**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | CC Docket No. 94-54          |
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| Interconnection and Resale       | ) |                              |
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**ORDER ON RECONSIDERATION OF MEMORANDUM OPINION**

**AND ORDER ON RECONSIDERATION**

**Adopted: August 17, 2000 Released: August 22, 2000**

By the Commission:

# INTRODUCTION

1.  The wireless resale rule prohibits CMRS providers from unreasonably
    restricting resale of their services. In the *CMRS Resale Report and
    Order,* the Commission extended its resale rule, initially
    applicable to cellular providers, to providers of broadband personal
    communications services (PCS) and certain specialized mobile radio
    (SMR) services to promote competition in the broadband CMRS
    market.[^1] The Commission determined to sunset the resale rule five
    years after completion of its initial grant of broadband PCS
    licenses,[^2] *i.e.*, November 24, 2002.[^3]

2.  On September 27, 1999, we issued an Order on Reconsideration of the
    *CMRS Resale Report and Order.*[^4] On reconsideration, we affirmed
    the 2002 sunset date[^5] but modified the resale rule to exclude
    customer premises equipment (CPE) and CPE in bundled packages,[^6]
    and to exclude from its scope certain C, D, E, and F block PCS
    licensees,[^7] as well as all CMRS providers of voice or data
    services that do not use in-network switching facilities.[^8] On
    December 19, 1999, MCI WorldCom filed a petition for further
    reconsideration of two issues addressed in the *CMRS First
    Reconsideration Order.* MCI WorldCom requests that we eliminate the
    exclusion for CPE and extend the sunset at least one full year
    beyond the successful conclusion of wireless local number
    portability implementation. The Commission has received six filings
    in response to this petition.[^9] For those reasons set forth below,
    we deny MCI WorldCom's Petition for Reconsideration and reaffirm our
    determinations to exclude CPE from the scope of the CMRS resale rule
    and to sunset the rule on November 24, 2002. With respect to the
    exclusion for certain C, D, E, and F block PCS licensees, we are not
    addressing here what impact our ultimate decision regarding
    eligibility to participate in the reauction of C and F block
    licensees may have on the scope of the CMRS resale rule.[^10]

# DISCUSSION

## Application of CMRS Resale Rule to Bundled Packages

3.  [Background]{.underline}. In the *CMRS Resale Report and Order*, the
    Commission included CPE within the ambit of the resale rule to
    eliminate carriers' incentives to cross-subsidize the CPE component
    with service revenues to competitively disadvantage resellers.[^11]
    However, in the *CMRS Resale First Reconsideration Order,* we
    decided to exclude CPE and CPE in bundled packages from the scope of
    the CMRS resale rule.[^12] On further reconsideration, MCI WorldCom
    contends that we should continue to include CPE within the scope of
    the CMRS resale rule because resellers will be required to employ
    the same handset solutions to the Commission's various E911
    requirements as those adopted by the underlying facilities-based
    carrier. MCI WorldCom expresses concern that manufacturers "may be
    pressured" to fill facilities-based carriers' handset orders first
    and that this will delay their acquisition by reseller
    customers.[^13] MCI WorldCom also requests that the Commission
    require facilities-based carriers that elect to adopt network-based
    E911 solutions to provide such E911 capabilities to resellers'
    customers in order to ensure end-user customer safety.[^14]

4.  [Discussion]{.underline}. We are unpersuaded by MCI WorldCom's
    arguments and continue to believe it appropriate to exclude CPE and
    CPE in bundled packages from the scope of the CMRS resale rule. We
    based our decision to adopt this approach on reconsideration, on the
    lack of evidence in the record that facilities-based carriers are
    actually cross-subsidizing the CPE component of their rates in order
    to disadvantage resellers, and on our assessments that the provision
    of CPE below cost to attract new customers is a legitimate
    promotional strategy and that resellers are capable of obtaining CPE
    elsewhere at volume discounts.[^15] We also observed that excluding
    bundled CPE from the resale rule is equitable because, to the extent
    the provision of CPE can be considered a marketing expense, such a
    policy puts resellers on the same footing as facilities-based
    carriers with respect to such expenses.[^16] By its own admission,
    MCI WorldCom's comment with respect to handset availability is
    speculative. We agree with those filing oppositions to its request,
    that MCI WorldCom has adduced no evidence or argument to establish
    that market driven incentives will not ensure an adequate supply of
    ALI-capable[^17] handsets to the extent that a reseller is reselling
    the service of a CMRS provider that has elected to deploy a handset
    solution.[^18] Consequently, we deny its request that we include CPE
    and CPE in bundled packages within the scope of the CMRS resale
    rule.

## Extension of Sunset Date

5.  [Background]{.underline}. In the *CMRS Resale Report and Order*, the
    Commission decided to sunset the resale rule at the end of the
    five-year period following award of the last group of broadband PCS
    li­censes, *i.e.*, November 24, 2002. [^19] On reconsideration, we
    affirmed the sunset date.[^20] On further reconsideration, MCI
    WorldCom contends that the 2002 sunset date should be extended at
    least one full year beyond the date as of which wireless local
    number portability (LNP) implementation is successfully
    concluded.[^21]

6.  [Discussion]{.underline}. We decline to grant MCI WorldCom's request
    for an extension of the sunset date for the CMRS resale rule. The
    Commission based its decision in the *CMRS Resale Report and Order*
    to sunset the resale rule at the end of the specified five-year
    period on its finding that the competitive development of broadband
    PCS and covered SMR service will obviate the need for a resale rule
    in the cellular, broadband PCS and covered SMR markets. We affirmed
    that decision on reconsideration, based on the absence of record
    evidence that the market will not be sufficiently competitive by
    November 24, 2002. MCI WorldCom has proffered no argument or
    evidence that the broadband CMRS market will be insufficiently
    competitive by that date to obviate the need for the resale rule.
    Instead, it interposes objections to the sunset derived from the
    implementation of LNP for wireless customers. We agree with those
    opposing its request that MCI WorldCom has engaged in mere
    speculation and has provided no support for its contention that the
    sunset will precipitate mass terminations of resale agreements and
    those customer inconveniences predicted by MCI WorldCom.[^22] We
    also agree with opposing parties that the issues raised by MCI
    WorldCom regarding LNP implementation are outside the scope of the
    present proceeding and does not require delay of the Commission's
    sunset of the CMRS resale rule.[^23] Hence, we also deny this part
    of MCI WorldCom's petition.

# PROCEDURAL MATTERS

## Regulatory Flexibility Act

7.  The Commission has not prepared an additional Supplemental Final
    Regulatory Flexibility Analysis (Supplemental FRFA) of the possible
    impact on small entities of the Commission's decisions, as otherwise
    required by the Regulatory Flexibility Act, 5 U.S.C. § 604, because
    no changes have been made in this Order to the Commission's rules or
    policies.

## Authority

8.  This action is taken pursuant to Sections 1, 4(i), 4(j), 10, 201,
    202, 303(r), 309, 332, and 403 of the Communications Act, 47 U.S.C.
    §§ 1, 4(i), 4(j), 160, 201, 202, 303(r), 309, 332, 403.

## Further Information

9.  For further information regarding this Order, contact Jane Phillips,
    Wireless Telecommunications Bureau, Policy Division, at (202)
    418-1310.

# ORDERING CLAUSE

10. Accordingly, IT IS ORDERED that the Petition for Reconsideration
    filed by MCI WorldCom IS DENIED.

> FEDERAL COMMUNICATIONS COMMISSION
>
> Magalie Roman Salas
>
> Secretary
>
> **Appendix A**

**Petition for Further Reconsideration:**

MCI WorldCom, Inc. (MCI WorldCom)

**Oppositions and Comments to Petition for Further Reconsideration:**

BellSouth Corporation (BellSouth)

Cellular Telecommunications Industry Association (CTIA)

GTE Service Corporation (GTE)

Personal Communications Industry Association (PCIA)

SBC Wireless Inc. (SBC)

US WEST WIRELESS, LLC (US WEST)

**Reply Comments:**

MCI WorldCom

[^1]: Interconnection and Resale Obligations Pertaining to Commercial
    Mobile Radio Services, CC Docket No. 94-54, *First Report and
    Order*, 11 FCC Rcd 18455 (1996) (*CMRS Resale First Report and
    Order*), *aff\'d sub nom*. Cellnet Communications v. FCC, 149 F.3d
    429 (6th Cir. 1998) (*Cellnet*).

[^2]: *Id*. at 18468 (para. 24). The Commission\'s decision to sunset
    the CMRS resale rule was affirmed in *Cellnet*.

[^3]: Commencement of Five-Year Period Preceding Termination of Resale
    Rule Applicable to Certain Covered Commercial Mobile Radio Service
    Providers, CC Docket No. 94-54, 13 FCC Rcd 17427 (1998).

[^4]: Interconnection and Resale Obligations Pertaining to Commercial
    Mobile Radio Services, CC Docket No. 94-54; Personal Communications
    Industry Association\'s Broadband Personal Communications Services
    Alliance\'s Petition for Forbearance for Broadband Personal
    Communications Services; Forbearance from Applying Provisions of the
    Communications Act to Wireless Telecommunications Carriers, WT
    Docket No. 98-100; Further Forbearance from Title II Regulation for
    Certain Types of Commercial Mobile Radio Service Providers, GN
    Docket No. 94-33; *Memorandum Opinion and Order on Reconsideration*,
    FCC 99-250 (rel. Sept. 27, 1999), 1999 WL 759700 (*CMRS Resale First
    Reconsideration Order*).

[^5]: C*MRS Resale First Reconsideration Order* at paras. 12-25.

[^6]: *Id*. at paras. 26-30.

[^7]: *Id*. at paras. 32-41. This exemption is based on our equation of
    C, D, E and F block licensees with \"smaller, new entrant
    competitors that have little market share and little or no incentive
    to restrict resale unreasonably. . . .\" *See id.* at para. 34.
    However, we are presently considering modification of the size
    status restriction on bidder eligibility when we reauction the
    recovered C and F block licenses. *See* Amendment of the
    Commission's Rules Regarding Installment Payment Financing for
    Personal Communications Services (PCS) Licensees, WT Docket No.
    97-82, *Further Notice of Proposed Rulemaking*, FCC 00-197 (rel.
    June 7, 2000) 2000 WL 729073 (*C and F Block Auction Notice of
    Proposed Rulemaking*).

[^8]: *Id*. at paras. 44-47.

[^9]: *See* Appendix A. In addition, SBC filed an *Ex Parte*
    presentation on March 28, 2000.

[^10]: *See* *C and F Block Auction Notice of Proposed Rulemaking,
    supra.*

[^11]: *CMRS Resale Report and Order* at para. 31.

[^12]: *CMRS Resale First Reconsideration Order* at paras. 26-30.

[^13]: MCI WorldCom Petition at 5.

[^14]: *Id*. at 5-6. This issue is beyond the scope of this proceeding.

[^15]: *CMRS Resale First Reconsideration Order* at para. 29.

[^16]: *Id*.

[^17]: Automatic Location Information.

[^18]: *See* CTIA Opposition at 6-8, US WEST Opposition at 8-10,
    BellSouth Opposition at 7-9.

[^19]: *CMRS Resale Report and Order* at para. 24.

[^20]: *CMRS Resale First Reconsideration Order* at paras. 12-25.

[^21]: MCI WorldCom Petition at 2-5. MCI WorldCom argues that LNP is a
    "safety net," in the absence of which a wireless carrier's
    anticipated termination of its resale agreements after the sunset
    date could strand wireless resale customers required to change
    telephone numbers in order to continue service. MCI WorldCom asserts
    that this problem will be exacerbated for wireless resale customers
    by implementation of the Commission's Calling Party Pays rules,
    which will induce customers to give out their telephone numbers and
    suffer even greater inconvenience when forced to change them upon
    termination of their provider's resale agreement. MCI WorldCom
    contends that the specter of this problem "skews the market in the
    favor of facilities-based carriers at the expense of resellers."
    *Id*. at 3. Based on its contention that wireless carriers have
    resisted complying with the Commission's LNP requirements by filing
    requests for extensions of time for implementation, MCI WorldCom
    requests that the Commision require the top ten wireless carriers to
    report quarterly regarding their progress in implementing LNP and
    provide the Commission with master test schedules for such
    implementation.

[^22]: CTIA Opposition at 2-4; SBC Comments at 1-4. In addition, several
    parties contend that current churn rates in the broadband CMRS
    market belie MCI WorldCom's assertions that number portability is a
    priority for customers. *See* BellSouth Opposition at 1-6; US WEST
    at 6-8.

[^23]: CTIA Opposition at 4-6; US WEST Opposition at 4-5; GTE Opposition
    at 5.