[Federal Register Volume 62, Number 47 (Tuesday, March 11, 1997)]
[Rules and Regulations]
[Pages 11083-11107]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-6064]



[[Page 11083]]

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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 25 and 87

[IB Docket No. 95-91; GEN Docket No. 90-357; FCC 97-70]


Digital Audio Radio Service in the 2310-2360 MHZ Frequency Band

AGENCY: Federal Communications Commission.

ACTION: Final Rule.

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SUMMARY: After carefully reviewing the comments and information the 
Commission received following issuance of the Notice of Proposed 
Rulemaking, concerning service and licensing rules for the Digital 
Audio Radio Service (DARS) in the 2310-2360 MHZ frequency bands, the 
Commission reached the following conclusions. The Commission will 
license satellite DARS. Opponents of the new service have not shown 
that its potential adverse impact on local radio service outweighs its 
potential benefits. Based on the record, the Commission finds that an 
economically viable satellite DARS system will require at least 12.5 
MHz of spectrum. Although the Commission has allocated 50 MHz of 
spectrum for satellite DARS in the S-band (2310-2360 MHz), recently 
enacted legislation directs the Commission to reallocate 25 MHz of that 
spectrum for any services consistent with the international allocation 
and to assign licenses for that 25 MHz by auction. Accordingly, in this 
proceeding the Commission will designate only two licenses for 
satellite DARS in the 25 MHz that remains in the part of the S-band 
allocated for satellite DARS. The Commission will award both satellite 
DARS licenses using competitive bidding, as it proposed in the NPRM, to 
resolve mutual exclusivity among the current applicants, under the 
auction rules they adopt today. The Commission also adopts service 
rules for satellite DARS licensees, including milestone requirements. 
Three of the four DARS applicants applied for pioneer's preferences. 
However, following unanimous recommendations from a panel of satellite 
experts that no pioneer's preferences be granted for satellite DARS all 
three applicants have withdrawn their applications. The intended effect 
of this action is to establish rules and policies for the DARS service 
in the 2310-2360 MHz frequency band.

EFFECTIVE DATE: The new and amended rules in Sections 25.144, 25.201, 
25.202, 25.214 and 87.303 shall become effective April 10, 1997; the 
new rules in Sections 25.401, 25.402, 25.403, 25.404, 25.405, and 
25.406 shall become effective March 11, 1997.

FOR FURTHER INFORMATION CONTACT: Rosalee Chiara at (202) 418-0754 or 
Ron Repasi at (202) 418-0768 with the International Bureau or Amy 
Zoslov or Christina Eads Clearwater at (202) 418-0660 with the Wireless 
Telecommunications Bureau.

SUPPLEMENTARY INFORMATION: This is a summary of the Report and Order 
and Memorandum Opinion and Order and Further Notice of Proposed 
Rulemaking in IB Docket No. 95-91; GEN Docket No. 90-357; RM No. 8610; 
PP-24; PP-86; and PP-87, FCC No. 97-70 (adopted and released March 3, 
1997). The complete text of the Report and Order and Memorandum Opinion 
and Order and Further Notice of Proposed Rulemaking is available for 
inspection and copying during normal business hours in the FCC 
Reference Center (Room 239), 1919 M Street, N.W., Washington, D.C. and 
also may be purchased from the Commission's copy contractor, 
International Transcription Services (202) 857-3800, 2100 M Street, 
N.W., Suite 140, Washington, D.C. 20037.

Synopsis of the Report and Order and Memorandum Opinion and Order 
and Further Notice of Proposed Rulemaking

    1. The Commission will summarize the background in this proceeding, 
which is described in greater detail in the NPRM, 60 FR 35166, (July 6, 
1995) and in prior orders. Satellite CD Radio, Inc. (CD Radio) 
initiated this proceeding in 1990 by filing a petition to allocate 
spectrum for satellite DARS and an application to provide the service. 
In February 1992, the World Administrative Radio Conference (WARC-92) 
adopted international frequency allocations for Broadcasting Satellite 
Service (BSS) (sound)(the international term for satellite DARS). 
Internationally, this band is also allocated on a primary basis to 
radiolocation services and fixed and mobile terrestrial services. In 
November 1992, the Commission established a proceeding to allocate 
satellite DARS spectrum domestically and announced a December 15, 1992 
cut-off date for satellite DARS license applications to be considered 
with CD Radio's. Of the six license applicants that filed before the 
cut-off; four remain: CD Radio, Primosphere Limited Partnership 
(Primosphere), Digital Satellite Broadcasting Corporation (DSBC) and 
American Mobile Radio Corporation (AMRC). In January 1995, the 
Commission allocated the 2310-2360 MHz band for satellite DARS on a 
primary basis.
    2. In the June 1995 NPRM, the Commission posed many questions about 
satellite DARS. The Commission requested detailed information on the 
new service's potential economic impact on terrestrial broadcasters. 
The NPRM asked about the most appropriate service design and regulatory 
classification. The Commission sought comment on what public interest 
obligations to impose and queried whether providers should be permitted 
to offer ancillary services. The NPRM proposed three possible licensing 
options and rules to allow expeditious licensing after an option was 
chosen. After the NPRM was released, the Appropriations Act directed 
the Commission to reallocate spectrum at 2305-2320 MHz and 2345-2360 
MHz for all services consistent with international allocations and to 
award licenses in that portion of the band using competitive bidding. 
As a consequence, the licenses designated pursuant to this order will 
be in the spectrum between 2320 and 2345 MHz.
    3. In the NPRM and in prior orders, the Commission discussed the 
benefits of satellite DARS proffered by the proponents. These include 
introduction of a new radio service to the public, a national 
distribution of radio programming to all areas, including underserved 
and unserved areas and population groups, the creation of jobs and the 
promotion of technological development in the satellite and receiver 
industries, and the improvement of U.S. competitiveness in the 
international economy. The Commission sought comment on its tentative 
conclusion that satellite DARS offers substantial public benefits.
    4. The Commission also invited detailed comment and information on 
the economic impact of satellite DARS on existing radio broadcasters. 
It acknowledged the high level of concern that terrestrial broadcasters 
have expressed about satellite DARS. In addition to three associations 
of broadcasters, more than one hundred terrestrial radio station owners 
or operators have submitted individual letters opposing satellite DARS.
    5. Recognizing the significant public value of terrestrial radio 
service, the Commission must weigh the potential public interest 
benefits of satellite DARS against its potential adverse impact on 
terrestrial radio. This impact is relevant ``to the extent that [it] 
would predictably lead to serious loss of important services to 
consumers, taking into account the potential for future enhancements of 
terrestrial broadcasting by the introduction of new technologies.'' In 
the NPRM, the Commission emphasized

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that, pursuant to Section 7 of the Communications Act, opponents of a 
new technology, such as satellite DARS, bear the burden of 
demonstrating that it is inconsistent with the public interest. The 
Commission has previously noted that, ``[t]he public interest in this 
regard is the provision of services of value to the listening public 
and includes the protection of competition, not competitors.''
    6. Satellite DARS can offer high-quality radio signals to listeners 
who currently receive few terrestrial radio signals. Commenters 
disagree concerning how many people are underserved by local radio. One 
respondent submitted a county-based analysis of listening diaries 
contending that only 6,100 people in the U.S. aged 12 and over receive 
less than six radio signals. However, that study defined a station as 
``covering'' a U.S. county if even one diary recorded having received 
its signal. Given that AM signals travel long distances at night and 
that such skywave signals fluctuate significantly even when usable, the 
Commission believes that such diary evidence may not accurately 
indicate the size of the population that receives radio signals.
    7. One study indicates that 722,102 persons (0.3% of the U.S. 
population) are covered by no FM stations, 2.4 million persons (1.0% of 
the U.S. population) are covered by one or fewer FM stations, and 22 
million persons (8.9% of the U.S. population) are covered by five or 
fewer FM stations. The NAB criticized this study, however, because it 
does not include AM radio stations, even though more than 40% of all 
radio stations are AM stations and even though AM signals often travel 
much further than FM signals at night. AM signals, due to limited 
bandwidth and greater susceptibility to noise and interference, do not 
provide as high fidelity sound as FM signals. Thus, FM signal quality 
may be closer to the quality of that satellite DARS would provide. 
While the Commission is unable to estimate an exact figure for the 
number of potential radio listeners who are currently underserved, it 
finds that the record is sufficient to indicate that a significant 
number of persons in the U.S. receive few high-quality audio signals. 
Satellite DARS offers the substantial benefit of providing these 
persons with many additional high-quality audio signals.
    8. It is the Commission's view that satellite DARS will 
particularly benefit communities where terrestrial broadcast service is 
less abundant. The record shows that counties with smaller populations 
have fewer radio stations and that smaller markets have fewer radio 
formats. The 33.2% of the U.S. population living in the top ten radio 
markets have access to an average of 26 formats, while the 18% of the 
U.S. population living in radio markets ranked 100-261 have access to 
an average of only 14.9 formats. Persons living outside these 261 
ranked markets are likely to have still fewer radio formats available. 
Given that each satellite DARS applicant proposes to provide 20 or more 
channels nationwide, satellite DARS would significantly reduce the 
proportional discrepancy in the geographic distribution of radio 
service.
    9. Moreover, satellite DARS can provide new services that local 
radio inherently cannot provide. With its national reach, satellite 
DARS could provide continuous radio service to the long-distance 
motoring public, persons living in remote areas, and may offer new 
forms of emergency services.
    10. Satellite DARS may also be able to foster niche programming 
because it can aggregate small, nationally dispersed listener groups 
that local radio could not profitably serve. Commenters suggest that 
satellite DARS could fulfill a need for more educational programming, 
rural programming, ethnic programming, religious programming, and 
specialized musical programming. One nationally representative survey 
found that 10-27% of the respondents indicated a strong interest in 
accessing programming formats that are not widely available. Evidence 
from a survey by the National Endowment for the Arts suggests that 
niche marketing opportunities exist for some of the less popular radio 
formats.
    11. The Commission believes that licensees will have an incentive 
to diversify program formats and thereby provide valuable niche 
programming. The Commission recognizes that satellite DARS licensees 
are likely to provide the programming that is most profitable. 
Nonetheless, given that the Commission anticipates each satellite DARS 
licensee will control more than 20 channels, each licensee will have an 
incentive to diversify programming so that one channel will not 
directly compete with another channel that the licensee itself 
controls. The Commission has noted the importance of this incentive, 
particularly with respect to entertainment programming, in other 
proceedings.
    12. In the NPRM, the Commission tentatively concluded that 
implementation of satellite DARS would foster the development of new 
technology. NAB has argued that U.S. implementation of satellite DARS 
is not necessary to advance satellite DARS technology. While this may 
be true, the Commission nevertheless believes that U.S. implementation, 
by providing large-scale market-based consumer feedback and increased 
economic incentives for further technological advances, would foster 
faster and more customer oriented development.
    13. The Commission concludes that licensing operators to provide 
satellite DARS will yield substantial benefits to consumers. The 
Commission now evaluates whether opponents have met their burden of 
showing that these benefits are outweighed by the potential harm to 
listeners from potential loss of terrestrial service resulting from 
increased competition from satellite DARS.
    14. In the NPRM, the Commission sought comment on the effect of 
satellite DARS on terrestrial radio listenership. The Commission 
explicitly requested commenters to consider the characteristics of 
satellite DARS that distinguish it from terrestrial radio. Commenters 
often failed to do so. Instead, several commenters implicitly assumed 
that satellite DARS' effect on local radio would be similar to the 
effect from competition generated by new local radio stations. Given 
the distinguishing features of satellite DARS--it is a national 
service, it will require new and relatively costly equipment, and it 
may be offered via paid subscription--the Commission finds that the 
effect of satellite DARS on terrestrial radio is likely to be 
significantly smaller than the effect of additional terrestrial radio 
stations.
    15. For example, one commenter includes a consumer survey which 
suggests that satellite DARS would cause a decline of 11.6% in 
terrestrial radio listenership. The appropriate interpretation of this 
figure is not clear, however, because the survey did not take into 
account the potential cost to the consumer of satellite DARS equipment, 
and the subscription fee included in the survey was only half of what 
one satellite DARS applicant (CD Radio) has proposed. Moreover, the 
survey failed to consider the possible introduction of terrestrial DARS 
in assessing consumer interest in satellite DARS. For these reasons the 
Commission believes that this survey may overestimate the likely 
decline in terrestrial radio listenership. And yet even in this survey 
80% of respondents indicated that they would not reduce the time they 
spend listening to terrestrial radio if satellite DARS was available. 
However, the Commission realizes that surveys of predicted

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consumer response to a new and untried service may be somewhat 
unreliable.
    16. By analogy, the diffusion of other new services and 
technologies may provide valuable perspective on the time period in 
which satellite DARS' may affect terrestrial radio listenership. In 
1994, six years after their introduction, CD players were in just 3.2 
percent of all automobiles. This experience is recent, involves high-
quality audio service and roughly comparable equipment costs, and 
relates to automobiles, perhaps the most likely market for satellite 
DARS receivers. On the other hand, for the first few years after CD 
players' introduction there were significant technical problems with 
their operation in automobiles, and CD players are less convenient to 
operate than radios. These factors may have reduced the rate at which 
CD players were installed in cars. Nonetheless, CD players offer a 
useful example by which to evaluate the penetration profile for 
satellite DARS receivers. Given anticipated satellite launch dates for 
satellite DARS applicants (1998-1999) and the example of the diffusion 
of CD players, the Commission believes it is reasonable to project that 
by about 2005 the over-all penetration rate of satellite DARS receivers 
in radio listening environments may not be significantly greater than 
4%.
    17. Estimating listening time diversion depends on the share of 
listening time allocated to satellite DARS when the listener has a 
choice between satellite DARS and terrestrial radio. Drawing an analogy 
with the diffusion of cable services indicates that established 
programming loses audience share relatively slowly. In 1984, about a 
decade after the introduction of premium cable services and the 
development of 24 to 36 channel cable TV systems, cable channels 
attracted 14% of television viewing time. After another decade, the 
share of cable channels in television viewing time rose to 30%. An 
important weakness in this analogy is that the difference between cable 
programming and network programming during this period is probably 
significantly greater than will be the difference between satellite 
DARS programming and terrestrial radio programming. Nonetheless, the 
Commission believes that owners of satellite DARS receivers will 
continue to allocate a significant share of their listening time to 
terrestrial radio in order to hear music or news of local interest. 
Even with rapid, further penetration of satellite DARS receivers, the 
Commission expects that satellite DARS' share of radio listening time 
will grow relatively slowly over decades.
    18. In the NPRM, the Commission asked parties to consider 
advertising revenues that terrestrial radio might lose because of 
satellite DARS. The record indicates two possible causes of terrestrial 
radio revenue loss: competition with satellite DARS for advertising 
dollars and competition with satellite DARS for listeners' attention.
    19. While the Commission recognizes that satellite DARS has 
significant competitive advantages in offering advertising to a 
national audience with satellite DARS receivers, several factors may 
limit the possible significance to terrestrial radio of such additional 
competition. First, at this time, only one out of the four satellite 
DARS applicants has indicated an intention to implement its system on a 
non-subscription, advertiser-supported basis. Second, a large share of 
the national radio audience is not likely to have satellite DARS 
receivers, at least for a significant period of time. Third, national 
advertising revenue amounts to only 18% of terrestrial radio 
advertising revenue and is on average less important for small-market 
stations than for large-market stations. Local advertising revenue is 
much more important than national advertising revenue for terrestrial 
radio's viability and prevalence, and, at this time, the Commission has 
no evidence that satellite DARS would be able to compete for local 
advertising revenue.
    20. More important to terrestrial radio is possible competition 
with satellite DARS for listener attention because this new offering 
could reduce the size of the local listening audience available for 
terrestrial radio stations to sell. The Commission recognizes that a 
decrease in the audience size could lead to some reduction in 
terrestrial station revenues. As discussed above, however, the 
Commission believes the reduction would be modest, although the record 
leaves room for significant uncertainty.
    21. Commenters have not fully analyzed the relationship between 
reductions in listenership and reductions in revenue. The Commission 
does not necessarily agree with those commenters who assert that 
terrestrial radio station revenue will fall one-for-one with any fall 
in listenership. Because the price of local radio advertising may rise, 
the effect on local radio revenue may be smaller than the effect on 
listenership. However, regardless of the precise relationship, the 
Commission does assume that a decrease in listenership will lead to a 
decrease in advertising revenues, if other variables are held constant.
    22. In the NPRM, the Commission asked questions about the impact of 
satellite DARS on the financial viability of local broadcast stations. 
In general, the Commission encourages competition for the provision of 
telecommunications services wherever possible and removes barriers for 
new competitors. Commenters differ sharply on the effect of satellite 
DARS on the profitability of terrestrial stations, with estimates of 
the reduction in terrestrial stations' profitability spanning 2.1-3.5% 
to 52%-122%. The wide range of these estimates do not allow the 
Commission to judge the effect of satellite DARS on terrestrial 
stations' profitability. The Kagan Study, by focusing on historical 
indicators of revenue and profitability and not considering the time 
path for satellite DARS diffusion, likely overestimates the potential 
impact of satellite DARS on terrestrial stations profitability. The MTA 
Study's audience diversion figures are lower than what the Commission 
believes, and the Commission questions the relevance of their use of 
the ratio of satellite DARS receiver owners to the total U.S. 
population, given that segments of the population, such as infants, are 
not potential satellite DARS owners. The Commission also finds their 
revenue loss projections to be unsubstantiated and unconvincing.
    23. The record supports a finding that the impact of satellite DARS 
would likely be greater on small-market terrestrial stations than 
large-market terrestrial stations. This result is not surprising 
because it is likely that the introduction of a 30-channel satellite 
DARS system could divert a larger share of the audience in a market 
with only 6 stations than in a market with 60 stations. Nonetheless, 
the record does not establish that any predicted reduction in station 
profitability would harm overall station viability.
    24. In fact, the record suggests that profitability figures may be 
a weak indicator of radio station viability. The wide range in the 
audience size distribution for existing radio stations suggests that 
most radio stations could remain viable given plausible audience 
reductions due to satellite DARS. Despite evidence that a large 
percentage of radio stations are experiencing losses, there is also 
evidence that overall the industry is very healthy. The value of radio 
station purchases in 1996 was 315% higher than in 1995 and radio 
station values as a multiple of cash flow also rose sharply. Factors 
such as debt financing and start-up costs may explain

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why radio stations would stay in business while reporting losses.
    25. The concern about licensing satellite DARS focuses on its 
impact on the provision of locally oriented radio service. Satellite 
DARS proponents argue that the ability to offer local content will give 
terrestrial broadcasters a competitive advantage. Terrestrial 
broadcasters argue that providing local content is a public service 
that depends, in effect, on cross-subsidization from more profitable 
programming.
    26. The Commission concludes that the record lacks systematically 
sampled, quantitative evidence about the listening time, revenue base, 
and profitability of local content. Nonetheless, if local content were 
relatively unprofitable for every station, one would expect competition 
among terrestrial stations to result in minimal local programming on 
most stations. Yet the record indicates that such analysis is not 
necessarily accurate; despite vigorous competition among stations, some 
stations provide much local programming, while others provide 
relatively little. Competition from satellite DARS may create 
incentives for at least some terrestrial stations to increase their 
emphasis on local programming in order to attempt to differentiate 
their service from satellite DARS. It is unclear the degree to which 
that might affect overall station profits.
    27. In sum, although healthy satellite DARS systems are likely to 
have some adverse impact on terrestrial radio audience size, revenues, 
and profits, the record does not demonstrate that licensing satellite 
DARS would have such a strong adverse impact that it threatens the 
provision of local radio service.
    28. The Commission also notes that revenue of terrestrial radio is 
projected to grow at a real (inflation adjusted) rate of about 4% per 
year. Such projected revenue should mitigate, at least to some extent, 
the eventual impact on terrestrial stations of satellite DARS. The 
Commission also notes that recently, it implemented provisions of the 
Telecommunications Act of 1996 and repealed all terrestrial radio 
national ownership limits and significantly relaxed local ownership 
limits. These changes should lead to reduced operating costs and 
increased profits for terrestrial station owners that take advantage of 
the new rules. The Commission expects any possible impact of satellite 
DARS on terrestrial radio's revenue to be relatively small and to occur 
over a long period of time. The Commission rejects as unnecessary a 
proposed phase-in and evaluation period for satellite DARS. The 
Commission concludes that opponents of satellite DARS have not shown 
that its potentially adverse impact on local radio outweighs its 
potential benefits to the American radio listener.
    29. There is uncertainty inherent in any attempt to predict the 
impact of satellite DARS on the terrestrial radio industry. The 
technologies, structure, and regulation of the communications industry 
are changing dramatically. Developments in the next decade may 
significantly change the market for both satellite DARS and terrestrial 
broadcasting. Although opponents of satellite DARS have not shown that 
it will have a sudden and dramatic adverse impact on terrestrial 
broadcasting, the Commission cannot entirely rule out the possibility 
of a major adverse impact. The Commission emphasizes that it remains 
committed to supporting a vibrant and vital terrestrial radio service 
for the public. Accordingly, the Commission will continue to monitor 
and evaluate the potential and actual impact of satellite DARS, 
particularly in small radio markets, so that it will be able to take 
any necessary action to safeguard the important service that 
terrestrial radio provides.
    30. In addition, the Commission continues to support the efforts of 
industry committees studying technical standards that would allow 
terrestrial radio broadcasters to convert to digital transmissions. 
When it appears that a viable system has been designed, the Commission 
will act expeditiously to consider changes to its rules to allow AM and 
FM licensees to offer digital sound. The Commission also remains open 
to considering other ways to encourage the continued viability of 
terrestrial radio if the adverse impact of satellite DARS on 
terrestrial radio proves to be substantially greater than expected.
    31. On February 17, 1995, Underripe National Radio Sales, Inc. 
(Underripe) filed a petition for reconsideration of the Commission's 
domestic Report and Order, 10 FCC Rcd 2310 (1995), 60 FR 8309 (February 
14, 1995) (``Allocation Order''). Underripe claims that satellite DARS 
could have an adverse impact on existing radio services and that, 
therefore, the Commission should not allow satellite DARS operations 
until terrestrial DARS is licensed. Underripe also suggests a number of 
guidelines it believes the Commission should adopt with respect to 
licensing and service rules for satellite DARS. The Commission denies 
the petition for the reasons given above. That is, the record evidence 
indicates that the public interest would be served by permitting an 
innovative new technology and service, satellite DARS, to become 
available as a competitive choice for consumers. The Commission notes 
that the petition does not contain any analysis which would undermine 
those reasons.
    32. The Consumer Electronics Manufacturers Association (CEMA) 
argues in an ex parte submission, based on its preliminary draft report 
on various digital audio radio technology test results, that satellite 
DARS cannot be successfully provided at 2.3 GHz. Specifically, CEMA 
argues that ``S-band operations suffer from a significant and startling 
level of signal blockage,'' that to provide satellite DARS using S-band 
frequencies will require hundreds or thousands of gap fillers and that 
satellite DARS in the S-Band has ``no likelihood for nationwide 
commercial acceptance.''
    33. The Commission has decided nevertheless to license DARS in the 
S-Band. CEMA's testing of signal propagation focused on terrestrial 
technologies; CEMA tested only one generic satellite technology and did 
not test any of the system designs of the four satellite DARS 
applicants. Nor does CEMA comment on any of the specific proposals 
submitted by the four DARS applicants. In addition, CEMA offers no new 
relevant information. It has been widely known and discussed in the 
record that DARS providers will need to rely on terrestrial repeaters 
and gap fillers. As with all new services, the FCC cannot prove or 
disprove viability. Only the market place can make this determination. 
CEMA's assertion that satellite DARS is not commercially viable in the 
S-Band is belied by the interest of many DARS investors who apparently 
have concluded that a viable satellite DARS service can be offered in 
the S-Band.
    34. Moreover, CEMA's recommendation that the FCC consider other 
spectrum options for satellite DARS, such as the L-Band, is beyond the 
scope of this proceeding. The 2310-2360 MHz band [S-Band] was allocated 
for satellite DARS internationally at WARC-92 and domestically in 1995. 
Frequencies in the L-Band, 1452-1492 MHz were considered and rejected. 
In the domestic Allocation Order the Commission noted that ``commenters 
strongly favored [S-Band] over, for example, the 1.5 GHz band [L-
Band]'' in part because the U.S. Government and U.S. commercial mobile 
aeronautical telemetry (MAT) already operates in the L-Band and it 
would be very difficult for them to relocate entire operations to the 
S-band. Satellite DARS cannot share with MAT systems in the same 
frequency band in the same coverage

[[Page 11087]]

area. And even if L-Band had been available, no persuasive evidence 
suggests that it is significantly better spectrum in which to receive 
satellite DARS signals. For the reasons stated above, the Commission 
finds CEMA's argument against proceeding to license satellite DARS 
applicants in the S-Band unpersuasive.
    35. In the NPRM, the Commission proposed three options for 
licensing satellite DARS systems. Under Option One, the Commission 
would have assigned the entire 50 MHz of spectrum allocated for 
satellite DARS to the four pending applicants, giving each 12.5 MHz, or 
10 MHz, if the Commission determined that the lower 10 MHz of the band 
should not be assigned at the time of its Order due to international 
coordination constraints. Option Two was to designate less than the 
full amount of useable spectrum for satellite DARS and to award the 
remaining spectrum to new applicants. Option Two proposed licensing the 
four applicants and assigning them each a band segment of less than 10 
MHz of spectrum. If either of the two band segments (one for pre-cut 
off applicants and one for new applicants) could not accommodate all 
applicants, the Commission would resolve mutual exclusivity via 
competitive bidding. Option Three was to reopen the cut-off for 
satellite DARS applications and allow additional applicants to file 
proposals for all of the useable DARS spectrum.
    36. In light of the recent legislation directing the Commission to 
conduct an auction for use of 25 MHz of the S-band spectrum previously 
allocated solely to DARS, the Commission cannot adopt any of the three 
licensing options exactly as proposed in the NPRM. After enactment of 
that legislation and the ensuing WCS Order, only 25 MHz remains 
exclusively for DARS. The licensing plan the Commission adopts today 
for that remaining spectrum is a logical outgrowth of Option Two, 
modified in light of the comments received in this proceeding and the 
recent legislation. In determining how many licenses may be awarded for 
use of the remaining DARS spectrum and how those licenses should be 
assigned, the Commission must first determine how much spectrum each 
satellite DARS licensee will require to operate an economically viable 
satellite DARS system.
    37. In the Allocation Order, the Commission found that, based on 
the information available at that time, satellite DARS was the best use 
of all of the 50 MHz of spectrum assigned to U.S. satellite DARS by 
WARC-92. The Commission requested comment on a number of issues in the 
NPRM to help it determine the best way to make individual satellite 
DARS frequency assignments. Specifically, the Commission sought comment 
on the following: the amount of spectrum and number of channels 
required for a satellite DARS system to be economically viable; the 
number of competitors that are necessary to ensure sufficient 
competition in satellite DARS; the possible number of channels per MHz 
capable of being delivered via satellite to a mobile user; alternative 
band plans that could be adopted for satellite DARS; possible uses for 
spectrum that is not licensed for satellite DARS, and, whether the 
proposal to license less than 50 MHz of spectrum would create a 
mutually exclusive situation among the four current applicants. Based 
on comments the Commission received on these specific issues, it 
concludes that 12.5 MHz of spectrum is necessary to offer enough 
channels for an economically viable satellite DARS system. In addition, 
in light of the recent legislation opening 25 MHz of spectrum for use 
by additional services, the Commission concludes that two licenses can 
be awarded.
    38. While the Commission is not sure of the optimal amount of 
spectrum necessary for satellite DARS, its goal is to try to determine 
spectrum block sizes and geographic areas that are most closely suited 
to provide for efficient provision of the most likely expected use. In 
this case, because this is a satellite service, the license areas 
should be nationwide and the Commission has evaluated the evidence 
about the minimum spectrum block sizes necessary to economically 
provide satellite DARS. The Commission begins its analysis of 
determining how much spectrum a single satellite DARS provider will 
require by considering what the record reveals about how many channels 
are necessary to operate an economically viable satellite DARS system. 
Because satellite DARS is a new service, there is an inevitable 
uncertainty about what precise configuration of channels will best 
satisfy consumer demand. The record contains no conclusive evidence 
establishing a specific minimum number of channels needed for a viable 
DARS system. The Commission will rely on the representations of the 
applicants which are based on their own market research. The record 
indicates that a range of channels from 19 to 44 is needed for a viable 
service.
    39. The applicants appear to base their estimated channel 
requirements on a cable television model in which operators bundle 
large and diverse packages of channels. The conclusion drawn from the 
cable television model is that no single channel attracts a large 
viewing audience, but subscribers value the service because they watch 
a few channels regularly and occasionally enjoy sampling a wider range 
of available programming. While the record does not show exactly how 
many channels a satellite DARS operator must offer to be economically 
viable, the cable television analogy demonstrates that some critical 
mass of channels is needed to provide sufficient programming diversity 
for consumers with diverse tastes.
    40. More direct support for the satellite DARS applicants' 
projections can be found by examining digital audio services packaged 
with video services and delivered via cable or satellite. Two such 
nationwide subscription services are Digital Music Express (DMX), 
offered via cable, and the Primestar direct-to-home video satellite 
service, a DBS service. Those services each began with roughly 30 
channels, but have chosen to increase the number of channels to 60. 
According to CD Radio, both are now expanding again to offer up to 120 
channels. The Commission presumes that the satellite DARS applicants 
would not undertake the risk and expense of implementing satellite 
systems if the number of channels they propose were not enough to 
provide a viable service.
    41. The satellite DARS applicants calculate that 12.5 MHz of 
spectrum would be necessary to offer a range of 19 to 44 CD quality 
audio channels. They contend that 12.5 MHz of spectrum is necessary to 
support a single viable satellite DARS system. Others commenters 
disagree. NAB, for instance, proposes that the satellite DARS spectrum 
be divided into 5 MHz band segments. DSBC and Primosphere counter that 
NAB's proposed spectrum plan would support a viable satellite DARS 
system only if at least three or more 5 MHz blocks can be aggregated. 
AMRC adds that it would be impossible to deliver enough high quality 
channels in 5 MHz of spectrum to attract a viable audience.
    42. A band plan introduced by Cracker Barrel in its reply comments 
maintains that by using Time Division Multiplexing (TDM) technology, 30 
channels of CD quality audio can be accommodated in 8.32 MHz, or 32 
channels of CD quality audio could be provided in 8.32 MHz using Code 
Division Multiplicity (CDM) technology, and thus six operators 
(presumably six economically viable systems) could be

[[Page 11088]]

accommodated in the 50 MHz initially allocated for satellite DARS. 
Cracker Barrel also contends that if all satellite DARS providers use 
the same error correction rates, then as many as eight satellite DARS 
licensees could be accommodated in the 50 MHz (i.e., each with a 6.25 
MHz assignment) and each could offer at least 30 channels of CD quality 
audio. Cracker Barrel contends that its band plan does not require use 
of regional spot beams or a higher order modulation constellation to 
gain additional channels per MHz of spectrum. It asserts that by using 
\1/3\ rate or \1/2\ rate FEC as opposed to \1/4\ rate as originally 
proposed by CD Radio and Primosphere, the bandwidth requirement for a 
32 or 30 channel CD quality system could be reduced from 12.5 MHz to 
8.32 MHz and 6.25 MHz respectively.
    43. Satellite DARS applicants assert that Cracker Barrel's 
assumptions used to derive spectrum requirements do not include 
techniques to overcome multipath fading present in a mobile environment 
and do not adequately address the associated limitations on satellite 
power, weight, launcher capacity, international coordination, or system 
cost. CD Radio asserts that 12.5 MHz of bandwidth is necessary for its 
satellite DARS system to provide 33 channels of CD quality audio using 
a spatially diverse architecture, CDM, and \1/2\ rate FEC, which is 
capable of operating at power flux-density levels that will make 
coordination with adjacent countries feasible. CD Radio indicates that 
it has changed to CDM to provide increased resilience to fading and 
noise. It concedes that, if it did not employ spatial diversity and 
instead used a single satellite, it would be possible to transmit 
approximately twice as many channels in a given amount of spectrum. 
However, CD Radio maintains that spatial diversity is key to providing 
high quality audio in a mobile environment. CD Radio contends that 
abandoning the use of spatial diversity would reduce sound quality, 
increase fading and blockage, and prove commercially unacceptable to 
its consumers. While the company notes that these problems could be 
addressed by increasing satellite power significantly, it points out 
that any such increase would only add to existing coordination 
difficulties with adjacent countries.
    44. Primosphere maintains that, in the case of CDM technology, even 
though a signal is coded so that it can be selected from the other 
signals simultaneously sharing the channel, simultaneous channels can 
interfere with each other when orthogonality is lost. This sets an 
effective limit on the number of CDM channels that can occupy a given 
channel. DSBC asserts that reducing the bandwidth from 12.5 MHz to 10 
MHz, or to 8.32 MHz as proposed by Cracker Barrel, while maintaining 
channel capacity would require greater received signal power (at least 
40% more) since the primary coding for a 10 MHz system is much less 
robust in correcting errors than that found in a 12.5 MHz system. An 
increase in signal power would increase coordination difficulties with 
adjacent countries and add cost to satellite DARS receivers and space 
stations.
    45. The Commission concludes, based on the current record, that 
each DARS licensee will require at least 12.5 MHz to successfully 
implement an economically viable satellite DARS system. The Commission 
believes that licensing less than 12.5 MHz would be insufficient to 
provide a critical mass of channels required for economic viability and 
could lead to significant power and cost constraints. The Commission 
does not find the contrary assertions by NAB and Cracker Barrel 
persuasive. Moreover, the applicants' successful efforts to increase 
the spectrum efficiency of their proposals supports their estimate of 
12.5 MHz as the minimum amount of spectrum needed. Comparing the 
channel and associated spectrum requirements of the applicants' 
original proposals with their existing comments, the Commission 
calculates that, on average, the applicants have increased the number 
of channels they propose to provide by seven, despite an average 
decrease in proposed spectrum use of 14 MHz. The applicants' efforts to 
improve their spectrum efficiency should not be treated as a detriment. 
DARS applicants may participate in the WCS auction to acquire 
additional spectrum if they desire it.
    46. While the Commission recognizes that further technological 
advances may result in even greater increases in spectrum efficiency, 
none of the commenters addressing this issue have demonstrated that 
they can provide a more spectrum efficient, economically viable, high 
quality DARS system in less than 12.5 MHz and using current state-of-
the-art in satellite technology. The above discussion is indicative of 
the trade-offs between bandwidth and power that satellite DARS 
applicants have weighed in their choice of transmission schemes and 
technology. Because each satellite DARS licensee will be limited to a 
bandwidth of 12.5 MHz, the trade-offs between increased power and 
channel capacity is particularly critical to overall satellite system 
design. The Commission will not attempt to impose its judgments in this 
regard on the satellite DARS licensees and will allow licensees to use 
the technology, channeling plans, modulation schemes, and multiple 
entry techniques of their choice within their 12.5 MHz band segment.
    47. Based on the recent legislation passed by Congress directing 
the Commission to reallocate and auction the 2305-2320 MHz and 2345-
2360 MHz bands, the Commission is licensing only the 2320-2345 MHz 
portion of the 2310-2360 satellite DARS band exclusively for satellite 
DARS. However, before satellite DARS service can be offered to the 
public, the Commission will require satellite DARS licensees to 
complete detailed frequency coordination with existing operations in 
adjacent countries to prevent the potential for unacceptable 
interference. The goal of the coordination process is to reach 
agreement with affected users on an operating arrangement which 
harmonizes the use of the radio frequency spectrum.
    48. In the NPRM, the Commission discussed potential issues that 
might arise during coordination of U.S. satellite DARS systems with 
existing operations in adjacent countries. Based on that the Commission 
knew then about the relatively large number of fixed Canadian 
terrestrial stations licensed in the 2310-2320 MHz band and tentatively 
concluded that the lowest 10 MHz in the 2310-2360 MHz band would be 
difficult to coordinate for satellite DARS. Indeed, one option in the 
NPRM proposed to license only spectrum above 2320 MHz for satellite 
DARS ``[t]o alleviate the potentially difficult and lengthy 
coordination'' posed by the presence of the nearly 200 Canadian 
terrestrial stations between 2310 and 2320 MHz. This option would seek 
to avoid requiring one satellite DARS licensee to be subject to 
coordination with a greater number of fixed terrestrial systems than 
other licensees. The Commission requested comment on its tentative 
conclusion.
    49. In the NPRM the Commission also observed that the upper portion 
of the 2310-2360 MHz band would likely present other potential 
obstacles to coordination with adjacent countries. For example, it 
cited a CD Radio study showing that Canada generally licenses its 
Mobile Aeronautical Telemetry (MAT) operations between 2350 and 2360 
MHz. Despite the operation of MAT above 2350 MHz, however, certain of 
the satellite DARS applicants maintained that the uppermost spectrum in 
the DARS band should be assigned to the first licensee that met its

[[Page 11089]]

milestone requirements. Based on this proposal, it appeared to the 
Commission that the satellite DARS applicants did not expect sharing 
with MAT operations of adjacent countries to be an insurmountable 
hurdle. The Commission requested specific comment on whether its 
different assessment was correct. Although the question of whether to 
reserve the entire S-band (2310-2360 MHz) exclusively for satellite 
DARS has been determined by the recent Congressional legislation, 
discussed above, the Commission discusses below terrestrial operations 
in the S-band that may affect future satellite DARS coordination.
    50. The Commission initiated formal negotiations with the Canadian 
Administration after release of the NPRM. The Commission used the 
information from these recent meetings to re-assess the current 
operating environment in the 2310-2360 MHz band. In meetings with 
Canada following release of the NPRM, International Bureau staff 
learned that the number of fixed terrestrial systems in the lower 
portion of the band has not changed significantly since the Commission 
accepted satellite DARS applications for filing. However, Canada 
informed the Commission's staff that Canadian MAT systems are currently 
licensed and operating at frequencies throughout the S-band from 
2329.25-2390 MHz. Upon receipt of this new information from Canada, the 
Commission forwarded it to the applicants and entered it into the 
public record so that the applicants' technical experts and others 
could provide comment.
    51. The Fixed Service. The applicants recognize that detailed 
coordination with foreign systems is unavoidable. Coordination between 
satellite DARS and Fixed Service systems (FS) is required because the 
power levels at which the applicants propose to operate their systems 
to achieve sufficient quality service in a mobile environment are 
higher than the thresholds levels which have triggered on-going 
bilateral coordination with adjacent countries. Detailed coordination 
would therefore be necessary with every FS station that is within the 
satellite DARS transmitting antenna gain contour unless the power 
levels of the proposed satellite DARS systems is reduced or measures 
are taken by the fixed terrestrial service to mitigate unacceptable 
interference from satellite DARS (e.g., re-pointing the receive antenna 
sufficiently away from the geostationary satellite orbit or upgrading 
receiver equipment).
    52. According to the international allocation, adjacent countries 
are free to license additional fixed and mobile terrestrial systems on 
frequencies between 2300-2483.5 MHz. The Commission has confirmed that 
Canada, alone, has licensed and will continue to license FS systems 
throughout the 2310-2360 MHz band. Currently, approximately 20% of the 
total number of systems licensed in Canada are above 2320 MHz.
    53. Mobile Aeronautical Telemetry. The threshold power levels 
necessary to protect foreign MAT systems are expected to be similar to 
the levels which the U.S. has established in the 1435-1525 MHz band (L-
band) to safeguard its MAT systems. The U.S. quantified its need to 
protect its MAT systems from interference in the L-band in detailed 
studies which it presented to numerous International Telecommunication 
Union-Radiocommunication Sector Study Groups. These studies show that 
it would not be feasible for a satellite service to share with MAT on a 
co-coverage, co-frequency basis. Indeed, the U.S. has taken necessary 
steps to relocate its own S-band MAT operations to frequencies above 
2360 MHz, recognizing that co-frequency, co-coverage operation of 
satellite DARS and MAT is not practical. Many of these U.S. MAT 
operations were relocated entirely from S-band to L-band.
    54. The Commission now knows that some of the MAT assignments in 
Canada are used to control remotely piloted vehicles (RPVs) which 
require reception at the aircraft as well as at land based stations. In 
addition, some Canadian MAT systems are operating within a hundred 
miles of the U.S./Canada border, making them even more susceptible to 
interference from U.S. satellite DARS. Although five of the 12 MAT 
frequency assignments in Canada lie below 2345 MHz, at least three of 
those assignments are repeated on center frequencies above 2345 MHz. 
This may indicate that there is some flexibility in the MAT operations 
that will help the coordination efforts in the 2320-2345 MHz band.
    55. In the NPRM, the Commission solicited comment on three pending 
requests for pioneer's preferences filed by CD Radio, DSBC, and 
Primosphere. No comments were filed on any of the satellite DARS 
pioneer's preference requests. On September 20, 1995, in compliance 
with new pioneer's preference rules, CD Radio, DSBC, and Primosphere 
each filed a supplement to their respective requests.
    56. By letter dated August 30, 1996, the Commission's Office of 
Engineering and Technology and the International Bureau requested that 
a specially convened panel of four satellite technology experts 
(``Panel'') review the three satellite DARS pioneer's preference 
requests and recommend to the Commission whether each of the requests 
should be granted. In a report dated November 18, 1996, the Panel 
unanimously recommended that no pioneer's preference be awarded. The 
Panel concluded that none of the applicants had demonstrated a seamless 
satellite DARS service and found that no award of a pioneer's 
preference could be justified on technical design grounds. On November 
19, 1996, the Commission issued a Public Notice, Report No. SPB-67, 
Mimeo No. 70798 requesting comments on the Panel report by December 3, 
1996.
    57. Following the release of the Panel's report, all three 
pioneer's preference applicants withdrew their requests. Accordingly, 
the Commission does not consider whether to award any pioneer's 
preferences for satellite DARS. While the Commission does not need to 
discuss the Panel's recommendations and report, the Commission commends 
the members of the Panel for their remarkable dedication and hard work 
during the several weeks in which they volunteered their expertise.
    58. In light of the withdrawal of each request for pioneer's 
preference, and having determined that each DARS licensee will require 
12.5 MHz, the Commission must now determine whether to reopen the 25 
MHz of spectrum that remains allocated primarily for satellite DARS to 
new applicants or allow only the existing applicants to resolve their 
mutually exclusive applications. Commenters urging reopening the cutoff 
for satellite DARS applications contend that it is necessary to ensure 
true competition and greater program diversity. Cracker Barrel, for 
example, asserts that it would be interested in filing an application 
advocating a different transmission technology that it claims will 
allow more operators in less spectrum. It states that because the cut-
off was three years ago, the Commission cannot be sure it has the best 
proposals before it. It also claims that the satellite DARS proceeding 
was ``out of order'' because applications were accepted before service 
rules were established. Because of this situation, Cracker Barrel 
complains it did not learn of the licensing process until the June 1995 
NPRM and thus it missed the 1992 cut-off. Cracker Barrel argues that 
the Commission has discretion under the public interest standard to 
reopen a cut-off in a given proceeding.
    59. Similarly, NAB asserts that technology has changed since the

[[Page 11090]]

Commission opened and closed the application window for DARS. It states 
that licensing multiple applicants will bring more program diversity 
and more business capabilities to the service. It also argues that any 
equities favoring the current applicants do not justify preserving the 
cut-off. NAB, like Cracker Barrel, argues that the available spectrum 
can support additional operators.
    60. Others, particularly the four current applicants, argue that 
the cut-off should stand. CD Radio asserts that reopening would be 
unlawful, inequitable, and unwise. It argues that cutoffs are reopened 
only in extraordinary circumstances that are absent here. CD Radio and 
AMRC also stress that reopening would ignore the equities favoring the 
current applicants, including the significant time and money invested 
to establish satellite DARS. Citizens for a Sound economy, a non-
applicant, added that reopening the cut-off could discourage future 
research and development of new services by allowing new applicants a 
``free ride'' on the current applicants' investments.
    61. Primosphere argues that cut-offs are key to a successful 
satellite policy. They bring finality and certainty to satellite 
proceedings by limiting the universe of applicants, allowing them to 
prepare their cases against a limited set of opponents and expediting 
inherently complex and costly development of new services. Similarly, 
DSBC argues that reopening the cutoff would contravene decades of 
satellite procedure. It states:

    Unlike its process in other services, the Commission invites 
applicants for new satellite services to submit their applications 
prior to the adoption of the technical and operational rules and 
often prior to a final decision on the threshold question of whether 
proceeding to authorize any one in the service is in the public 
interest. The Commission repeatedly has concluded that the technical 
complexity and the extraordinary lead time required uniquely in the 
satellite services requires this previously unprecedented approach.

    The purpose of this approach, DSBC explains, is to guarantee long-
term industry involvement in identifying the best use of spectrum and 
most efficient technology, thereby expediting new services. DSBC argues 
that satellite companies invest enormous amounts of time and money to 
develop new technologies and services, in reliance on the finality and 
certainty afforded by cutoffs and licensing rounds. Absent cutoffs, 
these parties would lack the incentive to risk the substantial 
resources required to develop and offer new satellite services to the 
public.
    62. The Commission agrees with those commenters that assert that 
the Commission has authority to reopen cut-offs and that doing so in 
some circumstances has several important advantages, including allowing 
for new competitors to emerge. But the Commission concludes that in 
this case, compelling policy reasons unique to satellite services 
militate against reopening the cut-off for satellite DARS license 
applications for the two licenses available.
    63. Sound satellite licensing policy and precedent, and the 
equities of this particular proceeding support the use of cut-offs in 
here. In this satellite proceeding, as in others, applicants require 
some measure of certainty to justify the inherently long-term 
investment of resources required by complex and lengthy international 
allocation and coordination procedures that must be completed prior to 
inauguration of service. This unique feature of satellite services, 
combined with the need to most expeditiously provide new services to 
the public, outweigh any benefits that would accrue from accepting 
additional applications. Cut-off procedures provide a greater measure 
of certainty. Given these unique factors in licensing satellite 
services, the Commission regularly establishes cut-offs, accepts 
applications and creates processing groups before service rules are 
adopted or even before specific operating frequencies are established. 
The Commission then relies heavily on the applicants to help develop 
service rules that allow them to share spectrum and expeditiously 
develop and deliver their new services to the public. The Commission 
relies heavily on applicants to assist the U.S. in international fora 
to obtain spectrum allocations and expects them to participate in the 
time consuming process of ITU notification and coordination. All of 
this activity requires significant expenditure of time and money by the 
applicants. Once the Commission adopts rules, it will permit applicants 
to amend their proposals to reflect compromises. This process expedites 
a complex and inherently risky venture, allowing license applicants to 
begin construction of their facilities immediately upon the grant of a 
license. The assertion by those opposing cut-offs that the Commission 
does not accept applications before adopting service rules in other, 
very different types of services, does not justify reopening the cut-
off in this satellite proceeding.
    64. Reopening the cut-off in this case will not necessarily advance 
DARS technology. There is no reason to assume that applicants will 
implement outmoded technology or spend hundreds of millions of dollars 
to construct inefficient satellite systems. Furthermore, in any 
satellite service rulemaking proceeding, the Commission always gives 
pending applicants the opportunity to amend their applications to 
conform to the final rules. In reviewing applications for space station 
facilities, the Commission requires that proposals reflect ``state-of-
the-art'' technology at the time of license grant. In fact, CD Radio 
had amended its application substantially since 1990 and will have the 
opportunity to do so again to reflect the adopted rules. Although 
Cracker Barrel claims that its proposal could use less spectrum than 
that proposed by CD Radio, the Commission concludes, as discussed 
previously, that its proposal would not accommodate certain innovations 
such as spatial diversity.
    65. Since CD Radio filed its original application in 1990, steps to 
implement the service have been well publicized. Both the government 
and the private sector worked to identify appropriate spectrum for 
satellite DARS at WARC-92. Shortly after WARC-92, the Commission 
announced its intention to allocate spectrum domestically and to accept 
applications for operations in the S-band to be considered in 
conjunction with CD Radio's. Since 1992, only one entity, Cracker 
Barrel, has indicated interest in filing an application to provide 
satellite DARS.
    66. Neither Cracker Barrel nor other commenters have presented 
compelling arguments to justify reopening the previously established 
cut-off for satellite DARS license applications. No commenter 
advocating reopening has shown any persuasive reason to depart from the 
satellite cut-off policy and precedent.
    67. Consistent with the conclusion not to reopen the cut-off in 
this proceeding, the Commission notes that existing Commission rules 
preclude satellite DARS applicants from effecting a substantial change 
in beneficial ownership if they want to maintain their pre-cut-off 
status. Section 25.116 of the rules provides that any amended 
application substantially changing an applicant's ownership will be 
considered a newly filed application and thus would not fall within 
cut-off protection unless the applicant requests and is granted an 
exemption by the Commission.
    68. The Commission proposed in its NPRM to authorize specific 
satellite DARS frequency assignments upon grant of satellite DARS 
authorizations to begin construction. There were mixed

[[Page 11091]]

reactions to its approach. Primosphere, asserts that the Commission 
should initiate international coordination in conjunction with all 
licensed satellite DARS systems and should assign specific frequency 
blocks following the conclusion of this coordination. DSBC proposes to 
permit licensees to select the frequency band it would like to employ 
at the time it certifies it has met the first milestone. This is 
similar to CD Radio's initial proposal that each licensee notify the 
Commission of the specific frequency assignment it is using at the same 
time it certifies to the Commission it has met the milestone and 
launched its first spacecraft. These alternative methods have one 
commonality; the exclusive frequency assignment for each satellite DARS 
licensee will not be known before and during the early stages of the 
coordination process. Indeed, it was necessary to initiate the 
coordination process with the ITU for each current satellite DARS 
system as though each system would operate over the entire 2310-2360 
MHz band. Until specific frequency assignments are issued, coordination 
with adjacent countries for each satellite DARS system is burdensome 
for both the Commission and the licensees.
    69. As discussed above, there is sufficient spectrum in the S-band 
to license only two satellite DARS systems. Dividing the available 25 
MHz of spectrum into four equal segments among the four applicants 
would result in exclusive frequency assignments of only 6.25 MHz for 
each satellite DARS applicant. Because the Commission has found that a 
viable and competitive satellite DARS service will require 12.5 MHz, it 
can license only two systems. The 2320-2345 MHz band that will remain 
allocated for satellite DARS will be divided into two equal 12.5 MHz 
segments (2320-2332.5 MHz and 2332.5-2345 MHz). We will award the two 
licenses for satellite DARS by using competitive bidding to resolve 
mutual exclusivity. Satellite DARS applicants that are winning bidders 
will have 30 days following the conclusion of the auction in which to 
amend their applications to conform with the satellite DARS service 
rules adopted today.
    70. Using the calculation methods provided in the comments, the 
satellite DARS licensees will be able to provide 19 to 44 channels of 
CD quality audio per system in the authorized 12.5 MHz of spectrum. 
Sufficient spectrum is available for two spatially diverse systems. 
Although the Commission decides not to reopen the processing round for 
satellite DARS, the Commission is not by its action today excluding all 
other potential DARS providers. Indeed, it may be possible to lease 
channels or purchase advertising time from the licensed satellite DARS 
providers.
    71. CD Radio had proposed that satellite DARS system operators be 
permitted temporarily to occupy frequency assignments other than their 
own, provided that their transmissions can be reconfigured to return to 
and thereafter use only their own frequency assignment upon launch of 
the satellite operated by the licensee assigned to the temporary 
frequency. DSBC objected to this proposal, arguing that while temporary 
use by the first operator(s) might avoid having frequencies lie fallow 
for a short time, prescribing temporary use may be disruptive and 
contrary to the public interest. It asserted that the temporary 
operator could be faced with reducing its services, discontinuing its 
service to its customers, or seeking to utilize frequencies that are 
rightfully assigned to another licensee once the temporary spectrum is 
no longer available for use. Primosphere, supports CD Radio's original 
proposal to authorize interim frequency assignments.
    72. Upon review of the record, the Commission has decided not to 
authorize interim operations. The Commission has concluded that 12.5 
MHz is necessary to implement a viable satellite DARS service. Nothing 
in the comments indicates that additional spectrum, or an interim 
assignment, is necessary to implement a viable system. Conversely, the 
Commission finds that an interim assignment could be disruptive and 
contrary to public interest because of possible service interruption or 
reduction. The Commission therefore adopts its original proposal not to 
authorize interim frequency assignments.
    73. Although spectrum constraints limit the Commission to licensing 
just two satellite DARS systems at this time, its licensing approach 
nonetheless provides the opportunity for a competitive DARS service. 
The Commission's goal is to create as competitive a market structure as 
possible, while permitting each DARS provider to offer sufficient 
channels for a viable service. In the NPRM, the Commission pointed out 
that ``satellite DARS will face competition from terrestrial radio 
services, CD players in automobiles and homes, and audio services 
delivered as part of cable and satellite services,'' and asked whether 
these delivery media, coupled with fewer than four DARS providers, 
could ensure an effectively competitive audio services market.
    74. Other audio delivery media are not, of course, perfect 
substitutes for satellite DARS. These media and satellite DARS all 
differ with respect to the programming menu (terrestrial radio can 
provide local programming and satellite DARS cannot), the sound 
quality, the cost of equipment, and the presence or absence of a 
subscription fee, but they all can provide music. The availability of 
these media, terrestrial radio in particular, varies across populated 
areas. Given the conclusion that satellite DARS can provide new and 
valuable service to the public, and given the overall competitive 
environment within which it will operate, the Commission is satisfied 
that licensing two satellite DARS providers will serve the public 
interest. The Commission agrees with commenters, that there should be 
more than one satellite DARS license awarded. Licensing at least two 
service providers will help ensure that subscription rates are 
competitive as well as provide for a diversity of programming voices. 
The two DARS licensees will compete against each other for satellite 
DARS customers and will face additional competitive pressure from the 
other aural delivery media mentioned above. Accordingly, eligible 
auction participants may acquire only one of the two licenses being 
auctioned. One license will be for the use of spectrum between 2320 and 
2332.5 MHz and the other for 2332.5 though 2345 MHz.
    75. Satellite DARS licensees' authority to operate will be 
conditioned upon completion of their international coordination 
obligations. As discussed above, and as the Commission indicated in the 
NPRM, both Canada and Mexico have allocated the 1452-1492 MHz frequency 
band (L-band) for DARS. Since U.S. satellite DARS systems will operate 
exclusively in the 2320-2345 MHz frequency band (S-band), coordination 
between U.S. satellite DARS and Digital Audio Broadcasting systems of 
adjacent countries is not necessary. The Commission indicated in the 
NPRM that the L-band is used extensively for U.S. Government and 
commercial mobile aeronautical telemetry operations. Coordination 
between Canadian terrestrial DARS and U.S. mobile aeronautical 
telemetry systems at L-band has proven to be challenging.
    76. Adjacent countries do, as discussed above, operate terrestrial 
fixed point-to-point, fixed point-to-multipoint, and mobile 
aeronautical telemetry systems throughout the S-band. U.S. satellite 
DARS systems will

[[Page 11092]]

be required to coordinate with these terrestrial systems currently 
operating in the 2320-2345 MHz band. Satellite DARS licensees must 
submit appropriate Appendix 3 material according to the International 
Radio Regulations to formally complete the international coordination 
process. This Appendix 3 material will contain the final configurations 
of the satellite DARS systems.
    77. In the NPRM, the Commission sought comment on whether satellite 
DARS licensees should have the flexibility to determine their own 
regulatory classification depending on the service they are providing 
or whether there are reasons to justify mandating a particular type of 
service. The Commission tentatively concluded that there was no reason 
to require that satellite DARS providers be licensed as common carriers 
or as broadcasters. The Commission raised a related question, pursuant 
to a suggestion by the NAB, whether the Commission should require that 
all licensees offer subscription service and asked for comment on the 
legal, policy and practical implications of such a requirement.
    78. Commenters addressing these questions fall into two general 
groups. Those supporting implementation of satellite DARS, including 
the incumbent applicants, advocate that licensees be permitted to 
determine their own regulatory classification in order to tailor 
services to meet customer requirements and to respond to market 
demands. These commenters also emphasize the extremely high costs of 
constructing and launching a satellite system and state that licensees 
cannot afford to be restricted to purely subscription service. They 
state that they must be allowed to choose their own mix of subscription 
and advertising. One commenter suggests that satellite DARS licensees 
be limited to national advertising and be prohibited from accepting 
local or regional ads. Media Access Project argues that satellite DARS 
should be classified as broadcasting because the providers use public 
spectrum and thus should be subject to public interest requirements.
    79. Commenters opposing satellite DARS argue that the service 
should be required to operate on a subscription only basis. NAB, for 
example, states that although satellite DARS would not be common 
carriage or broadcasting, providers should be required to restrict 
their service to subscription offerings in order to lessen the 
potential adverse impact on terrestrial broadcasters. NAB recognizes 
that DBS operators have been given the option to offer service as a 
broadcaster or by subscription but argues that treating satellite DARS 
like DBS in this regard is not warranted because the services operate 
in different competitive markets, with DBS subject to much more 
competition and not able to affect broadcasters as significantly as 
DARS.
    80. The record supports a conclusion that satellite DARS licensees 
should be able to tailor their services to meet customer needs and that 
mandating a particular regulatory classification is unwarranted. There 
is no compelling evidence in the record that would militate in favor of 
requiring a broadcast classification and in fact it appears that the 
current applicants favor subscription service. Nor does satellite DARS 
appear to be a common carrier service because much of the programming 
offered would be subject to the editorial control of the provider. The 
services proposed by three of the applicants will be neither broadcast 
or common carrier. Flexibility for licensees to meet market demands is 
crucial and it may be that the viability of a satellite DARS service 
will depend on offering a mix of advertiser supported and subscription 
service. The Commission finds that a requirement that satellite DARS be 
entirely subscription is unwarranted. Mandating that providers charge 
for their services is not in the public interest and raises significant 
legal questions if done for the purpose of economic protectionism as 
advocated by several commenters.
    81. The Commission's NPRM requested comment on a wide variety of 
questions regarding the advisability of public interest obligations in 
the context of this service. The Commission asked, for example, if all 
satellite DARS providers, including those not operating as 
broadcasters, should be subject to similar requirements. The Commission 
solicited comment on the Commission's authority to impose such 
obligations on non-broadcasters. The Commission requested information 
on the cost of complying with public interest obligations, and on 
whether the costs could be so significant as to hamper implementation 
of the service. Finally, the Commission asked about the types of 
obligations that apply to terrestrial broadcasters, which offerings 
would not be included by service providers in an unregulated 
environment, and whether these requirements increased or decreased 
profitability.
    82. Commenters were divided on whether the Commission should adopt 
public interest programming obligations for satellite DARS providers. 
In general, pending satellite DARS applicants proposing non-broadcast 
service cautioned against imposing obligations. For example, DSBC 
states that public interest programming obligations are not necessary 
to ensure diverse public oriented programming. It asserts that the 
economic and distribution structure of satellite DARS makes it good 
business to offer programming that regular broadcasters would not offer 
absent incentives. AMRC also expresses concern that many of the 
suggested service rules would not result in better service to the 
public but instead would make service impossible. Primosphere, the only 
applicant clearly proposing to operate as a broadcaster, states the 
Commission should strike a balance between ensuring that the public 
interest is served and assuring that timely introduction of service is 
not impeded. A non-applicant states that the Commission is not in a 
position to determine which services should be offered in light of 
rapidly changing technology and potential consumer services. Although 
arguing against mandatory offerings, many of the current applicants 
state that they plan to include public interest programming in their 
services.
    83. Media Access Project (``MAP'') urges that the Commission 
classify satellite DARS as broadcasting to trigger defined statutory 
public service obligations. In the absence of such a classification, 
MAP argues that broadcasters' obligations are appropriate. NAB states 
that imposing public interest obligations on DARS providers will, to 
some extent, compensate for the loss in local programming that it 
claims will inevitably result from implementing the service. Individual 
broadcasters assert that DARS providers will not keep their promises to 
provide niche programming but instead will offer mainstream services 
that will compete directly with terrestrial offerings.
    84. In response to the request for proposals for possible public 
service rules, NAB suggested that satellite DARS licensees be held to a 
``promises v. performance'' standard, similar to that formerly required 
of terrestrial broadcasters. Under this concept, operators would 
provide the Commission with a list of programming they propose to offer 
and to specifically describe ethnic or niche offerings included. They 
would then be subject to a periodic public interest review to determine 
if they have made good on their promises and to justify any substantial 
variations from their proposals.
    85. Bonneville International Corp., a company holding broadcast 
licenses, advocates requiring that music

[[Page 11093]]

programmed channels carry news, information, public service 
announcements and public service programming. Several commenters urge 
that satellite DARS providers be required to comply with Equal 
Employment Opportunity requirements. National Public Radio advocates 
either a specific reservation of channel capacity for noncommercial or 
educational programming or a commitment to provide a minimum amount of 
educational cultural, and informational programming to unserved or 
underserved areas. The suggestion is supported by the Minority Media 
and Telecommunications Council which states that satellite DARS 
licensees should be required to set aside channels for noncommercial 
public access and for minority entrepreneurial access. One commenter, a 
terrestrial radio station operator advocated that satellite DARS meet 
certain requirements for each different programming signal offered and 
for each different community served. NAB points out that there are 
certain types of local public interest programming that a national 
service like satellite DARS can neither provide nor replace. 
Entertainment Communications advocates a requirement that satellite 
DARS licensees serve ``niche'' audiences.
    86. As explained above, in allocating spectrum and adopting service 
rules for the satellite DARS service, the Commission has relied on the 
representations of satellite DARS applicants that they will provide 
audio programming to audiences that may be unserved or underserved by 
currently available audio programming. Thus, applicants have proposed 
new choices in audio programming which may be beneficial for the mobile 
public and for unserved and underserved communities, particularly in 
rural or remote areas. The Commission also has considered whether it is 
appropriate to apply to DARS public interest requirements similar or 
analogous to those that govern terrestrial radio broadcasters.
    87. With regard to non-programming obligations, the Commission 
concludes that satellite DARS licensees must comply with the 
Commission's equal employment opportunity requirements. The rationale 
behind these requirements is a belief that a licensee can better 
fulfill the needs of the community, whether local or national, if it 
makes an effort to hire a diverse staff, including minorities and 
women. This rationale applies with equal force to satellite DARS. The 
Commission notes that no commenters opposed the imposition of EEO 
requirements. The Commission has a pending rulemaking proposing 
revision to its EEO rules. Licensees in this service will be required 
to comply with the current rule and with any changes adopted when the 
rulemaking is completed.
    88. With regard to programming obligations, the Commission agrees 
with some of the commenters that satellite DARS service is likely to 
provide a new forum for political debate in this country. To ensure 
that there is fair treatment of federal political candidates that may 
seek to use this new forum, the Commission believes that satellite DARS 
licensees, whether they operate on a broadcast or subscription basis, 
should comply with the same substantive political debate provisions as 
broadcasters. These provisions are the federal candidate access 
provision, Section 312(a)(7), and the equal opportunities provision, 
Section 315. As the Supreme Court stated in upholding Section 312(a)(7) 
against constitutional attack, these political broadcast provisions 
``make a significant contribution to freedom of expression by enhancing 
the ability of candidates to present, and the public to receive, 
information necessary for the effective operation of the democratic 
process.''
    89. While the Commission is not adopting additional public interest 
programming obligations at this time, it reserves the right to do so. 
Licensees are specifically on notice that the Commission may adopt 
public interest requirements at a later date. If additional public 
interest obligations are found to be warranted, one option would be to 
adopt rules similar to those Congress enacted for DBS providers, 
including a 4-7% set-aside of capacity for noncommercial educational 
and informational programming. Another option would be to hold 
satellite DARS licensees to a `promise vs. performance' standard.
    90. In the NPRM, the Commission discussed the possibility of 
satellite DARS providers offering non-DARS, or ancillary, services. The 
Commission sought comment on what restrictions, if any, should apply to 
such services and on how to monitor compliance with any restrictions. 
In response, commenters favored allowing provision of ancillary 
services. Current satellite DARS applicants urged that the Commission 
allow flexibility to provide such services. Other commenters stated 
that allowing ancillary services will promote full and efficient use of 
the spectrum and could lower the price of DARS service, particularly in 
the early stages as satellite DARS is established.
    91. Some commenters suggested particular services that would be 
complementary. For example, Ford Motor Co. suggested allowing data 
services. Radio Order Corp. urges the Commission to allow song related 
voice messaging that would permit the listener to access information on 
a particular song during the uninterrupted music. The USDA/Forest 
Service National Weather Program suggests that satellite DARS providers 
could dedicate a channel to broadcasting potentially life-saving forest 
fire and emergency information.
    92. The applicants have proposed a mix of ancillary services. The 
Commission agrees with the commenters who argue that allowing 
flexibility consistent with the allocation will allow providers to 
tailor service offerings to meet consumer needs. Because the United 
States successfully obtained an international allocation for satellite 
DARS at WARC-92, the Commission would be concerned about any use of the 
spectrum that is inconsistent with the international allocation.
    93. The NPRM contained no specific proposal for satellite DARS 
service area requirements. It did, however, ask whether to require 
satellite DARS systems to provide 50-state coverage or 50-state plus 
Puerto Rico/Virgin Islands coverage, as the Commission does in the 
fixed-satellite service. The Commission noted that two satellite DARS 
applications propose service solely to the 48 contiguous states of the 
United States (CONUS). Two other applicants propose coverage of the 
CONUS, Alaska, Hawaii, Puerto Rico and the Virgin Islands.
    94. CD Radio and Primosphere assert that the Commission should not 
mandate that first generation satellite DARS systems provide service 
beyond the CONUS. Primosphere adds that requiring full 50-state 
coverage would require the use of satellite spot beams and additional 
spacecraft power. Primosphere also noted that most 12-14 GHz (Ku-band) 
and DBS licensees provide CONUS only coverage. CD Radio asserted that 
the service area is market-driven and that other applicants propose to 
serve Alaska, Hawaii, Puerto Rico, and the Virgin Islands CD Radio 
indicates also that its second generation design will include an 
expanded service area.
    95. One benefit of a satellite system is its ability to provide 
nation-wide service. The Commission recognizes that 50-state coverage 
is not mandatory for all satellite services and a service area 
requirement beyond full CONUS coverage may not be practical for first 
generation satellite DARS systems. All of the pending applications for 
satellite

[[Page 11094]]

DARS propose at least full CONUS coverage, however, and there appears 
to be support for such a minimum requirement. Accordingly, the 
Commission concludes that satellite DARS licensees' systems must 
provide, at a minimum, full CONUS coverage. The Commission strongly 
encourages coverage to other areas or territories of the United States 
where practical to do so for first generation systems.
    96. A concern identified in the NPRM was that satellite DARS 
signals be available to listeners, especially mobile ones, at every 
location nationwide. The Commission noted the service link margin is 
related to the percentage of service availability. The Commission also 
noted that there was significant comment on the pending satellite DARS 
applications which questioned the appropriate service link margin 
necessary for reception in a mobile environment. The Commission 
therefore proposed in the NPRM that satellite DARS applicants be 
required to identify the service link margin for their systems and 
demonstrate that their systems are capable of providing that service 
link margin in a mobile environment, under clear sky conditions, to the 
geographic areas they will serve. The Commission also sought comment on 
whether a specific value should be used to define an adequate service 
link margin for the specified service areas in urban and suburban 
environments and, if so, what that value is and analysis to support 
that value. Technical analyses were not included in initial comments to 
demonstrate that a particular service link margin would be necessary 
for mobile reception in urban and suburban environments.
    97. Pending applicants assert that satellite DARS operators will 
have an incentive to provide sufficient margin to deliver the highest 
quality audio and still permit low-cost manufacture of receiver 
equipment. Noting also that the amount of service link margin chosen by 
satellite operators is affected by a variety of factors, such as use of 
modulation and access techniques, satellite diversity, transmission 
schemes, intended audience, and use of terrestrial repeaters, it would 
be difficult for satellite operators to define one specific value that 
should be used. The Commission therefore will not require that 
satellite DARS licensees be capable of providing a specific value of 
service link margin for a given geographic area and withdraws its 
proposal regarding service link margin. The Commission will only 
require satellite DARS applicants to provide the information on their 
service link budgets that is already required by Section 25.114(c)(9) 
of its rules.
    98. In general, it is the Commission's policy to avoid mandating 
the use of one form of technology. The Commission concludes it is 
appropriate to follow that policy here because it will allow 
flexibility for satellite DARS licensees in designing their satellite 
DARS systems, and will promote innovative system designs. Indeed, in 
the NPRM, the Commission proposed to allow licensees to use the 
channelling plans, modulation schemes and multiple entry techniques of 
their choice. One of the underlying reasons for proposing a band 
segment approach to licensing the satellite DARS spectrum was to avoid 
imposing complex sharing arrangements among satellite DARS licensees 
that may result due to the diversity in the proposed satellite DARS 
designs. The diverse modulation and channelling techniques proposed in 
the pending satellite DARS applications, however, led it to seek 
comment in the NPRM on the issue of receiver inter-operability and 
standards for satellite and terrestrial DARS.
    99. The Commission indicated its concern that licensing diverse 
satellite DARS systems could increase the cost of manufacturing a 
receiver that is compatible with all competing satellite DARS 
technologies and terrestrial formats. The Commission therefore proposed 
that each applicant demonstrate that its satellite DARS system is 
capable of remotely tuning its individual mobile, fixed, and/or 
portable receivers across the allocated bandwidth 2310-2360 MHz. This 
rule would have been necessary if the Commission were to license more 
than one band segment to a particular satellite DARS licensee, (whether 
as an interim assignment or in the event that a license is dismissed 
and the spectrum is re-divided pro-rata) but in view of its conclusion 
to license only two satellite DARS systems through competitive bidding, 
and not to permit interim frequency assignments, such a provision is no 
longer required. The Commission adopts, however, the principle behind 
the proposed rule that satellite DARS licensees are required to design 
a receiver which would accommodate all satellite DARS providers. By 
promoting receiver inter-operability for satellite DARS, the Commission 
is encouraging consumer investment in satellite DARS equipment and 
creating the economies of scale necessary to make satellite DARS 
receiving equipment affordable. This rule also will promote competition 
by reducing transaction costs and enhancing consumers' ability to 
switch between competing DARS providers. The Commission declines to 
adopt a specific standard for satellite DARS receiver designs, though. 
This will allow licensees the flexibility to determine the most cost 
effective way to meet the receiver-interoperability requirements. The 
Commission does not mandate that satellite DARS receivers be capable of 
receiving terrestrial broadcasting formats. Terrestrial and satellite 
DARS are at different developmental stages and the Commission does not 
want to impede implementation of either service.
    100. Parties contend that Commission adoption of a single, 
industry-developed transmission standard for satellite DARS will keep 
receiver costs down, minimize design complexity, and encourage 
competition in the marketing of receivers. The Electronic Industry 
Association (EIA) maintains further that satellite DARS receivers 
should be designed so that consumers can seamlessly switch between 
satellite and terrestrial based DARS systems.
    101. Satellite DARS applicants share different views regarding the 
Commission's role in the process of receiver development. CD Radio 
asserts that receiver inter-operability is in the clear economic 
interests of all satellite DARS providers and it expects that its 
receiver will be fully tunable in the sense that the consumer can 
select the service provider of their choice. AMRC contends that 
creation of a common receiver capable of tuning in the entire DARS band 
is important in promoting consumer acceptance of the technology. Given 
the market incentive for receiver compatibility, DSBC asserts that it 
is likely that a compatible receiver standard for satellite DARS will 
be developed without regulatory intervention. Primosphere adds that it 
is committed to working with the appropriate industry organizations to 
develop a common receiver standard and therefore Commission action is 
not necessary. In a related matter, CD Radio seeks confirmation from 
the Commission that consumers may rely on the authorization of a 
satellite DARS provider and need not obtain any additional license or 
registration for receive-only earth stations used to obtain the 
service.
    102. As an alternative to this Commission mandating standards the 
Commission will require that a satellite DARS applicant, in its 
application, certify that its satellite DARS system will include a 
receiver design that will permit users to access all licensed DARS 
systems that are operational or under construction. Satellite DARS 
licensees, during the construction of their satellite systems, will 
have an opportunity to

[[Page 11095]]

work among themselves toward a final receiver design. The Commission 
agrees with commenters that it is in the interest of the satellite DARS 
licensees, and consumers, for the licensees to come to agreement on a 
single DARS receiver design. The Commission also agrees with commenters 
that, alternatively, a single transmission standard would be in the 
interest of the satellite DARS providers and consumers, independent of 
whether it is developed by the Commission or by industry, but it will 
not mandate use of a certain technology. If satellite DARS licensees 
redesign their systems to use conforming transmission technology, 
receiver complexity would be minimized and receiver costs would be 
lowered correspondingly. The Commission believes that, at the very 
least, consumers should be able to access the services from all 
licensed satellite DARS systems and the rule on receiver inter-
operability accomplishes this. The Commission also agrees with CD Radio 
that it is unnecessary for satellite DARS consumers to file for a 
license for their receive-only terminals. Indeed, the Commission has 
not licensed receive-only earth stations for years in an effort to 
deregulate such operations.
    103. Terrestrial broadcast and satellite DARS services are at 
different stages of development, however, and the Commission does not 
intend to add delay to the progress of the satellite service with 
further regulatory intervention by requiring that receivers be tunable 
to terrestrial broadcast signals. Testing and evaluation of proposed 
digital audio radio technologies has been on-going since 1991. The 
Commission urges satellite DARS licensees to take this information into 
account before they finalize their system and receiver designs. The 
comments indicate that satellite DARS licensees will continue to 
participate in the industry groups related to their service and the 
Commission has good reason to believe that this is sufficient to 
facilitate the design of a state-of-the-art satellite DARS receiver.
    104. The applicants propose various coding rates to produce near 
compact disc (CD) quality audio. Some applicants propose to use 
variable data rates to transmit a mix of audio formats where the 
bandwidth necessary to produce one CD quality channel, for example, 
would be used to provide several high quality channels at data rates 
which are lower than those necessary to produce CD quality. The 
Commission tentatively concluded that the use of variable data rates 
would promote efficient use of the spectrum and that satellite DARS 
licensees should be permitted to implement a mix of programming formats 
at variable data rates. The Commission reflected this in its proposal 
to require satellite DARS licensees to identify which coding scheme and 
coding rate(s) they plan to implement on their satellite DARS systems 
and require those satellite DARS systems which intend to offer audio 
formats other than CD quality to be capable of transmitting lower 
quality audio at lower data rates. The Commission proposed to refrain 
from requiring a particular level of audio quality or other quality for 
satellite DARS and sought comment on its tentative conclusions. The 
Commission adopts, today, a rule that is consistent with its proposal 
for variable data rates.
    105. Comments generally support the Commission proposal to allow 
use of variable data rates depending on the programming being offered 
and not to define a particular level of quality for DARS based on data 
rates. CD Radio asserts that satellite DARS licensees should be 
permitted to rely on market preferences to determine the data rates to 
use for particular formats and to determine the quality of the service. 
AMRC agrees with the Commission proposal because it intends to include 
some non-CD quality channels in its system. In this respect, CD Radio 
proposed a modification to the original proposal that would require a 
satellite DARS applicant to identify the compression rate it will use 
to transmit audio programming whether CD or other quality. The 
Commission adopts this proposal and extend it to require licensees to 
identify the compression rates used for non-audio formats.
    106. In the NPRM, the Commission proposed to adopt financial 
qualifications and milestone requirements for satellite DARS licensees. 
Because of the decision to auction licenses, financial qualifications 
are unnecessary. However, the Commission believes that strict adherence 
to satellite construction and operational milestones will assure that 
licensees are proceeding with their proposals and spectrum is used 
efficiently. Because of the long lead time necessary for satellite 
construction, the Commission proposed that satellite DARS licensees 
begin construction of their space stations within one year, launch and 
begin operating their first satellite within four years, and begin 
operating their entire system within six years. The Commission also 
proposed that licensees file annual reports on the status of their 
systems. The current applicants support the rules proposed in the NPRM. 
Accordingly, the Commission adopts the requirements as proposed.
    107. In the NPRM, the Commission proposed that licenses for 
satellite DARS space segment facilities would be issued for ten years. 
The Commission also noted that licensees choosing to operate as 
broadcasters would be limited by statute to a shorter term. Adoption of 
the original proposal would place DARS licensees that choose to be 
broadcasters at a disadvantage by giving them a shorter term. In 
addition, two different terms could cause confusion if an operator 
decided to change the mix of services it offered and might hamper the 
flexibility the Commission intended that licensees should have in 
choosing formats. Accordingly, because the Communications Act limits 
broadcast license terms to eight years, the Commission has determined 
that all satellite DARS license terms should be eight years. The 
license term will commence when each satellite is launched and put into 
operation. In addition, as proposed in the NPRM, individual satellite 
DARS receivers will not be licensed.
    108. As one of the pending satellite DARS applicants indicates, 
satellite systems are a collection of technical trade-offs between 
satellite power, number of channels, data rates, service link margin 
and bandwidth. Therefore, the greater the flexibility in the 
Commission's technical rules, the greater the flexibility satellite 
DARS licensees will have in designing their systems in such a way as to 
meet their business plans and marketing goals. The technical rules 
adopted today will offer satellite DARS licensees sufficient 
flexibility to make necessary trade-offs and to implement systems that 
are viable and competitive.
    109. The Commission proposed in the NPRM  not to apply power flux-
density (pfd) limits on satellite DARS networks and it believes the 
record supports its tentative decision. While initially CD Radio 
maintained that coordination of satellite DARS systems with adjacent 
countries would be facilitated if all systems were required to meet a 
pfd level at the Earth's surface of -139 dB(W/m2/4 kHz), CD Radio 
now contends that it is not necessary for the Commission to re-open the 
issue of required pfd limits since it will be part of the coordination 
process. Others agree. DSBC, for instance, maintains that experience 
has shown that the flexibility in the international coordination 
process is far superior to the rigidity of pfd limits. Accordingly, 
Satellite DARS licenses will be conditioned on the completion of

[[Page 11096]]

international coordination with adjacent countries.
    110. It is clear that each satellite DARS licensee will need to 
operate its satellite(s) at a pfd level that is high enough to provide 
sufficient service availability and yet low enough to coordinate with 
terrestrial services in adjacent countries. Coordination with adjacent 
countries becomes an important issue because the pfd values 
characteristic of proposed satellite DARS systems exceed the threshold 
levels that have been identified by foreign administrations to protect 
their existing terrestrial services. The discussion of coordination, 
above, provides satellite DARS applicants with a detailed understanding 
of the coordination issues in the 2320-2345 MHz band. The applicants 
are in a better position than the Commission to make necessary power 
trade-offs to implement their satellite DARS systems. Moreover, since 
the Commission is licensing satellite DARS providers in two separate 
frequency assignments, the failure of one licensee to complete 
coordination with adjacent countries in a timely fashion will not delay 
the coordination of the other licensee's system. In light of the above, 
adoption of a specific pfd limit is unnecessary. Satellite DARS 
applicants are reminded, however, that they are required to identify in 
their modified satellite DARS system applications the pfd at the 
Earth's surface from their spacecraft according to Section 
25.114(c)(11) of the Commission's rules.
    111. Satellite licensees are required to suppress out-of-band and 
spurious emissions from their space stations to the levels specified in 
Section 25.202(f) of the Commission's Rules. The Commission indicated 
in the NPRM that techniques such as spectral shaping, coding, offset 
quadraphase modulation and filtering, would be useful in mitigating 
out-of-band emissions. The Commission sought comment, however, on 
whether the out-of-band emission limits in Section 25.202(f) would be 
sufficient to protect radiocommunication services in bands adjacent to 
the 2310-2360 MHz band, particularly deep space operations below 2310 
MHz and U.S. MAT operations above 2360 MHz.
    112. Cornell University asserts in its comments that the Arecibo 
Observatory in Puerto Rico, which it operates for the National Science 
Foundation in the 2370-2390 MHz band, would require greater protection 
from satellite DARS than that which is currently required by Section 
25.202(f). Specifically, Cornell requests that, as a minimum, the 
Commission require the out-of-band emission limits of Section 
25.202(f)(3) for satellite DARS emissions beyond the 2370 MHz band 
edge. It requests that a rule for spurious emissions, consistent with 
those being considered by ITU-R Task Group 1/3 be applied to satellite 
DARS as well. This would require an additional 9 dB of attenuation 
below the out-of-band emission limits required by Section 25.202(f).
    113. Cornell's calculations assume that a satellite DARS licensee 
will be authorized to operate at a center frequency of 2355 MHz with a 
bandwidth of 8 MHz. Considering that satellite DARS systems will be 
licensed below 2345 MHz, and that the Commission is not requiring the 
provision of satellite DARS to Puerto Rico and the Virgin Islands, 
which offers further protection to the Arecibo Observatory, attenuation 
of out-of-band emissions beyond the limits already required by Section 
25.202(f) may not be necessary. It would be premature for the 
Commission to require satellite DARS licensees to meet the spurious 
emission limits which are currently in place as ``design guidelines'' 
and which may be reviewed again by ITU-R Study Groups. The TG 1/3 
Recommendation that Cornell cites in its comments is a draft 
Recommendation and the issue of spurious emissions will not be 
finalized until the 1999 international Radiocommunication Assembly.
    114. The Commission therefore will only require satellite DARS 
licensees to meet out-of-band and spurious emission limits which are 
contained in Section 25.202(f) of the Commission's Rules. Satellite 
DARS licensees should, however, take cognizance of the TG 1/3 ``design 
guidelines'' and the Arecibo deep space operations in the 2370-2390 MHz 
when designing, constructing and operating their space stations. In a 
related matter, the pending satellite DARS applicants assert that they 
can each operate without causing harmful interference to one another. 
Since the pending satellite DARS applicants propose a band segment 
licensing approach, the Commission presumes that the out-of-band 
emission limits of Section 25.202(f) would provide for interference-
free, intra-service satellite DARS operation. The issue of out-of-band 
emission limits to protect satellite DARS receivers is addressed in the 
Wireless Communication Services proceeding.
    115. The Commission sought comment in the NPRM on a suitable 
location for satellite DARS telemetry beacons. The Commission proposed 
in the NPRM that each system operator reduce its bandwidth occupancy by 
0.1 MHz to create two 0.2 MHz assignments adjacent to the edges of the 
satellite DARS band for location of telemetry beacons. The Commission 
also proposed an alternative location for all satellite DARS telemetry 
beacons at the lower edge of the 2310-2360 MHz band, considering the 
tentative conclusion not to immediately license the lower 10 MHz for 
satellite DARS. The alternative proposal would put fewer constraints on 
the satellite DARS licensees (i.e., they would no longer have to reduce 
their bandwidth occupancy to accommodate telemetry beacons), but the 
Commission indicated that further constraints would be placed on any 
future licensee of the lower portion of the band. The Commission 
requested comment on its proposals for satellite DARS telemetry beacons 
and it requested comment on alternative locations.
    116. In its comments, DSBC suggests that, alternatively, the 3697-
3699 MHz band would be suitable for satellite DARS telemetry beacons. 
It contends that the 3697-3699 MHz band could readily be coordinated 
for satellite DARS telemetry beacons thereby retaining the total DARS 
band for service links. CD Radio, in its comments, proposes a 
modification to the satellite DARS telemetry beacon proposal in the 
NPRM. According to CD Radio's proposal, satellite DARS licensees may 
reduce their assigned bandwidth occupancy to provide telemetry beacons. 
No other alternatives were identified for the location of satellite 
DARS telemetry beacons.
    117. The Commission adopts its original proposal to locate 
telemetry beacons for satellite DARS in the satellite DARS band, with 
minor modification. No parties supported the proposal made by DSBC. 
Further, DSBC provided no supporting information in its comments to 
assess the impact of satellite DARS telemetry beacons in the 3697-3699 
MHz band on the Radiolocation and Aeronautical Radionavigation users of 
the band. DSBC indicates that Intelsat and Inmarsat and numerous other 
non-U.S. satellite systems make use of all or large portions of this 
band. These satellite systems, however, are not located in the 
geostationary orbit between 80 deg. and 110'' W.L., where the satellite 
DARS applicants propose to locate their satellites. CD Radio, on the 
other hand, supports the operation of satellite DARS telemetry beacons 
within the satellite DARS service link spectrum. CD Radio's proposal is 
more flexible than the proposal in the NPRM because it does not mandate 
an amount of spectrum by which each satellite DARS licensee must reduce 
its bandwidth to accommodate telemetry beacons (i.e.,

[[Page 11097]]

0.1 MHz). The Commission therefore modifies its original proposal to 
require satellite DARS licensees to accommodate telemetry beacons for 
their systems within their exclusively licensed bandwidth but allow 
each licensee the flexibility to determine the appropriate amount of 
spectrum necessary for its telemetry beacons.
    118. Cross polarized signals are orthogonal signals as seen by the 
receiver. This technique is used extensively in the fixed-satellite 
service because it facilitates reuse of frequencies to accommodate 
multiple signals, thereby promoting efficient use of the spectrum. In 
the NPRM the Commission indicated that the record was insufficient for 
it to analyze the benefits of potential capacity increases, if any, 
that may result from use of cross-polarized transmissions for satellite 
DARS. The Commission proposed, however, that satellite DARS licensees 
be permitted to reach agreement with other satellite DARS licensees to 
transmit on cross-polarized frequencies in frequency assignments of 
other licensees. The parties who reach such agreements would be 
required to apply to the Commission for approval of the agreement. 
Commission approval would be conditioned on the outcome of coordination 
with other administrations.
    119. The satellite DARS applicants generally support this proposal. 
CD Radio asserts that a licensee should at least be permitted to 
transmit cross-polarized signals within its own frequency assignment. 
AMRC contends that the use of cross polarization techniques is still 
untested in the S-band and the availability of such techniques for DARS 
licensees should not be assumed. However, to the extent that cross 
polarization techniques become feasible, the Commission should allow 
its use to expand program offerings. The Commission believes that its 
proposed rule for cross polarization leaves open the possibility for 
satellite DARS operators to use this technique, when proven feasible, 
to meet future market demands for their service. The Commission 
received no comment in opposition to its proposal for use of cross-
polarized frequencies and it adopts its original proposal, without 
modification.
    120. In the NPRM the Commission indicated that modification to Part 
87 of its rules (Aviation Services) would be consequential to the 
licensing of satellite DARS systems in the 2310-2360 MHz band. The 
Commission recognized that the mobile and radiolocation services are 
currently allocated on a primary basis in the 2310-2360 MHz band until 
January 1, 1997 or until the first broadcasting-satellite (sound) 
system is operating and affecting or be affected by the mobile and 
radiolocation services in those service areas, whichever date is later. 
Further, its Allocation Order warned that the BSS(sound) and 
complementary terrestrial broadcasting service, during their 
implementation, should take cognizance of the expendable and reusable 
launch vehicle frequencies 2312.5, 2332.5 and 2352.5 MHz to minimize 
the impact on this mobile service use to the extent possible.
    121. The Commission proposed modification of Section 87.303, in 
Appendix II of the NPRM, to align Part 87 with Parts 2 and 25 of its 
Rules. The Commission recommended authorization of new primary 
assignments for mobile telemetry and telecommand operations, pursuant 
to Section 87.303, above 2360 MHz. The NPRM indicated that there was 
support from the aeronautical community to reaccommodate existing 
aeronautical telemetry users of the 2310-2390 MHz band to the 2360-2390 
MHz band. The Commission proposed modification to Section 87.303 to 
assign telemetry and associated telecommand operations in fully 
operational or expendable and re-usable launch vehicles above 2360 MHz. 
Moreover, the Commission suggested that any other telemetry use of the 
band 2310-2390 MHz would be secondary to launch vehicle use.
    122. As discussed, supra, co-frequency, co-coverage operation of 
satellite DARS and MAT is not possible and it would not be practical to 
license MAT systems in the satellite DARS band on a co-primary basis. 
There was no opposition to the proposal to modify Section 87.303. Only 
DSBC and AFTRCC commented with modifications to the proposal to clarify 
the status of telemetry use of the 2310-2390 MHz band. Consistent with 
its original proposal, footnote US328 to Part 2 of the Rules, and the 
developments in the remainder of the 2310-2360 MHz band, the Commission 
modifies Section 87.303 as it pertains to the 2320-2345 MHz band. The 
Commission therefore adopts the modified Section 87.303 contained 
below.
    123. In addition to satellite DARS space stations providing service 
downlinks in the 2320-2345 MHz band, feeder link earth stations for 
each satellite DARS system will be required to uplink programming 
information to the space station(s). The Commission recognized in the 
NPRM that feeder link networks are essential to deliver service to the 
end user and that ample contiguous spectrum is necessary to implement a 
viable satellite DARS system. The Commission also recognized that 
satellite DARS feeder link earth stations will be few in number (i.e. 
one, or possibly two for redundancy, per licensee) and will operate at 
fixed locations. Therefore, the Commission will authorize satellite 
DARS feeder link networks in fixed-satellite service (FSS) frequency 
allocations.
    124. The Commission indicated, however, that it would not authorize 
satellite DARS feeder link networks in the conventional FSS 4/6 GHz (C-
band) and 12/14 GHz (Ku-band) frequency bands which are already 
congested with U.S. fixed-satellite service networks. The Commission 
tentatively concluded that this would not be an efficient use of the 
FSS spectrum or the geostationary orbit. Additionally, the Commission 
recognized in the NPRM that the pending satellite DARS applicants 
propose feeder link operations in FSS bands other than the conventional 
4/6 and 12/14 GHz bands. This is consistent with its tentative 
conclusion. Moreover, the Commission understands that feeder link 
requirements for each satellite DARS system may increase or decrease 
depending on the amount of satellite DARS service link spectrum that is 
exclusively licensed to each applicant, and on the final configuration 
of the satellite DARS systems. For these reasons the Commission sought 
comment on possible alternative non-congested FSS frequency bands that 
would be suitable for satellite DARS feeder link operations in the 
event that the frequency bands originally proposed by the applicants 
are not available.
    125. Licensing service link spectrum in the 2320-2345 MHz band 
without designating spectrum for feeder link networks would result in 
the Commission licensing an incomplete satellite DARS system. The 
satellite DARS systems cannot operate without sufficient feeder link 
spectrum. The Commission therefore will permit satellite DARS feeder 
link networks in the FSS frequency bands 7025-7075 MHz and 6725-7025 
MHz (101 deg. W.L. orbital location only), consistent with the 
requirements identified in the current applications. The Commission 
will license satellite DARS feeder link Earth stations according to 
existing regulations for FSS Earth stations.
    126. According to the proposals in the pending applications, the 
feeder link spectrum requirements for three of the four applicants can 
be accommodated in the 7025-7075 MHz band. Since satellite DARS systems 
will be operating space stations in the geostationary orbit,

[[Page 11098]]

this 50 MHz of spectrum can be reused by satellite DARS licensees in 
the uplink direction, given sufficient orbital separation between the 
space stations. The Commission believes that an orbital separation of 
at least two degrees between satellite DARS space stations is 
obtainable. Primosphere and CD Radio propose in their applications to 
use the 7025-7075 MHz band. Though AMRC proposes to use the 6530-6545 
MHz band for its feeder links, it proposed no alternative bands. The 
Commission believes that AMRC's feeder link spectrum requirements, too, 
can be accommodated in the 7025-7075 MHz band.
    127. The fourth applicant, DSBC, proposes in its application to use 
the 6500-6855 MHz band for its feeder links. DSBC has a greater 
spectrum requirement than the other applicants because it proposes a 
system which uses multiple spot beams. Spot beams allow for greater 
frequency reuse of the service link spectrum but the amount of feeder 
link spectrum required is proportionately greater. The Commission notes 
also that DSBC has requested the 101 deg. W.L. orbital position which 
is allocated to the U.S. in accordance with the international FSS 
allotment plan. The spectrum in the 6725-7025 MHz allotment band is 
contiguous with the 7025-7075 MHz band. By combining the 300 MHz of 
spectrum from the allotment plan with the 50 MHz between 7025-7075 MHz, 
350 MHz of spectrum could be available to implement a satellite DARS 
system at 101 deg. W.L. which uses a multiple spot beam configuration. 
Moreover, this proposal would be a more efficient use of the FSS 
allotment plan by using it to its fullest.
    128. The 6725-7025 MHz allotment and 7025-7075 MHz bands are 
currently lightly used in the U.S. by the fixed-satellite service, in 
contrast to the conventional 4/6 GHz and 12/14 GHz bands. Indeed, the 
WRC-95 designated these frequency bands for NGSO MSS feeder link use 
because, globally, they are currently lightly used by the FSS. Though 
NGSO MSS feeder link networks are planned to operate in these frequency 
bands and these bands are used in the U.S. for broadcast auxiliary and 
Electronic News Gathering (ENG), the Commission believes, for the 
reasons stated herein, that satellite DARS feeder links can share the 
6725-7025 MHz allotment and 7025-7075 MHz bands with existing and 
planned co-primary users.
    129. Regarding the sharing situation in the U.S. with broadcast 
auxiliary and ENG use of the bands, the Commission identified in the 
NPRM the sharing issues that satellite DARS operators would have to 
address. Initially, commenters maintained that bands allocated for 
broadcast auxiliary are heavily used for ENG, inter-city relays and 
studio-to-transmitter links, and that use of the 7 GHz band for 
satellite DARS feeder link operations would not be feasible. Joint 
Comments from broadcasters assert, however, that satellite DARS feeder 
links could share the 7 GHz band with broadcast operations under 
certain conditions. The National Association of Broadcasters (NAB) 
maintains that satellite DARS feeder link use of the 7 GHz band would 
be possible only in small markets, noting that ENG may move from the 2 
GHz band to the 7 GHz band thereby crowding the 7 GHz band. CD Radio 
contends that, even in light of the mobile nature of ENG operations in 
the 7 GHz band, a carefully engineered and coordinated satellite DARS 
uplink may well be able to co-exist with these broadcast facilities.
    130. Most of the conditions for sharing the 7 GHz band identified 
by the broadcasters in their Joint Comments are typically negotiated 
during the domestic licensing process between satellite licensees and 
broadcasters. The results of this domestic coordination would be 
reflected in the satellite DARS earth station application to 
demonstrate that Earth station operations would not affect other co-
primary users of the band. Satellite DARS feeder link networks will be 
authorized as a fixed-satellite service in the 6725-7025 MHz allotment 
and 7025-7075 MHz bands on a co-primary basis, but Earth station 
operations are expected to be coordinated with pre-existing users of 
the spectrum before they will be licensed to operate. The Commission 
will authorize satellite DARS feeder link Earth stations only after the 
applicant demonstrates that coordination with potentially affected 
users in the band, including co-primary broadcast users, has been 
successfully completed.
    131. Certain of the conditions proposed by the broadcasters would 
not be imposed on satellite DARS operators after the earth station 
licensing process is completed. For instance, satellite DARS feeder 
links would not be required to accept interference received from 
existing and planned TV broadcast auxiliary stations once the earth 
stations are licensed. Moreover it would be premature for the 
Commission to identify and adopt ``keep out zones'' for satellite DARS 
earth stations, for example in areas near major sporting arenas and 
around existing 7 GHz television broadcast auxiliary receive sites, as 
proposed by broadcasters in their comments. This detailed frequency 
coordination exercise will be conducted between the satellite DARS 
licensees and broadcasters during the domestic licensing process and in 
parallel with the construction and deployment of the satellite DARS 
systems. Nevertheless, the fact that the Joint Commenters identified 
conditions that would facilitate sharing in the 7 GHz band is an 
indication that a workable solution can be realized for satellite DARS 
feeder link networks to operate in the bands shared with broadcast 
facilities.
    132. The Commission also identified the sharing issues regarding 
satellite DARS feeder links and planned feeder link networks for NGSO 
MSS systems in the NPRM. NGSO MSS feeder link networks will be 
transmitting in the downlink direction in the 7 GHz band while 
satellite DARS feeder links will be transmitting in the uplink 
direction in the same band (i.e., NGSO MSS feeder links will be 
operating ``reverse band''). Coordination between the transmitting 
satellite DARS earth stations and receiving NGSO MSS feeder link earth 
stations, and between receiving DARS space stations and transmitting 
NGSO MSS space stations is therefore required. Primosphere asserts that 
because satellite DARS feeder link earth stations do not have 
significant geographic limitations on where they can be located, it is 
not expected that coordinated use of the 7 GHz band with NGSO MSS 
feeder link earth stations will be difficult. DSBC adds that there are 
no apparent problems with satellite DARS feeder link band proposals 
even in light of WRC-95 proposals for NGSO MSS feeder links.
    133. Loral Qualcomm Partnership (LQP) asserts that any satellite 
DARS feeder link assignment in the 7 GHz band should be required to 
operate within the sharing criteria adopted at WRC-95 for sharing 
between GSO FSS and NGSO MSS feeder link networks. The Commission 
expects satellite DARS feeder link networks, and NGSO MSS feeder link 
networks, to operate according to WRC-95 decisions. The Commission 
believes that, based on WRC-95 decisions, geostationary satellite DARS 
feeder links and NGSO MSS feeder links can co-exist in the 7 GHz band. 
There will be relatively few feeder link earth stations for both 
services and sufficient distance can be maintained between the 
transmitting feeder link earth stations for satellite DARS and the 
receiving earth stations of NGSO MSS feeder links networks. 
Additionally, according to WRC-95 decisions, transmitting NGSO MSS 
feeder link space stations must meet power flux density limits at the

[[Page 11099]]

geostationary orbit to protect receiving space stations in the 7 GHz 
band. The domestic coordination process, in accordance with Section 
25.130 of the Rules, will facilitate feeder link Earth station 
licensing of both satellite DARS and NGSO MSS systems.
    134. Two 12.5 MHz DARS licenses will be granted for use of the 
spectrum at 2320-2332.5 MHz, and 2332.5-2345 MHz, respectively. As 
discussed above, since the Commission is not opening the filing cut-
off, the four applicants are the only eligible parties for these 
licenses. Accordingly, as all four applicants' proposals cannot be 
accommodated, it adopts rules to assign the licenses to two of these 
applicants through use of competitive bidding.
    135. The Commission has authority under Section 309(j) of the 
Communications Act of 1934, as amended (``Communications Act''), to 
employ auctions to choose among mutually exclusive applications for 
initial licenses where the principal use of the spectrum is likely to 
involve the licensee receiving compensation from subscribers. 
Specifically, the Communications Act permits auctions where: (1) 
mutually exclusive applications for initial license or construction 
permits are accepted for filing by the Commission; (2) the principal 
use of the spectrum will involve, or is reasonably likely to involve, 
the receipt by the licensee of compensation from subscribers in return 
for enabling those subscribers to receive or transmit communication 
signals utilizing the licensed frequencies; and (3) the public interest 
objectives of Section 309(j) would be served by subjecting mutually 
exclusive applications in the service to competitive bidding.
    136. In the NPRM, the Commission recognized that mutual exclusivity 
could arise if it decided not to make the entire 50 MHz of allocated 
spectrum available for satellite DARS licensing. The Commission also 
tentatively concluded that the principal use of the spectrum will be to 
provide subscription-based services. The Commission further concluded 
that using competitive bidding to assign DARS licenses would fulfill 
the public interest obligations mandated by statute.
    137. Some commenters contend that the Commission is not authorized 
to auction DARS licenses because they believe the applications on file 
are not mutually exclusive. The pending applicants argue that the 
Commission has a statutory obligation to avoid mutual exclusivity, 
citing Section 309(j)(6)(E) of the Communications Act. CD Radio and 
American Mobile Radio Corporation (AMRC) also allege that the use of 
auctions to resolve applications filed before the Commission was 
granted competitive bidding authority is not warranted.
    138. Based upon a review of the record in this proceeding, the 
Commission disagree with these commenters. As the Commission stated in 
the NPRM, with respect to the ``principal use'' requirement of Section 
309(j), auctions are authorized if at least a majority of the use of 
the spectrum is likely to be for subscription-based services. In making 
this determination, the Commission looks to classes of licenses and 
permits rather than individual licenses. Given that three of the four 
current applicants propose to provide subscription-based service, the 
Commission concludes that the principal use of the satellite DARS 
spectrum is likely to involve the licensee receiving compensation from 
subscribers. The Commission notes, however, that its ``principal use'' 
determination does not in any way preclude satellite DARS licensees 
from providing any amount of non-subscription service, and they are not 
precluded from recovering auction costs, as well as the costs of 
construction, launch, and operation from sources other than 
subscribers, such as advertising.
    139. The Commission also expects that the amended applications to 
be filed for the satellite DARS licenses will raise mutual exclusivity. 
While eligibility for this license is limited to the four existing 
applicants, the Commission expects that each of these applicants will 
file amended applications to participate in the auction for the two 
licenses in view of their continued interest, as expressed in this 
proceeding, in providing satellite DARS. In the event the Commission 
receives only one acceptable amended application for each of the 
licenses, the Wireless Telecommunications Bureau will issue a public 
notice cancelling the auction and establishing a date for the filing of 
an amended long-form application that complies with the service and 
technical rules adopted herein.
    140. The Commission turns now to the issue of whether using 
competitive bidding to assign the satellite DARS licenses will promote 
the public interest objectives set forth in Section 309(j)(3) of the 
Communications Act. These objectives are:
    (A) The development and rapid deployment of new technologies, 
products, and services for the benefit of the public, including those 
residing in rural areas, without administrative or judicial delays;
    (B) Promoting economic opportunity and competition and ensuring 
that new and innovative technologies are readily accessible to the 
American people by avoiding excessive concentration of licenses and by 
disseminating licenses among a wide variety of applicants, including 
small businesses, rural telephone companies, and businesses owned by 
members of minority groups and women;
    (C) Recovery for the public of a portion of the value of the public 
spectrum made available for commercial use and avoidance of unjust 
enrichment through the methods employed to award uses of that resource; 
and
    (D) Efficient and intensive use of the electromagnetic spectrum.
    The Commission concludes that using competitive bidding procedures 
to award the DARS licenses will further these objectives. Using 
competitive bidding for satellite DARS, a new national satellite 
service, does not present the same complexities and difficulties 
inherent in any consideration of using auctions for transnational 
systems. The complex and difficult issues involved in using competitive 
bidding to award licenses for global systems are described in the 
Commission's recent Little LEO NPRM 61 FR 69062 (December 31,1996). 
Satellite DARS is a domestic service. In fact, other countries will use 
different frequency bands for satellite DARS service. This unique 
situation offers the Commission the opportunity to provide the public 
with the advantages of competitive bidding without the significant 
disadvantages involved in using auctions to license transnational 
services.
    141. In general, paying for spectrum provides incentives for the 
licensee to construct quickly in order to obtain a return on its 
investment. The Commission therefore concludes that, in this particular 
set of circumstances, an auction for the satellite DARS licenses is 
likely to promote the rapid deployment of service because the party 
that is in the best position to deploy satellite DARS technologies and 
services is also likely to be the highest bidder. The Commission 
further believes that adopting competitive bidding procedures to award 
satellite DARS licenses is the most efficient mechanism for ensuring 
that satellite DARS is offered to the public in the most expeditious 
manner possible. Use of competitive bidding, as compared to other 
licensing methods, will speed the development and deployment of 
satellite DARS service to the public with

[[Page 11100]]

minimal administrative or judicial delays, and encourage efficient use 
of the spectrum as required by Section 309(j)(3)(A) and (D) of the 
Communications Act. Based on its experience with DBS, for example, the 
Commission believes that the satellite DARS auction could be concluded 
in a matter of days and it could move forward expeditiously with 
licensing. Additionally, competitive bidding will recover a portion of 
the value of the spectrum, as envisioned in Section 309(j)(3)(C).
    142. As discussed infra, the Commission has not adopted special 
provisions for small businesses and other designated entities because 
of the extremely high implementation costs associated with satellite-
based services and the lack of sufficient evidence in the current 
record to support the adoption of designated entity provisions. 
However, this does not mean either that the Commission has ignored 
Congress' mandate to offer designated entities the opportunity to 
participate in competitive bidding, that designated entities will be 
unable to participate in the DARS industry or that auctions of DARS 
spectrum will not promote many of the objectives of Section 309(j). 
Based upon prior experience with respect to other satellite-based 
services, it is likely that a wide variety of businesses, including 
designated entities, will be involved in various sectors of this 
industry as non-licensed operators, programmers, and equipment 
suppliers.
    143. Moreover, the Commission disagrees with commenters' arguments 
that it is inappropriate to use competitive bidding procedures to 
select from mutually exclusive applications that were filed before the 
Commission was granted competitive bidding authority. The Commission 
observes that Section 6002 of the Omnibus Budget Reconciliation Act of 
1993 (``1993 Budget Act'') specifically grants the Commission the 
discretion to decide whether to employ either lotteries or auctions to 
choose between mutually exclusive applications filed before July 26, 
1993. In this regard, the Commission believes that, in balancing the 
advantages and disadvantages of using a lottery or an auction to award 
the DARS licenses, the public interest is best served by its use of 
competitive bidding. As discussed supra, the Commission believes that 
an auction will ensure that the licenses are awarded to the party that 
values it most highly, thereby maximizing efficient use of the spectrum 
and facilitating the expeditious delivery of service to the public. 
This is especially true with regard to nationwide licenses because the 
winning bidders at the auction will likely be the parties that have 
made the greatest commitment to satellite DARS and are best prepared to 
begin construction of a nationwide system. Finally, use of auctions to 
assign the DARS licenses will advance the goals of Section 309(j)(3)(C) 
of the Communications Act by enabling the Commission to recover for the 
public a portion of the value of the spectrum and avoid unjust 
enrichment to license winners.
    144. In sum, the Commission concludes that it has the authority to 
award DARS licenses by means of competitive bidding. The Commission 
further concludes that the use of competitive bidding to assign DARS 
spectrum will promote the rapid deployment of DARS and the efficient 
use of DARS spectrum most effectively. The Commission will therefore 
award two 12.5 MHz DARS licenses by means of competitive bidding.
    145. In the NPRM, the Commission proposed that a simultaneous 
multiple round auction be used to award DARS licenses if the Commission 
determined that competitive bidding procedures should be implemented. 
In a simultaneous multiple round auction, in every round, a bidder may 
bid on any of the licenses for which it is eligible. The auction does 
not close until bidding has ceased on all licenses. In the Competitive 
Bidding Second Report and Order, 59 FR 24947 (May 13, 1994), the 
Commission concluded that this method ensures that interdependent 
licenses will be awarded to the bidders who value them most highly by 
generating the most information about license values and providing 
bidders with the greatest degree of flexibility to pursue back-up 
strategies. In the NPRM, the Commission said that if it employs 
competitive bidding for DARS licensing, it would conduct it ``pursuant 
to the general framework adopted in the Second Report and Order, the 
Commission's rules, and consistent with other Commission proceedings 
where auctions have been employed.'' There were no comments on the 
Commission's proposed auction design or bidding procedures for DARS.
    146. In view of the fact that the two DARS licenses are 
substitutable and these licenses will be significantly interdependent, 
the Commission concludes that a simultaneous multiple round auction 
design is the appropriate auction methodology. This auction methodology 
will generate valuable information about the licenses during the course 
of the auction. In addition, as noted below, consistent with the rules 
for other auctionable services, the Commission adopts bidding 
procedures to ensure that the auction proceeds at a rapid pace.
    147. The Commission observes that a multiple round electronic 
auction generally will provide bidders useful information about other 
bidders' valuations. Bidders will be able to observe who is willing to 
bid on a license at each announced price. Providing this information 
may enable bidders to refine their estimates of the license value, 
thereby reducing the tendency of bidders for licenses with uncertain 
value to shade down their bids to avoid the ``winner's curse.'' Because 
of the Commission's discretion to adjust the length of bidding rounds 
in an electronic auction and the other auction design features 
described below, the Commission expects the auction to proceed rapidly. 
The Commission will provide for on-site electronic bidding because of 
the limited number of eligible participants and the anticipated rapid 
auction pace. The Commission reserves the option, however, to offer 
remote bidding where bidders can place their bids by computer from any 
location.
    148. Consistent with the rules adopted in other services, the 
Commission concludes that the Wireless Telecommunications Bureau should 
have discretion to establish, raise and lower minimum bid increments 
during the course of the DARS auction. The Commission believes that 
this discretion over minimum bid increments is necessary to ensure that 
it can efficiently control the pace of the auction. The Commission 
anticipates using larger percentage minimum bid increments early in the 
auction and reducing the minimum increment percentage as bidding 
activity falls. The Commission also believes that the efficiency of the 
auction may be enhanced by limiting jump bidding, i.e., bidding above 
the minimum accepted bids. Therefore, the Wireless Telecommunications 
Bureau will announce by Public Notice prior to auction the specific bid 
increment that generally will be used, and will also retain the 
discretion to establish and change maximum bid increments during the 
course of the auction. Where a tie bid occurs, the high bidder will be 
determined by the order in which the bids were received by the 
Commission.
    149. To maximize the amount of information generated during the 
course of an auction and to ensure that the auction closes in a 
reasonable amount of time, the Commission will require a bidder to be 
active on one license in each round of the auction or use an

[[Page 11101]]

activity rule waiver, as defined below. To be active in the current 
round, a bidder must submit an acceptable bid in the current round or 
have the high bid from the previous round. A bidder who is not active 
in a round and has no remaining activity rule waivers will no longer be 
eligible to bid on the license being auctioned. Bidders will not be 
permitted to be active on more than one license in a single round. The 
Commission sees no efficiency-enhancing reason to permit such bidding 
because the service rules allow only one license to be acquired per 
bidder. Moreover, experience in previous auctions has raised concerns 
that such bidding could be used to signal or engage in other forms of 
anticompetitive strategic bidding. The Commission delegates to the 
Wireless Telecommunications Bureau the authority to determine and 
announce by Public Notice bid withdrawal procedures for the DARS 
auction.
    150. The Commission concludes that a minimum opening bid would help 
ensure that the auction proceeds quickly and would increase the 
likelihood that the public receives fair market value for the spectrum. 
The Commission will therefore establish a minimum opening bid for this 
spectrum, the amount of which will be announced by the Wireless 
Telecommunications Bureau by Public Notice. The Commission observes 
that this approach is consistent with its approach in the DBS context. 
The Wireless Telecommunications Bureau will determine the amount of the 
minimum opening bid using all available information and taking into 
consideration the uncertainty as to the value of the spectrum.
    151. To make allowance for unusual circumstances that might delay a 
bidder's bid preparation or submission in a particular round, the 
Commission will provide bidders with a limited number of waivers of the 
above-described activity rule. The Commission believes that some waiver 
procedure is needed because the Commission does not wish to end a 
bidder's participation due to an accidental act or circumstances not 
under the bidder's control. The Commission will provide bidders with 
three activity rule waivers that may be used in any round during the 
course of the auction. A waiver will preserve eligibility in the next 
round. Waivers may be applied automatically by the Commission or 
invoked proactively by bidders. If a bidder is not active in a round, a 
waiver will be applied automatically. An automatic waiver applied in a 
round in which there are no new valid bids will not keep the auction 
open. A proactive activity rule waiver is a waiver invoked by a bidder 
during the bid submission period. If a bidder submits a proactive 
waiver in a round in which no other bidding activity occurs, the 
auction will remain open.
    152. The Commission will retain the discretion to issue additional 
waivers during the course of an auction for circumstances beyond a 
bidder's control or in the event of a bid withdrawal, as discussed 
below. The Commission will also retain the flexibility to adjust, by 
Public Notice prior to an auction, the number of waivers permitted.
    153. A stopping rule specifies when an auction is over. The auction 
will close after one round passes in which no new valid bids or 
proactive activity rule waivers are submitted. The Commission retains 
the discretion, however, to keep the auction open even if no new valid 
bids and no proactive waivers are submitted. In the event that the 
Commission exercises this discretion, the effect will be the same as if 
a bidder had submitted a proactive waiver. This will help ensure that 
the auction is completed within a reasonable period of time, because it 
will enable the Commission to utilize larger bid increments, which 
speed the pace of the auction, without risking premature closing of the 
auction.
    154. In the NPRM, the Commission proposed to adopt the short-form 
application procedures, upfront payment requirements, public notice 
procedures, and default and disqualification provisions set forth in 
Subpart Q of Part 1 of the Commission's rules.
    155. The Commission received no comments addressing these 
proposals. Because there only are four applicants eligible in this 
auction, all of whom previously filed applications for DARS licenses, 
the Commission will not use its short-form application requirement (FCC 
Form 175) and adopts a new rule for the DARS auction. Specifically, it 
will require these applicants to supplement their previously-filed 
applications within five days of the publication of this Report & Order 
in the Federal Register. The supplemental information must be certified 
and include the following: 1. Applicant's name; 2. Mailing Address (no 
Post Office boxes); 3. City; 4. State; 5. ZIP Code; 6. Auction Number 
15; 7. FCC Account Number; 8. Person(s) authorized to make or withdraw 
a bid (list up to three individuals); 9. Certifications and name and 
title of person certifying the information provided; 10. Applicant's 
contact person and such person's telephone number, E-mail address and 
FAX number; 11. Signature and date. In keeping with previous practice, 
the Commission also retains discretion to implement or modify certain 
other procedures prior to the DARS auction, including rules governing 
the payment requirements.
    156. As discussed below, the Commission will require applicants to 
submit to the Commission an upfront payment prior to commencement of 
the DARS auction. In addition, each auction winner will be required to 
submit an amount sufficient to bring its total deposit up to 20 percent 
of its winning bid within ten (10) business days of the announcement of 
the winning bidder. The winning bidder also will be required to 
supplement its application in accordance with Part 25 of the 
Commission's Rules. This procedure will constitute the ``long-form 
application'' process referred to in the general auction rules. The 
winning bidder will be required to file such information by a date 
specified by Public Notice, generally within 30 business days after the 
close of bidding. After receiving the winning bidder's long-form 
application and verifying receipt of the bidder's 20 percent down 
payment, the Commission will announce the application's acceptance for 
filing, thus triggering the filing window for petitions to deny. If, 
pursuant to Section 309(d) of the Communications Act, the Commission 
dismisses or denies any and all petitions to deny, the Commission will 
issue an announcement to this effect, and the winning bidder will then 
have ten (10) business days to submit the balance of its winning bid. 
If the bidder fails to submit the balance of the winning bid or the 
license is otherwise denied, the Commission will assess a default 
payment as set forth below and re-auction the license among the other 
existing applicants. If no petitions to deny are filed, the Commission 
will issue a public notice conditionally granting the licenses pending 
final payment.
    157. In the NPRM the Commission proposed an upfront payment 
requirement of $0.02 per MHz-pop to ensure that only serious, qualified 
bidders participate at auction. Initially, the commenters did not 
address the proposed upfront payment provisions. In various recent ex 
parte filings, however, the eligible applicants claim that an upfront 
payment based on $0.02 per MHz-pop is too high and is not needed to 
ensure that only serious, qualified bidders participate at auction. The 
Commission concludes that its proposed up-front payment of $0.02 per 
MHz-pop may be too high here. The

[[Page 11102]]

Commission observes that the eligible applicants in this auction have 
demonstrated a continued interest in providing DARS and have already 
expended significant resources towards this end. Accordingly, the 
Commission believes a more modest upfront payment for the auction of 
the DARS licenses is appropriate. The Commission believes that a 
payment that takes into consideration the valuation of similarly 
auctioned satellite spectrum (such as DBS) would be appropriate. The 
Commission therefore delegates authority to the Wireless 
Telecommunications Bureau and the International Bureau to determine an 
appropriate calculation for the upfront payment and announce it by 
Public Notice.
    158. In the Competitive Bidding Second Report and Order, the 
Commission determined that bid withdrawal, default and disqualification 
provisions were needed to discourage insincere bidding. The Commission 
observed that insincere bidding, whether frivolous or strategic, 
distorts the price information generated by the auction process and 
reduces its efficiency. Accordingly, the Commission adopts the bid 
withdrawal, default and disqualification provisions as set forth in 
Sections 1.2104(g) and 1.2109 of the Commission's rules. Pursuant to 
these rules, any bidder who withdraws a high bid during an auction 
before the Commission declares bidding closed will be required to 
reimburse the Commission in the amount of the difference between its 
high bid and the amount of the winning bid the next time the license is 
offered by the Commission, if this subsequent winning bid is lower than 
the withdrawn bid. If a license is reoffered by auction, the ``winning 
bid'' refers to the high bid in the auction in which the license is 
reoffered. If a license is reoffered in the same auction, the winning 
bid refers to the high bid amount in that auction, made subsequent to 
the withdrawal. If the subsequent high bidder also withdraws its bid, 
that bidder will be required to pay an amount equal to the difference 
between its withdrawn bid and the amount of the subsequent winning bid 
the next time the license is offered by the Commission. If a license 
which is the subject of withdrawal or default is not re-auctioned, but 
is instead offered to the highest losing bidders in the initial 
auction, the ``winning bid'' refers to the bid of the highest bidder 
who accepts the offer. Losing bidders would not be required to accept 
the offer, i.e., they may decline without additional payment. The 
Commission wishes to encourage losing bidders in simultaneous multiple 
round auctions to bid on other licenses, and therefore the Commission 
will not hold them to their losing bids on license for which another 
bidder has withdrawn a bid or on which another bidder has defaulted.
    159. After bidding closes, a defaulting auction winner (i.e., a 
winner who fails to remit the required down payment within the 
prescribed time, fails to pay for a license, or is otherwise 
disqualified) will be assessed the difference between its high bid and 
the amount of the winning bid the next time the license is offered by 
the Commission, if this subsequent winning bid is lower than the high 
bid, plus an additional payment of three percent of the subsequent 
winning bid or three percent of the amount of the defaulting bid, if 
the defaulting bid was less. The additional three percent payment is 
designed to encourage bidders who wish to withdraw their bids to do so 
before bidding ceases. The Commission believes that these additional 
payments will adequately discourage default and ensure that bidders 
have adequate financing and that they meet all eligibility and 
qualification requirements.
    160. In addition, if withdrawal, default or disqualification 
involves gross misconduct, misrepresentation or bad faith by an 
applicant, the Commission retains the option to declare the applicant 
and its principals ineligible to bid in future auctions, or to take any 
other action it deems necessary, including institution of proceedings 
to revoke any existing licenses held by the applicant.
    161. The Commission notes that DARS licensees, like other satellite 
licensees, will be subject to rule 25.118, which prohibits transfers or 
assignments of licenses except upon application to the Commission and 
upon a finding by the Commission that the public interest would be 
served thereby. Even after DARS licenses are granted, one licensee will 
not be permitted to acquire control of the other remaining satellite 
DARS license. This prohibition on transfer of control will help assure 
sufficient continuing competition in the provision of satellite DARS 
service.
    162. As it stated in the NPRM, the Commission believes that it is 
necessary to adopt a rule prohibiting collusive conduct in connection 
with the satellite DARS auction. However, the Commission believes that 
a modified rule is warranted because there are a limited number of 
identified eligible participants for the satellite DARS action and thus 
the additional safeguards associated with an auction with many more 
bidders are absent here. Specifically, the Commission will not adopt 
any exceptions to the general anti-collusion rule. As noted above, in 
lieu of short-form applications, the eligible DARS applicants will be 
required to supplement their pending applications with certain 
information within five days of the publication date of this Order. At 
that time, all applicants will be prohibited from cooperating, 
collaborating, discussing or disclosing in any manner the substance of 
their bids or bidding strategies, or discussing or negotiating 
settlement agreements with other bidders.
    163. Due to the fact that this is a closed auction with a fixed 
number of eligible applicants, the Commission has determined that none 
of the three exceptions to its general collusion rules prohibiting 
discussions with other applicants will apply. Therefore, the applicants 
will not be permitted to enter into consortia or any type of joint 
bidding arrangement at any time since cooperation and collaboration are 
prohibited under the anti-collusion rule. Nor will they be able to 
enter into settlement arrangements following the filing of their 
supplemental information. Given the limited number of applicants (four) 
and available licenses (two), this is not the type of situation the 
Commission contemplated when it expressed its desire to preserve 
``efficiency enhancing bidding consortia'' so as to possibly reduce 
entry barriers for smaller firms. The universe of bidders here is 
already established and very small. In this situation, the Commission 
believes that allowing any joint bidding arrangements among this 
limited group will merely serve to undercut the competitiveness of the 
auction process and limit the number of bidders for each license. In 
this vein, the Commission also concludes that the other exceptions to 
the collusion rule designed to allow bidders to combine or obtain 
additional capital from one another during an auction are inapplicable 
or unnecessary here. These applicants have been preparing and 
developing this service for years, and this will be a very short 
auction. Thus, any additional capitalization requirements are likely to 
already have been met or should be after the auction. The Commission 
believes that the five-day window is sufficient to enable the 
applicants to conclude any settlement discussions, given the fact that 
the parties have had significant time prior to the adoption of this 
Order to reach a settlement. After this five-day period, all 
negotiations (if any) must cease. This

[[Page 11103]]

rule is both fair to the four applicants, who had time to negotiate 
settlements and raise capital, while helping to ensure the 
competitiveness of the auction and the post-auction market. All 
applicants will be prohibited from cooperating, collaborating, 
discussing or disclosing in any manner the substance of their bids or 
bidding strategies with other bidders five days after publication of 
this report and order in the Federal Register.
    164. Finally, in adopting these rules for the DARS auction, the 
Commission also reminds the eligible bidders that allegations of 
collusion may be investigated by the Commission or referred to the U.S. 
Department of Justice for investigation. Bidders who are found to have 
violated the antitrust laws or the Commission's Rules while 
participating in an auction may be subject to forfeiture of their down 
payment or their full bid amount, as well as revocation of their 
license, and may be prohibited from participating in future auctions.
    165. In the NPRM, the Commission asked commenters to discuss 
whether special provisions should be adopted to enable small 
businesses, businesses owned by minorities and women, and rural 
telephone companies (rural telcos) (collectively referred to as 
``designated entities'') to participate at auction and in the provision 
of DARS.
    166. The Commission received no comments addressing this issue. In 
an ex parte filing, CD Radio proposes that entrepreneurs and small 
businesses (as defined in the rules for broadband PCS C and F blocks) 
be afforded an installment payment plan. CD Radio claims, among other 
things, that failure to adopt such financing incentives would put 
pressure on the small business applicants to sell their ``place in 
line'' to large companies and encourage transfers and possible unjust 
enrichment of speculative applicants. The Commission first notes that 
the legislative history of the designated entity provisions shows that 
Congress did not necessarily intend for special measures in services 
such as DARS, as demonstrated by the following reference: ``[t]he 
characteristics of some services are inherently national in scope, and 
are therefore ill-suited for small businesses.'' Moreover, the 
Commission previously concluded that, because of the extremely high 
implementation costs associated with satellite-based services, no 
special provisions for designated entities would be made. In part, this 
conclusion was reached because it was unclear whether small businesses 
could attract the capital necessary to implement and provide satellite-
based services. Second, pursuant to Section 309(j), the purpose of such 
provisions is to attract the participation of a wide variety of small 
business applicants. In view of the fact that this is a closed auction 
with a fixed number of eligible applicants, this purpose of attracting 
a wide-array of applicants will not be served here. Third, the record 
is lacking in support for what the appropriate small business threshold 
is in the DARS context and whether any of the four applicants, 
including CD Radio, would qualify as a small business. In the DBS 
context, the Commission did not provide for designated entity 
provisions, primarily due to the high implementation costs and the lack 
of interest expressed by the potential beneficiaries, i.e., small 
businesses, businesses owned by minorities and women, and rural 
telecos. In this connection, the Commission notes that CD Radio's 
proposal is not supported by the ex parte filings of other potential 
applicants who arguably would fall within the definitions of 
entrepreneur and small business proposed by CD Radio. In contrast to CD 
Radio's proposal, in its ex parte filing, DSBC states that, ``[s]o long 
as the auction is limited to the four pending applicants, the 
Commission need not employ bidding credits or installment payments, or 
identify designated entities, to level the playing field among this 
group of potential licensees.'' Likewise, in its ex parte filing, 
Primosphere similarly states that ``[t]here should be no bidding 
preferences'' and ``[a]ll four applicants should be treated equally.''
    167. The Commission is, therefore, not convinced that in order to 
promote the objectives of Section 309(j)(3)(B) ensuring that new and 
innovative technologies are readily accessible to the American people 
and the dissemination of licenses among a wide variety of applicants, 
including small businesses, it needs to provide designated entity 
provisions, such as the financial incentives requested by CD Radio. 
Moreover, it concludes that the present record is insufficient to 
support either race-based rules under the strict scrutiny standard, or 
to support gender-based rules under the intermediate scrutiny standard 
that currently applies to those rules. Accordingly, the Commission is 
not adopting designated entity provisions for DARS.
    168. The Commission believes that the foregoing decision and 
licensing plan best serves the public interest in assuring that the 
spectrum in question is most efficiently utilized while allowing the 
implementation of new, innovative services.
    169. Accordingly, it is ordered that Part 25 of the Commissions 
rules are hereby amended as set forth below.
    170. Accordingly, it is ordered that Parts 25 and 87 of the 
Commissions rules are hereby amended as set forth below, and the new 
and amended rules in Sections 25.144, 25.201, 25.202, 25.214 and 87.303 
shall become effective April 10, 1997, except that the new rules in 
Sections 25.401, 25.402, 25.403, 25.404, 25.405, and 25.406 shall 
become effective March 11, 1997. The Commission finds good cause to 
make the auction rules for satellite DARS (Subpart F of Part 25) 
effective immediately upon publication in the Federal Register. These 
rules will allow the four pending applicants to amend their 
applications, which have been pending for more than four years, and to 
participate in the auction for this new service, for which spectrum was 
allocated two years ago. Immediate application of the rules governing 
the auction procedures will therefore expedite the DARS auction and the 
introduction of service to the public, including those residing in 
rural areas, in accordance with Section 309(j)(3)(A) of the 
Communications Act. In addition, the Commission notes that the pending 
applicants have made substantial financial investment in anticipation 
of the licensing of DARS. Finally, it is important that the DARS 
auction take place prior to the Wireless Communications Service 
(``WCS'') auction, which Congress had mandated begin no later than 
April 15, 1997. According to the applicants, their several years of 
planning and financial investment would be undermined if a WCS auction 
winner were to enter the DARS market first. The DARS applicants also 
contend that they may need WCS spectrum for auxiliary support of DARS 
operations, that they need time to assess these auxiliary needs, but 
that their efforts will be frustrated if WCS is auctioned first. 
Accordingly, the Commission finds that further deferral of the DARS 
auction and licensing procedures by a delay in the effective date, for 
purposes of providing adequate notice to the affected parties, would be 
impracticable, unnecessary and contrary to the public interest.
    171. The Final Regulatory Flexibility analysis is included as 
follows:

Final Regulatory Flexibility Analysis of Report and Order and 
Memorandum Opinion and Order and Further Notice of Proposed Rulemaking

    As required by Section 603 of the Regulatory Flexibility Act (RFA), 
5 U.S.C. Sec. 603, the Commission incorporated and sought comment on an

[[Page 11104]]

Initial Regulatory Flexibility Analysis (IRFA) in Establishment of 
Rules and Policies for the Digital Audio Radio Satellite Service in the 
2310-2360 MHz Frequency Band, 11 FCC Rcd 1 (1995) (NPRM). The 
Commission's Final Regulatory Flexibility Analysis (FRFA) in this 
Report and Order and Memorandum Opinion and Order and Further Notice of 
Proposed Rulemaking (Order) conforms to the RFA, as amended by the 
Small Business Regulatory Enforcement and Fairness Act of 1996 
(SBREFA).

A. Need for and Purpose of This Action

    In this Order, the Commission promulgates rules and assigns 
licenses for satellite Digital Audio Radio Service (DARS). The 
objective in this proceeding is to help establish a new service to 
provide continuous nationwide radio programming with compact disc 
quality sound. This new service has the potential to increase the 
variety of programming available to the listening public by offering 
new niche channels. Satellite DARS also promises to serve listeners in 
areas of the country that have been underserved by terrestrial radio.

B. Summary of Issues Raised by the Public Comments in Response to the 
Initial Regulatory Flexibility Analysis

    No comments were filed in direct response to the IRFA. The 
Commission received numerous comments on the wide variety of licensing 
and other issues raised by the NPRM, none of which were directly 
related to the treatment of small entities. Although not directed to 
the IRFA, three entities proposing to provide satellite DARS have filed 
ex parte comments concerning the issue of whether the Commission should 
employ special auction provisions to aid small businesses. These 
comments are addressed in Section V of this analysis.

C. Description and Estimate of the Small Entities Subject to the Rules

    The Commission has not developed its own definition of ``small 
entity'' for purposes of licensing satellite delivered services. 
Accordingly, the Commission relies on the definition of ``small 
entity'' provided under the Small Business Administration (SBA) rules 
applicable to Communications Services, Not Elsewhere Classified. A 
``small entity'' under these SBA rules is defined as an entity with 
$11.0 million or less in annual receipts. Based on the record in this 
proceeding, the Commission finds that the four current satellite DARS 
applicants are all ``small entities'' under the SBA definition. Because 
of spectrum limitations, the Commission does not foresee that there 
will be capacity for additional systems in the frequency band 
exclusively allocated for satellite DARS.

D. Summary of Projected Reporting, Record Keeping and Other Compliance 
Requirements

    Satellite DARS licensees will be required to begin construction of 
their space stations within one year of license grant, launch and begin 
operating their first satellite within four years, and begin operating 
their entire system within six years. They will be required to file 
annual reports on the status of their progress. Entities will require 
knowledge of satellite operations in order to prepare these reports.

E. Significant Alternatives and Steps Taken By Agency To Minimize 
Significant Economic Impact on a Substantial Number of Small Entities 
Consistent With Stated Objectives

    The NPRM proposed three possible licensing options for satellite 
DARS: (1) to license the available spectrum to the current four 
applicants; (2) to license less that the total available spectrum to 
the four applicants and auction the remainder; or, (3) to accept new 
applications and auction all licenses.
    After the NPRM was released, the Omnibus Consolidated 
Appropriations Act, 1997, Pub. L. 104-208, 110 Stat. 3009 (1996) 
(Appropriations Act) directed the Commission to reallocate spectrum at 
2305-2320 MHz and 2345-2360 MHz for all services consistent with 
international allocations and to award licenses in that portion of the 
band using competitive bidding. As a consequence, the licenses 
designated pursuant to this Order will authorize satellite DARS 
operation in the spectrum between 2320 and 2345 MHz. Because the record 
indicates that 12.5 MHz is necessary for a licensee to provide a viable 
satellite DARS service and because only 25 MHz remains as an exclusive 
DARS allocation, the Commission will award two licenses and use 
competitive bidding to resolve mutual exclusivity among the four 
current applicants. These applicants are CD Radio, Inc., Digital 
Satellite Broadcasting Corp., Primosphere Limited Partnership, and 
American Mobile Radio Corp.
    In deciding how to proceed, the Commission had two alternatives--
either to reopen the filing window and accept additional applications 
or to limit eligibility to the four applicants that filed before the 
1993 cut-off date. Because the Commission is not permitting additional 
applications, the four applicants who filed applications in 1990 and 
1993, all of which are small entities, are the only parties eligible to 
participate in the satellite DARS auction, and only two of these 
applicants will receive operating licenses. No other entities, 
including any small entities, will be able to participate in the 
subsequent auctions, or ultimately receive operating licenses. The 
decision to not reopen the filing cut-off is based on sound satellite 
licensing policy and precedent and the equities of this particular 
proceeding. In this satellite proceeding, as in others, applicants 
require some measure of certainty to justify the inherently long-term 
investment of resources required by complex and lengthy international 
allocation and coordination procedures that must be completed prior to 
inauguration of service. This unique feature of satellite services, 
combined with the need to most expeditiously provide new services to 
the public, outweighs any benefits that would accrue from accepting 
additional applications.
    Although one current applicant argues that special auction 
provisions are necessary, two others state that as long as the auction 
is limited to the four applicants, the Commission should not employ 
bidding credits or installment payments. As it has explained, the 
Commission has not adopted special auction provisions for small 
businesses. The Commission notes, however, that the proposal adopted 
herein will promote the principal objectives of Section 309(j) because 
all those participating in the bidding for these licenses are small 
businesses under the SBA definition.
    172. The Paperwork Reduction Act does not apply to the rules 
adopted herein as such rules apply to less than ten persons.
    173. This is a non-restricted notice and comment rulemaking 
proceeding. Ex parte presentations are permitted, except during the 
Sunshine Agenda period, provided they are disclosed as provided in 
Commission rules. See generally 47 CFR Sections 1.202, 1.203, and 
1.1206(a).
    174. Pursuant to applicable procedures set forth in sections 1.415 
and 1.419 of the Commission's rules, 47 CFR Sections 1.415 and 1.419, 
interested parties may file comments on or before May 2, 1997 and reply 
comments on or before May 23, 1997. To file formally in this 
proceeding, you must file an original and five copies of all comments, 
reply comments, and supporting comments. If you want each Commissioner 
to receive a personal copy of your comments, you must file

[[Page 11105]]

an original plus nine copies. You should send comments and reply 
comments to Office of the Secretary, Federal Communications Commission, 
Washington, D.C. 20554. Comments and reply comments will be available 
for public inspection during regular business hours in the FCC 
Reference Center of the Federal Communications Commission, Room 
239,1919 M Street, N.W., Washington, D.C. 20554.
    175. It is further ordered that, pursuant to 47 U.S.C. 155(c), the 
Chiefs, Wireless Telecommunications Bureau and International Bureau, 
are delegated authority to implement and modify auction procedures in 
the DARS service, including the general design and timing of an 
auction, the manner of submitting bids, minimum opening bids and bid 
increments, activity and stopping rules, and application and payment 
requirements.
    176. It is further ordered that the requests for pioneer's 
preference filed by Satellite CD Radio, Inc., Digital Satellite 
Broadcasting Corporation, and Primosphere Limited Partnership--PP-24, 
PP-86 and PP-87, respectively, in GEN Docket No. 90-357--are dismissed.
    177. It is further ordered that the petition for reconsideration 
filed on February 17, 1995 by Underripe National Radio Sales, Inc. is 
denied.
    178. This action is taken pursuant to Sections 1, 4(i), 4(j), 7, 
303(r) and 309(j) of the Communications Act of 1934, as amended, 47 
U.S.C. 151, 154(i), 154(j), 157, 303(r) and 309(j).

List of Subjects

47 CFR Part 25

    Communications common carriers, Communications equipment, Radio, 
Reporting and recordkeeping requirements, Satellites.

47 CFR Part 87

    Air Transportation, Communications equipment, Defense 
communications, Radio, Reporting and recordkeeping requirements.

Federal Communications Commission
William F. Caton,
Acting Secretary.

Rule Changes

    Parts 25 and 87 of Title 47 of this chapter are amended as follows:

PART 25--SATELLITE COMMUNICATIONS

    1. The authority citation for Part 25 is revised to read as 
follows:

    Authority: 47 U.S.C. 701-744. Interprets or applies sec. 303, 47 
U.S.C. 303. 47 U.S.C. sections 154, 301, 302, 303, 307, 309 and 332, 
unless otherwise noted.

    2. A new Section 25.144 is added under the heading ``Space 
Stations'' to read as follows:


Sec. 25.144  Licensing provisions for the 2.3 GHz satellite digital 
audio radio service.

    (a) Qualification Requirements:
    (1) Satellite CD Radio, Primosphere Limited Partnership, Digital 
Satellite Broadcasting Corporation, and American Mobile Radio 
Corporation are the applicants eligible for licensing in the satellite 
digital audio radio service.
    (2) General Requirements: Each application for a system 
authorization in the satellite digital audio radio service in the 2310-
2360 MHz band shall describe in detail the proposed satellite digital 
audio radio system, setting forth all pertinent technical and 
operational aspects of the system, and the technical, legal, and 
financial qualifications of the applicant. In particular, applicants 
must file information demonstrating compliance with Sec. 25.114 and all 
of the requirements of this section.
    (3) Technical Qualifications: In addition to the information 
specified in paragraph (a)(1) of this section, each applicant shall:
    (i) Demonstrate that its system will, at a minimum, service the 48 
contiguous states of the United States (full CONUS);
    (ii) Certify that its satellite DARS system includes a receiver 
that will permit end users to access all licensed satellite DARS 
systems that are operational or under construction; and
    (iii) Identify the compression rate it will use to transmit audio 
programming. If applicable, the applicant shall identify the 
compression rate it will use to transmit services that are ancillary to 
satellite DARS.
    (b) Milestone Requirements. Each applicant for system authorization 
in the satellite digital audio radio service must demonstrate within 10 
days after a required implementation milestone as specified in the 
system authorization, and on the basis of the documentation contained 
in its application, certify to the Commission by affidavit that the 
milestone has been met or notify the Commission by letter that it has 
not been met. At its discretion, the Commission may require the 
submission of additional information (supported by affidavit of a 
person or persons with knowledge thereof) to demonstrate that the 
milestone has been met. This showing shall include all information 
described in Sec. 25.140 (c), (d) and (e). The satellite DARS 
milestones are as follows, based on the date of authorization:
    (1) One year: Complete contracting for construction of first space 
station or begin space station construction;
    (2) Two years: If applied for, complete contracting for 
construction of second space station or begin second space station 
construction;
    (3) Four years: In orbit operation of at least one space station; 
and
    (4) Six years: Full operation of the satellite system.
    (c) Reporting requirements. All licensees of satellite digital 
audio radio service systems shall, on June 30 of each year, file a 
report with the International Bureau and the Commission's Laurel, 
Maryland field office containing the following information:
    (1) Status of space station construction and anticipated launch 
date, including any major problems or delay encountered;
    (2) A listing of any non-scheduled space station outages for more 
than thirty minutes and the cause(s) of such outages; and
    (3) Identification of any space station(s) not available for 
service or otherwise not performing to specifications, the cause(s) of 
these difficulties, and the date any space station was taken out of 
service or the malfunction identified.
    (d) The license term for each digital audio radio service satellite 
shall commence when the satellite is launched and put into operation 
and the term will run for eight years.
    3. Section 25.201 is amended by adding the definition of 
``Satellite Digital Audio Radio Service'' in alphabetical order to read 
as follows:


Sec. 25.201  Definitions

* * * * *
    Satellite Digital Audio Radio Service (``DARS''). A 
radiocommunication service in which audio programming is digitally 
transmitted by one or more space stations directly to fixed, mobile, 
and/or portable stations, and which may involve complementary repeating 
terrestrial transmitters, telemetry, tracking and control facilities.
* * * * *
    4. Section 25.202 is amended by adding a new paragraph (a)(6) to 
read as follows:


Sec. 25.202.  Frequencies, frequency tolerance and emission 
limitations.

    (a) * * *
    (6) The following spectrum is available for exclusive use by the 
satellite digital audio radio service:
    2320-2345 MHz: space-to-Earth (primary).
* * * * *
    5. A new Sec. 25.214 is added to read as follows:

[[Page 11106]]

Sec. 25.214  Technical requirements for space stations in the satellite 
digital audio radio service.

    (a) Definitions.
    (1) Allocated bandwidth. The term ``allocated bandwidth'' refers to 
the entry in the Table of Frequency Allocations of a given frequency 
band for the purpose of its use by one or more terrestrial or space 
radiocommunication services under specified conditions. This term shall 
be applied to the 2310-2360 MHz band for satellite DARS.
    (2) Frequency Assignment. The term ``frequency assignment'' refers 
to the authorization given by the Commission for a radio station to use 
a radio frequency or radio frequency channel under specified 
conditions. This term shall be applied to the two frequency bands (A) 
2320.0-2332.5 MHz and (B) 2332.5-2340.0 MHz for satellite DARS.
    (b) Each system authorized under this section will be conditioned 
upon construction, launch and operation milestones as outlined in 
Sec. 25.144(b). The failure to meet any of the milestones contained in 
an authorization will result in its cancellation, unless such failure 
is due to circumstances beyond the licensee's control or unless 
otherwise determined by the Commission upon proper showing by the 
licensee in any particular case.
    (c) Frequency assignments will be made for each satellite DARS 
system as follows:
    (1) Exclusive satellite DARS licenses are limited to the 2320-2345 
MHz band segment of the allocated bandwidth for satellite DARS;
    (2) Two, 12.5 MHz frequency assignments are available for satellite 
DARS: 2320.0-2332.5 MHz and 2332.5-2345.0 MHz;
    (3) Satellite DARS licensees may reduce their assigned bandwidth 
occupancy to provide telemetry beacons in their exclusive frequency 
assignments;
    (4) Each licensee may employ cross polarization within its 
exclusive frequency assignment and/or may employ cross polarized 
transmissions in frequency assignments of other satellite DARS 
licensees under mutual agreement with those licensees. Licensees who 
come to mutual agreement to use cross-polarized transmissions shall 
apply to the Commission for approval of the agreement before 
coordination is initiated with other administrations by the licensee of 
the exclusive frequency assignment; and
    (5) Feeder uplink networks are permitted in the following Fixed-
Satellite Service frequency bands: 7025-7075 MHz and 6725-7025 MHz 
(101 deg. W.L. orbital location only).
    6. A new subpart F consisting of sections 25.401 through 25.406 is 
added to Part 25 to read as follows:

Subpart F--Competitive Bidding Procedures for DARS

Sec.
25.401  Satellite DARS applications subject to competitive bidding.
25.402  Competitive bidding mechanisms.
25.403  Bidding application and certification procedures.
25.404  Submission of downpayment and filing of long-form 
applications.
25.405  Prohibition of collusion.
25.406  License grant, denial, default, and disqualification.

Subpart F--Competitive Bidding Procedures for DARS


Sec. 25.401  Satellite DARS applications subject to competitive 
bidding.

    Mutually exclusive initial applications filed by Satellite CD 
Radio, Primosphere Limited Partnership, Digital Satellite Broadcasting 
Corporation, and American Mobile Radio Corporation, to provide DARS 
service are subject to competitive bidding procedures. The procedures 
set forth in Part 1, Subpart Q of this chapter will apply unless 
otherwise specified in this subpart.


Sec. 25.402  Competitive bidding mechanisms.

    (a) Tie bids. Where a tie bid occurs, the high bidder will be 
determined by the order in which the bids were received by the 
Commission.
    (b) Maximum bid increments. The Commission may, by announcement 
before or during the auction, establish maximum bid increments in 
dollar or percentage terms.
    (c) Minimum opening bid. The Commission will establish a minimum 
opening bid for the DARS spectrum, and the amount of which will be 
announced by Public Notice prior to the auction.
    (d) Activity rules. The Commission will establish activity rules 
which require a minimum amount of bidding activity. Bidders will be 
entitled to request and be granted waivers of such rule. The Commission 
will specify the number of waivers permitted in an auction, the 
frequency with which they may be exercised, and the method of operation 
of waivers by Public Notice prior to the auction.


Sec. 25.403  Bidding application and certification procedures.

    Submission of Supplemental Application Information. In order to be 
eligible to bid, each pending applicant must timely submit certain 
supplemental information. All supplemental information shall be filed 
by the applicant five days after publication of these rules in the 
Federal Register. The supplemental information must be certified and 
include the following:
    (a) Applicant's name;
    (b) Mailing Address (no Post Office boxes);
    (c) City;
    (d) State;
    (e) ZIP Code;
    (f) Auction Number 15;
    (g) FCC Account Number;
    (h) Person(s) authorized to make or withdraw a bid (list up to 
three individuals);
    (i) Certifications and name and title of person certifying the 
information provided;
    (j) Applicant's contact person and such person's telephone number, 
E-mail address and FAX number; and
    (k) Signature and date.


Sec. 25.404  Submission of down payment and filing of long-form 
applications.

    (a) After bidding has ended, the Commission will identify and 
notify the high bidder and declare the bidding closed.
    (b) Within ten (10) business days of a Public Notice announcing the 
high bidder on a particular license(s), a high bidder must submit to 
the Commission's lockbox bank such additional funds (the ``down 
payment'') as are necessary to bring its total deposits (not including 
upfront payments applied to satisfy bid withdrawal or default payments) 
up to twenty (20) percent of its high bid(s). This down payment must be 
made by wire transfer or cashier's check drawn in U.S. dollars from a 
financial institution whose deposits are insured by the Federal Deposit 
Insurance Corporation and must be made payable to the Federal 
Communications Commission. Down payments will be held by the Commission 
until the high bidder has been awarded the license and has paid the 
remaining balance due on the license, in which case it will not be 
returned, or until the winning bidder is found unqualified to be a 
licensee or has defaulted, in which case it will be returned, less 
applicable payments. No interest on any down payment will be paid to a 
bidder.
    (c) A high bidder that meets its down payment obligations in a 
timely manner must, within thirty (30) business days after being 
notified that it is a high bidder, submit an amendment to its pending 
application to provide the information required by Sec. 25.144.

[[Page 11107]]

Sec. 25.405  Prohibition of collusion.

    Upon the deadline for filing the supplemental information required 
by Sec. 25.403, all applicants are prohibited from cooperating, 
collaborating, discussing or disclosing in any manner the substance of 
their bids or bidding strategies, or discussing or negotiating 
settlement agreements, with other applicants until after the high 
bidder makes the required down payment.


Sec. 25.406  License Grant, Denial, Default, and Disqualification.

    (a) Unless otherwise specified in these rules, auction winners are 
required to pay the balance of their winning bids in a lump sum within 
ten (10) business days following public notice by the Commission that 
it is prepared to award the licenses. Grant of the license will be 
conditioned on full and timely payment of the winning bid.
    (b) If a winning bidder withdraws its bid after the Commission has 
declared competitive bidding closed or fails to remit the required down 
payment within ten (10) business days after the Commission has declared 
competitive bidding closed, the bidder will be deemed to have 
defaulted, its application will be dismissed, and it will be liable for 
the default payment specified in Sec. 1.2104(g)(2). In such event, the 
Commission may either re-auction the license to existing or new 
applicants or offer it to the other highest bidders (in descending 
order) at their final bids. The down payment obligations set forth in 
Sec. 25.404(b) will apply.
    (c) A winning bidder who is found unqualified to be a licensee, 
fails to remit the balance of its winning bid in a timely manner, or 
defaults or is disqualified for any reason after having made the 
required down payment, will be deemed to have defaulted and will be 
liable for the penalty set forth in Sec. 1.2104(g)(2). In such event, 
the Commission will conduct another auction for the license, affording 
new parties an opportunity to file an application for the license.
    (d) Bidders who are found to have violated the antitrust laws or 
the Commission's rules in connection with their participation in the 
competitive bidding process may be subject, in addition to any other 
applicable sanctions, to forfeiture their up front payment, down 
payment or full bid amount, and may be prohibited from participating in 
future auctions.

PART 87--AVIATION SERVICES

    1. The authority citation in Part 87 continues to read as follows:

    Authority: 48 Stat. 1066, 1082, as amended; 47 U.S.C. 154, 303, 
unless otherwise noted. Interpret or apply 48 Stat. 1064-1068, 1081-
1105, as amended; 47 U.S.C. 151-156, 301-609.

    2. Paragraph (d)(1) of Sec. 87.303 is revised to read as follows:


Sec. 87.303  Frequencies.

* * * * *
    (d)(1) Frequencies in the bands 1435-1525 MHz and 2360-2390 MHz are 
assigned primarily for telemetry and telecommand operations associated 
with the flight testing of manned or unmanned aircraft and missiles, or 
their major components. The band 1525-1535 MHz is also available for 
these purposes on a secondary basis. In the band 2320-2345 MHz, the 
mobile and radiolocation services are allocated on a primary basis 
until a Broadcast-Satellite (sound) service has been brought into use 
in such a manner as to affect or be affected by the mobile and 
radiolocation services in those service areas. Permissible uses of 
these bands include telemetry and telecommand transmissions associated 
with the launching and reentry into the earth's atmosphere as well as 
any incidental orbiting prior to reentry of manned or unmanned objects 
undergoing flight tests. In the 1435-1530 MHz band, the following 
frequencies are shared with flight telemetry mobile stations: 1444.5, 
1453.5, 1501.5, 1515.5, 1524.5 and 1525.5 MHz. In the 2320-2345 MHz and 
2360-2390 MHz bands, the following frequencies may be assigned on a co-
equal basis for telemetry and associated telecommand operations in 
fully operational or expendable and re-usable launch vehicles whether 
or not such operations involve flight testing: 2332.5, 2364.5, 2370.5 
and 2382.5 MHz. In the 2360-2390 MHz band, all other telemetry and 
telecommand uses are secondary to the above stated launch vehicle uses.
* * * * *
[FR Doc. 97-6064 Filed 3-10-97; 8:45 am]
BILLING CODE 6712-01-P