# DISSENTING STATEMENT OF COMMISSIONER HAROLD FURCHTGOTT-ROTH 

Re Rulemaking to Amend Parts 1,2 21, and 25 of the Commission's Rules to
Redesignate the 27.5-29.5 GHz Frequency Band, to Reallocate the
29.5-30.0 GHz Frequency Band,to Establish Rules and Policies for Local
Multipoint Distribution Service and for Fixed Satellite Services, Sixth
Notice of Proposed Rule Making, CC Docket No. 92-297

Today's decision continues an unfortunate chapter in the Commission's
purported move towards deregulation and reliance on market forces. I
have previously voiced my disappointment with the Commission's decision
to impose eligibility requirements on LMDS licensees.[^1] As those
onerous restrictions are scheduled to sunset, the Commission has issued
this NPRM apparently seeking out a rationale for an extension of these
prohibitions. I believe that economic theory and the LMDS experience to
date illustrate the negative impact of these policies. In fact, today's
NPRM only adds uncertainty to this fragile market. Therefore I would not
have issued today's NPRM, but instead would have allowed the
restrictions to end on July 1, 2000.

The Commission imposed eligibility restrictions on LMDS with an
assurance that these extreme measures would be temporary. The majority
held that "\[b\]y temporarily restricting incumbents' eligibility to
acquire in-region LMDS licenses, this policy maximizes the likelihood of
increasing competition in both the LEC and MVPD markets."[^2] To date,
there has been no LMDS competition in the LEC and MVDS markets. In fact,
there has barely been any LMDS service at all.

As I said in 1998, "\[e\]ligibility restrictions on an innovative new
service are a draconian measure; such bans on competition should be used
only to prevent a substantial competitive harm to a specific market.
Here, the eligibility restrictions are imposed not to prevent a specific
harm, but in an attempt to enhance the mere possibility of
competition."[^3] Nothing in our LMDS experience or the competitive
landscape alters my view. Indeed I fear that the possible extension of
these eligibility requirements will create greater market uncertainty
and further delay the day that LMDS is deployed as a meaningful
competitor [in any market]{.underline}.

The Commission initially justified these eligibility restrictions based
on its apparent perception that LMDS represented a unique competitive
alternative that cable and telephony incumbents would attempt to thwart
by purchasing \-- and subsequently under-utilizing \-- the spectrum. The
Second Report held that the "temptation for preemptive acquisition is
particularly compelling here because of the unusually large size of the
LMDS spectrum allocation. . . relatively unused. . . . and \[with\]
development of equipment and technology \[that\] is already quite
advanced."[^4]

While the Second Report and Order touted the service based on its "high"
likelihood to provide competition in telephony and cable, our experience
has been significantly less positive.[^5] Two and a half years later,
there is little appreciable deployment of LMDS and the NPRM cites a
parade of factors that continue to hinder LMDS development. These
factors include service affordability, lack of building access, lack of
equipment, and line-of-sight problems. My point is not that LMDS is a
good or bad technology, or that it will or will not develop into a
viable market alternative. Rather, my point is that there is nothing
unique about LMDS that warrants excluding some providers from that
market.

The LMDS auctions themselves also seem to support the idea that this
spectrum is not a distinctly coveted resource. As the decision notes,
there have been two LMDS auctions. In total, the 400 A Block and 525 B
Block licenses sold for approximately \$323 million dollars. The Notice
trumpets this number: "\[t\]he willingness of LMDS licensees to bid
large sums demonstrates a substantial and probable market for LMDS."[^6]
Yet even these sums-- when compared with the tens of billions of dollars
bid for companies with only a potential to reach only a portion of
America by wire or fiber \-- hardly indicate that this spectrum is
[the]{.underline} "third pipe" into Americans homes that is [uniquely
well-positioned]{.underline} to compete with incumbent cable and
telephony providers.

In this evolving market, the Commission has singled out LMDS among fixed
wireless bands for these burdensome restrictions.[^7] In reality, there
are numerous other competitive wireless alternatives to cable and
wireline telephony -- yet we have wisely chosen not to extend the LMDS
eligibility restrictions to those services.[^8] The availability of
these market alternatives further undermines the notion that ILECs and
cable companies would have a rational incentive to purchase all the
relevant spectrum in each of the fixed wireless bands in order "to
protect their market power and preserve a stream of future profits."[^9]
The market has simply created too many alternatives for there to be any
economically rational "warehousing" of spectrum. This is especially true
at a time when incumbent cable and wireline telephony providers are
defending their turf from competitors of all shapes and sizes.

In putting aside the telephony and cable market theories, the Notice now
posits that LMDS could be a viable broadband competitor. Yet here too
there are other alternatives, and the only rationale for keeping some
players out is speculation about some future potential harm.[^10]
Moreover, I had hoped we were past the time when the Commission would
seek out new rationales for defending old anti-competitive restrictions.
We should be looking to knock down market barriers, not attempting to
shore them up.

In contrast to the speculative harms cited by the Notice, there are some
significant potential benefits from eliminating these restrictions.
First, LECs and cable companies may provide an infusion of much-needed
capital to jump start these services.[^11] Second, LMDS may be a logical
service to use in "filling in" underserved areas for existing
providers.[^12] Third, LECs and cable operators may be in a position to
ease the building access issues based on existing access arrangements.
Fourth, the prohibited entities may provide useful expertise in
technology, marketing, and product development. While this list is by no
means exhaustive, it does demonstrate the potential market benefits from
abandoning this competition ban.

Even if there were no identifiable, specific benefits to allowing one
class of entities to compete in a market, the mere denial by a
government agency of even an opportunity to compete in a market offends
basic concepts of justice and equity. If a government agency can deny
opportunities to compete in a market to one class of entities, it can
just as easily deny opportunities for another class of entities in a
different market. It is not for the government to burden any class of
would-be competitors with an obligation to demonstrate that they merit
an opportunity to compete; it is the obligation of government to
demonstrate that anyone should by rule of law be excluded.

No one should suffer the illusion that any market from which anyone has
been excluded without the soundest of reasons can be described as
[competitive]{.underline}. A [competitive]{.underline} market has entry
uncontrolled by the government. In my view, the Commission and the
public would be best served by allowing these potential competitors full
access to the marketplace.

I also join in the concern expressed by my colleague, Commissioner
Powell, regarding the staff-level review that undergirds key parts of
today's Notice. All parties are better served by an open process that
allows for a free exchange of ideas about pending Commission matters. I
see no reason to keep that Report from the parties and join Commissioner
Powell in calling for its release.

Based on these considerations, I respectfully dissent.

[^1]: See *Separate Statement of Commissioner Harold Furchtgott-Roth* in
    Rulemaking to Amend Parts 1,2, 21, and 25 of the Commission's Rules
    to Redesignate the 27.5-29.5 GHz Frequency Band, to Reallocate the
    29.5-30.0 GHz Frequency Band, to Establish Rules and Policies for
    Local Multipoint Distribution Service and for Fixed Satellite
    Services*,* Petitions for Further Reconsideration of the Denial of
    Applications for Waiver of the Commission's Common Carrier
    Point-to-Point Microwave Radio Service Rules, CC Docket No. 92-297,
    Third Order on Reconsideration (February 3, 1998). Similar concerns
    were expressed by Commissioner Powell in that proceeding and by
    Commissioner Chong in the Second Report and Order.

[^2]: See Rulemaking to Amend Parts 1,2, 21, and 25 of the Commission's
    Rules to Redesignate the 27.5-29.5 GHz Frequency Band, to Reallocate
    the 29.5-30.0 GHz Frequency Band, Second Report and Order, 12 FCC
    Rcd 12545, ¶ 162 (1997); see also id. at ¶ 160 (restrictions would
    be "short-term").

[^3]: See *Separate Statement of Commissioner Harold Furchtgott-Roth* in
    LMDS Third Order on Reconsideration.

[^4]: See Second Report and Order at ¶ 175.

[^5]: See Second Report and Order at ¶ 170.

[^6]: Order at ¶ 31. These costs are also substantial enough, however,
    to provide a significant disincentive for cable and telephony
    companies to spend resources trying to obtain these licenses, bur
    not use them efficiently.

[^7]: All of these market analyses seem misguided too in light of the
    NPRM's conclusion that "LMDS will likely not be used as a
    stand-alone network, but as a 'roof-top' means to extend other
    existing networks. Service providers are likely to use LMDS to fill
    out their service areas and/or to complement other wireless and
    fiber means of reaching customers." Order at ¶ 33.

[^8]: As noted in the NPRM, these services include the 24 GHz and 39 GHz
    bands as well as 2 GHz MDS and 2.5 GHz MMDS and ITFS.

[^9]: Second Report and Order at ¶ 171.

[^10]: The Commission has elsewhere determined that the broadband
    marketplace is competitive, thus appearing to undermine any eventual
    assertion to the contrary here. *See* e.g. Cable Services Bureau,
    "Broadband Today," A Staff Report to FCC Chairman Kennard, at 23-30
    (October 1999).

[^11]: This is consistent with the Commission's prior conclusions
    regarding LEC and cable entry into other markets. See e.g.
    *Amendment of the Commission's Rules to Establish New Personal
    Communications Services*, 8 FCC Rcd 7700, ¶ 126 (1993) (". . . we
    also find that allowing LECs to participate in PCS may produce
    significant economies of scope between wireline and PCS networks. We
    believe that these economies will promote more rapid development of
    PCS and will yield a broader range of PCS services at lower costs to
    consumers. In addition, allowing LECs to provide PCS service should
    encourage them to develop their wireline architectures to better
    accommodate all PCS services.")

[^12]: Order at ¶ 33.