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 95-98]

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: Final rule.

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

SUMMARY: In this Report and Order (Order), the Commission eliminates

rules that prohibit wireline telephone carriers from holding licenses

in the Specialized Mobile Radio (SMR) service and the commercial 220-

222 MHz land mobile band. The Order also eliminates the prohibition on

the provision of dispatch service by cellular licensees, other

licensees in the Public Mobile Services, and licensees in the Personal

Communications Services (PCS). After reviewing the record, the

Commission finds that these restrictions no longer serve the public

interest and should be eliminated.

EFFECTIVE DATES: Sections 22.577 and 22.901 rule changes will be

effective April 24, 1995. Sections 90.603 and 90.703 rule changes will

be effective March 24, 1995.

FOR FURTHER INFORMATION CONTACT:

Sue McNeil, Wireless Telecommunications Bureau, Commercial Radio

Division, (202) 418-0620.

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

in GN Docket No. 94-90, adopted March 7, 1995 and released March 7,

1995. 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 20037.

Synopsis of the Report and Order

I. Background

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

elected to prohibit wireline telephone common carriers from holding SMR

base station licenses. The Commission has stated that the wireline

prohibition was intended to ensure that the provision of SMR service

would be available as a business opportunity for small entrepreneurs

and to reduce incentives for wireline common carriers to engage in

discriminatory interconnection practices. In 1986, the Commission

proposed to eliminate the SMR restriction after receiving several

requests from wireline carriers for waiver of Section 90.603(c). The

Commission observed that the original rationale for establishing the

restriction may no longer apply. The Commission subsequently granted

several conditional waivers to wireline carriers seeking to acquire SMR

stations.

2. In 1992, the Commission terminated the proceeding on grounds

that the record had become stale and stated that the restriction should

be retained until the Commission could more fully evaluate the

competitive impact of allowing wireline providers into the SMR

marketplace. The Commission terminated all waivers that had been

previously granted, but gave waiver recipients an opportunity to

rejustify their waiver grants. Southwestern Bell Corporation

(Southwestern Bell), Bell Atlantic Enterprises International Inc. (Bell

Atlantic), and US West Paging, Inc. (US West) filed requests to

rejustify the waiver grants that had been terminated pursuant to the

Termination Order (57 Fed. Reg. 32450 (July 22, 1992)). In addition,

RAM Mobile Data USA Limited (RAM Mobile), Cass Cable TV, Inc. (Cass

Cable), and American Paging, Inc. (API) subsequently have sought

waivers of the wireline prohibition. The Commission issued a public

notice requesting public comment regarding the waiver requests on April

12, 1994. In addition, BellSouth has filed an appeal of the

Commission's Termination Order, which is pending before the D.C.

Circuit.

3. In 1991, the Commission adopted an analogous restriction for the

newly established commercial 220 MHz service that prevents wireline

carriers from holding licenses in that service as well. The

Commission's rationale for excluding wireline carriers from 220 MHz was

the same as its original rationale for excluding wireline carriers from

SMR licensing.

4. The Omnibus Budget Reconciliation Act of 1993 (Budget Act)

amended the Communications Act and prescribed comprehensive regulatory

changes for the mobile services marketplace. The legislative history of

the Budget Act identified the Commission's ban against wireline

carriers holding SMR licenses as a regulation that should be reviewed

by the Commission. The Commission thus proposed to eliminate its

restrictions that prohibit wireline telephone common carriers from

holding SMR and commercial 220 MHz licenses on the grounds that the

restrictions may no longer be necessary and that competition would be

promoted by their elimination.

5. At the same time, the Commission also proposed to eliminate the

prohibition on the provision of dispatch service by common carriers,

including cellular licensees, other licensees in the Public Mobile

Service, and PCS licensees. The prohibition, which was originally

enacted by Congress as part of the 1982 amendments to the

Communications Act, prohibited common carriers licensed after January

1, 1982, including all cellular licensees, from offering dispatch

services. In the Budget Act, Congress retained the statutory ban, thus

potentially applying it to all CMRS providers, but granted the

Commission authority to repeal the ban by regulation in whole or in

part. In the Notice of Proposed Rule Making (59 Fed. Reg. 42563 (Aug.

18, 1994)), the Commission tentatively concluded that the prohibition

was outdated and that its repeal would promote competition. Thirty-two

(32) comments and twelve (12) reply comments were filed in response to

the proposals in this proceeding. [[Page 15491]]

II. Discussion

A. Licensee Eligibility in SMR and Commercial 220 MHz Service

6. Background. In the Notice, we tentatively concluded that the SMR

and commercial 220 MHz wireline ownership restrictions are no longer

appropriate in today's competitive mobile services marketplace. As

described in the Notice, there were several reasons for this tentative

conclusion. First, we observed that the risk of wireline carriers being

able to cause competitive harm if allowed to enter the SMR market has

diminished in recent years. We indicated that the breakup of AT&T and

the rapid introduction of new mobile service options have combined to

create an environment in which wireline carrier participation in mobile

services has the potential to increase competition rather than impede

it.

7. In the Notice, we also drew comparisons to PCS, noting that we

have already concluded that wireline entry into PCS will produce

economies of scope for that service, which will promote its rapid

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

consumers. We indicated that similar benefits could result from

allowing wireline entry into the SMR and commercial 220 MHz services.

8. We also tentatively concluded that the restrictions no longer

are necessary to safeguard against competitive concerns that the LECs

may (1) discriminate in the offering of interconnection to non-

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

exchange market to cross-subsidize SMR services and undercut their

competitors. We indicated that existing statutory and regulatory

safeguards probably were sufficient to prevent LECs from engaging in

these discriminatory activities. In particular, the Commission has

found that, pursuant to Section 201 of the Communications Act, it is in

the public interest to require LECs to provide reasonable

interconnection to commercial mobile radio service (CMRS) providers. We

also noted that independent accounting and structural safeguards exist

and would apply to wireline participants in the SMR market to prevent

cross-subsidization. We did, however, seek comment on the effectiveness

of applying these existing safeguards to wireline carriers entering

these services.

9. We made additional observations as well. We indicated that

wireline entry was unlikely to chill further development of the service

since SMR spectrum has been licensed fully in most metropolitan areas.

As a result, we stated that wireline entry into the SMR service would

likely occur through acquisitions that are subject to Commission

review. Similarly, we reasoned that wireline entry into commercial 220

MHz likely would be gradual and subject to case-by-case review by the

Commission as part of the application process. We also asked whether

commercial 220 MHz services were sufficiently disparate from any LEC

offering to make negligible any ability these carriers might have to

exert undue market power or restrain trade. This was the analysis we

used to justify LEC entry into narrowband PCS. We further noted that

wireline participation could promote opportunities for additional entry

of small, rural telephone companies and could infuse new capital and

expertise into the mobile services marketplace.

10. Also, while we generally concluded that the wireline

restrictions were outmoded, we questioned whether there was any

justification for continuation of the restrictions for either or both

of the SMR and commercial 220 MHz services. Finally, we deferred

consideration of whether there was a need to restrict cellular

eligibility for SMR or commercial 220 MHz licensing pending a decision

in GN Docket No. 93-252 to impose a spectrum cap on CMRS providers.

11. Comments. All but two commenting parties support our proposal

to permit wireline telephone common carriers to hold SMR and commercial

220 MHz licenses. Many commenters maintain that eliminating the

restrictions in the SMR service would facilitate competition and that

increased competition would thereby benefit consumers through lower

prices and expanded choices. Commenters also agree that our proposal is

consistent with our efforts to achieve regulatory symmetry by providing

identical eligibility requirements for all CMRS licensees. In addition,

several commenters note that changes in the SMR marketplace during the

time since the service was established eliminate the need for wireline

eligibility restrictions. Finally, commenting parties generally agree

that existing accounting and interconnection safeguards will adequately

prevent cross-subsidization and discrimination. The Commission was

encouraged to enforce these existing safeguards rigorously.

12. Most parties who expressly commented on commercial 220 MHz

service generally support lifting the prohibition on wireline entry for

the same reasons set forth in support of lifting the restrictions on

wireline entry into SMR service. AMTA, however, opposes lifing the

restrictions at this time. AMTA contends that the commercial 220 MHz

service is still in its infancy, and that its competitive potential is

largely unknown.

13. SMR WON is the only commenting party to oppose lifting the

wireline prohibition for both SMR and commercial 220 MHz services.

Specifically, SMR WON expresses concern that eliminating the

restriction would harm traditional SMR operators that would not be able

to compete against the market power of wireline common carriers.

Moreover, SMR WON alleges that existing safeguards have been

ineffective in preventing wireline carriers from exercising their

monopoly power and financial strength to the detriment of competition

in the cellular marketplace. Therefore, SMR WON urges that no changes

in the wirline restriction should be made except as part of

comprehensive legislation addressing the monopoly power of the LECs.

14. Decision. We amend our rules to permit wireline telephone

common carriers to acquire SMR and commercial 220 MHz licenses without

restriction and dismiss pending waiver requests as moot. Eliminating

the wireline prohibition is likely to yield substantial public

benefits. Commenters echoed our view that permitting wireline common

carriers to acquire SMR and commercial 220 MHz licenses will allow the

realization of significant economies of scope and provide a new source

of capital that will yield a broader array of services at lower costs

to consumers. Repealing the wireline prohibition also will stimulate

competition and promote opportunities for additional entry of numerous

small wireline carriers, particularly in rural areas, in addition to

the large wireline carriers. Moreover, we note that the record supports

our view that changes in the wireless marketplace, including our

efforts to achieve regulatory symmetry among comparable mobile

services, obviate the need for the wireline restrictions. Finally, we

believe that existing regulatory safeguards will prevent wireline

common carriers from engaging in anti-competitive conduct.

15. We expect that wireline participation in the provision of SMR

and commercial 220 MHz services will benefit the consumer.

Specifically, allowing LECs to participate in SMR and commercial 220

MHz services will likely produce significant economies of scope by

allowing wireline carriers to combine related services so that they may

be provided at less cost than providing them separately. We expect

[[Page 15492]] that because of their existing wireline infrastructure,

LECs will be likely to achieve technical efficiencies in spectrum use

that will result in lower costs. Such economies can promote more rapid

development of technology and yield a broader range of services at

lower costs to consumers.

16. We expect that wireline entry also will benefit competition by

providing an additional source of capital and expertise in the mobile

services marketplace. Allowing wireline entry will give SMR providers

the ability to draw upon this capital and expertise as they move from

stand-alone analog to wide-area networks. Despite AMTA's opposition, we

reach a similar conclusion with respect to participation by wireline

carriers in the commercial 220 MHz service. We observe that access to

the capital and technical expertise of wireline carriers may be

important to the commercial 220 MHz service at its critical stage of

technological development. SNET notes, for example, that wireline

carriers can ``quickly allocate resources, including existing

infrastructure, into wireless services that will speed the deployment

of services, produce innovative service offerings, promote competition

and produce competitive rates for consumers.'' We also note that

commercial 220 MHz, like PCS, is a new, developing service, and we have

elected to allow wireline carriers to participate fully in both the

narrowband and broadband PCS services. Moreover, we observe that

commercial 220 MHz service resembles narrowband PCS in that it is a

two-way, narrowband service that is technically distinct from other

service offerings provided by LECs. In the Narrowband PCS First Report

and Order (59 FR 9100 (Feb. 25, 1994)), we concluded that the

dissimilarity between narrowband PCS and LEC service offerings provided

additional justification for allowing wireline entry. We conclude that

the same rational supports our conclusion with respect to commercial

220 MHz service.

17. Wireline participation also could promote opportunities for

additional entry of small entrepreneurs, such as rural telephone

companies, in the SMR service. As the record in this proceeding

suggests, small wireline carriers in rural communities are well

positioned to provide SMR and commercial 200 MHz services in areas that

presently are unserved or underserved. Eliminating the wireline

restrictions would allow these providers to offer cost-effective

services to rural customers by building on their existing

infrastructure and presence in the market. We disagree with SMR WON's

allegation that wireline participation would impede competition,

especially in rural communities. As commenters (including rural telcos)

point out, wireline entry will bring new or additional SMR services to

underserved rural areas, not merely replace existing small SMR

operators. Additional opportunities for small business entry into the

SMR business, including participation by small LECs, are being

considered as part of the commission's competitive bidding proceeding.

SMR WON erroneously suggests that our reference to our efforts to help

small businesses successfully compete at auctions reveals that our real

motivation for permitting wireline entry is to raise more funds at

auction. Rather, we repeal the wireline prohibition because the record

overwhelmingly indicates that wireline participation would serve the

public interest by promoting competition, lowering costs, and expanding

consumer choice. Moreover, we note that Congress specifically prohibits

us from exercising our auction authority for the primary purpose of

raising revenues.

18. Additionally, as we tentatively concluded in our Notice, the

wireline restrictions are outmoded in view of recent regulatory changes

in the mobile services marketplace. The Budget Act mandated that

similar mobile services receive comparable regulatory treatment and

divided all mobile services into two categories, CMRS and private

mobile radio service (PMRS). In our CMRS Second Report and Order (59 FR

18493 (April 19, 1994)), we concluded that certain private mobile radio

services, including SMR and commercial 220 MHz licensees, would be

subject to reclassification as CMRS if they provide ``interconnected

service.'' To the extent that SMR and commercial 220 MHz licensees

qualify as CMRS providers, the principles of regulatory symmetry

suggest that they should be subject to regulations similar to those

imposed on cellular carriers, PCS licensees and other CMRS providers.

Elimination of Secs. 90.603(c) and 90.703(c) thereby furthers our

objective to apply a symmetrical, consistent set of regulations

governing CMRS by establishing identical wireline eligibility

requirements for all CMRS providers.

19. As we observed in our Notice, the mobile services industry also

has undergone substantial changes that obviate the need for the

wireline restrictions. The record shows that the competitive concerns

that led to the SMR eligibility restrictions are no longer applicable

in the current competitive marketplace. The SMR industry has matured

significantly since it was established in 1974. As AMTA points out, SMR

channels already are in service in most large urban areas. Wireline

carriers therefore will be largely limited to acquiring existing

businesses, and all such transfers would be subject to Commission

review. We will consider the competitive impact of any transfer to a

wireline carrier as part of our public interest determination. In

addition, we note that wireline SMR acquisitions will be subject to our

CMRS spectrum cap, which restricts the amount of cellular, broadband

PCS and SMR spectrum that any one entity may acquire in a geographic

market. This acts as a competitive safeguard by limiting all wireline

carriers from exerting undue market power in these services.

Furthermore, we observe that the spectrum cap will also limit cellular

licensees' ability to exercise market power and we therefore do not

believe that additional restrictions on cellular participation are

warranted.

20. Moreover, customer demand and the desire to offer ``seamless''

communications services has fostered the development of wide-area

systems in both the 800 MHz and 900 MHz band. Wide-area licensees have

aggregated spectrum across large regions, and are poised to offer

services competitive with larger CMRS providers, such as cellular and

PCS. For these reasons, we are not persuaded by SMR WON's argument that

the SMR market is still relatively immature. These systems do not

continue to require the same degree of regulatory nurturing that may

have been appropriate during the early days of this service. In

addition, we note that artificial eligibility restraints may hinder the

growth of wide-area systems and their ability to compete with cellular

and other CMRS licensees.

21. In addition, we conclude that existing regulatory safeguards

are sufficient to prevent possible discrimination and cross-

subsidization. We note that wireline telephone companies are required

to provide reasonable interconnection upon request. As evidence of the

infrequency of interconnection problems, we are unaware of any pending

complaints alleging discriminatory interconnection filed by

unaffiliated cellular providers against wireline carriers with cellular

affiliates. We emphasize, however, that we agree with AMTA and ITA/CICS

that the public interest is best served by strongly enforcing our

policies and statutory requirements with respect to the interconnection

obligations of LECs.

22. Additionally, independent accounting and structural safeguards

exist to protect against cross- [[Page 15493]] subsidization of

services and discriminatory pricing. In the CMRS docket, we determined

that our 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 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 in accordance with specified valuation

methodologies. Since most SMRs and commercial 220 MHz licensees fall

inside the CMRS definition (and are not rate-regulated), these existing

and applicable accounting rules should deter cross-subsidization

problems. We also note that the largest LECs are subject to price caps,

which provides additional assurances that no cross-subsidization will

occur. Finally, we observe that the Commission adopted the same

approach concerning structural separations and accounting safeguards in

our PCS proceeding. We therefore decline to impose structural

separation requirements in addition to those already imposed on certain

dominant telephone carriers (i.e., BOCs) that provide cellular service.

We note, however, that we intend to enforce our existing safeguards

vigorously in this area and are prepared to take additional steps, if

necessary, to protect against cross-subsidization of services and

discriminatory pricing.

23. In sum, the rapid growth of mobile services, regulatory changes

and evolving competition in the mobile services industry justify the

repeal of the restrictions on wireline telephone common carriers

holding licenses in the SMR and commercial 220 MHz services.

Accordingly, we eliminate these rules today. In addition, we dismiss

requests for waivers filed by Southwestern Bell, Bell Atlantic, US

West, RAM Mobile, Cass Cable and API. These requests are mooted by our

decision to eliminate the wireline restriction.

B. Common Carrier Dispatch Prohibition

24. Background. In the Notice, the Commission tentatively concluded

that eliminating the dispatch ban would enhance competition and thereby

provide consumers with greater choice, more innovative service

offerings, and lower prices. Commenters were invited to address the

competitive consequences of permitting all CMRS providers\1\ to offer

dispatch services. As an alternative, however, the Commission solicited

comment on whether it should delay repeal of the rule until August 10,

1996 (3 years from the date the Budget Act amendments became law),

allow CMRS licensees (other than SMRs) to provide dispatch only on a

secondary basis, or impose a limit on the amount of system capacity

that non-SMR CMRS licensees may devote to dispatch service. The

Commission requested comment on whether these measures were needed to

prevent any anti-competitive impact that may result from participation

by all CMRS providers in the market, with particular focus on cellular

entry into dispatch. In addition, the Commission requested comment on

whether mobile common carriers that are not land-based (i.e., aviation,

marine, and mobile satellite licensees who provide common carrier

service) should be permitted to offer dispatch service. Noting that

these categories of licensees previously were not prohibited from

offering dispatch service under Section 332, we tentatively concluded

that Congress did not intend to extend the dispatch ban to non-land

mobile licensees when it amended that section in 1993. Instead, the

Commission reasoned that Congress meant simply to repeat and

incorporate its old prohibition against common carrier land mobile

service providers offering dispatch service without modification and to

give the Commission authority to repeal the prohibition in whole or in

part.

\1\The Budget Act provides that:

[a] common carrier (other than a person that was treated as a

provider of a private land mobile service prior to the enactment of

the Omnibus Budget Reconciliation Act of 1993) shall not provide any

dispatch service on any frequency allocated for common carrier

service, except to the extent such dispatch service is provided on

stations licensed in the domestic public land mobile radio service

before January 1, 1982. The Commission may by regulation terminate,

in whole or in part, the prohibition contained in the preceding

sentence if the Commission determines that such termination will

serve the public interest.

Budget Act at Sec. 6002(b)(2), 47 U.S.C. 332(c)(2). Most CMRS

licensees are thereby prohibited from offering dispatch service,

unless the Commission determines that termination of this

prohibition will serve the public interest.

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

25. Comments. Most commenters support our view that eliminating the

dispatch prohibition would promote competition in the dispatch service

and thereby provide customers with expanded choices and lower prices.

In addition, many commenters observe that the dispatch prohibition is

inconsistent with our efforts to achieve regulatory symmetry because it

allows SMRs to provide a service that other CMRS providers, such as

cellular licensees, may not. Moreover, several commenting parties note

that recent technological improvements obviate any concern that land

mobile licensees' common carrier service obligations would be

compromised by the provision of dispatch service. Noting the

significant benefits that would stem from permitting all CMRS licensees

to provide dispatch services, most commenters requested that the

Commission eliminate the prohibition immediately and without

restriction.

26. Several parties, however, urged the Commission to retain the

dispatch prohibition. Many proponents of the prohibition argue that

certain CMRS licensees, such as cellular providers, would chill

competition by forcing small dispatch providers out of the market

through below-cost pricing. To the extent that CMRS licensees seek to

offer dispatch service, commenters advocate that they do so on SMR

frequencies.

27. Several commenters request that if we elect to eliminate the

prohibition, we phase it out on August 10, 1996 or allow non-SMR CMRS

licensees to provide service only on a secondary basis. As a separate

matter, several commenters request the Commission to clarify that the

dispatch prohibition did not extend to non-land mobile common carrier

licensees.

28. Decision. We amend our rules to permit all mobile service

common carriers to provide dispatch service.\2\ The record demonstrates

that repeal of the dispatch ban will enhance competition and thereby

provide consumers with expanded choice and lower prices. Moreover, we

agree with commenters that retention of the ban is inconsistent with

our efforts to establish a regulatory framework which provides similar

services with symmetrical requirements. We also note that recent

technological developments, including digitalization, have minimized

any concerns that using common carrier spectrum for dispatch would

impair the licensees' capacity to provide common carrier service

because digital technologies allow spectrum to be used more

efficiently. Because of the significant public benefits that we expect

by eliminating the prohibition, we decline to impose a sunset provision

and permit all CMRS licensees to provide dispatch upon the effective

date of these rule changes, and without restriction.

\2\We note that we are not allowing cellular and other Part 22

licensees to provide stand-alone PMRS service, an issue that will be

resolved on reconsideration of our CMRS Second Report and Order. See

CMRS Third Report and Order, 59 Fed. Reg. 59945 (Nov. 21, 1994).

Rather, by this action we will permit Part 22 licensees to provide

non-interconnected dispatch service, so long as their dispatch users

also have the ability to utilize interconnected service if they

choose. [[Page 15494]]

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

29. In eliminating the dispatch prohibition, we expect to enhance

competition by permitting new types of CMRS providers to enter the

commercial dispatch service. We believe that increased competition in

dispatch service will, in turn, yield significant public benefits. We

note that there seems to be a scarcity of spectrum capacity available

for dispatch service, as users below 512 MHz strongly supported the

Commission's proposals to make more efficient use of the spectrum in

those bands and demand exists for most licenses in the 800 and 900 MHz

bands. Moreover, we agree with commenters that the introduction of new

competitors has the potential to lower costs to subscribers, increase

availability of choices, and improve the quality of service. Several

commenters maintain that allowing CMRS providers to provide dispatch in

addition to other mobile services will satisfy consumers' growing

demand for integrated services that are customized to fit their

individual needs. AirTouch notes, for example, that its market research

reveals that consumers want service packages to include text messaging,

vehicle location, alpha-numeric paging, fax, dispatch, and mobile

voice. In addition, we observe that eliminating the dispatch ban may

lower the cost of multifunction equipment since a greater number of

CMRS licensees will be able to provide dispatch service. Moreover, as

McCaw and East Otter Tail suggest, eliminating the dispatch prohibition

will make service available in areas where current options are limited.

In particular, we expect that the elimination of the dispatch

prohibition will benefit rural communities by facilitating competition

in underserved areas and will allow some rural subscribers to obtain

low-cost dispatch service from a third-party service provider for the

first time.

30. Commenters seeking to retain the dispatch ban argue that

allowing CMRS providers, particularly cellular licensees, to offer

dispatch services actually would have an anti-competitive impact on the

dispatch market. Noting that cellular carriers have significant

resources and spectrum, opponents claim that cellular carriers will

impermissibly underprice their service (by subsidizing the dispatch

service with cellular revenues) in order to drive SMR operators out of

business. To prevent any anti-competitive conduct, several commenters

suggest that all CMRS providers be required to provide dispatch on

frequencies designated for SMR service.

31. We are unpersuaded that any dispatch providers are likely to

engage in anticompetitive conduct. To sustain a predatory pricing

scheme, a dispatch provider must be able to price its services below

its own costs and the costs of its competitors in order to drive

competition out of the market. The dispatch provider must then raise

its prices above a competitive level and effectively preclude potential

competitors from entering or re-entering the market. We consider this

possibility highly unlikely because the entire CMRS market is

expanding, with a number of competitors expected to enter the

marketplace in the near term. As a result, the two cellular providers

in each market are expected to compete with other CMRS service

providers, including SMR and PCS licensees, in providing a host of

services in addition to dispatch. These providers will also compete

with private mobile radio service (PMRS) providers, including

businesses that elect to operate their own systems, in the provision of

dispatch service. It is therefore unlikely that cellular carriers would

benefit by engaging in any anticompetitive pricing scheme for

particular services in order to eliminate competitors. Rather, market

share likely will be based on quality, price, and the availability of

other service options to satisfy a customer's individual needs. We

note, however, that we will continue to study the dispatch market

carefully and can take appropriate enforcement action if licensees

engage in anticompetitive conduct. Moreover, we observe that the

Department of Justice also has authority to take enforcement action

against carriers that engage in predatory pricing.

32. We also do not believe that limiting dispatch service to SMR

frequencies would be an efficient use of spectrum. To the extent that

any CMRS providers have excess spectrum, we want to encourage them to

develop innovative uses for it that are responsive to consumer demand,

including dispatch service. Moreover, restricting dispatch service to

SMR frequencies would limit competition by creating an artificial

scarcity of spectrum available to provide dispatch service.

33. Permitting all CMRS licensees to provide dispatch service also

is consistent with our efforts to achieve regulatory symmetry among

comparable services. As many commenters point out, the dispatch

prohibition allows SMR licensees to offer services that its CMRS

competitors cannot. Elimination of the dispatch prohibition will help

to equalize the regulatory requirements applicable to all mobile

service providers by allowing competing operators to offer the same

portfolio of service options and packages. This result is required by

Congress' mandate that comparable mobile services receive similar

regulatory treatment.

34. In addition, we note that recent technological developments

undermine the original justification for the dispatch prohibition. When

Congress adopted the dispatch prohibition, it sought to ensure that

common carriers did not misuse frequencies by devoting them to dispatch

use. The development of new technologies, including digitalization,

have minimized any concerns that using common carrier spectrum for

dispatch would impair the licensees' capacity to provide common carrier

service because digital technologies allow spectrum to be used more

efficiently. Moreover, the mobile services marketplace will ensure that

spectrum is not used inefficiently for dispatch service if consumer

demand demonstrates that alternative uses are more desirable.

35. Because of the significant public benefits that we expect by

eliminating the prohibition, we decline to impose a sunset provision

and permit CMRS licensees to provide dispatch without restriction. We

agree with commenters that establishing a sunset period would delay the

introduction of new competition without providing any benefit to

consumers. Commenters favoring a sunset period maintain that they need

an opportunity to adjust to common carrier obligations without

disruption by new competitors. We note, however, that our intent in

establishing the three-year transition period was to provide private

carriers that will be reclassified as CMRS an opportunity to prepare

for new regulatory requirements, not to shield them from new sources of

competition. We are unpersuaded, therefore, that a sunset provision is

needed to protect SMR licensees. Moreover, we observe that to the

extent that non-SMR CMRS licensees will need to construct or modify

their systems before they will be able to offer dispatch services, SMR

providers will have an opportunity to adjust to new competitors. We

also decline to limit non-SMR CMRS licensees' participation to

providing dispatch on a secondary basis. There is no evidence in the

record that restricting their participation in this manner would

provide any benefit to consumers.

III. Procedural Matters

36. Final Regulatory Flexibility Analysis. Pursuant to the

Regulatory Flexibility Act of 1980, an Initial Regulatory Flexibility

Analysis (IRFA) was incorporated in the Notice. Written comments on the

IRFA were requested, although none were received. The Commission has

prepared the following [[Page 15495]] Final Regulatory Flexibility

Analysis (FRFA) of the expected impact of the proposed rule changes on

small entities.

I. Reason for Action. This Report and Order eliminates the

restrictions contained in Sections 90.603(c) and 90.703(c) of the

Commission's rules that prohibit wireline telephone common carriers

from holding licenses in the SMR service and commercial 220 MHz band.

The Report and Order also permits all CMRS providers to offer dispatch

service in competition with SMR systems. The record in this proceeding

demonstrates that these restrictions are no longer necessary and should

be repealed.

II. Objectives. 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 action is authorized under Sections 3(n),

4(i), 303(r), 332(c) and 332(d) of the Communications Act of 1934, as

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

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 rule changes

contained in the Report and Order. We expect that several small

entities will benefit by eliminating the wireline restrictions and

dispatch prohibition because it will provide these entities and

additional opportunity to participate in the provision of these

services.

VII. Significant Alternatives Minimizing the Impact on Small

Entities Consistent with the Stated Objectives. The Notice in this

proceeding solicited comments on whether to eliminate the wireline

eligibility restrictions and the dispatch prohibition. No significant

alternatives were presented in the comments.

37. Ordering Clauses. Accordingly, IT IS ORDERED, that Part 22 of

the Commission's Rules ARE AMENDED as set forth below and are effective

April 24, 1995. It is further ordered that Part 90 of the Commission's

Rules are amended as set forth below and are effective upon March 24,

1995.\3\

\3\We note that the Administrative Procedure Act allows the

rules to become effective immediately because we are relieving a

restriction rather than imposing one. See 5 U.S.C. 553(d)(1). We

believe that it is appropriate for these rules to take effect

immediately upon publication in the Federal Register in light of the

pending requests for waiver, discussed infra.

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

38. It is further ordered that the Petitions for Waiver filed by

Southwestern Bell, Bell Atlantic, US West, RAM Mobile, Cass Cable, and

API are dismissed as moot.

List of Subjects

47 CFR Part 22

Public mobile services; Radio.

47 CFR Part 90

Private land mobile services; Radio.

Federal Communications Commission.

William F. Caton,

Acting Secretary.

Amendatory Text

Parts 22 and 90 of Chapter I of Title 47 of the Code of Federal

Regulations are amended as follows:

PART 22--PUBLIC MOBILE SERVICE

1. The authority citation for part 22 continues to read as follows:

Authority: Sections 4, 303, 307, and 332, 48 Stat. 1066, 1082,

as amended; 47 U.S.C. 154, 303, 307 and 332, unless otherwise noted.

2. Section 22.577 is amended by revising the heading, the

introductory text, the introductory text of paragraph (a) and

paragraphs (a)(1), (a)(2), (b) and (d), to read as follows:

Sec. 22.577 Dispatch service.

Carriers licensed under this subpart may provide dispatch service

in accordance with the rules in this section.

(a) Installation without prior FCC approval. A station licensee may

install or remove dispatch points for subscribers without obtaining

prior FCC approval. A station licensee may install or remove dispatch

transmitters for subscribers without applying for specific

authorization, provided that the following conditions are met.

(1) Each dispatch transmitter must be able to transmit only on the

mobile channel that is paired with the channel used by the base

station.

(2) The antenna of the dispatch transmitter must not exceed the

criteria in Sec. 17.7 of this chapter that determine whether the FAA

must be notified of the proposed construction.

* * * * *

(b) Notification. Licensees must notify the FCC (FCC Form 489)

whenever a dispatch transmitter is installed pursuant to paragraph (a)

of this section. The notification must include the name and address of

the subscriber(s) for which the dispatch transmitter was installed, the

location of the dispatch transmitter, the height of antenna structure

above ground and above mean sea level, the channel(s) used, and the

call sign and location of the base station.

* * * * *

(d) Dispatch transmitters requiring authorization. A dispatch

transmitter that does not meet all of the requirements of paragraph (a)

of this section may be installed only upon grant of an application for

authorization therefor (FCC Form 600).

* * * * *

3. Section 22.901 is amended by revising paragraph (c) to read as

follows:

Sec. 22.901 Cellular service requirements and limitations.

* * * * *

(c) Dispatch service. Cellular systems may provide dispatch

service.

* * * * *

PART 90--PRIVATE LAND MOBILE RADIO SERVICES

4. The authority citation for part 90 continues to read as follows:

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

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

5. Section 90.603(c) is revised to read as follows:

Sec. 90.603 Eligibility.

* * * * *

(c) Any person eligible under this part and proposing to provide on

a commercial basis base station and ancillary facilities as a

Specialized Mobile Radio Service System operator, for the use of

individuals, federal government agencies and persons eligible for

licensing under subparts B, C, D, or E of this part.

6. 47 CFR 90.703(c) is revised to read as follows:

Sec. 90.703 Eligibility.

* * * * *

(c) Any person eligible under this part proposing to provide on a

commercial basis, station and ancillary facilities for the use of

individuals, federal government agencies and persons eligible for

licensing under subparts B, C, D, or E of this part.

[FR Doc. 95-7295 Filed 3-23-95; 8:45 am]

BILLING CODE 6712-01-M