Eligibility for the Specialized Mobile Radio Services and Radio Services in the 220-222 MHz Land Mobile Band and Use of Radio Dispatch Communications

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 22 and 90

[GN Docket No. 94-90, FCC 94-202]

Eligibility for the Specialized Mobile Radio Services and Radio

Services in the 220-222 MHz Land Mobile Band and Use of Radio Dispatch

Communications

AGENCY: Federal Communications Commission.

ACTION: Notice of proposed rule making.

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

SUMMARY: In this Notice of Proposed Rule Making (NPRM), the Commission

proposes to eliminate the rules that now prohibit wireline telephone

carriers from holding licenses in the Specialized Mobile Radio (SMR)

service and the commercial 220-222 MHz land mobile band. The NPRM also

proposes to eliminate the current prohibition on the provision of

dispatch service by cellular licensees and other licensees in the

Public Mobile Services.

DATES: Comments are due by September 21, 1994 and reply comments are

due by October 6, 1994.

ADDRESSES: Federal Communications Commission, Washington, D.C. 20554.

FOR FURTHER INFORMATION CONTACT:

Kathleen O'Brien Ham or Susan McNeil, Private Radio Bureau, Land Mobile

and Microwave Division, (202) 632-2443.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's NPRM

in GN Docket No. 94-90, adopted August 2, 1994 and released August 11,

1994. The full text of Commission decisions are available for

inspection and copying during normal business hours in the FCC Docket

Branch (Room 230), 1919 M Street, N.W., Washington, DC. The complete

text of this decision may also be purchased from the Commission's copy

contractor, International Transcription Service, Inc., (202) 857-3800,

2100 M Street, N.W., Washington, DC 20554.

Synopsis of the Notice of Proposed Rule Making

I. Background

A. Wireline Restrictions

1. When the Commission established the SMR service in 1974, it

elected to prohibit wireline telephone common carriers from holding SMR

base station licenses. Because of the dominance of the established

wireline carriers in the 1970's, the Commission viewed the prohibition

on wireline entry as consistent with promoting competition in the

fledgling SMR industry. The Commission has also stated that the

wireline prohibition was intended to ensure that SMRs would be

available as a business opportunity for small entrepreneurs and to

reduce incentives for wireline carriers to engage in discriminatory

interconnection practices.

2. When 220-222 MHz service was established in 1991, the Commission

adopted an identical restriction on wireline eligibility for commercial

licenses in that service. The Commission indicated that the rationale

for excluding wirelines from SMR licensing also served as the basis for

the 220 MHz limitation.

3. In 1986, the Commission issued a Notice of Proposed Rule Making

in PR Docket No. 86-3 that proposed to eliminate the SMR wireline

restriction. The proceeding was terminated in 1992 on the grounds that

the record has become stale. The Commission stated that the wireline

restriction should be retained at least until the Commission could more

fully evaluate ``the competitive potential of private land mobile

services vis-a-vis common carrier land mobile providers'' so as ``to

preserve a climate favorable to the continued development of private

land mobile competitors.''

B. Dispatch Prohibition

4. The Commission currently prohibits common carriers licensed

after January 1, 1982, including all cellular licensees, from offering

dispatch services. The Commission has since construed the prohibition

on dispatch services to include any transmission on cellular

frequencies that routes communications through a dispatcher, as opposed

to through a cellular switch (i.e., with no intervention by a

dispatcher). On the other hand, the Commission has allowed ``dispatch-

type'' communications to be offered through the cellular switched

network as long as the communication is not directly between a

dispatcher and end user.

II. Discussion

A. Licensee Eligibility in SMR and 220 MHz Commercial Service

5. In evaluating its present wireline restrictions, the Commission

tentatively concludes that there is no longer a need for the SMR

wireline ban or the commercial 220 MHz wireline restriction in today's

competitive mobile service marketplace. First, the Commission notes

that the risk of wireline carriers being able to cause competitive harm

if allowed to enter the SMR market has diminished in recent years. When

the SMR wireline ban was adopted 20 years ago, mobile services were in

their infancy and telecommunications was dominated by wireline carriers

under the control of AT&T. Since that time, the breakup of AT&T and the

rapid growth of mobile services have combined to create an environment

in which wireline carrier participation in mobile services, including

participation by the post-divestiture BOCs, has the potential to

increase competition rather than impede it.

6. In the Broadband PCS docket, the Commission recently concluded

that wireline entities should be allowed to hold broadband PCS licenses

without restriction (except to the extent such entities also hold

cellular interests). In that proceeding, the Commission determined that

wireline participation would produce significant economies of scope

between wireline and PCS networks, which, in turn, would promote rapid

development of PCS and yield a broader array of PCS services at lower

costs to consumers. The Commission has similarly concluded that LECs

should be allowed to participate in the provision of narrowband PCS

service without restriction. The Commission notes that its conclusions

with respect to wireline entry into broadband and narrowband PCS are

also potentially applicable to SMR and 220 MHz commercial service.

7. The Commission also questions whether the wireline restriction

continues to be necessary to protect against competitive harm. THe

wireline restrictions have served to eliminate any incentive for LECs

to: (1) Discriminate in the offering of interconnection to

nonaffiliated SMR licensees, or (2) use their market power in the local

exchange market to cross-subsidize SMR services, thereby undercutting

potential competition. Even if the wireline prohibition is eliminated,

however, other regulatory safeguards exist and can be enforced to

prevent wireline from engaging in these forms of anti-competitive

behavior.

8. With respect to discrimination in interconnection, Section 201

of the Communications Act mandates that a carrier must provide

reasonable interconnection to any carrier that requests it. In

addition, Section 332(c)(1)(B) of the Communications Act, as amended by

the Budget Act, requires the Commission pursuant to Section 201 to

order common carriers to interconnect with CMRS providers (which

includes any SMR or commercial 220 MHz licensee utilizing

interconnection) on reasonable request. In its Order implementing this

provision, the Commission determined that LECs should provide

reasonable interconnection to all CMRS providers in a manner that is

consistent with past requirements for cellular providers. In addition,

the Commission requires LECs to offer interconnection to PMRS

providers.

9. The Commission also notes that independent accounting safeguards

exist to protect against cross-subsidization in the event of wireline

entry into the SMR service. In the CMRS docket, the Commission

indicated that the joint cost and affiliate transaction rules would

apply to all CMRS providers with LEC affiliates. These rules require

LECs to maintain procedures to separate the costs of the regulated

activities from those of their activities that are classified as

nonregulated for federal accounting purposes, and to account for their

transactions with their nonregulated affiliates. Since most SMRs and

commercial 220 MHz licensees fall inside the CMRS definition, these

existing and applicable accounting rules should help prevent cross-

subsidization.

10. Another reason for eliminating the wireline prohibition is that

the SMR industry is sufficiently well-established that wireline entry

is unlikely to chill further development of the service. Although SMR

operations today are still relatively small in comparison to cellular

operations, most available SMR spectrum has been licensed in

metropolitan areas. Thus, any threat that wirelines might obtain a

substantial portion of SMR spectrum and thereby hinder the development

of SMR service by non-wireline carriers is substantially diminished. As

a practical matter, wirelines are likely to be largely limited to

entering the SMR business by acquiring existing SMR businesses, and all

such transfers would be subject to Commission review under existing

transfer and control rules.

11. The Commission reached a similar tentative conclusion with

respect to wireline participation in commercial 220 MHz service.

Although 220 MHz service was established more recently than SMR,

substantial licensing has occurred and the service is closed to new

applicants for the time being. Thus, wireline entry into commercial 220

MHz service would be likely to be gradual as the service develops, and

would be subject to case-by-case review by the Commission. In addition,

a more open eligibility policy may be suitable because of the

narrowband nature of 220 MHz service. In establishing regulations for

the licensing of narrowband PCS, for example, the Commission concluded

that LECs should be allowed to participate in the provision of

narrowband PCS service without restriction. The Commission reasoned

that narrowband PCS was sufficiently disparate from any LEC offering to

make negligible any ability these carriers might have to exert undue

market power or restrain trade. The Commission solicits comment on

whether a similar conclusion is justified in the case of 220 MHz

service.

12. Additionally, repeal of the wireline ban could promote

opportunities for small entrepreneurs as well as infuse new capital and

expertise into the mobile services marketplace. In its request for rule

making, Polar Communications suggested that the overwhelming majority

of companies shut out of the SMR business by the wireline ban are

small, rural telephone companies with capitalizations that are small in

comparison to many dominant SMR operators. Repeal of the ban could

therefore serve to further competition in the SMR market by increasing

the number of small business participants in the service. Future

auctions of SMR spectrum could provide additional opportunities for

small business entry into SMRS through competitive bidding incentives

established for small businesses, minorities, and rural telephone

companies.

13. In addition, wireline entry could infuse new capital and

expertise into the mobile services marketplace. The SMR industry is in

transition, evolving from stand-alone analog to wide-area networks. 220

MHz is also at an important stage of technological development. During

this time frame, wirelines can be a key source of capital and expertise

for the development of new technological advances that will benefit

these services.

14. The Commission concludes that the wireline restrictions have

been outmoded by changes in the mobile services marketplace since 1974

and that there may be cause to eliminate these restrictions. Commenters

are nevertheless invited to present any views that justify retaining

the wireline restrictions. In particular, the Commission is interested

in any concerns commenters may have about the potential ability of

wirelines to unfairly influence competition in the mobile services

marketplace. In addition, commenters may wish to address the

alternative of retaining the restrictions for one service and not the

other.

15. In proposing to allow wirelines to enter the SMR and commercial

220 MHz markets, the Commission emphasizes its intent to vigorously

enforce statutory and regulatory safeguards discussed above that

prohibit wirelines from engaging in discriminatory interconnection

practices. Commenters are encouraged to address how to best achieve

this objective.

16. Also, assuming the wireline restrictions are repealed, the

Commission seeks comment on whether existing accounting safeguards

applicable to LECs with CMRS operations are sufficient to protect

against cross-subsidization and discriminatory pricing, or whether

structural separation requirements should also be imposed. In the

Broadband PCS Second Report and Order, the Commission confirmed that

the accounting safeguards would apply to PCS but concluded that no new

subsidiary rules should be required because it would seriously

undermine the ability of LECs to take advantage of their potential

economics of scope and would jeopardize other public interest benefits

of wireline participation in PCS. Commenters should address whether

added structural separation requirements would similarly undermine the

potential public interest benefits of wireline entry into the SMR and

commercial 220 MHz markets.

17. Finally, assuming that the wireline restriction is eliminated,

the issue arises whether there is a need to impose other eligibility

restrictions on SMR and commercial 220 MHz applicants to address

present day competitive concerns. In particular, the Commission has

recognized in other contexts that it cannot yet determine that cellular

licensees lack market power in the mobile services market. The

Commission will defer consideration of whether this market power is

sufficient to justify restrictions on cellular eligibility for SMR or

220 MHz licensing pending a decision in General Docket 93-252 on a

proposal to impose a general limit on the amount of spectrum that any

CMRS licensee may acquire in a given geographic market.

B. Common Carrier Dispatch Prohibition

18. The Commission proposes to amend its rules to permit all mobile

service common carriers to provide dispatch service. A number of

parties have indicated in the past that repeal of the dispatch ban

would enhance competition in the dispatch market and thereby provide

consumers with expanded choice. The Commission tentatively agrees with

these views and therefore is included to repeal the present prohibition

entirely. Commenters should address the Commission's conclusion that

repeal of the dispatch ban will lead to more innovative service

offerings and lower costs for dispatch customers. The Commission also

seeks comment on whether repeal of the ban will increase opportunities

for dispatch customers to obtain service from commercial vendors as an

alternative to relying on internal systems or systems shared with other

eligible users.

19. The Commission also encourages commenters to provide data on

the current state of competition in the dispatch market, including the

level of participation by small businesses. Commenters are also asked

to address the potential for participation in the dispatch market by

mobile service common carriers, including (1) types of dispatch

services that common carrier licensees are most likely to offer, (2)

any technical advantages or disadvantages to offering dispatch service

on a common carrier mobile service system, and (3) the effect of common

carrier entry on competition in the dispatch market. Commenters should

further consider whether common carriers operating in the dispatch

market could engage in discriminatory pricing or cross-subsidization

activities that would place dispatch competitors at a disadvantage.

20. If the Commission concludes that immediate lifting of the

dispatch prohibition could have an anti-competitive impact, one

alternative would be to ``sunset'' the rule at some point in the

future. For example, the Commission could delay repeal of the rule

until August 10, 1996, three years from the date the Budget Act

amendments became law. This effective date would coincide with the

conclusion of the three year transition period provided in the Budget

Act for existing private land mobile licensees to adjust to regulation

as CMRS providers. A sunset provision would also effectively defer

cellular participation in the dispatch market and thereby give the

Commission more time to evaluate information concerning the state of

competition in the dispatch market. The Commission seeks comment on

this alternative.

21. Another alternative to outright repeal of the ban on common

carrier dispatch service would be to allow mobile common carrier

licensees to provide dispatch service only on a secondary basis or to

impose a limit on the amount of system capacity that common carrier

licensees may devote to dispatch service. Consumers appear to identify

cellular as primarily a two-way service, therefore cellular providers

may in any case be reluctant to divert system capacity from voice to

dispatch service. On the other hand, if dispatch evolves from a

primarily analog service to a primarily digital service, cellular

licensees may have ample capacity to provide both radiotelephone and

dispatch. In light of these factors, the Commission seeks comment on

whether imposing limits on cellular dispatch is necessary or practical.

22. Finally, the Commission asks commenters to consider the

treatment of dispatch offered by common carriers other than land mobile

service providers, e.g. aviation, marine, and mobile satellite

licensees who provide common carrier service. These categories of

common carriers were not previously prohibited from offering dispatch

service under old Section 332 of the Communications Act, which applied

only to land mobile services. Because Section 332 as amended applies to

all mobile services, however, an issue arises whether these categories

of licensees now fall within the scope of the prohibition absent

further Commission action. The Commission believes that Congress did

not intend to extend the dispatch ban to non-land mobile licensees but

meant simply to repeat and incorporate its old prohibition against

common carrier land mobile service providers offering dispatch without

modification and to give the Commission authority to repeal the

prohibition in whole or in part. The Commission seeks comment on this

view.

III. Procedural Matters

23. Initial Regulatory Flexibility Analysis. Pursuant to Section

603 of the Regulatory Flexibility Act, the Commission has prepared an

Initial Regulatory Flexibility Analysis (IRFA) of the expected impact

of the proposed rule changes on small entities. Written public comments

are requested on the IRFA.

I. Reason for Action. This rule making proceeding was initiated to

solicit comment on proposals to amend Sections 90.603(c), 90.703,

22.519(a) and 22.911(d) of the Commission's rules. The basic proposals

are (1) Repeal the ban on wireline telephone carrier eligibility for

Specialized Mobile Radio Service (SMR) and commercial 220-222 MHz

(commercial 220 MHz) land mobile service and (2) permit all commercial

mobile service providers to offer dispatch service in competition with

SMR systems.

II. Objectives. In making the above proposals, the Commission

intends to promote competition, growth and innovation at a time when

the mobile services marketplace is undergoing regulatory changes.

III. Legal Basis. The proposed action is authorized under Sections

3(n), 4(i), 303(r), 332(c), and 32(d) of the Communications Act of

1934, 47 U.S.C. 153(n), 154(i) and 303(r), 332(c) and 332(d), as

amended.

IV. Reporting, Recordkeeping and Other Compliance Requirements.

None.

V. Federal Rules Which Overlap, Duplicate or Conflict With Rules.

None.

VI. Description, Potential Impact, and Number of Small Entities

Involved. Many small entities could be affected by the proposals

contained in the Notice. The full extent of the impact cannot be

predicted until the issues presented in this proceeding are resolved.

The Commission will evaluate comments in response to the Notice and

will set forth its findings on the impact of the rule changes on small

entities in the Final Regulatory Flexibility Analysis.

VII. Significant Alternatives Minimizing the Impact on Small

Entities Consistent with the Stated Objectives. The Notice solicits

comments on the alternative described above. Any additional significant

alternatives presented in the comments will also be considered.

24. Ex Parte Rules/Non-Restricted Proceeding. This is a non-

restricted notice and comment rule making proceeding. Ex parte

presentations are permitted except during the Sunshine Agenda period,

provided that they are disclosed as provided in the Commission's rules.

See generally 47 CFR 1.1202, 1.1203, 1.120(a).

25. Comment Period. For filing requirements, see generally 47 CFR

1.415, 1.419. To file formally in this proceeding, participants must

file an original and four copies of all comments, reply comments, and

supporting materials. If you want each Commissioner to receive a

personal copy of your comments, you must file an original and nine

copies. Send comments and reply comments to the Office of the

Secretary, Federal Communications Commission, Washington, D.C. 20554.

In addition, commenters are requested to submit courtesy copies to the

Chief, Land Mobile and Microwave Division, Private Radio Bureau, 2025 M

Street, N.W., Room 5202, Washington, D.C. 20554. Comments and reply

comments will be available for public inspection during regular

business hours in the FCC Reference Center (Room 239) at the

Commission's headquarters at 1919 M Street, N.W., Washington, D.C.

26. Paperwork Reduction Act: No significant impact.

List of Subjects

47 CFR Part 22

Public mobile services; Radio.

47 CFR Part 90

Private land mobile services; Radio.

William F. Caton,

Acting Secretary.

[FR Doc. 94-19990 Filed 8-17-94; 8:45 am]

BILLING CODE 6712-01-M