal, or (3) by filing
paper copies. See Electronic Filing of
Documents in Rulemaking Proceedings,
63 FR 24121 (1998). The public may
view a full copy of this document at
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https://hraunfoss.fcc.gov/edocs_public/
attachmatch/FCC–06–8A1.doc.
• Electronic Filers: Comments may be
filed electronically using the Internet by
accessing the ECFS: https://www.fcc.gov/
cgb/ecfs/ or the Federal eRulemaking
Portal: https://www.regulations.gov.
Filers should follow the instructions
provided on the Web site for submitting
comments. Filers should follow the
instructions provided on the Web site
for submitting comments.
• For ECFS filers, in completing the
transmittal screen, filers 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, filers should send an email to ecfs@fcc.gov, and include the
following words in the body of the
message, ‘‘get form.’’ A sample form and
directions will be sent in response.
• Paper Filers: Parties who choose to
file by paper must file an original and
four copies of each filing. 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). All filings must be
addressed to the Commission’s
Secretary, Office of the Secretary,
Federal Communications Commission.
• The Commission’s contractor will
receive hand-delivered or messengerdelivered 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,
Express, and Priority mail should be
addressed to 445 12th Street, SW.,
Washington DC 20554.
• People with Disabilities: Contact
the FCC to request materials in
accessible formats (Braille, large print,
electronic files, audio format, etc.) by email at fcc504@fcc.gov or call the
Consumer and Governmental Affairs
Bureau at (202) 418–0531 (voice), (202)
418–7365 (TTY).
Initial Paperwork Reduction Act of
1995 Analysis
This document contains proposed
new or modified information collection
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requirements. The Commission, as part
of its continuing effort to reduce
paperwork burdens, invites the general
public and the Office of Management
and Budget (‘‘OMB’’) to comment on the
information collection requirements
contained in this document, as required
by the Paperwork Reduction Act of
1995, Public Law 104–13. Public and
agency comments are due April 11,
2006. Comments should address: (a)
Whether the proposed collection of
information is necessary for the proper
performance of the functions of the
Commission, including whether the
information shall have practical utility;
(b) the accuracy of the Commission’s
burden estimates; (c) ways to enhance
the quality, utility, and clarity of the
information collected; and (d) ways to
minimize the burden of the collection of
information on the respondents,
including the use of automated
collection techniques or other forms of
information technology. In addition,
pursuant to the Small Business
Paperwork Relief Act of 2002, Public
Law 107–198, see 44 U.S.C. 3506(c)(4),
the Commission seeks specific comment
on how it might further reduce the
information collection burden for small
business concerns with fewer than 25
employees.
OMB Control Number: 3060–0600.
Title: Application to Participate in an
Auction.
Form No.: FCC Form 175.
Type of Review: Revision of currently
approved collection.
Respondents: Business or other forprofit, not-for-profit institutions and/or
state, local or tribal governments.
Estimated Number of Respondents:
560 (60 respondents for this FNPRM;
500 respondents in a previously
approved submission to OMB).
Estimated Time Per Response: .166
hours–1.5 hours.
Frequency of Response: On occasion
reporting requirement.
Estimated Total Annual Burden: 760
hours (10 hours for this FNPRM
submission and 750 hours for the
previous submission approved by
OMB).
Estimated Total Annual Costs: N/A.
Privacy Act Impact Assessment: N/A.
Needs and Uses: Respondents would
be required to amend their short form
applications on or after the effective
date of the rule changes with a
statement declaring, under penalty of
perjury, that the applicant is qualified as
a designated entity pursuant to § 1.2110
of the Commission’s rules effective as of
the date of the statement. The
information collected will be used by
the Commission to determine if the
applicant is legally, technically, and
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financially qualified to participate in an
FCC auction and eligible for the status
requested. The Commission’s auction
rules and requirements are designed to
ensure that the competitive bidding
process is limited to serious qualified
applicants; to deter possible abuse of the
bidding and licensing process; and to
enhance the use of competitive bidding
to assign Commission licenses in
furtherance of the public interest.
I. Introduction
1. With this Further Notice of
Proposed Rule Making (‘‘FNPRM’’), WT
Docket No. 05–211, FCC 06–8, released
February 3, 2006, the Commission
considers whether it should modify its
general competitive bidding rules (‘‘part
1’’ rules) governing benefits reserved for
designated entities (i.e., small
businesses, rural telephone companies,
and businesses owned by women and
minorities). See 47 CFR 1.2110.
Specifically, the Commission seeks
comment on the elements of a proposal
raised by Council Tree
Communications, Inc. (‘‘Council Tree’’)
that seeks to prohibit the award of
bidding credits or other small business
benefits to entities that have what
Council Tree refers to as a ‘‘material
relationship’’ with a ‘‘large in-region
incumbent wireless service provider.’’
Council Tree maintains that such a
prohibition should apply to ‘‘otherwise
qualified designated entities.’’ In
examining this proposal, the
Commission reaches a tentative
conclusion that it should modify its part
1 rules to restrict the award of
designated entity benefits to an
otherwise qualified designated entity
where it has a ‘‘material relationship’’
with a ‘‘large in-region incumbent
wireless service provider,’’ and the
Commission seeks comment on how it
should define the elements of such a
restriction. Moreover, as discussed
further below, the Commission seeks
comment on whether it should restrict
the award of designated entity benefits
where an otherwise qualified designated
entity has a ‘‘material relationship’’ with
a large entity that has a significant
interest in communications services.
The Commission intends to complete
this proceeding in time so that any
modifications to its rules resulting from
this proceeding will apply to the
upcoming auction of licenses for
Advanced Wireless Services (‘‘AWS’’),
which currently is scheduled to begin
June 29, 2006. In light of its upcoming
auction schedule, the Commission seeks
comment on a proposal to require
designated entity auction applicants to
certify their qualifications subject to the
changed rules by amending any auction
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applications that are pending on the
effective date of any rule changes
adopted in this proceeding.
II. Background
2. In the Commission’s Declaratory
Ruling and Notice of Proposed
Rulemaking, 70 FR 43322 (July 27,
2005), 70 FR 43376 (July 27, 2005) to
implement rules and procedures needed
to comply with the Commercial
Spectrum Enhancement Act (‘‘CSEA’’),
the Commission proposed a number of
changes to its part 1 competitive
bidding rules that were necessary, apart
from CSEA, to bring them in line with
the current requirements of its auctions
program. With this FNPRM, the
Commission considers further updates
to its part 1 competitive bidding rules
and procedures.
3. The questions and tentative
conclusion the Commission poses here
arise out of a proposal made by Council
Tree in an ex parte filing that in part
supplemented its petition for
reconsideration of the Commission’s
order establishing service rules for
Advanced Wireless Services (‘‘AWS’’) in
the 1710–1755 and 2110–2155 MHz
bands. In the AWS–1 Service Rules
Order, 69 FR 5711, February 6, 2004, the
Commission adopted rules designed to
ensure that designated entities are given
the opportunity to participate in an
auction of AWS spectrum. By
establishing a range of geographic
licensing areas including relatively
small areas, such as Metropolitan
Statistical Areas (MSAs) and Rural
Service Areas (RSAs), and a range of
spectrum block sizes, the Commission
believed that it would encourage
participation by smaller and rural
entities. Accordingly, it concluded that
adopting set-asides or eligibility
restrictions would not be necessary. The
Commission also adopted two small
business size standards and associated
bidding credits for small businesses,
concluding that small business size
standards and bidding credit levels that
matched those offered in auctions of
broadband Personal Communications
Service (PCS) licenses were appropriate
because broadband PCS presented
service opportunities, capital
requirements, and entry issues
comparable to those presented by AWS.
4. Council Tree’s petition for
reconsideration of the AWS–1 Service
Rules Order, urged the Commission to
reconsider its position with respect to
set-asides for designated entities or, in
the alternative, to add a third small
business size standard and offer
qualifying entities a 35 percent bidding
credit. Council Tree’s ex parte filing
sought to supplement its petition for
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reconsideration and proposed, among
other things, that the Commission
prohibit the award of bidding credits or
other small business benefits to entities
that would ‘‘otherwise qualify’’ for
eligibility but have what it refers to as
a ‘‘material relationship’’ with a ‘‘large
in-region incumbent wireless service
provider.’’ Council Tree’s proposal also
suggested standards by which it sought
to define both ‘‘material relationship’’
and ‘‘large in-region incumbent wireless
service provider.’’
5. In its Order on Reconsideration, 70
FR 58061, October 5, 2005, the
Commission rejected Council Tree’s
Petition and the ex parte proposals it
made in the AWS proceeding. The
Commission concluded, however, that
Council Tree’s suggestion to restrict the
award of bidding credits or other small
business benefits where an entity
‘‘otherwise qualified’’ for eligibility but
has a ‘‘material relationship’’ with a
‘‘large in-region incumbent wireless
service provider’’ warranted further
study. It is this conclusion that forms
the basis for this FNPRM today. In
examining our current rules, the
Commission tentatively concludes that
it should modify its requirements
regarding designated entity eligibility to
restrict the award of designated entity
benefits to an otherwise qualified
designated entity where it has a
‘‘material relationship’’ with a ‘‘large inregion incumbent wireless service
provider.’’ As noted below, the
Commission seeks comment on the
specific elements of Council Tree’s
proposal. Additionally, the Commission
seeks comment on whether it should
restrict the availability of designated
entity benefits where an otherwise
qualified designated entity has a
‘‘material relationship’’ with a large
entity that has a significant interest in
the provision of communication
services, e.g., voice or data providers,
content providers, equipment
manufacturers, other media interests,
and/or facilities or non-facilities based
communications services providers
(hereinafter collectively referred to as
‘‘entity(ies) with significant interests in
communications services’’).
III. Discussion
6. Since the inception of the auctions
program, the Commission has sought to
facilitate the participation of small
businesses in the competitive bidding
process. In the Competitive Bidding
Second Report and Order, 59 FR 22980,
May 4, 1994, the Commission
established various incentives, such as
bidding credits and spectrum set-asides,
to encourage designated entities to
participate in future auctions and in the
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provision of service. The Commission
also has made substantial efforts to
ensure that only legitimate small
businesses reap the benefits of the
Commission’s designated entity
program. Over the last decade, the
Commission has engaged in numerous
rulemakings and adjudicatory
investigations to prevent companies
from circumventing the objectives of the
designated entity eligibility rules.
7. The Commission intends its small
business provisions to be available only
to bona fide small businesses. In this
FNPRM, the Commission tentatively
concludes that modifications to its
designated entity rules are warranted. In
determining whether additional
safeguards are necessary to ensure that
bidding credits and other benefits are
awarded to the appropriate entities, the
Commission recognizes that it must
strike a delicate balance between
encouraging the participation of small
businesses in the provision of spectrum
based services, and ensuring that those
small businesses who do participate in
competitive bidding have sufficient
capital and flexibility to structure their
businesses to be able to compete at
auction, fulfill their payment
obligations, and ultimately provide
service to the public.
8. In its ex parte filing, Council Tree
proposes that the Commission prohibit
the availability of bidding credits or
other small business benefits where an
‘‘otherwise qualified’’ entity seeking
such eligibility has what Council Tree
refers to as a ‘‘material relationship’’
with a ‘‘large, in-region, incumbent
wireless service provider.’’ Council Tree
asserts that if the Commission does not
limit the availability of bidding credits
and other designated entity benefits in
such instances, spectrum rights will be
concentrated in the hands of large,
incumbent wireless service providers.
Council Tree states that ‘‘following the
consummation of announced mergers,
the top-5 wireless carriers today will
control 89 percent of United States
wireless service subscribers, up from
just 50 percent in 1995.’’ It further
asserts that in Auction 58, the
Commission’s recent broadband PCS
auction, the five largest wireless carriers
won $367 million of licenses, or 18
percent of the auction total. Council
Tree maintains that ‘‘these same carriers
also partnered with designated entities
in Auction 58 to win an additional
$1.03 billion of licenses, representing
another 51 percent of the auction total.’’
Council Tree concludes that the large
carriers structured their relationships
with designated entities as a means to
realize for themselves the benefits and
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opportunities that the Commission had
intended for small businesses.
9. CTIA—The Wireless Association
(‘‘CTIA’’) opposes Council Tree’s ex
parte asserting, among other things, that
Council Tree’s proposed constraint on
relationships between large wireless
carriers and those seeking eligibility for
small business and entrepreneur
provisions is contrary to the
Commission’s goal of providing
legitimate small businesses maximum
flexibility in attracting passive
financing. CTIA further states that such
a limitation on a small business’ ability
to raise capital would undermine the
Commission’s intention of promoting
small business participation in the
highly competitive telecommunications
marketplace.
10. In its continued effort to preserve
for small businesses and entrepreneurs
the benefits reserved for designated
entities, the Commission seeks comment
generally on whether the Commission’s
existing rules should be modified as
suggested by our tentative conclusion
and Council Tree’s proposal to address
any concerns that our designated entity
program may be subject to potential
abuse from larger corporate entities. The
Commission also seeks comment below
on the particular elements of Council
Tree’s proposal. Additionally, the
Commission seeks comment on whether
it should restrict the availability of
designated entity benefits where an
otherwise qualified designated entity
has a ‘‘material relationship’’ with an
‘‘entity with significant interests in
communications services.’’
11. The Commission’s existing part 1
rules include generally applicable
provisions regarding the attribution of
gross revenues of an entity and its
controlling interests and affiliates to
determine whether that entity meets
service-specific eligibility standards for
designated entity benefits, such as
bidding credits. Council Tree proposes
that even where an entity qualifies for
designated entity benefits under the
Commission’s existing rules, such
benefits should not be available to that
entity if it has a ‘‘material relationship’’
with a ‘‘large, in-region, incumbent
wireless provider.’’ The Commission
tentatively concludes that it should
modify its rules to restrict the award of
designated entity benefits where such a
relationship exists. The Commission
seeks comment on Council Tree’s
proposal for defining ‘‘material
relationship’’ and on the two elements
Council Tree proposes to use in defining
a ‘‘large, in-region, incumbent wireless
service provider’’—the geographic
overlap between the incumbent and the
designated entity applicant, as well as
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the incumbent’s wireless gross
revenues. The Commission also seeks
comment on the factual assertions upon
which Council Tree’s proposals are
based and the impact, if any, that the
adoption of the proposed restriction
would have on the ability of small
businesses to provide spectrum-based
services. In addition, the Commission
seeks comment on whether it should
extend any rule modifications it adopts
to restrict the availability of designated
entity benefits where an otherwise
qualified designated entity has a
‘‘material relationship’’ with an ‘‘entity
with significant interests in
communications services.’’
12. Material Relationship. As noted
above, the Commission currently
applies a gross revenues test as its
general standard for measuring the size
of an entity for the purposes of awarding
small business benefits, in part because
such a standard provides ‘‘an accurate,
equitable, and easily ascertainable
measure of business size.’’ Under this
standard, the Commission attributes to
an applicant the gross revenues of its
‘‘controlling interests’’ and its
‘‘affiliates’’ in assessing whether the
applicant is qualified to take advantage
of our small business provisions, such
as bidding credits. A ‘‘controlling
interest’’ includes individuals or
entities, or groups of individuals or
entities, that have control of the
applicant under the principles of either
de jure or de facto control and under a
totality of the circumstances analysis.
Council Tree suggests, however, that the
Commission’s current rules do not
adequately prevent large corporations
from structuring relationships in a
manner that allows them to gain access
to benefits reserved for small
businesses.
13. According to Council Tree, the
Commission should determine that a
‘‘material relationship’’ exists if a ‘‘large,
in-region, incumbent wireless service
provider’’ has provided a material
portion of the total capitalization of the
applicant (i.e., equity plus debt), or has
any material operational arrangement
with the applicant (such as
management, joint marketing,
trademark, or other arrangements) or
other material financial arrangement
relating to the overlap markets. In the
event that there is such a ‘‘material
relationship,’’ Council Tree advocates
that designated entity benefits should be
withheld even if the entity would
otherwise qualify for designated entity
eligibility under our existing rules. As
noted above, the Commission
tentatively concludes that a relationship
between a ‘‘large, in-region incumbent
wireless service provider’’ and an
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otherwise qualified designated entity
applicant should trigger a restriction on
the availability of designated entity
benefits. The Commission therefore
seeks comment on the specific nature of
the relationship that should trigger such
a restriction. Additionally, the
Commission seeks comment on whether
other ‘‘material’’ relationships, such as
those between an otherwise qualified
designated entity and an ‘‘entity with
significant interests in communications
services,’’ should trigger a restriction on
the award of designated entity benefits.
14. With respect to determining what
may constitute a ‘‘material financial’’ or
‘‘material operational’’ relationship, the
Commission also seeks comment on
whether our existing ‘‘controlling
interest standard’’ and affiliation rules
appropriately measure and take into
consideration the existence of those
factors raised by Council Tree. For
instance, Council Tree proposes that the
material operational arrangements that
should trigger any proposed restriction
should include management, joint
marketing, and trademark arrangements.
Insofar as the Commission already
attributes the gross revenues of those
that have management or marketing
agreements with an applicant where
such agreements grant authority over
key aspects of the applicant’s business,
the Commission seeks comment on
whether a different standard should be
used where the relationship in question
is with a ‘‘large, in-region incumbent
wireless service provider’’ or with an
‘‘entity with significant interests in
communications services.’’ If so, how
should that standard differ from the
factors that the Commission currently
considers for determining indicia of
control? If commenters believe that the
Commission’s rules do not already
address these types of arrangements,
they should specify how it should
define these arrangements.
15. The Commission also seeks
comment on whether a prohibition
based on certain relationships, such as
the one proposed by Council Tree,
would be too harsh or limit a designated
entity’s ability to gain access to capital
or industry expertise. The Commission
seeks comment on whether there may be
instances where the existence of either
a ‘‘material financial agreement’’ or a
‘‘material operational agreement,’’ in
and of itself, may be appropriate
between a designated entity and a ‘‘large
incumbent wireless service provider’’ or
an ‘‘entity with significant interests in
communications services,’’ and may not
raise issues of undue control. Should
the Commission allow designated
entities to obtain a bidding credit if they
have only a ‘‘material financial
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agreement’’ or only a ‘‘material
operational agreement’’ with a ‘‘large
incumbent wireless service provider,’’
or an ‘‘entity with significant interests
in communications services,’’ but not
both? What factors should the
Commission consider in determining
whether either type of agreement may
be permissible? Would this approach be
sufficient to address any concerns that
the Commission’s designated entity
program may be subject to potential
abuse from larger corporate entities?
Commenters should address the
appropriate level of financial or
operational participation of a ‘‘large
incumbent wireless service provider’’ or
an ‘‘entity with significant interests in
communications services’’ that should
trigger any proposed prohibition of the
award of designated entity benefits to
entities that are otherwise qualified. As
a general matter, should the definition
of ‘‘material relationship’’ differ if the
Commission adopts its tentative
conclusion or if the Commission
expands the restriction to include
relationships with ‘‘entities with
significant interests in communications
services?’’
16. In its Secondary Markets
proceeding, the Commission concluded
that certain spectrum manager leases
between a designated entity licensee
and a non-designated entity lessee
would cause the spectrum lessee to
become an attributable affiliate of the
licensee, thus rendering the licensee
ineligible for designated entity benefits
and making such a spectrum lease
impermissible. The Commission seeks
comment on what, if any, standard
should be used to determine whether a
spectrum leasing arrangement is a
‘‘material relationship’’ for the purpose
of any additional restriction on the
availability of designated entity benefits
that it might adopt. The Commission
also seeks comment on whether other
arrangements should be taken into
account. If so, what arrangements
should it consider?
17. Wireless Gross Revenues. Council
Tree suggests that ‘‘large, in-region,
incumbent wireless providers’’ should
be defined, in part, as those having what
Council Tree refers to as ‘‘average gross
wireless revenues’’ for the preceding
three years exceeding $5 billion. The
Commission seeks comment on this
proposed benchmark and whether it is
a useful element for consideration if it
adopts its tentative conclusion to
modify the Commission’s part 1 rules to
include additional restrictions on the
availability of designated entity benefits.
Is $5 billion an appropriate level at
which to set the benchmark to define
‘‘large, in-region incumbent wireless
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provider?’’ In contemplating this
proposal, the Commission also seeks
comment on whether it should evaluate
the service provider’s ‘‘gross wireless
revenues’’ as suggested by Council Tree
or instead if it should generally consider
‘‘gross revenues’’ as defined in
§ 1.2110(n) of the Commission’s rules.
Should the Commission consider an
alternative benchmark? What would be
the appropriate benchmark if it extends
the restriction on designated entity
benefits to designated entities that have
material relationships with ‘‘entities
with significant interests in
communications services?’’ Commenters
supporting an alternative benchmark
should provide specific data to support
any such alternative. What standard
should the Commission use to attribute
revenues, wireless or otherwise, to the
incumbent wireless provider or to an
‘‘entity with significant interests in
communications services’’, if any?
Should the Commission use the same
‘‘controlling interest’’ standard and
affiliation rules currently used to
attribute to an applicant the gross
revenues of its investors and affiliates in
determining whether the applicant
qualifies for small business benefits?
18. Significant Geographic Overlap. In
addition to a gross revenues benchmark,
Council Tree proposes that the
Commission define a ‘‘large, in-region,
incumbent wireless service provider’’ as
an entity (including all parties under
common control) that is, or has an
attributable interest in, a CMRS or AWS
licensee whose licensed service area has
significant overlap in the geographic
area to be licensed to the designated
entity applicant. As a general matter, the
Commission seeks comment on whether
geographic overlap should be an
element in establishing any additional
restriction on the availability of
designated entity benefits. Council Tree
proposes that for purposes of
determining significant geographic
overlap in defining an in-region
incumbent wireless service provider,
the Commission should apply the
standard set forth in § 20.6(c) of the
Commission’s rules. Although the
CMRS spectrum aggregation limit sunset
on January 1, 2003, § 20.6 defined
significant overlap of geographic service
areas for the purpose of that limit, and
provides that significant overlap occurs
when there is an overlap of at least 10
percent of the population within the
impacted service areas. The further
seeks comment on whether it should
apply the standard set forth in § 20.6(c)
of the Commission’s rules as proposed
by Council Tree. If so, what factors
should the Commission consider in
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applying this standard to all wireless
services? Should it apply a different, or
any, geographic standard if it extends
the restriction on designated entity
benefits to designated entities that have
material relationships with ‘‘entities
with significant interests in
communications services?’’ If the
Commission determines that a
significant geographic overlap does
exist, how should the Commission
implement such a restriction? Should an
incumbent be allowed to divest its
interest in the subject service area to
allow a designated entity applicant to
maintain eligibility for a bidding credit?
If so, within what time period should
the Commission require the divestiture?
The Commission seeks comment on
whether the application of the standard
set forth in § 20.6(c) of the
Commission’s rules or any other
geographic overlap restriction would
place an undue administrative burden
on the Commission, making it difficult
to monitor an applicant’s compliance
with any adopted geographic overlap
restriction. Should the Commission
consider adopting any other geographic
overlap standards? In addressing these
issues, commenters should state with
specificity what factors the Commission
should consider and what mechanisms
it should adopt to ensure an applicant’s
continued compliance with any
geographic overlap restriction.
19. Entities with Significant Interests
in Communications Services. As noted
above, the Commission seeks comment
on whether we should prohibit the
award of designated entity benefits
where an otherwise qualified designated
entity applicant has a ‘‘material
relationship’’ with an ‘‘entity with
significant interests in communications
services.’’ If the Commission extends
the restriction in this manner, should
the Commission define ‘‘entities with
significant interests in communications
services’’ to include a broad category of
businesses such as voice or data
providers, content providers, equipment
manufacturers, other media interests,
and/or facilities or non-facilities based
communications services providers?
The Commission seeks comment on
whether all of these entities should be
included as part of its definition of
‘‘entities with significant interests in
communications services.’’ Should the
Commission consider excluding some of
these entities from its proposed
definition? If so, which entities should
the Commission exclude and why? Are
there additional entities that it should
consider including as part of its
proposed definition? If so, which
entities should the Commission include,
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Federal Register / Vol. 71, No. 28 / Friday, February 10, 2006 / Proposed Rules
and why? Moreover, the Commission
seeks comment on how it should
specifically define ‘‘significant interests
in communications services?’’ Does the
Commission’s consideration of the
category ‘‘communications services’’
provide additional safeguards to ensure
the award of its designated entity
benefits only to legitimate small
businesses or does it create too many
obstacles for designated entities to
obtain access to capital?
20. Unjust Enrichment. The
Commission’s existing rules require the
payment of unjust enrichment when an
entity that acquires its license with
small business benefits loses its
eligibility for such benefits or transfers
a license to another entity that is not
eligible for the same level of benefits.
Council Tree suggests that the
Commission should also impose a
reimbursement obligation on a licensee
that, in the first five years of its license
term, acquires a license with a bidding
credit and subsequently makes a change
in its ‘‘material relationships’’ or seeks
to assign or transfer control of the
license to an entity that would result in
its loss of eligibility for the bidding
credit pursuant to any eligibility
restriction that the Commission adopt.
Council Tree asserts that such a
requirement is necessary to fulfill the
Commission’s statutory obligation to
prevent unjust enrichment and to
ensure that the new eligibility
requirement for bidding credits has the
intended effect of helping eligible small
businesses to acquire spectrum licenses.
Council Tree also proposes, however,
that an unjust enrichment payment
should not be required in the case of
‘‘natural growth’’ of the revenues
attributed to an incumbent carrier above
the established benchmark. Instead, it
suggests that the reimbursement
obligation should apply only where the
licensee takes on new investment, or
enters into any operational agreement,
that would have disqualified the
licensee for the bidding credit at the
time of the licensee’s initial application.
The Commission seeks comment on
whether, if it adopts a new restriction
on the award of bidding credits to
designated entities, the Commission
should adopt revisions to its unjust
enrichment rules such as those
proposed by Council Tree, or in some
other manner. Should any
reimbursement obligation the
Commission adopts apply where the
licensee takes on new investment, or
also where it enters into any new
‘‘material financial relationship’’ or
‘‘material operational relationship’’ that
would have rendered the licensee
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ineligible for a bidding credit? If the
Commission requires reimbursement by
licensees that, either through a change
of ‘‘material relationships’’ or
assignment or transfer of control of the
license, lose their eligibility for a
bidding credit pursuant to any
eligibility restriction that it might adopt,
over what portion of the license term
should such unjust enrichment
provisions apply?
21. Pending Auction Provisions. As
stated at the outset, the Commission
intends any changes adopted in this
proceeding to apply to AWS licenses
currently scheduled to be offered in an
auction beginning June 29, 2006. In light
of the current auction schedule, any
changes that the Commission adopts in
this proceeding may become effective
after the deadline for filing applications
to participate in that auction. Under
Commission rules, applicants asserting
designated entity status in a
Commission auction are required to
declare, under penalty of perjury, that
they are qualified as a designated entity
under § 1.2110 of the Commission’s
rules. In the event that any designated
entity applicants have filed an
application to participate in an auction
prior to the effective date of any
designated entity rule changes adopted
in this proceeding, the Commission
proposes to require such applicants to
amend their applications on or after the
effective date of the rule changes with
a statement declaring, under penalty of
perjury, that the applicant is qualified as
a designated entity pursuant to § 1.2110
of the Commission’s rules effective as of
the date of the statement. In the event
applicants fail to file such a statement
pursuant to procedures announced by
public notice, they will be ineligible to
qualify as a designated entity, e.g.,
receive small business bidding credits,
either generally or with respect to
specific licenses. The Commission seeks
comment on this proposal.
IV. Conclusion
22. For the reasons stated above, the
Commission seeks comment on its
competitive bidding rules, on the
elements of the specific proposal raised
by Council Tree, and on its tentative
conclusion to modify its part 1 rules to
prohibit the award of designated entity
benefits where an otherwise qualified
designated entity has a ‘‘material
relationship’’ with a ‘‘large, in-region
wireless service provider.’’
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6997
V. Procedural Matters
A. Ex Parte Rules—Permit-But-Disclose
Proceeding
23. For purposes of this permit-butdisclose notice and comment
proceeding, members of the public are
advised that ex parte presentations are
permitted, except during the sunshine
Agenda period, provided that the
presentations are disclosed pursuant to
the Commission’s rules.
B. Initial Regulatory Flexibility Analysis
24. As required by the Regulatory
Flexibility Act, see 5 U.S.C. 603, the
Commission has prepared an Initial
Regulatory Flexibility Analysis (IRFA)
of the possible significant economic
impact on small entities of the proposals
suggested in this Further Notice of
Proposed Rulemaking. Written public
comments are requested on the IRFA.
These comments must be filed in
accordance with the same filing
deadlines as comments filed in response
to this FNPRM, and must have a
separate and distinct heading
designating them as responses to the
IRFA. The Commission will send a copy
of this FNPRM, including this IRFA, to
the Chief Counsel for Advocacy of the
Small Business Administration (SBA).
In addition, this FNPRM and the IRFA
(or summaries thereof) will be
published in the Federal Register.
i. Need for, and Objectives of, the
Proposed Rules
25. This FNPRM tentatively concludes
that the Commission should modify its
general competitive bidding rules
governing benefits reserved for
designated entities (i.e., small
businesses, rural telephone companies,
and businesses owned by women and
minorities). Specifically, the
Commission seeks comment on the
specific elements of a proposal raised by
Council Tree Communications, Inc.
(‘‘Council Tree’’) that seeks to prohibit
the award of bidding credits or other
small business benefits to entities that
have what Council Tree refers to as a
‘‘material relationship’’ with a ‘‘large inregion incumbent wireless service
provider.’’ Additionally, the
Commission seeks comment on whether
there are other entities that might have
a significant interest in the provision of
communication services, e.g., voice or
data providers, content providers,
equipment manufacturers, other media
interests, and/or facilities or nonfacilities based communications
services providers (hereinafter
collectively referred to as ‘‘entity(ies)
with significant interests in
communications services,’’) whose
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relationship with an otherwise qualified
designated entity applicant should
trigger a restriction on the availability of
designated entity benefits.
26. Over the last decade, the
Commission has engaged in numerous
rulemakings and adjudicatory
investigations to prevent companies
from circumventing the objectives of the
designated entity eligibility rules. To
that end, in determining whether to
award designated entity benefits, the
Commission adopted a strict eligibility
standard that focused on whether the
applicant maintained control of the
corporate entity. The Commission’s
objective in employing such a standard
was ‘‘to deter the establishment of sham
companies in a manner that permits
easy resolution of eligibility issues
without the delay of administrative
hearings.’’ The Commission intends its
small business provisions to be
available only to bona fide small
businesses.
27. By this FNPRM, the Commission
tentatively concludes that modifications
to its designated entity rules are
warranted. In determining what
additional safeguards are necessary to
ensure that bidding credits and other
benefits are awarded to the appropriate
entities, the Commission recognizes that
it must strike a delicate balance between
encouraging the participation of small
businesses in the provision of spectrum
based services, and ensuring that those
small businesses who do participate in
competitive bidding, have sufficient
capital to be able to compete at auction,
fulfill their payment obligations, and
ultimately provide service to the public.
In its continued effort to reserve for
small businesses and entrepreneurs the
designated entity benefits that the
Commission offers, this FNPRM seeks
comment on the elements of Council
Tree’s proposal and the Commission’s
tentative conclusion that its existing
rules should be modified.
hsrobinson on PROD1PC70 with PROPOSALS
ii. Legal Basis
28. The proposed actions are
authorized under sections 4(i), 303(r),
and 309(j) of the Communications Act of
1934, as amended, 47 U.S.C. 154(i),
303(r), and 309(j).
iii. Description and Estimate of the
Number of Small Entities to Which the
Proposed Rules Will Apply
29. The RFA directs agencies to
provide a description of and, where
feasible, an estimate of the number of
small entities that may be affected by
the proposed rules, if adopted. The RFA
generally defines the term ‘‘small
entity’’ as having the same meaning as
the terms ‘‘small organization,’’ ‘‘small
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13:32 Feb 09, 2006
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business,’’ and ‘‘small governmental
jurisdiction.’’ The term ‘‘small
business’’ has the same meaning as the
term ‘‘small business concern’’ under
the Small Business Act. A small
business concern is one which: (a) Is
independently owned and operated; (b)
is not dominant in its field of operation;
and (c) satisfies any additional criteria
established by the SBA.
30. A small organization is generally
‘‘any not-for-profit enterprise which is
independently owned and operated and
is not dominant in its field.’’
Nationwide, as of 2002, there were
approximately 1.6 million small
organizations. The term ‘‘small
governmental jurisdiction’’ is defined as
‘‘governments of cities, towns,
townships, villages, school districts, or
special districts, with a population of
less than fifty thousand.’’ As of 1997,
there were approximately 87,453
governmental jurisdictions in the
United States. This number includes
39,044 county governments,
municipalities, and townships, of which
37,546 (approximately 96.2%) have
populations of fewer than 50,000, and of
which 1,498 have populations of 50,000
or more. Thus, the Commission
estimates the number of small
governmental jurisdictions overall to be
84,098 or fewer. Nationwide, there are
a total of approximately 22.4 million
small businesses, according to SBA
data.
31. Any proposed changes or
additions to the Commission’s part 1
rules that may be made as a result of
this FNPRM would be of general
applicability to all services, applying to
all entities of any size that apply to
participate in Commission auctions.
Accordingly, this IRFA provides a
general analysis of the impact of the
proposals on small businesses rather
than a service by service analysis. The
number of entities that may apply to
participate in future Commission
auctions is unknown. The number of
small businesses that have participated
in prior auctions has varied. In all of the
Commission’s auctions held to date,
1,973 out of a total of 3,303 qualified
bidders either have claimed eligibility
for small business bidding credits or
have self-reported their status as small
businesses as that term has been defined
under rules adopted by the Commission
for specific services. In addition, the
Commission notes that, as a general
matter, the number of winning bidders
that qualify as small businesses at the
close of an auction does not necessarily
represent the number of small
businesses currently in service. Also,
the Commission does not generally track
subsequent business size unless, in the
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context of assignments or transfers,
unjust enrichment issues are implicated.
iv. Description of Projected Reporting,
Recordkeeping, and Other Compliance
Requirements
32. In the event that the Commission
changes its designated entity rules in
this proceeding, designated entity
applicants that have filed applications
to participate in an auction before the
effective date of any changes may be
required to amend their applications on
or after the effective date of the rule
changes with a statement declaring,
under penalty of perjury, that the
applicant is qualified as a designated
entity pursuant to the Commission’s
rules effective as of the date of the
statement.
v. Steps Taken To Minimize Significant
Economic Impact on Small Entities, and
Significant Alternatives Considered
33. 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): (a) The establishment of
differing compliance or reporting
requirements or timetables that take into
account the resources available to small
entities; (b) the clarification,
consolidation, or simplification of
compliance or reporting requirements
under the rule for small entities; (c) the
use of performance, rather than design,
standards; and (d) an exemption from
coverage of the rule or any part thereof
for small entities.
34. This FNPRM tentatively concludes
that the Commission should modify its
general competitive bidding rules
regarding designated entity eligibility.
The Commission seeks comment on the
specific elements described in a
proposal raised by Council Tree
Communications, Inc., which seeks to
prohibit the award of bidding credits or
other small business benefits to entities
that have what Council Tree refers to as
a ‘‘material relationship’’ with a ‘‘large
in-region incumbent wireless service
provider.’’ The Commission also seeks
comment on whether such a restriction
should apply to ‘‘entities with
significant interests in communications
services.’’ The Commission seeks
guidance from the industry on how it
should define the elements of any
restrictions it might adopt regarding the
award of designated entity benefits.
Small entity comments are specifically
requested.
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vi. Federal Rules That May Duplicate,
Overlap, or Conflict With the Proposed
Rule
35. None.
C. Ordering Clauses
36. Accordingly, it is ordered that,
pursuant to sections 4(i), 303(r), and
309(j) of the Communications Act of
1934, as amended, 47 U.S.C. 154(i),
303(r), and 309(j), this Further Notice of
Proposed Rule Making is hereby
adopted.
37. It is further ordered that the
Commission’s Consumer and
Governmental Affairs Bureau, Reference
Information Center, shall send a copy of
this Further Notice of Proposed Rule
Making, including the Initial Regulatory
Flexibility Analysis, to the Chief
Counsel for Advocacy of the Small
Business Administration.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 06–1290 Filed 2–9–06; 8:45 am]
BILLING CODE 6712–01–P
DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric
Administration
50 CFR Part 226
[I.D. 101405C]
RIN 0648–AT84
Endangered and Threatened Species;
Revision of Critical Habitat for the
Northern Right Whale in the Pacific
Ocean
National Marine Fisheries
Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA),
Commerce.
ACTION: Proposed rule, reopening of
public comment period.
hsrobinson on PROD1PC70 with PROPOSALS
AGENCY:
SUMMARY: On November 2, 2005, NMFS
published a proposed rule to revise
current critical habitat (CH) under the
Endangered Species Act of 1973 (ESA)
for the northern right whale (Eubalaena
glacialis) by designating areas within
the North Pacific Ocean. Two areas are
proposed for designation: an area in the
southeast Bering Sea and a second area
in the Gulf of Alaska south of Kodiak
Island. In response to a request, a public
hearing on this proposed rule will be
held on March 2, 2006, in Anchorage,
AK.
The hearing will be held in
Anchorage, AK on Thursday, March 2,
2006, from 3 p.m. to 5 p.m. The public
DATES:
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13:32 Feb 09, 2006
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comment period on the proposed rule
(70 FR 66332) will reopen on February
10, 2006 so that additional comments
submitted at, or in response to the
hearing may be considered in the
promulgation of the final rule. Any
additional comments on this proposed
rule must be received on or before
March 9, 2006.
The hearing will be in room
154 of the U.S. Federal Office Building,
222 W. 7th Avenue, Anchorage, AK.
Send comments to Kaja Brix, Assistant
Regional Administrator, Protected
Resources Division, AK Region, NMFS,
Attn: Ellen Walsh. Comments may be
submitted by:
• E-mail: 0648–AT84–
NPRWCH@noaa.gov. Include in the
subject line the following document
identifier: Right Whale Critical Habitat
PR. E-mail comments, with or without
attachments, are limited to 5 megabytes.
• Webform at the Federal
eRulemaking Portal: https://
www.regulations.gov. Follow the
instructions at that site for submitting
comments.
• Mail: P. O Box 21668, Juneau, AK
99802
• Hand delivery to the Federal
Building : 709 W. 9th Street, Juneau, AK
.
• Fax: (907) 586–7012
The proposed rule, maps, stock
assessments, and other materials
relating to this proposal can be found on
the NMFS Alaska Region website https://
www.fakr.noaa.gov/.
ADDRESSES:
FOR FURTHER INFORMATION CONTACT:
Brad
Smith, (907) 271–3023, e-mail:
Brad.Smith@NOAA.gov or Marta
Nammack, (301) 713–1401.
SUPPLEMENTARY INFORMATION:
Regulations governing petitions to
revise critical habitat under the ESA
provide that a public hearing shall be
held if any person so requests within 45
days of publication of a proposed
regulation (50 CFR 424.16(c)(3)). Notice
of such hearing is to be published in the
Federal Register no later than 15 days
prior to the hearing.
Comments and Responses
The November 2 proposed rule
concerning designation of critical
habitat established a comment period
ending on January 3, 2006. Twenty-one
comments were received on the
proposed rule. These comments are
summarized below. Responses to these
and to comments received during the
public hearing will appear in the final
rule on this action.
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6999
Size of Proposed Critical Habitat is Too
Large
Comment: The southern and western
boundaries of the proposed critical
habitat in the Bering Sea are based on
very few right whale sightings.
Eliminating these areas would reduce
the extent of the critical habitat from
27,700 to 24,000 square miles but retain
approximately 99 percent of all
sightings.
Comment: The area designated as CH
is arbitrary because there is no obvious
correlation between copepod abundance
and the distribution of the northern
right whale.
Proposed Critical Habitat is Too Small
Comment: The proposed designations
fail to address unoccupied right whale
habitat. Additional areas outside of the
known range of the northern right whale
at the time of ESA listing should be
included in this designation.
Comment: The extent of the areas
proposed for designation as critical
habitat in the North Pacific Ocean
would not be sufficient to provide for
the recovery of the northern right whale.
Comment: The proposed designation
is negatively biased in that it is based on
sighting effort which is not consistent
over the range of the northern right
whale. Therefore, the designation
should be expanded to compensate for
this bias. Both right whales and their
Primary Constituent Elements (PCE’s)
are likely to occur elsewhere in
densities equivalent to those occurring
in the designated critical habitats.
Comment: The proposed designation
should be expanded to recognize the
probability of increased importance of
adjacent areas, and to be consistent with
similar efforts to designate CH for the
northern right whale in the North
Atlantic Ocean.
Comment: The precautionary
principle requires NMFS to designate
other areas with similar habitat
conditions as CH.
Comment: The designation should
include State of Alaska waters because
they have nearly identical features to
the proposed CH areas.
Comment: NMFS should consider
designation of adjacent areas to preserve
diversity and act as buffer areas.
Comment: NMFS should include in
its designation historical right whale
habitat which was essential to their
conservation.
Comment: NMFS data demonstrate
right whales are found through Unimak
Pass and eastward to Kodiak Island.
These waters also contain important
features or serve important biological
needs and should be added to the areas
proposed for designation.
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]]>Agencies
[Federal Register Volume 71, Number 28 (Friday, February 10, 2006)]
[Proposed Rules]
[Pages 6992-6999]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 06-1290]
=======================================================================
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 1
[WT Docket No. 05-211; FCC 06-8]
Commercial Spectrum Enhancement Act and Modernization of the
Commission's Competitive Bidding Rules and Procedures
AGENCY: Federal Communications Commission.
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: In this Further Notice of Proposed Rule Making the Commission
considers whether it should modify its general competitive bidding
rules governing benefits reserved for designated entities (i.e., small
businesses, rural telephone companies and businesses owned by women and
minorities). The Commission has reached a tentative conclusion that it
should modify its part 1 rules to restrict the award of designated
entity benefits to an otherwise qualified designated entity where it
has a material relationship with a large in-region incumbent wireless
service provider,'' and the Commission seeks comment on how it should
define the elements of such a restriction. The Commission also seeks
comment on whether it should restrict the award of designated entity
benefits where an otherwise qualified designated entity has a
``material relationship'' with a large entity that has a significant
interest in communications services.
DATES: Comments due February 24, 2006 and Reply Comments due March 3,
2006. Written comments on the Paperwork Reduction Act proposed
information collection requirements must be submitted by the public,
Office of Management and Budget (OMB), and other interested parties on
or before April 11, 2006.
ADDRESSES: You may submit comments, identified by WT Docket No. 05-211;
FCC 06-8 by any of the following methods:
Federal eRulemaking Portal: https://www.regulations.gov.
Follow the instructions for submitting comments.
Federal Communications Commission's Web Site: https://
www.fcc.gov/cgb/ecfs/. Follow the instructions for submitting comments.
People with Disabilities: Contact the FCC to request
reasonable accommodations (accessible format documents, sign language
interpreters, CART, etc.) by e-mail: FCC504@fcc.gov or phone: 202-418-
0530 or TTY: 202-418-0432.
In addition to filing comments with the Secretary, a copy of any
comments on the Paperwork Reduction Act information collection
requirements contained herein should be submitted to Judith B. Herman,
Federal Communications Commission, Room 1-C804, 445 12th Street, SW.,
Washington, DC 20554, or via the Internet to PRA@fcc.gov, and to Kristy
L. LaLonde, OMB Desk Officer, Room 10234 NEOB, 725 17th Street, NW.,
Washington, DC 20503, via the Internet to Kristy L.
LaLonde@omb.eop.gov, or via fax at 202-395-5167.
For detailed instructions for submitting comments and additional
information on the rule making process, see the SUPPLEMENTARY
INFORMATION section of this document.
FOR FURTHER INFORMATION CONTACT: Brian Carter or Gary Michaels,
Auctions and Spectrum Access Division, Wireless Telecommunications
Bureau, (202) 418-0660. For additional information concerning the
Paperwork Reduction Act information collection requirements contained
in this document, contact Judith B. Herman at 202-418-0214, or via the
Internet at PRA@fcc.gov.
SUPPLEMENTARY INFORMATION: 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 and reply comments on or before the dates indicated on
the first page of this document. All filings related to this Further
Notice of Proposed Rule Making should refer to WT Docket No. 05-211.
Comments may be filed using: (1) The Commission's Electronic Comment
Filing System (ECFS), (2) the Federal Government's eRulemaking Portal,
or (3) by filing paper copies. See Electronic Filing of Documents in
Rulemaking Proceedings, 63 FR 24121 (1998). The public may view a full
copy of this document at
[[Page 6993]]
https://hraunfoss.fcc.gov/edocs_public/attachmatch/FCC-06-8A1.doc.
Electronic Filers: Comments may be filed electronically
using the Internet by accessing the ECFS: https://www.fcc.gov/cgb/ecfs/ or the Federal eRulemaking Portal: https://www.regulations.gov. Filers
should follow the instructions provided on the Web site for submitting
comments. Filers should follow the instructions provided on the Web
site for submitting comments.
For ECFS filers, in completing the transmittal screen,
filers 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, filers should send an e-mail to ecfs@fcc.gov, and include
the following words in the body of the message, ``get form.'' A sample
form and directions will be sent in response.
Paper Filers: Parties who choose to file by paper must
file an original and four copies of each filing. 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). All
filings must be addressed to the Commission's Secretary, Office of the
Secretary, Federal Communications Commission.
The Commission's contractor 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, Express, and Priority
mail should be addressed to 445 12th Street, SW., Washington DC 20554.
People with Disabilities: Contact the FCC to request
materials in accessible formats (Braille, large print, electronic
files, audio format, etc.) by e-mail at fcc504@fcc.gov or call the
Consumer and Governmental Affairs Bureau at (202) 418-0531 (voice),
(202) 418-7365 (TTY).
Initial Paperwork Reduction Act of 1995 Analysis
This document contains proposed new or modified information
collection requirements. The Commission, as part of its continuing
effort to reduce paperwork burdens, invites the general public and the
Office of Management and Budget (``OMB'') to comment on the information
collection requirements contained in this document, as required by the
Paperwork Reduction Act of 1995, Public Law 104-13. Public and agency
comments are due April 11, 2006. Comments should address: (a) Whether
the proposed collection of information is necessary for the proper
performance of the functions of the Commission, including whether the
information shall have practical utility; (b) the accuracy of the
Commission's burden estimates; (c) ways to enhance the quality,
utility, and clarity of the information collected; and (d) ways to
minimize the burden of the collection of information on the
respondents, including the use of automated collection techniques or
other forms of information technology. In addition, pursuant to the
Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44
U.S.C. 3506(c)(4), the Commission seeks specific comment on how it
might further reduce the information collection burden for small
business concerns with fewer than 25 employees.
OMB Control Number: 3060-0600.
Title: Application to Participate in an Auction.
Form No.: FCC Form 175.
Type of Review: Revision of currently approved collection.
Respondents: Business or other for-profit, not-for-profit
institutions and/or state, local or tribal governments.
Estimated Number of Respondents: 560 (60 respondents for this
FNPRM; 500 respondents in a previously approved submission to OMB).
Estimated Time Per Response: .166 hours-1.5 hours.
Frequency of Response: On occasion reporting requirement.
Estimated Total Annual Burden: 760 hours (10 hours for this FNPRM
submission and 750 hours for the previous submission approved by OMB).
Estimated Total Annual Costs: N/A.
Privacy Act Impact Assessment: N/A.
Needs and Uses: Respondents would be required to amend their short
form applications on or after the effective date of the rule changes
with a statement declaring, under penalty of perjury, that the
applicant is qualified as a designated entity pursuant to Sec. 1.2110
of the Commission's rules effective as of the date of the statement.
The information collected will be used by the Commission to determine
if the applicant is legally, technically, and financially qualified to
participate in an FCC auction and eligible for the status requested.
The Commission's auction rules and requirements are designed to ensure
that the competitive bidding process is limited to serious qualified
applicants; to deter possible abuse of the bidding and licensing
process; and to enhance the use of competitive bidding to assign
Commission licenses in furtherance of the public interest.
I. Introduction
1. With this Further Notice of Proposed Rule Making (``FNPRM''), WT
Docket No. 05-211, FCC 06-8, released February 3, 2006, the Commission
considers whether it should modify its general competitive bidding
rules (``part 1'' rules) governing benefits reserved for designated
entities (i.e., small businesses, rural telephone companies, and
businesses owned by women and minorities). See 47 CFR 1.2110.
Specifically, the Commission seeks comment on the elements of a
proposal raised by Council Tree Communications, Inc. (``Council Tree'')
that seeks to prohibit the award of bidding credits or other small
business benefits to entities that have what Council Tree refers to as
a ``material relationship'' with a ``large in-region incumbent wireless
service provider.'' Council Tree maintains that such a prohibition
should apply to ``otherwise qualified designated entities.'' In
examining this proposal, the Commission reaches a tentative conclusion
that it should modify its part 1 rules to restrict the award of
designated entity benefits to an otherwise qualified designated entity
where it has a ``material relationship'' with a ``large in-region
incumbent wireless service provider,'' and the Commission seeks comment
on how it should define the elements of such a restriction. Moreover,
as discussed further below, the Commission seeks comment on whether it
should restrict the award of designated entity benefits where an
otherwise qualified designated entity has a ``material relationship''
with a large entity that has a significant interest in communications
services. The Commission intends to complete this proceeding in time so
that any modifications to its rules resulting from this proceeding will
apply to the upcoming auction of licenses for Advanced Wireless
Services (``AWS''), which currently is scheduled to begin June 29,
2006. In light of its upcoming auction schedule, the Commission seeks
comment on a proposal to require designated entity auction applicants
to certify their qualifications subject to the changed rules by
amending any auction
[[Page 6994]]
applications that are pending on the effective date of any rule changes
adopted in this proceeding.
II. Background
2. In the Commission's Declaratory Ruling and Notice of Proposed
Rulemaking, 70 FR 43322 (July 27, 2005), 70 FR 43376 (July 27, 2005) to
implement rules and procedures needed to comply with the Commercial
Spectrum Enhancement Act (``CSEA''), the Commission proposed a number
of changes to its part 1 competitive bidding rules that were necessary,
apart from CSEA, to bring them in line with the current requirements of
its auctions program. With this FNPRM, the Commission considers further
updates to its part 1 competitive bidding rules and procedures.
3. The questions and tentative conclusion the Commission poses here
arise out of a proposal made by Council Tree in an ex parte filing that
in part supplemented its petition for reconsideration of the
Commission's order establishing service rules for Advanced Wireless
Services (``AWS'') in the 1710-1755 and 2110-2155 MHz bands. In the
AWS-1 Service Rules Order, 69 FR 5711, February 6, 2004, the Commission
adopted rules designed to ensure that designated entities are given the
opportunity to participate in an auction of AWS spectrum. By
establishing a range of geographic licensing areas including relatively
small areas, such as Metropolitan Statistical Areas (MSAs) and Rural
Service Areas (RSAs), and a range of spectrum block sizes, the
Commission believed that it would encourage participation by smaller
and rural entities. Accordingly, it concluded that adopting set-asides
or eligibility restrictions would not be necessary. The Commission also
adopted two small business size standards and associated bidding
credits for small businesses, concluding that small business size
standards and bidding credit levels that matched those offered in
auctions of broadband Personal Communications Service (PCS) licenses
were appropriate because broadband PCS presented service opportunities,
capital requirements, and entry issues comparable to those presented by
AWS.
4. Council Tree's petition for reconsideration of the AWS-1 Service
Rules Order, urged the Commission to reconsider its position with
respect to set-asides for designated entities or, in the alternative,
to add a third small business size standard and offer qualifying
entities a 35 percent bidding credit. Council Tree's ex parte filing
sought to supplement its petition for reconsideration and proposed,
among other things, that the Commission prohibit the award of bidding
credits or other small business benefits to entities that would
``otherwise qualify'' for eligibility but have what it refers to as a
``material relationship'' with a ``large in-region incumbent wireless
service provider.'' Council Tree's proposal also suggested standards by
which it sought to define both ``material relationship'' and ``large
in-region incumbent wireless service provider.''
5. In its Order on Reconsideration, 70 FR 58061, October 5, 2005,
the Commission rejected Council Tree's Petition and the ex parte
proposals it made in the AWS proceeding. The Commission concluded,
however, that Council Tree's suggestion to restrict the award of
bidding credits or other small business benefits where an entity
``otherwise qualified'' for eligibility but has a ``material
relationship'' with a ``large in-region incumbent wireless service
provider'' warranted further study. It is this conclusion that forms
the basis for this FNPRM today. In examining our current rules, the
Commission tentatively concludes that it should modify its requirements
regarding designated entity eligibility to restrict the award of
designated entity benefits to an otherwise qualified designated entity
where it has a ``material relationship'' with a ``large in-region
incumbent wireless service provider.'' As noted below, the Commission
seeks comment on the specific elements of Council Tree's proposal.
Additionally, the Commission seeks comment on whether it should
restrict the availability of designated entity benefits where an
otherwise qualified designated entity has a ``material relationship''
with a large entity that has a significant interest in the provision of
communication services, e.g., voice or data providers, content
providers, equipment manufacturers, other media interests, and/or
facilities or non-facilities based communications services providers
(hereinafter collectively referred to as ``entity(ies) with significant
interests in communications services'').
III. Discussion
6. Since the inception of the auctions program, the Commission has
sought to facilitate the participation of small businesses in the
competitive bidding process. In the Competitive Bidding Second Report
and Order, 59 FR 22980, May 4, 1994, the Commission established various
incentives, such as bidding credits and spectrum set-asides, to
encourage designated entities to participate in future auctions and in
the provision of service. The Commission also has made substantial
efforts to ensure that only legitimate small businesses reap the
benefits of the Commission's designated entity program. Over the last
decade, the Commission has engaged in numerous rulemakings and
adjudicatory investigations to prevent companies from circumventing the
objectives of the designated entity eligibility rules.
7. The Commission intends its small business provisions to be
available only to bona fide small businesses. In this FNPRM, the
Commission tentatively concludes that modifications to its designated
entity rules are warranted. In determining whether additional
safeguards are necessary to ensure that bidding credits and other
benefits are awarded to the appropriate entities, the Commission
recognizes that it must strike a delicate balance between encouraging
the participation of small businesses in the provision of spectrum
based services, and ensuring that those small businesses who do
participate in competitive bidding have sufficient capital and
flexibility to structure their businesses to be able to compete at
auction, fulfill their payment obligations, and ultimately provide
service to the public.
8. In its ex parte filing, Council Tree proposes that the
Commission prohibit the availability of bidding credits or other small
business benefits where an ``otherwise qualified'' entity seeking such
eligibility has what Council Tree refers to as a ``material
relationship'' with a ``large, in-region, incumbent wireless service
provider.'' Council Tree asserts that if the Commission does not limit
the availability of bidding credits and other designated entity
benefits in such instances, spectrum rights will be concentrated in the
hands of large, incumbent wireless service providers. Council Tree
states that ``following the consummation of announced mergers, the top-
5 wireless carriers today will control 89 percent of United States
wireless service subscribers, up from just 50 percent in 1995.'' It
further asserts that in Auction 58, the Commission's recent broadband
PCS auction, the five largest wireless carriers won $367 million of
licenses, or 18 percent of the auction total. Council Tree maintains
that ``these same carriers also partnered with designated entities in
Auction 58 to win an additional $1.03 billion of licenses, representing
another 51 percent of the auction total.'' Council Tree concludes that
the large carriers structured their relationships with designated
entities as a means to realize for themselves the benefits and
[[Page 6995]]
opportunities that the Commission had intended for small businesses.
9. CTIA--The Wireless Association (``CTIA'') opposes Council Tree's
ex parte asserting, among other things, that Council Tree's proposed
constraint on relationships between large wireless carriers and those
seeking eligibility for small business and entrepreneur provisions is
contrary to the Commission's goal of providing legitimate small
businesses maximum flexibility in attracting passive financing. CTIA
further states that such a limitation on a small business' ability to
raise capital would undermine the Commission's intention of promoting
small business participation in the highly competitive
telecommunications marketplace.
10. In its continued effort to preserve for small businesses and
entrepreneurs the benefits reserved for designated entities, the
Commission seeks comment generally on whether the Commission's existing
rules should be modified as suggested by our tentative conclusion and
Council Tree's proposal to address any concerns that our designated
entity program may be subject to potential abuse from larger corporate
entities. The Commission also seeks comment below on the particular
elements of Council Tree's proposal. Additionally, the Commission seeks
comment on whether it should restrict the availability of designated
entity benefits where an otherwise qualified designated entity has a
``material relationship'' with an ``entity with significant interests
in communications services.''
11. The Commission's existing part 1 rules include generally
applicable provisions regarding the attribution of gross revenues of an
entity and its controlling interests and affiliates to determine
whether that entity meets service-specific eligibility standards for
designated entity benefits, such as bidding credits. Council Tree
proposes that even where an entity qualifies for designated entity
benefits under the Commission's existing rules, such benefits should
not be available to that entity if it has a ``material relationship''
with a ``large, in-region, incumbent wireless provider.'' The
Commission tentatively concludes that it should modify its rules to
restrict the award of designated entity benefits where such a
relationship exists. The Commission seeks comment on Council Tree's
proposal for defining ``material relationship'' and on the two elements
Council Tree proposes to use in defining a ``large, in-region,
incumbent wireless service provider''--the geographic overlap between
the incumbent and the designated entity applicant, as well as the
incumbent's wireless gross revenues. The Commission also seeks comment
on the factual assertions upon which Council Tree's proposals are based
and the impact, if any, that the adoption of the proposed restriction
would have on the ability of small businesses to provide spectrum-based
services. In addition, the Commission seeks comment on whether it
should extend any rule modifications it adopts to restrict the
availability of designated entity benefits where an otherwise qualified
designated entity has a ``material relationship'' with an ``entity with
significant interests in communications services.''
12. Material Relationship. As noted above, the Commission currently
applies a gross revenues test as its general standard for measuring the
size of an entity for the purposes of awarding small business benefits,
in part because such a standard provides ``an accurate, equitable, and
easily ascertainable measure of business size.'' Under this standard,
the Commission attributes to an applicant the gross revenues of its
``controlling interests'' and its ``affiliates'' in assessing whether
the applicant is qualified to take advantage of our small business
provisions, such as bidding credits. A ``controlling interest''
includes individuals or entities, or groups of individuals or entities,
that have control of the applicant under the principles of either de
jure or de facto control and under a totality of the circumstances
analysis. Council Tree suggests, however, that the Commission's current
rules do not adequately prevent large corporations from structuring
relationships in a manner that allows them to gain access to benefits
reserved for small businesses.
13. According to Council Tree, the Commission should determine that
a ``material relationship'' exists if a ``large, in-region, incumbent
wireless service provider'' has provided a material portion of the
total capitalization of the applicant (i.e., equity plus debt), or has
any material operational arrangement with the applicant (such as
management, joint marketing, trademark, or other arrangements) or other
material financial arrangement relating to the overlap markets. In the
event that there is such a ``material relationship,'' Council Tree
advocates that designated entity benefits should be withheld even if
the entity would otherwise qualify for designated entity eligibility
under our existing rules. As noted above, the Commission tentatively
concludes that a relationship between a ``large, in-region incumbent
wireless service provider'' and an otherwise qualified designated
entity applicant should trigger a restriction on the availability of
designated entity benefits. The Commission therefore seeks comment on
the specific nature of the relationship that should trigger such a
restriction. Additionally, the Commission seeks comment on whether
other ``material'' relationships, such as those between an otherwise
qualified designated entity and an ``entity with significant interests
in communications services,'' should trigger a restriction on the award
of designated entity benefits.
14. With respect to determining what may constitute a ``material
financial'' or ``material operational'' relationship, the Commission
also seeks comment on whether our existing ``controlling interest
standard'' and affiliation rules appropriately measure and take into
consideration the existence of those factors raised by Council Tree.
For instance, Council Tree proposes that the material operational
arrangements that should trigger any proposed restriction should
include management, joint marketing, and trademark arrangements.
Insofar as the Commission already attributes the gross revenues of
those that have management or marketing agreements with an applicant
where such agreements grant authority over key aspects of the
applicant's business, the Commission seeks comment on whether a
different standard should be used where the relationship in question is
with a ``large, in-region incumbent wireless service provider'' or with
an ``entity with significant interests in communications services.'' If
so, how should that standard differ from the factors that the
Commission currently considers for determining indicia of control? If
commenters believe that the Commission's rules do not already address
these types of arrangements, they should specify how it should define
these arrangements.
15. The Commission also seeks comment on whether a prohibition
based on certain relationships, such as the one proposed by Council
Tree, would be too harsh or limit a designated entity's ability to gain
access to capital or industry expertise. The Commission seeks comment
on whether there may be instances where the existence of either a
``material financial agreement'' or a ``material operational
agreement,'' in and of itself, may be appropriate between a designated
entity and a ``large incumbent wireless service provider'' or an
``entity with significant interests in communications services,'' and
may not raise issues of undue control. Should the Commission allow
designated entities to obtain a bidding credit if they have only a
``material financial
[[Page 6996]]
agreement'' or only a ``material operational agreement'' with a ``large
incumbent wireless service provider,'' or an ``entity with significant
interests in communications services,'' but not both? What factors
should the Commission consider in determining whether either type of
agreement may be permissible? Would this approach be sufficient to
address any concerns that the Commission's designated entity program
may be subject to potential abuse from larger corporate entities?
Commenters should address the appropriate level of financial or
operational participation of a ``large incumbent wireless service
provider'' or an ``entity with significant interests in communications
services'' that should trigger any proposed prohibition of the award of
designated entity benefits to entities that are otherwise qualified. As
a general matter, should the definition of ``material relationship''
differ if the Commission adopts its tentative conclusion or if the
Commission expands the restriction to include relationships with
``entities with significant interests in communications services?''
16. In its Secondary Markets proceeding, the Commission concluded
that certain spectrum manager leases between a designated entity
licensee and a non-designated entity lessee would cause the spectrum
lessee to become an attributable affiliate of the licensee, thus
rendering the licensee ineligible for designated entity benefits and
making such a spectrum lease impermissible. The Commission seeks
comment on what, if any, standard should be used to determine whether a
spectrum leasing arrangement is a ``material relationship'' for the
purpose of any additional restriction on the availability of designated
entity benefits that it might adopt. The Commission also seeks comment
on whether other arrangements should be taken into account. If so, what
arrangements should it consider?
17. Wireless Gross Revenues. Council Tree suggests that ``large,
in-region, incumbent wireless providers'' should be defined, in part,
as those having what Council Tree refers to as ``average gross wireless
revenues'' for the preceding three years exceeding $5 billion. The
Commission seeks comment on this proposed benchmark and whether it is a
useful element for consideration if it adopts its tentative conclusion
to modify the Commission's part 1 rules to include additional
restrictions on the availability of designated entity benefits. Is $5
billion an appropriate level at which to set the benchmark to define
``large, in-region incumbent wireless provider?'' In contemplating this
proposal, the Commission also seeks comment on whether it should
evaluate the service provider's ``gross wireless revenues'' as
suggested by Council Tree or instead if it should generally consider
``gross revenues'' as defined in Sec. 1.2110(n) of the Commission's
rules. Should the Commission consider an alternative benchmark? What
would be the appropriate benchmark if it extends the restriction on
designated entity benefits to designated entities that have material
relationships with ``entities with significant interests in
communications services?'' Commenters supporting an alternative
benchmark should provide specific data to support any such alternative.
What standard should the Commission use to attribute revenues, wireless
or otherwise, to the incumbent wireless provider or to an ``entity with
significant interests in communications services'', if any? Should the
Commission use the same ``controlling interest'' standard and
affiliation rules currently used to attribute to an applicant the gross
revenues of its investors and affiliates in determining whether the
applicant qualifies for small business benefits?
18. Significant Geographic Overlap. In addition to a gross revenues
benchmark, Council Tree proposes that the Commission define a ``large,
in-region, incumbent wireless service provider'' as an entity
(including all parties under common control) that is, or has an
attributable interest in, a CMRS or AWS licensee whose licensed service
area has significant overlap in the geographic area to be licensed to
the designated entity applicant. As a general matter, the Commission
seeks comment on whether geographic overlap should be an element in
establishing any additional restriction on the availability of
designated entity benefits. Council Tree proposes that for purposes of
determining significant geographic overlap in defining an in-region
incumbent wireless service provider, the Commission should apply the
standard set forth in Sec. 20.6(c) of the Commission's rules. Although
the CMRS spectrum aggregation limit sunset on January 1, 2003, Sec.
20.6 defined significant overlap of geographic service areas for the
purpose of that limit, and provides that significant overlap occurs
when there is an overlap of at least 10 percent of the population
within the impacted service areas. The further seeks comment on whether
it should apply the standard set forth in Sec. 20.6(c) of the
Commission's rules as proposed by Council Tree. If so, what factors
should the Commission consider in applying this standard to all
wireless services? Should it apply a different, or any, geographic
standard if it extends the restriction on designated entity benefits to
designated entities that have material relationships with ``entities
with significant interests in communications services?'' If the
Commission determines that a significant geographic overlap does exist,
how should the Commission implement such a restriction? Should an
incumbent be allowed to divest its interest in the subject service area
to allow a designated entity applicant to maintain eligibility for a
bidding credit? If so, within what time period should the Commission
require the divestiture? The Commission seeks comment on whether the
application of the standard set forth in Sec. 20.6(c) of the
Commission's rules or any other geographic overlap restriction would
place an undue administrative burden on the Commission, making it
difficult to monitor an applicant's compliance with any adopted
geographic overlap restriction. Should the Commission consider adopting
any other geographic overlap standards? In addressing these issues,
commenters should state with specificity what factors the Commission
should consider and what mechanisms it should adopt to ensure an
applicant's continued compliance with any geographic overlap
restriction.
19. Entities with Significant Interests in Communications Services.
As noted above, the Commission seeks comment on whether we should
prohibit the award of designated entity benefits where an otherwise
qualified designated entity applicant has a ``material relationship''
with an ``entity with significant interests in communications
services.'' If the Commission extends the restriction in this manner,
should the Commission define ``entities with significant interests in
communications services'' to include a broad category of businesses
such as voice or data providers, content providers, equipment
manufacturers, other media interests, and/or facilities or non-
facilities based communications services providers? The Commission
seeks comment on whether all of these entities should be included as
part of its definition of ``entities with significant interests in
communications services.'' Should the Commission consider excluding
some of these entities from its proposed definition? If so, which
entities should the Commission exclude and why? Are there additional
entities that it should consider including as part of its proposed
definition? If so, which entities should the Commission include,
[[Page 6997]]
and why? Moreover, the Commission seeks comment on how it should
specifically define ``significant interests in communications
services?'' Does the Commission's consideration of the category
``communications services'' provide additional safeguards to ensure the
award of its designated entity benefits only to legitimate small
businesses or does it create too many obstacles for designated entities
to obtain access to capital?
20. Unjust Enrichment. The Commission's existing rules require the
payment of unjust enrichment when an entity that acquires its license
with small business benefits loses its eligibility for such benefits or
transfers a license to another entity that is not eligible for the same
level of benefits. Council Tree suggests that the Commission should
also impose a reimbursement obligation on a licensee that, in the first
five years of its license term, acquires a license with a bidding
credit and subsequently makes a change in its ``material
relationships'' or seeks to assign or transfer control of the license
to an entity that would result in its loss of eligibility for the
bidding credit pursuant to any eligibility restriction that the
Commission adopt. Council Tree asserts that such a requirement is
necessary to fulfill the Commission's statutory obligation to prevent
unjust enrichment and to ensure that the new eligibility requirement
for bidding credits has the intended effect of helping eligible small
businesses to acquire spectrum licenses. Council Tree also proposes,
however, that an unjust enrichment payment should not be required in
the case of ``natural growth'' of the revenues attributed to an
incumbent carrier above the established benchmark. Instead, it suggests
that the reimbursement obligation should apply only where the licensee
takes on new investment, or enters into any operational agreement, that
would have disqualified the licensee for the bidding credit at the time
of the licensee's initial application. The Commission seeks comment on
whether, if it adopts a new restriction on the award of bidding credits
to designated entities, the Commission should adopt revisions to its
unjust enrichment rules such as those proposed by Council Tree, or in
some other manner. Should any reimbursement obligation the Commission
adopts apply where the licensee takes on new investment, or also where
it enters into any new ``material financial relationship'' or
``material operational relationship'' that would have rendered the
licensee ineligible for a bidding credit? If the Commission requires
reimbursement by licensees that, either through a change of ``material
relationships'' or assignment or transfer of control of the license,
lose their eligibility for a bidding credit pursuant to any eligibility
restriction that it might adopt, over what portion of the license term
should such unjust enrichment provisions apply?
21. Pending Auction Provisions. As stated at the outset, the
Commission intends any changes adopted in this proceeding to apply to
AWS licenses currently scheduled to be offered in an auction beginning
June 29, 2006. In light of the current auction schedule, any changes
that the Commission adopts in this proceeding may become effective
after the deadline for filing applications to participate in that
auction. Under Commission rules, applicants asserting designated entity
status in a Commission auction are required to declare, under penalty
of perjury, that they are qualified as a designated entity under Sec.
1.2110 of the Commission's rules. In the event that any designated
entity applicants have filed an application to participate in an
auction prior to the effective date of any designated entity rule
changes adopted in this proceeding, the Commission proposes to require
such applicants to amend their applications on or after the effective
date of the rule changes with a statement declaring, under penalty of
perjury, that the applicant is qualified as a designated entity
pursuant to Sec. 1.2110 of the Commission's rules effective as of the
date of the statement. In the event applicants fail to file such a
statement pursuant to procedures announced by public notice, they will
be ineligible to qualify as a designated entity, e.g., receive small
business bidding credits, either generally or with respect to specific
licenses. The Commission seeks comment on this proposal.
IV. Conclusion
22. For the reasons stated above, the Commission seeks comment on
its competitive bidding rules, on the elements of the specific proposal
raised by Council Tree, and on its tentative conclusion to modify its
part 1 rules to prohibit the award of designated entity benefits where
an otherwise qualified designated entity has a ``material
relationship'' with a ``large, in-region wireless service provider.''
V. Procedural Matters
A. Ex Parte Rules--Permit-But-Disclose Proceeding
23. For purposes of this permit-but-disclose notice and comment
proceeding, members of the public are advised that ex parte
presentations are permitted, except during the sunshine Agenda period,
provided that the presentations are disclosed pursuant to the
Commission's rules.
B. Initial Regulatory Flexibility Analysis
24. As required by the Regulatory Flexibility Act, see 5 U.S.C.
603, the Commission has prepared an Initial Regulatory Flexibility
Analysis (IRFA) of the possible significant economic impact on small
entities of the proposals suggested in this Further Notice of Proposed
Rulemaking. Written public comments are requested on the IRFA. These
comments must be filed in accordance with the same filing deadlines as
comments filed in response to this FNPRM, and must have a separate and
distinct heading designating them as responses to the IRFA. The
Commission will send a copy of this FNPRM, including this IRFA, to the
Chief Counsel for Advocacy of the Small Business Administration (SBA).
In addition, this FNPRM and the IRFA (or summaries thereof) will be
published in the Federal Register.
i. Need for, and Objectives of, the Proposed Rules
25. This FNPRM tentatively concludes that the Commission should
modify its general competitive bidding rules governing benefits
reserved for designated entities (i.e., small businesses, rural
telephone companies, and businesses owned by women and minorities).
Specifically, the Commission seeks comment on the specific elements of
a proposal raised by Council Tree Communications, Inc. (``Council
Tree'') that seeks to prohibit the award of bidding credits or other
small business benefits to entities that have what Council Tree refers
to as a ``material relationship'' with a ``large in-region incumbent
wireless service provider.'' Additionally, the Commission seeks comment
on whether there are other entities that might have a significant
interest in the provision of communication services, e.g., voice or
data providers, content providers, equipment manufacturers, other media
interests, and/or facilities or non-facilities based communications
services providers (hereinafter collectively referred to as
``entity(ies) with significant interests in communications services,'')
whose
[[Page 6998]]
relationship with an otherwise qualified designated entity applicant
should trigger a restriction on the availability of designated entity
benefits.
26. Over the last decade, the Commission has engaged in numerous
rulemakings and adjudicatory investigations to prevent companies from
circumventing the objectives of the designated entity eligibility
rules. To that end, in determining whether to award designated entity
benefits, the Commission adopted a strict eligibility standard that
focused on whether the applicant maintained control of the corporate
entity. The Commission's objective in employing such a standard was
``to deter the establishment of sham companies in a manner that permits
easy resolution of eligibility issues without the delay of
administrative hearings.'' The Commission intends its small business
provisions to be available only to bona fide small businesses.
27. By this FNPRM, the Commission tentatively concludes that
modifications to its designated entity rules are warranted. In
determining what additional safeguards are necessary to ensure that
bidding credits and other benefits are awarded to the appropriate
entities, the Commission recognizes that it must strike a delicate
balance between encouraging the participation of small businesses in
the provision of spectrum based services, and ensuring that those small
businesses who do participate in competitive bidding, have sufficient
capital to be able to compete at auction, fulfill their payment
obligations, and ultimately provide service to the public. In its
continued effort to reserve for small businesses and entrepreneurs the
designated entity benefits that the Commission offers, this FNPRM seeks
comment on the elements of Council Tree's proposal and the Commission's
tentative conclusion that its existing rules should be modified.
ii. Legal Basis
28. The proposed actions are authorized under sections 4(i),
303(r), and 309(j) of the Communications Act of 1934, as amended, 47
U.S.C. 154(i), 303(r), and 309(j).
iii. Description and Estimate of the Number of Small Entities to Which
the Proposed Rules Will Apply
29. The RFA directs agencies to provide a description of and, where
feasible, an estimate of the number of small entities that may be
affected by the proposed rules, if adopted. The RFA generally defines
the term ``small entity'' as having the same meaning as the terms
``small organization,'' ``small business,'' and ``small governmental
jurisdiction.'' The term ``small business'' has the same meaning as the
term ``small business concern'' under the Small Business Act. A small
business concern is one which: (a) Is independently owned and operated;
(b) is not dominant in its field of operation; and (c) satisfies any
additional criteria established by the SBA.
30. A small organization is generally ``any not-for-profit
enterprise which is independently owned and operated and is not
dominant in its field.'' Nationwide, as of 2002, there were
approximately 1.6 million small organizations. The term ``small
governmental jurisdiction'' is defined as ``governments of cities,
towns, townships, villages, school districts, or special districts,
with a population of less than fifty thousand.'' As of 1997, there were
approximately 87,453 governmental jurisdictions in the United States.
This number includes 39,044 county governments, municipalities, and
townships, of which 37,546 (approximately 96.2%) have populations of
fewer than 50,000, and of which 1,498 have populations of 50,000 or
more. Thus, the Commission estimates the number of small governmental
jurisdictions overall to be 84,098 or fewer. Nationwide, there are a
total of approximately 22.4 million small businesses, according to SBA
data.
31. Any proposed changes or additions to the Commission's part 1
rules that may be made as a result of this FNPRM would be of general
applicability to all services, applying to all entities of any size
that apply to participate in Commission auctions. Accordingly, this
IRFA provides a general analysis of the impact of the proposals on
small businesses rather than a service by service analysis. The number
of entities that may apply to participate in future Commission auctions
is unknown. The number of small businesses that have participated in
prior auctions has varied. In all of the Commission's auctions held to
date, 1,973 out of a total of 3,303 qualified bidders either have
claimed eligibility for small business bidding credits or have self-
reported their status as small businesses as that term has been defined
under rules adopted by the Commission for specific services. In
addition, the Commission notes that, as a general matter, the number of
winning bidders that qualify as small businesses at the close of an
auction does not necessarily represent the number of small businesses
currently in service. Also, the Commission does not generally track
subsequent business size unless, in the context of assignments or
transfers, unjust enrichment issues are implicated.
iv. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements
32. In the event that the Commission changes its designated entity
rules in this proceeding, designated entity applicants that have filed
applications to participate in an auction before the effective date of
any changes may be required to amend their applications on or after the
effective date of the rule changes with a statement declaring, under
penalty of perjury, that the applicant is qualified as a designated
entity pursuant to the Commission's rules effective as of the date of
the statement.
v. Steps Taken To Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
33. 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): (a)
The establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (b) the clarification, consolidation, or simplification of
compliance or reporting requirements under the rule for small entities;
(c) the use of performance, rather than design, standards; and (d) an
exemption from coverage of the rule or any part thereof for small
entities.
34. This FNPRM tentatively concludes that the Commission should
modify its general competitive bidding rules regarding designated
entity eligibility. The Commission seeks comment on the specific
elements described in a proposal raised by Council Tree Communications,
Inc., which seeks to prohibit the award of bidding credits or other
small business benefits to entities that have what Council Tree refers
to as a ``material relationship'' with a ``large in-region incumbent
wireless service provider.'' The Commission also seeks comment on
whether such a restriction should apply to ``entities with significant
interests in communications services.'' The Commission seeks guidance
from the industry on how it should define the elements of any
restrictions it might adopt regarding the award of designated entity
benefits. Small entity comments are specifically requested.
[[Page 6999]]
vi. Federal Rules That May Duplicate, Overlap, or Conflict With the
Proposed Rule
35. None.
C. Ordering Clauses
36. Accordingly, it is ordered that, pursuant to sections 4(i),
303(r), and 309(j) of the Communications Act of 1934, as amended, 47
U.S.C. 154(i), 303(r), and 309(j), this Further Notice of Proposed Rule
Making is hereby adopted.
37. It is further ordered that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of this Further Notice of Proposed Rule Making, including the
Initial Regulatory Flexibility Analysis, to the Chief Counsel for
Advocacy of the Small Business Administration.
Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 06-1290 Filed 2-9-06; 8:45 am]
BILLING CODE 6712-01-P
