Policies Regarding Mobile Spectrum Holdings; Expanding the Economic and Innovation Opportunities of Spectrum Through Incentive Auctions, 39977-40003 [2014-15769]

Agencies

• FEDERAL COMMUNICATIONS COMMISSION

[Federal Register Volume 79, Number 133 (Friday, July 11, 2014)]
[Rules and Regulations]
[Pages 39977-40003]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-15769]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 20

[WT Docket No. 12-269; Docket No. 12-268; FCC 14-63]


Policies Regarding Mobile Spectrum Holdings; Expanding the 
Economic and Innovation Opportunities of Spectrum Through Incentive 
Auctions

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) updates its initial screen for review of spectrum 
acquisitions through secondary markets and makes determinations 
regarding whether to establish mobile spectrum holding limits for its 
upcoming auctions of high- and low-band spectrum, in light of the 
growing demand for spectrum, the differences between spectrum bands, 
and in accordance with its desire to preserve and promote competition.

DATES: Effective September 9, 2014.

FOR FURTHER INFORMATION CONTACT: Daniel Ball, Wireless 
Telecommunications Bureau, (202) 418-1577, email Daniel.Ball@fcc.gov; 
Amy Brett, Wireless Telecommunications Bureau (202) 418-2703, email 
Amy.Brett@fcc.gov.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order (R&O), WT Docket No. 12-269; Docket No. 12-268; FCC 14-63, 
adopted May 15, 2014 and released June 2, 2014. The full text of this 
document is available for inspection and copying during business hours 
in the FCC Reference Information Center, Portals II, 445 12th Street 
SW., Room CY-A257, Washington, DC 20554. Also, it may be purchased from 
the Commission's duplicating contractor at Portals II, 445 12th Street 
SW., Room CY-B402, Washington, DC 20554; the contractor's Web site, 
https://www.bcpiweb.com; or by calling (800) 378-3160, facsimile (202) 
488-5563, or email FCC@BCPIWEB.com. Copies of the R&O also may be 
obtained via the Commission's Electronic Comment Filing System (ECFS) 
by entering the docket number WT Docket No. 12-269. Additionally, the 
complete item is available on the Federal Communications Commission's 
Web site at https://www.fcc.gov.
    1. In the R&O the Commission updates its spectrum screen for its 
competitive review of proposed secondary market transactions to reflect 
current suitability and availability of spectrum for mobile wireless 
services. It adds to its spectrum screen: 40 megahertz of AWS-4; 10 
megahertz of H Block; 65 megahertz of AWS-3 (when it becomes available 
on a market-by-market basis); 12 megahertz of BRS; 89 megahertz of EBS; 
and the total amount of 600 MHz spectrum auctioned in the Incentive 
Auction. It subtract from its spectrum screen: 12.5 megahertz of SMR; 
and 10 megahertz that was the Upper 700 MHz D Block. The Commission 
establishes a market-based spectrum reserve of up to 30 megahertz in 
the Incentive Auction in each license area to ensure against excessive 
concentration in holdings of low-band spectrum and ensuring that all 
bidders bear a fair share of the cost of the Incentive Auction. It 
adopts limits on secondary market transactions of 600 MHz spectrum 
licenses for six years post-auction. It declines to adopt auction-
specific limits for AWS-3. It treats certain further concentrations of 
below-1-GHz spectrum as an enhanced factor in its case-by-case analysis 
of the potential competitive harms posed by individual transactions.

[[Page 39978]]

I. Preserving and Promoting Competition in the Mobile Wireless 
Marketplace

    2. The Commission has long recognized that ``spectrum is an input 
in CMRS markets,'' and that ``the state of control over the spectrum 
input is a relevant factor'' in its competitive analysis. Ensuring that 
sufficient spectrum is available for multiple existing mobile service 
providers as well as potential entrants is crucial to promoting 
consumer choice and competition throughout the country, including in 
rural areas, and is similarly crucial to fostering innovation in the 
marketplace. For these reasons, Congress directed the Commission to 
proactively ``include safeguards to protect the public interest'' when 
specifying the classes and characteristics of licenses and permits to 
be issued by competitive bidding, and to ``promot[e] economic 
opportunity and competition and ensur[e] that new and innovative 
technologies are readily accessible to the American people by avoiding 
excessive concentration of licenses[.]'' In order for there to be 
robust competition, multiple competing service providers must have 
access to or hold sufficient spectrum to be able to enter a marketplace 
or expand output rapidly in response to any price increase or reduction 
in quality, or other change that would harm consumer welfare. 
Consistent with the Commission's statutory mandate, the fundamental 
goal that has guided its policies regarding mobile spectrum holdings 
has been the preservation and promotion of competition, which in turn, 
enables consumers to make choices among numerous service providers and 
leads to lower prices, improved quality, and increased innovation.
    3. Since the Commission's last comprehensive review of its mobile 
spectrum holdings policies more than a decade ago, the marketplace for 
mobile wireless services has evolved significantly--both in consumer 
demand for services and market structure--as has the role of low-band 
spectrum for coverage purposes and high-band spectrum for capacity 
purposes in the deployment of providers' networks. As providers deploy 
next-generation mobile networks, the engineering properties and 
deployment capabilities of the mix of particular spectrum bands in 
providers' holdings have become increasingly important, particularly as 
multi-band phones allow users to take advantage of the different 
properties of different spectrum bands. Moreover, while the mobile 
wireless marketplace a decade ago consisted of six near-nationwide 
providers and a substantial number of regional and small providers, 
since then, there has been a significant degree of consolidation 
resulting in a market with four nationwide providers and a smaller 
number of regional and more local service providers.
    4. Reflecting this evolution in the mobile wireless marketplace, 
the Commission, in recent years, has considered in more detail the 
technical distinctions among spectrum bands used to deploy next-
generation mobile networks. The Commission adopted mobile spectrum 
holdings policies in this rulemaking that address how the differences 
among spectrum bands may affect its overall competitive analysis of 
spectrum acquisitions and therefore its decision making for both 
auctions and secondary market transactions.
    5. In adopting these policies, the Commission is mindful that the 
statutory framework established by Congress for mobile wireless 
services and implemented by the Commission, with its reliance on 
competition as the primary driver of consumer benefits, has fostered 
substantial economic growth and consumer benefits for its nation. Among 
other goals, Congress has directed us as well to promote the 
``efficient and intensive use of the electromagnetic spectrum'' and 
avoid an ``excessive concentration of licenses'' in the design of 
systems of competitive bidding, as well as to review transactions to 
ensure that they serve the public interest.
    6. Consistent with the evolution of the marketplace and the 
Commission's statutory directives and policy goals, and in light of the 
evolution of wireless services demanded by consumers, the Commission 
must ensure that multiple service providers have access to spectrum in 
the foreseeable future. Existing marketplace conditions, including 
concerns about the potential for anticompetitive behavior, inform its 
predictive judgment but are not determinative as to whether the 
Commission needs to act. The mobile spectrum holdings policies the 
Commission adopted are necessary to preserve and promote consumer 
choice and competition among multiple service providers, promote the 
efficient and intensive use of spectrum, maximize economic opportunity, 
and foster the deployment of innovative technologies.

A. Evolution of the Mobile Wireless Marketplace

    7. During the past decade, provider supply and consumer demand for 
wireless services has exploded, moving from the provision of mobile 
voice services to the provision of mobile broadband services. The rapid 
adoption of smartphones, tablet computers, mobile applications, and 
increasing deployment of high-speed 3G and now 4G technologies, is 
driving significantly more intensive use of mobile networks. In 2013, a 
single smartphone generated 48 times more mobile data traffic than a 
feature phone, and average smartphone usage grew 50 percent in 2013. 
The adoption of smartphones increased from 27 percent to 54 percent of 
U.S. subscribers from December 2010 to December 2012. Consequently, 
service providers generally need access to more spectrum to meet the 
increasing demand for mobile broadband, which consumes far greater 
amounts of bandwidth than did mobile phones just a short time ago.
    8. The wireless industry has also undergone significant 
consolidation during the past decade. In 2003, there were six 
nationwide facilities-based wireless service providers: AT&T Wireless, 
Sprint PCS, Verizon Wireless, T-Mobile, Cingular Wireless, and Nextel. 
Now there are four--Verizon Wireless, AT&T, Sprint, and T-Mobile. In 
addition, there have been several significant spectrum-only 
transactions, such as AT&T-Qualcomm (2011), Verizon Wireless-SpectrumCo 
(2012), and AT&T WCS (2012) that have resulted in increased spectrum 
aggregation among the remaining providers.
    9. Concentration in the market share of the major providers has 
also increased during that time period. As of December 2003, the top 
six facilities-based nationwide providers accounted for approximately 
79 percent of total mobile wireless subscribers in the country. By 
December 2013, the top four facilities-based nationwide providers had 
increased their combined market share to 97 percent of all subscribers. 
Verizon Wireless and AT&T together accounted for 68 percent of the 
nation's subscribers as of year-end 2013, compared to 51 percent in 
2004. Some regional and local service providers have achieved 
significant market shares within particular local markets, often the 
most rural markets, but they typically rely on roaming agreements with 
nationwide facilities-based providers to extend the geographic reach of 
their networks.
    10. The Commission has ``ample latitude to adapt its rules and 
policies to the demands of changing circumstances.'' In light of these 
trends and current spectrum aggregations, the Commission must examine 
whether changes in its mobile spectrum holdings policies are necessary 
to facilitate the

[[Page 39979]]

robust competition that leads to lower prices, improved quality, and 
greater innovation. The following are some of the benefits of 
competition: Service providers have offered various pricing plans, 
ranging from tiered usage-based data pricing with overage charges 
(Verizon Wireless, AT&T) to unlimited data pricing (Sprint), and in 
2012, both Verizon Wireless and AT&T launched shared data plans for 
smartphones and other mobile data devices, and T-Mobile reintroduced an 
unlimited smartphone data pricing option.

B. Ensuring That All Americans Benefit From Mobile Wireless Competition

    11. Based upon the record before us, the Commission finds that the 
spectrum aggregation limits the Commission adopted is needed to advance 
its statutory objectives under section 309(j), to promote competition, 
and to avoid competitive harms. The Commission's competition-related 
decision making is designed to advance the public interest by 
preserving and promoting competition that benefits consumers and the 
Commission must consider the totality of the circumstances and choose 
policies that are most likely to allow competition to flourish for the 
public benefit. Accordingly, the Commission recognizes the important 
tradeoffs in the policy decision at hand. Policies that would limit the 
ability of major providers to acquire additional spectrum licenses may 
limit their ability to provide new services or serve new customers. At 
the same time, policies that would allow these service providers to 
acquire all or substantially all of the spectrum licenses to be 
auctioned in the near future, particularly spectrum licenses being 
auctioned in the Incentive Auction, or that would allow further 
concentration in below-1-GHz spectrum in secondary market transactions 
without enhanced scrutiny, would raise significant competitive issues.
    12. Raising Rivals' Costs and Foreclosure. In 2001, the Commission 
recognized that ``it is at least a threshold possibility that because 
the supply of suitable spectrum is limited, firms in CMRS markets might 
choose to overinvest in spectrum in order to deter entry, depending on 
the costs of doing so.'' In certain situations, a dominant firm may 
raise rivals' costs by a variety of means, including input 
monopolization. As rivals' costs are raised, the competiveness of the 
marketplace is likely to diminish. Foreclosure can occur when 
competitors have an incentive and ability to acquire an input not only 
to put it to their own use, but also to withhold it from their rivals.
    13. Discussion. In its review of the evolution of the mobile 
wireless marketplace, its current state, and the potential future 
effects on consumers, the Commission is required to consider a number 
of concerns to advance the public interest. Section 309(j) requires the 
Commission to balance a number of specific statutory objectives 
including competition, diversity and the avoidance of excessive 
concentration in designing its rules regarding spectrum licenses and 
the competitive bidding assignment process. The Commission finds that, 
under the totality of circumstances, the public interest will be 
advanced by: Reaffirming the current case-by-case review of proposed 
transactions, with continued use of a spectrum screen triggered at 
aggregations of approximately one third or more of the spectrum 
suitable and available for mobile telephony/broadband; updating the 
spectrum screen to include spectrum currently suitable and available 
for mobile telephony/broadband; treating certain levels of increased 
aggregations of below-1-GHz spectrum as an enhanced factor during case-
by-case review of secondary market transactions involving below-1-GHz 
spectrum; and establishing a market-based spectrum reserve in the 
upcoming 600 MHz auction.
    14. There are three independent bases for its conclusion, each of 
which the Commission finds warrants the policies the Commission 
adopted: (1) The importance of access to low-band spectrum to promote 
variety in licensees and the advancement of rural deployment as 
directed by Section 309(j), (2) the benefits to consumers associated 
with robust competition among multiple providers having access to low-
band spectrum, and (3) the potential for competitive harm if the 
Commission does not provide safeguards to mitigate against the 
possibility of providers raising rivals' costs or foreclosing 
competition by denying competitors access to low-band spectrum.
    15. Its findings are compelled by the changing circumstances posed 
by the marketplace today: Increased consolidation, the growth in demand 
for mobile broadband, and the significance of the upcoming 600 MHz 
auction. First, the Commission recognizes that the mobile wireless 
marketplace has undergone considerable consolidation, both in terms of 
number of firms and relative market shares, as well as increased 
concentration of low-band spectrum. Recent acquisitions have 
exacerbated this concentration. While limited amounts of low-band 
spectrum might theoretically be acquired in secondary market 
transactions, the vast bulk of that spectrum has already been acquired. 
There is also significantly less low-band spectrum than there is high-
band spectrum: after its decisions, there will be 134 megahertz of 
spectrum below 1 GHz suitable and available for the provision of mobile 
broadband services and 446.5 megahertz of suitable and available 
spectrum above 1 GHz. Concentration in spectrum holdings by service 
providers of low-band spectrum has become particularly pronounced, with 
Verizon Wireless and AT&T together having aggregated more than 90 
percent of all cellular spectrum. In addition, these two service 
providers together currently hold approximately 72 percent of 700 MHz 
spectrum. By comparison, variation in spectrum holdings of higher-
frequency spectrum in the range of 1 to 2 GHz is more evenly 
distributed: Of the PCS spectrum, Verizon Wireless holds 16 percent, 
AT&T holds 29 percent, Sprint holds 28 percent and T-Mobile holds 22 
percent; of the AWS-1 spectrum, Verizon Wireless holds 37 percent, AT&T 
holds 13 percent, and T-Mobile holds 42 percent.
    16. Second, its findings are informed by the skyrocketing consumer 
demand for mobile broadband. Today, consumers are demanding more data 
at higher speeds, while at home, at work, and in transit. The 
Commission finds that to provide sufficient level of service in the 
marketplace to the benefit of consumers, providers will need to deploy 
more spectrum that can provide both coverage and in-building 
penetration, as well as spectrum that can provide the increased 
throughput for mobile broadband applications
    17. Third, its findings are based on the recognition that the 600 
MHz spectrum that will be made available in the Incentive Auction will 
be the last offering of a significant amount of nationwide greenfield 
low-band spectrum for the foreseeable future. This is particularly 
important because of the very different characteristics of low-band 
spectrum. There is a large frequency gap between the below-1-GHz 
spectrum (in the 700 and 800 MHz bands now largely held by the leading 
providers and the 600 MHz Incentive Auction spectrum) and the remaining 
spectrum currently suitable and available for mobile broadband use, 
beginning with the AWS-1 band at 1710 MHz. Low-band spectrum possesses 
distinct propagation advantages for network deployment, particularly in 
rural areas and indoors. As a result, the auction of spectrum below 1 
GHz

[[Page 39980]]

presents a once-in-a-generation opportunity to promote competition as 
specifically required by section 309(j). Based upon current trends in 
consumer demand for mobile broadband services, the Commission concludes 
that the decisions the Commission makes here will have a significant 
impact on the extent to which competition may flourish for years to 
come.
    18. Though there is substantial support in the record for 
distinguishing between low-band and high-band spectrum based on 
propagation characteristics, as discussed above, the Commission finds 
that the record does not support such categorical distinctions between 
three different spectrum groupings--below-1-GHz, 1-2.2 GHz, and 2.3-2.7 
GHz--as recently advocated by Sprint.
    19. Variety of Licensees and Rural Deployment. Under Section 
309(j), Congress mandated that the Commission designs auctions to 
``include safeguards to protect the public interest in the use of the 
spectrum,'' including the objectives to disseminate licenses ``among a 
wide variety of applicants'' and to promote deployment of new 
technologies, products, and services to ``those residing in rural 
areas.'' The limited restrictions the Commission imposes on spectrum 
holdings will promote both of these statutory policies. A variety of 
licensees is particularly important in light of the lack of competitive 
offerings in rural America today.
    20. Increasing the number of providers who have access to low-band 
spectrum can increase the competitive offerings of mobile wireless 
service for consumers, particularly in rural areas. Two nationwide 
providers control the vast majority of low-band spectrum, and this 
disparity makes it difficult for rural consumers to have access to the 
competition and choice that would be available if more wireless 
competitors also had access to low-band spectrum. Low-band spectrum, 
given its unique propagation characteristics, can serve as a foundation 
for expansion of an existing network or a new or upcoming service 
providers' network deployment as it builds a customer base to support 
further growth. The Commission finds that its spectrum holdings 
policies will promote variety in licensees and deployment of new 
technologies to those residing in rural areas.
    21. The Commission believes that holding a mix of spectrum bands is 
advantageous to providers and that consumer's benefit when multiple 
providers have access to a mix of spectrum bands which in turn can 
increase competition, drive down prices, and ensure continued 
innovation and investment. Accordingly, the Commission finds its public 
interest goal of promoting consumer welfare would be advanced by the 
policies the Commission adopted.
    22. Potential for Competitive Harm From Increased Aggregation of 
Spectrum. The Commission also finds that in the absence of additional 
below-1-GHz spectrum on a nationwide basis, there is a substantial 
likelihood of competitive harm if providers that currently lack 
sufficient access to such spectrum cannot acquire it. Under section 
309(j), the Commission has mandates to promote competition, promote 
efficient use of spectrum, and avoid the excessive concentration of 
licenses. Low-band spectrum is less costly to deploy and provides 
higher coverage quality and the leading providers have most of the low-
band spectrum available today. If they were to acquire all or 
substantially all of the remaining low-band spectrum, they would 
benefit independently of any deployment of this newly acquired spectrum 
to the extent that their rivals are denied its use. Without access to 
this low-band spectrum, their rivals would be less able to provide a 
competitive alternative.
    23. Along with an attenuated ability to increase output or service 
quality in response to price increases, providers that lack access to 
low-band spectrum may lack the ability quickly to expand coverage or 
provide new or innovative services, which would have a significant 
impact on competition in the mobile wireless marketplace. The 
Commission agrees that a service provider that is limited to high-band 
spectrum holdings would face challenges to provide services as robust 
as those offered by providers holding a mix of low- and high-band 
spectrum. The consumer harms from the raising of rivals' costs from 
increased concentration of low-band spectrum outweigh the potential 
benefits of unlimited spectrum aggregation. Accordingly, the Commission 
finds that the limited restrictions the Commission adopted will 
reasonably balance its goals of promoting competition, ensuring the 
efficient use of spectrum, and avoiding an excessive concentration of 
licenses in accord with section 309(j).
    24. Foreclosure. The Commission agrees with DOJ, today's mobile 
wireless marketplace is characterized by factors that, according to 
DOJ, increase the potential for anticompetitive conduct, including high 
market concentration, highly concentrated holdings of low-band 
spectrum, high margins, and high barriers to entry. These risk factors 
increase the incentive and ability for a provider with low-band 
spectrum to bid for the spectrum in an attempt to stifle competition 
that may arise if multiple licensees were to hold low frequency 
spectrum. As a result, such a provider might be the highest bidder in a 
spectrum auction, not because it will put the spectrum to its highest 
use, but because it is motivated to engage in a foreclosure strategy. 
In light of this risk and balancing the inherent tradeoffs, the 
Commission finds that the limited restrictions the Commission enacted 
is a reasonable balance of the Section 309(j) and public interest 
factors that form its statutory mandate, including the goals to promote 
competition, disseminate licenses among a wide variety of applicants, 
ensure high quality service to those in rural areas and avoid the 
excessive concentration of licenses, while also promoting the efficient 
and intensive use of the spectrum.

C. Conclusion

    25. For the reasons set forth above, spectrum is a limited and 
essential input for the provision of mobile wireless telephony and 
broadband services, and ensuring access to, and the availability of, 
sufficient spectrum is critical to promoting the competition that 
drives innovation and investment. The Communications Act has long 
required the Commission to examine closely the impact of spectrum 
aggregation on competition, innovation, and the efficient use of 
spectrum to ensure that spectrum is allocated and assigned in a manner 
that serves the public interest, convenience and necessity, and avoids 
the excessive concentration of licenses. In recent years, the 
Commission has considered in more detail and largely in the context of 
its case-by-case analysis of secondary market transactions how 
distinctions among spectrum bands affect competition in the provision 
of next-generation mobile broadband services.
    26. In today's marketplace, in many service areas currently 
suitable and available below-1-GHz spectrum is disproportionately 
concentrated in the hands of larger nationwide service providers: The 
two largest providers hold 73 percent of the low-band spectrum. 
Particularly in the context of the once-in-a-generation Incentive 
Auction, the Commission finds that there is a reasonably foreseeable 
risk of not achieving its various section 309(j) goals whether or not 
leading providers are motivated by foreclosure strategies. The 
Commission concludes that if the Commission do not act at this time to 
ensure the highest use of low-band spectrum, the competitive choices

[[Page 39981]]

available to wireless consumers will likely be substantially less 
attractive. The Commission therefore finds it essential to establish 
clear and transparent policies that will preserve and promote 
competition in the future, promote the efficient use of spectrum, 
ensure competitive mobile broadband service in rural areas, and avoid 
an excessive concentration of licenses. The Commission finds that 
excessive concentration in the allocation of relatively scarce below-1-
GHz spectrum, given ever increasing consumer demand for more bandwidth-
intensive services, would substantially harm the public interest and 
indeed, would create a significant risk in the future of an 
insufficient number of service providers with a network capable of 
satisfying consumer demand.
    27. The Commission finds that the promotion of competition, variety 
of licensees, rural coverage, and consumer choice in the mobile 
marketplace, as well as in the future, crucially depends upon multiple 
providers having access to the low-band spectrum they need to operate 
and vigorously compete. The Commission also finds that the Commission 
must consider the potential for anticompetitive results if the 
concentrated holdings of below-1-GHz spectrum are not addressed. The 
Commission cannot ignore the possibility of diminished competition in 
the future, both from rivals' costs being raised and from foreclosure. 
Further, the Commission finds that the burden that some providers may 
experience by limits on their ability to acquire increasing amounts of 
below-1-GHz spectrum, when tailored to the minimum the Commission 
believed necessary to promote competition, will be outweighed by the 
public interest benefits that will flow from the preservation and 
promotion of robust and sustainable competition. By adopting clear and 
transparent spectrum aggregation limits, the Commission aim to ensure 
that American consumers have meaningful choices among multiple service 
providers in the future.

II. Changes to the Spectrum Screen

    28. The Commission retains the current standard for whether 
particular bands should be included in the spectrum screen--
``suitable'' and ``available'' in the near term for the provision of 
mobile telephony/broadband services. The Commission determines that the 
following spectrum should be added to the spectrum screen: The 600 MHz 
band (at the conclusion of the Incentive Auction), Advanced Wireless 
Services in the 2000-2020 MHz and 2180-2200 MHz spectrum bands (AWS-4), 
H Block, additional BRS spectrum, the majority of the EBS spectrum, and 
the AWS-3 band (on a market-by-market basis as it becomes 
``available''). The Commission also determines that it should not 
include the Upper 700 MHz D Block and a certain amount of the SMR 
spectrum, both of which previously have been included.

A. Standard for Inclusion of Bands

    29. When assessing spectrum aggregation in its review of wireless 
transactions, the Commission evaluates the current spectrum holdings of 
the acquiring firm that are ``suitable'' and ``available'' in the near 
term for the provision of mobile telephony/broadband services. 
Suitability is determined by whether the spectrum is capable of 
supporting mobile service given its physical properties and the state 
of equipment technology, whether the spectrum is licensed with a mobile 
allocation and corresponding service rules, and whether the spectrum is 
committed to another use that effectively precludes its uses for mobile 
services. Spectrum is considered ``available'' if it is ``fairly 
certain that it will meet the criteria for suitable spectrum in the 
near term, an assessment that can be made at the time the spectrum is 
licensed or at later times after changes in technology or regulation 
that affect the consideration.''
    30. In the Mobile Spectrum Holdings NPRM, 77 FR 61330, October 9, 
2012, the Commission sought comment on whether to continue to consider 
spectrum based on the suitability and availability standard or whether 
to consider other factors and asked for any legal, economic, and 
engineering justifications to support existing or modified criteria to 
determine the suitability and availability standard. The Commission 
also sought comment on the application of the relevant factors to 
particular spectrum bands and which spectrum bands should be included 
in the Commission's spectrum analysis.
    31. The Commission retains the current definition. The Commission 
finds that the current suitable and available standard has worked well 
to identify new spectrum to be included in the spectrum screen, and the 
record does not provide persuasive evidence to support modifying the 
current suitability and availability standard. Any narrower definition 
such as ``actually'' or ``imminently'' available would preclude 
relevant spectrum from being accounted for in its analysis of spectrum 
aggregation as the Commission review secondary market wireless 
transactions.

B. 600 MHz Band

    32. The Commission finds that the 600 MHz Band is suitable for the 
provision of mobile telephony/mobile broadband services. In the 
Incentive Auction Report and Order, the Commission establishes rules to 
implement the Incentive Auction and to govern the use of the 600 MHz 
Band for the provision of mobile wireless services and adopts a band 
plan that facilitates wireless broadband deployment operations. The 
Commission also finds that the 600 MHz Band is available for the 
provision of mobile telephony/mobile broadband services, citing the 
framework for transitioning incumbent broadcasters from the 600 MHz 
Band within 39 months of the close of the auction set forth in the 
Incentive Auction Report and Order. Given this concrete transition 
framework, the relative clarity regarding the availability of this 
spectrum, and the importance of this band to the mobile wireless 
marketplace going forward, the Commission anticipates that the spectrum 
cleared at auction is likely to begin having a competitive impact very 
shortly after the auction ends. As a result, the Commission will 
consider the 600 MHz Band to be available upon the release of the 
Channel Reassignment PN after conclusion of the Incentive Auction. The 
amount of repurposed 600 MHz Band spectrum added to the spectrum screen 
will be equal to the total megahertz amount of spectrum repurposed for 
flexible use wireless licenses.

C. Advanced Wireless Service

1. AWS-4 Spectrum
    33. The Commission finds that the 40 megahertz of spectrum in the 
AWS-4 band is suitable and available for the provision of mobile/
telephony broadband services, and therefore should be included in the 
spectrum screen. In the AWS-4 Report and Order, the Commission adopted 
licensing, operating, and technical rules for stand-alone terrestrial 
mobile wireless operations in the AWS-4 band, which already included an 
allocation for mobile use, and took other actions to remove regulatory 
barriers to mobile broadband use of the AWS-4 band, as described above. 
The Commission also determined that it would assign AWS-4 licenses to 
DISH, as the incumbent MSS operator in that spectrum, and established a 
concrete, proven process for efficient relocation of incumbent 
operations from 2180-2200 MHz. In light of these Commission actions, 
the Commission finds that the 40 megahertz

[[Page 39982]]

in the AWS-4 band should be included in the spectrum screen going 
forward.
    34. The Commission rejects argument that it should include only 35 
out of the 40 megahertz of AWS-4 spectrum because of the stringent 
technical restrictions placed on AWS-4 operations in 2000-2005 MHz to 
protect adjacent operations in the upper portion of the H Block (1995-
2000 MHz). Given the flexibility provided in the AWS-4 Report and Order 
allowing these technical restrictions on AWS-4 operations in 2000-2005 
MHz to be modified by commercial agreements between licensees of the 
AWS-4 band and the H Block, and the fact that DISH now holds all AWS-4 
and H Block licenses, the Commission concludes that any potential 
interference issues between 2000-2005 MHz and 1995-2000 MHz should be 
sufficiently resolved so that the Commission should count 2000-2005 MHz 
in the spectrum screen along with the other 35 megahertz of AWS-4 
spectrum.
2. H Block
    35. The Commission finds that the H Block spectrum is suitable and 
available for the provision of mobile/telephony broadband services, and 
therefore should be counted in the spectrum screen. In the H Block 
Report and Order (78 FR 50214, August 16, 2013), the Commission 
explained that through the adoption of service rules for this band, the 
Commission increased the nation's supply of spectrum for flexible-use 
services, including mobile broadband, and in particular would extend 
the widely deployed broadband PCS band used by numerous providers to 
offer mobile service across the United States. The Commission also 
found that, consistent with the technical rules it adopted, the use of 
both the 1915-1920 MHz band and the 1995-2000 MHz band can occur 
without causing harmful interference to broadband PCS downlink 
operations at 1930-1995 MHz. In light of these conclusions, along with 
the recent completion of the H Block auction and the fact that 
incumbent licensees in these bands previously were cleared by UTAM, 
Inc. and by Sprint, the Commission finds that the H Block should be 
included in the spectrum screen going forward.
3. AWS-3 Bands
    36. The Commission finds that the AWS-3 bands (1695-1710 MHz, 1755-
1780 MHz, and 2155-2180 MHz) are suitable for the provision of mobile 
telephony/mobile broadband services. In the recent AWS-3 Report and 
Order, the Commission amended the Allocation Table to include a mobile, 
non-Federal allocation for the 1695-1710 MHz and 1755-1780 MHz bands, 
which already applied to the 2155-2180 MHz band and found that 
licensing AWS-3 bands in a combination of 5 and 10 megahertz blocks 
aligns well with a variety of wireless broadband technologies, 
including LTE, Wideband Code Division Multiple Access (WCDMA), HSPA, 
and LTE-advanced. The Commission concluded that pairing uplink/mobile 
transmit operations in the 1755-1780 MHz band with downlink operations 
in the 2155-2180 MHz band would be compatible with similar operations 
in the adjacent AWS-1 band, effectively creating a combined 140 
megahertz band. Further, the Commission observed that no regulation 
would prohibit licensees from pairing the unpaired 1695-1710 MHz uplink 
band with another present or future licensed downlink band. Given the 
anticipated use of the AWS-3 bands for mobile broadband service, either 
as an extension of the AWS-1 band or potentially in combination with 
other AWS bands, the Commission concludes that the AWS-3 bands are 
suitable for the provision of mobile telephony/mobile broadband 
service.
    37. The Commission also finds that the AWS-3 bands should be 
considered available for mobile telephony/mobile broadband services on 
a market-by-market basis in the future, given that the timing of that 
access will depend on the nature of the Federal operations affecting 
each particular market. Commercial operators will have access to the 
1755-1780 MHz and 1695-1710 MHz bands outside of areas where federal 
operations are protected during their transition, inside areas where 
federal operations are protected during their transition if 
successfully coordinated with the Federal incumbent, in areas in which 
the Federal incumbents have relocated pursuant to their Transition 
Plan, and inside areas in which Federal incumbents are protected 
indefinitely if successfully coordinated with the Federal incumbent. 
Accordingly, given that the effect of Federal incumbent operations on 
the timing and scope of commercial operations will vary from market to 
market, the Commission determines that the 1755-1780 MHz and 1695-1710 
MHz bands will become available on a market-by-market basis in the 
future. In addition, consistent with the paired offering of the 2155-
2180 MHz band with the 1755-1780 MHz band, the Commission will count 
the 2155-2180 MHz band as available for purposes of the spectrum screen 
at the same time the Commission counts the 1755-1780 MHz band in the 
particular market, consistent with its approach to the paired AWS-1 
band.
    38. The Commission notes that the timing and the extent of access 
by commercial licensees to the 1755-1780 MHz and 1695-1710 MHz bands in 
particular markets will depend, in part, on the timelines to be set in 
the Transition Plans for relocating Federal incumbents, which will be 
made publicly available. In light of the importance of this band in 
adding capacity spectrum for mobile wireless providers to deploy next-
generation networks, and the timelines to be set in the Transition 
Plans for different systems in different markets, the Commission will 
count the 1755-1780 MHz and 1695-1710 MHz bands in the spectrum screen 
in a particular market once all relocating Federal incumbent systems in 
that market are within three years of completing relocation, according 
to the Transition Plans. The Commission notes that the timing and the 
extent of access by commercial licensees to these AWS-3 bands also will 
depend on successful coordination with federal systems during the 
transition process and the Federal systems that will not be relocating 
from these bands. However, given that the nature and timing of the 
coordination will be the subject of two-party private discussions 
between commercial licensees and Federal incumbents and will vary from 
market to market, from licensee to licensee, and from system to system, 
the Commission will not base the timing of when the Commission count 
AWS-3 spectrum to be available in a particular market on the status of 
coordination with non-relocating Federal incumbents. The Commission 
notes that the Commission will count the 2155-2180 MHz band in the 
spectrum screen for a particular market at the same time the Commission 
counts the 1755-1780 MHz and 1695-1710 MHz bands in that market, for 
the reasons indicated above.

D. Big LEO Bands

    39. The Commission declines to add to the spectrum screen Big LEO 
MSS spectrum in the 2483.5-2495 MHz and 1610-1617.775 MHz ranges, 
noting that Globalstar's ATC authority to operate terrestrial base 
stations and mobile terminals using this spectrum under the authority 
of a waiver granted in 2008 was suspended in 2010 and none of these 
proposed changes have been acted on by the Commission. Thus, the 
Commission declines to add this Big LEO MSS spectrum to the spectrum 
screen at this time. The Commission distinguishes this decision from 
its

[[Page 39983]]

determination to add to the spectrum screen the AWS-4 band (2000-2020 
MHz and 2180-2200 MHz), for which the Commission has taken a number of 
actions to make the band suitable and available for mobile telephony/
mobile broadband. Specifically, for the AWS-4 band, the Commission has 
added a mobile allocation, adopted licensing rules for stand-alone 
terrestrial mobile wireless operations, and assigned the spectrum to 
the incumbent MSS operator, DISH.

E. BRS/EBS Bands

    40. Background. The 194 megahertz in the 2496-2690 MHz band (2.5 
GHz) comprises (1) 73.5 megahertz licensed to commercial operators in 
the BRS band; (2) 112.5 megahertz licensed to eligible educational 
institutions or non-profit educational organizations in the EBS band; 
and (3) 8 megahertz licensed to BRS or EBS as guard bands dividing the 
lower, middle, and upper band segments of the 2.5 GHz.
    41. In 2008, in the Sprint-Clearwire Order, the Commission decided 
to include in the spectrum screen 55.5 megahertz of BRS spectrum in the 
upper band segment, in those markets in which the transition to the new 
band plan was complete. The Commission observed that 2.5 GHz licensees 
had made substantial progress in the prior few years in transitioning 
to the new band plan, finalizing the WiMAX standards, developing 
equipment, and formulating their plans for using the 2.5 GHz band to 
provide service. The Commission declined to include in the spectrum 
screen the 12 megahertz of BRS spectrum in the middle band segment 
(``MBS'') due to concerns of interference from legacy high-power video 
operations, stating it lacked sufficient information ``to determine the 
extent to which MBS is in fact available for mobile telephony/broadband 
services.'' The Commission also declined to include in the spectrum 
screen the BRS Channel-1 (2496-2502 MHz), which is not contiguous to 
the 55.5 megahertz of BRS spectrum that was included, finding that the 
Channel does not fit into the contemplated WiMAX deployment plans. 
Further, the Commission excluded from the screen the 8 megahertz of 
guard bands because they are secondary to adjacent-channel operations 
and they are too narrow to be used unless they were all aggregated in a 
market.
    42. The Commission currently does not include in the screen any EBS 
spectrum, which is licensed to eligible educational entities who can 
lease spectrum to commercial operators subject to the requirement, 
inter alia, to reserve at least five percent of digital transmission 
capacity for educational purposes. In the Sprint-Clearwire Order, it 
declined to include EBS spectrum in the screen, observing that ``the 
primary purpose of EBS is to further the educational mission of 
accredited public and private schools, colleges and universities 
providing a formal educational and cultural development to enrolled 
students through video, data, or voice transmissions.'' The Commission 
noted that, while educational licensees are allowed to lease their 
excess capacity to commercial operators, leasing is subject to various 
special requirements designed to maintain the primary educational 
character of services provided using EBS spectrum. In addition, the 
Commission recognized that other elements of the EBS licensing regime, 
such as its solely site-specific character, with the absence of any 
licensee in various unassigned EBS ``white spaces,'' complicate use of 
this spectrum for commercial purposes. Further, the Commission 
indicated that it was sensitive to the concerns raised by EBS licensees 
that potential divestitures, in response to spectrum aggregation 
concerns relating to competition among commercial services, could 
disproportionately harm EBS licensees.
    43. In subsequent transaction reviews, the Commission declined to 
add EBS or additional BRS spectrum to the spectrum screen, finding 
either that the circumstances had not sufficiently changed from Sprint-
Clearwire Order or that the instant rulemaking proceeding is a more 
appropriate place to evaluate this issue. In the context of reviewing 
the SoftBank-Sprint-Clearwire transaction, however, the Commission did 
consider arguments on the record regarding the competitive effect of 
Sprint obtaining 100 percent stock ownership in and de facto control of 
Clearwire's BRS and EBS spectrum holdings, finding competitive harm 
unlikely.
    44. Discussion. The Commission finds that it is necessary to modify 
the amount of 2.5 GHz spectrum the Commission currently includes in the 
screen to reflect today's marketplace realities. The Commission will 
update the spectrum screen to increase the amount of 2.5 GHz spectrum 
from 55.5 megahertz to 156.5 megahertz. The Commission will add the 12 
megahertz in the two MBS BRS channels, as well as 89 megahertz of EBS 
spectrum, which represents most of the EBS spectrum, adjusted to 
reflect white space and education use elements. The Commission will 
continue to exclude the six megahertz in BRS Channel 1 and the guard 
bands.
    45. As an initial matter, the Commission observes that Sprint 
announced its intent to integrate its 2.5 GHz spectrum throughout its 
network to provide mobile broadband service. Sprint recently announced 
its next generation service ``Sprint Spark,'' an enhanced LTE network, 
which it plans to deploy over the next three years using its SMR, PCS, 
and 2.5 GHz spectrum. The Commission finds that based upon how the 2.5 
GHz band is being used today, and will be used in the near term; the 
majority of the band is suitable and available for mobile telephony/
mobile broadband services.
    46. With respect to BRS spectrum, the Commission finds that, in 
addition to the 55.5 megahertz currently counted in the screen, the 
Commission should include 12 megahertz of BRS MBS spectrum. The 
Commission recognizes that legacy video operations in the MBS, once 
considered a significant impediment to the deployment of cellularized 
operations in the MBS, are now no longer a barrier to deploying mobile 
broadband service in the vast majority of markets. The Commission notes 
that Sprint recently has acknowledged that BRS MBS channels are ``more 
routinely available'' for mobile broadband use. Accordingly, the 
Commission includes the 12 megahertz of BRS MBS spectrum in the screen.
    47. However, the Commission will continue to exclude the 6 
megahertz BRS Channel 1 (2496-2502 MHz). The proponents of including 
BRS Channel 1 in the screen have not demonstrated any material change 
in circumstances since 2008 with respect to that channel and the 
Commission acknowledges Sprint's concern that BRS Channel 1 is not 
contiguous with the other BRS channels and therefore is not conducive 
to the provision of mobile telephony/mobile broadband service.
    48. With respect to EBS spectrum, the Commission declines to 
continue its policy of excluding all EBS spectrum. Leasing in and of 
itself does not preclude the spectrum from meeting the suitable and 
available standard. The Commission does not find that the differences 
in propagation characteristics between the 2.5 GHz band and lower 
frequency spectrum should result in its continued exclusion of the 2.5 
GHz band from the spectrum screen for purposes of its competitive 
review. Nor does the Commission agree with Sprint that the aggregation 
of 20 megahertz of this band is a necessary precursor to counting EBS 
in the screen. The benefit of contiguous holdings in a band is not a 
factor unique to EBS

[[Page 39984]]

spectrum that warrants excluding EBS holdings from the screen in cases 
where such contiguity is not achieved.
    49. Although the Commission finds that EBS spectrum generally is 
suitable and available for mobile telephony/mobile broadband services, 
the Commission agrees with Sprint that there are certain factors unique 
to EBS that warrant not including all of the EBS spectrum in the 
screen. The Commission will continue to exclude the five percent of the 
EBS capacity that is reserved for educational uses. The Commission 
remains committed to EBS spectrum serving educational purposes. 
Originally, the 2500-2690 MHz band was allocated for ITFS service and 
``established to provide formal education and cultural development in 
aural and visual form to students enrolled in accredited public and 
private schools, colleges and universities.'' The Commission continues 
to support the education mission of accredited public and private 
schools, colleges, and universities providing a formal educational and 
cultural development to enrolled students through video, data, or voice 
transmissions. Therefore, as a starting point, the Commission will 
include 95 percent, or approximately 107 megahertz, of EBS spectrum in 
the screen.
    50. With EBS spectrum licensed on a site-specific basis, certain 
areas exist where the Commission has not assigned a license to an 
educational entity. And no educational entity has been able to apply 
for a license for an EBS white space since 1995. Therefore, no 
commercial wireless provider has ever had the opportunity to lease EBS 
spectrum in that area. Therefore, white spaces can present certain 
obstacles for providing reliable, wide-area coverage. The Commission 
finds it reasonable to discount for white space when including EBS 
spectrum in the screen.
    51. Given the complexity of calculating a white space discount on a 
market-by-market basis, Sprint proposes a uniform, nationwide EBS white 
space discount for administrative practicability and regulatory 
certainty. Sprint calculated that across all EBS channels, an average 
of approximately 16.5 percent of the population is located in EBS white 
space and therefore proposes to use a 16.5 percent discount. The 
Commission agrees that a nationwide discount is the best option for 
applying a white space discount for EBS spectrum and find Sprint's 
proposal reasonable. While as Verizon Wireless notes, using a 
nationwide average may in some instances undercount EBS white space in 
some markets and overcount EBS white space in other markets, the 
Commission finds that using an average across all markets is a 
reasonable method, which balances administrative efficiency with the 
complexity of a precise market-by-market calculation. Thus, after 
taking the discount into consideration, of the initial 107 megahertz of 
EBS spectrum, the Commission will include 89 megahertz of EBS spectrum 
in the screen. As discussed in Section VI.G below, the Commission 
declines to further weight EBS spectrum, or other spectrum bands, based 
on propagation characteristics.

F. Upper 700 MHz D Block

    52. In light of Congress' reallocation of the Upper 700 MHz D Block 
spectrum (758-763 MHz, 788-793 MHz) for public safety use--and the 
subsequent steps taken by the Commission and the Public Safety and 
Homeland Security Bureau to effectuate the reallocation and licensing 
of this spectrum for public safety--the Commission finds that the 10 
megahertz previously designated as the Upper 700 MHz D Block is no 
longer suitable and available for the provision of mobile telephony/
mobile broadband services. Therefore, going forward, the Commission 
will exclude from the spectrum screen that 10 megahertz (758-763 MHz, 
788-793 MHz) that currently is part of the screen, along with the 
adjacent public safety broadband spectrum that is also now licensed to 
FirstNet (763-768 MHz, 793-798 MHz), which was not previously counted 
in the initial spectrum screen.
    53. The Commission notes that, under the Spectrum Act, FirstNet is 
permitted to provide access to the 20 megahertz of Public Safety 
Broadband spectrum to commercial entities through certain ``covered 
leasing agreements.'' The Commission will not add to the screen any of 
this spectrum merely because FirstNet has entered into leasing 
arrangements contemplated by the Act. Deployment of this spectrum is 
essential to the critical statutory goal of deploying a nationwide 
interoperable public safety broadband network, and the Commission wants 
to provide equal incentives to all commercial operators to partner with 
FirstNet to make this goal a reality.

G. SMR Bands

    54. In 2004, the Commission adopted a new band plan for the 800 MHz 
band to ``address the [then] ongoing and growing problem of 
interference to public safety communications in the 800 MHz band.'' The 
interference problem was caused ``by a fundamentally incompatible mix 
of two types of communications systems: Cellular-architecture multi-
cell systems . . . and high-site non-cellular systems.'' To provide 
immediate relief, the Commission implemented technical standards that 
defined unacceptable interference in the 800 MHz band, while also 
reconfiguring the band to separate commercial wireless systems from 
public safety and other high site systems. Pursuant to the band 
reconfiguration, the Commission eliminated the interleaving of public 
safety and commercial channels in the 800 MHz band and separated 
cellularized multi-cell and non-cellularized high-site systems within 
the band.
    55. Under the reconfiguration plan, Nextel (now Sprint) was 
required to vacate the 806-817 MHz and the 851-862 MHz band segments 
and relocate to 817-824/862-869 MHz. The Commission had designated the 
upper portion of the 800 MHz band (817-824 MHz/862-869 MHz) for 
Enhanced Specialized Mobile Radio (ESMR) systems and designated the 
lower portion of the 800 MHz band (806-815 MHz/851-860 MHz) for use by 
public safety, Critical Infrastructure Industries (CII), and other non-
cellular systems.
    56. The Commission eliminates from inclusion in the screen 7.5 
megahertz in the 800 MHz Band because, after the Commission 
reconfigured the band, that spectrum is no longer licensed for 
commercial, cellularized operations. The Commission also eliminates the 
remaining 5 megahertz in the 900 MHz band that is narrowly-channelized 
in 125 kHz blocks and not adjacent to the remaining 14 megahertz of SMR 
spectrum that is licensed for and considered suitable and available for 
the provision of mobile telephony/mobile broadband services. Therefore, 
going forward, the Commission finds only 14 megahertz of SMR spectrum 
is suitable and available for the provision of mobile telephony/mobile 
broadband services and will be included in the screen.

III. Licensing Through Competitive Bidding

    57. The Commission concludes that it is in the public interest, for 
auctions, to replace the current case-by-case approach of evaluating 
long form applications of winning bidders with a determination of 
whether a band-specific spectrum holding limit should apply ex ante to 
the licensing of particular bands through competitive bidding. In the 
R&O, the Commission finds that the Commission should determine what if 
any spectrum holding limitations should affect the licensing of

[[Page 39985]]

particular bands through competitive bidding before the relevant 
competitive bidding process begins for that band. The Commission 
determines certain guidelines that the Commission will consider in 
making such determinations prior to the beginning of the competitive 
bidding process for a particular band, which generally will be made in 
the service rulemakings for those bands, enabling the Commission to 
take into account all relevant objectives specific to the bands in 
question and competitive bidding process. Given the proximity of the 
AWS-3 auction and Incentive Auction, the Commission makes 
determinations regarding whether to adopt, in the context of this 
rulemaking, any mobile spectrum holdings limits for the licensing of 
these bands through competitive bidding. In particular, based on the 
record in this proceeding and in the two service rulemakings, as well 
as the statutory goals set forth in the Communications Act and the 
Spectrum Act, the Commission reserves spectrum in the forward auction 
for the 600 MHz Band licenses in order to ensure against excessive 
concentration in holdings of below-1-GHz spectrum, and the Commission 
declines to adopt any mobile spectrum holding limits for the licensing 
of the AWS-3 bands through competitive bidding.

A. Ex Ante Application of Mobile Spectrum Holding Limits to the 
Licensing of Spectrum Bands Through Competitive Bidding

    58. In the Mobile Spectrum Holdings NPRM, the Commission sought 
comment on general approaches to address mobile spectrum policies at 
auction, including whether to retain its current case-by-case approach 
or adopt a bright-line limit. The Commission also sought comment on the 
costs and benefits of applying a case-by-case approach to initial 
licenses acquired at auction and whether it affords participants 
sufficient certainty to determine whether they would be allowed to hold 
a given license post-auction.
    59. The Commission concludes that it is in the public interest to 
replace its post-auction case-by-case analysis of the licensing of 
spectrum bands through competitive bidding with a determination of 
whether a band-specific mobile spectrum holding limit is necessary to 
carry out the duties under the Communications Act and, if so, to 
establish an ex ante application of that limit to the competitive 
bidding for that band.\1\ The Commission finds that upfront, clear 
determination, instead of case-by-case analysis post-auction, would 
provide potential bidders with greater certainty in the auction process 
regarding how much spectrum they would be permitted to acquire at 
auction. Providing such certainty is consistent with Section 
309(j)(3)(E) of the Communications Act, which emphasizes the need for 
clear bidding rules ``to ensure that interested parties have a 
sufficient time to develop business plans, assess marketplace 
conditions, and evaluate the availability of equipment for the relevant 
services.''
---------------------------------------------------------------------------

    \1\ In subsequent secondary market transactions, the licenses 
acquired at auction will be included in the application of our 
revised spectrum screen when the spectrum is deemed suitable and 
available for inclusion in the screen.
---------------------------------------------------------------------------

    60. To the extent that the Commission adopts a mobile spectrum 
holding limit for the licensing of a particular band through 
competitive bidding, applying the limit ex ante would provide greater 
certainty and efficiency in the process of licensing through 
competitive bidding, which would be particularly important for complex 
auctions like the Incentive Auction. Upfront, bright-line 
determinations would streamline the post-auction review of license 
applications, which should allow winning bidders to receive their 
licenses more quickly and proceed to deploy service using the acquired 
spectrum. The application of a mobile spectrum holding limit ex ante 
would avoid certain challenges in trying to remedy concerns after post-
auction competitive review. If the Commission were to make a finding 
post-auction that the acquisition of spectrum by a winning bidder would 
be likely to cause competitive harm, it could compel abandonment of the 
license application or divestiture of the license won at auction, which 
could create incentives for bidder behavior that would undermine the 
goals of the auction. Alternatively, divestiture of another license 
from the bidder's pre-auction spectrum holdings might not address the 
Commission's competitive concerns with aggregation of the spectrum made 
available at auction, especially if the spectrum the winning bidder 
would propose to divest does not have similar characteristics of the 
spectrum acquired in the auction.
    61. The Commission finds that, for competitive review of spectrum 
licenses acquired through competitive bidding, the benefits of a 
bright-line ex ante application of a mobile spectrum holding limit to 
the competitive bidding for those licenses outweigh any costs 
associated with any perceived loss of flexibility that the existing 
post-auction review might afford. The Commission notes that a case-by-
case review of spectrum licenses acquired through secondary markets 
continues to be appropriate, as discussed below.
    62. The Commission finds that the determination of whether to apply 
any mobile spectrum holding limits to the licensing of a particular 
band through competitive bidding, and if so the scope of such limits 
and policies, should be clearly specified sufficiently in advance of 
the auction. This approach would afford a prospective bidder sufficient 
time to develop a bidding strategy based on the mobile spectrum 
holdings determination adopted for an upcoming auction, while allowing 
the Commission to consider the unique circumstances of each spectrum 
band auction when making its determination.
    63. The Commission would evaluate a number of factors in 
considering whether to adopt a mobile spectrum holdings limit for the 
licensing of a particular band through competitive bidding and, if so, 
what type of limit to apply. As an initial matter, its evaluation will 
encompass the ``broad aims of the Communications Act,'' which include, 
among other things, preserving and enhancing competition in relevant 
markets, accelerating private sector deployment of advanced services, 
and generally managing the spectrum in the public interest. Its 
determination will help carry out its duties under the Communications 
Act, serving the public interest. Its public interest analysis in this 
context also may entail assessing whether a particular auction specific 
policy will affect the quality of communications services or result in 
the provision of new or additional services to consumers. Moreover, the 
Commission must consider any other statutory goals and directives 
applicable to a particular spectrum band being licensed by competitive 
bidding.
    64. The Commission will consider whether the acquisition at auction 
of licenses to use a significant portion of spectrum by one or more 
providers would potentially harm the public interest by reducing the 
likelihood that multiple service providers would have access to 
sufficient spectrum to compete robustly in the provision of mobile 
telephony/mobile broadband service. This determination will be based on 
several factors, including total amount of spectrum to be assigned, 
characteristics of the spectrum to be assigned, timing of when the 
spectrum could be used for mobile telephony/mobile broadband services, 
the specific rights being granted to licensees of the spectrum, and the 
extent to which

[[Page 39986]]

competitors have opportunities to gain access to alternative bands that 
would serve the same purpose as the spectrum licenses at issue.

B. 600 MHz Band Incentive Auction

    65. For the Incentive Auction, the Commission establishes a market-
based spectrum reserve of up to 30 megahertz in each license area 
designed to ensure against excessive concentration in holdings of low-
band spectrum--a reserve that includes safeguards to ensure that all 
bidders bear a fair share of the cost of the Incentive Auction. The 
market-based reserve balances the need to meet the requirements for 
concluding the Incentive Auction with the competition goals discussed 
above.
    66. In the Mobile Spectrum Holdings NPRM, the Commission sought 
comment on whether to adopt limits on the amount of spectrum that 
entities could acquire in the context of spectrum auctions mandated by 
the Spectrum Act. In the Incentive Auction NPRM, the Commission sought 
comment on what, if anything, it should do to meet the statutory 
requirements of section 309(j)(3)(B) and promote the goals of the 
Incentive Auction. For instance, the Commission noted that ``section 
309(j)(3)(B)'s directive to avoid excessive concentration of licenses 
might militate in favor of a rule that permits any single participant 
in the auction to acquire no more than one-third of all 600 MHz Band 
spectrum being auctioned in a given licensed area.''
    67. The amount of repurposed spectrum depends on the outcome of the 
reverse and forward auction components of the Incentive Auction. The 
reverse and forward auctions will be integrated in a series of stages. 
Each stage will consist of a reverse auction and a forward auction 
bidding process. Prior to the first stage, the initial spectrum 
clearing target will be determined based on broadcasters' collective 
willingness to relinquish spectrum usage rights at the opening prices 
offered to them. The first stage reverse auction bidding rounds will 
determine the total amount of incentive payments necessary in 
connection with the initial clearing target. The forward auction 
bidding process will follow. If the final stage rule described below is 
satisfied, the forward auction bidding will continue until there is no 
excess demand for 600 MHz Band licenses. If the final stage rule is not 
satisfied, additional stages will be run, with progressively lower 
spectrum targets in the reverse auction and less spectrum available in 
the forward auction until the rule is satisfied.
    68. The final stage rule is a reserve price with two components, 
both of which must be satisfied. The first component requires that the 
prices for licenses in the forward auction meet or exceed a certain 
price benchmark to assure that prices generally reflect competitive 
market values for comparable spectrum licenses. The first component 
consists of alternative conditions, depending on the clearing target 
for the particular stage in which it is being applied. The alternative 
formulations recognize that per-unit market prices for spectrum 
licenses may decline consistent with an increase in supply. The price 
and spectrum clearing benchmarks will be established by the Commission 
in the Incentive Auction Procedures PN, after an opportunity for 
additional comment. The second component of the final stage rule 
requires that the proceeds of the forward auction be sufficient to meet 
expenses set forth in the Spectrum Act and any Public Safety Trust Fund 
amounts needed for FirstNet. If the requirements of both components of 
the reserve price are met, then the final stage rule is satisfied.
    69. In the Incentive Auction Report and Order, the Commission 
indicates that, in the coming months, the Commission will solicit 
public input on final auction procedures by Public Notice (``Incentive 
Auction Comment PN''). This Public Notice will include specific 
proposals on crucial auction design issues such as opening prices, 
television channel assignment optimization, how much market variation 
to accommodate in the 600 MHz Band Plan, and benchmarks for 
implementing the final stage rule. Well in advance of the auction, also 
by public notice, the Commission will resolve these implementation 
issues and provide detailed explanations and instructions for potential 
auction participants (``Incentive Auction Procedures PN'').
1. The Need for a Market-Based Spectrum Reserve
    70. Given the importance of multiple providers, including rural and 
regional providers, having access to below-1-GHz spectrum for 
deployment and competition, the Commission concludes that a clear 
mobile spectrum holdings policy for the Incentive Auction is necessary 
to increase access opportunities to the 600 MHz Band. The Commission 
finds that it is appropriate to adopt a market-based spectrum reserve 
for entities that do not currently hold a significant amount of below-
1-GHz spectrum.
    71. The Commission will reserve on a contingent basis, licenses 
covering up to 30 megahertz of spectrum for bidders with spectrum 
holdings, at the deadline for filing a short-form application to 
participate in the forward auction, of less than 45 megahertz, on a 
population-weighted basis, of suitable and available below-1-GHz 
spectrum in a PEA. All bidders, including those unable to bid on 
reserved licenses, will be able to bid on the unreserved licenses. The 
Commission specifies the maximum amount of spectrum that will be 
reserved in each market for eligible entities (``reserve-eligible'' 
entities) in the forward auction under the various band plan scenarios 
identified in the Incentive Auction Report and Order, but the actual 
amount of spectrum reserved will depend on the demand by reserve-
eligible bidders when the auction reaches a trigger (the ``spectrum 
reserve trigger''). The Commission finds that this approach balances a 
number of the key statutory directives, including promoting 
competition, facilitating the deployment of advanced services by making 
spectrum available for flexible use, and sharing the costs of the 
Incentive Auction on a fair and equitable basis.
    72. In reaching its decisions, the Commission must consider a 
number of statutory directives applicable to the Incentive Auction, 
including promoting competition, making spectrum available for flexible 
use, meeting proceeds requirements, and facilitating deployment of 
advanced services. With respect to promoting competition in the mobile 
wireless marketplace, the Commission observes that any of the types of 
limits discussed on the record--spectrum caps based on a provider's 
existing below-1-GHz holdings, equal spectrum caps for all bidders, or 
reserved spectrum--have the potential to promote competition by 
ensuring that in the near future, more providers would hold a 
sufficient mix of spectrum to compete robustly. The Commission finds 
that its market-based spectrum reserve for the Incentive Auction has 
distinct advantages over the other approaches with respect to the other 
statutory directives.
    73. First, the spectrum reserve gives mobile service providers 
significant latitude to bid on spectrum licenses they need in each area 
to meet their network requirements, including providers who are unable 
to bid for reserved spectrum in a particular PEA. Rules that would 
restrict the larger providers to no more than a 5 x 5 megahertz block 
of 600 MHz Band spectrum do not adequately consider the needs of those 
providers for

[[Page 39987]]

additional spectrum to meet the demand of their subscribers in the 
longer term. Nor do such rules adequately consider that efficient 
deployment of services using the 600 MHz Band spectrum would likely 
rely on ensuring that the larger as well as smaller nationwide 
providers having a stake in the development of equipment for the band. 
Spectrum caps also could affect to a certain extent mobile broadband 
providers' flexibility to expand services to meet increasing consumer 
needs.
    74. Second, proposals that would set an individual spectrum cap on 
the amount of 600 MHz Band spectrum for which each provider could 
acquire licenses have greater risk of decreasing forward auction 
proceeds, and thus endangering its ability to repurpose spectrum, 
because it likely would lessen competition between the largest wireless 
providers for spectrum in amounts greater than the cap would permit.
    75. The Commission concludes that its market-based spectrum 
reserve, particularly in the amounts and under the rules the Commission 
adopts is unlikely to reduce competition among bidders and in fact, 
will encourage competition among bidders wanting at least 20 megahertz 
of spectrum, as compared to other potential approaches to mobile 
spectrum holdings limits that could be applied to the Incentive 
Auction. Under the market-based spectrum reserve, every bidder will 
have the opportunity to bid for, and win, at least half of the 600 MHz 
Band spectrum in each market, and at some levels of spectrum made 
available in the forward auction, significantly more than half.
    76. Third, the Commission concludes that its approach would not 
reduce participation in the auction by large providers to a level that 
would reduce the amount of spectrum that can be repurposed by the 
Incentive Auction. The reserved spectrum amount would be contingent 
upon (and subject to a reduction based on) the demand expressed in the 
forward auction by reserve-eligible bidders. If there is insufficient 
demand for reserved spectrum licenses, the amount of reserved spectrum 
would be reduced.
    77. The Commission also finds that its market-based spectrum 
reserve is more likely to achieve its purposes more effectively than 
bidding credits based on the level of spectrum holdings. On balance, 
applying bidding credits based on spectrum holdings as opposed to 
reserving licenses for providers without significant below-1-GHz 
spectrum would not address the Commission's competitive concerns with 
aggregation of the spectrum made available at auction. The Commission 
notes that in the Incentive Auctions Report and Order the Commission 
adopted the bidding credits for the forward auction applicable to small 
businesses. The Commission also stated it will initiate a separate 
proceeding to examine its designated entity (``DE'') rules generally.
    78. The Commission notes that its decision to adopt a 600 MHz Band 
spectrum reserve and to establish the amounts of reserved spectrum 
specified below is based on the current marketplace structure of the 
mobile wireless service industry. If significant changes in the 
marketplace structure occur or a proposed transaction is filed with the 
Commission in the future affecting the top four nationwide providers 
and their spectrum holdings, the Commission will revisit its decisions 
here regarding the reserved spectrum provisions for the 600 MHz Band 
that the Commission adopted. The Commission will review as well whether 
changes should be made to any other decisions in the R&O. The 
Commission also plans to consider in a Further Notice of Proposed 
Rulemaking possible change to certain auction rules relating to joint 
bidding arrangements and strategies in the Incentive Auction. In order 
to allow the Commission to evaluate how certain bidding arrangements 
might affect the Incentive Auction, potential bidders will need to file 
well before the normal deadlines some of the information currently 
required in auction and license application forms.
2. Qualification To Bid on Reserved Licenses
    79. The Commission needs to facilitate access by multiple providers 
to below-1-GHz spectrum is the basis for its adoption of a market-based 
spectrum reserve for the Incentive Auction and, accordingly, the 
Commission finds that a provider's existing below-1-GHz holdings in a 
particular PEA should be the threshold basis for determining whether 
the provider qualifies to bid on reserved spectrum. To qualify to bid 
on reserved licenses in a PEA, an entity must not have an attributable 
interest in 45 megahertz or more, on a population-weighted basis, of 
below-1-GHz spectrum that is suitable and available for the provision 
of mobile telephony/mobile broadband services in that PEA, at the 
deadline for filing a short-form application to participate in the 
Incentive Auction. In its calculation of below-1-GHz spectrum holdings, 
the Commission includes not only the entity's licensed spectrum, on a 
county-by-county basis, but also all long-term spectrum leasing 
arrangements, with spectrum being attributed to both the lessee and 
lessor. Further, it includes in the calculations only the below-1-GHz 
spectrum that the Commission currently considers to be ``suitable'' and 
``available,'' in the modified spectrum screen adopted today, and thus, 
no 600 MHz Band spectrum is included, as although it is suitable, it is 
not considered available until the conclusion of the Incentive Auction. 
The 45 megahertz of below-1-GHz spectrum approximates one-third of the 
134 megahertz of below-1-GHz spectrum that the Commission counts in the 
modified total spectrum screen the Commission adopted. The Commission 
will measure an entity's spectrum holdings on a county-by-county basis 
within a PEA,\2\ and then construct a total county-population-weighted 
below-1-GHz spectrum holding for each entity within the PEA.\3\ As 
discussed below, even if a non-nationwide provider holds approximately 
one-third or more of the suitable and available below-1-GHz spectrum in 
a given market, it will not be precluded from bidding on reserved 
spectrum licenses in any market.
---------------------------------------------------------------------------

    \2\ In the context of secondary market transactions review, the 
Commission typically measures a provider's holdings in a particular 
CMA based on the maximum spectrum holdings in any one county within 
that CMA. Unlike the screen the Commission uses for reviewing 
transactions, the qualification for bidding on reserved spectrum is 
a bright-line test, and PEAs are generally larger in geographic 
scope than the CMAs it uses for competitive review of transactions. 
Given those distinctions, the Commission finds that measuring a 
bidder's below-1-GHz spectrum holdings amount in a given PEA, based 
on the highest below-1-GHz holding amount in any one county within a 
PEA, would not be appropriate.
    \3\ To determine whether an entity is qualified to bid on 
reserved spectrum, its below-1-GHz spectrum holdings are calculated 
by summing (PEA county spectrum holdings x PEA county population 
(using U.S. Census 2010 population data)), and then dividing that 
sum by the total population of the PEA. In its calculations, the 
Commission includes licensed spectrum, on a county-by-county basis, 
as well as all long-term spectrum leasing arrangements, with leased 
spectrum being attributed to both the lessee and lessor. In those 
PEAs where there are existing long-term commercial leases, as the 
Commission attributes the leased spectrum to both the lessee and 
lessor, it increases the total below-1-GHz spectrum amount included 
by the (population-weighted) amount of the lease so that service 
providers' holdings are not overstated.
---------------------------------------------------------------------------

    80. The Commission observes that the 45 megahertz threshold 
(approximately one-third of total below-1-GHz spectrum) to identify 
those who can bid on reserved licenses is consistent with the 
approximately one-third threshold for total spectrum that the 
Commission uses to identify those holdings in local markets that may 
raise particular competitive concerns in the context of

[[Page 39988]]

secondary market transactions, as discussed below. The approximately 
one-third threshold is, based on its experience in numerous 
transactions over the last decade, an effective analytical tool in the 
secondary market context. Similarly, the Commission concludes that a 
threshold of approximately one-third is an effective line of 
demarcation to identify those entities that currently lack significant 
below-1-GHz spectrum holdings and would likely benefit from access to 
the reserved spectrum. In particular, the Commission finds that this 
threshold would help to ensure that multiple providers are able to 
access a sufficient amount of low-band spectrum, which would facilitate 
the extension and improvement of service in both rural and urban areas, 
to the benefit of consumers.
    81. Non-Nationwide Providers. The 45 megahertz holding threshold 
may have substantial effects on non-nationwide providers that could 
outweigh the intended benefits.\4\ In many areas, regional and local 
service providers offer consumers additional choices in the areas they 
serve and provide some constraint on the ability of nationwide 
providers to act in anticompetitive ways to the detriment of consumers. 
Although nationwide providers generally set prices on a national basis, 
there can be significant variation in discounts, service quality, and 
extent of coverage at the local level. Non-nationwide providers are 
also important sources of competition in rural areas, where multiple 
nationwide service providers may have less incentive to offer high 
quality services. Today, 92 percent of non-rural consumers, but only 37 
percent of rural consumers are covered by at least four 3G or 4G mobile 
wireless providers' networks and more than 1.3 million people in rural 
areas have no mobile broadband access. Smaller providers in such areas 
are likely to be more dependent upon the efficiencies gained from the 
unique propagation benefits of 600 MHz spectrum because they are less 
able to subsidize their deployment costs by revenues accrued in more 
densely populated areas where a nationwide subscriber base provides 
them with greater scale economies. Promoting competition by non-
nationwide providers also advances the statutory goals of avoiding 
excessive concentration of licenses, disseminating licenses among a 
wide variety of applicants, and encouraging rapid deployment of new 
wireless broadband technologies to all Americans, including those 
residing in rural areas.
---------------------------------------------------------------------------

    \4\ In the 16th Mobile Wireless Competition Report, the 
Commission observed that there are four nationwide providers in the 
U.S. with networks that cover a majority of the population and land 
area of the country--Verizon Wireless, AT&T, Sprint, and T-Mobile. 
For purposes of this R&O, the Commission refers to other providers--
with networks that are limited to regional and local areas--as 
``non-nationwide providers.''
---------------------------------------------------------------------------

    82. The Commission will permit bidding on 600 MHz reserve spectrum 
by regional and local service providers in all PEAs, including those 
where such a provider holds more spectrum than its 45 megahertz holding 
threshold of the available low-band spectrum. The Commission 
establishes a bright-line rule to address these issues for the same 
reasons set forth above for generally adopting bright line rules on 
spectrum aggregation issues for its 600 MHz Incentive Auction. Non-
nationwide service providers enhance competitive choices for consumers 
in the mobile wireless marketplace, and help promote deployment in 
rural areas. They also present a significantly lower risk of 
effectively denying access of low band spectrum to competitors in order 
to foreclose competition or to raise rivals' costs because of their 
relative lack of resources. Accordingly, the Commission concludes that 
non-nationwide service providers should be eligible to bid on reserved 
spectrum in all markets nationwide.
    83. In sum, to qualify to bid on reserved licenses in a PEA, an 
entity must not hold an attributable interest in 45 megahertz or more 
of below-1-GHz spectrum in a PEA, as described above, or must be a non-
nationwide provider. The Commission will revise the short-form 
application to provide for a certification by an applicant intending to 
bid on reserved spectrum that it meets the qualification criteria. If 
any entity plans to file a pre-auction divestiture application to come 
into compliance with the below-1-GHz holdings threshold, it will have 
to file in sufficient time to qualify by the short-form application 
deadline.
3. Market-Based Amount of Reserved Spectrum
    84. Because the Commission will not know the exact number of blocks 
licensed or their frequencies until the Incentive Auction concludes, 
the 600 MHz Band Plan in the Incentive Auction Report and Order adopted 
a set of band plan scenarios that comprise the 600 MHz Band Plan, one 
of which will serve as the ultimate Band Plan for the 600 MHz Band. 
Consistent with this approach, the Commission specifies in the chart 
below the maximum amount of licensed spectrum that will be reserved in 
each market for eligible entities (``reserve-eligible'' entities) in a 
forward auction for each indicated amount of licensed spectrum at 
initial stage spectrum clearing targets. A spectrum clearing target 
will include licensed spectrum and guard bands; the chart refers only 
to the amount of licensed spectrum included in each target because only 
licensed spectrum is relevant to determination of the reserve. Each 
stage of the Incentive Auction will consist of a reverse auction and a 
forward auction bidding process. Prior to the first stage, the 
Commission will determine the initial spectrum clearing target and will 
run additional stages if necessary. If the auction does not close in 
the initial stage, the maximum amount of reserved licensed spectrum in 
each individual market in subsequent stages will be the smaller of: (1) 
The maximum amount of reserved spectrum in the previous stage, or (2) 
the amount that the reserve-eligible bidders demand at the end of the 
previous stage. For example, if the initial clearing target is 100 
megahertz, the maximum reserve will be 30 megahertz in the initial and 
subsequent stages. By contrast, if the initial spectrum clearing target 
is 60 megahertz, the maximum reserve in the initial and subsequent 
stages will be 20 megahertz. In either case, if the auction fails to 
close at the initial stage, the maximum reserved spectrum in each PEA 
at the second stage will be the smaller of the maximum reserve or the 
amount that reserve-eligible bidders demand at the end of the first 
stage in that market. Correspondingly, the amount of spectrum that an 
unreserved bidder may acquire in subsequent stages will depend on the 
amount that the bidder demanded at the end of the previous stage. The 
actual amount of spectrum reserved will depend on the demand by 
reserve-eligible bidders when the auction reaches a trigger (the 
``spectrum reserve trigger''). Because the actual amount of reserved 
spectrum depends on auction participation, the Commission calls this a 
``market-based spectrum reserve.''

[[Page 39989]]



----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
Licensed Spectrum In the Initial          * 100           90           70           60           50           40
 Clearing Target (in megahertz)...
Minimum Unreserved Spectrum.......           70           60           40           40           40           30
Maximum Reserved Spectrum.........           30           30           30           20           10           10
----------------------------------------------------------------------------------------------------------------
* The maximum amount of reserved licensed spectrum is 30 megahertz for initial clearing targets with more than
  100 megahertz of licensed spectrum.

    85. In determining how much reserved and unreserved spectrum will 
be available, the Commission balances a number of the key statutory 
directives, including promoting competition, facilitating the 
deployment of advanced services by making spectrum available for 
flexible use, and sharing the costs of the Incentive Auction on a fair 
and equitable basis. For the reasons explained above, the Commission 
finds that access to licenses for sufficient spectrum in the 600 MHz 
Band by providers that do not already hold licenses for significant 
amounts of below-1-GHz spectrum is important to the preservation and 
promotion of competition in the mobile wireless marketplace now and in 
the future. At the same time, however, the Commission recognizes that 
the structure of the Incentive Auction presents unique challenges to 
the adoption of a spectrum reserve for reserve-eligible bidders. In 
particular, because the Incentive Auction will rely on market forces to 
determine the amount of spectrum licenses that will be made available 
in the forward auction, the Commission needs to ensure that all bidders 
in the forward auction bear a fair share of the clearing costs 
identified in the reverse auction and the other costs specified in the 
Incentive Auction final stage rule.
    86. The amount of reserved spectrum in the Incentive Auction will 
depend upon bidding in the forward auction. The Commission specifies a 
maximum amount of reserved spectrum in the chart above, but the actual 
amount of spectrum available only to reserve-eligible bidders will be 
determined at a spectrum reserve trigger that fairly distributes the 
responsibility for satisfying the costs of the Incentive Auction among 
all bidders.
    87. The Commission will set the spectrum reserve trigger at the 
point when the final stage rule is satisfied, so that the actual amount 
of reserved spectrum will be based on the quantity demanded by reserve-
eligible bidders in each individual market at that point in the forward 
auction. The amount of reserved spectrum will be the smaller of: (1) 
The maximum amount of reserved spectrum for that stage, or (2) the 
amount demanded by reserve-eligible bidders at the trigger. The 
Commission intends, after opportunity for comment in the Incentive 
Auction Comment PN, to clarify that reserve-eligible bidders will not 
be able to acquire more than 20 megahertz of reserved spectrum in a 
market unless there is another bidder for reserved spectrum in that 
market. Until the spectrum reserve trigger is met, bidding for licenses 
in the forward auction will not distinguish between licenses for 
reserved and unreserved spectrum. Accordingly, all bidders will compete 
for generic licenses in each area--with a single price applying in each 
area to all the licenses in a category of generic licenses--up to the 
point at which the spectrum reserve trigger is reached.
    88. Maximum Amount of Reserved Spectrum. The Commission sets the 
maximum amount of reserved spectrum at 30 megahertz for most of the 
potential amounts of total licensed spectrum made available in the 
forward auction. Setting the maximum amount of reserved spectrum at a 
consistent amount across most levels of total licensed spectrum will, 
among other things, facilitate the repurposing of more spectrum in the 
600 MHz Band, because it provides the opportunity, and creates 
incentives, for all auction participants to bid aggressively to acquire 
more spectrum licenses as the total amount of available spectrum 
increases.
    89. A 30 megahertz maximum spectrum reserve at most band clearing 
scenarios also benefits competition and consumers by giving reserve-
eligible bidders the assurance that, after the spectrum reserve trigger 
is reached, they will have a greater opportunity to purchase licenses 
in the 600 MHz Band. At the same time, its initial maximum reserve 
amounts ensure that a majority of licenses at the beginning of the 
forward auction will be available for bidding by all participants under 
all circumstances. In the Incentive Auction Report and Order, the 
Commission determined that the 600 MHz Band will be licensed in 10 
megahertz (5x5 paired) blocks. Some providers have advocated that 20 
megahertz of contiguous spectrum is particularly valuable for the 
deployment of next-generation networks. A maximum of 30 megahertz of 
reserved spectrum could permit at least two reserve-eligible bidders to 
acquire 600 MHz spectrum licenses for deployment of next-generation 
networks, with one of the bidders potentially acquiring 20 megahertz of 
reserved spectrum for such deployment. Moreover, a maximum of 30 
megahertz of reserved spectrum, an odd number of 10-megahertz blocks, 
will facilitate competition among bidders seeking to acquire 20 
megahertz. In addition, at most levels of total licensed spectrum made 
available in the forward auction, a maximum of 30 megahertz of reserved 
spectrum will leave a significant amount of unreserved spectrum 
available, for which all bidders will have the opportunity to compete.
    90. Accordingly, a maximum spectrum reserve of 30 megahertz for 
most levels of total available spectrum licenses, on balance, will make 
additional low-band spectrum available to multiple providers; ensure 
that all bidders have an opportunity to acquire a stake in the 600 MHz 
ecosystem that will be critical in the future; and facilitate 
competitive bidding. However, if the amount of licensed spectrum at the 
initial stage target is less than 70 megahertz, maintaining a maximum 
of 30 megahertz of reserved spectrum would not be in the public 
interest. Maintaining that amount of reserved spectrum would 
potentially reduce the amount of unreserved spectrum to 20 or even 10 
megahertz, which the Commission deemed to be too low to provide all 
bidders with an adequate opportunity to acquire licenses in the 600 MHz 
Band.
    91. Market-Based Spectrum Reserve. Under the market-based spectrum 
reserve rule, the amount of reserved spectrum in each individual PEA 
will be set at the level demanded by reserve-eligible entities at the 
time the spectrum reserve trigger is satisfied, up to the maximum 
amount of reserved spectrum at the beginning of the stage. Once the 
spectrum reserve is established, bidders will bid separately for 
generic reserved and unreserved spectrum licenses, with reserve-
eligible bidders able to bid for spectrum in either category, and the 
other bidders able to bid only for the unreserved spectrum. For 
instance, if the spectrum reserve trigger is met in a stage with a 
maximum of 30 megahertz of reserved spectrum, if reserve-eligible 
bidders demand only 20 megahertz in a

[[Page 39990]]

given PEA at those prices when the trigger is met, then 20 megahertz 
will be reserved.
    92. The market-based reserve rule would not prevent unreserved 
bidders from acquiring the minimum initial stage amount of unreserved 
spectrum specified in the chart above in subsequent stages of the 
auction, provided they bid actively on that amount of spectrum 
throughout the auction, beginning in the first stage. For example, if 
an unreserved bidder demands 20 megahertz throughout the initial stage 
(including the extended round) but the stage fails, that bidder will be 
eligible to bid for 20 megahertz in the next stage. The Commission 
anticipates that bidding in the most urban areas is likely to be the 
most intense, with the highest bids, and thus that the spectrum reserve 
trigger mechanism the Commission ultimately adopted will mean that 
reserved spectrum in those areas will sell only at substantial prices.
    93. The market-based reserve rule the Commission adopts balances 
the need to meet the requirements for concluding the Incentive Auction 
with the competition goals discussed above. Setting an appropriate 
spectrum reserve trigger for determining how much spectrum will be 
allotted for reserve-eligible bidders will ensure that all bidders, 
those eligible to bid on reserved spectrum and other bidders, 
contribute a fair share to the clearing costs identified in the reverse 
auction and the other costs specified in the Incentive Auction final 
stage rule. The market-based spectrum reserve leverages competition 
across both reserved and unreserved spectrum to provide all bidders 
with the incentive to bid aggressively and repurpose larger rather than 
smaller amounts of spectrum. Further, the contingent nature of the 
reserve will create reserves only in PEAs where there is sufficient 
demand at the point where the spectrum reserve trigger is reached. This 
will ensure spectrum is reserved only where there is demand at market-
based prices and increase the likelihood that the auction will close at 
a higher spectrum target.
    94. In the coming months, the Commission will solicit public input 
in the Incentive Auction Comment PN on procedures for implementing 
certain auction-related decisions made in the Incentive Auction Report 
and Order. Among other things, the Comment PN will seek comment on how 
to establish the details of a spectrum reserve trigger based on the 
final stage rule, in order to fairly distribute the responsibility for 
satisfying the costs of the reverse auction among all bidders. Among 
other things, the Commission will consider whether the trigger should 
be based solely on prices or revenues in the ``major markets'' and, if 
so, how to identify such markets. The Procedures PN will adopt the 
details of its spectrum reserve trigger at the same time that the 
Commission establishes final auction procedures and resolves crucial 
auction design issues, including the benchmarks required to implement 
the final stage rule, opening prices, and how much market variation to 
accommodate in the 600 MHz Band Plan.
4. Holding Period for 600 MHz Band Licenses
    95. The Commission finds that certain restrictions on secondary 
market transactions of 600 MHz Band licenses are necessary in certain 
circumstances. These secondary market restrictions for 600 MHz Band 
licenses will not apply to exchanges of equal amounts of 600 MHz Band 
spectrum in the same market.
    96. First, the Commission recognizes that its goal in adopting the 
spectrum reserve--facilitating access to 600 MHz Band licenses in order 
to ensure against excessive concentration in holdings of low-band 
spectrum--could be undermined if entities that would not be permitted 
to acquire reserved 600 MHz Band licenses in the auction are permitted 
to acquire them after the auction through secondary markets. The risk 
of undermining its goals for competition and the Incentive Auction must 
be balanced, however, against the Commission's general policy of 
promoting flexibility in secondary markets transactions. The Commission 
finds that precluding secondary market transactions of 600 MHz Band 
licenses for six years, which represents the interim buildout period 
for 600 MHz licenses, strikes the appropriate balance to preserve the 
integrity of its market-based spectrum reserve while still permitting 
some flexibility in secondary markets transactions. Accordingly, the 
Commission concludes that, for a period of six years, entities that 
acquired reserved spectrum licenses in the Incentive Auction cannot 
assign or transfer those licenses to, or enter into long-term leases 
regarding those licenses with, entities that would not have been in 
compliance with the reserve-eligible entity requirements on the date 
the short form application was due for the Incentive Auction.
    97. In addition, the Commission notes that its decision to adopt a 
holding period reflects its continuing efforts to avoid excessive 
concentration of licenses not only as a result of the Incentive 
Auction, but also to ensure that secondary market transactions do not 
frustrate the underlying public interest goals of its mobile spectrum 
holdings policies for this band. Aggregation of 600 MHz Band spectrum 
by means of secondary market transactions has the potential to further 
exacerbate its concerns about below-1-GHz spectrum license 
concentration, which must be balanced against the Commission's general 
policy of promoting flexibility in secondary market transactions. 
Accordingly, the Commission will prohibit any transfer, assignment, or 
long-term leasing of any 600 MHz Band licenses (including unreserved 
600 Band licenses) for a period of six years post-auction that would 
result in the acquiring entity holding approximately one-third or more 
of suitable and available below-1-GHz spectrum post-transaction. Given 
that this limit is a bright-line prohibition, the acquiring entity's 
below-1-GHz spectrum holdings will be determined by a population-
weighted methodology.
5. Further Implementation Issues
    98. The Commission will seek comment in the Incentive Auction 
Comment PN on any further implementation issues that may affect its 
market-based spectrum reserve, and whether and if so how the policies 
and rules the Commission adopted should apply or be adjusted based on 
any auction details that might be relevant to the process (e.g., 
auctioning impaired spectrum blocks). The Commission will resolve any 
relevant further implementation in the Incentive Auction Procedures PN.
6. Legal Authority
    99. Section 6404 of the Spectrum Act, codified at 47 U.S.C. 
309(j)(17), provides that the Commission may not ``prevent'' a person 
who is otherwise qualified from ``participating in a system of 
competitive bidding'' under Section 309(j). However, Section 6404 
further provides that ``[n]othing in [the foregoing restriction] 
affects any authority the Commission has to adopt and enforce rules of 
general applicability,'' including without limitation ``rules 
concerning spectrum aggregation that promote competition.''
    100. The Commission finds that its adoption of reserved spectrum 
for the Incentive Auction is fully consistent with its authority under 
Title III and the Spectrum Act. The market-based spectrum reserve that 
the Commission adopted are ``rules of general applicability'' that fall 
under the Spectrum Act's savings clause codified at 47 U.S.C. 
309(j)(17)(B). The term

[[Page 39991]]

``rule of general applicability'' is a term of art; it has an 
established meaning under the Administrative Procedure Act. ``In the 
absence of contrary indication, the Commission assumes that when a 
statute uses . . . a term [of art], Congress intended it to have its 
established meaning.'' The established meaning of the term ``rule of 
general applicability'' is a rule that is not party-specific, that is, 
not a ``rule of particular applicability.'' It is to be contrasted 
with, for example, a named telephone company's rate of return. The rule 
that the Commission adopted would be triggered by the amount of an 
entity's below-1-GHz spectrum holdings; depending upon the particular 
geographic market, eligibility to bid for the reserved spectrum may 
vary. And the mere fact that, in a particular PEA, a specific person 
would not be so eligible does not render the rule one of particular 
applicability. Even a general rule must have potential particular 
effect--otherwise every rule would be ineffective. For similar reasons, 
it need not apply on an industry-wide basis, or apply to all Commission 
auctions. Because the rule that the Commission adopted applies to any 
entity that has the general characteristics identified in the rule, the 
rule is not party-specific.
    101. In addition, by expressly stating that ``[n]othing in 
subparagraph (A) affects any authority the Commission has to adopt and 
enforce . . . rules concerning spectrum aggregation that promote 
competition[,]'' Section 309(j)(17)(B) preserves the Commission's long-
standing authority under Title III of the Communications Act to adopt 
``rules concerning spectrum aggregation that promote competition.'' 
Over the past three decades that the Commission has licensed mobile 
wireless spectrum, Title III authority has been the basis for several 
restrictions that the Commission has adopted regarding spectrum 
aggregation, including ex ante limitations. The Court of Appeals for 
the District of Columbia Circuit has affirmed that Title III grants the 
Commission ``expansive authority'' to regulate mobile wireless 
licenses, and that authority includes its power to regulate spectrum 
concentration in mobile wireless markets.
    102. Because the rules the Commission adopted today fall squarely 
under the historical authority of the Commission under Title III as 
preserved by subparagraph (B), the new prohibition created in 
subparagraph (A) is not applicable. In other words, the Commission 
interprets Section 6404 to preserve the Commission's authority to adopt 
rules of general applicability regarding spectrum aggregation, without 
regard to whether such rules prevent participation in a system of 
competitive bidding.
    103. Even if subparagraph (A) were to apply to an ex ante 
reservation of spectrum, the market-based spectrum reserve that the 
Commission adopted does not violate that provision because it would not 
``prevent'' any entity ``from participating'' in a ``system of 
competitive bidding.'' Supreme Court precedent compels us to interpret 
these terms according to their ordinary meaning. The ordinary meaning 
of ``prevent'' is ``to stop someone from doing something,'' and the 
ordinary meaning of ``participate'' is ``to take part'' or ``to have a 
part or a share in something.'' Thus, the ordinary meaning of the 
phrase ``prevent . . . from participating,'' in context, is that the 
Commission may not stop a person who is otherwise qualified from taking 
part in a system of competitive bidding.
    104. The term ``a system of competitive bidding'' is also a term of 
art that refers broadly to the process for granting licenses through 
competitive bidding, including, identifying classes of licenses to be 
assigned by auction, specifying eligibility and other characteristics 
of such licenses, and designing the methodologies to be used for 
competitive bidding for particular licenses. Thus, participation in a 
``system of competitive bidding'' does not mean that every entity must 
be able to participate in the bidding for every single license or 
spectrum block that may be available in an auction.
    105. The market-based spectrum reserve the Commission adopted will 
permit all bidders to bid for some spectrum licenses in every market, 
while reserving certain spectrum blocks for providers with existing 
holdings of below-1-GHz spectrum of less than 45 megahertz. In a single 
PEA, under every band scenario there will be at least as much 
unreserved as reserved spectrum, and in some scenarios from two to 
three times as much. Its action will satisfy its statutory mandate to 
promote very broad participation in its systems of competitive bidding 
by current providers of mobile services and potential entrants into the 
wireless data and telephony marketplace.
    106. Finally, the Commission determined that it is clear from the 
plain text of Section 309(j)(B)(17) that the Commission has the 
authority to adopt the market-based spectrum reserve in its design of a 
system of competitive bidding. Accordingly, the Commission concluded 
that the market-based spectrum reserve that the Commission adopted does 
not prevent any person from participating in its system of competitive 
bidding in a manner contrary to the Spectrum Act.
    107. The Commission disagrees with arguments that it did not 
provide adequate notice under the APA. First, the Commission inquired 
about an ex ante restriction in the Incentive Auctions NPRM, observing 
that ``section 309(j)(3)(B)'s direction to avoid excessive 
concentration of licenses might militate in favor of a rule that 
permits any single participant in the auction to acquire no more than 
one-third of all 600 MHz spectrum being auctioned in a given license 
area.'' The rule that the Commission adopted is a ``variatio[n] of that 
approach,'' on which the Commission also sought comment. It would 
prevent providers in certain circumstances from bidding on reserved 600 
MHz spectrum in some PEAs in the Incentive Auction. However, all 
providers will be permitted to bid on more than one-third of the 
available spectrum in any PEA. In addition, the Commission specifically 
asked about adoption of a bright-line limits approach in the Mobile 
Spectrum Holdings NPRM, including limits on holdings below 1 GHz and 
band-specific limits. Applying a 600 MHz limit applicable only to 
bidders with significant holdings below 1 MHz also is a logical 
outgrowth of issues identified in the NPRM. Where the Commission asked 
about a one-third limit, it did so ``[a]s [an] example.'' The 
Commission finds that the market-based spectrum reserve the Commission 
adopted is consistent with the Spectrum Act and with its general 
authority under Title III and was adequately noticed under the APA.

C. AWS-3 Auction

    108. In the Mobile Spectrum Holdings NPRM, the Commission sought 
comment on whether to adopt limits on the amount of spectrum that 
entities could acquire in the context of spectrum auctions mandated by 
the Spectrum Act. In the AWS-3 NPRM, the Commission sought comment on 
whether and how to address the mobile spectrum holdings issues to meet 
its statutory requirements pursuant to section 309(j)(3)(B) and its 
goals for the AWS-3 bands.
    109. The Commission finds that, on balance, it is not in the public 
interest to adopt a band-specific mobile spectrum holdings limit for 
the AWS-3 auction. Nothing in the record indicates that without such a 
limitation, opportunities for access to spectrum with similar 
characteristics would be significantly constrained. In particular, the 
Commission emphasizes the availability of a substantial amount of

[[Page 39992]]

comparable high-band spectrum to competitors and the significant 
existing holdings of multiple providers of comparable spectrum. In 
addition, with rising demand for mobile broadband services, increasing 
network capacity is important to all providers, and above-1-GHz 
spectrum is particularly suitable for such needs. The 65 megahertz of 
AWS-3 spectrum that the Commission plans to auction have the potential 
to allow for greater network capacity for all providers to meet this 
demand.
    110. The Commission notes that multiple providers currently have 
access to bands comparable to AWS-3. Moreover, each of the four 
nationwide providers holds a significant amount of this spectrum. This 
is unlike the case with the 600 MHz Band, which has fewer ``coverage 
band'' substitutes (700 MHz and 800 MHz). Moreover, in contrast to 
bands comparable to AWS-3, the bands comparable to the 600 MHz Band are 
held by a limited number of service providers. Accordingly, while it is 
necessary to adopt a 600 MHz Band specific spectrum holding policy, 
such an approach is not necessary for the AWS-3 auction.

IV. Secondary Market Transactions

    111. The Commission articulated its framework for a case-by-case 
review for the first time in analyzing the Cingular-AT&T Wireless 
transaction in 2004. In particular, in that context and in its analysis 
of subsequent proposed transactions, the Commission used an initial 
screen to help identify for case-by-case review local markets where 
changes in spectrum holdings resulting from the transaction may be of 
particular concern. For transactions that result in the acquisition of 
wireless business units and customers or change the number of firms in 
any market, the Commission also applies an initial screen based on the 
size of the post-transaction HHI of market concentration and the change 
in the HHI. As set out in various transactions orders, however, the 
Commission has not limited its consideration of potential competitive 
harms solely to markets identified by its initial screen, if it 
encounters other factors, such as increased aggregation of below-1-GHz 
spectrum that may bear on the public interest inquiry.
    112. The Commission finds that it is in the public interest to 
retain its current case-by-case review for secondary market 
transactions. The Commission will also retain its current product and 
geographic market definitions. The Commission will continue to apply 
the spectrum screen on a county-by-county basis to identify those CMAs 
where an entity would hold approximately one-third or more of the total 
spectrum that is suitable and available for the provision of mobile 
telephony/broadband services post-transaction, and will evaluate these 
markets for any competitive harm. Further, the Commission will continue 
to evaluate the likely competitive effects of increased aggregation of 
below-1-GHz spectrum, and in particular, will pay specific attention to 
those markets in which a proposed transaction would result in a service 
provider holding approximately one-third or more of suitable and 
available below-1-GHz spectrum post-transaction. Moreover, the 
Commission finds that it is in the public interest not to limit its 
analysis of potential competitive harms to solely those markets 
identified by the initial screen, if the Commission encounters other 
factors that may bear on the public interest inquiry.

A. Case-by-Case Review vs. Bright Line Limits

    113. In the Mobile Spectrum Holdings NPRM, the Commission observed 
that the case-by-case approach to proposed transactions review affords 
the Commission flexibility to consider the unique circumstances of a 
proposed transaction and the changing needs of the mobile wireless 
marketplace generally, and to tailor remedies to the specific harm and 
circumstances. At the same time, however, the Commission noted that 
case-by-case review is both time- and resource-intensive, and has been 
criticized for creating uncertainty as to whether a particular 
transaction will be approved. The Commission sought comment on the 
costs and benefits of its case-by-case review and whether the review of 
proposed transactions could be more transparent, predictable, or better 
tailored to promote its goals. The Commission asked if bright-line 
limits, similar to the CMRS spectrum cap eliminated in 2003, would 
better serve the public interest.
    114. The Commission finds that it is in the public interest to 
continue to use its initial spectrum screen and case-by-case analysis 
to evaluate the likely competitive effects of increased spectrum 
aggregation through secondary market transactions, rather than to adopt 
a bright-line limit. It observes that the fundamental principles that 
the Commission articulated in eliminating the spectrum cap in favor of 
a case-by-case approach to transactions review continue to apply today. 
Moreover, in the context of transactions review, the Commission is 
concerned that ex ante limits on spectrum aggregation may prevent 
transactions that are in the public interest. The Commission has found 
that in reviewing secondary market transactions, the complex technical, 
strategic, and economic factors that determine the likely competitive 
effects of increased spectrum aggregation require a case-by-case 
assessment.
    115. The Commission distinguishes its decision to retain case-by-
case review for spectrum acquisitions through transactions from its 
determination above that any mobile spectrum holding limit applied to 
auctions should be a bright-line rule. The unique circumstances 
typically associated with spectrum auctions, particularly the time 
constraints and the need for certainty for each bidder regarding which 
licenses it would be permitted to acquire at the auction, make case-by-
case analysis challenging in the auction context.

B. Market Definitions

    116. The Commission considers whether to modify the current market 
definitions that the Commission uses in its competitive analysis for 
proposed secondary market transactions. The Commission concludes that 
it is in the public interest to retain the current product market 
definition and the current geographic market definition.
1. Relevant Product Market
    117. Background. In its recent transaction orders, the Commission 
has determined that the relevant product market is a combined ``mobile 
telephony/broadband services'' product market that comprises mobile 
voice and data services, including mobile voice and data services 
provided over advanced broadband wireless network (mobile broadband 
services).
    118. In the Mobile Spectrum Holdings NPRM, the Commission sought 
comment on whether the product market definition should be modified to 
reflect differentiated service offerings, devices and contract 
features, for instance, or whether smaller sub-markets should be 
defined within a larger market. The Commission also sought comment on 
the costs and benefits of any potential modifications.
    119. The Commission retains the current product market definition. 
The Commission does not find sufficient evidence in the record to 
support a change in the current product market definition. The 
Commission finds that the current product market definition, ``mobile 
telephony/broadband services,'' continues to encompass the mobile voice 
and data services that are provided today, and is sufficiently flexible 
to reflect emerging, next-

[[Page 39993]]

generation wireless services. The Commission did not find evidence in 
the record to convince us that the current definition has been defined 
too broadly or too narrowly for purposes of its competitive analysis. 
As set out in prior transactions, the product market the Commission 
defined encompasses differentiated services (e.g., voice-centric or 
data-centric), devices (e.g., feature phone, smartphone, tablet, etc.), 
and contract features (e.g., prepaid vs. postpaid). While such 
distinctions may suggest the possibility of smaller markets nested 
within that larger product market, the Commission finds it unnecessary 
to define such smaller product markets in order to analyze the 
potential competitive effects of secondary market transactions. The 
Commission will continue to consider these aspects of product 
differentiation, as appropriate, when the Commission analyzes the 
competitive effects of the proposed secondary market transaction within 
the markets the Commission defined. Therefore, the Commission finds it 
is in the public interest to retain the current product market 
definition.
2. Relevant Geographic Market
    120. In its recent transactions orders, the Commission has found 
that the relevant geographic markets for certain wireless transactions 
generally are local, while also evaluating a transaction's competitive 
effects at the national level where a transaction exhibits certain 
national characteristics that provide cause for concern. In the Mobile 
Spectrum Holdings NPRM, the Commission sought comment on the 
appropriate geographic market definition to use when evaluating a 
licensee's mobile spectrum holdings, under either its current case-by-
case analysis or if bright-line limits were adopted.
    121. The Commission finds for purposes of evaluating the 
competitive effects of proposed transactions it will continue to use 
local geographic markets, but also will analyze potential national 
effects as appropriate. The Commission continues to find that most 
consumers use their mobile telephony/broadband services at or close to 
where they live, work, and shop, in support of its decision that local 
markets are the relevant geographic markets in which to analyze the 
potential for competitive harms as a result of certain wireless 
transactions. Certain elements of the provision of mobile wireless 
services are national in scope, including key variables such as 
pricing, development of equipment, and service plan offerings, and 
nothing in the record suggests that the basis for this finding has 
changed. The Commission also will continue therefore to analyze the 
potential competitive effects of those wireless transactions that 
exhibit national characteristics, such as increased spectrum 
aggregation in many local markets across the country with the 
implication that harms that may occur at the local level collectively 
could have nationwide competitive effects.

C. Applicable Spectrum Holdings Threshold

    122. In 2004 the Commission established a spectrum screen threshold 
of approximately one-third of suitable and available spectrum that 
would be held by the acquiring entity post-transaction. In the Mobile 
Spectrum Holdings NPRM, the Commission sought comment on whether one-
third is still the appropriate threshold generally, and whether a 
higher threshold should apply in rural areas.
    123. The Commission will retain the approximately one-third 
threshold for applying its initial spectrum screen. Based on its 
experience in applying this threshold in numerous transactions over the 
last decade, the Commission has found it to be an effective analytical 
tool in helping to identify individual markets where a proposed 
transaction may raise particular competitive concerns. In its 
application of the screen, the Commission includes not only the 
entity's licensed spectrum, on a county-by-county basis, but also all 
long term spectrum leasing arrangements, with spectrum being attributed 
to both the lessee and lessor.
    124. The Commission finds that even where one entity holds 
approximately one-third of suitable and available spectrum, a market 
may contain more than three viable competitors. Its goal is not to 
equalize the amount of spectrum held by each competitor in each market. 
Increasing the threshold, would not be in the public interest.
    125. The Commission also disagrees with AT&T's assertion that the 
Commission can increase the spectrum screen threshold because the costs 
of ``false positive'' errors--chilling innovation and investment, and 
an inefficient use of the Commission's resources--outweigh the costs of 
``false negative'' errors because spectrum acquisitions that would harm 
competition would be remedied by other Federal agencies (e.g., DOJ). As 
the Commission previously has stated in the context of orders 
addressing proposed transactions, its competitive analysis, which forms 
an important part of the public interest evaluation, is informed by, 
but not limited to, traditional antitrust principles.
    126. In addition, the Commission declines to adopt a spectrum 
screen threshold based on spectrum share HHIs finding that to do so 
would mark a substantial departure from its traditional approach that 
is not supported by the record. The Commission does not believe the 
record demonstrates the efficacy of applying an HHI analysis to an 
input market, and believes establishing such a requirement would be 
burdensome and create substantial uncertainty.
    127. The Commission declines to establish a higher spectrum screen 
threshold for rural markets. In rural areas there are significant 
benefits to consumers of facilitating access by multiple providers to 
sufficient spectrum, such that they are able to provide an effective 
competitive constraint. To the extent there are unique considerations 
in a particular rural market such that spectrum aggregation above the 
spectrum screen is in the public interest; its case-by-case analysis 
provides the Commission the flexibility to approve such a transaction.
    128. Accordingly, the Commission will continue to apply an 
approximately one-third spectrum screen threshold in its review of 
secondary market spectrum acquisitions. Specifically, the modified 
spectrum screen the Commission adopted would include 580.5 megahertz of 
spectrum, with a trigger of 194 megahertz, or approximately one-third 
of the suitable and available spectrum. The spectrum screen is 
triggered where the Applicants would have, on a county-by-county basis, 
an attributable interest in 194 megahertz or more of spectrum where 
both AWS-1 and BRS/EBS spectrum are available in the particular market. 
If AWS-1 and/or BRS/EBS spectrum are not available in that market, 
these bands are not counted for purposes of applying the spectrum 
screen trigger in that market.

D. Operation of the Spectrum Screen

    129. As set out in various transactions orders, the Commission has 
not limited its consideration of potential competitive harms solely to 
markets identified by its initial screen, if it encounters other 
factors that may bear on the public interest inquiry. For example, the 
Commission has considered below-1-GHz concentration, and concentration 
within a particular spectrum band, including a band that was not at the 
time included in the spectrum screen. In the Mobile Spectrum Holdings 
NPRM, the Commission sought comment on establishing a higher burden of 
proof for

[[Page 39994]]

the approval of proposed transactions that would exceed the relevant 
spectrum threshold.
    130. The Commission will continue to review on a case-by-case basis 
those markets in which an entity would exceed the initial spectrum 
screen if the transaction as proposed were approved. The Commission 
declines to establish a rebuttable presumption, finding it would 
unnecessarily limit the Commission's flexibility. Further, the 
Commission affirms the Commission's conclusions that its consideration 
of potential competitive harms resulting from a proposed spectrum 
acquisition in the secondary market should not be limited solely to 
markets identified by the initial screen, if the Commission encounters 
other factors that may bear on its public interest inquiry. For 
instance, the Commission has specifically analyzed the potential 
competitive effects of aggregation of spectrum below 1 GHz. The 
Commission finds, in light of current marketplace conditions, that 
access by multiple service providers to sufficient spectrum below 1 GHz 
will preserve and promote competition in the mobile wireless 
marketplace to the benefit of American consumers, and therefore find 
that further significant aggregation of below-1-GHz spectrum holdings 
in secondary market transactions will be subject to enhanced review in 
its case-by-case competitive evaluation, as discussed below.
    131. While the Commission recognizes that a safe harbor would 
provide greater certainty to applicants, just as a bright-line limit 
would provide greater certainty, the Commission finds that in the 
context of secondary market transactions, it is in the public interest 
to maintain flexibility to consider any factors presented that may bear 
on our review. Moreover, in the absence of such flexibility, the 
Commission's review of future proposed transactions would be limited by 
its understanding of technology and industry practices at the time it 
adopted the specific thresholds. The Commission finds that its 
articulation of factors it will consider in its case-by-case analysis 
as set forth below provides sufficient clarity to potential applicants, 
while maintaining flexibility to consider changes in technology and 
industry practices in the rapidly-evolving mobile wireless marketplace.
    132. The Commission distinguishes its decision not to adopt a safe 
harbor for case-by-case review of spectrum acquisitions through 
transactions from its determination above that any mobile spectrum 
holdings limit applied to auctions should be a bright-line rule. The 
unique circumstances typically associated with spectrum auctions, 
particularly the time constraints and the need for certainty for each 
bidder regarding which licenses it would be permitted to acquire at the 
auction, make case-by-case analysis challenging in the auction context.

E. Nationwide Screen

    133. In the Mobile Spectrum Holdings NPRM, the Commission sought 
comment on whether, in addition to the spectrum screen applied on a 
county-by-county basis in helping to identify local markets of 
particular competitive concern, it should also adopt a separate screen 
that would be applied on a nationwide basis.
    134. The Commission declines to establish a separate screen as a 
means to evaluate spectrum holdings at the nationwide level. The 
Commission finds it would either be redundant or create irrational 
incentives for providers to divest or to forego acquisition of spectrum 
in markets in which there would be a net public benefit from such an 
acquisition. However, as certain elements of the provision of mobile 
wireless services are national in scope, including key variables such 
as pricing, development of equipment, and service plan offerings, the 
Commission will continue to analyze the potential competitive effects 
of those secondary market transactions that exhibit national 
characteristics. Increased spectrum aggregation in many local markets 
across the country may imply that harms that occur at the local level 
collectively could have nationwide competitive effects. The Commission 
finds that it is in the public interest to continue to define local 
geographic markets but also to analyze potential national effects as 
appropriate.

F. Distinguishing among Spectrum Bands for Transactions Review

    135. In recent years, the Commission has considered below-1-GHz 
spectrum concentration as a factor in its review of spectrum 
acquisitions in the secondary market. In the Mobile Spectrum Holdings 
NPRM, the Commission sought comment on whether it should adopt a 
separate screen for below-1-GHz spectrum under which an entity that 
would hold, post-transaction, approximately one-third or more of the 
relevant spectrum below 1 GHz in a geographic market would be subject 
to a more detailed competitive review in that market. The Commission 
also sought comment on whether, alternatively, it should establish a 
bright-line limit for spectrum holdings below 1 GHz, whether it should 
assign different weights to each of the spectrum bands as part of its 
case-by-case review, or whether it should take any other action to 
recognize distinctions between spectrum bands in its competitive review 
of proposed transactions.
    136. The Commission declines to adopt a separate screen or bright-
line limit for below-1-GHz spectrum holdings, or a set of weighting 
factors for each spectrum band included in its initial spectrum screen. 
Post-transaction below-1-GHz spectrum holdings will be an enhanced 
factor under its case-by-case review.
1. Below-1-GHz Limit
    137. Several commenters assert that the Commission should 
supplement the total spectrum screen applied to transactions with a 
screen or a bright-line limit for below-1-GHz spectrum, ranging from 25 
percent to 40 percent.
    138. The Commission adopts a market-based spectrum reserve for the 
Incentive Auction and to set limitations on the assignment or transfer 
of 600 MHz licenses after the Incentive Auction. These actions will 
help to ensure that multiple providers are able to access a sufficient 
amount of low-band spectrum, which will facilitate the extension and 
improvement of service in both rural and urban areas, to the benefit of 
consumers. In light of these actions, the Commission concludes that it 
is not necessary at this time to adopt a separate screen or cap 
applicable to its evaluation of the assignment or transfer of below-1-
GHz spectrum. Nonetheless, the Commission will continue to evaluate 
below-1-GHz holdings as a factor in its case-by-case review of such 
transactions, consistent with the Commission's precedent in the past 
few years. Moving forward, post-transaction below-1-GHz spectrum 
holdings will become an enhanced factor in its competitive evaluation, 
as discussed below, and therefore, the Commission will apply particular 
focus to its review of this factor as the Commission evaluated the 
likelihood of potential competitive harms.
2. Spectrum Weighting
    139. Background. Several commenters, including Sprint, assert that 
the Commission should weight spectrum bands to reflect the extent to 
which spectrum at that frequency yields lower costs for the deployment 
and operation of equipment. Other approaches to weighting raised on the 
record include using price data from spectrum auctions and secondary 
market transactions. Others contend that spectrum weighting would 
distort the

[[Page 39995]]

Commission's analysis of the competitive effect of proposed 
transactions and is otherwise impractical to implement. Sprint argues 
that weight spectrum should be based on the cost to deploy and operate 
using a particular band, arguing that low-band spectrum is typically 
significantly more cost-effective to deploy than higher-frequency 
spectrum.
    140. The Commission finds that, in principle, spectrum weighting 
has the potential to enhance its competitive analysis of proposed 
spectrum acquisitions. However, the Commission concludes that, at this 
time, it cannot justify, on the basis of the record, adopting specific 
weighting factors for each spectrum band. Nonetheless, the Commission 
observes that the data submitted on the record does demonstrate that 
there are significant differences in deployment costs between low-band 
and high-band spectrum, and it is able to consider those differences as 
a key factor in its case-by-case analysis moving forward.
    141. The Commission finds that to establish specific weighting 
factors for each spectrum band based on band-specific signal 
propagation characteristics raises certain issues, including the 
underlying assumptions that are appropriate to make. Further, the 
Commission finds that establishing specific weighting factors based on 
other factors, such as the ``value'' of the spectrum, also raises 
certain issues as prices paid at auction vary significantly over time 
based on a variety of factors not necessarily related to the 
characteristics of the spectrum being auctioned. The Commission finds 
that treating below-1-GHz spectrum concentration as an enhanced factor 
in its case-by-case analysis is a better approach at this time because 
it is able to distinguish between the characteristics of different 
frequency bands without imposing a weighting schema that may fail to 
accurately reflect their competitive significance. Based upon the 
record in this proceeding, the Commission concludes that adopting a 
spectrum weighting schema would not be in the public interest at this 
time.

G. Factors Considered in Competitive Analysis

    142. Background. In its evaluation of proposed secondary market 
transactions, the Commission broadly assesses whether and to what 
extent proposed acquisitions of wireless spectrum could affect 
downstream competition in the mobile telephony/broadband services 
marketplace. In particular, the Commission's competitive analysis of 
wireless transactions focuses initially on those markets identified by 
the screen where the acquisition of customers and/or spectrum would 
result in significant concentration of either or both, and thereby 
could lead to competitive harm. As discussed above, however, the 
Commission has not limited its consideration of potential competitive 
harms solely to markets identified by its initial screen if it 
encounters other factors that may bear on the public interest inquiry. 
Specifically, the Commission has considered concentration of below-1-
GHz holdings, and concentration of spectrum within a specific band.
    143. In its transactions analyses, the Commission has considered 
various other factors that help to predict the likelihood of 
competitive harm post-transaction. These competitive variables include, 
but are not limited to: The total number of rival service providers; 
the number of rival firms that can offer competitive nationwide service 
plans; the coverage by technology of the firms' respective networks; 
the rival firms' market shares; the combined entity's post-transaction 
market share and how that share changes as a result of the transaction; 
the amount of spectrum suitable for the provision of mobile telephony/
broadband services controlled by the combined entity; and the spectrum 
holdings of each of the rival service providers. The Commission notes 
that it is important to recognize that many transactions are more than 
spectrum transfers; they involve the disappearance of a separate 
business enterprise as an ongoing potential competitive constraint and 
source of innovations in services and marketing.
    144. In the Mobile Spectrum Holdings NPRM, the Commission asked if 
it should adopt guidelines setting forth the factors that will be 
considered during any review of a licensee's mobile spectrum holdings 
or delegate authority to the Wireless Telecommunications Bureau to do 
so.
    145. Discussion. The Commission retains the authority to consider 
all factors that could affect the likely competitive impact of proposed 
transactions, and declines to adopt a formal set of guidelines at this 
time. It does not find sufficient evidence in the record to support the 
adoption of the specific standards advocated by commenters regarding 
spectrum utilization or spectrum weighting. Nonetheless, the Commission 
retains the right to consider such factors in specific future 
transactions. In addition, parties are free to bring such matters to 
the Commission's attention. It affirms its continued use of the factors 
considered in the Commission's case-by-case analyses to date of the 
potential competitive impacts of further concentration of spectrum in 
particular markets. The Commission continues to hold the view that band 
concentration may be a relevant factor to consider in its case-by-case 
analysis, and recognize that changes in technology and the marketplace 
may result in band-specific concentrations warranting increased 
scrutiny.
    146. Certain frequencies possess distinct characteristics for the 
provision of mobile wireless services, and a service provider is best 
positioned if it holds spectrum licenses for both low- and high-band 
spectrum. The Commission finds that spectrum holdings by service 
provider in the limited low- (i.e., below-1-GHz) bands have become 
particularly concentrated. The Commission has concerns about the 
potential effects of further concentration of below-1-GHz spectrum on 
competition and innovation in the mobile wireless services marketplace. 
The Commission decided not to adopt a separate below-1-GHz screen or 
cap at this time. Building on the Commission precedent in the past few 
years, however, it will treat certain further concentration of below-1-
GHz spectrum as an enhanced factor in its case-by-case analysis of the 
potential competitive harms posed by individual transactions.
    147. The Commission currently considers a variety of factors in its 
case-by-case analysis of spectrum acquisition through transactions-
including, but not limited to the total number of rival service 
providers; the number of rival firms that can offer competitive service 
plans; the coverage by technology of the firms' respective networks; 
the rival firms' market shares; the amount of spectrum suitable for the 
provision of mobile telephony/broadband services controlled by the 
combined entity; the spectrum holdings of each of the rival service 
providers; the acquisition of below-1-GHz spectrum nationwide; and 
concentration in a particular band with an important ecosystem. In 
analyzing spectrum acquisitions based on these factors, the Commission 
generally determines, based on the totality of the circumstances, 
whether there is an increased ability or incentive for the acquiring 
firm to successfully raise prices or otherwise engage in anti-
competitive behavior. The Commission then employs a balancing test 
weighing any potential public interest harms against any potential 
public interest benefits, and the applicants bear the burden of 
proving, by a preponderance of the evidence, that the proposed

[[Page 39996]]

transaction, on balance, will serve the public interest.
    148. In implementing this approach going forward, the Commission 
anticipates that any entity that would end up with more than one third 
of below-1-GHz spectrum as a result of a proposed transaction would 
facilitate its case-by-case review with a detailed demonstration 
regarding why the public interest benefits outweigh harms. When the 
other factors the Commission ordinarily considers indicate a low 
potential for competitive or other public interest harm, the 
acquisition of below-1-GHz spectrum resulting in holdings of 
approximately one-third or more of such spectrum will not preclude a 
conclusion that a proposed transaction, on balance, furthers the public 
interest. Absent that, however, any transaction that would result in an 
entity holding approximately one-third or more of suitable and 
available below-1-GHz spectrum will more likely be found to cause 
competitive harm in its case-by-case review.
    149. Consistent with its overall concerns about the potential 
public interest harms regarding the concentration of below-1-GHz 
spectrum, the Commission anticipates it likely would have even greater 
concerns where the proposed transaction would result in an assignee or 
transferee that already holds approximately one-third or more of below-
1-GHz spectrum in a market acquiring additional below-1-GHz spectrum in 
that market, especially with regard to paired low-band spectrum. In 
these cases, the demonstration of the public interest benefits of the 
proposed transaction would need to clearly outweigh the potential 
public interest harms associated with such additional concentration of 
below-1-GHz spectrum, irrespective of other factors. For instance, 
applicants could provide a particularly detailed showing in such cases 
that they currently are maximizing the use of their spectrum and how 
the proposed transaction is necessary to maintain, enhance, or expand 
services provided to consumers. The Commission believes such a showing 
would be required to achieve its goal of ensuring that the ability of 
rival service providers to offer a competitive response to any price 
increase or to offer new innovative services is not eliminated or 
significantly lessened.
    150. The Commission finds that considering additional below-1-GHz 
spectrum concentration as an enhanced factor in its review of secondary 
market transactions will help ensure that further concentration of such 
spectrum will not have adverse competitive effects either in particular 
local markets or on a broader regional or national level.
    151. In addition, although the Commission declines to adopt 
specific weighting factors for each band, or for groups of bands, it 
recognizes that differences between spectrum bands can be relevant to a 
determination of the public interest in the context of reviewing 
transactions. It will consider such differences in its case-by-case 
review of specific transactions. For example, applications involving 
small amounts of high-band spectrum, particularly EBS spectrum, likely 
would present limited potential for public interest harms.

H. Remedies

    152. In the Mobile Spectrum Holdings NPRM, the Commission sought 
comment on the remedies, including divestitures that would be 
appropriate for it to prevent competitive harm resulting from spectrum 
acquisitions. In particular, it sought comment on whether different 
approaches or types of divestures would best serve the Commission's 
goals, and whether the Commission should adopt different criteria for 
divestiture based on whether the spectrum to be divested is from lower 
or upper frequency bands or is immediately ``useable'' by another 
licensee. It sought comment on the extent to which the Commission 
should remedy the potential harms posed by a transaction by placing 
other conditions, such as, for example, requirements to offer leasing, 
roaming or collocation, in conjunction with, or in lieu of, requiring 
divestitures.
    153. Based upon the record in this proceeding, the Commission 
believes it is unnecessary to change its existing approach to 
protecting and promoting the public interest, including competition, 
through the application of transaction-specific remedies. Its case-by-
case analysis allows the Commission to carefully tailor remedies that 
address and ameliorate public interest harms or alternatively ensure 
that proposed public interest benefits are realized by consumers. The 
Commission does not believe, and the record does not indicate, that the 
narrowly-tailored, fact-specific remedies it has required in recent 
transactions have discouraged transactions that generally are in the 
public interest, and it does not conclude that any greater specificity 
with regard to remedies would significantly affect parties' willingness 
to enter into transactions. The Commission finds that the public 
interest benefits and public interest harms often are specific to each 
transaction, and that limiting possible remedies ex ante would undercut 
the benefits of case-by-case review, that is, the tailoring of the 
review, and remedies, to the specific circumstances of any given 
transaction. The Commission does not see any evidence in the record 
that the use of tailored remedies has inhibited competitiveness-
enhancing transactions, and it finds that there are the pro-competitive 
effects of the Commission's policies on remediation. The Commission 
declines to limit possible remedial action as AT&T suggests. The 
Commission's public interest analysis, which considers the near and 
long-term competitive effects of spectrum aggregation, and which may 
have an impact beyond the local markets involved should not be limited 
to a particular geographic location or spectrum band in proposing 
remedies to protect the public interest.

V. Attribution of Interests in License Holdings

    154. In the Mobile Spectrum Holdings NPRM, the Commission proposed 
to codify the attribution threshold and sought comment on proposed 
section 20.21 of the Commission's Rules, which would apply to mobile 
spectrum holdings. Pursuant to the proposal, all controlling interest 
and non-controlling interests of ten percent or more would be 
attributable. In addition, non-controlling interests of less than ten 
percent would be attributable if the Commission determined that the 
interest confers de facto control, including but not limited to 
partnership and other ownership interests and any stock interest in a 
licensee. The Commission also sought comment on whether to include a 
specific waiver provision if it codified the rule. In addition, 
consistent with its current practice, the Commission proposed to 
attribute long-term de facto transfer leasing arrangements and long-
term spectrum manager leasing arrangements to the lessees, lessors, 
sublessees, and sublessors.
    155. The Commission finds insufficient evidence in the record to 
support any modifications to its current practices for attribution. The 
Commission has developed its current practices over the years through 
its case-by-case review of secondary market transactions and related 
transfer of control applications. Therefore, the Commission finds that 
retaining the current ten percent attribution threshold will serve the 
public interest. Accordingly, all controlling interests and non-
controlling interests of ten percent or more would be attributable. In 
addition, interests of less than ten

[[Page 39997]]

percent would be attributable if the interest confers de facto control, 
including but not limited to partnership and other ownership interests 
and any stock interest in a licensee. The Commission also codifies 
these rules for purposes of determining spectrum holdings amounts 
before an auction. The Commission finds that codifying the rules will 
provide additional transparency and clarity for applicants and 
prospective auction participants. The Commission also concludes that 
the general waiver standard provided in Section 1.925 of the 
Commission's rules provides sufficient guidance for applicants seeking 
to waive of these attribution rules.
    156. Consistent with its current practice, the Commission also 
attributed long-term de facto transfer leasing arrangements and long-
term spectrum manager leasing arrangements to the lessor and the 
lessee, including sublessors and sublessees. Spectrum leasing 
arrangement are arrangements between a licensed entity and a third-
party entity in which the licensee leases certain of its spectrum usage 
rights in the licensed spectrum to the third-party entity, the spectrum 
lessee. Leasing provides lessees the flexibility to lease a small or 
large quantity of spectrum for short or longer time periods depending 
on their business needs. The Commission will attribute only the long-
term spectrum leasing arrangements, with limited exceptions, to both 
lessee and lessor. The attribution rule will apply to determine partial 
ownership and other interests in spectrum holdings for purposes of: (1) 
Applying a mobile spectrum holding limit to the licensing of spectrum 
through competitive bidding; and (2) applying the initial spectrum 
screen to secondary market transactions. Consistent with current 
practices, if, after applying the initial screen, the Commission's 
analysis of a particular market reveals concerns with respect to 
attribution due to a particular organizational or financial 
relationship, it may evaluate such relationships in the context of the 
relevant secondary market transaction.

VI. Procedural Matters

A. Final Regulatory Flexibility Analysis

    157. The Regulatory Flexibility Act (RFA) requires that agencies 
prepare a regulatory flexibility analysis for notice-and-comment 
rulemaking proceedings, unless the agency certifies that ``the rule 
will not have a significant economic impact on a substantial number of 
small entities.'' Accordingly, the Commission has prepared a Final 
Regulatory Flexibility Analysis (FRFA) concerning the possible impact 
of the rule changes contained in the R&O on small entities.
    158. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated in the Notice of Proposed Rulemaking. The Wireless 
Telecommunications Bureau (WTB) sought written public comment on the 
proposals in the Notice, including comment on the IRFA. This present 
Final Regulatory Flexibility Analysis (FRFA) conforms to the RFA.
    159. The Commission believes that it would serve the public 
interest to analyze the possible significant economic impact on small 
entities of the policy and rule changes in the R&O. Accordingly, this 
FRFA contains an analysis of this impact in connection with the 
adoption in the R&O of mobile spectrum holdings rule changes meant to 
protect and promote competition for the benefit of consumers, while 
facilitating greater transparency and predictability to better allow 
service providers to make investment and transactional decisions.

B. Need for, and Objectives of, the Report and Order

    160. The Commission is under a Congressional mandate to manage 
spectrum to promote economic opportunity, competition, innovation, and 
service accessibility. In the wake of recent industry trends, both in 
service evolution and marketplace structure, the Commission has 
revisited its mobile spectrum holdings rules and policies. The 
Commission adopts several mobile spectrum holdings policies today: 
Entering the spectrum screen into FCC rules; specifying which spectrum 
blocks are included in the spectrum screen; replacing case-by-case, 
post-auction spectrum screen analysis with consideration of auction 
specific spectrum limits; and reserving a certain amount of 600 MHz 
spectrum in order to ensure against excessive concentration in holdings 
of below-1-GHz spectrum. These policies will promote consumer choice 
and competition among multiple service providers, and consistent with 
its statutory mandate, will promote the efficient and intensive use of 
scarce spectrum as well as maximizing economic opportunity and the 
deployment of innovative technologies. The Commission seeks to minimize 
the risk of the lessening of competition in the future due to the 
likelihood that an insufficient number of service providers would have 
access to the mix of low- and high-band spectrum needed to ensure 
robust competition in the mobile wireless marketplace.

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

    161. There were no comments filed that specifically addressed the 
rules and policies proposed in the IRFA.

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

    162. 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 rules adopted herein. The RFA generally defines the 
term ``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, 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 Small Business 
Administration (SBA).
    163. Small Businesses, Small Organizations, and Small Governmental 
Jurisdictions. Its action may, over time, affect small entities that 
are not easily categorized at present. The Commission therefore 
describes here, at the outset, three comprehensive, statutory small 
entity size standards. First, nationwide, there are a total of 
approximately 27.5 million small businesses, according to the SBA. In 
addition, 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 2007, there were 
approximately 1,621,315 small organizations. Finally, the term ``small 
governmental jurisdiction'' is defined generally as ``governments of 
cities, towns, townships, villages, school districts, or special 
districts, with a population of less than fifty thousand.'' Census 
Bureau data for 2011 indicate that there were 89,476 local governmental 
jurisdictions in the United States. The Commission estimates that, of 
this total, as many as 88,506 entities may qualify as ``small 
governmental jurisdictions.'' Thus, the Commission estimates that most 
governmental jurisdictions are small.
    164. Cellular Licensees. The SBA has developed a small business 
size standard for small businesses in the category ``Wireless 
Telecommunications Carriers (except satellite).'' Under that SBA 
category, a business is small if it has 1,500 or fewer employees. The

[[Page 39998]]

census category of ``Cellular and Other Wireless Telecommunications'' 
is no longer used and has been superseded by the larger category 
``Wireless Telecommunications Carriers (except satellite).'' The Census 
Bureau defines this larger category to include ``establishments engaged 
in operating and maintaining switching and transmission facilities to 
provide communications via the airwaves. Establishments in this 
industry have spectrum licenses and provide services using that 
spectrum, such as cellular phone services, paging services, wireless 
Internet access, and wireless video services.''
    165. In this category, the SBA has deemed a wireless 
telecommunications carrier to be small if it has fewer than 1,500 
employees. For this category of carriers, Census data for 2007, which 
supersede similar data from the 2002 Census, shows 1,383 firms in this 
category. Of these 1,383 firms, only 15 (approximately 1%) had 1,000 or 
more employees. While there is no precise Census data on the number of 
firms in the group with fewer than 1,500 employees, it is clear that at 
least the 1,368 firms with fewer than 1,000 employees would be found in 
that group. Thus, at least 1,368 of these 1,383 firms (approximately 
99%) had fewer than 1,500 employees. Accordingly, the Commission 
estimates that at least 1,368 (approximately 99%) had fewer than 1,500 
employees and, thus, would be considered small under the applicable SBA 
size standard.
    166. Wireless Telecommunications Carriers (except satellite). This 
industry comprises establishments engaged in operating and maintaining 
switching and transmission facilities to provide communications via the 
airwaves. Establishments in this industry have spectrum licenses and 
provide services using that spectrum, such as cellular phone services, 
paging services, wireless Internet access, and wireless video services. 
The appropriate size standard under SBA rules is for the category 
Wireless Telecommunications Carriers. The size standard for that 
category is that a business is small if it has 1,500 or fewer 
employees. For this category, census data for 2007 show that there were 
11,163 establishments that operated for the entire year. Of this total, 
10,791 establishments had employment of 999 or fewer employees and 372 
had employment of 1,000 employees or more. Thus under this category and 
the associated small business size standard, the Commission estimates 
that the majority of wireless telecommunications carriers (except 
satellite) are small entities that may be affected by its proposed 
action.
    167. 2.3 GHz Wireless Communications Services. This service can be 
used for fixed, mobile, radiolocation, and digital audio broadcasting 
satellite uses. The Commission defined ``small business'' for the 
wireless communications services (``WCS'') auction as an entity with 
average gross revenues of $40 million for each of the three preceding 
years, and a ``very small business'' as an entity with average gross 
revenues of $15 million for each of the three preceding years. The SBA 
approved these definitions. The Commission conducted an auction of 
geographic area licenses in the WCS service in 1997. In the auction, 
seven bidders that qualified as very small business entities won 31 
licenses, and one bidder that qualified as a small business entity won 
a license.
    168. 1670-1675 MHz Services. This service can be used for fixed and 
mobile uses, except aeronautical mobile. An auction for one license in 
the 1670-1675 MHz band was conducted in 2003. The Commission defined a 
``small business'' as an entity with attributable average annual gross 
revenues of not more than $40 million for the preceding three years, 
which would thus be eligible for a 15 percent discount on its winning 
bid for the 1670-1675 MHz band license. Further, the Commission defined 
a ``very small business'' as an entity with attributable average annual 
gross revenues of not more than $15 million for the preceding three 
years, which would thus be eligible to receive a 25 percent discount on 
its winning bid for the 1670-1675 MHz band license. The winning bidder 
was not a small entity.
    169. 3650-3700 MHz Band Licensees. In March 2005, the Commission 
released an order providing for the nationwide, non-exclusive licensing 
of terrestrial operations, utilizing contention-based technologies, in 
the 3650 MHz band (i.e., 3650-3700 MHz). As of April 2010, more than 
1270 licenses have been granted and more than 7433 sites have been 
registered. The Commission has not developed a definition of small 
entities applicable to 3650-3700 MHz band nationwide, non-exclusive 
licensees. However, the Commission estimated that the majority of these 
licensees are Internet Access Service Providers (ISPs) and that most of 
those licensees are small businesses.
    170. Wireless Telephony. Wireless telephony includes cellular, 
personal communications services, and specialized mobile radio 
telephony carriers. As noted, the SBA has developed a small business 
size standard for Wireless Telecommunications Carriers (except 
Satellite). Under the SBA small business size standard, a business is 
small if it has 1,500 or fewer employees. Census data for 2007 shows 
that there were 1,383 firms in the Wireless Telecommunications Carriers 
(except Satellite) category that operated that year. Of those 1,383, 
1,368 had fewer than 100 employees, and 15 firms had more than 100 
employees. Thus under this category and the associated small business 
size standard, the majority of firms can be considered small. According 
to Trends in Telephone Service data, 434 carriers reported that they 
were engaged in wireless telephony. Of these, an estimated 222 have 
1,500 or fewer employees and 212 have more than 1,500 employees. 
Therefore, approximately half of these entities can be considered 
small. Similarly, according to Commission data, 413 carriers reported 
that they were engaged in the provision of wireless telephony, 
including cellular service, Personal Communications Service (PCS), and 
Specialized Mobile Radio (SMR) Telephony services. Of these, an 
estimated 261 have 1,500 or fewer employees and 152 have more than 
1,500 employees. Consequently, the Commission estimates that 
approximately half or more of these firms can be considered small. 
Thus, using available data, the Commission estimates that the majority 
of wireless firms can be considered small.
    171. Broadband Personal Communications Service. The broadband PCS 
spectrum is divided into six frequency blocks designated A through F, 
and the Commission has held auctions for each block. The Commission 
initially defined a ``small business'' for C- and F-Block licenses as 
an entity that has average gross revenues of $40 million or less in the 
three previous years. For F-Block licenses, an additional small 
business size standard for ``very small business'' was added and is 
defined as an entity that, together with its affiliates, has average 
gross revenues of not more than $15 million for the preceding three 
years. These small business size standards, in the context of broadband 
PCS auctions, have been approved by the SBA. No small businesses within 
the SBA-approved small business size standards bid successfully for 
licenses in Blocks A and B. There were 90 winning bidders that claimed 
small business status in the first two C-Block auctions. A total of 93 
bidders that claimed small and very small business status won 
approximately 40 percent of the 1,479 licenses in the first auction for 
the D, E,

[[Page 39999]]

and F Blocks. On April 15, 1999, the Commission completed the re-
auction of 347 C-, D-, E-, and F-Block licenses in Auction No. 22. Of 
the 57 winning bidders in that auction, 48 claimed small business 
status and won 277 licenses.
    172. On January 26, 2001, the Commission completed the auction of 
422 C and F Block Broadband PCS licenses in Auction No. 35. Of the 35 
winning bidders in that auction, 29 claimed small business status. 
Subsequent events concerning Auction 35, including judicial and agency 
determinations, resulted in a total of 163 C and F Block licenses being 
available for grant. On February 15, 2005, the Commission completed an 
auction of 242 C-, D-, E-, and F-Block licenses in Auction No. 58. Of 
the 24 winning bidders in that auction, 16 claimed small business 
status and won 156 licenses. On May 21, 2007, the Commission completed 
an auction of 33 licenses in the A, C, and F Blocks in Auction No. 71. 
Of the 14 winning bidders in that auction, six claimed small business 
status and won 18 licenses. On August 20, 2008, the Commission 
completed the auction of 20 C-, D-, E-, and F-Block Broadband PCS 
licenses in Auction No. 78. Of the eight winning bidders for Broadband 
PCS licenses in that auction, six claimed small business status and won 
14 licenses.
    173. AWS Services (1710-1755 MHz and 2110-2155 MHz bands (AWS-1); 
1915-1920 MHz, 1995-2000 MHz, 2020-2025 MHz and 2175-2180 MHz bands 
(AWS-2); 2155-2175 MHz band (AWS-3)). For the AWS-1 bands, the 
Commission has defined a ``small business'' as an entity with average 
annual gross revenues for the preceding three years not exceeding $40 
million, and a ``very small business'' as an entity with average annual 
gross revenues for the preceding three years not exceeding $15 million. 
In 2006, the Commission conducted its first auction of AWS-1 licenses. 
In that initial AWS-1 auction, 31 winning bidders identified themselves 
as very small businesses. Twenty-six of the winning bidders identified 
themselves as small businesses. In a subsequent 2008 auction, the 
Commission offered 35 AWS-1 licenses. Four winning bidders identified 
themselves as very small businesses, and three of the winning bidders 
identified themselves as a small business. For AWS-2 and AWS-3, 
although the Commission does not know for certain which entities are 
likely to apply for these frequencies, the Commission noted that the 
AWS-1 bands are comparable to those used for cellular service and 
personal communications service. The Commission has not yet adopted 
size standards for the AWS-2 bands but has proposed to treat both AWS-2 
similarly to broadband PCS service and AWS-1 service due to the 
comparable capital requirements and other factors, such as issues 
involved in relocating incumbents and developing markets, technologies, 
and services.
    174. On March 31, 2014, the Commission adopted rules for spectrum 
in the 1695-1710 MHz, 1755-1780 MHz, and 2155-2180 MHz bands 
(collectively, ``AWS-3'') that make available an additional sixty-five 
megahertz of commercial spectrum for the provision of mobile broadband 
services. The Commission indicated that the Commission will assign AWS-
3 licenses by competitive bidding, offering five megahertz and ten 
megahertz blocks. The Spectrum Act states that the Commission shall 
grant new initial licenses for these bands by February 23, 2015.
    175. In December 2012, the Commission adopted licensing, operating, 
and technical rules for stand-alone terrestrial mobile wireless 
operations in the AWS-4 spectrum. The Commission concluded that it 
would assign the AWS-4 spectrum to the incumbent Mobile Satellite 
Service (MSS) operators in order to make this spectrum available 
efficiently and quickly for flexible, terrestrial use, such as mobile 
broadband. The Commission also determined that it would assign AWS-4 
licenses to DISH, as the incumbent MSS operator in that spectrum, and 
established a concrete, proven process for efficient relocation of 
incumbent operations from 2180-2200 MHz.
    176. In June 2013, the Commission implemented the Spectrum Act 
provisions pertaining to the H Block by adopting service rules for the 
band, including pairing the two 5 megahertz blocks establishing EAs as 
the license area, and generally adopting Part 27 flexible use rules. On 
February 27, 2014 the Commission concluded its auction of H Block 
licenses, with DISH placing the winning bids on all 176 licenses across 
the nation.
    177. Lower 700 MHz Band Licenses. The Commission previously adopted 
criteria for defining three groups of small businesses for purposes of 
determining their eligibility for special provisions such as bidding 
credits. The Commission defined a ``small business'' as an entity that, 
together with its affiliates and controlling principals, has average 
gross revenues not exceeding $40 million for the preceding three years. 
A ``very small business'' is defined as an entity that, together with 
its affiliates and controlling principals, has average gross revenues 
that are not more than $15 million for the preceding three years. 
Additionally, the Lower 700 MHz Service had a third category of small 
business status for Metropolitan/Rural Service Area (``MSA/RSA'') 
licenses --``entrepreneur''-- which is defined as an entity that, 
together with its affiliates and controlling principals, has average 
gross revenues that are not more than $3 million for the preceding 
three years. The SBA approved these small size standards. An auction of 
740 licenses was conducted in 2002 (one license in each of the 734 
MSAs/RSAs and one license in each of the six Economic Area Groupings 
(EAGs)). Of the 740 licenses available for auction, 484 licenses were 
won by 102 winning bidders. Seventy-two of the winning bidders claimed 
small business, very small business, or entrepreneur status and won a 
total of 329 licenses. A second auction commenced on May 28, 2003, 
closed on June 13, 2003, and included 256 licenses. Seventeen winning 
bidders claimed small or very small business status and won 60 
licenses, and nine winning bidders claimed entrepreneur status and won 
154 licenses. In 2005, the Commission completed an auction of 5 
licenses in the lower 700 MHz band (Auction 60). All three winning 
bidders claimed small business status.
    178. In 2007, the Commission reexamined its rules governing the 700 
MHz band in the 700 MHz Second Report and Order. An auction of A, B and 
E block licenses in the Lower 700 MHz band was held in 2008. Twenty 
winning bidders claimed small business status (those with attributable 
average annual gross revenues that exceed $15 million and do not exceed 
$40 million for the preceding three years). Thirty three winning 
bidders claimed very small business status (those with attributable 
average annual gross revenues that do not exceed $15 million for the 
preceding three years). In 2011, the Commission conducted Auction 92, 
which offered 16 lower 700 MHz band licenses that had been made 
available in Auction 73 but either remained unsold or were licenses on 
which a winning bidder defaulted. Two of the seven winning bidders in 
Auction 92 claimed very small business status, winning a total of four 
licenses.
    179. Upper 700 MHz Band Licenses. In the 700 MHz Second Report and 
Order, the Commission revised its rules regarding Upper 700 MHz 
licenses. On January 24, 2008, the Commission commenced Auction 73 in 
which

[[Page 40000]]

several licenses in the Upper 700 MHz band were available for 
licensing: 12 Regional Economic Area Grouping licenses in the C Block, 
and one nationwide license in the D Block. The auction concluded on 
March 18, 2008, with three winning bidders claiming very small business 
status (those with attributable average annual gross revenues that do 
not exceed $15 million for the preceding three years) and winning five 
licenses.
    180. Pursuant to the Spectrum Act, Congress provided for the 
deployment of a nationwide public safety broadband network in the 700 
MHz band, including reallocating the Upper 700 MHz D Block from a 
commercial spectrum block to public safety use. On September 7, 2012, 
the Public Safety and Homeland Security Bureau adopted a Report and 
Order to reallocate the D Block for ``public safety services.'' 
Congress established FirstNet as an independent authority within the 
National Telecommunications and Information Administration (NTIA), and 
required the Commission to grant a license to FirstNet for the use of 
both the existing public safety broadband spectrum (763-768/793-798 
MHz) and the Upper D Block. On November 15, 2012, the Public Safety and 
Homeland Security Bureau granted FirstNet the license prescribed by 
statute, under call sign WQQE234.
    181. 700 MHz Guard Band Licenses. In 2000, the Commission adopted 
the 700 MHz Guard Band Report and Order, in which it established rules 
for the A and B block licenses in the Upper 700 MHz band, including 
size standards for ``small businesses'' and ``very small businesses'' 
for purposes of determining their eligibility for special provisions 
such as bidding credits. A small business in this service is an entity 
that, together with its affiliates and controlling principals, has 
average gross revenues not exceeding $40 million for the preceding 
three years. Additionally, a very small business is an entity that, 
together with its affiliates and controlling principals, has average 
gross revenues that are not more than $15 million for the preceding 
three years. SBA approval of these definitions is not required. An 
auction of these licenses was conducted in 2000. Of the 104 licenses 
auctioned, 96 licenses were won by nine bidders. Five of these bidders 
were small businesses that won a total of 26 licenses. A second auction 
of 700 MHz Guard Band licenses was held in 2001. All eight of the 
licenses auctioned were sold to three bidders. One of these bidders was 
a small business that won a total of two licenses.
    182. Specialized Mobile Radio. The Commission adopted small 
business size standards for the purpose of determining eligibility for 
bidding credits in auctions of SMR geographic area licenses in the 800 
MHz and 900 MHz bands. The Commission defined a ``small business'' as 
an entity that, together with its affiliates and controlling 
principals, has average gross revenues not exceeding $15 million for 
the preceding three years. The Commission defined a ``very small 
business'' as an entity that, together with its affiliates and 
controlling principals, has average gross revenues not exceeding $3 
million for the preceding three years. The SBA has approved these small 
business size standards for both the 800 MHz and 900 MHz SMR Service. 
The first 900 MHz SMR auction was completed in 1996. Sixty bidders 
claiming that they qualified as small businesses under the $15 million 
size standard won 263 licenses in the 900 MHz SMR band. In 2004, the 
Commission held a second auction of 900 MHz SMR licenses and three 
winning bidders identifying themselves as very small businesses won 7 
licenses. The auction of 800 MHz SMR licenses for the upper 200 
channels was conducted in 1997. Ten bidders claiming that they 
qualified as small or very small businesses under the $15 million size 
standard won 38 licenses for the upper 200 channels. A second auction 
of 800 MHz SMR licenses was conducted in 2002 and included 23 Basic 
Economic Area (``BEA'') licenses. One bidder claiming small business 
status won five licenses.
    183. The auction of the 1,053 800 MHz SMR licenses for the General 
Category channels was conducted in 2000. Eleven bidders who won 108 
licenses for the General Category channels in the 800 MHz SMR band 
qualified as small or very small businesses. In an auction completed in 
2000, a total of 2,800 Economic Area licenses in the lower 80 channels 
of the 800 MHz SMR service were awarded. Of the 22 winning bidders, 19 
claimed small or very small business status and won 129 licenses. Thus, 
combining all four auctions, 41 winning bidders for geographic licenses 
in the 800 MHz SMR band claimed to be small businesses.
    184. In addition, there are numerous incumbent site-by-site SMR 
licensees and licensees with extended implementation authorizations in 
the 800 and 900 MHz bands. The Commission does not know how many firms 
provide 800 MHz or 900 MHz geographic area SMR pursuant to extended 
implementation authorizations, nor how many of these providers have 
annual revenues not exceeding $15 million. One firm has over $15 
million in revenues. In addition, the Commission does not know how many 
of these firms have 1,500 or fewer employees. The Commission assumes, 
for purposes of this analysis, that all of the remaining existing 
extended implementation authorizations are held by small entities, as 
that small business size standard is approved by the SBA.
    185. 1.4 GHz Band Licensees. The Commission conducted an auction of 
64 1.4 GHz band licenses in the paired 1392-1395 MHz and 1432-1435 MHz 
bands, and in the unpaired 1390-1392 MHz band in 2007. For these 
licenses, the Commission defined ``small business'' as an entity that, 
together with its affiliates and controlling interests, had average 
gross revenues not exceeding $40 million for the preceding three years, 
and a ``very small business'' as an entity that, together with its 
affiliates and controlling interests, has had average annual gross 
revenues not exceeding $15 million for the preceding three years. 
Neither of the two winning bidders claimed small business status.
    186. Broadband Radio Service and Educational Broadband Service. 
Broadband Radio Service systems, previously referred to as Multipoint 
Distribution Service (``MDS'') and Multichannel Multipoint Distribution 
Service (``MMDS'') systems, and ``wireless cable,'' transmit video 
programming to subscribers and provide two-way high speed data 
operations using the microwave frequencies of the Broadband Radio 
Service (``BRS'') and Educational Broadband Service (``EBS'') 
(previously referred to as the Instructional Television Fixed Service 
(``ITFS'')). In connection with the 1996 BRS auction, the Commission 
established a ``small business'' as an entity that had annual average 
gross revenues of no more than $40 million in the previous three years. 
The BRS auctions resulted in 67 successful bidders obtaining licensing 
opportunities for 493 Basic Trading Areas (``BTAs''). Of the 67 auction 
winners, 61 met the definition of a small business. BRS also includes 
licensees of stations authorized prior to the auction. At this time, 
the Commission estimated that of the 61 small business BRS auction 
winners, 48 remain small business licensees. In addition to the 48 
small businesses that hold BTA authorizations, there are approximately 
392 incumbent BRS licensees that are considered small entities. After 
adding the number of small business auction licensees to the number of 
incumbent

[[Page 40001]]

licensees not already counted, the Commission finds that there are 
currently approximately 440 BRS licensees that are defined as small 
businesses under either the SBA or the Commission's rules. In 2009, the 
Commission conducted Auction 86, which resulted in the licensing of 78 
authorizations in the BRS areas. The Commission offered three levels of 
bidding credits: (i) A bidder with attributed average annual gross 
revenues that exceed $15 million and do not exceed $40 million for the 
preceding three years (small business) will receive a 15 percent 
discount on its winning bid; (ii) a bidder with attributed average 
annual gross revenues that exceed $3 million and do not exceed $15 
million for the preceding three years (very small business) will 
receive a 25 percent discount on its winning bid; and (iii) a bidder 
with attributed average annual gross revenues that do not exceed $3 
million for the preceding three years (entrepreneur) will receive a 35 
percent discount on its winning bid. Auction 86 concluded in 2009 with 
the sale of 61 licenses. Of the ten winning bidders, two bidders that 
claimed small business status won four licenses; one bidder that 
claimed very small business status won three licenses; and two bidders 
that claimed entrepreneur status won six licenses.
    187. In addition, the SBA's Cable Television Distribution Services 
small business size standard is applicable to EBS. There are presently 
2,032 EBS licensees. All but 100 of these licenses are held by 
educational institutions. Educational institutions are included in this 
analysis as small entities. Thus, the Commission estimated that at 
least 1,932 licensees are small businesses. Since 2007, Cable 
Television Distribution Services have been defined within the broad 
economic census category of Wired Telecommunications Carriers; that 
category is defined as follows: ``This industry comprises 
establishments primarily engaged in operating and/or providing access 
to transmission facilities and infrastructure that they own and/or 
lease for the transmission of voice, data, text, sound, and video using 
wired telecommunications networks. Transmission facilities may be based 
on a single technology or a combination of technologies.'' For these 
services, the Commission uses the SBA small business size standard for 
the category ``Wireless Telecommunications Carriers (except 
satellite),'' which is 1,500 or fewer employees. To gauge small 
business prevalence for these cable services the Commission must, 
however, use the most current census data. According to Census Bureau 
data for 2007, there were a total of 955 firms in this previous 
category that operated for the entire year. Of this total, 939 firms 
employed 999 or fewer employees, and 16 firms employed 1,000 employees 
or more. Thus, the majority of these firms can be considered small.

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

    188. The R&O implements several rule and policy modifications: (1) 
Codifying the Commission's policies for attributing spectrum holdings 
for certain purposes; (2) including in the initial spectrum screen 
applied to the Commission's review of transactions the AWS-4 band, AWS 
H Block, additional BRS spectrum, most of the EBS spectrum and the AWS-
3 band (on a market-by-market basis); (3) replacing the current 
application of the mobile spectrum screen in case-by-case analysis of 
post-auction applications with a determination for each auction of 
whether to apply mobile spectrum holding limits to that auction; and 
(4) reserving a certain amount of 600 MHz spectrum (to be determined by 
a market-based mechanism during the Incentive Auction) for qualified 
bidders. These modifications should have minimal, if any reporting, 
recordkeeping or compliance impact on small entities, which tend to 
have relatively small spectrum holdings and rarely engage in the sort 
of large mergers and spectrum acquisitions that would trigger the 
spectrum screen and competitive scrutiny. All four rule modifications 
are intended to provide a clear framework for the Commission's 
competitive review of spectrum acquisitions in auctions and secondary 
markets--a framework that focuses, among other things, on facilitating 
access by multiple providers, including small entities, to a mix of 
low-band and high-band spectrum. Rule modification 3 is intended to 
facilitate access to 600 MHz spectrum for the entry and expansion of 
multiple providers, including small entities.

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

    189. The rule modifications the Commission implements in the R&O 
are intended to promote competition in the provision of mobile services 
by, among other measures, facilitating access to spectrum by multiple 
providers, including small entities. The Commission has done so by 
imposing a minor new regulatory requirement on small firms, namely that 
such firms (and others) certify their qualification to bid on the 
reserved 600 MHz spectrum. After careful review, the Commission has 
determined that imposing this qualification to bid on reserved spectrum 
is necessary to help preserve spectrum for small entities. This 
certification process saves time and resources for small entities, 
making them better equipped to compete in spectrum auctions.

F. Report to Congress

    190. The Commission will send a copy of the R&O, including this 
FRFA, in a report to be sent to Congress pursuant to the Congressional 
Review Act. In addition, the Commission will send a copy of the R&O, 
including this FRFA, to the Chief Counsel for Advocacy of the SBA. A 
copy of the R&O and FRFA (or summaries thereof) will also be published 
in the Federal Register.

G. Paperwork Reduction Act Analysis

    191. The Report and Order contains new or modified information 
collection requirements subject to the Paperwork Reduction Act of 1995 
(PRA), Public Law 104-13. It will be submitted to the Office of 
Management and Budget (OMB) for review under section 3507(d) of the 
PRA. OMB, the general public, and other Federal agencies will be 
invited to comment on the new or modified information collection 
requirements contained in this proceeding in a separate Federal 
Register notice. In addition, the Commission notes that pursuant to the 
Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 
U.S.C. 3506(c)(4), the Commission previously sought specific comment on 
how the Commission might further reduce the information collection 
burden for small business concerns with fewer than 25 employees.
    192. In this present document, the Commission has assessed the 
effects of modifying reporting rules, and finds that doing so does not 
change the burden on small businesses with fewer than 25 employees.

VII. Ordering Clauses

    193. Accordingly, it is ordered, pursuant to sections 1, 4(i), 201, 
301, 303, 307, 308, 309, 310, 316, and 332 of the Communications Act of 
1934, as amended, and sections 6003, 6401, 6402, 6403, and 6404 of the 
Middle Class Tax Relief Act of 2012, Public Law 112-96, 126 Stat. 156, 
47 U.S.C. 151, 154(i), 201, 301, 303, 307, 308, 309, 310, 316, 332, 
1403, 451, and 1452, that this Report and Order is hereby adopted.

[[Page 40002]]

    194. It is further ordered that the rules adopted herein will 
become effective September 9, 2014.
    195. It is further ordered that, pursuant to section 801(a)(1)(A) 
of the Congressional Review Act, 5 U.S.C. 801(a)(1)(A), the Commission 
shall send a copy of the R&O to Congress and to the Government 
Accountability Office.
    196. It is further ordered that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this R&O, including the Final Regulatory Flexibility Analysis, 
to the Chief Counsel for Advocacy of the Small Business Administration.

List of Subjects in Part 20

    Communications common carriers, Communications equipment, Radio.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR part 20 as follows:

PART 20--COMMERCIAL MOBILE SERVICES

0
1. The authority citation for part 20 continues to read as follows:

    Authority:  47 U.S.C. 154, 160, 201, 251-254, 301, 303, 316, and 
332 unless otherwise noted.
    Section 20.12 is also issued under 47 U.S.C. 1302.

0
2. Add Sec.  20.22 to read as follows:


Sec.  20.22  Rules Governing Mobile Spectrum Holdings

    (a) Applicants for mobile wireless licenses for commercial use, for 
assignment or transfer of control of such licenses, or for long-term de 
facto transfer leasing arrangements as defined in Sec.  1.9003 of this 
chapter and long-term spectrum manager leasing arrangements as 
identified in Sec.  1.9020(e)(1)(ii) must demonstrate that the public 
interest, convenience, and necessity will be served thereby. The 
Commission will evaluate any such license application consistent with 
the policies set forth in Policies Regarding Mobile Spectrum Holdings, 
Report and Order, FCC 14-63, WT Docket No. 12-269, adopted May 15, 
2014.
    (b) Attribution of interests. (1) The following criteria will apply 
to attribute partial ownership and other interests in spectrum holdings 
for purposes of:
    (i) Applying a mobile spectrum holding limit to the licensing of 
spectrum through competitive bidding; and
    (ii) Applying the initial spectrum screen to secondary market 
transactions.
    (2) Controlling interests shall be attributable. Controlling 
interest means majority voting equity ownership, any general 
partnership interest, or any means of actual working control (including 
negative control) over the operation of the licensee, in whatever 
manner exercised.
    (3) Non-controlling interests of 10 percent or more in spectrum 
shall be attributable. Interests of less than 10 percent in spectrum 
shall be attributable if such interest confers de facto control, 
including but not limited to partnership and other ownership interests 
and any stock interest in a licensee.
    (4) The following interests in spectrum shall also be attributable 
to holders:
    (i) Officers and directors of a licensee shall be considered to 
have an attributable interest in the entity with which they are so 
associated. The officers and directors of an entity that controls a 
licensee or applicant shall be considered to have an attributable 
interest in the licensee.
    (ii) Ownership interests that are held indirectly by any party 
through one or more intervening corporations will be determined by 
successive multiplication of the ownership percentages for each link in 
the vertical ownership chain and application of the relevant 
attribution benchmark to the resulting product, except that if the 
ownership percentage for an interest in any link in the chain exceeds 
50 percent or represents actual control, it shall be treated as if it 
were a 100 percent interest. (For example, if A owns 20% of B, and B 
owns 40% of licensee C, then A's interest in licensee C would be 8%. If 
A owns 20% of B, and B owns 51% of licensee C, then A's interest in 
licensee C would be 20% because B's ownership of C exceeds 50%).
    (iii) Any person who manages the operations of a licensee pursuant 
to a management agreement shall be considered to have an attributable 
interest in such licensee if such person, or its affiliate, has 
authority to make decisions or otherwise engage in practices or 
activities that determine, or significantly influence, the nature or 
types of services offered by such licensee, the terms upon which such 
services are offered, or the prices charged for such services.
    (iv) Any licensee or its affiliate who enters into a joint 
marketing arrangement with another licensee or its affiliate shall be 
considered to have an attributable interest in the other licensee's 
holdings if it has authority to make decisions or otherwise engage in 
practices or activities that determine or significantly influence the 
nature or types of services offered by the other licensee, the terms 
upon which such services are offered, or the prices charged for such 
services.
    (v) Limited partnership interests shall be attributed to limited 
partners and shall be calculated according to both the percentage of 
equity paid in and the percentage of distribution of profits and 
losses.
    (vi) Debt and instruments such as warrants, convertible debentures, 
options, or other interests (except non-voting stock) with rights of 
conversion to voting interests shall not be attributed unless and until 
converted or unless the Commission determines that these interests 
confer de facto control.
    (vii) Long-term de facto transfer leasing arrangements as defined 
in Sec.  1.9003 of this chapter and long-term spectrum manager leasing 
arrangements as identified in Sec.  1.9020(e)(1)(ii) that enable 
commercial use shall be attributable to lessees, lessors, sublessees, 
and sublessors for purposes of this section.
    (c) 600 MHz Band holdings. (1) The Commission will reserve licenses 
for up to 30 megahertz of the 600 MHz Band, offered in the Incentive 
Auction authorized by Congress pursuant to 47 U.S.C. 309(j)(8)(G), for 
otherwise qualified bidders who do not hold an attributable interest in 
45 megahertz or more of the total 134 megahertz of below-1-GHz spectrum 
which consists of the cellular (50 megahertz), the 700 MHz (70 
megahertz), and the SMR (14 megahertz) spectrum in a Partial Economic 
Area (PEA), as calculated on a county by county population-weighted 
basis, utilizing 2010 U.S. Census data. The amount of reserved and 
unreserved 600 MHz Band licenses will be determined based on the 
market-based spectrum reserve set forth in Policies Regarding Mobile 
Spectrum Holdings, Report and Order, FCC 14-63, WT Docket No. 12-269, 
adopted May 15, 2014, as well as subsequent Public Notices. Nothing in 
this paragraph will limit, or may be construed to limit, an otherwise 
qualified bidder that is a non-nationwide provider of mobile wireless 
services from bidding on any reserved or unreserved license offered in 
the Incentive Auction.
    (2) For a period of six years, after initial licensing, no 600 MHz 
Band license, regardless of whether it is reserved or unreserved, may 
be transferred, assigned, partitioned, disaggregated, or long term 
leased to any entity that, after consummation of the transfer, 
assignment, or leased on a long term basis, would hold an attributable

[[Page 40003]]

interest in one-third or more of the total suitable and available 
below-1-GHz spectrum as calculated on a county by county population-
weighted basis in the relevant license area, utilizing 2010 U.S. Census 
data.
    (3) For a period of six years, after initial licensing, no 600 MHz 
Band reserved license may be transferred, assigned, partitioned, 
disaggregated, or leased on a long term basis to an entity that was not 
qualified to bid on that reserved spectrum license under paragraph 
(c)(1) of this section at the time of the Incentive Auction short-form 
application deadline.

[FR Doc. 2014-15769 Filed 7-10-14; 8:45 am]
BILLING CODE 6712-01-P