NEWSReport No. DC 96-38 ACTION IN DOCKET CASE April 25, 1996 FCC ADOPTS PROPOSALS TO ENCOURAGE RAPID PCS DEPLOYMENT THROUGH MODIFICATION OF MICROWAVE RELOCATION RULES, ADOPTION OF COST-SHARING PLAN (WT Docket No. 95-157) The Commission today adopted a Report and Order and Further Notice of Proposed Rule Making in the Microwave Relocation proceeding that will promote the deployment of broadband Personal Communications Services (PCS). The Order adopted today: -- Amends and clarifies the Commission's microwave relocation rules to encourage rapid negotiation of voluntary relocation agreements and to clarify the rights of PCS licensees and microwave incumbents in the event they do not reach voluntary relocation agreements. -- Adopts a cost-sharing plan that will provide incentives for early relocation of multi- link microwave systems by A- and B-block PCS licensees, which will result in band- clearing benefits to future PCS licensees in other blocks. By adopting this Order, the Commission seeks to expedite the clearing of the 2 GHz band and the introduction of PCS to the public, while at the same time ensuring that relocation does not cause disruption to service. The amendments and clarifications adopted today will promote an efficient and equitable relocation process, which minimizes transaction costs and maximizes benefits for all parties, including incumbents, PCS licensees, and the public. Background The Commission previously allocated the 1850-1990, 2110-2150, and 2160-2200 MHz bands to emerging technology services, including PCS, and established procedures for PCS licensees to relocate incumbent licensees in the private and common carrier fixed microwave services out of these bands. The relocation process consists of a two-year voluntary negotiation period (three years for public safety incumbents) and a one-year mandatory negotiation period (two years for public safety), after which the incumbent becomes subject to involuntary relocation provided that the PCS licensee pays for comparable facilities. - more - - 2 - Summary of Cost-Sharing Plan In this Report & Order, the Commission substantially adopts the cost-sharing plan proposed in the Notice of Proposed Rule Making in this docket, adopted October 12, 1995. The cost-sharing plan will promote the relocation of entire microwave systems at once, which benefits microwave incumbents, and it will distribute relocation costs more equitably among PCS licensees. The plan is conditioned on approval of one or more entities to administer the cost-sharing clearinghouse. The basic operation of the plan is as follows: Before any PCS licensee turns on its system, it is required to send a Prior Coordination Notification (PCN) to the clearinghouse administrator. The clearinghouse administrator will then determine whether a reimbursement obligation is owed, using an objective test. If the PCS licensee is required to contribute to another licensee's relocation expenses, the clearinghouse will notify the licensee of the exact amount of its reimbursement obligation, according to a formula prescribed by the Commission. In general, the later a PCS licensee enters the market, the lower its payment obligation under the cost-sharing plan. (See attached chart.) Summary of Relocation Rule Changes In this Report & Order, the Commission:  requires that the incumbent allow the PCS licensee access to its facilities one year into the voluntary period so that an independent third party can estimate the cost to relocate the incumbent to comparable facilities;  clarifies the obligations of the parties to negotiate in good faith during the mandatory negotiation period. Specifically, the Commission will: (1) consider common law principles when interpreting the obligation to negotiate in good faith, (2) require the parties to share pertinent information, (3) place the burden on the party alleging bad faith to provide the Commission with cost estimates for comparable facilities, and (4) consider the following factors when evaluating claims of failure to negotiate in good faith: efforts to obtain estimates of the actual cost of relocating the incumbent to comparable facilities, whether either party has withheld information, the type of premium requested, if any, and the proportionality of premiums requested to actual relocation costs;  clarifies the nature of "comparable facilities" that must be provided by the PCS licensee if it seeks involuntary relocation of an incumbent. Specifically, a facility will be deemed "comparable" if it is equivalent with respect to (1) communications throughput, (2) system reliability, and (3) operating costs;  limits compensation to incumbents for increased recurring costs associated with the replacement facilities to a five-year time period during an involuntary relocation and limits reimbursement of incumbents' transactional costs during an involuntary relocation to two percent of the "hard costs" involved; - 3 -  clarifies that the twelve-month trial period in our rules applies only if an involuntary relocation occurs. Therefore, if the parties decide that a trial period should be established for relocations that occur during the voluntary or mandatory period, the trial period must be provided for in the contract;  requires that public safety licensees self-certify that they meet the criteria for extended negotiation periods;  adopts the Commission's proposal to "sunset" the relocation obligations of PCS licensees in the year 2005, but does not adopt proposal to convert all remaining microwave incumbents to secondary status at that time; requires PCS licensees to give six months' notice before commencing operation that would interfere with a microwave link for which relocation was not negotiated; after the notice period has expired the incumbent will be required to turn its 2 GHz license back into the Commission. Summary of Further Notice of Proposed Rulemaking The Commission also seeks comment on: whether microwave incumbents should be permitted to seek reimbursement for relocation expenses from PCS licensees through participation in the cost-sharing plan; and whether the Commission should adjust the negotiation period by shortening the voluntary negotiation period by one year, and lengthening the mandatory negotiation period by one year, for PCS licensees in the D, E and F blocks. Comment is also sought on whether or not this adjustment should be made for the C block. Interim Licensing Policy Finally, the Order adopts the Commission's interim licensing policy for 2 GHz microwave systems, which permits a grant of primary status only for the following limited number of minor technical changes: decreases in power, minor changes in antenna height, minor location changes (up to two seconds), any data correction which does not involve a change in the location of the existing facility, reductions in authorized bandwidths, minor changes in structure heights, changes in ground elevation (but preserving centerline height), and changes in equipment; all other modifications will be permitted only on a secondary basis, unless (1) the incumbent affirmatively justifies primary status, and (2) the incumbent establishes that the modification would not add to the relocation costs of PCS licensees. Action by the Commission April 25, 1996 by Report & Order and Further Notice of Proposed Rule Making (FCC 96-196). Chairman Hundt, Commissioners Quello, Ness, and Chong, with Chairman Hundt and Commissioner Quello issuing statements. News Media Contact: Kara Palamaras at (202) 418-0654 Wireless Telecommunications Bureau contact: Linda Kinney at (202) 418-0620 Separate Statement of Commissioner James H. Quello April 25, 1996 Re:Amendment of the Commission's Rules Regarding a Plan for Sharing the Costs of Microwave Relocation, WTB Docket No. 95 - 157; RM - 8643 This Report and Order and Further Notice of Proposed Rule Making clarifies some aspects of the relocation rules applicable when emerging technologies displace incumbent licensees. In the instant matter, the microwave relocation rules continue to be the most controversial part of our PCS regulatory scheme. Although the majority of the negotiations are proceeding as intended, in several instances the negotiation process has broken down. These disputes appear to be more than "hard ball" negotiations; they appear to be instances of "gaming" some unintended ambiguities in the rules. We, therefore, adopt some "fine-tuning" of this Commission's relocation rules to clarify this Commission's intent. First and foremost, we adopt a cost sharing plan that will facilitate the relocation of the microwave incumbents and the roll-out of PCS, with detriment to neither. I do not want this significant achievement to get lost in the minutiae of wrangling over legal terms of art in this contentious proceeding. Indeed, the proposal for a cost sharing mechanism was the basis for opening this rule making. The focus should be on achieving the overarching goal of the relocation rules, viz., to provide comparable facilities to the incumbents that are paid for by the new entrants. This process must be based on verifiable data for actual costs of demonstrably comparable facilities. The microwave incumbents are to be made whole. They were to be no worse off after the relocation than before. That is, their communications system should have the same (i.e., "comparable") performance criteria. These amendments reiterate that this Commission will not tolerate instances of over-reaching by permitting demands for more than comparable facilities. I noted at the NPRM stage that the virtue of the relocation procedures -- their inherent flexibility -- can also be the source of some difficulties. That is always the situation when the Commission correctly decides to rely on negotiations between the parties rather than heavy-handed governmental intrusion into what should be private contractual matters. This Commission wisely built in this give- and-take to accommodate the needs of both the displaced incumbents and the new entrants. While I believe that some fine-tuning is in order, I want to reiterate my support for the relocation procedures and urge the parties to negotiate forthrightly. I find it somewhat surprising that we would need to explicitly require our licensees, whether they are incumbents or new entrants, to negotiate in good faith. I believe that good faith behavior is required at all times. Some negotiations, however, have floundered significantly. These instances, although a minority, nevertheless threaten the rapid and rational deployment of PCS. Therefore, in addition to more explicitly defining such terms as "comparable facilities" my colleagues also wish to define what constitutes "good faith." I myself believe that this definition will at best be proven superfluous once the other elements of the Further Notice are in place. These will assist the parties in achieving a fair result that fulfills our goal to facilitate emerging technologies by refocusing the negotiation on the fundamental issue of determining the actual costs of relocating the interfering microwave links.