Implementation of the Commercial Spectrum Enhancement Act and Modernization of the Commission's Competitive Bidding Rules and Procedures, 35594-35599 [E6-9593]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 71, Number 119 (Wednesday, June 21, 2006)]
[Proposed Rules]
[Pages 35594-35599]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E6-9593]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 1

[WT Docket No. 05-211; FCC 06-52]


Implementation of the Commercial Spectrum Enhancement Act and 
Modernization of the Commission's Competitive Bidding Rules and 
Procedures

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: In this document the Commission seeks comment on whether the 
Commission should implement additional safeguards beyond those the 
Commission adopted in its Second Report and Order and whether the 
Commission should further modify its competitive bidding rules 
governing benefits reserved for designed entities. The Commission also 
seeks comment to obtain additional evidence regarding how and under 
what circumstances an entity's size might affect its relationships and 
agreements with designated entity applicants and licensees.

DATES: Comments due August 21, 2006; Reply Comments due September 19, 
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 August 21, 2006.

ADDRESSES: You may submit comments, identified by WT Docket No. 05-211, 
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, Auctions and Spectrum 
Access Division, Wireless Telecommunications Bureau at (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: This is a summary of the Second Further 
Notice of Proposed Rule Making released on April 25, 2006. The complete 
text of the Second Further Notice of Proposed Rule Making including 
attachments and related Commission documents is available for public 
inspection and copying from 8:00 a.m. to 4:30 p.m. Monday through 
Thursday or from 8:00 a.m. to 11:30 a.m. on Friday at the FCC Reference 
Information Center, Portals II, 445 12th Street, SW., Room CY-A257, 
Washington, DC 20554. The Second Further Notice of Proposed Rule Making 
and related Commission documents may also be purchased from the 
Commission's duplicating contractor, Best Copy and Printing, Inc. 
(BCPI), Portals II, 445 12th Street, SW., Room CY-B402, Washington, DC 
20554, telephone 202-488-5300, facsimile 202-488-5563, or you may 
contact BCPI at its Web site: https://www.BCPIWEB.com. When ordering 
documents from BCPI please provide the appropriate FCC document number, 
for example, FCC 06-52. The Second Further Notice of Proposed Rule 
Making and related documents are also available on the Internet at the 
Commission's Web site: https://wireless.fcc.gov/auctions.
    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, May 1, 1998.
     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, if multiple docket or rulemaking numbers 
appear in the caption of this proceeding, filers must transmit one 
electronic copy of the comments for each docket or rulemaking number 
referenced in the caption. 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-

[[Page 35595]]

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. If more than one 
docket or rule making number appears in the caption of this proceeding, 
filers must submit two additional copies for each additional docket or 
rule making number. Filings can be sent by hand or messenger delivery, 
by commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail (although we continue to experience delays in 
receiving U.S. Postal Service mail). 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 may contain proposed 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 August 21, 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: 620 (60 respondents for this 
Second FNPRM and; 560 respondents in a previously approved submission 
to OMB.
    Estimated Time per Response: 0.350 hours-1.5 hours.
    Frequency of Response: On occasion reporting requirement.
    Estimated Total Annual Burden: 775 hours (10 hours for this Second 
FRPRM and 765 hours for the previous submission approved by OMB).
    Estimated Total Annual Costs: N/A.
    Privacy Act Impact Assessment: N/A.
    Needs and Uses: 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.

Synopsis of the Second Further Notice of Proposed Rule Making

I. Introduction

    1. The Commission issued a Second Further Notice of Proposed Rule 
Making (Second FNPRM) released on April 25, 2006 to consider whether it 
should modify further its general competitive bidding rules governing 
benefits reserved for designated entities.
    2. Specifically, the Commission seeks guidance on whether it should 
implement additional safeguards beyond those adopted in its Second 
Report & Order (Second R&O) released April 25, 2006, 71 FR 26245, May 
4, 2006, to ensure that its designated entity benefits are awarded to 
the entities and for the purposes intended by Congress. The Commission 
requests additional economic evidence regarding how and under what 
circumstances an entity's size might affect its relationships and 
agreements with designated entity applicants and licensees. 
Additionally, the Commission seeks further comment on whether it should 
adopt additional rule changes that would restrict the award of 
designated entity benefits under certain circumstances and in 
connection with relationships with certain entities.

A. Defining the Class

    3. In the FNPRM, 71 FR 6992, February 10, 2006, the Commission 
tentatively concluded that it should restrict the award of designated 
entity benefits to an otherwise qualified applicant where it has a 
material relationship with a large in-region incumbent wireless service 
provider. The Commission sought comment on how to define the specific 
elements of such a restriction.
    4. The FNPRM also sought comment on whether the Commission should 
instead apply the restriction to the award of designated entity 
benefits where an applicant had a material relationship with entities 
with significant interests in communications services in order to 
extend the scope of such a restriction to a broader 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 
sought comment on whether all of these entities should be included as 
part of its definition of entities with significant interests in 
communications services or whether the Commission should consider 
excluding some of these entities from its proposed definition. The 
Commission also sought comment on whether it should consider including 
other entities as part of its proposed definition.
    5. The Commission acknowledges that voice, data, and video services 
are converging and are being offered as bundled service packages. These 
bundled service offerings may include wireline, wireless, cable and or 
DBS services along with the required equipment such as handsets and 
receivers. In light of the continuing

[[Page 35596]]

dynamic technological developments and convergence occurring in the 
communications marketplace, the Commission seeks comment on the 
appropriate class of entity, if any, that should trigger any additional 
restriction the Commission may adopt regarding relationships with 
designated entities. For instance, would the Commission be better 
positioned to achieve its statutory mandates if it defined such an 
entity to include one that is subject to the Commission's jurisdiction 
under Titles I, II, III, or VI of the Communications Act, including any 
of the entity's controlling interests or affiliates as those terms are 
defined in Sec.  1.2110 of the Commission's rules. The Commission seeks 
comment on whether adopting a definition of a class of entities with 
which a designated entity's agreements might trigger additional 
restrictions for designated entity benefits will better ensure that the 
Commission can continue to award such benefits to entities that 
Congress intended.
    6. The Commission also seeks comment on the financial threshold, if 
any, that it should consider in defining the appropriate class of 
entity that might trigger any additional eligibility restrictions it 
adopts. It seeks further comment on the proposed financial benchmarks 
raised by commenters. Should the Commission consider a financial 
threshold of $5 billion in annual gross revenues as advocated by 
various parties or lower thresholds such as $1 billion or $125 million 
as suggested by other commenters? The Commission also seeks comment on 
whether an entity's size is relevant to its incentive and/or ability to 
influence a designated entity with respect to the type and scope of the 
service it might provide as well as relevant economic analysis to 
support such arguments.
    7. Similarly, the Commission seeks comment on whether it should 
define a class of entities based on its particular spectrum interests, 
for instance those that have licenses for commercial mobile radio 
services (CMRS) spectrum. If the Commission were to define a class in 
this manner, should it define CMRS spectrum to include any spectrum for 
which the service specific rules permit the provision of commercial 
mobile radio services as that term is defined in Sec.  20.9 of the 
Commission's rules? If the Commission determines to base any additional 
safeguards upon an entity's particular spectrum interests, should it 
consider including spectrum other than CMRS spectrum for the purposes 
of such restrictions? If so, what spectrum and why is it more or less 
relevant than other types of spectrum?

B. In-Region Limitation for Class of Entities

    8. In the FNPRM, the Commission sought comment on whether 
geographic overlap should be an element in establishing any additional 
restriction on the availability of designated entity benefits for 
entities that have a material relationship with a large wireless 
service provider. The Commission also sought comment on whether it 
should apply a different, or any, geographic standard if it extends the 
restriction on designated entity benefits to applicants that have a 
material relationship. The Commission asked whether it should apply the 
standard set forth in the former spectrum aggregation rule to define 
the geographic overlap or if it should adopt a different definition of 
geographic overlap. Further, the Commission sought comment on how the 
Commission should implement such a restriction if the Commission 
determined that a significant geographic overlap did exist. The 
Commission asked whether an incumbent should be allowed to divest its 
interest in the subject service area to allow a designated entity 
applicant to maintain eligibility for a bidding credit, and if so, 
within what time period should it require the divestiture. The 
Commission also sought 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.
    9. In response to the FNPRM, the Commission received comment both 
in support of and against an in-region element to any further 
designated entity restrictions. Many of these commenters suggested 
using the significant overlap, attributable interest, and divestiture 
standards from the sunset CMRS spectrum aggregation limit pursuant to 
Sec.  20.6(c)(2) of the Commission's rules. Other commenters stated 
that significant overlap should not be a factor in determining 
eligibility for small business benefits.
    10. In the Second FNPRM, the Commission seeks further comment on 
whether it should adopt an in-region component to defining 
relationships with any particular class or type of entity that could 
trigger any additional eligibility restrictions it might adopt. The 
Commission also seeks comment on whether all entities with in-region 
spectrum interests have the same ability and incentive to leverage an 
inappropriate level of influence over a designated entity with which it 
has financial and/or operational arrangements. Additionally, the 
Commission seeks comment on how the in-region component might protect 
the designated entity program from being subject to potential abuse 
from those entities that might seek to craft relationships with 
designated entity applicants in a manner intended to serve their self-
interests.
    11. Assuming the Commission does adopt an in-region component to 
any additional eligibility restrictions, the Commission seeks comment 
as to whether it should find that a geographic overlap that triggers 
the in-region restriction occurs when there is any overlap between the 
licensed service areas of the entity that has in-region spectrum, with 
whom the designated entity applicant has a material relationship, or 
any affiliate of the entity that has in-region spectrum as defined in 
Sec.  1.2110 of the Commission's rules, and the licensed service area 
to be acquired by the designated entity applicant. Further, the 
Commission seeks comment on whether the adoption of an in-region 
component to any additional eligibility restrictions would be 
burdensome to implement.
    12. Most entities responding to the FNPRM declined to discuss 
whether a restricted entity should be allowed to divest its interest in 
the subject service area to allow a designated entity applicant to 
maintain eligibility for designated entity benefits. Thus, in the 
Second FNPRM, the Commission seeks comment as to whether any class of 
entities on which any additional eligibility restriction is based 
should be allowed to divest its interest in the subject service area to 
allow a designated entity applicant to maintain eligibility for 
benefits. The Commission also seeks comment as to whether the 
Commission should adopt divestiture provisions similar to those found 
in the eliminated spectrum aggregation limit rules.
    13. The Commission seeks comment on whether divestiture should be 
permitted. Specifically, the Commission seeks comment as to how such 
divestitures should be implemented. The Commission seeks comment on the 
time period for divestiture and whether the restricted entity should be 
allowed to market the spectrum or whether such marketing should be done 
by a trustee. The Commission seeks comment as to whether the award of 
designated entity licenses should be withheld until the restricted 
entity files the applications to divest or until the transaction to 
sell the divestiture spectrum has been consummated. The Commission also

[[Page 35597]]

seeks comment as to whether the Commission should receive reports 
detailing the progress made in identifying a buyer for the divestiture 
spectrum and how often such reports should be filed.
    14. The Commission also asked commenters to discuss what should 
occur if the restricted entity that has in-region spectrum fails to 
divest. The Commission seeks comment on whether the designated entity 
must purchase the license without the benefit of the bidding credit and 
be subject to the Commission's default rules. The Commission also seeks 
comment on whether the requirement for a designated entity to purchase 
the license without the bidding credit maintains auction integrity and 
ensures that entities with in-region CMRS spectrum are not able to game 
the auction process.

C. Material Relationships

    15. Following on its rule revisions adopted in the Second R&O, in 
the Second FNPRM, the Commission seeks comment on whether there is a 
need to even further modify its part 1 designated entity eligibility 
rules to include other types of agreements in its definitions of 
``impermissible material relationships'' or ``attributable material 
relationships.''
    16. In particular, the Commission seeks comment on the specific 
types of additional agreements, if any, that should fall within its 
definitions of impermissible material relationships and attributable 
material relationships. The Commission also seeks comment on whether 
its concern regarding relationships between designated entity 
applicants or licensees and other entities should differ depending upon 
the type of entity at issue and the circumstances surrounding the 
relationship. Should the Commission reconsider adopting a minimum 
equity requirement for designated entity applicants or define material 
relationship in a way that would prohibit a designated entity applicant 
from securing all of its capitalization from outside sources? The 
Commission also seeks comment on commenters' suggestions to include 
additional operational agreements in its definitions of material 
relationship and asks whether doing so creates technological and 
practical restrictions that could hinder a designated entity licensee's 
ability to become a provider of spectrum based services, as intended by 
Congress.
    17. Based on the limited record developed in response to the FNPRM, 
and the Commission's extensive experience in administering the 
designated entity program, the Commission is concerned that additional 
types of relationships could have the potential to confer significant 
influence over the actions of a designated entity licensee thereby 
allowing an ineligible entity the ability to gain undue advantages in 
the communications marketplace through the benefits offered to a 
designated entity applicant. The Commission therefore seeks comment on 
the specific types of additional agreements that should fall within its 
definitions of ``impermissible material relationships'' and 
``attributable material relationships'' so that it may be better able 
to prevent the potential for abuse of the designated entity program, 
thereby ensuring the award of our designated entity benefits only to 
legitimate small businesses.
    18. The Commission generally does not have the same concerns 
regarding relationships between designated entity applicants and those 
who do not have interests in spectrum capacity or the provision of 
service, such as financial institutions or venture capital firms, 
provided that such entities do not have a controlling interest 
relationship with the applicant. The Commission presumes that for those 
entities, the overarching goal and primary incentive for partnering 
with a designated entity is to seek a return on investment rather than 
to provide service themselves using the designated entity's spectrum 
licenses. The Commission seeks comment on its presumption. Likewise, 
the Commission presumes that where an entity is not already providing 
communications services, there is no opportunity for it to bundle 
existing communications services with a strategic wireless partner, and 
there is less potential for those entities to exert undue influence 
over a designated entity licensee's decision making regarding its 
service provision or the use of its licensed spectrum. The Commission 
also seeks comment on this presumption. Assuming that its presumptions 
are valid, the Commission anticipates that such relationships will not 
require the additional safeguards the Commission may apply to 
relationships with other entities that have differing incentives and 
motivations. For instance, if the Commission includes financial 
relationships in its definition of either impermissible material 
relationships or attributable material relationship it might 
specifically exclude relationships with financial institutions from 
such a definition. The Commission seeks comment on whether it should 
specifically do so.
    19. With regard to financial relationships, Commission asks whether 
it should conclude that the greater the financial stake an entity has 
in a designated entity the more incentive it has to significantly 
influence the designated entity licensee's decisions regarding its 
provision of service. The Commission also seeks comment on whether it 
should expand its definitions of impermissible material relationship or 
attributable material relationship to include any financial 
relationship(s) (including any combination of equity, debt, loan or 
credit agreements, as well as future interests for such financial 
arrangements) between a designated entity applicant or licensee and 
another entity that represents more than a certain percentage of the 
designated entity's total financing. If so, it asks what is the 
appropriate percentage? The Commission seeks comment on how the 
percentage of an entity's financial interest in a designated entity 
applicant or licensee should be considered in its definitions of 
impermissible material relationship or attributable material 
relationship. In this regard the Commission is concerned that it does 
not want to create a situation in which additional safeguards regarding 
financial interests render a designated entity without any avenues for 
access to much needed capital.
    20. Additionally, the Commission asks whether there are 
circumstances in which it should define material relationships to 
include, without limitation, management agreements, trademark license 
agreements, joint marketing agreements, future interest agreements 
(such as puts, calls, options, and warrants), and long-term de facto 
and spectrum manager leasing arrangements? If so, should such 
relationships be considered to be impermissible material relationships 
or attributable material relationships? Likewise, the Commission seeks 
comment regarding the circumstances under which the existence of any 
agreement between a designated entity applicant or licensee and another 
entity will have the strong potential to convey influence over the 
operations of the designated entity and the deployment of its spectrum 
in a manner contrary to that intended by Congress.
    21. The Commission also seeks comment upon whether it should adopt 
even tighter safeguards to prevent the development of relationships 
that might deter designated entities from evolving into independent 
facilities-based competitors. For example, are circumstances in which 
the Commission should define ``material relationship'' to include any 
relationship, financial and/

[[Page 35598]]

or operational, between a designated entity applicant or licensee and 
another entity? For instance, does the likelihood that certain 
relationships will influence a designated entity's provision of service 
increase when agreements are entered into with an entity that has 
existing self-interests in the same spectrum?
    22. The Commission seeks comment on whether, if it includes all 
agreements, both financial and operational, as either impermissible 
material relationships or attributable material relationships between 
designated entities and entities that have existing spectrum interests 
in the same geographic areas, it can reduce the reliance of designated 
entities on those that might provide funding or operational support in 
a manner designed to complement their own services rather than for 
facilitating the emergence of new technologies and new facilities-based 
competitors.
    23. The Commission also seeks comment on any and all of the 
agreements it should consider including in its definitions of 
impermissible material relationships or attributable material 
relationships and whether it should take into consideration whether 
such agreements are made with certain types of entities with certain 
geographic interests.
    24. Moreover, the Commission seeks comment on whether it should 
include personal net worth in determining designated entity eligibility 
and if so, whether it should adopt the proposal to prohibit individuals 
with a net worth of $3 million or more (excluding the value of a 
primary residence) from having a controlling interest in a designated 
entity or whether it should place other net-worth-based restrictions on 
designated entity eligibility.
    25. The Commission generally has not adopted personal net worth 
restrictions, including personal income and assets, for purposes of 
eligibility for designated entity provisions. The Commission has 
observed, for example, that personal net worth limits are difficult to 
apply and enforce and may be easily manipulated. The Commission seeks 
comment on whether it should reconsider its treatment of personal net 
worth in determining eligibility for designated entity benefits and if 
so, what changes the Commission should adopt and why.

II. Procedural Matters

A. Regulatory Flexibility Analysis

    26. The Commission has prepared an Initial Regulatory Flexibility 
Analysis (IRFA) for the Second FNPRM. Comments on the IRFA should be 
labeled as IRFA Comments, and should be submitted pursuant to the 
filing dates and procedures.

III. Initial Regulatory Flexibility Analysis

    27. As required by the Regulatory Flexibility Act (RFA), the 
Commission has prepared this Initial Regulatory Flexibility Analysis 
(IRFA) of the possible significant economic impact on small entities by 
the policies and rules proposed in the Second Further Notice of 
Proposed Rule Making (Second FNPRM). Written public comments are 
requested on this IRFA. Comments must be identified as responses to the 
IRFA and must be filed by the deadlines for comments provided in the 
Second FNPRM. The Commission will send a copy of the Second Further 
Notice, including this IRFA, to the Chief Counsel for Advocacy of the 
Small Business Administration (SBA). In addition, the Second FNPRM and 
the IRFA (or summaries thereof) will be published in the Federal 
Register.

A. Need for, and Objectives of, the Proposed Rules

    28. The initial FNPRM proceeding tentatively concluded that it 
should restrict the award of designated entity benefits to an otherwise 
qualified applicant where it has a material relationship with a large 
in-region incumbent wireless service provider. The Commission sought 
comment on how it should define the elements of such a restriction. 
Based on the Commission's experience in administering the designated 
entity program and the record developed in response to the FNPRM, the 
Second FNPRM seeks further comment on those issues, including comment 
to obtain additional economic evidence regarding how and under what 
circumstances an entity's size might affect its relationships and 
agreements with designated entity applicants and licensees. The Second 
FNPRM also seeks comment on whether the Commission should adopt 
additional rule changes that would restrict the award of designated 
entity benefits under certain circumstances and in connection with 
relationships with certain types of entities and individuals with high 
personal net worth, including whether and how in-region relationships 
and personal net worth should be considered in determining eligibility 
for designated entity benefits.
    29. 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.

B. Legal Basis

    30. 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. sections 154(i), 303(r), and 309(j).

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

    31. 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: (1) Is independently owned and operated; (2) is not dominant in 
its field of operation; and (3) satisfies any additional criteria 
established by the SBA.
    32. 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. Census Bureau data for 2002 indicate that there were 87,525 
local governmental jurisdictions in the United States. The Commission 
estimates that, of this total, 84,377 entities were small governmental 
jurisdictions. Thus, we estimate that most governmental jurisdictions 
are small. Nationwide, there are a total of approximately 22.4 million 
small businesses, according to SBA data.
    33. Any proposed changes or additions to the Commission's Part 1 
rules that may be made as a result of the

[[Page 35599]]

Second 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 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 our auctions held to date, 1,975 out of a total of 3,545 
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, we note 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.

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

    34. The Commission will not require additional reporting, 
recordkeeping or other compliance requirements pursuant to the Second 
FNPRM.

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

    35. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): (1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule or any part thereof for small 
entities.
    36. The initial FNPRM in that proceeding tentatively concluded that 
it should restrict the award of designated entity benefits to an 
otherwise qualified applicant where it has a material relationship with 
a large in-region incumbent wireless service provider. The Commission 
sought comment on how it should define the elements of such a 
restriction. Based on the Commission's experience in administering the 
designated entity program and the record developed in response to the 
FNPRM, the Second FNPRM seeks further comment on those issues, 
including comment to obtain additional economic evidence regarding how 
and under what circumstances an entity's size might affect its 
relationships and agreements with designated entity applicants and 
licensees. The Second FNPRM also seeks comment on whether the 
Commission should adopt additional rule changes that would restrict the 
award of designated entity benefits under certain circumstances and in 
connection with relationships with certain types of entities and 
individuals with high personal net worth, including whether and how in-
region relationships and personal net worth should be considered in 
determining eligibility for designated entity benefits. The Second 
FNPRM 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.

F. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rule

    37. None.

IV. Paperwork Reduction Act Analysis

    38. The Second FNPRM may contain 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 August 21, 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.

V. Ordering Clauses

    39. 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. 
sections 154(i), 303(r), and 309(j), this Second Further Notice of 
Proposed Rule Making is hereby adopted.
    40. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Second Further Notice of Proposed Rule Making, including 
the Initial Regulatory Flexibility Analysis, to the Chief Counsel for 
Advocacy of the Small Business Administration.

List of Subjects in 47 CFR Part 1

    Administrative practice and procedure, Auctions, Licensing, 
Telecommunications.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
 [FR Doc. E6-9593 Filed 6-20-06; 8:45 am]
BILLING CODE 6712-01-P