Implementation of Sections 3(n) and 332 of the Communications ActRegulatory Treatment of Mobile Services

FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 20 and 24

[GN Docket No. 93-252, FCC 94-270]

Implementation of Sections 3(n) and 332 of the Communications

Act--Regulatory Treatment of Mobile Services

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this Fourth Report and Order the Commission adopts rules

that make certain non-equity relationships attributable interests for

purposes of applying the 40 MHz limitation on broadband Personal

Communications Service (PCS) spectrum, the PCS-cellular cross-ownership

rules, and the general Commercial Mobile Radio Service (CMRS) spectrum

cap. The Commission concluded that it is not in the public interest to

treat resale agreements as attributable interests for the purpose of

applying CMRS multiple-and cross-ownership rules. However, the

Commission found that joint marketing arrangements between competitors

in the same geographic area and certain management agreements should be

treated as attributable interests for purposes of spectrum caps. These

rules are necessary to ensure that a single entity will not have the

ability to influence or control a large portion of the available mobile

wireless spectrum and thereby undermine competitive pricing for

wireless services.

EFFECTIVE DATES: The rule changes made to Part 20 of the Commission's

Rules will become effective on January 2, 1995. The rule changes made

to Part 24 of the Commission's Rules will become effective upon

publication in the Federal Register.

FOR FURTHER INFORMATION CONTACT:

Office of Plans and Policy Contact: Greg Rosston, (202) 418-2030.

Common Carrier Bureau Contact: Leila Brown, (202) 418-1300.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Fourth

Report and Order in GN Docket No. 93-252, adopted October 20, 1994 and

released November 18, 1994. The full text of Commission decisions are

available for inspection and copying during normal business hours in

the FCC Public Reference Center, Room 239, 1919 M Street, NW.,

Washington, DC. The complete text of this decision may also be

purchased from the Commission's copy contractor, International

Transcription Service, Inc. 2100 M St., NW., Suite 140, Washington, DC

20037, (202) 857-3800.

Final Regulatory Flexibility Analysis

Pursuant to the Regulatory Flexibility Act of 1980, 5 U.S.C.,

Section 604, a final regulatory flexibility analysis has been prepared

and is presented below. It is available for public viewing as part of

the full text of the decision, which may be obtained from the

Commission or its copy contractor. Written comments on the proposals in

the Notice, including the Regulatory Flexibility Analysis, were

requested.

A. Need for and Objective of Rules

This rule making proceeding was initiated to implement Sections

3(n) and 332 of the Communications Act of 1934, as amended. In prior

orders, the Commission has adopted spectrum caps and cross-ownership

rules to prevent excessive aggregation of spectrum. The goal of these

limitations is to promote competition by ensuring that the aggregation

of spectrum in a given geographic area does not result in

anticompetitive influence over price or service offerings. The Fourth

Report and Order in GN Docket No. 93-252 adopts attribution rules that

make certain management agreements and joint marketing arrangements

attributable interests for purposes of applying the Commission's

spectrum cap rules. In the absence of such attribution rules, there is

a risk that management agreements and joint marketing agreements may

undermine our efforts to foster a competitive marketplace for wireless

services.

B. Issues Raised by the Public in Response to the Initial Analysis

No comments were submitted specifically in response to the Initial

Regulatory Flexibility Analysis.

C. Significant Alternatives Considered

The rules adopted in this Order are narrowly tailored to minimize

any intrusive consequences with regard to the operations of CMRS

licensees. The Order does not prohibit management or joint marketing

agreements. It finds, however, that certain management or joint

marketing agreements will be treated as creating attributable interests

in the licensees for purposes of the Commission's spectrum cap

limitations. The regulatory burdens we have established for all CMRS

licensees, including small entities, are necessary to carry out our

duties under the Communications Act of 1934, as amended. We will

continue to examine alternatives in the future with objectives of

eliminating unnecessary regulations and minimizing any significant

impact on small entities. A copy of this Order will be sent to the

Chief Counsel for Advocacy of the Small Business Administration.

Synopsis of the Fourth Report and Order

On July 18, 1994, the Commission adopted a Second Further Notice of

Proposed Rule Making, 59 FR 37734 (July 25, 1994) in which we sought

comment on whether we should consider certain non-equity relationships

to be attributable interests for purposes of applying the 40 MHz

limitation on broadband Personal Communications Service (PCS) spectrum,

the PCS-cellular cross-ownership rules, and a more general Commercial

Mobile Radio Service (CMRS) spectrum cap. The Commission also requested

comment on whether any attribution rules we might adopt in this

proceeding should apply differently depending on whether the applicant

or licensee involved is a designated entity.

Specifically, the Second Further Notice asked whether resale

agreements, management contracts, and joint marketing arrangements that

do not confer de facto control on a party should be considered

attributable because these interests may affect the incentive or

ability of PCS and other CMRS licensees to compete vigorously in the

marketplace or because they may affect the number of effective

competing providers or the independence of pricing decisions by service

providers. After close of the comment period, the Commission released

the Third Report and Order, 59 FR 59945 (Nov. 21, 1994), in this

docket. In that Order, the Commission adopted a spectrum cap of 45 MHz

on the combined ownership of broadband PCS, cellular radio, and

Specialized Mobile Radio (SMR) licenses that are classified as CMRS.

This spectrum cap is in addition to the existing 40 MHz cap on

broadband PCS ownership and the PCS-cellular cross-ownership rules. The

Third Report and Order also conformed the rules relating to station

management and control for CMRS providers and stated that we would

address whether standards regarding indicia of control in connection

with CMRS management contracts should be further conformed or modified

in the context of our examination of whether to attribute non-

controlling management contracts.

In an effort to ensure that the significant changes that will be

occurring in wireless services produce a robustly competitive market

with a diversity of efficient providers serving a variety of consumer

needs, the Commission has taken steps to prevent excessive aggregation

of spectrum through various spectrum caps and cross-ownership rules.

The goal of these limitations is to ensure that a single entity will

not have the ability to influence or control a large portion of the

available mobile wireless spectrum and thereby undermine competitive

pricing for wireless services. This Order makes attributable management

agreements and joint marketing agreements between licensees that confer

the ability to determine or significantly influence price or service

offerings. While such arrangements are considered attributable, they

will not be prohibited by our rules so long as those with attributable

interests remain below the various spectrum thresholds after

considering all attributable spectrum.

The Order concludes that management agreements, resale, and joint

marketing arrangements can enhance the competitiveness of wireless

service providers. Management agreements had been used in the SMR

industry and have proven to be beneficial to the introduction of new

technology such as trunked systems and new wide area systems. In

certain contexts, however, they may also be used to facilitate the

exercise of market power and produce anticompetitive results.

This Order is concerned with the effects on competition from non-

equity arrangements. In the current wireless marketplace joint

marketing arrangements such as MobiLink and Cellular One can be

beneficial to consumers. These types of arrangements facilitate roaming

and brand identity without conferring the ability to set or

significantly influence the price or service offerings of individual

licensees. However, there may be other joint marketing arrangements

that may confer the ability to significantly influence price and

service offerings. In these cases, those arrangements will be

considered attributable and would be prohibited if a party to the

agreement exceeded the applicable caps.

The Order is also concerned about the effects attributing such

arrangements might have on the competitiveness of designated entities.

It finds that considering management contracts attributable interests

for purposes of spectrum caps will not harm competition or efficiency,

nor will it harm the ability of designated entities to find suitable

expertise should they wish to do so. Investor/manager agreements are

one of many alternatives available to designated entities and the

Commission does not believe that treating management agreements as

attributable for designated entities in exactly the same manner for

spectrum cap purposes as for other entities will hamper the

competitiveness of designated entities. This does not mean, however,

that these management agreements will be deemed ``attributable'' for

purposes of the revenue thresholds in the entrepreneur's blocks. The

Order points out that this decision in no way restricts designated

entities (or other licensees) from entering into management or joint

marketing agreements with entities with no attributable interests in

the same market.

The Commission concludes that it is not in the public interests to

treat resale agreements as attributable interests for the purpose of

applying CMRS multiple-and cross-ownership rules. However, the

Commission has determined that joint marketing arrangements between

competitors in the same geographic area and certain management

agreements should be treated as attributable interests for purposes of

spectrum caps and pursuant to the rules and criteria we adopt in the

Fourth Report and Order.

Ordering Clauses

Accordingly, it is ordered that the rule changes made to Part 20 of

the Commission's Rules specified below will become effective on January

2, 1995. This action is taken pursuant to Sections 4(i), 7(a) 302,

303(c) 303(f) 303(g) and 303(r) of the Communications Act of 1934, as

amended, 47 U.S.C. Sections 154(i), 157(a), 302, 303(c), 303(f),

303(g), and 303(r).

It is further ordered that the rule changes made to Part 24 of the

Commission's Rules herein will become effective immediately upon

publication in the Federal Register. This action is taken pursuant to

Sections 4(i), 7(a), 302, 303(c), 303(f), 303(g) and 303(r) of the

Communications Act of 1934, as amended, 47 U.S.C. Sections 154(i),

157(a), 302, 303(c), 303(f), 303(g) and 303(r).

List of Subjects

47 CFR Part 20

Commercial mobile radio services.

47 CFR Part 24

Personal communications services.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Rule Amendments

47 CFR Parts 20 and 24 are amended as follows:

PART 20--COMMERCIAL MOBILE RADIO SERVICES

1. The authority citation for Part 20 continues to read as follows:

Authority: Secs. 4, 303, and 332, 48 Stat. 1066, 1082 as

amended; 47 U.S.C. 154, 303, and 332, unless otherwise noted.

2. Section 20.6 is amended by adding new paragraphs (d)(9) and

(d)(10) to read as follows:

Sec. 20.6 CMRS spectrum aggregation limit.

* * * * *

(d) * * *

(9) Any person who manages the operations of a broadband PCS,

cellular, or SMR licensee pursuant to a management agreement shall be

considered to have an attributable interest in such licensee if such

person, or its affiliate has authority to make decisions or otherwise

engage in practices or activities that determine, or significantly

influence,

(i) The nature or types of services offered by such licensee;

(ii) The terms upon which such services are offered; or

(iii) The prices charged for such services.

(10) Any licensee or its affiliate who enters into a joint

marketing arrangements with a broadband PCS, cellular, or SMR licensee,

or its affiliate shall be considered to have an attributable interest,

if such licensee, or its affiliate has authority to make decisions or

otherwise engage in practices or activities that determine, or

significantly influence,

(i) The nature or types of services offered by such licensee;

(ii) The terms upon which such services are offered; or

(iii) The prices charged for such services.

* * * * *

PART 24--PERSONAL COMMUNICATIONS SERVICES

1. The authority citation for Part 24 continues to read as follows:

Authority: 47 U.S.C. 154, 301, 302, 303, 309, and 332, unless

otherwise noted.

2. Section 24.204 is amended by adding new paragraphs (d)(2)(ix)

and (d)(2)(x), by redesignating paragraphs (f)(1), (2) and (3) as

(f)(2), (3) and (4), and by redesignating the introductory text of

paragraph (f) as paragraph (f)(1) and revising it to read as follows:

* * * * *

Sec. 24.204 Cellular eligibility.

* * * * *

(d)* * *

(2)* * *

(ix) Any person who manages the operations of a broadband PCS or

cellular licensee pursuant to a management agreement shall be

considered to have an attributable interest in such licensee, if such

person, or its affiliate has authority to make decisions or otherwise

engage in practices or activities that determine, or significantly

influence,

(A) The nature or types of services offered by such licensee;

(B) The terms upon which such services are offered; or

(C) The prices charged for such services.

(x) Any licensee who enters into a joint marketing arrangement with

a broadband PCS or cellular licensee, or its affiliate, shall be

considered to have an attributable interest, if such licensee has

authority to make decisions or otherwise engage in practices or

activities that determine, or significantly influence,

(A) The nature or types of services offered by such licensee;

(B) The terms upon which such services are offered; or

(C) The prices charged for such services.

* * * * *

(f) Cellular Divestiture. (1)(i) Parties holding controlling or

attributable ownership interests in cellular licensees may be a party

to a broadband PCS application (i.e., have a controlling or

attributable interest in a broadband PCS applicant), and such PCS

applicant will be eligible for more than one 10 MHz broadband PCS

license and/or 30 MHz broadband PCS license(s) pursuant to the

divestiture procedures set forth in paragraphs (f)(2) through (4) of

this section; Provided, however, that these divestiture procedures

shall be available only to:

(A) Parties with controlling or attributable ownership interests in

cellular licenses where the CGSA(s) covers 20 percent or less of the

PCS service area population;

(B) Parties with attributable interests solely due to management

agreements or joint marketing agreements; and

(C) Parties with non-controlling attributable interests in cellular

licenses, regardless of the degree to which the CGSA(s) covers the PCS

service area population.

(ii) For purposes of this paragraph, a ``non-controlling

attributable interest'' is one in which the holder has less than a

fifty (50) percent voting interest and there is an unaffiliated single

holder of a fifty (50) percent or greater voting interest.

* * * * *

[FR Doc. 94-29730 Filed 12-1-94; 8:45 am]

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