U.S. v. Motorola, Inc. & Nextel Communications, Inc.; Proposed Final Judgment and Competitive Impact Statement

DEPARTMENT OF JUSTICE

Antitrust Division

U.S. v. Motorola, Inc. & Nextel Communications, Inc.; Proposed

Final Judgment and Competitive Impact Statement

Notice is hereby given pursuant to the Antitrust Procedures and

Penalties Act, 15 U.S.C. 16(b)-(h), that a proposed Final Judgment, a

Stipulation, and a Competitive Impact Statement have been filed in the

United States District Court for the District of Columbia in United

States v. Motorola, Inc. and Nextel Communications, Inc., Civ. No.

1:94CV02331

The Complaint alleges that the agreement between Nextel and

Motorola to transfer control of substantial portions of Motorola's SMR

service business to Nextel, both through Nextel's purchase of a

substantial portion of Motorola's SMR frequencies and its assumption of

management control of most of Motorola's remaining SMR frequencies,

violates section 7 of the Clayton Act, as amended, 15 U.S.C. 18. The

Complaint alleges that the two companies are each other's chief

competitor and that the agreement between them is likely to

substantially reduce competition in fifteen (15) major cities in the

United States in the market for trunked SMR services. As a result of

the transactions, Nextel would control virtually all of the service

alternatives available for persons with a need for trunked SMR services

in those cities and would be able to increase the prices of or reduce

the quality or availability of such services.

The proposed Final Judgment enjoins Nextel and Motorola from

holding or acquiring more than a limited number of 900 MHz channels in

fourteen of the cities and requires Nextel and Motorola to divest

themselves of channels they hold above that number. Nextel and Motorola

are also required to terminate, at the request of the licensee, the

management agreements of 900 MHz licensees whose channels they manage.

Nextel and Motorola are also required to divest themselves of a certain

number of 800 MHz SMR channels in the city of Atlanta, Georgia.

Public comment on the proposed Final Judgment is invited within the

statutory 60-day comment period. Such comments and responses thereto

will be published in the Federal Register and filed with the Court.

Comments should be directed to George S. Baranko, Attorney,

Communications and Finance Section, Antitrust Division, U.S. Department

of Justice, 555 Fourth Street, N.W., Room 8104, Washington, D.C. 20001.

Constance K. Robinson,

Director of Operations, Antitrust Division.

In the United States District Court for the District of Columbia

United States of America, Plaintiff, v. Motorola, Inc. and

Nextel Communications, Inc., Defendants, Civil Action No. 94-2331.

Stipulation

It Is Hereby Stipulated and Agreed, by and between the

undersigned parties, by their respective attorneys, that:

1. The parties consent that a Final Judgment in the form hereto

attached may be filed and entered by the Court, upon the motion of

any party or upon the Court's own motion, at any time after

compliance with the requirements of the Antitrust Procedures and

Penalties Act (15 U.S.C. Sec. 16), and without further notice to any

party or other proceedings, provided that plaintiff has not

withdrawn its consent, which it may do at any time before the entry

of the proposed Final Judgment by serving notice thereof on

defendants and by filing that notice with the Court.

2. The parties shall abide by and comply with the provisions of

the Final Judgment pending entry of the Final Judgment.

3. In the event plaintiff withdraws its consent or if the

proposed Final Judgment is not entered pursuant to this Stipulation,

this Stipulation will be of no effect whatever, and the making of

this Stipulation shall be without prejudice to any party in this or

any other proceeding.

Dated: October 27, 1994.

For the Plaintiff:

Anne K. Bingaman,

Assistant Attorney General.

Steven C. Sunshine,

Deputy Assistant Attorney General.

Constance K. Robinson,

Director of Operations.

Donald J. Russell,

Chief, Telecommunications Task Force.

George S. Baranko,

Katherine E. Brown,

J. Philip Sauntry, Jr.,

Susanna M. Zwerling,

Attorneys, Antitrust Division, U.S. Department of Justice, Washington,

D.C. 20002, (202) 514-5640.

For Defendant Nextel Communications, Inc.

Jones, Day, Reavis & Pogue,

By:

Charles A. James,

A member of the Firm, 1450 G Street, N.W., Washington, D.C. 20005, 202-

879-3675.

For Motorola, Inc.

David F. Hixson, Esquire,

Vice President and General Attorney, 1303 East Algonquin Road,

Schaumburg, Illinois 60196, 708-576-3960.

In the United States District Court for the District of Columbia

United States of America, Plaintiff, v. Motorola, Inc. and

Nextel Communications, Inc. Defendants. Civil Action No. 94 3221.

Final Judgment

Plaintiff, United States of America, having filed its complaint

herein on October 27, 1994; the parties, by their respective attorneys,

having consented to the entry of this Final Judgment; and without this

Final Judgment constituting any evidence against or admission by any

party with respect to any issue of fact or law herein;

Now, therefore, before the taking of any testimony, without trial

or adjudication of any issue of fact or law; and upon the consent of

the parties, it is hereby

Ordered, Adjudged and Decreed as follows:

I

Jurisdiction

This Court has jurisdiction over the parties and the subject matter

of this action. The Complaint states a claim upon which relief may be

granted against defendants under Section 7 of the Clayton Act, as

amended (15 U.S.C. 18).

II

Definitions

As used in this Final Judgment:

A. ``Affiliate'' means any person in which Motorola or Nextel

separately or in combination hold (i) the right, contractual or

otherwise, to direct the management decisions, or (ii) an ownership

interest of 50 percent or greater, unless defendants do not have the

right to direct the management decisions.

B. ``Category A City'' means any or all of the cities of Boston,

Massachusetts; Chicago, Illinois; Dallas and Houston, Texas; Denver,

Colorado, Los Angeles and San Francisco, California; Miami and Orlando,

Florida; New York, New York; Philadelphia, Pennsylvania; and

Washington, D.C.

C. ``Category B City'' means either or both of the cities of

Detroit, Michigan or Seattle, Washington.

D. ``Category C City'' means the city of Atlanta, Georgia.

E. ``Defendants'' means Nextel and/or Motorola.

F. ``800 MHz channel'' means a trunked or conventional channel or

frequency pair in the 800 MHz band within a 25 mile radius of the

geographic center of Atlanta, capable of being used in providing

trunked SMR service in accordance with the Federal Communications Act.

Center coordinates are defined in 47 CFR 90.635 and in Federal

Communications Commission Public Notice 43004, Private Radio 800 MHz

Systems Application Waiting List, released May 27, 1994.

G. ``900 MHz channel'' means a trunked or conventional channel or

frequency pair in the 900 MHz band within a 25 mile radius of the

geographic center of any city identified in section II paragraphs B and

C, capable of being used in providing trunked SMR service in accordance

with the Federal Communications Act. Center coordinates are defined in

47 C.F.R. Sec. 90.635 and in Federal Communications Commission Public

Notice 43004, Private Radio 800 MHz Systems Application Waiting List,

released May 27, 1994. For the purposes of this Final Judgment, the

location of channels shall be determined as of September 1, 1994.

H. ``Management agreement'' means the SMR Systems Facilities

Services Agreement, SMR User Acceptance Agreement and any and all such

agreements relating to Motorola's and/or Nextel's management of an SMR

license for any licensee.

I. ``Motorola''means Motorola, Inc., each affiliate, subsidiary or

division thereof, and each officer, director, employee, agent or other

person acting for or on behalf of any of them.

J. ``Nextel'' means Nextel Communications, Inc., each affiliate,

subsidiary or division thereof, and each officer, director, employee,

agent or other person acting for or on behalf of any of them. Nextel

shall include OneComm Corporation as provided for in the Agreement and

Plan of Merger dated July 13, 1994 and Dial Page, Inc. as provided for

in the letter of intent dated August 5, 1994.

K. ``Person'' means any natural person, corporation, association,

firm, partnership or other legal entity.

L. ``SMR infrastructure equipment'' means equipment (e.g.,

switches, transmission equipment, and radio base stations) used by an

SMR service provider in or for the provision of SMR service anywhere in

North America and includes related software, maintenance and support

and other equipment, products or services used to provide SMR service.

M. ``Specialized Mobile Radio System'' or ``SMR'' means a radio

system in which licensees provide land mobile communication services

(other than radio-location services) in the 800 MHz and 900 MHz bands

on a commercial basis as defined and regulated in 47 C.F.R. Part 90.

III

Applicability

A. The provisions of this Final Judgment shall apply to defendants,

to each of their successors and assigns, to their subsidiaries,

affiliates, directors, officers, managers, agents, and employees, and

to all persons in active concert or participation with any of them who

shall have received actual notice of this Final Judgment by personal

service or otherwise.

B. Nothing herein contained shall suggest that any portion of this

Final Judgment is or has been created for the benefit of any third

party and nothing herein shall be construed to provide any rights to

any third party.

IV

Prohibited Conduct

Defendants are enjoined and restrained as follows:

A. Defendants as a group may not hold or acquire licenses for more

than thirty (30) 900 MHz channels in any Category A City or more than

ten (10) 900 MHz channels in any Category B City without the prior

written permission of plaintiff. To the extent that defendants are

currently the licensees for more than thirty (30) 900 MHz channels in

any Category A City or more than then (10) 900 MHz channels in any

Category B City, defendants shall divest fully and completely all

licensed channels in excess of the relevant number and sell all SMR

infrastructure equipment attributable to the divested channels to a

person or persons approved by the plaintiff, provided, however, that

the provisions of this Final Judgment shall have effect with respect to

frequencies licensed under the authority of a foreign government.

B. Defendants shall not finance any portion of the purchase of any

license pursuant to a sale mandated by section IV. paragraph A of this

Final Judgment without plaintiff's prior written permission.

C. Except as permitted by paragraph E, defendants shall terminate

management agreements relating to all 900 MHz channels in Category A

and Category B Cities at the written request of the licensee. Further,

defendants are prohibited from exercising, maintaining, enforcing or

claiming any right of first refusal to purchase the system, license or

operation relating to such channels, and are prohibited from

exercising, maintaining, enforcing or claiming any right to select the

SMR infrastructure equipment to be deployed on the systems.

D. Except as permitted by paragraph E, defendants are further

enjoined and restrained from taking any action to prevent or inhibit a

licensee's termination of its management agreement and/or affiliating

with a network controlled by a third-party pursuant to section IV.

paragraph C, above. Defendants may, however, require a licensee to

provide 120 days notice of an intent to exercise its rights under

section IV. paragraph C, and may solicit customers of a terminating

system to purchase defendants' services. Nothing in this paragraph

shall impose any express or implied duty on the part of defendants to

conduct business with any person.

E. Notwithstanding the provisions of section IV. paragraphs C and

D, above, defendants may (1) refuse to terminate a management

agreement, (2) exercise, maintain, enforce or claim a right of first

refusal to purchase, or (3) exercise, maintain, enforce or claim a

right to select the SMR infrastructure equipment used by a 900 MHz

channel in a Category A City when, including that channel, the

defendants as a group control by license and by management agreement,

combined, thirty (30) or fewer 900 MHz channels in that city. Further,

defendants may (1) refuse to terminate a management agreement, (2)

exercise, maintain, enforce or claim a right of first refusal to

purchase, or (3) exercise, maintain, enforce or claim a right to select

the SMR infrastructure equipment used by a 900 MHz channel in a

Category B City when, including that channel, the defendants as a group

control by license and by management agreement, combined, ten (10) or

fewer 900 MHz channels in that city.

F. Defendants shall fully and completely divest forty-two (42) 800

MHz channels in the Category C City to a person or persons approved by

the plaintiff. Defendants shall have the full discretion to designate

the frequencies to be divested. The divestitures required by this

paragraph shall be contingent upon closing of the transaction

contemplated by the letter of intent between Nextel and Dial Page,

Inc., dated August 5, 1994.

G. Defendants are enjoined and restrained from entering into new

management agreements for 900 MHz channels in any Category A or

Category B Cities, except to channels owned or managed by defendants as

of August 4, 1994, without the prior written permission of plaintiff.

Defendants are further enjoined and restrained from holding or

acquiring, either directly or indirectly, more than a five percent

ownership interest in any corporation or entity that itself owns,

controls, or manages, either directly or indirectly, 900 MHz channels

in any Category A or B Cities without the prior written permission of

the plaintiff unless the corporation's or entity's ownership, control

or management of 900 MHz channels in combination with that of

defendants is less than or equal to thirty (30) 900 MHz channels if a

Category A city and ten (10) 900 MHz channels if a Category B city.

H. For purposes of complying with the provisions of section IV.

paragraphs A through F, defendants shall share information and enter

agreements to the extent reasonably necessary to effect the allocation

between them with respect to 900 MHz channels they will continue to

license under the relevant number limit.

I. Defendants shall take all reasonable steps to complete the

required divestitures no later than 180 days after entry of this Final

Judgment. Defendants shall provide plaintiff notice when the

divestitures have been completed in accordance with the terms of this

Final Judgment with respect to each city. In its sole discretion,

plaintiff may extend the date by which defendants are required to

divest rights in 900 MHz frequencies; provided however, that plaintiff

shall extend the divestiture period to accommodate proceedings by the

Federal Communications Commission with respect to the transfer of any

divested license.

J. Until the divestitures required by this Final Judgment have been

accomplished, defendants shall refrain from taking any action that

would jeopardize the economic viability of properties to be divested.

V

Agent

A. If defendants have not completed the required divestitures

within 180 days of entry of this Final Judgment, the Court shall, upon

application of the plaintiff, appoint an agent to effect the mandated

sales. After the agent's appointment becomes effective, defendants

immediately shall identify specific frequencies to be divested.

Thereafter, only the agent, and not the defendants, shall have the

right to sell excess licensed channels. The agent shall have the power

and authority to effectuate the mandated sales at such price and on

such terms as are then obtainable by the agent, to a purchaser

acceptable to the plaintiff, subject to the provisions of this Final

Judgment. The agent shall have such other powers as the Court deems

appropriate. Defendants shall use all reasonable efforts to assist the

agent in accomplishing the required sales. Defendants shall not object

to a sale by the agent on any grounds other than malfeasance. Any such

objection by defendants shall be conveyed to plaintiff and to the agent

within fifteen (15) days after the agent has notified defendants of a

proposed sale.

B. The agent shall be a business broker with experience and

expertise in the disposition of telecommunications properties.

Plaintiff shall provide defendants with the names of not more than two

nominees for the position of agent for the required divestiture.

Defendants will notify plaintiff within five days thereafter whether

either or both such nominees are acceptable. If either or both of such

nominees are acceptable to defendants, plaintiff shall notify the Court

of the person or persons upon whom the parties have agreed and the

Court shall appoint one of the nominees as agent. If neither of such

nominees is acceptable to defendants, defendants shall furnish to

plaintiff within five days after plaintiff provides the names of its

nominees, written notice of the names and qualifications of not more

than two nominees for the position of agent for the required

divestiture. Plaintiff shall furnish the Court the names and

qualifications of its proposed nominees and the names and

qualifications of the nominees proposed by defendants. The Court may

hear the parties as to the qualifications of the nominees and shall

appoint one of the nominees as agent.

C. The agent shall serve at the cost and expense of defendants, on

such terms and conditions as the Court may prescribe, and shall account

for all monies derived from the sale of channels and all costs and

expenses so incurred.

D. The agency shall have full and complete access to the personnel,

books, records, and facilities of the defendants relevant to excess

licensed channels and the defendants shall develop such financial or

other information relevant to the channels to be sold as the agent may

request. Defendants shall take no action to interfere with or impede

the agent's accomplishment of the sale and shall use their best efforts

to assist the agent in accomplishing the required sale.

E. After his or her appointment, the agent shall file monthly

reports with the parties and the Court setting forth the agents'

efforts to accomplish divestitures contemplated under this Final

Judgment. If the agent has not accomplished such divestitures within

six months after the agent's appointment, the agent shall thereupon

promptly file with the Court a report setting forth (1) the agent's

efforts to accomplish the required divestitures, (2) the reasons, in

the agent's judgment, why the required divestitures have not been

accomplished, and (3) the agent's recommendations. The agent at the

same time shall furnish such report to the parties, who shall each have

the right to be heard and to make additional recommendations. The Court

thereafter shall enter such orders as it shall deem appropriate to

carry out the purpose of the agency, which shall include, if necessary,

extending the term of the agency and the term of the agent's

appointment.

VI

Sanctions

Nothing in this Final Judgment shall bar the United States from

seeking, or the Court from imposing, against defendants or any person

any relief available under any applicable provision of law.

VII

Plaintiff Access

A. To determine or secure compliance with this Final Judgment and

for no other purpose, duly authorized representatives of the plaintiff

shall, upon written request of the Assistant Attorney General in charge

of the Antitrust Division, and on reasonable notice to defendants, be

permitted:

1. access during defendant's office hours to inspect and copy all

records and documents in their possession or control relating to any

matters contained in this Final Judgment; and

2. to interview defendants' officers, employees, trustees, or

agents, who may have counsel present, regarding such matters. The

interviews shall be subject to defendants' reasonable convenience and

without restraint or interference from defendants.

B. Upon written request of the Assistant Attorney General in charge

of the Antitrust Division, defendants shall submit such written

reports, under oath if requested, relating to any of the matters

contained in this Final Judgment as may be reasonably requested.

C. No information or documents obtained by the means provided in

this section VII shall be divulged by plaintiff to any person other

than a duly authorized representative of the executive branch of the

United States or a duly authorized representative of the Federal

Communications Commission, except in the course of legal proceedings to

which the United States is a party, or for the purpose of securing

compliance with this Final Judgment, or as otherwise required by law.

VIII

Further Elements of Decree

A. Defendants shall provide each licensee subject to a management

agreement with a copy of this Final Judgment and notice of their rights

under this Final Judgment in a form approved by plaintiff within seven

days of the date this Final Judgment is entered.

B. This Final Judgment resolves issues with respect to: (1)

defendants' consummated and proposed acquisitions of 800 MHz channels

in the continental United States and Canada; (2) proposed mergers and

acquisitions between Nextel, OneComm Corporation and Dial Page, Inc.;

and (3) agreements between and among the defendants as of August 4,

1994 with respect to the financing and construction of SMR systems.

Nothing in this Final Judgment, expressly or by implication, is

intended to affect defendants' activities except as specifically

required herein.

C. This Final Judgment shall expire ten years from the date of

entry.

D. Jurisdiction is retained by this Court for the purpose of

enabling any of the parties to this Final Judgment to apply to this

Court at any time for further orders and directions as may be necessary

or appropriate to carry out or construe this Final Judgment, to modify

or terminate any of its provisions, to enforce compliance, and to

publish violations of its provisions.

E. Five years after the entry of this Final Judgment, any party to

this Final Judgment may seek modification of its substantive terms and

obligations, and neither the absence of specific reference to a

particular event in the Final Judgment, nor the foreseeability of such

an event at the time this Final Judgment was entered, shall preclude

this Court's consideration of any modification request.

The common law applicable to modification of final judgments is not

otherwise altered.

F. Entry of this Final Judgment is in the public interest.

Dated:

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United States District Judge

In the United States District Court for the District of Columbia

United States of America, Plaintiff, v. Motorola, Inc. and

Nextel Communications, Inc. Defendants.

Case Number 1:94CV02331

Judge: Thomas F. Hogan

Deck Type: Antitrust

Date Stamp: 10/27/94

Competitive Impact Statement

Pursuant to Section 2(b) of the Antitrust Procedures and Penalties

Act (``APPA'') or ``Tunney Act''), 15 U.S.C. 16 (b)-(h), the United

States, submits this Competitive Impact Statement relating to the

proposed Final Judgment submitted for entry against Nextel

Communications, Inc. (``Nextel'') and Motorola, Inc. (``Motorola'') in

this civil antitrust proceeding.

I

Nature and Purpose of Proceeding

On October 27, 1994, the United States filed a civil antitrust

complaint, under Section 15 of the Clayton Act, as amended, 15 U.S.C.

25, against Nextel and Motorola, alleging that an agreement between

Nextel and Motorola violates Section 7 of the Clayton Act, as amended,

15 U.S.C. 18. That agreement would transfer ownership of a substantial

portion of Motorola's specialized mobile radio (``SMB'') business to

Nextel and control of most of Motorola's remaining SMR business.

The complaint alleges that the Nextel/Motorola transactions are

likely to reduce competition substantially in fifteen (15) major cities

in the United States in the market for ``trunked SMR services.'' SMR

service is a form of dispatch service that enables a customer to

communicate with a fleet of vehicles, such as delivery trucks, repair

trucks and messenger services. SMR service also enables a vehicle to

communicate with another member of the fleet. The transactions would

allow Nextel to control virtually all the service alternatives

available for persons with a need for trunked SMR services in those

cities and increase the prices of or reduce the quality of such

services. The complaint seeks, among other relief, to enjoin the

combination of Nextel's and Motorola's trunked SMR operations and

thereby to preserve competition in the relevant markets.

On October 27, 1994, the United States, Nextel and Motorola filed a

Stipulation by which they consented to the entry of a proposed Final

Judgment designed to eliminate the anticompetitive effects of the

transactions. Under the proposed Final Judgment, Nextel and Motorola

will divest themselves of substantially all of their SMR channels in

the 900 MHz radio band and release upon request of the license holder

substantially all the 900 MHz SMR channels they manage in the cities of

Boston, Massachusetts; Chicago, Illinois; Dallas and Houston, Texas;

Detroit, Michigan; Los Angeles and San Francisco, California; Miami and

Orlando, Florida; New York, New York; Philadelphia, Pennsylvania;

Seattle, Washington; and Washington, DC. In addition, Nextel's and

Motorola's freedom in the future to acquire 900 MHz channels in these

cities and in Denver, Colorado would be significantly constrained. In

Atlanta, Georgia, either Nextel or Motorola will sell 42 800 MHz

channels to an independent SMR service provider.

The United States, Nextel and Motorola have stipulated that the

proposed Final Judgment may be entered after compliance with the APPA,

unless the government withdraws its consent. Entry of the proposed

Final Judgment would terminate this action, except that the Court would

retain jurisdiction of construe, modify, and enforce the proposed Final

Judgment and to punish violations of the Judgment.

II

Facts Giving Rise to the Alleged Violation

A. Product Market

SMR service is a type of land mobile communications service used by

customers such as contractors, service companies and delivery services

that have significant field operations and need to provide their

personnel with the ability to communicate directly with each other,

either on a one-to-one or one-to-many basis. This type of service is

commonly referred to as ``dispatch'' service. SMR service is provided

pursuant to licenses granted by the Federal Communications Commission

in the 800 MHz and 900 MHz radio bands.\1\

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\1\The regulations allocating the spectrum and governing its use

are contained in 47 CFR Part 90, Subpart S, Secs. 90.601-90.659. A

similar service is provided in the 220 MHz band, as discussed below.

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SMR services may be ``conventional'' or ``trunked.'' Conventional

SMR service is a method of operation in which one or more radio

frequency channels are assigned to mobile and base stations on a non-

exclusive, first come, first served, basis. Users listen to hear if the

channel is being used by others and wait until other conversations on

the channel are completed before using it themselves. Trunked SMR

service allows a number of customers to share a number of channels by

electronically assigning a channel to a customer when he or she wishes

to use the system. Trunked SMR service affords customers greater

privacy and more reliable channel availability than conventionally

service.

SMR systems have historically utilized high-elevation based

stations to receive signals from transmitting radios, to allocate the

signals among available channels and to transmit the enhanced signal to

the intended recipients. In this deployment, SMR base stations have had

a broad range, allowing users to communicate within the area of

broadcast. An 800 MHz SMR system will generally broadcast throughout

the entire area of the license, which covers a radius of 35 miles from

the base station transmitter. A 900 MHz SMR system will cover a

designated filing area as defined in 52 FR 1302 (January 12, 1987). In

contrast, cellular telephone companies ``reuse'' spectrum by dividing a

licensed service area into ``cells'' and reusing a frequency within the

same system. Several cells would have to be used to transmit a

communication to reach a group of vehicles; consequently, this method

of operation is not well suited for SMR customers who need the

capability of sending frequent, short messages over a broad area to one

or to many recipients. Moreover, the FCC prohibits cellular companies

from providing one-to-many dispatch service.

The FCC initially allocated 280 800 MHz channels for trunked SMR

service in every market.\2\ In 1988 the FCC allocated an additional 200

900 MHz channels to trunked SMR services in 50 major cities across the

country where allocated 800 MHz channels appeared inadequate to meet

consumer demand for SMR service. In a few markets the FCC has taken

back some 900 MHz channels because of the failure of licensees to

construct their systems. Recently, the FCC has announced plans to

auction the 900 MHz SMR spectrum it has taken back and the 900 MHz

spectrum in markets where it had not previously been allocated. Even

though the mobile radios used on 800 MHz and 900 MHz systems are not

compatible with each other, 800 MHz and 900 MHz systems provide

interchangeable service.

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\2\More than 280 800 MHz channels are currently being used for

trunked SMR service in some cities through ``intercategory

sharing.'' Regulations permit SMR licensees to include in their SMR

systems unallocated channels assigned to industrial, land

transportation or other private dispatch use in the 800 MHz band

under certain conditions. In metropolitan areas where all 800 MHz

channels have been allocated, intercategory sharing involves an

agreement between an SMR service provider and a license holder of a

channel allocated to one of these other service categories. In

exchange for providing trunked SMR service to the industrial or

other licensee, the SMR service provider is able to use the

remaining capacity of the channel in its commercial SMR operations.

Most private systems, however, utilize virtually all of the capacity

of their channels and are unwilling to participate in intercategory

sharing arrangements.

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In 1991 the FCC announced its intent to allocate channels in the

220 MHz bandwidth for SMR services. The FCC allocated 100 channels for

non-nationwide trunked use including private systems and SMR systems.

Initiation of SMR service in the 220 MHz band, however, was delayed by

litigation which was settled in March 1994. The delays led the FCC to

extend the time holders of 220 MHz licenses had to construct their

systems until April 4, 1995. If the systems are not constructed by that

date, the licenses will revert to the FCC.

SMR service in the 220 MHz band will be a substitute for SMR

services in the 800 MHz and 900 MHz bands at some point in the future.

At present, however, the only constructed 220 MHz SMR systems are in

California. Systems are planned for, among other cities, Atlanta,

Boston, Chicago, Dallas, Houston, Los Angeles, New York, Philadelphia,

San Francisco, and Washington DC, but the scope of expected

implementation varies by city. Further, 220 MHz service will require

some time to gain commercial acceptance, just as 800 MHz and 900 MHz

services required when they were first implemented. As a result, when

220 MHz systems are constructed, they will not adequately discipline

the parties' control of 800 MHz and 900 MHz systems in the 15 cities.

The product market consists of trunked SMR service in the 800 MHz,

900 MHz and 220 MHz bands. Conventional dispatch service is not a

substitute for trunked SMR service because it affords lesser privacy

and lower reliability. Cellular telephone service is not a substitute

because it is significantly more expensive than SMR service, is

significantly more difficult for customers to restrict communications

to a defined fleet or group, and because it cannot be provided on a

one-to-many dispatch basis.

B. Geographic Market

SMR channels in the 800 MHz band are licensed by the FCC for a 35

mile radius from a specific location. Subsequent applicants for

licenses may apply for the same channel if they protect the coverage

area of the first licensee. Channels in the 900 MHz band are licensed

for designated filing areas, which generally approximate metropolitan

statistical areas.

SMR service providers seek to place their broadcast antennas in

locations that will afford their users geographic coverage that will

correspond to the area served by their fleet of vehicles. Consequently,

frequently used sites include centrally located skyscrapers and

mountains that shadow metropolitan areas, such as Stone Mountain

outside Atlanta. Antenna sites are also placed to ensure coverage of

high traffic areas, particularly downtown areas and important traffic

arteries.

The geographic markets consist of the license areas in which the

FCC has authorized the provision of SMR service. In any particular

city, the geographic market can be considered to include the twenty-

five mile radius from city center because SMR service providers must be

able to cover the high-traffic downtown area.

C. Developments in the 800 MHz Band

The FCC's early licensing policies of 800 MHz spectrum led to an

industry of many small SMR service providers. Applicants could apply

for up to five trunked channel pairs per market. To retain channels, an

SMR provider had to build its facilities within one year and meet

certain loading requirements. Trunked SMRs were required to be

``loaded'' to 70 radio units per channel within five years. Systems not

meeting the standards would have unloaded channels reassigned to

applicants on a waiting list. Initially, the FCC limited radio

equipment manufacturers, like Motorola, to one 20 channel trunked

system nationwide.

The FCC permitted Motorola and others to manage licenses held by

other persons in exchange for a percentage of the revenues of the

operation. Such ``Management'' agreements commonly assign the managing

company responsibility for daily operations, grant the managing company

the right to select the type of infrastructure equipment to be deployed

by the system, and grant the managing company a right of first refusal

in the event the licensee receives an offer to purchase the system.

While the FCC requires that management agreements technically leave

control of the operations in the hands of the licensee, managing

companies generally have effective control of the channels they manage.

In the last five years Nextel has become the primary supplier of

trunked SMR services in the United States through its acquisition of

dozens of small SMR companies, principally in the 800 MHz band. Nextel

has also assumed responsibility for many contracts providing for the

management of SMR licenses held by others.

Nextel recently moved to establish a nationwide presence in the 800

MHz band through its agreements of July 13, 1994, to acquire OneComm

Corporation, which had been accumulating 800 MHz spectrum in sixteen

Western states, and of August 5, 1994 to acquire Dial Page, Inc., which

had been accumulating 800 MHz spectrum in twelve Southeastern states.

As a result, Nextel controls far more 800 MHz SMR channels in the

United States than any other company. It also owns or manages a large

number of 900 MHZ SMR channels in cities across the United States.

Nextel's numerous acquisitions of 800 MHz SMR service providers are

part of a plan to replace the currently deployed analog technologies in

those systems with the new Motorola Integrated Radio System (``MIRS'')

digital technology developed by Motorola. The technology will be

deployed in a multi-site configuration, much like that employed by

cellular services providers. Use of digital technology and frequency

re-use on Nextel's 800 MHz channels will greatly increase each system's

capacity and, Nextel believes, allow it to implement a variety of

services, including a more reliable and better quality telephone

interconnect service that would compete with the cellular providers,

and to continue as a dispatch service provider in the market it serves.

Motorola is the second largest provider of trunked SMR services in

the United States. It owns or manages a substantial number of 800 MHz

and 900 MHz channels it has used to provide trunked SMR services.

On August 4, 1994, Motorola and Nextel signed an agreement

providing that Motorola would sell and Nextel would buy Motorola's 800

MHz SMR business, including both owned (licensed) and managed channels.

The agreement also provided that Nextel would manage Motorola's 900 MHz

SMR business for three years; the agreement can be renewed for

subsequent periods of two years. In return for its SMR business,

Motorola would receive twenty-four percent (24%) of Nextel's voting

securities. By agreements entered into the same day, Nextel committed

to purchase Motorola equipment for its 800 MHz SMR business.

D. Harm to Competition Resulting from the Transactions

The combination of Nextel's and Motorola's owned and managed 800

MHz SMR channels as well as the parties' owned and managed 900 MHz

channels would result in Nextel holding virtually all of the SMR

spectrum in the markets of Atlanta, Georgia; Boston, Massachusetts;

Chicago, Illinois; Dallas and Houston, Texas; Denver, Colorado;

Detroit, Michigan; Los Angeles and San Francisco, California; Miami and

Orlando, Florida; New York, New York; Philadelphia, Pennsylvania;

Seattle, Washington; and Washington, DC. As a result of the

consolidation, there would be few, if any, alternatives available to

SMR customers in those areas, and the combined entity would have the

ability to raise prices or reduce the quality or quantity of service.

III

Explanation of the Proposed Final Judgment

The United States brought this action because the effect of the

Nextel/Motorola transactions may be substantially to lessen competition

in trunked SMR services in the relevant geographic markets in violation

of Section 7 of the Clayton Act. The risk to competition posed by the

transaction would be substantially eliminated by the relief provided in

the proposed Final Judgment which will ensure that alternative trunked

SMR service providers will be available in all the relevant geographic

markets.

Nextel's planned acquisition of Motorola's 800 MHz channels,

following its numerous acquisitions of other SMR service providers, and

its planned management of Motorola's 900 MHz SMR services would have

the effect of eliminating all but a few suppliers of trunked SMR

services in a number of cities in the United States. In San Francisco,

for example, within 25 miles of the center of the city, Nextel

currently owns or manages approximately 209 800 MHz channels and 42 900

MHz channels. Motorola is the largest remaining provider of SMR

services in San Francisco. It owns or manages approximately 45 800 MHz

channels and 12 900 MHz channels there. The several other providers of

trunked SMR services there currently hold, in total, licenses for

approximately 35 800 MHz and 900 MHz channels on which they can provide

trunked SMR service. While SMR service providers in the 220 MHz band

have not yet completed construction of their systems, approximately

half of the licensed 220 MHz channels are likely to be fully available

service alternatives within the next two year.\3\ Even allowing for

entry by 220 MHz operators, the resulting market concentration exceeds

the levels the Antitrust Division has generally found to indicate that

a transition may be anticompetitive.\4\

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\3\The precise number of 220 MHz channels that will be

operational in any particular city within the next two years cannot

be determined. It is unlikely that all allocated 220 MHz channels

that have been allocated for SMR services will be constructed in

that time. However, even if all allocated 220 MHz channels in the

fifteen cities are constructed and become operational within the

next two years, given the overwhelming dominance of Nextel, those

220 MHz services and the few independent 800 MHz and 900 MHz

services will be inadequate, without more, to discipline Nextel's

services.

\4\The Antitrust Divison's Horizontal Merger Guidelines provide

for the Division to consider the post-merger concentration and the

increase in concentration resulting from a merger. The increase in

concentration is measured by the Herfindahl-Hirschman Index which is

calculated by summing the squares of the individual market shares of

all the participants. The HHI thresholds are exceeded in each of the

15 cities. Without considering the affect of 220 MHz channels, the

HHI is currently greater than 2200 in each city and the transaction

will increase the HHI by more than 1400 points. If 220 MHz services

are included, the premerger HHI will be more than 1550 in each city

and the transaction will increase the HHI by more than 600 points.

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Nextel's consolidation of SMR spectrum, however, may enable it to

create a third mobile telephone service to compete with established

cellular services. The result could be a wider variety of wireless

services at a lower cost in the near future. The Department saw

substantial benefits to new competition in another market (the cellular

telephone market) if Nextel could obtain sufficient capacity at 800 MHz

to enable it to enter that market. Thus, the Department decided to

limit the relief sought in this action to the 900 Mhz band (with the

single exception of Atlanta).

MIRS technology cannot be deployed on 900 MHz spectrum, and

Nextel's ownership or control of 900 MHz spectrum is not necessary to

obtain the benefits of new competition to the cellular companies.

Rather, Nextel's ownership and management of a significant portion of

900 MHz spectrum in cities where it will own and manage virtually all

of the 800 MHz spectrum services to enhance its power over customers

requiring trunked SMR services. Absent judicial intervention, Nextel

will be able to raise prices and reduce the quality or quantity of

services to such customers and inhabit the deployment of alternative

technologies.

The proposed Final Judgment preserves competition for trunked SMR

customers by limiting the 900 MHz spectrum Nextel and Motorola will own

and control for the next ten years. Nextel and Motorola together will

have the power to control, by license and by management agreement, no

more than 30 900 MHz channels in Boston, Massachusetts; Chicago,

Illinois; Dallas and Houston, Texas; Los Angeles and San Francisco,

California; Miami and Orlando, Florida; New York, New York;

Philadelphia, Pennsylvania; and Washington, DC.; or 10 900 MHz channels

in Detroit, Michigan and Seattle, Washington.\5\ Nextel and Motorola

would be permitted to continue to own or manage a limited amount of

spectrum indefinitely because: (1) Nextel's deployment of its 800 MHz

digital mobile network will be facilitated by its control of a limited

number of 900 MHz channels to use to transfer customers to the new

service; (2) the number of channels required by the decree to be sold

or released will be sufficient to permit the entry of new trunked SMR

service providers for customers with a need for dispatch services; and

(3) excluding Motorola from the 900 MHz band might foreclose its

experimentation with new technologies there.

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\5\Nextel and Motorola would be limited to a combined 10 900 in

Seattle and Detroit because those are border cities where, by

international agreement, only half of the available spectrum may be

licensed by the United States.

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Where Nextel and Motorola together currently own more than the

permitted number of 900 MHz channels, the proposed Final Judgment

requires that the channels in excess of the permitted amount be sold to

a purchaser approved by the plaintiff. If they are unable to complete

the sales within 180 days of the entry of the Final Judgment, upon

application by plaintiff, the Court would appoint an agent to

effectuate the mandated sales.

The proposed Final Judgment also requires that Nextel and Motorola

release management agreements relating to 900 MHz channels in affected

cities at the request of the licensee unless Nextel and Motorola hold

fewer than a specified number of channels in that particular market.\6\

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\6\It is possible that Nextel and Motorola may control a greater

number of 900 MHz channels in the relevant geographic markets if the

licensees of managed systems do not request to be released from

their management agreements. In any case, neither Nextel nor

Motorola would be able to preclude the licensees from moving their

licensed channels to other managers, networks or technologies.

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Channels to be divested or released are defined as those within 25

miles of the center point of each relevant city. This is to ensure that

would-be competitors are able to secure spectrum in the central city

areas where spectrum is most difficult to obtain and must be obtained

in order to provide a competitive service.

The proposed Final Judgment prohibits Nextel and Motorola from

acquiring, either directly or indirectly, any ownership interest in or

entering into new management agreements for 900 MHz channels in

affected cities without the plaintiff's prior written permission.\7\

The Defendants may, however enter into new management agreements with

respect to channels either Motorola or Nextel owned or managed as of

August 4, 1994, provided that the new agreements are subject to section

IV paragraphs C and D of the proposed Final Judgment. The proposed

Final Judgment also prohibits the parties from acquiring, either

directly or indirectly, more than a five percent ownership interest in

any entity that itself owns, controls, or manages 900 MHz channels in

those cities without the prior written permission of the United States,

except that prior approval will not be required where the acquisition

of ownership will not cause Motorola's and Nextel's combined channel

position to exceed applicable thresholds.

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\7\Neither Motorola nor Nextel own or manage any 900 MHz

spectrum in Denver, Colorado and much of the 900 MHz SMR channels

there reverted to the FCC because the license holders did not

construct or load the systems. The proposed Final Judgment addresses

the competitive problems in this market by limiting the amount of

900 MHz spectrum the defendants may obtain in the future to 30

channels.

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In Atlanta, due to the existence of a viable purchaser, the parties

are required to divest 42 800 MHz channels to a purchaser or purchasers

acceptable to plaintiff.

The United States, Nextel and Motorola have stipulated that the

proposed Final Judgment may be entered by the Court at any time after

compliance with the APPA. The proposed Final Judgment constitutes no

admission by either party as to an issue of fact or law. Under the

provisions of Section 2(e) of the APPA, entry of the proposed Final

Judgment is conditioned upon a determination by the Court that the

proposed Final Judgment is in the public interest.

The term of the proposed Final Judgment is 10 years. It provides

that the Court retains jurisdiction over this action, and any party may

apply to the Court for any order necessary or appropriate for its

modification, interpretation and enforcement. Such a request will be

subject to common law standards of decree modification for five years

after entry of the judgment. Thereafter, a party seeking modification

may rely upon events that were known and foreseeable at the time of

entry of the proposed Final Judgment, provided the grounds for

modification at common law are otherwise met. The parties contemplate

that a complete extinguishment of Motorola's relationship with Nextel

would be a significant changed circumstance under the decree.

IV

Remedies Available to Potential Private Litigants

Section 4 of the Clayton Act, 15 U.S.C. Sec. 15, provides that any

person who has been injured as a result of conduct prohibited by the

antitrust laws may bring suit in federal court to recover three times

the damages the person has suffered, as well as costs and reasonable

attorneys fees. Entry of the proposed Final Judgment will neither

impair nor assist the bringing of any private antitrust action under

the Clayton Act. Under the provisions of Section 5(a) of the Clayton

Act, 15 U.S.C. Sec. 16(a), the proposed Final Judgment has no prima

facie effect in any private lawsuit that may be brought against the

defendant.

V

Procedures Available for Modification of the Proposed Final Judgment

The APPA provides a period of at least sixty (60) days preceding

the effective date of the proposed Final Judgment within which any

person may submit to the United States written comments regarding the

proposed Final Judgment. Any person who wishes to comment should do so

within sixty (60) days of the date of publication of this Competitive

Impact Statement in the Federal Register. The United States will

evaluate the comments, determine whether it should withdraw its

consent, and respond to the comments. The comments and response(s) of

the United States will be filed with the Court and published in the

Federal Register.

Written comments should be submitted to George S. Baranka,

Attorney, Communications and Finance Section, Antitrust Division, U.S.

Department of Justice, 555 Fourth Street NW., Room 8104, Washington, DC

20001.

VI

Alternatives to the Proposed Final Judgment

As an alternative to the proposed Final Judgment, the United States

considered litigation seeking to limit the number of 800 MHz channels

Nextel held in each affected city. The United States rejected that

alternative for two reasons: first, it is satisfied that the relief it

has obtained relating to 900 MHz frequencies will adequately address

the harm to competition alleged in the complaint; second, the

Department did not want to inhibit Nextel's ability to offer cellular

telephone service.

The United States also considered the desirability of requiring the

modification of the ancillary equipment agreements under which Nextel

will purchase from Motorola infrastructure and subscriber equipment to

construct its digital network. The Untied States rejected that

alternative because Motorola's equipment pricing practices are likely

to be constrained by those of other wireless equipment suppliers to the

cellular service providers and to the personal communications service

providers, which are expected to be soon authorized by the FCC.

VII

Standard of Review Under the Tunney Act for Proposed Final Judgment

The APPA requires that proposed consent judgments in antitrust

cases brought by the United States are subject to a sixty-day comment

period, after which the court shall determine whether entry of the

proposed Final Judgment ``is in the public interest.'' In making that

determination,

the court may consider--

(1) the competitive impact of such judgment, including termination

of alleged violations, provisions for enforcement and modification,

duration or relief sought, anticipated effects of alternative remedies

actually considered, and any other considerations bearing upon the

adequacy of such judgment;

(2) the impact of entry of such judgment upon the public generally

and individuals alleging specific injury from the violations set forth

in the complaint including consideration of the public benefit, if any,

to be derived from a determination of the issues at trial.

15 U.S.C. Sec. 16(e) (emphasis added). The courts have recognized that

the term ``public interest'' ``take[s] meaning from the purposes of the

regulatory legislation.'' NAACP versus Federal Power Comm'n, 425 U.S.

662, 669 (1976). Since the purpose of the antitrust laws is to

``preserv[e] free and unfettered competition as the rule of trade,''

Northern Pacific Railway Co. versus United States, 356 U.S. 1, 4

(1958), the focus of the ``public interest'' inquiry under the Tunney

Act is whether the proposed Final Judgment would serve the public

interest in free and unfettered competition. United States versus

American Cyanamid Co., 719 F.2d 558, 565 (2d Cir. 1983), cert. denied,

465 U.S. 1101 (1984); United States versus Waste Management, Inc.,

1985-2 Trade Cas.  66,651, at 63,046 (D.D.C. 1985). In conducting this

inquiry, ``the Court is nowhere compelled to go to trial or to engage

in extended proceedings which might have the effect of vitiating the

benefits of prompt and less costly settlement through the consent

decree process.''\8\ Rather,

\8\119 Cong. Rec. 24598 (1973). See United States versus

Gillette Co., 406 F. Supp. 713, 715 (D. Mass. 1975). A ``public

interest'' determination can be made properly on the basis of the

Competitive Impact Statement and Response to Comments filed pursuant

to the APPA. Although the APPA authorizes the use of additional

procedures, 15 U.S.C. Sec. 16(f), those procedures are

discretionary. A court need not invoke any of them unless it

believes that the comments have raised significant issues and that

further proceedings would aid the court in resolving those issues.

See H.R. Rep. 93-1463, 93rd Cong. 2d Sess. 8-9, reprinted in (1974)

U.S. Code Cong. & Ad. News 6535, 6538.

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absent a showing of corrupt failure of the government to discharge

its duty, the Court, in making the public interest finding, should *

* * carefully consider the explanations of the government in the

competitive impact statement and its responses to comments in order

to determine whether those explanations are reasonable under the

circumstances.

United States versus Mid-America Dairymen, Inc., 1977-1 Trade Cas. 

61,508, at 71,980 (W.D. Mo. 1977).

It is also unnecessary for the district court to ``engage in an

unrestricted evaluation of what relief would best serve the public.''

United States versus BNS. Inc., 858 F.2d 456, 462 (9th Cir. 1988)

quoting United States versus Bechtel Corp., 648 F.2d 660, 666 (9th

Cir.), cert. denied, 454 U.S. 1083 (1981). Precedent requires that

the balancing of competing social and political interests affected

by a proposed antitrust consent decree must be left, in the first

instance, to the discretion of the Attorney General. The court's

role in protecting the public interest is one of insuring that the

government has not breached its duty to the public in consenting to

the decree. The court is required to determine not whether a

particular decree is the one that will best serve society, but

whether the settlement is ``within the reaches of the public

interest.'' More elaborate requirements might undermine the

effectiveness of antitrust enforcement by consent decree.\9\

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\9\United States versus Bechtel, 648 F.2d at 666 (citations

omitted) (emphasis added); see United States versus BNS, Inc., 858

F.2d at 463; United States versus National Broadcasting Co., 449 F.

Supp. 1127, 1143 (C.D. Cal. 1978); United States versus Gillette

Co., 406 F. Supp. at 716. See also United States versus American

Cyanamid Co., 719 F.2d at 565.

A proposed consent decree is an agreement between the parties which

is reached after exhaustive negotiations and discussions. Parties do

not hastily and thoughtlessly stipulate to a decree because, in doing

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so, they

waive their right to litigate the issues involved in the case and

thus save themselves the time, expense, and inevitable risk of

litigation. Naturally, the agreement reached normally embodies a

compromise; in exchange for the saving of cost and the elimination

of risk, the parties each give up something they might have won had

they proceeded with the litigation.

United States versus Armour & Co., 402 U.S. 673, 681 (1971).

The proposed consent decree, therefore, should not be reviewed

under a standard of whether it is certain to eliminate every

anticompetitive effect of a particular practice or whether it mandates

certainty of free competition in the future. Court approval of a Final

Judgment requires a standard more flexible and less strict than the

standard required for a finding of liability. ``[A] proposed decree

must be approved even if it falls short of the remedy the court would

impose on its own, as long as it falls within the range of

acceptability or is `within the reaches of public interest.' (citations

omitted).''\10\

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\10\United States versus American Tel. and Tel Co., 552 F. Supp.

131, 150 (D.D.C.), affd sub nom. Maryland versus United States, 460

U.S. 1001 (1982) quoting United States versus Gillette Co., supra,

406 F. Supp. at 716; United States versus Alcan Aluminum, Ltd., 605

F. Supp. 619, 622 (W.D. Ky 1985).

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VIII

Determinative Documents

No documents were determinative in the formulation of the proposed

Final Judgments. Consequently, the United States has not attached any

such documents to the proposed Final Judgment.

Respectfully submitted,

Dated: October 27, 1994.

Anne K. Bingaman,

Assistant Attorney General.

Steven C. Sunshine,

Deputy Assistant Attorney General.

Constance K. Robinson,

Director of Operations.

Jonathan M. Rich,

Assistant Chief, Communications & Finance Section.

George S. Baranko,

Katherine E. Brown,

J. Philip Sauntry, Jr.,

Susanna M. Zwerling,

Attorneys, U.S. Department of Justice, Antitrust Division, 555 4th

Street, N.W., Washington, D.C. 20002, (202) 514-5640.

[FR Doc. 94-27640 Filed 11-7-94; 8:45 am]

BILLING CODE 4410-01-M