*Pages 1--19 from Microsoft Word - 26727* Federal Communications Commission FCC 03- 85 1 Before the Federal Communications Commission Washington, D. C. 20554 In the Matter of Amendment of Parts 2 and 25 of the Commission’s Rules to Permit Operation of NGSO FSS Systems Co- Frequency with GSO and Terrestrial Systems in the Ku- Band Frequency Range; Amendment of the Commission’s Rules to Authorize Subsidiary Terrestrial Use of the 12.2- 12.7 GHz Band by Direct Broadcast Satellite Licensees and Their Affiliates; and Applications of Broadwave USA, PDC Broadband Corporation, and Satellite Receivers, Ltd. to Provide a Fixed Service in the 12.2- 12.7 GHz Band ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ET Docket No. 98- 206 RM- 9147 RM- 9245 SECOND FURTHER NOTICE OF PROPOSED RULE MAKING Adopted: April 10, 2003 Released: April 15, 2003 By the Commission: TABLE OF CONTENTS Heading Paragraph # I. INTRODUCTION AND EXECUTIVE SUMMARY ........................................................................... 1 II. BACKGROUND.................................................................................................................................... 2 III. DISCUSSION ........................................................................................................................................ 8 A. Service Area..................................................................................................................................... 8 B. Build Out Requirement .................................................................................................................. 16 C. Impact on Competitive Bidding..................................................................................................... 18 IV. PROCEDURAL MATTERS................................................................................................................ 19 A. Initial Regulatory Flexibility Analysis........................................................................................... 19 B. Ex Parte Rules – Permit- But- Disclose Proceedings ...................................................................... 21 C. Comment Dates.............................................................................................................................. 22 D. Further Information........................................................................................................................ 27 V. ORDERING CLAUSES....................................................................................................................... 29 APPENDIX A: INITIAL REGULATORY FLEXIBILITY ANALYSIS APPENDIX B: PROPOSED RULES APPENDIX C: NIELSEN LETTER 1 Federal Communications Commission FCC 03- 85 2 I. INTRODUCTION AND EXECUTIVE SUMMARY 1. In this Second Further Notice of Proposed Rule Making (Second Further Notice), we seek further comment on the appropriate service area definition for the Multichannel Video Distribution and Data Service (MVDDS) in the 12.2- 12.7 GHz band (12 GHz band). Specifically, we seek comment on the most appropriate service area definition for the geographic licensing of MVDDS. We also seek comment on whether Designated Market Areas (DMAs) will facilitate delivery of advanced wireless services, such as video and data broadband services, to a wide range of populations, including those areas that are unserved and underserved. In addition, we seek comment on whether we should modify the MVDDS build out requirement as a means to foster expeditious deployment of advanced wireless services, such as video and data broadband services, to these communities as well. II. BACKGROUND 2. In the First Report and Order in this proceeding, the Commission concluded that MVDDS could operate in the 12 GHz band on a co- primary non- harmful interference basis with incumbent Broadcast Satellite Service providers and on a co- primary basis with entities providing non- geostationary satellite orbit fixed- satellite services. 1 At the same time, in the Further Notice, the Commission sought comment on service, technical, and licensing rules for the MVDDS, including but not limited to, the appropriate service area definition. 2 3. In the Second R& O, the Commission adopted a geographic licensing approach for the service. 3 In addition, the Commission decided to define the service areas for the MVDDS based on Component Economic Areas (CEAs). 4 In reaching its decision to use CEAs, the Commission noted that it declined to use Nielsen Media Research’s DMAs 5 , despite support in the record for such use, 6 in part 1 Amendment of Parts 2 and 25 of the Commission’s Rules to Permit Operation of NGSO FSS Systems Co- Frequency with GSO and Terrestrial Systems in the Ku- Band with Frequency Range; Amendment of the Commission’s Rules to Authorize Subsidiary Terrestrial Use of the 12.2- 12.7 GHz Band by Direct Broadcast Satellite Licensees and Their Affiliates; and Applications of Broadwave USA, PDC Broadband Corporation, and Satellite Receivers, Ltd. To Provide A Fixed Service in the 12.2- 12.7 GHz Band, First Report and Order and Further Notice of Proposed Rule Making, FCC 00- 418, ET Docket No. 98- 206, 16 FCC Rcd 4096, 4099- 4100 ¶ 2 (2000) (First R& O and Further Notice). 2 Further Notice, 16 FCC Rcd at 4202 ¶ 285. 3 Memorandum Opinion and Order and Second Report and Order, FCC 02- 116, ET Docket No. 98- 206, 17 FCC Rcd 9614, 9665 ¶ 130 (2002) (Second R& O). 4 Id. at 9665- 9666 ¶ 132. CEAs are based on Economic Areas delineated by the U. S. Dept. of Commerce. Each CEA consists of a single economic node and the surrounding counties that are economically related to the node. The 354 CEA service areas are based on the 348 CEAs delineated by the Regional Economic Analysis Division, Bureau of Economic Analysis, U. S. Department of Commerce February 1995, with the following six FCC- defined service area additions: American Samoa, Guam, Northern Mariana Islands, San Juan (Puerto Rico), Mayagüez/ Aguadilla- Ponce (Puerto Rico), and the United States Virgin Islands. 5 Nielsen Media Research (Nielsen) uses audience survey information from cable and non- cable households to determine the assignment of counties to local television markets, or DMAs. Nielsen then determines what constitutes a separate market based on a complex statistical formula based upon viewership and other factors. See http:// www. nielsenmedia. com/ DMAs. html. The station's assignment to a DMA is then made available in Nielsen's Directory of Stations publication. There are 210 DMAs (from 211 DMAs in 2000) delineated by Nielsen (continued….) 2 Federal Communications Commission FCC 03- 85 3 because Nielsen, the copyright owner of the DMA listing, had not given the Commission a blanket license to use the listing for the MVDDS. 7 Thus, the Commission reasoned that absent a copyright license (through a blanket license agreement or some other arrangement) from Nielsen for use of the copyrighted material, a MVDDS licensee could not rely on the grant of a Commission authorization as a defense to any claim of copyright infringement brought by Nielsen. Consequently, the Commission concluded that economic benefits would accrue to MVDDS licenses from the establishment of a geographic licensing approach premised on service areas in the public domain. 8 4. With respect to its decision to use CEAs, the Commission noted that adopting CEAs would provide similar benefits as DMAs, but would better promote its objectives and address commenters’ concerns. 9 Specifically, the Commission premised its decision on three factors. First, the smaller CEA service areas would better track actual deployment of fixed services. Second, CEAs would encourage rapid service deployment to less populated and rural regions because they will permit additional opportunities for small businesses to provide MVDDS. Third, the use of CEAs would encourage the meaningful participation of small businesses better than a nationwide or regional geographic licensing approach because the smaller areas would likely require a lower minimum investment. Further, the Commission noted that for those seeking a regional or national footprint, the use of CEAs would not prevent them from aggregating areas to create such larger networks. 10 5. Subsequent to the release of the Second R& O, Commission staff continued discussions with Nielsen representatives regarding a blanket licensing agreement or some other arrangement by which Nielsen would consent to the Commission’s use of the DMA listing in the MVDDS context. 11 Although Nielsen does not wish to enter into a blanket license agreement with the Commission regarding use of (Continued from previous page) in its publication entitled “U. S. Television Household Estimates” dated September 2002. See Nielsen Media Research, Nielsen Station Index: Methodology Techniques and Data Interpretation. Nielsen's website contains the above publications. See http:// www. nielsenmedia. com." 6 Northpoint and SRL supported licensing on the basis of DMAs which they aver are well- suited to the low- power character of their technologies. See Northpoint Technology Ltd. and Broadwave USA Comments at 32 (filed Mar. 12, 2001); Satellite Receivers Limited (SRL) Comments at 3 (filed Mar. 12, 2001). In addition, Northpoint, Pegasus Broadband Corporation (Pegasus) and SRL applied for licenses utilizing DMAs. See Broadwave Network, L. L. C. Application for License to Provide a New Terrestrial Transport Service in the 12.2- 12.7 GHz Band (filed Jan 8, 1999); Application of PDC Broadband Corp. for Licenses to Provide Terrestrial Services in the 12.2- 12.7 GHz Band (filed Apr. 18, 2000); and SRL. Application for Licenses to provide Terrestrial Television Broadcast and Data Services in the 12.2- 12.7 GHz Band in Illinois, Indiana, Iowa, Michigan, Minnesota and Wisconsin (filed Aug. 25, 2000). 7 See Second R& O, 17 FCC Rcd at 9665- 66 ¶ 132. 8 Id. (citing Revision of Part 22 and 90 of the Commission’s Rules to Facilitate Future Development of Paging Systems, Second Report and Order and Further Notice of Proposed Rulemaking, WT Docket No. 96- 18, 12 FCC 2732, 2735 n. 3 (1997)). 9 Id. 10 Id. 11 See Letter from Thomas J. Sugrue, Chief, Wireless Telecommunications Bureau, Federal Communications Commission and Jane Mago, General Counsel, Federal Communications Commission, to David Schwartz- Leeper, Vice President/ GC, Nielsen Media Research (Jan. 24, 2003). 3 Federal Communications Commission FCC 03- 85 4 DMAs for licensing MVDDS, 12 it now appears that Nielsen would agree to extend a perpetual, royalty-free license to the Commission with certain conditions as discussed infra. 13 6. On January 30, 2003, the Wireless Telecommunications Bureau (Bureau) sought comment on reserve prices, minimum opening bids, and other auction procedures regarding an MVDDS auction. 14 The Auction PN sought comment on these issues as they would apply to an MVDDS auction based on either CEAs or DMAs in order to minimize any delay in the auction process resulting from a change in geographic license areas. 15 7. On March 25, 2003, MDS America, Inc. (MDS America) filed an ex parte notification (ex parte) which describes its continued concern about the current build out requirements for the MVDDS. 16 In the Second R& O, the Commission determined that it would apply a ten- year build out requirement with a demonstration of substantial service by the MVDDS licensee as the basis for its license renewal expectancy. 17 In its ex parte, MDS America indicated that the current ten- year build out period for MVDDS licenses is too long. It also expressed concern that the build out requirement presented the potential for anti- competitive warehousing of the MVDDS spectrum. It noted that a five- year build out would better address the demand for rural broadband service. III. DISCUSSION A. Service Area 8. Based on the differing responsive comments to the Auction PN received from Northpoint Technology, Ltd. (Northpoint) 18 and MDS America, 19 and our belief that initially MVDDS licensees will provide multichannel video programming distribution (MVPD) services, we take this opportunity to initiate this Second Further Notice. Based on the record in this proceeding, we continue to believe that initially MVDDS licensees will provide multichannel video distribution of local television programs and 12 See Letter from David A. Schwartz- Leeper, Senior Vice President/ GC, Nielsen Media Research, to Thomas J. Sugrue, [former] Chief, Wireless Telecommunications Bureau, Federal Communications Commission and Jane Mago, [former] General Counsel, Federal Communications Commission at 2 (Mar. 26, 2003) (Nielsen letter). See also Appendix C for the text of the Nielsen Letter. 13 See para. 10, supra. 14 See Public Notice, Auction of Multichannel Video Distribution and Data Service Licenses Rescheduled for June 25, 2003, Report No. AUC- 03- 53- A, DA 03- 286, 2003 WL 202902 (rel. Jan. 30, 2003) (Auction PN). 15 Id. 16 See, e. g., Letter from Nancy Killien Spooner, Counsel for MDS America, Inc., to Ms. Marlene H. Dortch, Secretary, Federal Communications Commission (Mar. 25, 2003 Notice of Ex Parte Meeting). 17 Second R& O, 17 FCC Rcd at 9683 ¶ 175. 18 Northpoint supports the use of DMAs in the 12 GHz band. Comments of Northpoint and Broadwave USA, Inc., Regarding Auction Procedures at 5- 6 (filed Feb. 13, 2003). 19 MDS America supports the use of CEAs in the 12 GHz band. Reply Comments of MDS America at 2- 4 (filed Feb. 20, 2003) 4 Federal Communications Commission FCC 03- 85 5 high- speed Internet access in the MVPD marketplace. Consequently, we believe that licensees will require ubiquitous coverage within their geographic service areas to compete. 20 We also continue to believe that with the exception of the Direct Broadcast Satellite Service, most MVPD service remains local or regional service. We also recognize that generally, licensees deploy fixed services, such as high-speed Internet access, on a localized basis. 9. Against this backdrop, we note that the absence of a blanket license agreement with Nielsen regarding the use of the DMA listing for the MVDDS was a significant decisional factor in the Commission’s previous decision to forego using DMAs as the service area definition for MVDDS. 21 Absent such license or other formal agreement, the Commission reasoned that establishing a designation that was in the public domain would be more appropriate for the MVDDS. 22 Consequently, the Commission adopted CEAs -- a service area definition that would provide similar benefits as DMAs, but without the copyright concerns. 23 10. In a letter received on March 26, 2003, 24 counsel for Nielsen stated that Nielsen would agree to extend a perpetual, royalty- free license to the Commission, without the right to sublicense, to “Nielsen Media Research’s DMA market and regions,” 25 provided that the Commission: (i) agrees, and continues to communicate to prospective MVDDS suppliers, that a territorial license from the Commission to supply MVDDS does not confer the right to use Nielsen Media Research’s DMA mark, regions or data, and that such right must be obtained from Nielsen Media Research on such terms as may be mutually acceptable to Nielsen Media Research and the supplier, in their sole and respective discretion, and (ii) does not republish DMA regions or data in any statute, regulation or rule or otherwise. 26 11. We are concerned that Nielsen’s conditions on the use of DMAs may unduly limit the business plans and opportunities for MVDDS licensees. By its most recent letter, Nielsen makes it clear that it is unwilling to consent to allowing the Commission’s MVDDS licensees use the DMA mark, regions or data in their MVDDS business without an individual license from Nielsen. 27 Thus, it does not appear that the license Nielsen described would give Commission licensees sufficient flexibility to make practical use of the DMA designation in connection with their MVDDS operations. Additionally, although the Commission could cross- reference DMAs in its rules, Nielsen’s limitations may interfere with our enforcement flexibility, since Nielsen does not want us to "republish DMA regions or data in any 20 Second R& O, 17 FCC Rcd at 9664 ¶ 128. 21 Id. at 9664 ¶ 132. 22 Id. 23 Id. 24 See Nielsen letter. 25 Id. at 3. 26 Id. 27 Id. 5 Federal Communications Commission FCC 03- 85 6 statute, regulation or rule or otherwise." 28 We seek comment on whether the conditions described by Nielsen are so restrictive that use of DMAs would be of limited utility. 12. While we do not prejudge the type of services licensees will offer in the 12 GHz band, we nonetheless believe that it is appropriate to adopt a service area definition that will afford MVDDS licensees the opportunity to provide a wide array of services. Based on the record in this proceeding, we believe that utilizing DMAs could be more effective in this regard. DMAs, as compared to CEAs, provide a better method to delineate television markets based on viewing patterns. 29 In addition, MVDDS licensees may find it easier to compete with cable if our regulatory structure makes it easier for MVDDS licensees to organize their systems by DMAs. Northpoint has argued that cable systems are organized along these lines, and a compulsory copyright license is available for retransmitting local television broadcast stations within DMAs. 30 It appears that the definition of "cable system" for purposes of rebroadcasting television programming under the compulsory copyright licensing provisions of the Copyright Act are quite broad and may extend to MVDDS licensees. 31 We ask for comment on this possibility and whether MVDDS systems must be organized along DMA lines in order to gain the same type of benefits that are available to cable providers under the compulsory license. In addition, it appears that MVDDS licensees with service offerings involving the delivery of television programming may find the use of DMAs to be administratively easier due to the close nexus between the television viewer market areas as determined by the DMA delineation and the proposed use of the service. We ask for specific comment on any such administrative benefits and on any other additional economic benefits that may flow from the use of a DMA service area. 13. As to other uses, including fixed services, we believe that DMAs and CEAs are equally advantageous because they are both local in nature. While we recognize that CEAs are smaller than DMAs, we continue to believe that DMAs, which are county- based, provide a viable option in facilitating local access to cable, non- cable, and MVDDS service offerings. 32 Consequently, we believe that both DMAs and CEAs would encourage rapid service deployment in unserved or underserved areas and encourage meaningful participation by small businesses. Additionally, entities desiring a national footprint, may aggregate either DMAs or CEAs to create such larger networks. 14. In conclusion, DMAs, as opposed to CEAs, may provide a better method of delineating service areas for those who seek to provide MVPD service offerings involving the retransmission of broadcast programming. In addition, DMAs may allow MVDDS licensees to compete more vigorously with cable systems who generally have a royalty- free statutory copyright license to retransmit local TV 28 Id. 29 See Definition of Markets for Purposes of the Cable Television, Broadcast Signal Carriage Rules, Order on Reconsideration and Second Report and Order, CS Docket No. 95- 178, 14 FCC Rcd 8366, 8372 ¶ 13 (1999). 30 Consolidated Response of Northpoint Technology, Ltd., and Broadwave USA, Inc., to Petitions for Reconsideration of Second Report and Order at 3 (filed Sep. 3, 2002). 31 See 17 U. S. C. § 111( f). 32 First R& O, 16 FCC Rcd at 4202 ¶ 285. 6 Federal Communications Commission FCC 03- 85 7 programming within the DMA of the station being rebroadcast. 33 In addition, DMAs, as opposed to CEAs, may be administratively easier due to the close nexus between the television viewer market areas as determined by the DMA delineation and the proposed use of the service. However, as noted above, Nielsen’s limitations on the use of DMAs may constrain both the Commission’s and licensees use of DMAs. Thus, we seek comment on the appropriate service area designation for MVDDS. 15. In the event that we ultimately adopt a licensing system based on DMAs for the MVDDS, we propose to license MVDDS based on 214 service areas. Specifically, we would utilize the 210 DMAs delineated by Nielsen in its publication entitled "U. S. Television Household Estimates" dated September 2002. We also would include the following four FCC- defined service areas: (1) Alaska - Balance of State (all geographic areas of Alaska not included in Nielsen's three DMAs for the state: Anchorage, Fairbanks, and Juneau); (2) Guam and the Northern Mariana Islands; (3) Puerto Rico and the United States Virgin Islands; and (4) American Samoa. We seek comment on our proposals. B. Build Out Requirement 16. Given that we are revisiting the service area definition, we also take this opportunity to explore whether the current build out requirement sufficiently promotes expeditious deployment of service. We seek to ensure that we generate a complete record as to the best approach to fostering advanced wireless services to the various communities, particularly those communities that are traditionally unserved or underserved. As indicated earlier, the Second R& O establishes a ten- year build out requirement for the MVDDS licensees based on substantial service as a basis for a renewal expectancy. The Commission reasoned that given the complexity and contention surrounding the issues involving band sharing that a ten- year build out period will provide ample time and flexibility for the MVDDS licensees to work with other service providers in the 12 GHz band as they determine the best method to deploy valuable services to the public. MDS America has expressed concern that a ten- year build out period for MVDDS licenses was too long given the potential for anti- competitive warehousing of spectrum in this service and the great demand for rural broadband service. 34 Specifically, MDS America supports a five- year build out period, a requirement advocated by other commenters in this record. 35 17. We believe that this Second Further Notice is a good opportunity to seek additional comment on the practicality of the current build out requirement for this service. We, however, do not believe, nor has any party suggested that we should revisit the substantial service requirement. Rather, we seek limited comment on the timing of whether a ten- year build out requirement is optimal for fostering expeditious delivery of advanced wireless services to all communities, in particular communities that are traditionally unserved or underserved. In addition, we seek comment on whether a shorter build out requirement will facilitate more effective deployment of these services. If so, what is the appropriate 33 17 U. S. C. § 111; 37 C. F. R. § 201.17 (establishing a royalty- free copyright linked to cable must- carry area); cf. also 47 C. F. R. § 76.55( e) (the default must- carry market is DMA- based). We note that MVDDS does not have must- carry obligations. 34 See Letter from Helen E. Disenhaus, Counsel for MDS America, Inc., to Ms. Marlene H. Dortch, Secretary, Federal Communications Commission (Oct. 3, 2002 Notice of Ex Parte Meeting); Letters from Nancy Killien Spooner, Counsel for MDS America, Inc., to Ms. Marlene H. Dortch, Secretary, Federal Communications Commission (Oct. 11, 2002, Mar. 7, 2003 and Mar. 25, 2003 Notice of Ex Parte Meeting). 35 Id.; see also Pegasus Comments at 19 (filed Mar. 12, 2001). 7 Federal Communications Commission FCC 03- 85 8 benchmark for a build out requirement? For example, should the Commission consider a hybrid approach, requiring MVDDS licensees to submit a showing of service deployed, five years from license grant with an additional showing of substantial service by the tenth year. We also ask whether the substantial service requirement would be appropriate as a construction requirement some time earlier in the license term, as well as at the end of the license term. So instead of just meeting the substantial service requirement once at the end of the license term, the licensee would have to meet it twice - at year 10 to justify a renewal expectancy and at an earlier time to meet the license build- out requirement. We seek comment on these matters and any alternative proposals. C. Impact on Competitive Bidding 18. Currently, the auction of MVDDS licenses is scheduled to commence on June 25, 2003. 36 Consequently, we are seeking comment on these issues in an expeditious manner in order not to unduly disrupt the auction process or the efforts that interested parties have undertaken in preparation for participating in such process. Accordingly, we also request comment on the potential impact on business plans if we change the service area designation or the build out requirement. Additionally, we invite comment on whether revising the service area definition or the build out requirement at this time is more likely to speed deployment of advanced services to consumers. Commenters also should discuss whether a change in the service areas at this time would adversely affect the Commission’s objectives in establishing the licensing and service rules for the MVDDS. In this regard, we note that the Commission’s expressed objectives were to provide a regulatory framework to encourage robust competition in the MVPD marketplace, provide opportunities for small businesses to provide niche services across the nation, encourage innovation and advances in MVDDS technology that will not only complement other MVPD offerings, but will expand those offerings. 37 IV. PROCEDURAL MATTERS A. Initial Regulatory Flexibility Analysis 19. As required by Section 603 of the Regulatory Flexibility Act, the Commission has prepared an Initial Regulatory Flexibility Analysis (IRFA) of the expected impact on small entities of the proposals suggested in this document. 38 Appendix A contains the IRFA. We request written public comments on the IRFA. In order to fulfill the mandate of the Contract with America Advancement Act of 1996 regarding the Final Regulatory Flexibility Analysis, we ask a number of questions regarding the prevalence of small businesses in the affected industries. 20. Interested parties must file comments in accordance with the same filing deadlines as comments filed in this Notice, but they must have a separate and distinct heading designating them as responses to the IRFA. The Commission’s Consumer Information Bureau, Reference Information Center, SHALL SEND a copy of this Notice, including the IRFA, to the Chief Counsel for Advocacy of the Small Business Administration in accordance with Section 603( a) of the Regulatory Flexibility Act. 39 36 See Auction PN. 37 Second R& O, 17 FCC Rcd at 9664 ¶ 127. 38 5 U. S. C. § 603 (1996). 39 Id. 8 Federal Communications Commission FCC 03- 85 9 B. Ex Parte Rules – Permit- But- Disclose Proceedings 21. This is a permit- but- disclose notice and comment rule making proceeding. Our rules permit ex parte presentations, except during the Sunshine Agenda period, provided they are disclosed as provided in the Commission's rules. See generally 47 C. F. R. §§ 1.1202, 1.1203, 1.2306( a). C. Comment Dates 22. Pursuant to Sections 1.415 and 1.419 of our Rules, interested parties may file comments on or before 7 days from the date of publication in the Federal Register and reply comments on or before 14 days from the date of publication in the Federal Register. 40 Comments may be filed using the Commission's Electronic Comment Filing System (ECFS), http:// www. fcc. gov/ e- file/ ecfs. html, or by filing paper copies. 41 23. Comments filed through the ECFS can be sent as an electronic file via the Internet to http:// www. fcc. gov/ e- file/ ecfs. html. Generally, only one copy of an electronic submission must be filed. If multiple docket or rulemaking numbers appear in the caption of this proceeding, however, commenters must transmit one electronic copy of the comments to each docket or rulemaking number referenced in the caption. In completing the transmittal screen, commenters should include their full name, U. S. Postal Service mailing address, and the applicable docket or rulemaking number. Parties may also submit an electronic comment by Internet e- mail. To get filing instructions for e- mail comments, commenters should send an e- mail to ecfs@ fcc. gov, and should including the following words in the body of the message, "get form