[Federal Register Volume 77, Number 195 (Tuesday, October 9, 2012)]
[Proposed Rules]
[Pages 61330-61350]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-24790]


=======================================================================
-----------------------------------------------------------------------

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 20

[WT Docket No. 12-269; FCC 12-119]


Policies Regarding Mobile Spectrum Holdings

AGENCY: Federal Communications Commission.

ACTION: Proposed rule.

-----------------------------------------------------------------------

SUMMARY: In this document, the Commission seeks comment on whether to 
retain or modify the current case-by-case analysis used to evaluate 
mobile spectrum holdings in the context of transactions and auctions, 
as well as whether to adopt bright-line limits advocated by some 
providers and public interest groups. In addition, the Commission seeks 
comment on updating the spectrum bands that should be included in any 
evaluation of mobile spectrum holdings and whether to make distinctions 
between different bands. Further, the Commission seeks comment on the 
appropriate product and geographic markets and other implementation 
issues such as attribution rules, remedies, and possible transition 
issues.

DATES: Interested parties may file comments on or before November 23, 
2012, and reply comments on or before December 24, 2012.

ADDRESSES: You may submit comments, identified by WT Docket No. 12-269, 
by any of the following methods:
    [ssquf] Federal eRulemaking Portal: http://www.regulations.gov. 
Follow the instructions for submitting comments.

[[Page 61331]]

    [ssquf] Federal Communications Commission's Web site: http://www.fcc.gov/cgb/ecfs/. Follow the instructions for submitting comments.
    [ssquf] Mail: Filings can be sent by hand or messenger delivery, by 
commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail (although the Commission continues to experience 
delays in receiving U.S. Postal Service mail). All filings must be 
addressed to the Commission's Secretary, Office of the Secretary, 
Federal Communications Commission.
    [ssquf] People with Disabilities: Contact the FCC to request 
reasonable accommodations (accessible format documents, sign language 
interpreters, CART, etc.) by email: FCC504@fcc.gov or phone: 202-418-
0530 or TTY: 202-418-0432.
    For detailed instructions for submitting comments and additional 
information on the rulemaking process, see the Supplementary 
Information section of this document.

FOR FURTHER INFORMATION CONTACT: Christina Clearwater, Wireless 
Telecommunications Bureau, Spectrum and Competition Policy Division, 
(202) 418-1893, email at Christina.Clearwater@fcc.gov, or Nicole 
McGinnis, Wireless Telecommunications Bureau, Spectrum and Competition 
Policy Division, (202) 418-2877, email at Nicole.McGinnis@fcc.gov.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Notice 
of Proposed Rulemaking (NPRM) in WT Docket No. 12-269, adopted 
September 28, 2012, and released September 28, 2012. The full text of 
the NPRM 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. It may also 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, 
http://www.bcpiweb.com; or by calling (800) 378-3160, facsimile (202) 
488-5563, or email FCC@BCPIWEB.com. Copies of the NPRM 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 http://www.fcc.gov.

I. Introduction

    1. With this Notice of Proposed Rulemaking, the Commission 
initiates a review of its policies governing mobile spectrum holdings 
in order to ensure that they fulfill its statutory objectives given 
changes in technology, spectrum availability, and the marketplace since 
the Commission's last comprehensive review more than a decade ago. In 
the last few years, large, medium, and small providers as well as 
public interest groups have raised concerns about the current approach, 
and sought review. In addition, the Commission adopts, in a separate 
proceeding, a Notice of Proposed Rulemaking in GN Docket No. 12-268 
soliciting comment on the framework for an incentive auction of the 
broadcast television spectrum, which will represent a major addition of 
new spectrum available for mobile broadband. The Commission initiates 
this proceeding to provide rules of the road that are clear and 
predictable, and that promote the competition needed to ensure a 
vibrant, world-leading, innovation-based mobile economy.
    2. Since the Commission's last comprehensive review of these 
issues, the number of spectrum bands used for mobile wireless services 
has expanded; new, innovative service offerings have been rolled out; 
increasingly sophisticated devices have been introduced into the 
marketplace; and consumers have adopted these devices to access a wide 
array of bandwidth-intensive applications. In light of the surge in 
consumer demand for mobile broadband services that require greater 
bandwidth, spectrum--a key input in the provision of mobile wireless 
services--is becoming increasingly critical for all providers. In this 
proceeding, the Commission seeks comment on retaining or modifying the 
current case-by-case analysis used to evaluate mobile spectrum holdings 
in the context of transactions and auctions, as well as on bright-line 
limits advocated by some providers and public interest groups. In 
addition, the Commission seeks comment on updating the spectrum bands 
that should be included in any evaluation of mobile spectrum holdings 
and whether it should make distinctions between different bands. The 
Commission also takes a fresh look at geographic market analysis and 
other implementation issues such as attribution rules, remedies, and 
possible transition issues. This proceeding affords the Commission the 
opportunity to receive valuable input from a broad range of active 
participants in the mobile broadband industry, as well as trade 
associations and consumer groups, that have requested that its policies 
be revised to keep pace with market changes.

II. Background

A. Statutory Framework

    3. Section 309(j)(3)(B) of the Communications Act provides that, in 
designing systems of competitive bidding, the Commission shall 
``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.'' \1\ 
Additionally, under the Communications Act, when reviewing a proposed 
license assignment or transfer application, the Commission must 
determine whether the applicant has demonstrated that the proposed 
assignment or transfer of control of licenses will serve the public 
interest, convenience, and necessity.\2\ Moreover, Congress has 
established the promotion of competition as a fundamental goal of the 
nation's mobile wireless policy.\3\ More recently, Congress enacted 
Section 6404 of the Spectrum Act, which modifies Section 309(j) to 
prohibit the Commission from preventing an otherwise qualified entity 
from participating in an auction, but reaffirms the Commission's 
authority ``to adopt and enforce rules of general applicability, 
including rules concerning spectrum aggregation that promote 
competition.'' \4\
---------------------------------------------------------------------------

    \1\ 47 U.S.C. 309(j)(3)(B).
    \2\ 47 U.S.C. 310(d).
    \3\ See 47 U.S.C. 332(a)(3), (c)(1)(C).
    \4\ Middle Class Tax Relief and Job Creation Act of 2012, Pub. 
L. 112-96, Section 6404 (Spectrum Act).
---------------------------------------------------------------------------

B. The Commission's Policies Regarding Mobile Spectrum Holdings

    4. Access to spectrum is a precondition to the provision of mobile 
wireless services. Ensuring the availability of sufficient spectrum is 
critical for promoting the competition that drives innovation and 
investment. Over time, the Commission has increased the amount of 
spectrum available for the provision of mobile wireless services, 
making this additional spectrum available in different frequency bands, 
bandwidths, and licensing areas. As discussed below, in order to 
address its statutory mandate, the Commission has implemented a variety 
of mobile spectrum aggregation policies and rules, including the 
cellular cross interest rule, the Personal Communications Service (PCS) 
cross-ownership rule, the Commercial Mobile Radio Services (CMRS) 
spectrum cap, and the current case-by-case spectrum aggregation 
analysis.
    5. Cellular Services. In 1981, in establishing the rules for the 
licensing of

[[Page 61332]]

cellular service, the Commission decided to award two cellular services 
licenses per market--a separate allocation of 20 megahertz for 
incumbent wireline carriers and an allocation of 20 megahertz for other 
applicants.\5\ With two licensees per market, the Commission reasoned 
it would be more difficult for a single entity to dominate the cellular 
market nationwide.\6\ The Commission adopted the cellular cross-
interest rule in 1991 ``to guarantee the competitive nature of the 
cellular industry and to foster the development of competing systems.'' 
\7\ The rule was adopted when only two cellular licensees provided 
mobile voice services in each geographic area of the U.S.\8\ At that 
time, a party with a controlling interest in one of the cellular 
licensees was prohibited from having more than a five percent direct or 
indirect ownership interest in the other licensee in the same cellular 
geographic service area (CGSA).\9\ In the Second Biennial Review Order 
in 2001, the Commission eliminated the cellular cross-interest rule in 
Metropolitan Statistical Areas (MSAs) after finding numerous 
competitive choices for consumers in urban markets.\10\ Later, in 2004, 
the Commission eliminated the cellular cross-interest rule in favor of 
a case-by-case review for all markets, finding that the continued 
application of the cellular cross-interest rule in Rural Service Areas 
(RSAs) could impede the development of new services in rural and 
underserved areas.\11\
---------------------------------------------------------------------------

    \5\ Inquiry Into the Use of the Bands 825-845 MHz and 870-890 
MHz for Cellular Communications Systems; and Amendment of Parts 2 
and 22 of the Commission's Rules Relative to Cellular Communications 
Systems, CC Docket No. 79-318, Report and Order, 86 FCC 2d 469, 488-
92 paras. 38-43 (1981) (Cellular Report and Order).
    \6\ See Cellular Report and Order, 86 FCC 2d at 491 para. 43.
    \7\ Amendment of Part 22 of the Commission's Rules to Provide 
for Filing and Processing of Applications for Unserved Areas in the 
Cellular Service and to Modify Other Cellular Rules, CC Docket No. 
90-6, First Report and Order and Memorandum Opinion and Order on 
Reconsideration, 6 FCC Rcd 6185, 6628 para. 104 (1991) (Cellular 
First Report and Order).
    \8\ See Cellular First Report and Order, 6 FCC Rcd at 6228 para. 
103.
    \9\ See Cellular First Report and Order, 6 FCC Rcd at 6228 
paras. 104-105.
    \10\ 2000 Biennial Regulatory Review--Spectrum Aggregation 
Limits for Commercial Mobile Radio Services, WT Docket No. 01-14, 
Report and Order, 16 FCC Rcd 22668, 22671 para. 7, 22707 para. 84 
(2001) (Second Biennial Review Order).
    \11\ See Facilitating the Provision of Spectrum-Based Services 
to Rural Areas and Promoting Opportunities for Rural Telephone 
Companies to Provide Spectrum-Based Services, WT Docket No. 02-381, 
Report and Order and Further Notice of Proposed Rule Making, 19 FCC 
Rcd 19078, 19113-115 paras. 63-67 (2004) (Rural Report and Order).
---------------------------------------------------------------------------

    6. Cellular/PCS Cross-Ownership Rule. In 1993, in establishing the 
initial PCS service rules, the Commission imposed service-specific 
limitations on the aggregation of broadband PCS spectrum and on 
cellular/PCS cross-ownership.\12\ The Commission limited broadband PCS 
licensees to 40 megahertz of total spectrum allocated to broadband 
PCS,\13\ and limited cellular licensees to 10 megahertz of broadband 
PCS spectrum in their cellular service areas.\14\ In 1996, the 
Commission eliminated the service-specific limitations on the 
aggregation of broadband PCS spectrum and on cellular/PCS cross-
ownership, and decided to rely solely on the 45 megahertz CMRS spectrum 
cap, implemented in 1994, ``to ensure that multiple service providers 
would be able to obtain broadband PCS spectrum and thereby facilitate 
the development of competitive markets for wireless services.'' \15\
---------------------------------------------------------------------------

    \12\ See Amendment of the Commission's Rules to Establish New 
Personal Communications Services, Second Report and Order, 8 FCC Rcd 
7700, 7728 para. 61, 7745 para. 106 (1993) (PCS Second Report and 
Order).
    \13\ See PCS Second Report and Order, 8 FCC Rcd at 7728 para. 
61.
    \14\ See PCS Second Report and Order, 8 FCC Rcd at 7745 para. 
106. See also Amendment of the Commission's Rules to Establish New 
Personal Communications Services, Memorandum Opinion and Order, 9 
FCC Rcd 4957, 4984 paras. 66-67 (1994).
    \15\ See Second Biennial Review Order, 16 FCC Rcd at 22673 para. 
13 (citing Amendment of Parts 20 and 24 of the Commission's Rules--
Broadband PCS Competitive Bidding and the Commercial Mobile Radio 
Service Spectrum Cap; Amendment of the Commission's Cellular/PCS 
Cross-Ownership Rule, WT Docket No. 96-59, Report and Order, 11 FCC 
Rcd 7824, 7869 para. 94 (1996), aff'd, 12 FCC Rcd 14031 (1997), 
aff'd sub nom. BellSouth Corp. v. FCC, 162 F.3d 1215 (D.C. Cir. 
1999)).
---------------------------------------------------------------------------

    7. CMRS Spectrum Cap. In 1994, the Commission implemented a 
spectrum cap on Cellular, broadband PCS, and Specialized Mobile Radio 
(SMR) spectrum to promote diversity and competition in mobile 
services,\16\ ``recognizing the possibility that mobile service 
licensees might exert undue market power or inhibit market entry by 
other service providers if permitted to aggregate large amounts of 
spectrum.'' \17\ The Commission found that a spectrum cap provided a 
``minimally intrusive means'' to ensure that the mobile communications 
marketplace remained competitive and preserved incentives for 
efficiency and innovation.\18\ Under former Section 20.6 of the 
Commission's rules, no licensee in the broadband PCS, Cellular, or SMR 
services regulated as CMRS could have an attributable interest in more 
than 45 megahertz of licensed spectrum (broadband PCS, cellular, and 
SMR spectrum regulated as CMRS) that has significant overlap in any 
geographic area.\19\ A few years later, the Commission increased the 
cap to 55 megahertz in the RSAs.\20\ Subsequently, in the Second 
Biennial Review Order, the Commission eliminated the spectrum cap 
effective January 1, 2003,\21\ in favor of case-by-case review of 
mobile spectrum holdings.\22\
---------------------------------------------------------------------------

    \16\ Implementation of Sections 3(n) and 332 of the 
Communications Act--Regulatory Treatment of Mobile Services, GN 
Docket No. 93-252, Third Report and Order, 9 FCC Rcd 7988, 8100 
para. 238, 8109 para. 263 (1994) (CMRS Third Report and Order).
    \17\ CMRS Third Report and Order, 9 FCC Rcd at 8100 para. 239.
    \18\ See CMRS Third Report and Order, 9 FCC Rcd at 7999 para. 
16.
    \19\ See 1998 Biennial Regulatory Review--Spectrum Aggregation 
Limits for Wireless Telecommunications Carriers, WT Docket No. 98-
205, Report and Order, 15 FCC Rcd 9219, 9224 para. 8 (1999) (First 
Biennial Review Order) (quoting former 47 CFR 20.6(a)). A 
``significant overlap'' of a PSC licensed service area, CGSA, and 
SMR service area occurred when at least ten percent of the 
population of the PCS licensed service area was within the cellular 
geographic service area and/or SMR service area. See id. (citing 
former Section 20.6(c)). The spectrum cap sunset on January 1, 2003. 
47 CFR 20.6(f).
    \20\ See First Biennial Review Order, 15 FCC Rcd at 9254-57 
paras. 80-84.
    \21\ See 47 CFR 20.6(f); Second Biennial Review Order, 16 FCC 
Rcd at 22669 para. 1, 22696 para. 55. The Commission also raised the 
spectrum cap to 55 MHz in all markets during the sunset period. See 
47 CFR 20.6(a); Second Biennial Review Order, 16 FCC Rcd at 22671 
para. 6, 22693 para. 47.
    \22\ See Second Biennial Review Order, 16 FCC Rcd at 22670-71 
para. 6.
---------------------------------------------------------------------------

    8. Case-by-Case Analysis. Since 2003, the Commission has examined 
the competitive effects of proposed wireless transactions involving the 
transfer, assignment, or lease of Commission licenses by employing a 
case-by-case review. In 2008, the Commission determined that it would 
apply the case-by-case analysis to spectrum acquired via auction.\23\ 
Beginning in 2004, the Commission has used a two-part screen to help 
identify markets where the acquisition of spectrum provides particular 
reason for further competitive analysis.\24\ The Commission does not,

[[Page 61333]]

however, limit its consideration of potential competitive harms in 
proposed transactions solely to markets identified by its initial 
screen.\25\ The first part of the screen considers changes in market 
concentration as a result of the transaction and is based on the size 
of the post-transaction Herfindahl-Hirschman Index (HHI) \26\ and the 
change in the HHI.\27\ The second part examines the amount of spectrum 
that is suitable and available on a market-by-market basis for the 
provision of mobile telephony/broadband service.\28\ For those markets 
highlighted by one or both steps in the analysis, the Commission 
routinely conducts detailed, market-by-market reviews to determine 
whether the transaction would result in an increased likelihood or 
ability in those markets for the combined entity to behave in an 
anticompetitive manner.\29\ The case-by-case analysis considers 
variables that are important in predicting the incentives and ability 
of service providers to successfully reduce competition on price or 
non-price terms, and transaction-specific public interest benefits that 
may mitigate or outweigh any harms arising from the transaction.\30\
---------------------------------------------------------------------------

    \23\ See Union Telephone Company, Cellco Partnership d/b/a 
Verizon Wireless, Applications for 700 MHz Band Licenses, Auction 
No. 73, Memorandum Opinion and Order, 23 FCC Rcd 16787, 16791 para. 
9 (2008) (Verizon Wireless-Union Tel. Order).
    \24\ See, e.g., Applications of Cellco Partnership d/b/a Verizon 
Wireless and SpectrumCo LLC and Cox TMI, LLC for Consent to Assign 
AWS-1 Licenses, et al,. WT Docket No. 12-4, Memorandum Opinion and 
Order and Declaratory Ruling, FCC 12-95 (rel. Aug. 23, 2012) at 
para. 48 (Verizon Wireless-SpectrumCo Order); Application of AT&T 
Inc. and Qualcomm Incorporated For Consent to Assign Licenses and 
Authorizations, WT Docket No. 11-18, Order, 26 FCC Rcd 17589, 17602 
para. 31 (2011) (AT&T-Qualcomm Order); Applications of AT&T Wireless 
Services, Inc. and Cingular Wireless Corporation For Consent to 
Transfer Control of Licenses and Authorizations, WT Docket No. 04-
70, Memorandum Opinion and Order, 19 FCC Rcd 21522, 21552 para. 58 
(2004) (Cingular-AT&T Wireless Order).
    \25\ See, e.g., Verizon Wireless-SpectrumCo Order, FCC 12-95, at 
para. 48; AT&T-Qualcomm Order, 26 FCC Rcd at 17609-10 paras. 49-50; 
Applications of AT&T Inc. and Centennial Communications Corp. For 
Consent to Transfer Control of Licenses, Authorizations, and 
Spectrum Leasing Arrangements, WT Docket No. 08-246, Memorandum 
Opinion and Order, 24 FCC Rcd 13915, 13946-48 paras. 71-74, 13952 
para. 85 (2009) (AT&T-Centennial Order); Applications for the 
Assignment of License from Denali PCS, L.L.C. to Alaska Digitel, 
L.L.C. and the Transfer of Control of Interests in Alaska Digitel, 
L.L.C. to General Communication, Inc., WT Docket 06-114, Memorandum 
Opinion and Order, 21 FCC Rcd 14863, 14898 para. 85 (2006).
    \26\ The Herfindahl-Hirschman Index (HHI), which is calculated 
by summing the squares of all provider subscriber market shares in 
any given market, is a commonly used measure of market concentration 
in competition analysis.
    \27\ The HHI screen identifies for further case-by-case market 
analysis those markets in which, post-transaction, the HHI would be 
greater than 2800 and the change in the HHI would be 100 or greater, 
or the change in the HHI would be 250 or greater, regardless of the 
level of the HHI. The HHI screen has remained the same since the 
Commission adopted the case-by-case review process.
    \28\ See, e.g., Verizon Wireless-SpectrumCo Order, FCC 12-95, at 
para. 59; see also infra discussion on determining spectrum that is 
suitable and available for the relevant product market at para. 26.
    \29\ This Notice of Proposed Rulemaking does not address the 
part of our review that considers changes in market concentration 
based on HHI, but considers only our review of mobile spectrum 
holdings.
    \30\ See Applications of Cellco Partnership d/b/a Verizon 
Wireless and Atlantis Holdings LLC For Consent to Transfer Control 
of Licenses, Authorizations, and Spectrum Manager and De Facto 
Transfer Leasing Arrangements and Petition for Declaratory Ruling 
that the Transaction is Consistent with Section 310(b)(4) of the 
Communications Act, WT Docket No. 08-95, Memorandum Opinion and 
Order and Declaratory Ruling, 23 FCC Rcd 17444, 17460 para. 26 
(2008) (``Verizon Wireless-ALLTEL Order'').
---------------------------------------------------------------------------

C. Criticisms of Current Case-by-Case Analysis Approach

    9. In its consideration of transactions, the Commission generally 
has reviewed and, when necessary, adjusted its case-by-case analysis to 
reflect changing industry and consumer needs. In recent years, large 
and small wireless providers, as well as trade associations and public 
interest groups, have requested that the Commission undertake an 
examination of its current policies regarding mobile spectrum holdings. 
For example, Verizon Wireless has contended that the Commission should 
reconsider the particular spectrum to be examined in a competitive 
analysis and has urged that the Commission include additional spectrum 
bands. AT&T has expressed concerns that the current case-by case 
evaluation is not clear and predictable and the spectrum screen changes 
from one transaction to the next. AT&T has argued that there is ``more 
regulatory uncertainty on top of an industry that is a foundation for a 
lot of today's innovation, making it difficult for all of us to 
allocate and commit capital,'' and that ``we don't know how much 
spectrum we're allowed to hold.'' Sprint Nextel has argued that the 
current method of evaluating spectrum holdings values spectrum equally, 
``regardless of whether it lies within more valuable `beachfront' bands 
or in higher-frequency bands of limited commercial use.'' T-Mobile has 
argued that to further the goal of a robust marketplace, the Commission 
should modify its case-by-case evaluation to recognize the difference 
in value of spectrum above and below 1 GHz.
    10. The Rural Cellular Association (RCA) has urged the Commission 
to ``take a fresh approach to its competitive analysis'' instead of 
``recycl[ing] the outdated spectrum screen.'' RTG has urged the 
Commission to conduct a more in-depth competitive review of large-scale 
transactions, in part by adopting a lower spectrum screen that will 
trigger a heightened level of review and allow consideration of certain 
factors other than the amount of spectrum held by licensees, in order 
to determine whether further spectrum concentration will threaten 
market competition. Both RTG and Leap Wireless have contended that the 
case-by-case approach creates uncertainty and/or suggest that an 
alternative approach would provide greater clarity.\31\ Free Press has 
urged the use of a spectrum screen based on spectrum value, contending 
that the current spectrum screen, a ``simple old analytical tool,'' is 
insufficient to reveal changes in market power. Similarly, Public 
Knowledge has argued that the assumptions underlying the method used to 
calculate the spectrum screen have proven to be unreliable, and that 
the Commission should consider the long-term implications of spectrum 
holdings among carriers.
---------------------------------------------------------------------------

    \31\ See, e.g., RTG Reply Comments, RM No. 11498, at 1-3 (urging 
the Commission to consider instituting a spectrum cap); Leap 
Comments, RM No. 11498, at 8-9. (advocating bright-line rules). 
Because this Notice of Proposed Rulemaking addresses policies 
regarding mobile spectrum holdings from a broad perspective, we 
decline to initiate the more narrowly-tailored requests made in 
RTG's petition for rulemaking. See RTG Petition for Rulemaking, RM 
No. 11498, at 5 (proposing that the FCC impose, on a county level, a 
110 MHz aggregation limit below 2.3 GHz).
---------------------------------------------------------------------------

D. The Current Wireless Landscape

    11. During the past decade, the use of wireless services has surged 
as the number of spectrum bands used to provide mobile wireless 
services has expanded, an array of increasingly sophisticated devices 
has been introduced in the marketplace, and new service offerings have 
been rolled out. As discussed below, some of these changes could have 
implications for its policies regarding mobile spectrum holdings. The 
industry is undergoing a transformation, from an industry providing 
predominantly voice services to one that is increasingly focused on 
providing data services, particularly mobile broadband services. This 
transition has led to the need of competitors for more spectrum to meet 
the increasing demand for mobile broadband, which consumes greater 
amounts of bandwidth. In order to ensure that its policies continue to 
serve the public interest and keep pace with changing technologies and 
consumer needs, the Commission must consider these and other industry 
changes.
    12. Facilitating access by all providers to valuable spectrum 
resources they need to serve their customers is essential given the 
current mobile wireless landscape. The rapid adoption of smartphones, 
as well as tablet computers and the wide-spread use of mobile 
applications, combined with deployment of high-speed 3G and 4G 
technologies, is driving more intensive use of mobile networks. A 
single smartphone can generate as much traffic as 35 basic-feature 
phones; a tablet as

[[Page 61334]]

much traffic as 121 basic-feature phones; and a single laptop can 
generate as much traffic as 498 basic-feature phones.\32\ The adoption 
of smartphones alone increased at a 50 percent annual growth rate in 
2011, from 27 percent of U.S. mobile subscribers in December 2010 to 
nearly 42 percent in December 2011.\33\ Moreover, global mobile data 
traffic is anticipated to grow eighteen-fold between 2011 and 2016.\34\ 
Indeed, a study by the Council of Economic Advisors (CEA) found that 
``the spectrum currently allocated to wireless is not sufficient to 
handle the projected growth in demand, even with technological 
improvements allowing for more efficient use of existing spectrum and 
significant investment in new facilities.'' \35\
---------------------------------------------------------------------------

    \32\ See Cisco White Paper, Cisco Visual Networking Index: 
Global Mobile Data Traffic Forecast Update, 2011-2016, at 7, 
February 14, 2012, available at http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-520862.pdf (last visited Sept. 6, 2012).
    \33\ comScore 2012 Mobile Future in Focus (2012), available at 
http://www.comscore.com/Press_Events/Presentations_Whitepapers/2012/2012_Mobile_Future_in_Focus (last visited Sept. 6, 2012). 
For consumers ages 25-34, eight of ten recent new phone purchases 
were smartphones. See Survey: New U.S. Smartphone Growth by Age and 
Income, NIELSENWIRE, Feb. 20, 2012, available at http://blog.nielsen.com/nielsenwire/online_mobile/survey-new-u-s-smartphone-growth-by-age-and-income/ (last visited Sept. 6, 2012).
    \34\ See Cisco White Paper, Cisco Visual Networking Index: 
Global Mobile Data Traffic Forecast Update, 2011-2016, Executive 
Summary, February 14, 2012, available at http://www.cisco.com/en/US/solutions/collateral/ns341/ns525/ns537/ns705/ns827/white_paper_c11-520862.html (last visited Sept. 6, 2012).
    \35\ Council of Economic Advisors, The Economic Benefits of New 
Spectrum for Wireless Broadband at 5 (Feb. 2012), available at 
http://www.whitehouse.gov/sites/default/files/cea_spectrum_report_2-21-2012.pdf (last visited Sept. 6, 2012).
---------------------------------------------------------------------------

    13. Given the limited spectrum resources, the Commission must 
consider how its policies regarding mobile spectrum holdings can 
accommodate the increasing demand for spectrum by all providers. While 
there are numerous ways in which wireless service providers can 
increase network capacity to satisfy increasing demand, acquiring more 
spectrum has been the least costly way for all providers to address 
capacity constraints. In light of these circumstances, ensuring that 
the Commission's policies regarding mobile spectrum holdings promote 
access to spectrum is critical.\36\
---------------------------------------------------------------------------

    \36\ We note that Congress, as well as the Commission and NTIA, 
has taken innovative steps to bring additional spectrum suitable for 
mobile broadband to the commercial marketplace. For instance, 
Congress recently passed the Spectrum Act, which authorizes the 
auction and repurposing of television broadband spectrum for the 
provision of wireless services. See Middle Class Tax Relief and Job 
Creation Act of 2012, Pub. L. No. 112-96, Subtitle D--Spectrum 
Auction Authority, Section 6401 et seq. As another example, the 
Commission has opened a proceeding to increase the supply of 
spectrum for mobile broadband by providing for flexible use of 40 
megahertz of spectrum assigned to the Mobile Satellite Service (MSS) 
in the 2 GHz Band. See, e.g., Service Rules for Advanced Wireless 
Services in the 2000-2020 MHz and 2180-2200 MHz Bands, WT Docket No. 
12-70, Notice of Proposed Rulemaking and Notice of Inquiry, 27 FCC 
Rcd 3561 (2012) (AWS-4 NPRM). NTIA undertook a ``fast-track'' review 
of several bands that could be reallocated to mobile use. See U.S. 
Department of Commerce, An Assessment of the Near-Term Viability of 
Accommodating Wireless Broadband Systems in the 1675-1710 MHz, 1755-
1780 MHz, 3500-3650 MHz, and 4200-4220 MHz, 4380-4400 MHz Bands 
(Oct. 2010), available at http://www.ntia.doc.gov/reports/2010/FastTrackEvaluation_11152010.pdf (NTIA Fast Track Report) (last 
visited Sept. 6, 2012). Additionally, on August 13, 2012, the 
Commission granted T-Mobile's application for experimental special 
temporary authority to begin testing possible use of the 1755 MHz to 
1780 MHz band on a shared basis for providing commercial mobile 
broadband services. See FCC Experimental Special Temporary 
Authorization, Call Sign No. WF9XQW, File No. 0373-EX-ST-2012, 
available at https://apps.fcc.gov/els/GetAtt.html?id=128554 (last 
visited Sept. 6, 2012).
---------------------------------------------------------------------------

    14. Since the sunset of the spectrum cap, there also have been 
other changes in the wireless industry that warrant reexamination of 
the Commission's policies. In 2003, when the Commission eliminated the 
spectrum cap, there were six mobile telephone operators that analysts 
then described as nationwide: AT&T Wireless, Sprint PCS, Verizon 
Wireless, T-Mobile, Cingular Wireless (``Cingular''), and Nextel.\37\ 
Today, as a result of mergers and other transactions, there are four 
nationwide providers: Verizon Wireless, AT&T, T-Mobile, and Sprint 
Nextel.\38\ As of December 2003, the top six facilities-based 
nationwide providers served approximately 78 percent of total mobile 
wireless subscribers in the country.\39\ By December of 2009, the top 
four facilities-based nationwide providers had increased their combined 
market share to 88 percent.\40\ Moreover, since 2003, a number of 
regional and rural facilities-based providers have exited the 
marketplace through mergers and acquisitions, including Dobson 
Communications, SunCom Wireless, Rural Cellular Corporation, ALLTEL, 
and Centennial Communications.\41\ In addition, there have been 
significant spectrum-only transactions, such as the transaction at the 
end of 2011 in which AT&T acquired Qualcomm's nationwide Lower 700 MHz 
downlink spectrum \42\ and the more recent transaction in which Verizon 
Wireless acquired AWS-1 licenses from SpectrumCo, LLC, and Cox TMI.\43\
---------------------------------------------------------------------------

    \37\ See Implementation of Section 6002(b) of the Omnibus Budget 
Reconciliation Act of 1993, Annual Report and Analysis of 
Competitive Market Conditions With Respect to Commercial Mobile 
Services, WT Docket No. 04-111, Ninth Report, 19 FCC Rcd 20597, 
20613 para. 36 (2004) (Ninth Annual CMRS Competition Report).
    \38\ See, e.g., AT&T-Qualcomm Order, 26 FCC Rcd at 17604 para. 
35; AT&T-Centennial Order, 24 FCC Rcd 13915; Verizon Wireless-ALLTEL 
Order, 23 FCC Rcd 17444; Applications of Nextel Communications, Inc. 
and Sprint Corporation For Consent To Transfer Control of Licenses 
and Authorizations, WT Docket No. 05-63, Memorandum Opinion and 
Order, 20 FCC Rcd. 13967 (2005) (Sprint-Nextel Order).
    \39\ See Ninth Annual CMRS Competition Report, 19 FCC Rcd at 
para. 174, A-8, Table 4.
    \40\ See Fifteenth Mobile Wireless Competition Report, 26 FCC 
Rcd at 9760, Table 14, and John C. Hodulik et al., US Wireless 411 
Report for 4Q2010, UBS Investment Research, UBS, at 13, Table 8.
    \41\ See Fifteenth Mobile Wireless Competition Report, 26 FCC 
Rcd at 9722, Table 10.
    \42\ See generally AT&T-Qualcomm Order, 26 FCC Rcd 17589.
    \43\ See generally Verizon Wireless-SpectrumCo Order, FCC 12-95.
---------------------------------------------------------------------------

III. Discussion

    15. In the sections below, the Commission seeks comment on whether 
and how to revise its policies and rules regarding mobile spectrum 
holdings. In particular, the Commission asks that comments address how 
to ensure that its policies and rules afford all interested parties 
greater certainty, transparency and predictability to make investment 
and transactional decisions, while also promoting the competition 
needed to ensure a vibrant, increasingly mobile economy driven by 
innovation. First, the Commission discusses general approaches to 
address competitive harm resulting from foreclosing access to spectrum, 
including a case-by-case analysis, bright-line limits, and other 
methodologies, and how they might apply not only to secondary market 
transactions but also to initial spectrum licensing after auctions. The 
Commission then takes a fresh look at implementation issues under 
various approaches, such as which spectrum should be considered, 
relevant product and geographic markets, and issues relating to 
attribution rules, appropriate remedies and transition concerns.
    16. The Commission also seeks comment on the costs and benefits of 
any proposals or proposed changes to policies and rules. The Commission 
asks that commenters take into account only those costs and benefits 
that directly result from the implementation of the particular approach 
or rule that could be adopted. Further, to the extent possible, 
commenters should provide specific data and information, such as actual 
or estimated dollar figures for each specific cost or benefit 
addressed, including a description of how the data or information was 
calculated or obtained, and any supporting

[[Page 61335]]

documentation or other evidentiary support.\44\
---------------------------------------------------------------------------

    \44\ During the pendency of this proceeding, the Commission will 
continue to apply its current case-by-case approach to evaluate 
mobile spectrum holdings during our consideration of secondary 
market transactions and initial spectrum licensing after auctions.
---------------------------------------------------------------------------

A. General Approaches to Mobile Spectrum Holdings

1. Case-by-Case Analysis
    17. The Commission seeks comment on its current policies regarding 
mobile spectrum holdings. In general, the Commission currently examines 
the impact of spectrum aggregation on competition, innovation, and the 
efficient use of spectrum on a case-by-case basis, after establishing 
the relevant product and geographic markets in each case.\45\ The 
Commission has applied this approach to wireless transactions, using an 
initial spectrum screen, since 2004,\46\ and to mobile spectrum 
acquired through competitive bidding since 2008.\47\ In reviewing a 
proposed wireless transaction, 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.\48\ The current screen identifies local markets 
where an entity would acquire more than approximately one-third of the 
total spectrum suitable and available for the provision of mobile 
telephony/broadband services.\49\ The Commission does not, however, 
limit its consideration of potential competitive harms in proposed 
transactions solely to markets identified by its initial screen.\50\ 
The Commission balances a number of factors in its analysis, 
considering the totality of the circumstances in each market.\51\ The 
Commission also has considered whether harms in numerous local markets 
may result in nationwide harms.\52\
---------------------------------------------------------------------------

    \45\ See AT&T-Qualcomm Order, 26 FCC Rcd at 17602 paras. 31-32.
    \46\ See Cingular-AT&T Wireless Order, 19 FCC Rcd at 21568-69 
paras. 107-12. See also AT&T-Qualcomm Order, 26 FCC Rcd at 17602 
para. 31; AT&T Inc. and Cellco Partnership d/b/a Verizon Wireless 
Seek FCC Consent To Assign or Transfer Control of Licenses and 
Authorizations and Modify a Spectrum Leasing Arrangement, WT Docket 
No. 09-104, Memorandum Opinion and Order, 25 FCC Rcd 8704, 8720-21 
para. 32 (2010) (AT&T-Verizon Wireless Order).
    \47\ See Verizon Wireless-Union Tel. Order, 23 FCC Rcd at 16791-
92 para. 9.
    \48\ See Verizon Wireless-SpectrumCo Order, FCC 12-95, at para. 
59; AT&T-Qualcomm Order, 26 FCC Rcd at 17605-06 para. 38; AT&T-
Verizon Wireless Order, 25 FCC Rcd at 8723-24 para. 39; AT&T-
Centennial Order, 24 FCC Rcd at 13934 para. 43. See infra discussion 
of determining spectrum suitable and available for the relevant 
product market at para. 26.
    \49\ See Verizon Wireless-SpectrumCo Order, FCC 12-95, at para. 
59; Verizon Wireless-ALLTEL Order, 23 FCC Rcd at 17473 para. 54.
    \50\ See, e.g., Verizon Wireless-SpectrumCo Order, FCC 12-95, at 
para. 48; AT&T-Qualcomm Order, 26 FCC Rcd at 17609-10 paras. 49-50; 
AT&T-Centennial Order, 24 FCC Rcd 13915, 13946-48 paras. 71-74, 
13952 para. 85.
    \51\ See, e.g., Verizon Wireless-ALLTEL Order, 23 FCC Rcd at 
17487-88 para. 91.
    \52\ See Verizon Wireless-SpectrumCo Order, FCC 12-95, at para. 
76.
---------------------------------------------------------------------------

    18. The Commission recognizes that a case-by-case approach affords 
flexibility to consider different circumstances, permits a variety of 
factors to be considered, and allows it to better tailor any remedies 
to the specific harm and circumstances, particularly in its review of 
wireless transactions. In addition to recognizing factors unique to 
each licensee, a case-by-case approach allows the Commission to 
consider the changing needs of the mobile wireless marketplace more 
generally. On the other hand, a case-by-case approach is time- and 
resource-intensive, and has been criticized for creating uncertainty as 
to whether a particular transaction will be approved.\53\ One 
commenter, however, has suggested generally that a case-by-case 
approach can provide sufficiently clear guidance to enable providers to 
make their transactional and investment decisions.\54\ The Commission 
seeks comment on the costs and benefits of a case-by-case analysis to 
consumers, wireless service providers, and others, as well as the 
overall effectiveness of such an approach in achieving its public 
policy objectives. Should the Commission change its current case-by-
case analysis process? For instance, should the Commission continue to 
use a screen that includes a measure of spectrum holdings? Could the 
Commission take measures to make the process more transparent, 
predictable, or better tailored to promote its goals? For example, 
should the Commission consider a regular review of its policies and 
guidelines to keep pace with changing marketplace conditions? Should 
the Commission 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?
---------------------------------------------------------------------------

    \53\ See, e.g., ``Stephenson: Verizon/Cable Deals Could Offer 
Guidance From FCC,'' TR Daily (June 12, 2012).
    \54\ See Union Tel. Co. Comments, RM No. 11498, at i.
---------------------------------------------------------------------------

    19. Finally, the Commission seeks comment on the specific costs and 
benefits of applying a case-by-case approach to initial licenses 
acquired through competitive bidding. Does a case-by-case analysis 
afford auction participants sufficient certainty to determine whether 
they would be allowed to hold a given license post-auction? Does the 
lack of a bright-line spectrum limit deter auction participation? 
Further, does the lack of a bright-line rule provide an opportunity for 
licensees to bid on spectrum, regardless of whether they believe they 
ultimately would be allowed to hold the licenses, in order to raise 
bidding costs or foreclose other competitors from acquiring certain 
licenses? A case-by-case approach could result in an inefficient 
auction process if the Commission ultimately denies the winning 
bidder's application to hold a license. In addition to imposing costs 
on competitors, the expenditure of public or private resources and 
resulting delay in awarding the spectrum to another bidder impose costs 
on the public. The Commission seeks comment on whether there are 
additional measures it would need to adopt to promote an effective and 
efficient auction process while discouraging the potential for 
anticompetitive behavior. If the Commission continues its case-by-case 
analysis for secondary market transactions, should the Commission adopt 
another approach for initial licensing rather than a case-by-case 
analysis, such as band-specific limits adopted prior to an auction?
2. Bright-Line Limits
    20. As discussed above, the Commission employed a CMRS spectrum cap 
to prevent excessive spectrum concentration, but eliminated that cap in 
2003 and then started using the current case-by-case approach. Before 
employing a CMRS spectrum cap, the Commission used other bright-line 
limits on spectrum holdings.\55\ There have been many changes in the 
mobile wireless industry since the Commission first started using a 
case-by-case approach to assess spectrum concentration, as noted above, 
and the Commission believes that these changes warrant reevaluating 
that approach.\56\ The Commission seeks comment on whether adoption of 
bright-line limits would serve the public interest now, and also on the 
specific costs and benefits of adopting such an approach. Bright-line 
limits could offer providers greater certainty, clarity, and 
predictability regarding which licenses they could acquire. Bright-line 
limits might encourage auction participation

[[Page 61336]]

or more secondary market transactions by affording parties greater 
certainty and predictability to develop their business plans and obtain 
necessary financing. On the other hand, a bright-line approach would 
limit the Commission's flexibility to consider individualized 
circumstances and to respond swiftly to the changing needs of the 
mobile wireless industry and consumers. If the Commission were to adopt 
bright-line limits, how could the Commission do so in a manner that 
preserves its flexibility?
---------------------------------------------------------------------------

    \55\ See PCS Second Report and Order, 8 FCC Rcd 7700, 7728 para. 
61, 7745 para. 106.
    \56\ See Second Biennial Review Order, 16 FCC Rcd at 22694 para. 
50. See supra section II.D.: The Current Wireless Landscape.
---------------------------------------------------------------------------

    21. The Commission seeks comment on related implementation issues 
with respect to applying bright-line limits to initial licenses 
acquired through competitive bidding as well as to licenses acquired 
through the secondary market. The Commission further seeks comment on 
whether it should consider applying a band-specific spectrum limit in 
the context of any band-specific service rules that are adopted prior 
to an auction. Such an approach would be consistent with the 
Commission's practice of seeking comment on spectrum aggregation issues 
with respect to particular spectrum bands prior to an auction, would 
afford auction participants greater certainty, and would allow the 
Commission to re-evaluate its spectrum aggregation policies in the 
context of newly available spectrum bands and changing industry and 
consumer needs.\57\ Further, adopting band-specific spectrum limits 
generally applicable to all licensees would be consistent with Section 
6404 of the Spectrum Act, which recognizes the Commission's authority 
``to adopt and enforce rules of general applicability, including rules 
concerning spectrum aggregation that promote competition.'' \58\ For 
instance, should the Commission consider adopting limits on the amount 
of spectrum that entities could acquire in the context of spectrum 
auctions mandated by the Spectrum Act? The Commission seeks comment on 
these approaches.
---------------------------------------------------------------------------

    \57\ See, e.g., Service Rules for Advanced Wireless Services in 
the 2155-2175 MHz Band, WT Docket No. 07-195, Notice of Proposed 
Rulemaking, 22 FCC Rcd 17035, 17079-80 paras. 101-03 (2007).
    \58\ Spectrum Act at Section 6404.
---------------------------------------------------------------------------

3. Alternative Approaches
    22. The Commission seeks comment on any alternative approaches to 
evaluate the competitive effect of spectrum aggregation. Are there 
other mechanisms for evaluating spectrum aggregation that would better 
serve the public interest and meet the Commission's statutory 
objectives? In this regard, the Commission seeks comment on whether 
there are different ways in which it could conduct a case-by-case 
analysis, such as adopting a case-by-case analysis that does not 
include an initial spectrum screen. Another approach would be to 
combine some elements of a bright-line limit with a case-by-case 
analysis. One hybrid approach would be to adopt a bright-line threshold 
that, if exceeded, would trigger a heightened burden on the applicants 
to demonstrate that approval of the proposed transaction would be in 
the public interest. The Commission seeks comment on these approaches 
and how they could be implemented, and on any other alternatives.

B. Implementation Issues

    23. Certain threshold issues would need to be considered if the 
Commission were to adopt any new or modified approach to reviewing 
mobile spectrum holdings, including establishing initial definitions 
such as the relevant product and geographic markets, assessing the 
spectrum bands that should be included, and deciding how to treat 
different spectrum bands. Finally, the Commission discusses attribution 
and remedies, and explores whether there are other factors for it to 
consider in this area.
1. Relevant Product Market
    24. In order to assess competition in a given market, the 
Commission has initiated its analysis of a proposed transaction by 
establishing definitions for the relevant product market. In recent 
wireless transactions, the Commission has determined that the relevant 
product market is a combined ``mobile telephony/broadband services'' 
product market,\59\ comprised of mobile voice and data services, 
including mobile voice and data services provided over advanced 
broadband wireless networks (mobile broadband services).\60\ In AT&T-
Qualcomm and Verizon Wireless-SpectrumCo, while the Commission 
evaluated the transaction using a combined mobile telephony/broadband 
market, it recognized the growing importance of mobile broadband 
services and focused its analysis to an increasing degree on mobile 
broadband services.\61\
---------------------------------------------------------------------------

    \59\  See Verizon Wireless-SpectrumCo Order, FCC 12-95, at para. 
53; AT&T-Qualcomm Order, 26 FCC Rcd at 17603 para. 33; AT&T-Verizon 
Wireless Order, 25 FCC Rcd at 8721 para. 35; AT&T-Centennial Order, 
24 FCC Rcd at 13932 para. 37. The Commission has previously 
determined that there are separate relevant product markets for 
interconnected mobile voice and data services, and also for 
residential and enterprise services, but found it reasonable to 
analyze all of these services under a combined mobile telephony/
broadband services product market. See AT&T-Qualcomm Order, 26 FCC 
Rcd at 17603 para. 33; AT&T-Verizon Wireless Order, 25 FCC Rcd at 
8721 at para. 35; AT&T-Centennial Order, 24 FCC Rcd at 13932 para. 
37.
    \60\ See Verizon Wireless-SpectrumCo Order, FCC 12-95, at para. 
53; AT&T-Qualcomm Order, 26 FCC Rcd at 17602-03 paras. 32-33; AT&T-
Verizon Wireless Order, 25 FCC Rcd at 8721 para. 35; AT&T-Centennial 
Order, 24 FCC Rcd at 13932 para. 37.
    \61\ See Verizon Wireless-SpectrumCo Order, FCC 12-95, at paras. 
53, 70; AT&T-Qualcomm Order, 26 FCC Rcd at 17602-03 para. 32, 17605 
para. 38.
---------------------------------------------------------------------------

    25. The Commission seeks comment on whether the current approach to 
the product market definition continues to be appropriate. Given the 
transition to data-centric services and the development of more 
spectrum-efficient technologies that will transmit voice as data,\62\ 
the Commission seeks comment on whether the relevant product market has 
changed and, if so, whether these changes warrant any modifications to 
the Commission's product market definition. For example, should the 
Commission modify the relevant product market definition to reflect 
differentiated service offerings, devices, and contract features? \63\ 
The Commission also seeks comment on whether it should separately 
define smaller product markets that may be nested within a larger 
defined product market and, if so, how it would analyze such smaller 
defined product markets vis-[agrave]-vis the larger defined product 
market. What are the costs and benefits if the Commission were to 
modify its product market definition versus keeping the current 
combined ``mobile telephony/broadband services'' product market or 
focusing the analysis on mobile broadband services? Commenters also 
should discuss how their particular approach for the relevant product 
market definition is supported by economic or antitrust theory.
---------------------------------------------------------------------------

    \62\ One example of changing technology is the development of 
``Voice Over LTE'' (or ``VoLTE''). See ``MetroPCS Unveils First U.S. 
Voice Over LTE Service, Phone,'' by Chloe Albanesius, PCMag.com, 
Aug. 8, 2012, available at http://www.pcmag.com/article2/0,2817,2408216,00.asp (last visited Sept. 6, 2012).
    \63\ See American Antitrust Institute Comments, WT Docket No. 
11-65, at 6; Sprint Petition To Deny, WT Docket No. 11-65, at 11-15; 
Free Press Petition to Deny, WT Docket No. 11-65, at 9-12; 
Greenlining Institute Petition To Deny, WT Docket No. 11-65, at 4, 
12-13.
---------------------------------------------------------------------------

2. Suitable and Available Spectrum
    26. In order to assess whether any particular spectrum acquisition 
exceeds a certain threshold of available spectrum, the Commission first 
must determine what spectrum it will include in its overall evaluation. 
Currently, the Commission includes spectrum in its case-by-case 
analysis if it determines that it is suitable and available for the

[[Page 61337]]

relevant product market.\64\ ``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 use for the relevant mobile service.\65\ Particular 
spectrum is considered to be ``available'' if it is fairly certain that 
it will meet the criteria for suitable spectrum in the near term.\66\ 
In recent applications of the spectrum screen, the Commission has 
included cellular, PCS, SMR, and 700 MHz spectrum, as well as AWS-1 and 
certain BRS spectrum, where available.\67\
---------------------------------------------------------------------------

    \64\ See Verizon Wireless-SpectrumCo Order, FCC 12-95, at para. 
59; AT&T-Qualcomm Order, 26 FCC Rcd at 17605-06 para. 38; AT&T-
Centennial Order, 24 FCC Rcd at 13935 para. 43.
    \65\ See AT&T-Qualcomm Order, 26 FCC Rcd at 17605-06 para. 38; 
AT&T-Centennial Order, 24 FCC Rcd at 13935 para. 43; Verizon 
Wireless-ALLTEL Order, 23 FCC Rcd at 17473 para. 53.
    \66\ See AT&T-Qualcomm Order, 26 FCC Rcd at 17606 para.38.
    \67\ See, e.g., Verizon Wireless-SpectrumCo Order, FCC 12-95, at 
para. 59; AT&T-Qualcomm Order, 26 FCC Rcd at 17605-06 para. 39; 
AT&T-Centennial Order, 24 FCC Rcd at 13935 para. 43.
---------------------------------------------------------------------------

    27. Should the Commission continue to consider spectrum based on 
its suitability and availability for a given product market? Are there 
other factors that the Commission should consider in determining 
whether particular spectrum bands are suitable and available for the 
relevant product market? The Commission seeks comment on any measures 
that might increase the transparency with which it determines what 
spectrum it would include in a case-by-case spectrum analysis or in 
implementing bright-line limits. For example, should the Commission 
adopt a regular process to add or remove existing or newly allocated 
spectrum bands for purposes of assessing spectrum concentration? The 
Commission also seeks comment on the costs and benefits of implementing 
a new process for identifying the spectrum to include in a case-by-case 
spectrum analysis. The Commission seeks comment on the legal, economic, 
and engineering justifications to support the existing or any modified 
criteria for determining the suitability and availability of spectrum.
    28. While mobile wireless operators primarily have used licenses 
associated with three different frequency bands to provide mobile voice 
and, in most cases, mobile data services--cellular (in the 850 MHz 
band), SMR (in the 800/900 MHz band), and broadband PCS (in the 1.9 GHz 
band)--providers are now incorporating additional spectrum bands into 
their networks, such as BRS and EBS in the 2.5 GHz band, AWS in the 
1.7/2.1 GHz band, and the 700 MHz band. These bands enable the 
provision of additional competitive mobile voice and data services.\68\ 
In several recent transactions, some parties have suggested modifying 
the Commission's spectrum analysis to include additional spectrum 
bands, such as the BRS spectrum that is not currently included in the 
screen, EBS, or MSS.\69\ Others also have argued in favor of including 
WCS spectrum, citing certain changes the Commission made to the WCS 
technical service rules that enable licensees to provide mobile 
broadband service in a portion of the WCS band.\70\ Aside from general 
factors the Commission should consider in determining whether spectrum 
is suitable and available, the Commission also seeks comment on the 
application of these factors to particular spectrum bands. Which 
spectrum bands should be included in the Commission's spectrum 
analysis? In particular, at what point should television broadcast 
spectrum that is repurposed in the incentive auction be included in the 
analysis? \71\ Commenters also should discuss at what point other 
spectrum bands, such as WCS and the frequencies the Commission is 
required to auction under the Spectrum Act,\72\ should be included in 
the analysis. Are there any band-specific factors the Commission may 
want to consider in determining suitability and availability of a 
particular band? Further, the Commission seeks comment on whether there 
are any economic or technical justifications that would warrant 
modifying the criteria used to determine the suitability and 
availability of spectrum. For example, should the Commission consider 
factors such as channel size, potential interference issues, or 
conditions that may develop after the allocation and licensing of 
spectrum (such as technological developments that affect the timely 
deployment of services)? If the Commission were to modify the criteria 
it uses to determine the suitability and availability of spectrum, how 
could it do so in a manner that promotes clarity and predictability? 
\73\
---------------------------------------------------------------------------

    \68\ See Fifteenth Mobile Wireless Competition Report, 26 FCC 
Rcd at 9822-23 para. 269.
    \69\ See, e.g., AT&T-Qualcomm Order, 26 FCC Rcd at 17606-07 
para. 40; AT&T-Qualcomm Application, Public Interest Statement, WT 
Docket No. 11-18, at 22-27.
    \70\ See, e.g., RCA Petition To Deny, WT Docket No. 11-18, at 
10-11. See also Amendment of Part 27 of the Commission's Rules To 
Govern the Operation of Wireless Communications Services in the 2.3 
GHz Band, Report and Order, 25 FCC Rcd 11710, 11711 para. 1 (2010) 
(WCS Report and Order), recon. pending.
    \71\ See Expanding the Economic and Innovation Opportunities of 
Spectrum Through Incentive Auctions, GN Docket No. 12-268, Notice of 
Proposed Rulemaking, FCC 12-118 (adopted Sept.28, 2012).
    \72\ See Spectrum Act at Section 6401 (identifying the following 
bands 1915-1920 MHz, 1995-2000 MHz, and 2155-2180 MHz).
    \73\ We also seek comment below on whether such factors should 
be reflected in any valuation approach. See infra at para. 38.
---------------------------------------------------------------------------

    29. Further, the Commission seeks comment on whether it should 
remove any spectrum bands from its consideration. For instance, the 
Commission recently indicated that, as the provision of mobile 
broadband services becomes increasingly central to wireless 
transactions, it may be appropriate to reduce the amount of suitable 
SMR spectrum from 26.5 megahertz to 14 megahertz to reflect the portion 
of SMR spectrum through which mobile broadband service can be 
provided.\74\ The Commission seeks comment on how much SMR spectrum is 
suitable and available in the near term for mobile broadband 
services.\75\ The Commission notes that the Upper 700 MHz D Block is to 
be reallocated for public safety service rather than commercial 
service. The Commission seeks comment, however, on whether and how, 
pursuant to Section 6101 of the Spectrum Act,\76\ this spectrum and the 
existing public safety broadband spectrum may be relevant to its 
spectrum analysis in the event such spectrum is leased to a commercial 
licensee pursuant to this section of the Spectrum Act.\77\ The 
Commission seeks comment on these considerations, and whether there are 
any additional spectrum bands that should be reduced or removed from 
its analysis.
---------------------------------------------------------------------------

    \74\ See AT&T-Qualcomm Order, 26 FCC Rcd at 17607 para. 42.
    \75\ See Improving Spectrum Efficiency Through Flexible Channel 
Spacing and Bandwidth Utilization for Economic Area-Based 800 MHz 
Specialized Mobile Radio Licensees, WT Docket No. 12-64, Report and 
Order, 27 FCC Rcd 6489 (2012).
    \76\ See Spectrum Act at Section 6101.
    \77\ See Spectrum Act at Section 6101.
---------------------------------------------------------------------------

3. Relevant Geographic Market Area
    30. Defining the relevant geographic market is important in 
accurately assessing the competitive effects that may result from a 
potential transaction. This can be a difficult process in some 
instances, as the licensed areas of different spectrum bands, and even 
within the same band, may not be the same. Under the case-by-case 
analysis, the Commission has found that relevant geographic markets are 
local, larger than

[[Page 61338]]

counties, may encompass multiple counties, and, depending on the 
consumer's location, may even include parts of more than one state.\78\ 
The Commission has primarily used Cellular Market Areas (CMAs) \79\ as 
the local geographic markets in which to analyze the potential 
competitive harms arising from spectrum concentration as a result of 
the transaction.\80\
---------------------------------------------------------------------------

    \78\ See, e.g., AT&T-Qualcomm Order, 26 FCC Rcd at 17604 para. 
34; Cingular-AT&T Wireless Order, 19 FCC Rcd at 21562-63 paras. 89-
90; 21561 para. 82 (citing the Supreme Court's definition of a 
relevant geographic market in Tampa Electric Co. v. Nashville Coal 
Co., 365 U.S. 320, 327 (1961) as ``the area of effective competition 
to which purchasers can practicably turn for services''). The 
Commission based its findings on the ``hypothetical monopolist 
test.'' Under the DOJ/FTC Horizontal Merger Guidelines, the 
hypothetical monopolist test ensures that markets are not defined 
too narrowly, but it does not lead to a single relevant market. The 
Guidelines also provide that ``the Agencies may evaluate a merger in 
any relevant market satisfying the test, guided by the overarching 
principle that the purpose of defining the market and measuring 
market shares is to illuminate the evaluation of competitive 
effects.'' See DOJ/FTC Horizontal Merger Guidelines Section 4.1.1.
    \79\ CMAs are standard geographic areas used for the licensing 
of cellular systems and are comprised of Metropolitan Statistical 
Areas (MSAs) and Rural Service Areas (RSAs). See 47 CFR 22.909; 
AT&T-Qualcomm Order, 26 FCC Rcd at 17603 para. 32 n.96.
    \80\ See, e.g., AT&T-Qualcomm Order, 26 FCC Rcd at 17604 para. 
34.
---------------------------------------------------------------------------

    31. In the recent Verizon Wireless-SpectrumCo Order, the Commission 
found that it was appropriate to analyze the local markets in which 
consumers purchase mobile wireless services where they live, work, and 
shop.\81\ The Commission also considered the potential nationwide 
competitive impacts of the transaction because the proposed acquisition 
would be in the majority of markets across the country and harms that 
may occur at the local level collectively could have nationwide 
competitive effects.\82\ The Commission noted that although there are 
local geographic markets for retail wireless services, prices and 
service plan offerings do not vary for most providers across most 
geographic markets.\83\ Moreover, the four nationwide providers, as 
well as other providers of retail mobile telephony/broadband services, 
set the same rates for a given plan everywhere and advertise 
nationally.\84\ Also, mobile broadband equipment and devices are 
developed and deployed primarily on a national scale.\85\
---------------------------------------------------------------------------

    \81\ See Verizon Wireless-SpectrumCo Order, FCC 12-95, at para. 
58.
    \82\ See Verizon Wireless-SpectrumCo Order, FCC 12-95, at para. 
58; AT&T-Qualcomm Order, 26 FCC Rcd at 17603-05 paras. 32, 34.
    \83\ See AT&T-Qualcomm Order, 26 FCC Rcd at 17604 para. 35.
    \84\ See Verizon Wireless-SpectrumCo Order, FCC 12-95, at para. 
57; AT&T-Qualcomm Order, 26 FCC Rcd at 17604 para. 35.
    \85\ See Verizon Wireless-SpectrumCo Order, FCC 12-95, at para. 
57; AT&T-Qualcomm Order, 26 FCC Rcd at 17605 para. 35.
---------------------------------------------------------------------------

    32. In light of the above, the Commission seeks comment on the 
appropriate geographic market definition to use when evaluating a 
licensee's mobile spectrum holdings. If the Commission were to adopt 
bright-line limits or continue to use a case-by case analysis, what 
should be the applicable geographic market? Should the Commission adopt 
a two-tiered approach under which there is a spectrum threshold at the 
local level and a separate threshold that applies on a nationwide 
basis? \86\ Is there another approach that would allow the Commission 
to consider both local and national competitive effects in establishing 
a spectrum threshold for bright-line limits or case-by-case analysis? 
Commenters should discuss any other issues with respect to geographic 
market definition that might be relevant to adopting a bright-line 
limit, case-by-case analysis, or any other approach that would promote 
competition and prevent excessive concentration of spectrum in any 
given area.
---------------------------------------------------------------------------

    \86\ See AT&T-Qualcomm Order, 26 FCC Rcd at 17603 para. 32 
(finding that it was appropriate to analyze competitive effects on 
both a national and local level).
---------------------------------------------------------------------------

4. Applicable Spectrum Threshold
    33. As part of the current case-by-case review process, the 
Commission examines the amount of spectrum suitable and available on a 
market-by-market basis for the provision of mobile telephony/broadband 
service. The Commission uses a spectrum screen, which is approximately 
one-third of the total spectrum suitable and available for mobile 
telephony/broadband services, to help identify markets where the 
acquisition of spectrum provides particular reason for further 
competitive analysis. The Commission conducts the further competitive 
analysis to determine whether the transaction would result in an 
increased likelihood or ability in those markets for the combined 
entity to behave in an anticompetitive manner.\87\
---------------------------------------------------------------------------

    \87\ See Section III.A.1, supra.
---------------------------------------------------------------------------

    34. The spectrum threshold can affect the number of competitors in 
a geographic market. The one-third threshold currently used in the 
Commission's case-by-case review envisions at least three competitors 
having access to approximately the same amount of suitable spectrum for 
providing mobile wireless broadband service. Whether the Commission 
uses the threshold in a case-by-case review or as a bright-line limit, 
is one-third the appropriate threshold level, or should the threshold 
be higher in rural areas? Given that the licensed geographic areas of 
different spectrum bands, and even within the same band, may not be the 
same, commenters should address any issue that may arise in calculating 
mobile spectrum holdings at the local level. Finally, for transactions 
that involve a large geographic area with national characteristics, the 
Commission seeks comment on how to calculate mobile spectrum holdings 
at the national level.\88\ For example, should the Commission use an 
approach similar to the one used in AT&T-Qualcomm, in which the 
Commission calculated providers' spectrum holdings on a ``MHz*POPs'' 
basis? \89\ Would it be better to use population-weighted average 
megahertz, which the Commission reported in the Verizon Wireless-
SpectrumCo Order,\90\ and/or a nationwide-weighted average market 
share? Are there are other methods to compute spectrum holdings at the 
national level?
---------------------------------------------------------------------------

    \88\ See also the discussion regarding evaluating competitive 
effects at the national level in Section III.B.3, supra.
    \89\ See AT&T-Qualcomm Order, 26 FCC Rcd at 17608 para. 45. The 
Commission noted that it calculated MHz*POPs by multiplying the 
megahertz of spectrum held in an area by the population in that 
area. See id. n.128.
    \90\ Verizon Wireless-SpectrumCo Order, FCC 12-95, at para. 77. 
Population-weighted average megahertz is calculated by adding the 
provider's MHz*POPs and dividing by the U.S. population. See 
Fifteenth Mobile Wireless Competition Report, 26 FCC Rcd at 9830 
para. 288, 9831, Table 28.
---------------------------------------------------------------------------

5. Making Distinctions Among Bands
    35. The Commission also seeks comment on whether it should adopt an 
approach to evaluating a licensee's mobile spectrum holdings that 
accounts for differing characteristics of spectrum bands. The 
Commission has recognized that spectrum resources in different 
frequency bands can have disparate technical characteristics that 
affect how the bands can be used to deliver mobile services.\91\ In 
particular, the Commission has noted that the more favorable 
propagation characteristics of lower frequency spectrum, i.e., spectrum 
below 1 GHz, allow for better

[[Page 61339]]

coverage across larger geographic areas and inside buildings,\92\ while 
higher frequency spectrum may be well-suited for providing capacity, 
such as in high-traffic urban areas.\93\ Because the properties of 
lower and higher frequency spectrum are complementary, the Commission 
has recognized that both types of spectrum may be helpful for the 
development of an effective nationwide competitor that can address both 
coverage and capacity needs.\94\ The Commission also has noted that 
there currently is significantly more spectrum above 1 GHz potentially 
available for mobile broadband services than spectrum below 1 GHz.\95\ 
The Commission seeks comment on whether its policies regarding mobile 
spectrum holdings should include separate consideration of spectrum in 
different frequency bands, e.g., below or above 1 GHz. Would a separate 
spectrum threshold limit for spectrum holdings below 1 GHz, as some 
countries have adopted, advance the goals of promoting wireless 
competition, innovation, investments and broadband deployment in rural 
areas? \96\
---------------------------------------------------------------------------

    \91\ See AT&T-Qualcomm Order, 26 FCC Rcd at 17609-11 para. 49. 
See also Fifteenth Mobile Wireless Competition Report, 26 FCC Rcd at 
9832-37 paras. 289-97. In its consideration of mobile wireless 
competition issues, the DOJ has noted the differences between the 
use of lower and higher frequency bands. See, e.g., United States of 
America et al. v. Verizon Communications Inc. and ALLTEL 
Corporation, Competitive Impact Statement, Case No. 08-cv-1878, at 
5-6 (filed Oct. 30, 2008), available at http://www.justice.gov/atr/cases/f238900/238947.pdf (last visited Sept. 6, 2012).
    \92\ See AT&T-Qualcomm Order, 26 FCC Rcd at 17609-11 para. 49. 
See also, e.g., Service Rules for the 698-746, 747-762 and 777-792 
MHz Band, WT Docket No. 06-150, Second Report and Order, 22 FCC Rcd 
15289, 15349 para. 158, 15354-55 para. 176, 15400-401 para. 304 
(2007); Unlicensed Operation in the TV Broadcast Bands, ET Docket 
No. 04-186, Second Report and Order and Memorandum Opinion and 
Order, 23 FCC Rcd 16807, 16820-21 para. 32 (2008); Unlicensed 
Operation in the TV Broadcast Bands, ET Docket No. 04-186, Second 
Memorandum Opinion and Order, 25 FCC Rcd 18661, 18662 para. 1 
(2010).
    \93\ See Fifteenth Mobile Wireless Competition Report, 26 FCC 
Rcd at 9832 para. 289, 9836 para. 296; see also AT&T-Qualcomm Order, 
26 FCC Rcd at 17609-11 para. 49.
    \94\ See, e.g., AT&T-Qualcomm Order, 26 FCC Rcd at 17609-11 
para. 49, n.140; Fifteenth Mobile Wireless Competition Report, 26 
FCC Rcd at 9837 para. 297.
    \95\ See AT&T-Qualcomm Order, 26 FCC Rcd at 17611 para. 49; 
Fifteenth Mobile Wireless Competition Report, 26 FCC Rcd at 9836 
para. 296.
    \96\ Some countries conducting or planning auctions of spectrum 
reclaimed as part of the transition from analog to digital 
television have adopted various measures that recognize the 
differences between lower-frequency and higher-frequency spectrum in 
the context of spectrum aggregation limits. See, e.g., Federal 
Network Agency, Decisions of the President's Chamber of the Federal 
Network Agency for Electricity, Gas, Telecommunications, Post and 
Railway of 12 October 2009 on Combining the Award of Spectrum in the 
Bands 790 to 862 MHz, 1710 to 1725 MHz and 1805 to 1820 MHz with 
Proceedings to Award Spectrum in the Bands 1.8 GHz, 2 GHz and 2.6 
GHz for Wireless Access for the Provision of Telecommunications 
Services, at 6 (2009), available at http://www.bundesnetzagentur.de/cae/servlet/contentblob/138364/publicationFile/3682/DecisionPresidentChamberTenor_ID17495pdf.pdf (adopting limits on 
sub-1 GHz spectrum in Germany's 4G auction) (last visited Sept. 6, 
2012); Office of Communications (Ofcom), Statement on Assessment of 
Future Mobile Competition and Award of 800 MHz and 2.6 GHz, at 
Executive Summary, page 3, (2012), available at http://stakeholders.ofcom.org.uk/binaries/consultations/award-800mhz/statement/Statement-summary.pdf (adopting limits on sub-1 GHz 
spectrum in United Kingdom's upcoming 4G auction) (last visited 
Sept. 6, 2012).
---------------------------------------------------------------------------

    36. If the Commission were to adopt differential treatment for 
different spectrum bands, what mechanism should the Commission use to 
evaluate the aggregation of below 1 GHz spectrum? Should the Commission 
add a threshold limit for below 1 GHz spectrum as part of its current 
case-by-case review? For example, the Commission could establish a 
trigger under which an entity that would hold, post-transaction, more 
than one third of the relevant spectrum below 1 GHz in a geographic 
market would be subject to a more detailed competitive review in that 
market. Or, alternatively, the Commission could establish bright-line 
limits for spectrum holdings below 1 GHz. If so, what should those 
limits be? Should the Commission consider adopting limits on the amount 
of below 1 GHz spectrum that entities could acquire in the context of 
spectrum auctions? The Commission also could adopt a hybrid approach, 
for instance, in which it establishes a bright-line limit for below 1 
GHz spectrum and conduct a case-by-case analysis of total mobile 
spectrum holdings. Under such an approach, no licensees could aggregate 
more than the specified percentage of spectrum below 1 GHz in the 
market, but the Commission would conduct a case-by-case review on total 
mobile spectrum holdings, with a particular focus on markets where an 
applicant's post-transaction spectrum holdings would exceed a spectrum 
screen threshold. What are the costs and benefits of these various 
approaches? Is 1 GHz an appropriate demarcation line for a separate 
competitive analysis and associated threshold? Consistent with the 
Commission's intention regarding the applicability of any revised 
policies for overall spectrum holdings,\97\ the Commission would not 
anticipate revisiting licensees' current spectrum holdings under any 
revised policy for below 1 GHz spectrum, but instead would grandfather 
those holdings.
---------------------------------------------------------------------------

    \97\ See infra at para 49.
---------------------------------------------------------------------------

    37. Are there other ways the Commission should distinguish among 
spectrum bands, such as taking into account the value of spectrum held 
by each licensee rather than the amount of spectrum held, as some 
parties have proposed? \98\ For example, Sprint Nextel has proposed 
that an analysis of the book values of spectrum holdings as reflected 
in providers' SEC filings would be helpful in the Commission's 
analysis.\99\ To address what it contends is a growing ``spectrum gap'' 
between the largest spectrum providers and other competing providers, 
Public Knowledge suggested, among other things, that spectrum be 
weighted by its suitability for mobile data use and, further, that 
spectrum held by providers with substantial existing spectrum holdings 
or spectrum that has not yet been built out be weighted more 
heavily.\100\ Free Press similarly argued that the Commission should 
use ``inputs that determine value'' and suggested that these inputs 
should primarily be ``wavelength, contiguous block size, block pairing, 
market density and demographics, and interference issues.'' \101\ T-
Mobile has asked the Commission to recognize the difference in value of 
spectrum above and below 1 GHz by assigning different value weights to 
each of the spectrum bands.\102\ The value weights would be derived 
from analysts' reports, which in turn are based on prices paid at 
auction and publicly available information about spectrum 
transactions.\103\ T-Mobile proposed the following specific value 
weights: cellular, 1.7; 700 MHz, 1.5; SMR, 1.5; AWS/PCS, .75; and BRS, 
.2.\104\ AT&T argued that the Commission should not adopt such an 
approach for several reasons, including because the Commission already 
considers propagation and other physical characteristics in determining 
whether to count spectrum in the case-by case analysis, the marketplace 
already accounts for cost differences between different spectrum bands, 
and there are many factors other than propagation characteristics that 
determine the relative value of spectrum.\105\ The Commission seeks 
comment on these suggested approaches.
---------------------------------------------------------------------------

    \98\ See Free Press Reply To Opposition, WT Docket No. 12-4, at 
23; Free Press Petition to Deny, WT Docket No. 12-4, at 12; Public 
Knowledge et al. Petition to Deny, WT Docket No. 12-4, at 47; RCA 
Petition to Condition or Deny, WT Docket No. 12-4, at 52; T-Mobile 
Comments, WT Docket No. 11-186, at 6-7.
    \99\ See Sprint Nextel Comments, WT Docket No. 12-4, at 18 n. 
45.
    \100\ See Letter from Harold Feld, Legal Director, Public 
Knowledge, to Marlene Dortch, Secretary, FCC, WT Docket No. 12-4 
(Apr. 30, 2012) at 3.
    \101\ See Free Press Petition to Deny, WT Docket No. 12-4, at 
16.
    \102\ See T-Mobile Comments, WT Docket No. 11-186, at 6-8.
    \103\ See T-Mobile Comments, WT Docket No. 11-186, at 7.
    \104\ See T-Mobile Comments, WT Docket No. 11-186, at 7.
    \105\ See AT&T Supplemental Reply Comments, WT Docket No. 11-
186, at 6-13.
---------------------------------------------------------------------------

    38. If the Commission were to assign value to spectrum for purposes 
of its policy on mobile spectrum holdings,

[[Page 61340]]

what variables should it consider? The Commission recognizes, for 
example, that license values tend to vary with geographic 
location.\106\ Moreover, in recent auctions, licenses in densely 
populated markets generally were sold at higher winning bids than those 
in less populated areas.\107\ The value of a license can also depend on 
its location within the spectrum band.\108\ For instance, spectrum 
blocks at the edge of a band can be less valuable due to the increased 
risk of interference to and from operations on neighboring bands.\109\ 
Should the Commission take these factors into account in assigning 
value to licenses? Should the Commission consider changes in the value 
of spectrum as technology evolves? \110\ As a practical matter, how 
should the Commission quantify differences in value? How would the 
Commission use spectrum valuation in applying bright-line limits, as 
opposed to a case-by-case analysis? What are the costs and benefits of 
attaching a value to spectrum?
---------------------------------------------------------------------------

    \106\ See Kimberly M. Randolph, Spectrum Licenses: Valuation 
Intricacies, available at http:[sol][sol]www.srr.com/article/
spectrum-licenses-valuation-intricacies (last visited Sept. 6, 
2012).
    \107\ For example, in the 700 MHz band auction (Auction No. 73), 
the winning bid for the lower 700 MHz B-Block license in New York 
City ($4.57 per MHz*POP, or $884 million) was much higher, both in 
dollars per MHz per person and in total dollars, than the winning 
bid for the lower 700 MHz B Block license in Binghamton, NY ($.04 
per MHz*POP, or $186,000). See more information about the 700 MHz 
band auction, available at http:[sol][sol]wireless.fcc.gov/auctions/
default.htm?job=auction--summary&id=73 (last visited on Sept. 6, 
2012).
    \108\ See Kimberly M. Randolph, Spectrum Licenses: Valuation 
Intricacies, available at http:[sol][sol]www.srr.com/article/
spectrum-licenses-valuation-intricacies (last visited Sept. 6, 
2012).
    \109\ For example, the average auction price for A-Block 
licenses was much lower than the average price for B-Block licenses 
in the lower 700 MHz band. See Auction 73 results, available at 
http:[sol][sol]wireless.fcc.gov/auctions/default.htm?job=releases--
auction&id=73&page=P (last visited Sept. 6, 2012). See also ITU 
Broadband Series, Exploring the Value and Economic Valuation of 
Spectrum, April 2012, page 1, available at 
http:[sol][sol]www.itu.int/ITU-D/treg/broadband/ITU-BB-Reports_
SpectrumValue.pdf (last visited Sept. 6, 2012).
    \110\ Spectrum values can be affected by technologies adopted by 
licensees. For example, spectrum aggregation technologies might 
affect spectrum value. See Mohammed Alotaibi, and Marvin A. Sirbu, 
Spectrum Aggregation Technology: Benefit-Cost Analysis and its 
Impact on Spectrum Value, at 12-13, 39th Research Conference on 
Communication, Information, and Internet Policy, 2011, available at 
http:[sol][sol]papers.ssrn.com/so13/papers.cfm?abstract--id=1985738 
(last visited Sept. 6, 2012). Similarly, for those service providers 
that hold spectrum in high frequency bands, Wi-Fi off-load may 
mitigate the disadvantage of inferior indoor coverage. See J.P. 
Morgan, The Economics of Wireless Data--Part 3, at 50, March 26, 
2012, available at https:[sol][sol]mm.jpmorgan.com/stp/t/
c.do?i=83100-F7&u=a--p*d--814984.pdf*h---177n7l2 (last visited Sept. 
6, 2012).
---------------------------------------------------------------------------

    39. The Commission seeks comment on other methods or considerations 
that might be relevant in reviewing its policies regarding mobile 
spectrum holdings. In its current case-by-case approach, the Commission 
considers factors such as the number of rival service providers, firms' 
network coverage, rival firms' and the licensee's market shares, the 
applicant's post-transaction spectrum holdings, and the spectrum 
holdings of each of the rival service providers.\111\ Should the 
Commission modify the factors it considers or include other marketplace 
conditions that may affect competition? For example, in order to be 
considered a meaningful competitor for purposes of a market-by-market 
analysis, should a licensee have a particular weighted average market 
share or hold a particular amount of spectrum in the geographic market 
at issue? The Commission also seeks comment on how to take into account 
special circumstances, such as how efficiently the licensee is using 
its existing spectrum resources and whether it has alternatives to meet 
its competitive needs aside from acquiring more spectrum. Would 
imposing some level of spectral efficiency and/or a spectrum 
utilization requirement, perhaps coupled with a higher level bright-
line limit or a higher case-by-case spectrum threshold, help prevent 
spectrum warehousing and encourage more efficient spectrum use? Some 
parties have suggested that as part of a case-by-case analysis, the 
Commission should calculate the spectrum HHI, or the increase in 
concentration of spectrum shares post-transaction.\112\ What would be 
the benefits and costs of such measures?
---------------------------------------------------------------------------

    \111\ See, e.g., AT&T-Verizon Wireless Order, 25 FCC Rcd at 8732 
para. 63; Verizon Wireless-ALLTEL Order, 23 FCC Rcd at 17487-88 
para. 91.
    \112\ For example, U.S. Cellular has argued that the Commission 
should apply HHI measurements to ``greenfield'' spectrum acquired at 
auction. See U.S. Cellular (USCC) Comments, RM No. 11498, at 8; USCC 
Reply Comments (RM No. 11498) at 2; see also Letter from John 
Bergmayer, Senior Staff Attorney, Public Knowledge, to Marlene 
Dortch, Secretary, FCC, WT Docket No. 12-4 (March 27, 2012) at 4; 
Sprint Nextel Comments, WT Docket No. 12-4, at 19-20; Free Press 
Reply to Opposition, WT Docket No. 12-4, at 24.
---------------------------------------------------------------------------

6. Attribution Rules
    40. No matter which approach the Commission decides to take, it 
needs attribution rules to determine which of a licensee's spectrum 
interests counts toward that licensee's total mobile spectrum holdings. 
Under the spectrum cap, the Commission's attribution rules were 
designed to protect competition in the wireless services marketplace by 
making certain equity and non-equity interests attributable. Some non-
equity interests in spectrum, as well as equity interests in spectrum 
that are less than controlling, can potentially confer the ability to 
significantly influence wireless service offerings and prices to one or 
a few parties, and the Commission seeks to make these interests 
cognizable under its attribution rules.\113\
---------------------------------------------------------------------------

    \113\ See, e.g., Implementation of Sections 3(n) and 332, 
Regulatory Treatment of Mobile Services, GN Docket No. 93-252, 
Fourth Report and Order, 9 FCC Rcd 7123, 7124 paras. 5-6 (1994).
---------------------------------------------------------------------------

    41. Over time, while the Commission's policies regarding mobile 
spectrum holdings have changed, its attribution rules consistently have 
focused on a licensee's controlling interests, as well as non-
controlling and other interests above a certain percentage threshold or 
that result in de facto influence or control. Today, when reviewing 
transactions on a case-by-case basis, the Commission generally 
considers all equity ownership interests of ten percent or more to be 
attributable to those interest holders, but it has the flexibility to 
examine equity and non-equity ownership and other interests that do not 
meet the ten percent equity interest threshold, as the Commission deems 
those interests relevant.\114\ In the past, the Commission had 
attribution rules for counting controlling and some non-controlling 
interests toward the CMRS spectrum cap that were generally consistent 
with current practice.\115\ Under those rules, the Commission 
attributed to a licensee's total spectrum holdings both controlling 
interests and a number of non-controlling interests, including in most 
cases equity interests of twenty percent or more.\116\ For

[[Page 61341]]

purposes of its cellular cross-interest rule described above, the 
Commission generally included as attributable interests, in addition to 
any controlling interest, partnership and other ownership interests of 
twenty percent or more.\117\
---------------------------------------------------------------------------

    \114\ See, e.g., Sprint Nextel Corporation and Clearwire 
Corporation Applications for Consent To Transfer Control of 
Licenses, Leases, and Authorizations, WT Docket No. 08-94, 
Memorandum Opinion and Order, 23 FCC Rcd 17570, 17601-02 para. 78 
(2008) (Sprint Nextel-Clearwire Order) (declining to attribute 
interests below ten percent). See also AT&T-Centennial Order, 24 FCC 
Rcd at 13917 para. 7, 13946-47 paras. 71-74.
    \115\ See 47 CFR 20.6(d)(1)-(10). The relevant rules governing 
divestiture of interests are in subsection (e) of the same rule. See 
47 CFR 20.6(e). Section 20.6 ceased to be effective on January 1, 
2003. See 47 CFR 20.6(f). See also 47 CFR 1.2110 (attribution rules 
for competitive bidding purposes).
    \116\ These non-controlling interests included partnership and 
other ownership interests; interests of investment companies, 
insurance companies, and banks holding stock through their trust 
departments; non-voting stock interests; debt interests and 
instruments such as warrants, convertible debentures, and options; 
limited partnership interests; officers and directors; ownership 
interests held indirectly through an intervening corporation; 
managing interests; and parties with joint marketing arrangements. 
See 47 CFR 20.6(d)(1)-(10). Section 20.6 ceased to be effective on 
January 1, 2003. See 47 CFR 20.6(f). See also 47 CFR 1.2110 
(attribution rules for competitive bidding purposes).
    \117\ See 47 CFR 22.942 (repealed 2004), available at http://www.gpo.gov/fdsys/pkg/CFR-2002-title47-vol2/pdf/CFR-2002-title47-vol2-sec22-942.pdf (last visited Sept. 6, 2012).
---------------------------------------------------------------------------

    42. In light of these past and present approaches, the Commission 
seeks comment on whether and how the attribution rules that are used to 
implement its policies regarding mobile spectrum holdings should be 
amended if it decides to continue the existing case-by-case review of 
transactions or in the event that it alters its transaction review 
mechanism. Regardless of which approach taken, what interests should be 
attributable for purposes of reviewing mobile spectrum holdings? The 
attached draft rules generally follow the attribution standards the 
Commission currently applies,\118\ but the Commission seeks comment on 
whether it should make any changes in those standards. For instance, 
the Commission seeks comment on what level of non-controlling interest 
should be attributable, and whether that level should be different 
whether it adopts a case-by-case approach or a bright-line limit. The 
Commission seeks comment on the types of interests that should be of 
primary importance when it reviews proposed transactions, and whether 
and how the importance of any attributable interests may have changed 
over time. Should the Commission define as attributable any interests 
that have not been attributed in the past or exclude any non-
controlling interests that have been attributed in the past? If the 
Commission makes any changes to its spectrum holdings review process, 
how, if at all, should the Commission attribute leased mobile spectrum 
holdings? Finally, the Commission notes that the draft attribution 
rules include a waiver provision. The Commission seeks comment on this 
provision.
---------------------------------------------------------------------------

    \118\ See Appendix A: Proposed Rules.
---------------------------------------------------------------------------

7. Remedies
    43. In considering applications for initial licenses and 
applications for the assignment or transfer of control of licenses, 
including spectrum leasing, the Commission must determine whether the 
applicants have demonstrated that the application will serve the public 
interest, convenience, and necessity.\119\ The Commission reviews the 
competitive effects of a transaction under the broad public interest 
standard,\120\ and may impose remedies, such as requiring divestitures 
of certain licenses, to address potential harms likely to result from a 
transaction or to help ensure the realization of potential benefits 
promised for the transaction.\121\
---------------------------------------------------------------------------

    \119\ 47 U.S.C. 310(d).
    \120\ See, e.g., AT&T-Qualcomm Order, 26 FCC Rcd at 17599-600 
para. 25.
    \121\ See, e.g., AT&T-Verizon Wireless Order, 25 FCC Rcd at 8718 
para. 25; AT&T-Centennial Order, 24 FCC Rcd at 13929 para. 30; 
Verizon Wireless-ALLTEL Order, 23 FCC Rcd at 17463 para. 29; Sprint 
Nextel-Clearwire Order, 23 FCC Rcd at 17582 para. 22; Cingular-AT&T 
Wireless Order, 19 FCC Rcd at 21546 para. 43.
---------------------------------------------------------------------------

    44. The Commission seeks comment on what remedies, including 
divestitures, would be appropriate for it to require in order to 
prevent competitive harm. The Commission seeks comment on the value of 
divestures as a remedy to redress particular competitive harms, and 
whether different approaches or types of divestures would best serve 
the Commission's goals, including providing clarity and certainty to 
parties while promoting competition. If granting a license application 
or an assignment or transfer of control of licenses to a licensee would 
result in competitive harm, should that licensee be required to divest 
spectrum only in markets where it would exceed the spectrum aggregation 
threshold, or should it be required to divest more broadly across its 
licensed markets, and under what, if any, conditions? The Commission 
notes that there are a number of approaches to divestitures, including 
a clustered approach that would require divestitures of population 
centers to allow a prospective purchaser to offer a viable service and 
to minimize or prevent piecemeal divestiture.\122\ Other approaches 
could include full business unit divestures, spectrum-only divestures, 
divestitures with a ``right of first refusal'' to a particular set of 
licensees, particular limits on parties that have licenses divested to 
them (such as requiring divestiture to rural or midsize carriers that 
may be in a position to offer roaming),\123\ or divestiture of spectrum 
by sale on the secondary market. The Commission seeks comment on these 
or other approaches, including remedies that could provide greater 
predictability to allow the industry to better make needed investment 
decisions. The Commission also seeks comment on measures it can adopt 
to facilitate spectrum being divested expeditiously to licensees that 
will put it to use quickly and efficiently.\124\ If the Commission 
decides to permit divestiture of spectrum by sale on the secondary 
market, what conditions, limits, or other rules should apply?
---------------------------------------------------------------------------

    \122\ See Verizon Wireless-ALLTEL Order, 23 FCC Rcd at 17517 
para. 160.
    \123\ See id.
    \124\ Verizon Wireless-SpectrumCo Order, FCC 12-95, Statement of 
Commissioner Ajit Pai, approving in part and concurring in part, at 
1, available at http://transition.fcc.gov/Daily_Releases/Daily_Business/2012/db0823/FCC-12-95A6.pdf (last visited Sept. 6, 2012).
---------------------------------------------------------------------------

    45. Many licensees hold spectrum in multiple frequency bands with 
different propagation or other characteristics, and some spectrum 
holdings may be more valuable than others. Some parties have proposed 
that the Commission should adopt different criteria for divestiture 
based on whether the spectrum to be divested is from lower or upper 
frequency bands \125\ or is immediately ``useable'' by another 
licensee, perhaps for a particular technology.\126\ The Commission 
seeks comment on these proposals and any other factors it should 
consider when determining which and how much spectrum should be 
divested to prevent competitive harms. The Commission also seeks 
comment on any other approach to spectrum divestiture that would meet 
its goals of promoting competition yet make its policies regarding 
mobile spectrum holdings more clear, transparent, and predictable.
---------------------------------------------------------------------------

    \125\ See Letter from Carl W. Northrop, Counsel for MetroPCS, to 
Marlene Dortch, Secretary, FCC, WT Docket No. 12-4, (Apr. 26, 2012) 
at 3; see also RCA Reply to Opposition to Petition to Condition or 
Otherwise Deny Transactions, WT Docket No. 12-4, at 35.
    \126\ See, e.g., RCA Reply Comments, WT Docket No. 12-4, at 35; 
RCA Petition To Condition or Deny, WT Docket No. 12-4, at 55.
---------------------------------------------------------------------------

    46. As an alternative or supplement to divestiture, the Commission 
has also placed conditions on transactions to remedy certain aspects 
that may be contrary to the public interest, convenience, and 
necessity, including any potential anti-competitive effects of the 
transaction. For example, in the Verizon Wireless-ALLTEL Order, in 
addition to requiring divestiture, the Commission conditioned its 
approval on Verizon Wireless's commitments regarding roaming 
availability and rates, a phase down of competitive ETC high cost 
support, and using counties for measuring compliance with the 
Commission's E911 location accuracy rules governing handset-based 
technologies.\127\ In the AT&T-

[[Page 61342]]

Qualcomm Order, as another example, the Commission required AT&T to 
make roaming commitments and imposed additional conditions designed to 
protect against interference with competitors using neighboring 700 MHz 
spectrum.\128\ In the Verizon Wireless-SpectrumCo Order, the Commission 
required Verizon Wireless to make roaming commitments and imposed 
accelerated buildout requirements on the AWS-1 spectrum Verizon 
Wireless acquired.\129\ The Commission seeks comment on the extent to 
which it 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. Would application of such remedies be 
appropriate if the Commission adopts bright-line limits? How can the 
Commission provide clarity and guidance on such remedies and the 
circumstances under which such remedies may be appropriate?
---------------------------------------------------------------------------

    \127\ See Verizon Wireless-ALLTEL Order, 23 FCC Rcd at 17546-47 
para. 233.
    \128\ See AT&T-Qualcomm Order, 26 FCC Rcd at 17613-14 paras. 56-
57, 17616-18 paras. 61-68.
    \129\ Verizon Wireless-SpectrumCo Order, FCC 12-95, at para. 
121.
---------------------------------------------------------------------------

    47. The Commission also seeks comment on whether there are other 
remedial approaches it could require and how it might apply them. 
Commenters should discuss and, to the extent possible, quantify any 
associated costs or benefits of implementing any remedial approaches or 
any other proposals. Commenters should address the particular benefits 
associated with these remedies, and the cost savings, if any, that may 
be available from requiring certain conditioned spectrum access.
    48. With regard to spectrum acquired through competitive bidding, 
the Commission prospectively applies a competitive analysis of spectrum 
to be acquired through auctions in order to determine whether granting 
a winning bidder's license application is in the public interest and 
whether requiring divestiture prior to granting such application is 
necessary to protect the public interest.\130\ The Commission seeks 
comment on what changes and clarifications might be needed in using 
divestiture as a remedy to cure competitive harm resulting from 
spectrum acquired in an auction in the context of a case-by case 
analysis. Are there any differences or additional considerations among 
remedies that are applicable to spectrum acquired through auctions and 
those applicable to licenses acquired through secondary market 
transactions? What else should the Commission take into account when 
determining and applying remedies in the event it adopts bright-line 
limits that apply in an auction?
---------------------------------------------------------------------------

    \130\ Verizon Wireless-Union Tel. Order, 23 FCC Rcd at 16791 
para. 9.
---------------------------------------------------------------------------

8. Transition Issues
    49. If the Commission were to change its current case-by-case 
approach or adopt new rules or policies, the Commission seeks comment 
on transition issues to consider as new rules or policies are 
implemented. For example, the Commission would not anticipate 
revisiting licensees' current spectrum holdings under any revised 
policy, but instead it would anticipate grandfathering those holdings. 
The Commission seeks comment on that issue, as well as on any other 
transition issues that may arise in implementing the new rules or 
policies.

IV. Procedural Matters

A. Initial Regulatory Flexibility Analysis

    50. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission has prepared this Initial Regulatory 
Flexibility Analysis (IRFA) of the possible significant economic impact 
of the policies and rules proposed in the Notice of Proposed Rulemaking 
(NPRM) on a substantial number of small entities. Written public 
comments are requested on the IRFA. Comments must be identified as 
responses to the IRFA and must be filed by the deadline for comments as 
listed on the first page of this document. The Commission will send a 
copy of the NPRM, including this IRFA, to the Chief Counsel for 
Advocacy of the Small Business Administration (SBA).
    51. Although Section 213 of the Consolidated Appropriations Act of 
2000 provides that the RFA shall not apply to the rules and competitive 
bidding procedures for frequencies in the 746-806 MHz Band, the 
Commission believes that it would serve the public interest to analyze 
the possible significant economic impact of the proposed policy and 
rule changes in this band on a substantial number of small entities. 
Accordingly, this IRFA contains an analysis of this impact in 
connection with all spectrum that falls within the scope of the NPRM, 
including spectrum in the 746-806 MHz Band.
1. Need for, and Objectives of, the Proposed Rules
    52. With this NPRM, the Commission initiates a review of its 
policies governing mobile spectrum holdings in order to ensure that 
they fulfill its statutory objectives given changes in technology, 
spectrum availability, and the marketplace since the Commission's last 
comprehensive review. Specifically, the Commission seeks comment on 
retaining or modifying the current case-by-case analysis used to 
evaluate mobile spectrum holdings in the context of transactions and 
auctions, as well as on bright-line limits advocated by some providers 
and public interest groups. In addition, the Commission seeks comment 
on updating the spectrum bands that should be included in any 
evaluation of mobile spectrum holdings, and whether the Commission 
should make distinctions between different bands. The Commission also 
takes a fresh look at the relevant product market, geographic market, 
and other implementation issues such as attribution rules, remedies, 
and transition issues. The Commission initiates this proceeding to 
provide rules of the road that are clear and predictable, and that 
promote the competition needed to ensure a vibrant, world-leading, 
innovation-based mobile economy.
    53. In its examination of the current case-by-case analysis used to 
evaluate mobile spectrum holdings, the Commission seeks comment on the 
costs and benefits of a case-by-case analysis to consumers, wireless 
service providers and others, as well as the overall effectiveness of 
such an approach in achieving its public policy objectives. The 
Commission also seeks comment on the specific costs and benefits of 
applying a case-by-case approach to initial licenses acquired through 
competitive bidding. In this regard, the Commission seeks comment on 
whether a case-by-case analysis affords auction participants sufficient 
certainty to determine whether they would be allowed to hold a given 
license post-auction and on whether the lack of a bright-line spectrum 
limit deters participation or provides an opportunity for bidding, 
regardless of whether bidders believe they ultimately would be allowed 
to hold the licenses, in order to raise bidding costs or foreclose 
other competitors from acquiring certain licenses. Further, the 
Commission requests comment on whether there are additional measures 
the Commission would need to adopt to promote an effective and 
efficient auction process while discouraging the potential for 
anticompetitive behavior, such as including band-specific limits 
adopted prior to an auction.
    54. In addition, the Commission seeks comment on whether the 
adoption of bright-line limits would serve the public interest now, and 
on the specific costs

[[Page 61343]]

and benefits of adopting bright-line limits. The Commission also seeks 
comment on related implementation issues with respect to applying 
bright-line limits to both initial licenses acquired through 
competitive bidding as well as to licenses acquired through the 
secondary market. The Commission further requests comment on whether it 
should consider applying a band-specific spectrum limit in the context 
of any band-specific service rules that it adopts prior to an auction. 
Are there any alternative approaches to evaluate the competitive effect 
of spectrum aggregation, such as adopting a case-by-case analysis that 
does not include an initial spectrum screen? The Commission seeks 
comment on these approaches and how they could be implemented, and on 
any other alternatives.
    55. If the Commission were to adopt any new or modified approach to 
reviewing mobile spectrum holdings, certain threshold issues would need 
to be considered, including initial definitions of the relevant product 
and geographic markets, deciding the relevant spectrum bands and their 
treatment, as well as attribution rules and potential remedies. Toward 
that end, the Commission seeks comment on whether the relevant product 
market has changed and, if so, whether these changes warrant any 
modifications to the Commission's product market definition. The 
Commission also seeks comment on how it should determine what spectrum 
to include in its overall evaluation. The Commission requests comment 
on any measures that might increase the transparency with which it 
determine what spectrum it would include in a case-by-case spectrum 
analysis or in implementing bright-line limits. The Commission further 
seek comment on the costs and benefits of implementing a new process 
for identifying the spectrum to include in a case-by-case spectrum 
analysis. Finally, what are the legal, economic, and engineering 
justifications to support the existing or any modified criteria for 
determining suitability and availability of spectrum?
    56. Aside from general factors the Commission should consider in 
determining whether spectrum is suitable and available, the Commission 
also seeks comment on the application of these factors to particular 
spectrum bands. Specifically, the Commission seeks comment on which 
spectrum bands should be included, reduced, or removed from 
consideration in its spectrum analysis and whether there are any band-
specific factors the Commission should consider in determining 
suitability and availability of a particular band.
    57. The Commission also seeks comment on the appropriate geographic 
market definition to use when evaluating a licensee's mobile spectrum 
holdings, including any other issues with respect to geographic market 
definition that might be relevant to adopting a bright-line limit, 
case-by-case analysis, or any other approach that would promote 
competition and prevent excessive concentration of spectrum in any 
given area. Should the Commission adopt a two-tiered approach under 
which there is a spectrum threshold at the local level and a separate 
threshold that applies on a nationwide basis? In addition, the 
Commission seeks comment on the appropriate spectrum threshold to be 
used in evaluating mobile spectrum holdings, including whether the 
threshold should be higher in rural areas. For transactions that 
involve a large geographic area with national characteristics, the 
Commission also seeks comment on how to calculate mobile spectrum 
holdings at the national level.
    58. The Commission has recognized that spectrum resources in 
different frequency bands can have disparate technical characteristics 
that affect how the bands can be used to deliver mobile services. 
Therefore, the Commission seeks comment on whether the Commission 
should adopt an approach to evaluating a licensee's mobile spectrum 
holdings that accounts for differing characteristics of spectrum bands, 
including whether the spectrum is below or above 1 GHz. If the 
Commission were to adopt differential treatment for different spectrum 
bands, the Commission seeks comment on what mechanism it should use to 
evaluate the aggregation of below 1 GHz spectrum and whether to apply 
different threshold limits--for example one to spectrum below 1 GHz and 
another to spectrum above 1 GHz. The Commission also seeks comment on 
whether to take into account the value of spectrum held by each 
licensee rather than the amount of spectrum held. If it were to assign 
value to spectrum, the Commission seeks comment on what variables it 
should consider when doing so. Possible variables include geographic 
location and location within the spectrum band itself.
    59. Further, the Commission seeks comment on other methods or 
considerations that might be relevant in reviewing its policies 
regarding mobile spectrum holdings. For instance, should the Commission 
take into account special circumstances, such as how efficiently the 
licensee is using its existing spectrum resources and whether it has 
alternatives to meet its competitive needs aside from acquiring more 
spectrum? As part of a case-by-case analysis, should the Commission 
calculate the spectrum HHI, or the increase in concentration of 
spectrum shares post-transaction?
    60. No matter which approach it decides to take, the Commission 
needs attribution rules to determine which of a licensee's spectrum 
interests counts toward that licensee's total mobile spectrum holdings. 
Whether or not the Commission decides to alter its review mechanism for 
transactions and license applications, the Commission seeks comment on 
whether and how the attribution rules that are used to implement its 
policies regarding mobile spectrum holdings should be amended and on 
what interests should be attributable for purposes of reviewing mobile 
spectrum holdings. The Commission also seeks comment on the types of 
interests that should be of primary importance when it reviews proposed 
transactions, and whether and how the importance of any attributable 
interests may have changed over time. Additionally, the Commission 
seeks comment on whether it should define as attributable any interests 
that have not been attributed in the past or exclude any non-
controlling interests that have been attributed in the past. Further, 
if the Commission makes any changes to its spectrum holdings review 
process, how, if at all, should it attribute leased mobile spectrum 
holdings.
    61. In considering applications for initial licenses and 
applications for the assignment or transfer of control of licenses, 
including spectrum leasing, the Commission must determine whether the 
applicants have demonstrated that the application will serve the public 
interest, convenience, and necessity. The Commission reviews the 
competitive effects of a transaction under the broad public interest 
standard, and may impose remedies, such as requiring divestitures of 
certain licenses, to address potential harms likely to result from a 
transaction or to help ensure the realization of potential benefits 
promised for the transaction. With this in mind, the Commission seeks 
comment on what remedies, including divestitures, would be appropriate 
for the Commission to require in order to prevent competitive harm. The 
Commission also seeks comment on the value of divestures as a remedy to 
redress particular competitive harms, and whether different approaches 
or types of divestures including a clustered approach, full business 
unit divestures,

[[Page 61344]]

spectrum-only divestures, divestitures with a ``right of first 
refusal'' to a particular set of licensees, particular limits on 
parties that have licenses divested to them (such as requiring 
divestiture to rural or midsize carriers that may be in a position to 
offer roaming), or divestiture of spectrum by sale on the secondary 
market, would best serve the Commission's goals.
    62. The Commission also seeks comment on measures it can adopt to 
facilitate spectrum being divested expeditiously to licensees that will 
put it to use quickly and efficiently, and what conditions, limits or 
other rules should apply if the Commission should decide to permit 
divestiture of spectrum by sale on the secondary market. Toward that 
end, the Commission proposes rules governing mobile spectrum holdings. 
These include proposed Section 20.21(b), which would require applicants 
subject to divestiture of interests as required by the Commission, in 
conjunction with the grant of a license application or a transfer of 
control or assignment of authorization, to divest expeditiously, and 
within the time period specified by the Commission.\131\ The Commission 
also proposes rules governing the attribution of interests, including 
controlling interests, non-controlling interests, and waivers.\132\ 
These proposed rules generally follow the attribution standards it 
currently applies, but the Commission seeks comment on whether it 
should make any changes in those standards, including the level of non-
controlling interest that should be attributable, and whether that 
level should be different whether the Commission adopts a case-by-case 
approach or a bright-line limit.
---------------------------------------------------------------------------

    \131\ See proposed 47 CFR 20.21(b), Appendix A, supra.
    \132\ See proposed 47 CFR 20.21(c), Appendix A, supra.
---------------------------------------------------------------------------

    63. In addition, many licensees hold spectrum in multiple frequency 
bands with different propagation or other characteristics, and some 
spectrum holdings may be more valuable than others. The Commission 
seeks comment on whether it 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, perhaps for a particular technology, and any other factors it 
should consider when determining which and how much spectrum should be 
divested to prevent competitive harm. The Commission also seeks comment 
on any other approach to spectrum divestiture that would meet its goals 
of promoting competition yet make its policies regarding mobile 
spectrum holdings more clear, transparent and predictable.
    64. Further, as an alternative or supplement to divestiture, the 
Commission has previously placed conditions on transactions to remedy 
certain aspects that may be contrary to the public interest, 
convenience, and necessity, including any potential anti-competitive 
effects of the transaction. The Commission seeks comment on the extent 
to which it should remedy the potential harms posed by a transaction by 
placing other conditions on it, including leasing, roaming, or 
collocation, in conjunction with or in lieu of requiring divestitures. 
The Commission also seeks comment on whether there are other remedial 
approaches it could require and how it might apply them. The Commission 
further seeks comment on what changes and clarifications might be 
needed in using divestiture as a remedy to cure competitive harm 
resulting from spectrum acquired in an auction in the context of a 
case-by case analysis.
    Finally, the Commission seeks comment on whether there are any 
transition issues to consider if new rules or policies are implemented. 
The Commission anticipates that grandfathering existing holdings in 
excess of any spectrum limit it may adopt would serve the public 
interest. The Commission seeks comment on the grandfathering issue, as 
well as on any other transition issues that may arise in implementing 
the new rules or policies.
2. Legal Basis
    65. The sources of authority for the actions proposed in this NPRM 
are contained in Sections 1, 2, 4(i), 4(j), 301, 303(g), 303(r), 309(j) 
and 310(d) of the Communications Act of 1934, as amended, 47 U.S.C. 
Sections 151, 152, 154(i), 154(j), 301, 303(g), 303(r), 309(j) and 
310(d).
3. Description and Estimate of the Number of Small Entities to Which 
the Proposed Rules Will Apply
    66. The RFA directs agencies to provide a description of, and where 
feasible, an estimate of the number of small entities that may be 
affected by the proposed rules and policies, if adopted. 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 
SBA.
    67. In the following paragraphs, the Commission further describes 
and estimates the number and type of small entities that may be 
affected by its proposals regarding mobile spectrum holdings. 
Implementing new policies regarding mobile spectrum holdings would 
affect entities that hold or lease spectrum within spectrum bands that 
are available for mobile wireless service.
    68. This IRFA analyzes the number of small entities affected on a 
service-by-service basis. When identifying small entities that could be 
affected by the Commission's new rules, this IRFA provides information 
that describes auction results, including the number of small entities 
that were winning bidders. However, the number of winning bidders that 
qualify as small businesses at the close of an auction does not 
necessarily reflect the total number of small entities currently in a 
particular service. The Commission does not generally require that 
licensees later provide business size information, except in the 
context of an assignment or a transfer of control application that 
involves unjust enrichment issues.
    69. 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 that encompass entities that could be directly 
affected by the proposals under consideration. As of 2009, small 
businesses represented 99.9% of the 27.5 million businesses in the 
United States, according to the SBA. Additionally, 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, counties, towns, 
townships, villages, school districts, or special districts, with a 
population of less than fifty thousand.'' Census Bureau data for 2007 
indicate that there were 89,527 governmental jurisdictions in the 
United States. The Commission estimates that, of this total, as many as 
88,761 entities may qualify as ``small governmental jurisdictions.'' 
Thus, the Commission estimates that most governmental jurisdictions are 
small.

[[Page 61345]]

    70. 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 
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.''
    71. 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.
    72. 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 (except satellite). 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 1,383 firms that operated for the entire year. Of this 
total, 1,368 firms had 999 or fewer employees and 15 had 1000 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.
    73. 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.
    74. 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.
    75. 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 estimates that the majority of these 
licensees are Internet Access Service Providers (ISPs) and that most of 
those licensees are small businesses.
    76. 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.
    77. Broadband Personal Communications Service. The broadband 
personal communications services (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

[[Page 61346]]

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, 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.
    78. 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.
    79. 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, it notes 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 or AWS-3 bands but has proposed to treat both 
AWS-2 and AWS-3 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.
    80. 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.
    81. 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.\133\
---------------------------------------------------------------------------

    \133\ Id.
---------------------------------------------------------------------------

    82. 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 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 3 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.
    83. 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

[[Page 61347]]

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.
    84. Specialized Mobile Radio. The Commission adopted small business 
size standards for the purpose of determining eligibility for bidding 
credits in auctions of Specialized Mobile Radio (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 BEA 
licenses. One bidder claiming small business status won five licenses.
    85. 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.
    86. 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.
    87. 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.
    88. 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 size standard 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 estimates 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 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.\134\ Auction 86 concluded in 2009 with the sale of 61 licenses. Of 
the ten winning bidders, two bidders that claimed small business status 
won 4 licenses; one bidder that claimed very small business status won 
three licenses; and two bidders that claimed entrepreneur status won 
six licenses.
---------------------------------------------------------------------------

    \134\ Id. at 8296 para. 73.
---------------------------------------------------------------------------

    89. 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.\135\ Thus, the Commission estimates 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,

[[Page 61348]]

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 we 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.
---------------------------------------------------------------------------

    \135\ The term ``small entity'' within SBREFA applies to small 
organizations (nonprofits) and to small governmental jurisdictions 
(cities, counties, towns, townships, villages, school districts, and 
special districts with populations of less than 50,000). 5 U.S.C. 
601(4)-(6). The Commission does not collect annual revenue data on 
EBS licensees.
---------------------------------------------------------------------------

4. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities
    90. The NPRM initiates a review of the FCC's policies and rules 
governing mobile spectrum holdings. The FCC seeks comment on whether it 
should retain or modify its current rules. To the extent the Commission 
retains its current policies, this proceeding will not result in any 
additional reporting, recordkeeping, or other compliance burdens. If 
the FCC modifies its rules, those changes could alter the compliance 
requirements (and burdens) that apply to small entities. Those burdens, 
which may be offset by efficiencies associated with any modified rules, 
could include professional skills necessary to monitor and abide by the 
new rules, burdens associated with the ability to retain or acquire 
additional spectrum, and costs associated with changes in market 
competition.
5. Steps Taken To Minimize Significant Economic Impact on Small 
Entities and Significant Alternatives Considered
    91. The RFA requires an agency to describe any significant 
alternatives that it has considered in developing its approach, which 
may include the following four alternatives (among others): (1) The 
establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) an 
exemption from coverage of the rule, or any part thereof, for small 
entities.\136\
---------------------------------------------------------------------------

    \136\ See 5 U.S.C. 603(c).
---------------------------------------------------------------------------

    92. In light of the surge in consumer demand for mobile broadband 
services that require greater bandwidth, spectrum is becoming 
increasingly critical for all providers. With that in mind, the 
Commission initiates a review of policies governing mobile spectrum 
holdings. This proceeding provides the opportunity to obtain valuable 
input from a broad range of active participants in the mobile broadband 
industry, trade associations, and consumer groups that have requested 
that the Commission's policies be revised to keep pace with market 
changes. The Commission seeks comment on whether and how to revise its 
policies and rules regarding mobile spectrum holdings. In particular, 
the Commission seeks alternatives that address how to ensure that its 
policies and rules afford all interested parties greater certainty, 
transparency and predictability to make investment and transactional 
decisions, while reducing the regulatory burdens on small entities.
    93. First, the Commission seeks comment on retaining or modifying 
the current case-by-case analysis used to evaluate mobile spectrum 
holdings in the context of transactions and auctions, as well as on 
bright-line limit proposals advocated by some providers and public 
interest groups. The Commission seeks comment on the costs and benefits 
of a case-by-case analysis to consumers, wireless service providers and 
others, as well as the overall effectiveness of such an approach in 
achieving its public policy objectives. The Commission requests 
alternatives that would reduce the burdens on small entities while 
making the process more transparent, predictable, or better tailored to 
promote its goals.
    94. The Commission also seeks comment on whether adoption of 
bright-line limits would now serve the public interest, and if so on 
its potential application, and on the specific costs and benefits of 
adopting bright-line limits. The Commission seeks possible alternatives 
that would best balance the goal of providing greater certainty, 
clarity, and predictability with regard to auction participation and 
secondary market transactions while maximizing the Commission's 
flexibility to consider individualized circumstances and respond 
swiftly to the changing needs of the mobile wireless industry and 
consumers, all while reducing the burden on small entities. Further, 
the Commission seeks comment on any alternative approaches regarding 
the competitive effect of spectrum aggregation, how alternative 
approaches could be implemented, and on any other alternatives that 
would further reduce burdens on small businesses.
    95. The Commission also seeks comment on whether the current 
approach to the product and geographic market definitions continues to 
be appropriate when evaluating a licensee's mobile spectrum holdings. 
The Commission seeks alternate proposals that might increase the 
transparency with which it determines what spectrum it would include in 
a case-by-case spectrum analysis or in implementing bright-line limits, 
as well as any other approach that would promote competition and 
prevent excessive concentration of spectrum in any given area. Such 
alternative proposals should address the issue of reducing burdens on 
small business.
    96. In addition, the Commission seeks comment on updating the 
spectrum bands that should be considered in any evaluation of mobile 
spectrum holdings and whether to make distinctions between bands. The 
Commission requests alternatives that would reduce the burdens on small 
entities while advancing the goals of promoting wireless competition, 
innovation, investments and broadband deployment in rural areas.
    97. The Commission also seeks comment on whether and how the 
attribution rules that are used to implement its policies regarding 
mobile spectrum holdings should be amended if the Commission decides to 
continue its existing case-by-case review of transactions and in the 
event that the Commission alters its transaction review mechanism. 
Further, the Commission seeks comment on its proposed rules regarding 
attribution standards, which include a waiver provision, and more 
generally on the types of interests that should be of primary 
importance when the Commission reviews proposed wireless transactions, 
and whether and how the importance of any attributable interests may 
have changed over time. The Commission seeks to receive alternate 
proposals regarding potential changes to the attribution rules in 
general, and more specifically how any proposed changes could limit the 
burdens on small entities.
    98. The Commission also seeks comment on what remedies, including 
divestitures, would be appropriate to prevent competitive harm, and how 
it might apply them. The Commission seeks comment on the value and 
types of divestitures that would be effective remedies to redress 
particular competitive harms, its proposed divestiture rule, and any 
other

[[Page 61349]]

alternative approaches that could provide greater predictability to 
allow the industry to better make needed investment decisions, while 
easing the burden on small entities. Commenters should discuss and 
quantify any associated costs or benefits of implementing any remedial 
approaches or any other proposals that would best serve the 
Commission's goals of providing clarity and certainty to parties while 
promoting competition and further reducing the burden on small 
business.
    99. Finally, if the Commission were to change its current case-by 
case approach or adopt new rules or polices, the Commission seeks 
comment on whether there are any transition issues to consider as new 
rules or policies are implemented, such as considering grandfathering 
spectrum held before the effective date of any new rule or policy. The 
Commission seeks alternate proposals that would best achieve the goal 
of reducing the burdens on small business while making its policies 
regarding mobile spectrum holdings more clear, transparent and 
predictable.
    100. For each of the proposals in the Notice, the Commission seeks 
discussion, and where relevant, alternative proposals, on the effect 
that each prospective new requirement, or alternative rules, might have 
on small entities. For each proposed rule or alternative, the 
Commission seeks discussion about the burden that the prospective 
regulation would impose on small entities and how the Commission could 
impose such regulations while minimizing the burdens on small entities. 
For each proposed rule, the Commission asks whether there are any 
alternatives it could implement that could achieve the Commission's 
goals while at the same time minimizing the burdens on small entities. 
For the duration of this docketed proceeding, the Commission will 
continue to examine alternatives with the objectives of eliminating 
unnecessary regulations and minimizing any significant economic impact 
on small entities.
6. Federal Rules That May Duplicate, Overlap, or Conflict With the 
Proposed Rules
    None.

B. Paperwork Reduction Act Analysis

    101. This document does not contain proposed information 
collection(s) subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. In addition, therefore, it does not contain any new 
or modified information collection burden for small business concerns 
with fewer than 25 employees, pursuant to the Small Business Paperwork 
Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).

C. Ex Parte Rules

    102. Permit-But-Disclose. The proceeding initiated by this Notice 
of Proposed Rulemaking shall be treated as a ``permit-but-disclose'' 
proceeding in accordance with the Commission's ex parte rules.\137\ 
Persons making ex parte presentations must file a copy of any written 
presentation or a memorandum summarizing any oral presentation within 
two business days after the presentation (unless a different deadline 
applicable to the Sunshine period applies). Persons making oral ex 
parte presentations are reminded that memoranda summarizing the 
presentation must: (1) List all persons attending or otherwise 
participating in the meeting at which the ex parte presentation was 
made, and (2) summarize all data presented and arguments made during 
the presentation. If the presentation consisted in whole or in part of 
the presentation of data or arguments already reflected in the 
presenter's written comments, memoranda, or other filings in the 
proceeding, the presenter may provide citations to such data or 
arguments in his or her prior comments, memoranda, or other filings 
(specifying the relevant page and/or paragraph numbers where such data 
or arguments can be found) in lieu of summarizing them in the 
memorandum. Documents shown or given to Commission staff during ex 
parte meetings are deemed to be written ex parte presentations and must 
be filed consistent with rule 1.1206(b). In proceedings governed by 
rule 1.49(f) or for which the Commission has made available a method of 
electronic filing, written ex parte presentations and memoranda 
summarizing oral ex parte presentations, and all attachments thereto, 
must be filed through the electronic comment filing system available 
for that proceeding and must be filed in their native format (e.g., 
.doc, .xml, .ppt, searchable .pdf). Participants in this proceeding 
should familiarize themselves with the Commission's ex parte rules.
---------------------------------------------------------------------------

    \137\ 47 CFR 1.1200 et seq.
---------------------------------------------------------------------------

D. Filing Requirements

    103. Pursuant to sections 1.415 and 1.419 of the Commission's 
rules, 47 CFR 1.415, 1.419, interested parties may file comments and 
reply comments on or before the dates indicated on the first page of 
this document. Comments may be filed using the Commission's Electronic 
Comment Filing System (ECFS). See Electronic Filing of Documents in 
Rulemaking Proceedings, 63 FR 24121 (1998).

[ssquf] Electronic Filers: Comments may be filed electronically using 
the Internet by accessing the ECFS: http://fjallfoss.fcc.gov/ecfs2/.
[ssquf] Paper Filers: Parties who choose to file by paper must file an 
original and one copy of each filing. If more than one docket or 
rulemaking number appears in the caption of this proceeding, filers 
must submit two additional copies for each additional docket or 
rulemaking number. Filings can be sent by hand or messenger delivery, 
by commercial overnight courier, or by first-class or overnight U.S. 
Postal Service mail. All filings must be addressed to the Commission's 
Secretary, Office of the Secretary, Federal Communications Commission.

    [ssquf] All hand-delivered or messenger-delivered paper filings for 
the Commission's Secretary must be delivered to FCC Headquarters at 445 
12th St. SW., Room TW-A325, Washington, DC 20554. The filing hours are 
8:00 a.m. to 7:00 p.m. All hand deliveries must be held together with 
rubber bands or fasteners. Any envelopes and boxes must be disposed of 
before entering the building.
    [ssquf] Commercial overnight mail (other than U.S. Postal Service 
Express Mail and Priority Mail) must be sent to 9300 East Hampton 
Drive, Capitol Heights, MD 20743.
    [ssquf] U.S. Postal Service first-class, Express, and Priority mail 
must be addressed to 445 12th Street SW., Washington DC 20554.

    104. Availability of Documents. Comments, reply comments, and ex 
parte submissions will be available for public inspection during 
regular business hours in the FCC Reference Center, Federal 
Communications Commission, 445 12th Street SW., CY-A257, Washington, DC 
20554. These documents will also be available via ECFS. Documents will 
be available electronically in ASCII, Microsoft Word, and/or Adobe 
Acrobat.
    105. Accessibility Information. To request information in 
accessible formats (computer diskettes, large print, audio recording, 
and Braille), send an email to fcc504@fcc.gov or call the FCC's 
Consumer and Governmental Affairs Bureau at (202) 418-0530 (voice), 
(202) 418-0432 (TTY). This document can also be downloaded in Word and 
Portable Document Format (PDF) at: http://www.fcc.gov.

[[Page 61350]]

    106. Additional Information. For additional information on this 
proceeding, contact Monica DeLong, Monica.DeLong@fcc.gov, of the 
Wireless Telecommunications Bureau, Spectrum and Competition Policy 
Division, (202) 418-1337.

V. Ordering Clauses

    107. Accordingly, it is ordered, pursuant to sections 1, 2, 4(i), 
4(j), 301, 303(g), 303(r), 309(j) and 310(d) of the Communications Act 
of 1934, as amended, 47 U.S.C. 151, 152, 154(i), 154(j), 301, 303(g), 
303(r), 309(j) and 310(d), that this Notice of Proposed Rulemaking in 
WT Docket No. 12-269 IS adopted.
    108. It is further ordered that the Commission's Consumer & 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Notice of Proposed Rulemaking, including the Initial 
Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy of 
the Small Business Administration.

List of Subjects 47 CFR Part 20

    Communications common carriers.

Federal Communications Commission.
Marlene H. Dortch,
Secretary.

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

PART 20--COMMERCIAL MOBILE SERVICES

    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.

    2. Add Sec.  20.21 to read as follows:


Sec.  20.21  Rules Governing Mobile Spectrum Holdings

    (a) This section applies to mobile spectrum holdings that are 
suitable and available for commercial use. Applicants for mobile 
spectrum 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 subpart X of part 1 of these 
rules 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 standards set 
forth in WT Docket No. 12-269.
    (b) Divestiture of interests as required by the Commission, in 
conjunction with the grant of a license application or a transfer of 
control or assignment of authorization, must occur expeditiously, and 
within the time period specified by the Commission.
    (c) Attribution of Interests. Ownership and other interests in 
mobile spectrum holdings for commercial use will be attributable to 
their holders pursuant to the following criteria:
    (1) 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.
    (2) Non-controlling interests of 10 percent or more in mobile 
spectrum holdings shall be attributable. Non-controlling interests of 
less than 10 percent in mobile spectrum holdings shall be attributable 
if the Commission determines that such interest confers de facto 
control, including but not limited to partnership and other ownership 
interests and any stock interest in a licensee.
    (3) The following interests in mobile 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 percent of B, 
and B owns 40 percent of licensee C, then A's interest in licensee C 
would be 8 percent. If A owns 20 percent of B, and B owns 51 percent of 
licensee C, then A's interest in licensee C would be 20 percent because 
B's ownership of C exceeds 50 percent.)
    (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 subpart X of part 1 of these rules 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.
    (4) Requests for waivers of paragraph (c) of this section, pursuant 
to Sec.  1.925 of the Commission rules, must contain the information 
necessary to make an affirmative showing to the Commission that:
    (a) The interest holder is not likely to affect the relevant 
geographic market(s) in an anticompetitive manner;
    (b) The interest holder is not involved in the day-to-day 
operations of the licensee and does not have the ability to influence 
the licensee on a regular basis; and
    (c) Grant of a waiver is in the public interest because the 
benefits to the public of common ownership outweigh any potential harm 
to the market.

[FR Doc. 2012-24790 Filed 10-5-12; 8:45 am]
BILLING CODE 6712-01-P