**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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**NOTICE OF PROPOSED RULE MAKING**

**Adopted:** January 19, 2001 **Released:** January 23, 2001[^1]

Comment Date: \[60 days after publication in the Federal Register\]

Reply Comment Date: \[30 days after comment date\]

By the Commission: Commissioner Furchtgott-Roth concurring and issuing a
separate statement.

Table of Contents

Heading Paragraph \#

I. INTRODUCTION 1

II\. BACKGROUND 2

A. CMRS Spectrum Cap 2

B. Cellular Cross-Interest Rule 9

III\. DISCUSSION 11

A. Section 11 Review of CMRS Spectrum Aggregation Limits 11

B. Reexamination and Public Interest Determination 13

1\. Development of Meaningful Economic Competition 14

2\. Spectrum Management and Other Regulatory Considerations 26

3\. International Developments 40

C. Possible Modifications to the CMRS Spectrum Cap and Cellular
Cross-Interest Rule 46

1\. Possible Modifications to the CMRS Spectrum Cap 47

2\. Possible Modifications to the Cellular Cross-Interest Rule 54

IV\. CONCLUSION 58

V. PROCEDURAL MATTERS 59

A. Regulatory Flexibility Act 59

B. *Ex Parte* Rules 60

C. Filing Procedures 61

VI\. ordering clauses 64

APPENDIX: Initial Regulatory Flexibility Analysis

# INTRODUCTION

1.  In this Notice of Proposed Rulemaking (NPRM), we begin our
    reexamination of the need for Commercial Mobile Radio Services
    (CMRS) spectrum aggregation limits as part of our 2000 biennial
    regulatory review of the Commission\'s telecommunications
    regulations. Specifically, we are initiating our second
    comprehensive review of the two regulations that currently limit the
    aggregation of broadband CMRS spectrum: the CMRS spectrum cap and
    the cellular cross-interest rule. In September 1999, we generally
    found that these spectrum limits were still necessary to safeguard
    competition in CMRS markets, although we made certain modifications
    to each of them to provide more flexibility in permissible
    investment and partnering arrangements among carriers.[^2] In this
    proceeding, pursuant to the mandate of section 11 of the
    Communications Act of 1934, as amended (Communications Act),[^3] we
    seek comment on whether competitive or other developments in CMRS
    markets warrant elimination or modification of one or both of these
    regulations.

# BACKGROUND

## CMRS Spectrum Cap

2.  The CMRS spectrum cap rule reads: "No licensee in the broadband PCS,
    cellular, or SMR services (including all parties under common
    control) regulated as CMRS . . . shall have an attributable interest
    in a total of more than 45 MHz of licensed broadband PCS, cellular
    and SMR spectrum regulated as CMRS with significant overlap in any
    geographic area, except that in Rural Service Areas (RSAs), . . . no
    licensee shall have an attributable interest in a total of more than
    55 MHz of licensed broadband PCS, cellular, and SMR spectrum
    regulated as CMRS with significant overlap in any RSA."[^4] No more
    than 10 MHz is attributed to an entity when calculating Specialized
    Mobile Radio (SMR) spectrum under the cap.[^5] Thus, a total of 180
    MHz of spectrum designated for services that could be regulated as
    CMRS is subject to the 45/55 MHz spectrum cap, namely the 120 MHz of
    broadband Personal Communications Services (PCS) spectrum, 50 MHz of
    cellular spectrum, and 10 MHz of attributable SMR spectrum.[^6]

3.  Section 20.6(d) of the Commission's rules provides generally that
    ownership interests of 20 percent or more are deemed
    attributable.[^7] Once all the applicable CMRS spectrum attributable
    to a given entity is identified, one then determines whether the
    attributable CMRS spectrum serves markets having a "significant
    overlap."[^8] This inquiry is complicated by the fact that different
    licensing and service areas are used for cellular, broadband PCS,
    and SMR spectrum.[^9] When a situation involves both a PCS license
    and a cellular or SMR license, a significant overlap exists when 10
    percent or more of the population of the designated PCS licensed
    service area is within the CGSA or SMR service area(s) in
    question.[^10]

4.  In 1994, before the licensing of PCS and the advent of digital SMR
    service, and when only two cellular licensees offered mobile voice
    services in any given geographic market, the Commission established
    a 45 MHz CMRS spectrum cap to complement the then-existing 40 MHz
    broadband PCS spectrum cap and the PCS/cellular cross-ownership
    rule.[^11] In 1996, the Commission eliminated these latter two
    service-specific limitations on licensees\' ability to aggregate
    broadband PCS spectrum, and determined to rely solely on the 45 MHz
    CMRS spectrum cap to ensure that multiple service providers would be
    able to obtain broadband PCS spectrum and facilitate the development
    of competitive markets for wireless services.[^12] The Commission
    reasoned that the CMRS spectrum cap was sufficient "to avoid
    excessive concentration of licenses and promote and preserve
    competition," while also noting its belief that discouraging
    anticompetitive behavior must be accomplished while "maintaining
    incentives for innovations and efficiency."[^13]

5.  In the *First Biennial Review Order*, issued in September 1999 as
    part of the 1998 biennial review, we decided substantially to retain
    the CMRS spectrum cap (and the cellular cross-interest rule), with
    targeted modifications to reflect circumstances in rural areas and
    to permit passive institutional investors to acquire greater
    non-attributable interests in CMRS carriers.[^14] We considered the
    danger that increased broadband spectrum aggregation would result in
    decreased service competition and in forgone consumer benefits. We
    also, however, took into consideration the need that certain
    carriers expressed for additional spectrum to deal with congestion
    on their networks and to implement new, advanced services. We
    concluded that a bright-line spectrum aggregation limit remained a
    simple and effective means of generally maintaining a proper balance
    between these public policy objectives.[^15] In the order, we
    recognized that a major purpose of the CMRS spectrum cap was to
    provide additional opportunities for potential new entrants to
    particular CMRS markets to secure spectrum rights in those areas and
    begin offering service.[^16] Specifically, we found that "CMRS
    markets differ from certain other telecommunications markets with
    respect to ease of entry because of the need to obtain a
    governmentally-granted spectrum license to provide CMRS."[^17]
    Because CMRS market entry is subject to such necessary government
    control, we found that unregulated market entry alone cannot
    necessarily be relied on to discipline anticompetitive conduct.[^18]
    Thus, we reaffirmed the 45 MHz limit as striking the proper balance
    (in non-rural areas) in providing carriers with sufficient spectrum
    until we could allocate additional amounts suitable for the
    provision of CMRS, while helping assuage the competitive
    consequences of the spectrum-related barriers to entry in today's
    CMRS markets.

6.  The decision in the *First Biennial Review Order* generally to
    retain our spectrum aggregation limits rested to a great extent on
    our view that substantial consumer benefits had resulted from the
    dramatic increases in competition in CMRS markets over the previous
    few years. We found that our spectrum cap policies had played a
    positive role in the development of CMRS competition by ensuring the
    potential participation of four or more facilities-based competitors
    in most areas.[^19] In particular, we found that eliminating these
    regulations and enabling reconsolidation to occur could threaten
    reversal of the trends toward falling prices, improved service
    quality, product innovation, and product differentiation.[^20] In
    this regard, we noted the differentiated products that have been
    offered by multiple service providers, and cited data showing that
    the bundled price per minute for cellular service had declined
    significantly with the entry of the fourth and fifth broadband CMRS
    carriers into a market.[^21] We therefore rejected certain carriers'
    arguments that we should raise the cap (*e.g*., to 60 MHz) because
    consolidation to three competitors would not adversely affect CMRS
    markets, stating instead that "significant benefits of competition
    are unlikely to be exhausted with the entry of a third
    carrier."[^22] We also rejected similar arguments to raise the cap
    uniformly to 55 MHz, concluding that three carriers with 55 MHz
    each, with 15 MHz of spectrum for a fourth competitor, could result
    in a more highly concentrated and less competitive market than many
    CMRS markets were in 1999.[^23] We based our conclusions, at least
    in part, on measurements of market concentration that were computed
    using customer subscription data, and relied to a significant degree
    on the Herfindahl-Hirschman Index (HHI), which indicated that all of
    the nation's largest CMRS markets were highly concentrated.[^24]

7.  We further determined that the asserted benefits from a repeal or
    fundamental modification of our spectrum aggregation limits that
    would permit fewer than four significant competitors in any given
    market were unsupported. We noted existing alternative spectrum that
    could be used to provide certain types of new services, as well as
    the alternative of allocating more spectrum suitable for the
    provision of CMRS.[^25] We described a waiver process that could be
    used to meet the spectrum requirements for third-generation (3G) and
    other advanced wireless services until we could allocate additional
    spectrum for next generation applications.[^26] With regard to the
    possible allocation of additional spectrum potentially suitable for
    CMRS, we decided that we would not necessarily subject any such
    spectrum to the current 45/55 MHz CMRS spectrum cap, but would
    consider its treatment in the service rules proceedings for such
    spectrum.[^27] We also cited our belief that the cap \"furthers the
    goal of diversity of ownership that we are mandated to promote under
    section 309(j)\" of the Communications Act.[^28]

8.  We did conclude that the public policy tradeoffs were different in
    rural areas than in non-rural areas, and we raised the cap to 55 MHz
    in RSAs. We based this conclusion on findings that the potential
    consumer benefits in rural areas from competitive, facilities-based
    entry were likely to be limited by the economics of offering service
    to lower-density populations.[^29] As a practical matter, because
    many RSAs are unlikely to see four or more competitors actually
    offering service, we determined that the costs of raising the cap in
    those areas are likely to be less than in urban and suburban areas.
    We found that a 45 MHz spectrum cap might affect the ability of
    rural cellular carriers (with 25 MHz licenses) and broadband PCS
    carriers (with 30 MHz licenses) to attain certain economies of scale
    and scope that could enhance efficiency without threatening
    competition. Therefore, we concluded that a 55 MHz spectrum ceiling
    recognizes the reality that higher concentration through
    efficiency-enhancing partnering and other arrangements is likely or
    inevitable in rural areas.[^30]

## Cellular Cross-Interest Rule

9.  Adopted originally in 1991,[^31] the cellular cross-interest rule
    substantially limits the ability of parties to have interests in
    cellular carriers on different channel blocks in a geographic area.
    Application of the cellular cross-interest rule requires comparison
    of the CGSAs of cellular licensees operating on A Block frequencies
    with those of cellular licensees operating on B Block frequencies.
    Because cellular licensees are authorized on frequencies in either
    one or the other of these channel blocks,[^32] any geographic area
    generally will fall within the CGSAs of no more than two cellular
    licensees (one on each channel block).[^33] To the extent licensees
    on different channel blocks have any degree of overlap between their
    respective CGSAs, section 22.942 of the Commission\'s rules
    prohibits any entity from having a direct or indirect ownership
    interest of more than 5 percent in one such licensee when it has an
    attributable interest in the other licensee.[^34] An attributable
    interest is defined generally to include an ownership interest of 20
    percent or more, as well as any controlling interest.[^35] Under the
    rule, however, an entity may have non-controlling and otherwise
    non-attributable direct or indirect ownership interests of less than
    20 percent in licensees for different channel blocks in overlapping
    CGSAs.[^36]

10. As part of our 1998 biennial review of the cellular cross-interest
    rule, we determined that the restriction continued to be necessary
    to protect against substantial anticompetitive threats from common
    ownership between the two cellular carriers in any given geographic
    area. We found that cellular carriers served approximately 86
    percent of nationwide mobile telephone subscribers at the end of
    1998, and determined that in only a few major metropolitan markets
    was that percentage less than 70 percent.[^37] With two cellular
    carriers being the only providers of mobile telephone service in
    some markets and having the lion's share of subscribers in all
    markets, we concluded that economic competition alone would not
    ensure that the public interest objectives of the cellular
    cross-interest rule would be met.[^38] We also concluded that
    reliance on the CMRS spectrum cap without a cellular cross-interest
    rule would allow cellular carriers to acquire too much of an
    ownership interest in the other cellular licensee in urban markets,
    and would permit one entity to acquire complete control of both
    cellular licensees in rural markets.[^39] However, because
    competition from other services had increased on the whole since the
    rule's inception in 1991, we altered what had been a near absolute
    bar against cross-ownership[^40] by relaxing application of the
    rule's attribution standards to the current limits under section
    22.942.[^41]

# DISCUSSION

## Section 11 Review of CMRS Spectrum Aggregation Limits

11. *Background*. Section 11 of the Communications Act imposes an
    affirmative obligation to eliminate or modify any of our rules for
    telecommunications services, such as our spectrum aggregation limits
    applicable to CMRS, if any such rule is determined to be no longer
    necessary in the public interest. In passing the Telecommunications
    Act of 1996[^42] to significantly amend the Communications Act,
    Congress anticipated that, as competition developed, market forces
    would reduce the need for regulation.[^43] Specifically, in adopting
    section 11, Congress required the Commission, every two years, to
    review all regulations that apply to "the operations or activities
    of any provider of telecommunications service" and to \"determine
    whether any such regulation is no longer necessary in the public
    interest as the result of meaningful economic competition between
    providers of such service."[^44] If we determine that, as the result
    of competition in CMRS markets, certain regulations applicable to
    CMRS providers are no longer necessary in the public interest, then
    we "shall repeal or modify" those regulations per Congress'
    mandate.[^45]

12. *Discussion*. To determine whether the CMRS spectrum cap and the
    cellular cross-interest rule are no longer necessary in the public
    interest as the result of meaningful economic competition, we are
    here soliciting detailed comments from wireless telecommunications
    carriers, consumers of their services, and other interested parties
    on whether we should retain, repeal or modify these limits under the
    standards of section 11 of the Communications Act. Under section 11,
    our fundamental inquiry is whether, as a result of meaningful
    economic competition among providers of telecommunications services,
    spectrum aggregation limits are no longer necessary in the public
    interest, *e.g*., to prevent harmful concentration of spectrum
    ownership or to ensure meaningful opportunities for broadband CMRS
    market entry. In order to make this determination, we seek comment
    regarding what providers of "telecommunications service" fall within
    the purview of our section 11 analysis of our spectrum aggregation
    policies. What constitutes "meaningful economic competition" under
    section 11, and to what degree have the relevant competitive
    conditions changed since our 1998 biennial review of these
    rules?[^46] If meaningful competition between providers of
    telecommunications services now exists, have spectrum aggregation
    limits served their purpose and are they no longer in the public
    interest?[^47] Or, are there public interest reasons to retain
    spectrum aggregation limits notwithstanding the development of
    meaningful economic competition? We ask commenters to consider
    generally the relation between "public interest" and "meaningful
    economic competition" under section 11's terms.

## Reexamination and Public Interest Determination

13. In this review under section 11, we seek public comment and input,
    including the submission of specific market data and studies, to
    assist our public interest determination of whether the CMRS
    spectrum aggregation rules are no longer necessary in the public
    interest and, if they are necessary, whether our existing spectrum
    limits should be modified. First, we reexamine whether spectrum
    aggregation limits, including the cellular cross-interest rule,
    continue to promote procompetitive ends in today's CMRS marketplace.
    As part of this inquiry, we consider the development of meaningful
    economic competition, as well as the potential competitive
    consequences of consolidation that may occur without spectrum
    aggregation limits. We then invite comment on spectrum management
    and other regulatory considerations, particularly in the context of
    the specific scarcity considerations affecting the availability of
    spectrum suitable for broadband CMRS. Among other subjects, our
    inquiry examines any costs that our spectrum aggregation limits may
    impose on the development of advanced wireless services, the
    possible benefits of standards that create "bright lines" for
    industry, and whether these standards contribute to the development
    of efficient technologies. Finally, we seek comment on how recent
    international developments should affect our public interest
    determination.

### Development of Meaningful Economic Competition

14. *Background*. Since we last reviewed spectrum aggregation limits in
    September 1999, CMRS markets have continued to grow in size, range
    of service offerings, and the pace of technological advances. In our
    *Fifth Annual CMRS Competition Report*, released in August 2000, we
    described considerable evidence that the mobile telephony market has
    experienced strong growth and competitive development.[^48] We cite
    just a few indicia of these trends. By the end of 1999,[^49] we had
    witnessed the largest twelve-month percentage increase in the total
    number of subscribers in the history of the mobile telephone sector.
    Specifically, total U.S. mobile telephone subscribership had reached
    86 million,[^50] and the Cellular Telecommunications and Internet
    Association (CTIA) has reported that total subscribership reached
    over 97 million as of June 2000.[^51] On the competition front, we
    reported that, as broadband PCS licensees continued to roll out
    service and operational carriers expanded their nationwide
    footprints, about 88 percent of U.S. residents lived in counties
    that were served by three or more different broadband CMRS
    providers.[^52] In the largest counties, where 69 percent of our
    population lives, we determined that at least five different mobile
    telephone operators were competing for subscribers.[^53] We noted
    that carriers were taking advantage of the economies of scale and
    increased efficiencies that resulted from expanding their footprints
    nationwide.[^54] As a result, there are now six nationwide or
    near-nationwide carriers offering service in the United States,[^55]
    as well as a large number of regional and local CMRS providers. In
    addition, because of upgrades by cellular carriers to convert to
    digital technology and thereby expand their network capacity, we
    reported that 84 percent of the nation's population lived in areas
    with digital cellular coverage.[^56] Including broadband PCS,
    digital cellular, and digital SMR, digital subscribers for the first
    time composed a greater percentage of the mobile telephone market
    than did analog subscribers, the traditional mainstay of the
    cellular industry.[^57] Moreover, because digital subscribers tend
    to use mobile services more intensively than analog subscribers, the
    percentage of digital traffic in CMRS networks substantially
    exceeded 50 percent.[^58] We also reported that non-cellular
    carriers had for the first time attracted a majority of the
    industry's total new subscribers.[^59] As a result, cellular
    licensees' market share of mobile telephone subscribers nationwide
    had dropped from 86 percent at the end of 1998 to approximately 75
    percent at the end of 1999.[^60]

15. Concurrent with, and we believe largely as the result of, the
    continued growth of competition in the mobile telephony market,
    consumers have benefited from declining prices, rapidly expanding
    coverage areas, new service packages, and technological innovation.
    In our *First Biennial Review Order,* we noted that prices were
    falling, minutes of use (MOUs) were increasing, and service options
    were growing.[^61] According to our analysis, entry by a fourth and
    fifth facilities-based competitor into mobile telephone markets was
    leading to significant declines in bundled per-minute prices for
    consumers.[^62] Moreover, in our *Fifth Annual CMRS Competition
    Report,* we cited data that the entrance of new competitors into
    these markets continues to reduce prices and benefit consumers.[^63]
    We further concluded that the decreasing pricing trends are likely
    contributing to the increased MOUs and reliance on mobile wireless
    services.[^64] In addition, consumers are also experiencing the
    increasing emergence of mobile data services. Specifically, there
    have been continuing developments, both domestically and
    internationally, regarding the provision of advanced mobile wireless
    services, including broadband, multi-media services such as Internet
    access.[^65]

16. *Discussion*. In light of the developments in competition just
    discussed, we solicit comment on whether spectrum aggregation limits
    continue to promote our procompetitive goals in today's CMRS
    markets. In our *First Biennial Review Order*, we concluded that
    some spectrum aggregation limits were necessary to ensure that these
    competitive successes continued to be realized in CMRS markets. We
    now seek comment on whether these regulations continue to serve the
    public interest by promoting or protecting competition in CMRS
    services. Will our spectrum aggregation limits continue to
    contribute to the rise of competition and resulting benefits to
    consumers, as we have found in the past, or are they no longer
    necessary? In particular, we seek comment regarding the correlation
    between the number of competitors maintained by current spectrum
    aggregation limits and the growth and maintenance of competition
    that has produced the benefits to consumers that we have observed.

17. In September 1999, we determined that improvements in the various
    indicia of competition would be threatened by eliminating the
    spectrum cap, as doing so could enable reconsolidation to occur. We
    were especially concerned at that time that allowing individual
    carriers to acquire spectrum holdings in excess of the cap could
    lead to a reconsolidation of the broadband CMRS marketplace with
    negative impacts on competition, given the need to obtain spectrum
    licenses from the FCC to provide CMRS.[^66] In reassessing the need
    for aggregation limits, we seek comment on whether competitive
    developments since that time have obviated the need for limits such
    as the spectrum cap to prevent potentially harmful reconsolidation.
    Are such limits still needed today, as we concluded then, to prevent
    retrogression and competition-eroding concentration in CMRS markets?
    Because incentives may exist for operational carriers to consolidate
    within markets, how valuable a role do spectrum limits play in
    preventing potentially harmful concentration versus allowing
    consolidations that benefit the public interest? In this regard, we
    note that spectrum aggregation limits do not appear to have
    prevented the consolidation of carriers into nationwide networks
    with the resulting beneficial service options for consumers.[^67]

18. We ask for comment on the impact that these market trends, as well
    as the regulatory considerations discussed below,[^68] should have
    on our assessment of the various economic relationships on which our
    spectrum cap policy is based. How do these developments affect our
    concern that limits were necessary in order to ensure a minimum
    number of competitors in any given geographic area? Should the
    relevant measures of market capacity (*e.g*., assigned spectrum,
    subscriber shares, *etc*.) be weighted differently than in the past?
    What role should we continue to afford HHI calculations or similar
    measures of concentration of ownership or control, and what inputs
    should we use in calculating HHI? Moreover, should we redefine the
    relevant product market in light of increasing product convergence
    between providers subject to the CMRS spectrum cap and other service
    providers? Should we continue to apply the cap to all broadband PCS,
    cellular, and SMR spectrum regulated as CMRS, regardless of the use
    to which the spectrum currently is dedicated; or, should we limit
    application of the cap to CMRS spectrum used for mobile voice
    service?[^69] If we were to limit the cap to mobile voice services
    only, how would we further and clearly define the included and
    excluded product markets? Also in the increasingly converging
    marketplace, are these product markets truly segregable? Moreover,
    how would such a policy affect the spectrum cap\'s goal to guard
    against excessive accumulation of CMRS spectrum? Also, how should we
    define the relevant geographic market, especially in light of the
    trend toward nationwide footprints and affiliations? Commenters
    should specifically address whether today's CMRS markets will enable
    new entrants -- both existing carriers seeking to expand their
    footprints and firms, including small businesses, seeking to enter
    the market *ab initio* -- to have access to the limited spectrum
    that is practically available today for mobile telephone services.

19. We also seek comment on the implications for our spectrum
    aggregation limits of our authority under section 310(d) of the
    Communications Act to determine that a particular consolidation is
    not in the public interest.[^70] If we were to eliminate or relax
    the spectrum cap, could we, or should we, incorporate other methods
    into the section 310(d) review process that would serve our goal of
    preventing consolidations that would eliminate the benefits brought
    by competition, while giving due consideration to the need for firms
    to achieve minimum efficient scale?[^71] For example, could we adopt
    a processing standard that if a proposed transaction would cause an
    applicant to exceed 45 MHz of covered spectrum (or some other
    threshold amount), it must provide an additional public interest
    showing meeting certain criteria (*e.g*., HHI and/or other economic
    data demonstrating concentration of market)? Alternatively, would it
    be preferable to establish a threshold based on the number of
    competitors providing CMRS (or CMRS mobile voice telephony) in a
    geographic market?[^72] Commenters advocating such a threshold
    should address how we should determine the number of competitors, as
    well as how to determine what service providers to include and the
    scope of the geographic markets. We seek comment on other standards
    or methodologies that would accomplish what is "necessary" from a
    competition perspective. We also seek comment on the benefits and
    detriments of providing bright-line criteria that do not
    substantially increase burdens on the public or Commission
    resources.[^73] Commenters should consider the impact of any
    standards that will increase time and expense for small businesses,
    which often may not have the requisite resources for case-by-case
    reviews.

20. More broadly, we seek comment on the implications of other agencies'
    enforcement of antitrust laws for our spectrum aggregation limits
    and our public interest review required by section 310(d). In our
    *First Biennial Review Order*, we identified certain benefits of the
    spectrum cap and cellular cross-interest rule that were not afforded
    by antitrust review and decided that "the antitrust laws should
    \[not\] be the exclusive tool for addressing competition issues of
    the nature we confront in CMRS markets."[^74] We note, however, that
    in the past few years, the Department of Justice (DOJ) in some cases
    has entered into consent decrees with merging CMRS carriers to
    prevent competitive harm in overlapping markets after the
    merger.[^75] Can we, and should we, defer to the DOJ in such
    matters, and if so, what form should such deference take? For
    example, can we, and should we, adopt an approach such that all
    transfers resulting in consolidation of spectrum below a spectrum
    threshold should be exempt from section 310(d) competitive analysis?
    Can we, and should we, eschew an independent review of the
    competitive implications of license transfers that are part of
    mergers that are subject to some specified level of DOJ review, and,
    if so, how should we define that level? What would be the legal and
    policy implications of adopting these or any alternative approaches?
    Antitrust laws may adequately focus on mergers that threaten to
    curtail actual competition harming consolidation.[^76] Do spectrum
    aggregation limits continue to promote other public interest goals
    that stress policies such as the beneficial role of market entry?

21. If we conclude that spectrum aggregation limits remain necessary at
    this time, we ask commenters to address whether subsequent
    competitive developments could obviate the need for such limits and
    thereby enable us to sunset these regulations. In our 1998 biennial
    review, we sought comment on the possibility of establishing a
    sunset date for CMRS spectrum aggregation limits in some or all
    markets, but we ultimately declined to adopt a sunset, concluding
    that it was more appropriate to revisit the rules in our year 2000
    biennial review.[^77] We again seek comment on whether it is
    appropriate to adopt a sunset in light of anticipated competitive
    evolution of CMRS markets. Alternatively, we seek comment on whether
    there are public interest reasons not to sunset the rules even if
    such evolution occurs or whether we should reexamine the regulations
    in our year 2002 biennial review. If commenters believe that a
    sunset provision is appropriate, we seek further comment on whether
    it should be tied to a specific date in the future, and how best to
    predict the timing of the competitive developments on which it would
    be based. Alternatively, we seek comment on whether a sunset should
    be based on the development of specified competitive conditions or
    other criteria, in some or all markets, regardless of when they
    occur. We encourage commenters to provide specific economic evidence
    supporting their proposals and views.

22. We ask for comment on the potential harms or benefits of adopting
    limits other than the current 45/55 MHz spectrum cap thresholds.
    Under increased thresholds, which combinations would harm or benefit
    consumers? For example, a 60 MHz spectrum cap would permit an A
    Block broadband PCS carrier to combine with the B Block PCS carrier,
    or with a cellular carrier, in any given geographic area. Under a 55
    MHz spectrum cap, a 25 MHz cellular carrier and a 30 MHz broadband
    PCS carrier would be able to merge their operations in non-rural
    areas.[^78] Assuming consolidation between broadband PCS and
    cellular operators, a 55 MHz cap would still ensure at least four
    broadband competitors under the 180 MHz of covered spectrum.
    However, under such a limit, it is possible that one competitor
    could have significantly less spectrum than the other three under
    current allocations.[^79] Would such an eventuality allow harmful
    reconsolidation, or would consumers potentially benefit? Do the
    current aggregation limits potentially serve as the best guarantee
    that new entrants, including small businesses, can obtain the needed
    spectrum licenses to gain access to compete in CMRS markets?

23. In addition to seeking comment on these issues with respect to the
    spectrum cap, we also seek comment on whether we should repeal the
    cellular cross-interest rule. The distinctions between cellular and
    PCS services appear to have decreased since our 1998 biennial
    review.[^80] In addition, we note that according to recent
    estimates, cellular licensees' market share of mobile telephone
    subscribers nationwide has dropped from 86 percent at the end of
    1998, as noted in the *First Biennial Review Order,* to
    approximately 75 percent by year-end 1999, a trend that industry
    analysts expect to continue in the coming years.[^81] On the other
    hand, most broadband PCS operators are still deploying their
    networks and do not yet provide facilities-based coverage comparable
    to the current combined nationwide cellular footprint.[^82] We
    therefore seek comment on whether the need for a separate cellular
    cross-interest rule has lessened, or whether the cellular sector may
    still have the potential to undermine the level of CMRS competition
    we have seen so far. In a marketplace where carriers are building
    nationwide networks that combine different CMRS services, can we
    continue to make distinctions and compare competitive differences
    between "cellular carriers" and their competitors, *e.g*., "PCS
    carriers"? In inviting comment on whether maintaining separate
    cellular cross-ownership limits is still necessary in the public
    interest, we ask commenters to provide empirical evidence and/or
    studies on the relative competitive and buildout status of cellular,
    SMR, and broadband PCS carriers on a market-by-market as well as
    comprehensive basis.

24. We also seek comment on whether the cellular cross-interest rule may
    still be necessary to prevent cellular carriers from merging in
    certain markets where there is limited or no competition from other
    CMRS providers. There still appear to be some geographic markets
    where no broadband PCS provider has yet initiated service.[^83]
    Also, in rural areas where cellular carriers are the dominant
    providers and the CMRS spectrum cap is 55 MHz, the spectrum cap
    alone would not prevent the two cellular carriers from merging.
    Could the purpose of the cross-interest rule still be served by its
    application in these circumstances? Or would our ability to review
    consolidations on a case-by-case basis under section 310(d) suffice
    to prevent monopolistic cellular consolidation?[^84]

25. Finally, one of the primary goals of the 1996 Act is to promote
    competition in local telecommunications markets.[^85] We seek
    comment on whether and, if so, how our spectrum aggregation limits
    affect CMRS providers\' ability to enter into and compete in local
    telecommunications markets. Since September 1999, has the spectrum
    cap enhanced or impeded the provision of wireless services as a
    competitive alternative to wireline services? How significant are
    the opportunity costs of dedicating broadband CMRS spectrum to
    mobile services when other spectrum bands are available for fixed
    wireless services?[^86] To the extent that incumbent licensees build
    networks using CMRS spectrum that are targeted mainly to particular
    services, are opportunities for entry and development of competition
    in other services limited in the short to medium term? In addition,
    how should these considerations affect our identification and
    analysis of the appropriate CMRS product markets for our biennial
    review?[^87]

### Spectrum Management and Other Regulatory Considerations

26. *Background*. We must also review the CMRS spectrum aggregation
    rules in light of our spectrum management responsibilities, pursuant
    to which we issue the licenses for spectrum necessary to provide
    CMRS, as well as other regulatory considerations. We begin by
    acknowledging that, relative to demand, there is a limited amount of
    spectrum available that, as a practical matter, is suitable for the
    provision of broadband CMRS within the foreseeable future. For
    example, the propagation characteristics of spectrum above
    approximately 3 GHz make it generally unsuitable for mobile use
    using current technology. In addition, many bands below 3 GHz are
    allocated for multiple uses other than CMRS, including broadcast
    operations, private mobile and fixed services, and various types of
    satellite operations. Moreover, significant amounts of spectrum
    below 3 GHz are allocated for important federal government uses,
    such as defense, national security, law enforcement, and air traffic
    control. Because scarcity issues to some degree affect all users of
    spectrum (and, indeed, all users of any finite natural resource) and
    all spectrum bands, scarcity in and of itself is not sufficient to
    justify a limit on the aggregation of spectrum. However, significant
    shortages of spectrum relative to demand raise concerns, especially
    in service markets where there are few close non-spectrum
    substitutes.[^88] The Commission has found that the particular
    conditions that apply to broadband CMRS spectrum support the use of
    aggregation limits in the bands currently used for these
    services.[^89] In other bands, where different conditions prevail,
    we have taken a different approach. For instance, there are several
    substantial, technologically suitable bands allocated for fixed
    wireless services, and we do not impose any aggregation limits on
    such spectrum.[^90] Moreover, wireline services are for many
    customers close substitutes for such wireless services and so
    aggregation of such spectrum in a small number of licensees would
    not necessarily raise competitive concerns.

27. There have been a number of regulatory actions since the last
    biennial review that may affect our decisions here regarding CMRS
    spectrum aggregation limits. For example, we recently reconfigured
    the licenses available in the broadband PCS C and F block auction --
    Auction No. 35 -- to better enable all carriers to acquire
    additional CMRS spectrum in most markets without triggering any CMRS
    spectrum cap concerns.[^91] First, we removed the entrepreneur
    auction eligibility restrictions and established "open" bidding for
    a substantial portion of the available spectrum licenses. Second,
    given our determination that the vast majority of carriers have 35
    MHz or less of spectrum in most geographic areas, we divided each
    available 30 MHz C block license into three 10 MHz C Block licenses,
    to increase the ability of these carriers to obtain additional
    spectrum at auction. By these two decisions, the Commission intended
    to help carriers obtain PCS spectrum for economies of scale and the
    introduction of 3G services, while maintaining the current CMRS
    spectrum cap to prevent excessive CMRS consolidation.[^92]

28. In addition, we decided to exclude from spectrum aggregation limits
    the 700 MHz bands that will be auctioned early this year. This
    decision may permit entry by new competitors as well as increase the
    availability of significant spectrum for the introduction of 3G
    services over the medium to long term.[^93] We also eliminated the
    separate narrowband PCS spectrum aggregation limit earlier this
    year.[^94] We did so based on our findings that narrowband PCS
    licensees increasingly compete with other sectors of the wireless
    industry, including broadband PCS and SMR, and that the risk that
    lifting the limit could lead to anticompetitive concentration or
    spectrum warehousing was low due to the intense competition from all
    wireless sectors.[^95]

29. Another significant regulatory consideration is spectrum efficiency.
    Increases in the number of competitors and the associated demand for
    CMRS spectrum are leading to increases in spectrum efficiency. As
    operators seek to increase mobile voice capacity and deploy
    spectrum-intensive, advanced wireless services such as high-speed
    Internet access and mobile video conferencing, we see the
    marketplace responding with technological solutions that are
    increasing the technical capacity of wireless networks. For example,
    in our *Fifth Annual CMRS Competition Report*, we noted that U.S.
    carriers are migrating to 3G systems by beginning to implement new
    technologies and infrastructure upgrades that will offer faster data
    speeds.[^96] The development of these capacity-enhancing
    technologies demonstrates that increasing efficiency where spectrum
    is limited can be accomplished by engineering more capacity from the
    same bandwidth per square kilometer. In addition to the development
    of these efficiencies through techniques such as compression and
    modulation methods, the deployment of infrastructure upgrades that
    involve spatial reuse designs -- *e.g*., cell splitting and
    frequency reuse -- will also result in more efficient wireless
    systems. Thus, all of these innovations in spectrum efficiency
    promise to permit data communications sessions to multi-mode
    handsets, increased numbers of telephone calls in densely populated
    areas, and other benefits to consumers.

30. Finally, we found in the *First Biennial Review Order* that
    bright-line rules like the spectrum cap and cellular cross-interest
    rules hold many benefits over alternative regulatory tools. In
    particular, we reconfirmed that the spectrum cap would allow review
    of CMRS acquisitions in an administratively simple manner and lend
    certainty to the marketplace.[^97] We determined that bright-line
    rules reduce burdens placed on both the Commission and industry,
    especially small businesses, as well as give industry advance notice
    of which types of cross-ownership situations the Commission would
    find anticompetitive.[^98] We also stated that use of other
    regulatory tools, such as case-by-case review under section 310(d),
    would eventually lead to an understanding of which types of
    cross-ownership interests the Commission believes are
    anticompetitive. We concluded, however, that this would require the
    Commission and industry to expend significant resources in reviewing
    individual cross-ownership proposals before sufficient precedent
    would be set to establish the line.[^99] As the U.S. Court of
    Appeals for the D.C. Circuit has recognized, "\[a\] spectrum cap,
    unlike many other regulations, might actually require a bright-line
    rule to be effective."[^100] In recognition that any bright-line
    test may be over-inclusive or under-inclusive in individual cases,
    we specifically provided that parties who believed that
    individualized analysis is appropriate could always request a waiver
    of the spectrum cap and/or cross-interest rule.[^101]

31. *Discussion*. We seek comment on the implications of the above
    considerations for our spectrum aggregation limits. Choices about
    CMRS spectrum aggregation limits appear to involve market structure
    and fundamental spectrum management issues regarding this limited
    amount of spectrum. For example, in response to the scarcity of
    spectrum suitable for CMRS, the U.S. Government has undertaken a
    number of initiatives to identify additional spectrum for these
    services. As part of its plans for the transition to digital
    television, Congress has directed the reallocation for commercial
    use of certain spectrum suitable for mobile services that is
    currently reserved for broadcast services.[^102] In addition, the
    Commission is exploring the possible use of several frequency bands
    below 3 GHz to support the introduction of new advanced wireless
    services, including 3G wireless systems.[^103] At the same time, we
    have found that any new market entry is unlikely to be sufficiently
    timely or sufficiently certain to discipline markets adequately in
    the near term.[^104] Accordingly, we seek comment on our above
    analysis of CMRS spectrum scarcity issues and its implications for
    our decisions on CMRS spectrum aggregation limits.[^105]

32. We seek comment on the potential efficiency benefits or costs of our
    spectrum aggregation limits. We described above the significant
    technological developments and service offerings that have occurred
    since September 1999. As we explained in our *First Biennial Review
    Order*, there may be reduced incentives to implement more efficient
    technologies in a regulatory environment without spectrum
    aggregation limits.[^106] Thus, have such limits provided incentives
    to the development and deployment of spectrum-efficient technologies
    that will better serve the public interest in the middle and long
    term? Or, would such innovation have occurred independent of our
    spectrum aggregation limits? Can promoting the expansion of capacity
    through technological advances (as opposed to simply affording more
    spectrum to the market) serve as an effective disciplinary force on
    potential anticompetitive conduct in CMRS markets where market entry
    is limited? Or, do spectrum limits do more to impede the efficient
    development of new 3G technologies that may be spectrum-intensive in
    the short term?

33. We ask commenters to address any costs of constraining control of
    CMRS spectrum by individual carriers. In particular, we seek comment
    on the extent, if any, to which our regulations impede beneficial
    economies of scale and the introduction of innovative new
    technologies and services. We have stated that mobile telephone
    service providers are beginning to deploy 2.5G technologies and test
    3G equipment that could potentially drive the migration to the
    provision of high-speed, multimedia services as part of CMRS.[^107]
    As early as this year, some operators intend to begin offering
    commercial Internet access service at speeds that will increase
    current rates by a factor of ten or more.[^108] We seek specific
    comment on how the decision to limit carriers' access to CMRS
    spectrum affects the deployment of next-generation services and the
    migration of 2G service providers to those services. How do
    aggregation limits impact the emergence of mobile Internet access
    and other data services? We seek comment on how to promote advanced
    wireless services while simultaneously ensuring that meaningful
    economic competition continues to develop. Are new data technologies
    developing as rapidly as they could despite current limits on access
    to spectrum? As a general matter, how do we best manage the spectrum
    resource designated for use of CMRS and factor in other relevant
    regulatory considerations to maximize both the benefits to consumers
    that result from multiple facilities-based competitors and the
    opportunity for carriers that rely on this resource to offer
    advanced mobile wireless services?

34. We also seek updated comment on how our spectrum aggregation limits
    may impair potential efficiencies for all CMRS markets, including
    those within urban areas. In 1999, we found that spectrum
    aggregation limits may inhibit economies of scope in rural areas
    that would permit greater investment there by CMRS providers.[^109]
    We also noted more generally that up to a point, horizontal
    concentration in CMRS markets may be in the public interest because
    it could allow efficiencies and economies that would otherwise not
    be achievable.[^110] In today's CMRS markets, would achieving such
    economies be in the public interest despite any potential increased
    risk of anticompetitive consolidation? Commenters should address the
    extent to which the current 45 MHz aggregation limit may be
    thwarting the realization of potential economies in non-rural areas,
    and commenters should submit evidence on the magnitude and time
    frame of any such potential savings or efficiencies in particular
    market settings.

35. In discussing the availability of spectrum for advanced wireless
    services, commenters should address the extent to which companies'
    ability to use alternative spectrum -- *i.e*., spectrum outside of
    the broadband PCS, cellular and SMR bands subject to the cap --
    should affect our analysis here. For example, in our *First Biennial
    Review Order*, we identified numerous alternatives to CMRS spectrum
    that can be used for delivering services in fixed access
    networks.[^111] Other frequency bands, such as the 700 MHz bands
    that will soon be auctioned, could be used to introduce advanced
    wireless services. The Commission also is exploring the possible use
    of other frequency bands below 3 GHz for advanced wireless services.
    Thus, we seek comment on how the current availability of additional
    spectrum affects the need for CMRS spectrum aggregation limits.
    Similarly, we seek comment on what effect our allocation of
    additional spectrum in the future, suitable for mobile voice and
    data services, will have on the appropriate aggregation limits for
    the spectrum at issue here. To the extent that future spectrum bands
    like 700 MHz are not subject to the cap, does this lessen the need
    to increase the spectrum cap by creating opportunities for CMRS
    incumbents to obtain spectrum in these bands? Or, will new spectrum
    eliminate the access-to-spectrum barrier to entry faced by potential
    competitors, and thus lessen the need to maintain a spectrum cap at
    all?

36. Similarly, we seek comment on how to assess the treatment of newly
    allocated spectrum for spectrum cap purposes. As a general matter,
    we believe that newly available CMRS-suitable spectrum either should
    be excluded from the spectrum cap or, if it is included, that the
    cap should be adjusted accordingly. We seek comment on the factors
    to consider in deciding between these two options. We invite comment
    as well on any other cap-related issues that we may encounter when
    we make new CMRS-suitable spectrum available. We request that
    commenters provide analytical and factual support for their
    conclusions. While we will not be making specific decisions in this
    proceeding on what, if any, constraints ought to apply to
    concentration of ownership in newly available spectrum bands, we
    plan to consider an analytical framework to apply to such bands.

37. We also seek comment on whether the impact of the spectrum cap on
    development of advanced services could be adequately addressed by
    continuation of the waiver policy that we adopted in the *First
    Biennial Review Order.* In this regard, it appears that most PCS
    carriers still have not yet deployed up to the limits of their
    licensed capacity; in addition, we have not received any waiver
    requests as contemplated in our *First Biennial Review Order*.[^112]
    Does our specific waiver process enable carriers with a demonstrable
    need for additional spectrum, especially for advanced wireless
    services, to obtain such spectrum? We again seek comment on the
    flexibility of this waiver standard for meeting carriers' needs, and
    whether we should modify the waiver test.[^113] In answering these
    questions, we request parties to provide specific evidence and
    concrete examples of the extent to which carriers' holdings in
    markets approach or are at the 45/55 MHz cap.

38. Commenters are also asked to address whether any developments in the
    last year should lead us to alter our determination that a
    bright-line approach remains preferable to exclusive reliance on
    case-by-case review under section 310(d). Our conclusion that
    straightforward application of spectrum aggregation limits promotes
    regulatory certainty and efficiency was based to a large extent on
    an understanding that clear standards would best provide the
    industry with incentives to make investments in advanced mobile
    wireless services, as well as speed the processing of efforts to
    restructure spectrum holdings to create nationwide footprints. The
    speed with which the Commission processes transfers and assignments
    remains an issue of significant controversy.[^114] We seek comment
    on the extent to which our approach has facilitated these goals for
    licensees, including licensees that are small businesses. Commenters
    should discuss the fact that in large merger proceedings, the
    transfer and assignment of CMRS licenses are typically resolved in
    principle more quickly and with less controversy than are other
    major issues not governed by analogous rules. As spectrum management
    tools, do these bright-line standards remain preferable to reliance
    on section 310(d) review or other alternative regulatory mechanisms?
    Commenters are encouraged to provide specific examples where our
    aggregation limits either did or did not provide the certainty or
    efficiency that a particular marketplace transaction required.

39. Finally, we seek specific comment on whether we should make any
    fundamental changes in rural and high-cost markets, which appear not
    to have seen the development of competition in mobile wireless
    services to the degree that is evident in urban areas. The available
    information suggests that many of the nation\'s residents living in
    rural and other high-cost areas do not yet have meaningful
    competitive alternatives to the incumbent cellular carriers.[^115]
    In September 1999, we recognized that the spectrum cap might affect
    the ability of a CMRS provider to attain certain economies of scale
    and scope in these areas.[^116] Spectrum may be made newly available
    for commercial use through partitioning and disaggregation, but the
    economics of offering service to these lower-density populations may
    nevertheless limit the extent of competitive, facilities-based
    entry. In considering whether to make further changes, we seek
    comment on whether increasing the existing spectrum cap last year in
    rural areas has had any impact on the delivery of service to rural
    customers in terms of prices, availability of digital services, or
    other factors. Wireless carriers who have aggregated 55 MHz in these
    areas should describe these efficiencies and any other public
    interest benefits. Should we, at a minimum, continue to retain the
    cellular cross-interest rule until increased PCS and other service
    deployments become more firmly established?

### International Developments

40. *Background*. We also wish to examine the significance for our
    reexamination of spectrum aggregation limits of foreign mobile
    licensing policies, and particularly the 3G licensing process now
    taking place in Europe and Asia. A recent study issued by the
    Organization for Economic Cooperation and Development (OECD) has
    documented a global trend in mobile licensing policy towards
    increasing numbers of operators in a given market, a trend that
    predates the 3G licensing process.[^117] Moreover, many Western
    European countries are using the 3G licensing process as an
    opportunity to promote the development of competitive market
    structures. All of the Western European countries that have
    completed the 3G licensing process have licensed four or more 3G
    operators, and a number of these countries (United Kingdom, Germany,
    the Netherlands, Italy and Austria) have licensed five or more 3G
    operators.[^118] In addition, the majority of these countries (the
    United Kingdom, Germany, Italy, Austria, Spain, Switzerland, Norway,
    Sweden and Portugal) have awarded at least one more 3G license than
    the number of incumbent mobile operators, thereby ensuring that one
    or more new operators enter the market.[^119] These countries have
    assured a minimum number of competitors either by using spectrum
    aggregation limits analogous to our spectrum cap, as in Germany and
    Austria,[^120] or, more commonly, by fixing the size and number of
    licenses in advance and limiting each operator to one national
    license. On the other hand, some countries have used fixed national
    licenses to authorize a limited number of competitors with large
    spectrum blocks rather than to increase the number of competitors.
    In Japan, for example, the Ministry of Posts and Telecommunications
    has licensed only three 3G operators, and countries such as China
    and Brazil currently maintain a duopoly in mobile telecommunications
    services.[^121]

41. European countries are able both to ensure a minimum number of
    competitors and to permit each provider access to more spectrum
    because substantially more suitable spectrum has been allocated for
    commercial mobile telecommunications services in Europe than in the
    United States. Prior to the start of the 3G licensing process in
    Europe, the total amount of spectrum available for mobile telephony
    services in most countries was roughly comparable to the 180 MHz
    allocation in the United States.[^122] However, with the additional
    140 to 145 MHz of spectrum that most Western European countries have
    allocated to licensed 3G use, the total amount of spectrum available
    for mobile telephony services in these countries now exceeds 180
    MHz, in most cases by a wide margin. In particular, we estimate that
    the total amount of spectrum available for first-, second- and
    third-generation mobile communications services in most Western
    European countries is generally about 250-300 MHz, and ranges from a
    high of almost 365 MHz in the United Kingdom to a low of about 187
    MHz in Norway.[^123]

42. Prior to the start of the 3G licensing process, the average amount
    of spectrum assigned to individual mobile operators in most Western
    European countries was generally within the limits of the
    Commission's CMRS spectrum cap.[^124] Licenses awarded to both new
    and incumbent operators in the 3G licensing process have ranged in
    size from 35 MHz to 20 MHz.[^125] Those 3G licensees that are not
    incumbent mobile operators are limited to the amount of spectrum
    they acquired in the 3G licensing process. In contrast, the
    additional spectrum to which incumbent mobile operators have gained
    access as a result of the 3G licensing process puts each of these
    operators' total spectrum holdings (for 1G, 2G, and 3G services) in
    excess of the Commission's CMRS spectrum cap.[^126] Thus, because
    most European countries have allocated more total spectrum for
    mobile telecommunications services, they are able to allow
    individual carriers to acquire larger total spectrum holdings than
    would be permitted under our spectrum cap policy, while at the same
    time ensuring that there are at least four, and often more,
    competitors in their markets.

43. We also note that other countries limit the amount of spectrum
    operators can acquire in the secondary market. In the vast majority
    of countries, including EU Member States, strict limits on trading
    of wireless licenses and/or spectrum rights render a spectrum cap
    largely superfluous. Apart from the United States, only a relative
    few countries, including Canada, Australia and New Zealand, allow
    spectrum licenses to be traded both in whole and in part.[^127] In
    Canada, as in the United States, spectrum trading is subject to a
    spectrum cap, although Canada has adopted a 55 MHz cap for its CMRS
    spectrum allocation.[^128] Both Australia and New Zealand rely on
    general competition law, rather than a spectrum cap or other special
    restrictions on spectrum acquisition, to control an operator's
    ability to acquire access to spectrum in the secondary market.[^129]
    In Australia, spectrum aggregation limits have been used to restrict
    bidding in spectrum auctions, but these spectrum caps generally
    expire once the auction ends and the spectrum is assigned. The
    Australian Competition and Communications Commission (ACCC) is
    empowered to intervene to prevent trades of spectrum licenses where
    it believes the acquisition of a license will result in a
    substantial lessening of competition, and it has demonstrated a
    willingness to exercise this authority.[^130]

44. *Discussion*. We generally seek comment on the lessons to be learned
    from experience internationally, as summarized above. In addressing
    these issues, commenters should consider the significance of the
    differences between the United States and foreign countries. For
    instance, for a number of reasons, the availability of spectrum
    below 3 GHz, which is generally considered the frequency range best
    suited for mobile services, appears to be less constrained abroad
    than in the United States. This allows other countries to allocate
    larger amounts of technically suitable spectrum to CMRS than in the
    United States, which in turn allows them to permit higher overall
    aggregation limits for individual carriers without compromising the
    ability to maintain multiple facilities-based providers. We further
    note that countries in both the European Union (EU) and Asia are
    generally less flexible than the United States in their approach to
    spectrum management. In particular, unlike our "flexible use"
    approach in the United States, spectrum management policies abroad
    generally do not afford wireless operators the flexibility to deploy
    3G technologies on spectrum currently licensed for 2G services.
    Moreover, in contrast to our rules on transferability of licenses
    and partitioning and disaggregation, laws in the EU and Asia
    typically do not as yet permit licensees to trade rights to use
    radio spectrum, but require that any transfer of spectrum be back to
    the licensing authority.[^131]

45. We also seek comment generally on how international developments
    relate to the question of whether to eliminate spectrum limits to
    direct the course of development in U.S. CMRS markets. We note that
    most EU Member States have already licensed 3G spectrum or are
    planning to do so by the first half of 2001 to give operators
    sufficient lead time to plan for 3G deployment. Spectrum aggregation
    limits may affect U.S. development of advanced wireless services
    over the short term. We ask parties to comment on the trade-offs
    that we will face in the United States during this time, compared to
    other countries that appear able to maintain a competitive market
    structure using mechanisms such as limiting the number of licenses
    per carrier, while also allocating larger quantities of unencumbered
    spectrum because they have more spectrum available. We also seek
    comment on whether U.S. carriers may require smaller amounts of
    total spectrum for 2G and 3G services than their counterparts in
    Europe and Asia because our policies afford U.S. carriers more
    flexibility with respect to spectrum use and alternative means of
    acquiring access to spectrum. Finally, we seek comment on whether
    any of the mechanisms other countries use to ensure they have an
    adequate number of competitors in their markets might be adapted to
    the U.S. market, as an alternative to our spectrum cap approach.
    Commenters should provide data on these and any other international
    issues that they believe will assist us in our review of these
    regulations.

## Possible Modifications to the CMRS Spectrum Cap and Cellular Cross-Interest Rule

46. In the event that we do not eliminate our spectrum aggregation
    limits, we also request comment on whether specific attributes of
    the CMRS spectrum cap and cellular cross-interest rule should be
    modified to allow some of the benefits that may arise from
    additional cross-ownership interests.[^132] To the extent that
    certain revisions to these rules would reduce any public interest
    costs of our limits or promote objectives discussed above, we seek
    comment on how to implement them without significantly increasing
    barriers to entry for new competitors or risk reducing benefits to
    wireless consumers.

### Possible Modifications to the CMRS Spectrum Cap 

47. In addition to the possible fundamental modification of the amount
    of spectrum permitted to be held under the cap discussed
    above,[^133] we seek comment on other aspects of the CMRS spectrum
    cap that could be modified to increase carriers' flexibility and
    promote our various public policy objectives. Because there are a
    number of options available for consideration when evaluating the
    aggregation of CMRS spectrum within geographic areas, proponents of
    each alternative should explain why it is necessary in the public
    interest and should support their assertions with specific data and
    analysis.

48. To begin, we seek comment on the effect of recent changes in CMRS
    markets, particularly the emergence of broadband PCS licensees as
    competitors to cellular licensees,[^134] on the rationale for a 10
    percent population overlap threshold. What are the public interest
    benefits of increasing the threshold and do those benefits outweigh
    any potential for reduced consumer benefits from the concentration
    of ownership or control of CMRS licenses? Would increasing the
    threshold facilitate in any way carriers' buildout of seamless
    nationwide service footprints? If we were to adopt a different
    approach to overlap analysis, would we need to increase the current
    10 percent threshold?

49. We solicit comment on whether there is a mechanism for triggering
    the application of a spectrum cap in given geographic areas that
    might be superior to our current overlap standard. In a regulatory
    environment where partitioning is permitted and geographic
    authorizations are increasingly issued for all spectrum subject to
    the cap, clarifying and/or modifying our rule to treat licensees in
    each service similarly may be in the public interest. Under the
    current rule, any overlap between attributable PCS licensed service
    areas (*i.e.,* between MTAs and BTAs) is subject to the cap, while a
    cellular CGSA or station-defined SMR service area only counts
    towards the cap if it overlaps 10 percent or more of the PCS
    licensed service area's population. Moreover, although SMR is no
    longer licensed only on a site-by-site basis, the current rule's
    overlap analysis focuses on "SMR service area(s)."[^135]
    Accordingly, we ask for comment on the pros and cons of adopting a
    simplified overlap standard that turns on a certain allowable
    percentage of overlap between *licensed* service areas. For example,
    assuming a 10 percent threshold, one possible approach would be a
    standard where a PCS BTA-based license's overlap with a partitioned
    MTA-based license would not come under the cap if the population
    covered by the overlap were less than 10 percent of the total
    population of the PCS BTA *and* less than 10 percent of the total
    population of the partitioned PCS MTA. Similarly, if we were to
    eliminate the cellular cross-interest rule under such a standard, an
    A-Block cellular license's overlap in CGSA with the CGSA of a
    B-Block cellular license would not trigger the cap if the population
    covered by the overlap were less than 10 percent of the total
    population of the A-Block CGSA *and* less than 10 percent of the
    total population of the B-Block CGSA. A variation of this standard
    would be to exempt overlaps from the cap if the population in the
    overlap area were less than 10 percent of the total population of
    the more populous licensed service area. In addition, the threshold
    could be set at some level other than 10 percent. We seek comment on
    these and any other possible approaches.

50. With respect to SMR spectrum licensed on a site-by-site basis, the
    current rules require that, in calculating the amount of
    attributable spectrum, an entity must count all 800- and 900-MHz
    channels located at any SMR base station inside the geographic area
    where there is significant overlap with PCS or cellular
    licensees.[^136] The rule also provides that all 800-MHz channels
    located on an least one of those identified base stations count as
    50 kHz (25 kHz paired) and all 900-MHz channels located on at least
    one of those identified base stations count as 25 kHz (12.5 kHz
    paired).[^137] Regardless of how much 800-MHz and 900-MHz SMR
    spectrum an entity actually controls, no more than 10 MHz of such
    spectrum is attributed to it for purposes of determining compliance
    with the cap.[^138]

51. We seek comment here on whether recent developments in the SMR
    industry warrant any modification of the special provisions for SMR
    overlap analysis and calculation of attributable spectrum. The
    original justification for the maximum attribution of 10 MHz was
    based on the conclusion that SMR spectrum is not equivalent to
    cellular or broadband PCS. Specifically, we noted that it was
    encumbered by existing licensees, that channels were historically
    assigned on a station-by-station basis, rather than by geographic
    area, and that the spectrum was not available as a contiguous
    block.[^139] We seek comment on whether the rationale for this 10
    MHz limit continues in today's marketplace for broadband CMRS. For
    example, how have our recent auctions of SMR spectrum affected the
    rationale to limit the amount of SMR spectrum attributed to a
    carrier? Do we need to clarify our spectrum cap analysis to account
    for application of the cap when these auctioned geographic-based SMR
    licenses overlap with PCS licensed service areas?[^140] In addition,
    should significant recent acquisition and merger activity lead us to
    question the assumption that SMR spectrum is difficult to
    reconfigure? If we were to revise our approach to station-defined
    SMR spectrum, should we increase the maximum attributable amount
    from 10 MHz to a higher figure (*e.g*., 15 or 20 MHz), or should we
    simply attribute to each carrier the actual spectrum it has in each
    market? If we were to adopt the latter approach, how would we
    determine the amount of spectrum and define the geographic area for
    our overlap analysis?

52. We also seek comment on whether we should modify the ownership
    attribution standards. The Commission chose a 20 percent attribution
    level for broadband CMRS to help ensure the availability of capital
    investment without compromising incentives for full competition,
    which could arise with too much common ownership of
    competitors.[^141] The Commission permits small businesses, rural
    telephone companies, and passive institutional investors to hold
    ownership interests up to 40 percent in CMRS providers without
    attribution. Similarly, the Commission allows entities to hold
    non-controlling equity interests up to 40 percent in a broadband PCS
    licensee or applicant that is a small business. Should the 20
    percent general attribution standard be modified? If so, what are
    the public interest benefits and/or harms of modifying the 20
    percent standard? We also seek comment on the effect that a 40
    percent attribution standard has had on the ability of CMRS
    providers to obtain capital. Have small businesses benefited from
    their general 40 percent attribution standard? Again, commenters
    proposing a different standard should provide analytical support for
    their proposals.

53. We also seek comment on whether any of our other ownership
    attribution criteria should be modified. In the past we have found
    that even a noncontrolling interest in a competitor would
    significantly reduce competitive incentives.[^142] Are there
    situations where an entity can acquire effective control over
    another entity that are not adequately contemplated under our
    attribution standards? Alternatively, are there situations
    proscribed by our attribution rules that do not pose a threat to
    competition? Should we attribute spectrum used pursuant to potential
    spectrum leasing arrangements,[^143] or to management and joint
    marketing agreements?

### Possible Modifications to the Cellular Cross-Interest Rule

54. We sought comment above on the possible repeal of the cellular
    cross-interest rule. In the alternative, can we modify the rule so
    that it does not apply in certain circumstances where other
    regulations will provide adequate safeguards? One possibility we
    have mentioned would be to have the rule apply only in markets where
    there are a limited number of competitors to the existing cellular
    providers.[^144] Accordingly, we seek comment on whether there is a
    need to maintain any cellular-specific restrictions in more urban
    areas, where there is generally a larger number of competitive
    choices for consumers. Would the absence of service-specific
    restrictions, along with maintaining the general 45 MHz spectrum
    cap, foster secondary markets in disaggregated cellular spectrum
    while providing sufficient protection from potentially
    anticompetitive behavior by preventing the outright consolidation of
    two 25 MHz cellular licensees? Although cellular providers still
    maintain large market shares in MSAs, would cellular/cellular
    combinations be more anticompetitive than cellular/PCS or PCS/PCS
    combinations if the cellular cross-interest rule is repealed in
    MSAs? Commenters should focus on whether cellular combinations would
    be able to sustain prices above the competitive level without
    reduction in market shares and explain their conclusions with
    specific data such as customer churn percentages and whether these
    are price driven, quality/coverage driven, or both.

55. Another possibility, given that cellular licensees can now
    disaggregate their spectrum, would be to replace the current rule
    with a separate cellular spectrum cap of 35 MHz (or some other
    amount). Under the current cross-interest rule, an entity with an
    attributable interest in a cellular license cannot hold a 5 percent
    interest in a disaggregated license for even 1 MHz of spectrum on
    the other channel block in an overlapping CGSA. Such a rule change
    would allow increased opportunities for partnering[^145] while
    maintaining protection against the complete consolidation of two 25
    MHz cellular carriers. We seek comment on the potential effects of
    such a change of the cellular cross-interest rule. In addition, we
    ask parties to comment on any modifications necessary to permit
    parties to disaggregate spectrum as contemplated in our *Cellular
    Disaggregation Order*.[^146]

56. In addition, we seek comment on the public interest benefits and/or
    harms of increasing the 5 percent ownership interest limit in a
    cellular licensee when one has a controlling or otherwise
    attributable interest in the other licensee in an overlapping CGSA.
    In general, a higher attribution standard may permit increased
    investment, but it would also potentially allow greater
    consolidation of cellular interests. Moreover, although the
    cross-interest rule prohibits interests greater than 5 percent, our
    ownership disclosure standards for wireless telecommunications
    services only require licensees to report interests greater than 10
    percent.[^147] We therefore seek comment on whether conformity
    between these two provisions would permit the Commission more
    accurately to regulate compliance with the cellular cross-interest
    rule.

57. We also seek comment on whether we should modify the divestiture
    provisions related to this rule. For example, should we revise the
    rule to operate similar to the spectrum cap? Currently, both
    regulations require divestiture of interests acquired as a result of
    an assignment of authorization or transfer of control to occur prior
    to the consummation of the transfer or assignment. With respect to
    the spectrum cap, however, we consider parties to have come into
    compliance with the rule once they have submitted an application for
    assignment or transfer of control of sufficient spectrum to comply
    with the cap.[^148] By contrast, under the cross-interest rule a
    party would be required to obtain a rule waiver if it could not
    completely divest the prohibited cross-ownership interest prior to
    consummation. Commenters are asked to address the competitive and
    public interest implications of harmonizing these and any other
    provisions of the two rules.

# CONCLUSION

58. Pursuant to the mandate in section 11 of the Communications Act, we
    hereby seek comment in this NPRM on whether the CMRS spectrum cap
    and cellular cross-interest rule, as currently formulated, are no
    longer necessary in the public interest. We seek public input and
    data, so that we may best assess the impact of recent competitive
    trends, our spectrum management responsibilities, and the
    international developments discussed above.

# PROCEDURAL MATTERS

## Regulatory Flexibility Act

59. As required by the Regulatory Flexibility Act,[^149] the Commission
    has prepared an Initial Regulatory Flexibility Analysis (IRFA) of
    the possible impact on small entities of the proposals in the Notice
    of Proposed Rulemaking*.* The IRFA is set forth in the Appendix.
    Written public comments are requested on the IRFA. These comments
    must be filed in accordance with the same filing deadlines for
    comments on the NPRM, and they must have a separate and distinct
    heading designating them as responses to the IRFA. The Commission's
    Consumer Information Bureau, Reference Information Center, will send
    a copy of this NPRM, including the IRFA, to the Chief Counsel for
    Advocacy of the Small Business Administration, in accordance with
    the Regulatory Flexibility Act.[^150]

## *Ex Parte* Rules

60. This is a permit-but-disclose notice and comment rule making
    proceeding. *Ex parte* presentations are permitted, except during
    the Sunshine Agenda period, provided they are disclosed as provided
    in Commission rules.[^151]

## Filing Procedures

61. Pursuant to applicable procedures set forth in sections 1.415 and
    1.419 of the Commission\'s Rules,[^152] interested parties may file
    comments on or before \[60 days after publication in the Federal
    Register\] and re­ply comments on or before \[30 days after comment
    date\]. Comments and reply comments should be filed in WT Docket No.
    01-14. All relevant and timely filings will be considered by the
    Commission before final action is taken in this proceeding. To file
    formally in this proceeding, interested parties must file an
    original and four copies of each filing. All filings must be sent to
    the Commission's Secretary, Magalie Roman Salas, Office of the
    Secretary, Federal Communications Commission, 445 12th St., S.W.,
    Rm. TW-A325, Washington, D.C. 20554, with a copy to Michael J.
    Rowan, Commercial Wireless Division, Wireless Telecommunications
    Bureau, Federal Communications Commission, 445 12th St., S.W., Rm.
    4A-131, Washington, D.C. 20554. One copy of all filings should also
    be sent to the Commission's copy contractor.

62. Comments may also be filed using the Commission's Electronic Comment
    Filing System (ECFS).[^153] Comments filed through the ECFS can be
    sent as an electronic file via the Internet to
    \<http://www.fcc.gov/e-file/ecfs.html\>. Generally, only one copy of
    an electronic submission must be filed. Parties may also submit an
    electronic comment by Internet E-Mail. To obtain filing instructions
    for E-Mail comments, commenters should send an E-mail to
    ecfs@fcc.gov, and should include the following words in the body of
    the message: "get form \<your E-Mail address\>." A sample form and
    directions will be sent in reply. Or you may obtain a copy of the
    ASCII Electronic Transmittal Form (FORM-ET) at
    \<http://www.fcc.gov/e-file/email.html\>.

63. Comments and reply comments will be available for public inspection
    during regu­lar business hours at the FCC Reference Information
    Center, Rm. CY-A257, at the Federal Communica­tions Commission, 445
    12th St., S.W., Washington, D.C. 20554. Copies of comments and reply
    comments are available through the Commission\'s duplicating
    contractor: International Transcription Service, Inc. (ITS, Inc.),
    1231 20th Street, N.W., Washington, D.C. 20037, (202) 857-3800.

# ordering clauses

64. Accordingly, IT IS ORDERED, pursuant to the authority of sections 1,
    4(i), 11, 303(g), and 303(r) of the Communications Act of 1934, as
    amended, 47 U.S.C. §§ 151, 154(i), 161, 303(g), and 303(r), that
    this Notice of Proposed Rulemaking is ADOPTED.

65. IT IS FURTHER ORDERED that the Commission\'s Consumer Information
    Bureau, Reference Information Center, SHALL SEND a copy of the
    Notice of Proposed Rulemaking, including the Initial Regulatory
    Flexibility Analysis, to the Chief Counsel for Advocacy of the Small
    Business Administration.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

**[APPENDIX]{.underline}**

Initial Regulatory Flexibility Analysis

1.  As required by the Regulatory Flexibility Act (RFA),[^154] the
    Commission has prepared this Initial Regulatory Flexibility Analysis
    (IRFA) of the possible significant economic impact on small entities
    of the policies and proposals in this Notice of Proposed Rulemaking
    (NPRM), WT Docket No. 01-14. Written public comments are requested
    on this IRFA. These comments must be filed in accordance with the
    same filing deadlines for comments on the rest of this NPRM, as set
    forth in paragraph 61, *supra*, and they must have a separate and
    distinct heading designating them as responses to the IRFA. The
    Commission will send a copy of this NPRM, including this IRFA, to
    the Chief Counsel for Advocacy of the Small Business Administration
    (SBA) in accordance with RFA.[^155] In addition, the NPRM and IRFA
    (or summaries thereof) will be published in the Federal
    Register.[^156]

## Need for, and Objectives of, the Proposed Rules

66. As part of our biennial regulatory review, pursuant to section 11 of
    the Communications Act,[^157] we solicit comment on whether we
    should retain, modify, or eliminate the commercial mobile radio
    services (CMRS) spectrum cap.[^158] We also seek comment on whether
    we should retain, modify, or repeal the cellular cross-interest
    rule.[^159] In asking these questions, the NPRM looks at recent
    competitive changes in CMRS markets, reexamines the public interest
    objectives that the spectrum limits are designed to achieve, and
    asks whether there are alternatives to the existing rules that avoid
    any potential public interest costs. It seeks comment on how
    international trends and developments in the marketplace since the
    completion of our last biennial review in September 1999 may affect
    our analysis. The NPRM discusses reliance on case-by-case analysis
    of the potential competitive effects of a proposed spectrum holding
    pursuant to section 310(d) of the Communications Act as one
    potential alternative to the current rules, and it discusses
    possible modifications to the spectrum cap and cross-interest rules.
    These include, among other things: 1) increasing the amount of
    spectrum that a single entity may hold in a given geographic area
    beyond 45/55 MHz; 2) modifying the spectrum cap's 10 percent
    population overlap threshold and/or attribution rules; 3)
    eliminating or modifying the rule that limits attributable
    Specialized Mobile Radio (SMR) spectrum to 10 MHz; 4) altering the
    cellular cross-interest rule's provisions as they relate to
    disaggregation of spectrum and/or post-licensing divestiture; and 5)
    modifying the ownership attribution standards under both rules.
    Through the process of seeking public comment and collecting data,
    we hope to assess the impact of recent competitive trends,
    international developments, and spectrum management and other
    regulatory considerations.

## Legal Basis

67. The potential actions on which comment is sought in this NPRM would
    be authorized under sections 1, 4(i), 11, 303(g), and 303(r) of the
    Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 154(i),
    161, 303(g), and 303(r).

## Description and Estimate of the Small Entities Subject to the Rules 

68. The RFA requires that an initial regulatory flexibility analysis be
    prepared for notice-and-comment rulemaking proceedings, unless the
    Agency certifies that "the rule will not, if promulgated, have a
    significant impact on a substantial number of small entities."[^160]
    The RFA generally defines the term "small entity" as having the same
    meaning as the terms "small business," "small organization," and
    "small governmental jurisdiction."[^161] In addition, the term
    "small business" has the same meaning as the term "small business
    concern" under the Small Business Act.[^162] A small business
    concern is one which: (1) is independently owned and operated; (2)
    is not dominant in its field of operation; and (3) satisfies any
    additional criteria established by the SBA.[^163] This IRFA
    describes and estimates the number of small-entity licensees that
    may be affected if the proposals in this NPRM are adopted.

69. This NPRM could result in rule changes that, if adopted, would
    affect small businesses that currently are or may become licensees
    in the cellular, broadband Personal Communications Services (PCS)
    and/or SMR services.

70. **Cellular Radiotelephone Service**. Neither the Commission nor the
    SBA has developed a definition of small entities applicable to
    cellular licensees. Therefore, the applicable definition of small
    entity is the definition under the SBA rules applicable to
    radiotelephone (wireless) companies. This provides that a small
    entity is a radiotelephone company employing no more than 1,500
    persons.[^164] According to the Bureau of the Census, only twelve
    radiotelephone firms from a total of 1,178 such firms, which
    operated during 1992, had 1,000 or more employees.[^165] Therefore,
    even if all twelve of these firms were cellular telephone companies,
    nearly all cellular carriers were small businesses under the SBA's
    definition. In addition, we note that there are 1,758 cellular
    licenses; however, a cellular licensee may own several licenses. In
    addition, according to the most recent *Telecommunications Industry
    Revenue* data, 808 carriers reported that they were engaged in the
    provision of either cellular service or PCS, which are placed
    together in the data. We do not have data specifying the number of
    these carriers that are not independently owned and operated or have
    more than 1,500 employees, and thus are unable at this time to
    estimate with greater precision the number of cellular service
    carriers that would qualify as small business concerns under the
    SBA's definition. Consequently, we estimate that there are fewer
    than 808 small cellular service carriers that may be affected by
    these proposals, if adopted.

71. **Broadband Personal Communications Service (PCS)**. The broadband
    PCS spectrum is divided into six frequency blocks designated A
    through F, and the Commission has held auctions for each block. The
    Commission defined \"small entity\'\' for Blocks C and F as an
    entity that has average gross revenues of less than \$40 million in
    the three previous calendar years.[^166] For Block F, an additional
    classification for \"very small business\" was added and is defined
    as an entity that, together with its affiliates, has average gross
    revenues of not more than \$15 million for the preceding three
    calendar years.[^167] These regulations defining \"small entity\'\'
    in the context of broadband PCS auctions have been approved by the
    SBA.[^168] No small businesses within the SBA-approved definition
    bid successfully for licenses in Blocks A and B. There were 90
    winning bidders that qualified as small entities in the Block C
    auctions. A total of 93 small and very small business bidders
    initially won approximately 40 percent of the 1,479 licenses for
    Blocks D, E, and F.[^169] On March 23, 1999, the Commission
    reauctioned 347 C, D, E, and F Block licenses; there were 48 small
    business winning bidders. Based on this information, we conclude
    that the number of small broadband PCS licensees will include the 90
    winning C Block bidders and the 93 qualifying bidders in the D, E,
    and F blocks plus the 48 winning bidders in the re-auction, for a
    total of approximately 231 small entity PCS providers as defined by
    the SBA and the Commission\'s auction rules. In addition, the
    Commission anticipates that a total of 422 licenses will be
    auctioned in the broadband PCS reauction of the C & F Blocks that
    began December 12, 2000. Therefore, we conclude that the number of
    additional C & F Block broadband PCS licensees that may ultimately
    be affected by these proposals could be as many as 422.

72. **Specialized Mobile Radio (SMR)**. Pursuant to 47 C.F.R. §
    90.814(b)(1), the Commission has defined "small business" for
    purposes of auctioning 900 MHz SMR licenses, 800 MHz SMR licenses
    for the upper 200 channels, and 800 MHz SMR licenses for the lower
    230 channels on the 800 MHz band as a firm that has had average
    annual gross revenues of \$15 million or less in the three preceding
    calendar years.[^170] The SBA has approved this small business size
    standard for the 800 MHz and 900 MHz auctions. The auction of the
    1,020 900 MHz SMR geographic area licenses for the 900 MHz SMR band
    began on December 5, 1995, and was completed on April 15, 1996.
    Sixty (60) winning bidders for geographic area licenses in the 900
    MHz SMR band qualified as small businesses under the \$15 million
    size standard. The auction of the 525 800 MHz SMR geographic area
    licenses for the upper 200 channels began on October 28, 1997, and
    was completed on December 8, 1997. Ten (10) winning bidders for
    geographic area licenses for the upper 200 channels in the 800 MHz
    SMR band qualified as small businesses under the \$15 million size
    standard.

73. The lower 230 channels in the 800 MHz SMR band are divided between
    General Category channels (the upper 150 channels) and the lower 80
    channels. The auction of the 1,053 800 MHz SMR geographic area
    licenses (1,050 - 800 MHz licenses for the General Category
    channels, and 3 - 800 MHz licenses for the upper 200 channels from a
    previous auction) for the General Category channels began on August
    16, 2000, and was completed on September 1, 2000. At the close of
    the auction, 1,030 licenses were won by bidders. Eleven (11) winning
    bidders for geographic area licenses for the General Category
    channels in the 800 MHz SMR band qualified as small businesses under
    the \$15 million size standard. The auction of the 2,800 800 MHz SMR
    geographic area licenses for the lower 80 channels of the 800 MHz
    SMR service began on November 1, 2000, and was completed on December
    5, 2000. Nineteen (19) winning bidders for geographic area licenses
    for the lower 80 channels in the 800 MHz SMR band qualified as small
    businesses under the \$15 million size standard. In addition, there
    are numerous incumbent site-by-site SMR licensees on the 800 and 900
    MHz bands. The Commission awards bidding credits in auctions for
    geographic area 800 MHz and 900 MHz SMR licenses to firms that had
    revenues of no more than \$15 million in each of the three previous
    calendar years.[^171]

## Description of Projected Reporting, Recordkeeping and Other Compliance Requirements

74. This NPRM neither proposes nor anticipates any additional reporting,
    recordkeeping or other compliance measures.

## Steps Taken to Minimize Significant Economic Impact on Small Entities, and Significant Alternatives Considered

75. The RFA requires an agency to describe any significant alternatives
    that it has considered in reaching its proposed approach, which may
    include the following four alternatives (among others): (1) the
    establishment of differing compliance or reporting requirements or
    timetables that take into account the resources available to small
    entities; (2) the clarification, consolidation, or simplification of
    compliance or reporting requirements under the rule for small
    entities; (3) the use of performance, rather than design, standards;
    and (4) an exemption from coverage of the rule, or any part thereof,
    for small entities.

76. In our September 1999 *First Biennial Review Order*, we concluded
    that retention of the CMRS spectrum cap and cellular cross-interest
    rule serves the public interest. We found that the benefits of these
    bright-line rules in addressing concerns about increased spectrum
    aggregation continued to make these approaches preferable to
    exclusive reliance on case-by-case review under section 310(d). By
    setting bright lines for permissible ownership interests, we found
    that the rules continued to benefit both the telecommunications
    industry and subscribers, including small businesses, by providing
    regulatory certainty and facilitating more rapid processing of
    transactions. Specifically, we noted that case-by-case review is
    especially expensive and time-consuming for small businesses, which
    often do not have the requisite resources.

77. In our 2000 biennial regulatory review pursuant to section 11, we
    here reexamine our findings and determinations in September 1999.
    Since that time, there have been international and economic
    developments that have significantly affected CMRS markets. For
    example, consolidation within the CMRS industry in an effort to
    create national service footprints has tended to reduce the number
    of smaller entities providing broadband CMRS on a purely local
    level. As part of this 2000 biennial review, we seek to develop a
    record regarding whether the CMRS spectrum cap and cellular
    cross-interest rule continue to make regulatory and economic sense
    in CMRS markets in the current-, mid-, and long-term. In doing so,
    we generally request comment on whether retention, modification, or
    elimination of the CMRS spectrum cap and/or cellular cross-interest
    rule is appropriate with respect to small businesses that are
    licensees in the cellular, broadband PCS and/or SMR services. We
    seek comment on whether there continues to be a need for these rules
    to ensure that new entrants, including small businesses, have access
    to spectrum licenses both at auction and in the secondary market. We
    inquire whether these bright-line rules continue to create
    efficiencies and reduce transaction costs for small business. We
    consider the impact on small businesses if we were to adopt
    alternative approaches that rely more heavily on case-by-case
    review. We also seek specific comment on various aspects of these
    rules that particularly affect small business, such as the whether
    our September 1999 decision to increase attribution standards to 40
    percent has benefited small businesses.

##  Federal Rules that May Duplicate, Overlap or Conflict with the Proposed Rules

78. None.

    **CONCURRING STATEMENT OF COMMISSIONER HAROLD FURCHTGOTT-ROTH**

Re: 2000 Biennial Regulatory Review---Spectrum Aggregation Limits for
Commercial Mobile Radio Services, Notice of Proposed Rulemaking, WT
Docket No. 01-14, (rel. January 23, 2001).

The use of a spectrum cap is a drastic regulatory remedy that continues
to search for a corresponding competitive ill. To the extent the
marketplace was ever genetically predisposed to such a malady (a
disputable proposition in itself), I believe such treatment has long ago
outlived its effectiveness.[^172] In light of this diagnosis, I would
have crafted today's Notice in a substantially different way. There is
nothing in the Communications Act that requires the FCC to promulgate
any type of spectrum cap. As I have stated before, other agencies are
fully capable of monitoring the competitive health of the CMRS
marketplace. Nor is there any policy rationale for the continued
application of the technology- and efficiency-stifling caps. Thus, I
would have tentatively concluded here that the caps should be
eliminated. Finally, I have grown impatient with the Commission's
repeated re-examinations of these issues without substantial alterations
in our policy approach. Nonetheless, in light of our current policy
posture, I fully support fulfilling our promise to re-examine the caps
as part of this year's biennial review. I look forward to a full record
on these issues and prompt resolution by the Commission.

[^1]: ^^ The final version of this item was approved by the Commission
    on January 19, 2001.

[^2]: 1998 Biennial Regulatory Review, Spectrum Aggregation Limits for
    Wireless Telecommunications Carriers, WT Docket No. 98-205, *Report
    and Order*, 15 FCC Rcd 9219, 9223 ¶ 6 (1999) (*First Biennial Review
    Order*).

[^3]: 47 U.S.C. § 161.

[^4]: 47 C.F.R. § 20.6(a).

[^5]: *Id*. § 20.6(b). This ceiling on attributable SMR spectrum was
    adopted in 1994 because SMR spectrum was highly encumbered, was
    assigned on a station-by-station basis, and was not available as a
    contiguous block. *See* Implementation of Sections 3(n) and 332 of
    the Communications Act, Regulatory Treatment of Mobile Services, GN
    Docket No. 93-252, *Third Report and Order*, 9 FCC Rcd 7988, 8112-14
    ¶¶ 270-75 (1994) (*CMRS Third Report and Order*).

[^6]: *See, e.g., First Biennial Review Order*, 15 FCC Rcd at 9254-55 ¶
    80; *CMRS Third Report and Order,* 9 FCC Rcd at 7870 ¶ 97.

[^7]: *See generally* 47 C.F.R § 20.6(d). Specifically, under the CMRS
    spectrum cap, controlling interests are attributable. *Id*. §
    20.6(d)(1). Also attributable are non-controlling ownership
    interests of 20 percent or more (40 percent if held by a small
    business or rural telephone company, or a passive institutional
    investor), including general and limited partnership interests,
    voting and non-voting stock interests or any other equity interest,
    are considered attributable. *Id*. § 20.6(d)(2), (3), (4), (6).
    Officers and directors are attributed with their company's holdings,
    as are persons who manage certain operations of licensees, and
    licensees that enter into certain joint marketing arrangements with
    other licensees. *Id*. § 20.6(d)(7), (9), (10). Debt does not
    constitute an attributable interest for purposes of the spectrum
    cap, and securities affording potential future equity interests
    (such as warrants, options, or convertible debentures) are not
    considered attributable until they are converted or exercised. *Id*.
    § 20.6(d)(5). Finally, ownership interests held through successive
    subsidiaries are calculated by using a multiplier. *Id*. §
    20.6(d)(8).

[^8]: *Id.* § 20.6(c).

[^9]: For spectrum cap purposes, the relevant geographic area for
    cellular spectrum is the Cellular Geographic Service Area (CGSA),
    *i.e.*, the composite 32 dBu service area contour within which the
    cellular system is entitled to protection from interference. *See*
    *id*. § 22.911. For broadband PCS spectrum, the relevant area is the
    licensed service area, which can be either a Major Trading Area
    (MTA) or a Basic Trading Area (BTA). *See* *id*. § 24.202. SMR
    service can be licensed by economic areas (EAs), by MTAs, or by
    service area contour. BTAs and MTAs are based on material
    copyrighted  1992 Rand McNally & Company.

[^10]: *Id*. § 20.6(c). Where both MSA and RSA areas are included in a
    single PCS licensed area, those areas within MSAs where total
    spectrum exceeds 45 MHz and those areas within RSAs where total
    spectrum exceeds 55 MHz are considered in the calculation. *See*
    1998 Biennial Regulatory Review, Spectrum Aggregation Limits for
    Wireless Telecommunications Carriers, WT Docket No. 98-205,
    *Memorandum Opinion and Order on Reconsideration*, FCC 00-376 (rel.
    Nov. 8, 2000) ¶ 22 (*First Biennial Review MO&O*). Where only PCS
    licenses are involved, however, this analysis does not apply, and
    any overlap between BTA-licensed and MTA-licensed spectrum is
    considered significant. Situations involving overlap of CGSAs
    generally do not arise because such holdings are generally
    prohibited under the cellular cross-interest rule, 47 C.F.R. §
    22.942. *See* *infra* para. 9.

[^11]: Amendment of the Commission\'s Rules to Establish New Personal
    Communications Services, GN Docket No. 90-314, *Second Report and
    Order*, 8 FCC Rcd 7700, 7728 ¶ 61, 7745 ¶ 106 (1993) (limited
    broadband PCS licensees to 40 MHz of the total spectrum allocated to
    broadband PCS; limited cellular licensees to no more than 10 MHz of
    PCS spectrum in their cellular service areas); Amendment of the
    Commission\'s Rules to Establish New Personal Communications
    Services, GN Docket No. 90-314, *Memorandum Opinion and Order*, 9
    FCC Rcd 4957, 4984 ¶ 67 (1994) (revised the PCS/cellular
    cross-interest rule to allow cellular licensees to increase their
    holding of PCS spectrum from 10 MHz to 15 MHz after January 1,
    2000).

[^12]: Amendment of Parts 20 and 24 of the Commission's Rules \--
    Broadband PCS Competitive Bidding and the Commercial Mobile Radio
    Service Spectrum Cap; Amendment of the Commission\'s Cellular/PCS
    Cross-Ownership Rule, WT Docket 96-59, GN Docket 90-314, *Report and
    Order*, 11 FCC Rcd 7824, 7869 ¶ 94 (1996) (*CMRS Spectrum Cap Report
    and Order*), *recon.* 12 FCC Rcd 14031 (1997) (*BellSouth MO&O*),
    *aff'd sub nom. BellSouth Corp. v. FCC*, 162 F.3d 1215 (D.C. Cir.
    1999).

[^13]: *CMRS Spectrum Cap Report and Order,* 11 FCC Rcd at 7869 ¶¶
    94-95.

[^14]: *See* *First Biennial Review Order*, 15 FCC Rcd at 9249 ¶ 66.
    These two actions were necessary to facilitate deployment to rural
    areas and to increase the availability of capital to all CMRS
    carriers, respectively. *Id*.

[^15]: *Id.* at 9242-49 ¶¶ 49-65. In our *First Biennial Review MO&O*,
    we denied the generally framed petitions for reconsideration
    challenging our September 1999 decision to retain the CMRS spectrum
    cap. *See* *First Biennial Review MO&O* at ¶¶ 9-12. Recognizing the
    speed of change within the CMRS industry, we noted our intention to
    revisit the continued need for the cap in greater detail as part of
    our 2000 biennial review. *Id*. at ¶ 17.

[^16]: *First Biennial Review Order*, 15 FCC Rcd at 9234-35 ¶ 31.

[^17]: *Id.* at 9233 ¶ 28.

[^18]: *Id.* at 9234-35 ¶ 31.

[^19]: *Id.* at 9240 ¶ 44.

[^20]: *Id.* at 9242 ¶ 48.

[^21]: *Id*. at 9240 ¶¶ 43, 44.

[^22]: *Id.*

[^23]: *Id.* at 9256 ¶ 83.

[^24]: *Id.* at 9236-38 ¶¶ 35-38.

[^25]: *Id.* at 9247-48 ¶¶ 60-61, 63.

[^26]: *Id*. at 9255-56 ¶ 82 (describing factors that will be reviewed
    when considering a request for permanent waiver of the spectrum cap
    to provide advanced wireless services). Under this process, a
    carrier can obtain a waiver of the cap if it can credibly
    demonstrate in a particular geographic area that the applicable
    limit is having a significant adverse effect on its ability to
    provide advanced wireless services. *Id*.

[^27]: *Id*. The first occasion to apply this approach came four months
    later when we held that CMRS provided on the 746-764 MHz and 776-794
    MHz bands would not be subject to in-band spectrum aggregation
    limits, nor to the general CMRS spectrum cap. *See* Service Rules
    for the 746-764 and 776-794 MHz Bands, and Revisions to Part 27 of
    the Commission's Rules, WT Docket No. 99-168, *First Report and
    Order*, 15 FCC Rcd 476 (2000) (*700 MHz First Report and Order*). We
    concluded that excluding the 700 MHz bands from the spectrum
    aggregation limits would best promote the availability of spectrum
    for advanced services while avoiding anticompetitive harm. *Id*. at
    497-98 ¶¶ 52-53; *see also* Service Rules for the 746-764 and
    776-794 MHz Bands, and Revisions to Part 27 of the Commission's
    Rules, WT Docket No. 99-168, *Memorandum Opinion and Order*, FCC
    00-224 (rel. June 30, 2000) at ¶ 73. We noted that our decision not
    to include the spectrum in these bands under the cap was premised on
    retaining the cap on the existing 180 MHz of broadband CMRS
    spectrum. *See id*. We considered the option of increasing the
    spectrum cap and including the 700 MHz bands within that cap, but
    concluded that doing so would risk harmful consolidation of spectrum
    within the existing CMRS bands. *700 MHz First Report and Order,* 15
    FCC Rcd at 498 ¶ 53. By this decision, we identified additional
    suitable spectrum that would be made available for mid- and
    long-term use by CMRS carriers without compromising the consumer
    benefits of ensuring multiple facilities-based carriers.

[^28]: *First Biennial Review Order*, 15 FCC Rcd at 9230 ¶ 21 (citing
    *CMRS Spectrum Cap Report and Order,* 11 FCC Rcd at 7873 ¶ 102).

[^29]: *Id.* at 9256-57 ¶ 84.

[^30]: *Id*.

[^31]: *See* Amendment of Part 22 of the Commission\'s Rules to Provide
    for the Filing and Processing of Applications for Unserved Areas in
    the Cellular Service and to Modify Other Cellular Rules, CC Docket
    Nos. 90-6, 85-388, *First Report and Order and Memorandum Opinion
    and Order on Reconsideration,* 6 FCC Rcd 6185, 6228-29 ¶¶ 103-06.
    The original cellular rules restricted cellular-cross ownership by
    limiting ownership of cellular A block licenses to non-wireline
    carriers and ownership of cellular B block licenses to wireline
    carriers. These restrictions were lifted for cellular unserved area
    licenses in 1989 and for all cellular licenses in 1994. *See*
    Amendment of the Commission's Rules for Rural Cellular Service, CC
    Docket No. 85-388, *Order on Reconsideration of Second Report and
    Order*, 4 FCC Rcd 5377 (1989); Revision of Part 22 of the
    Commission's Rules Governing the Public Mobile Services, CC Docket
    No. 92-115, *Report and Order*, 9 FCC Rcd 6513 (1994).

[^32]: *See* 47 C.F.R § 22.905.

[^33]: We recently adopted an order permitting cellular carriers to
    disaggregate spectrum. *See* Geographic Partitioning and Spectrum
    Disaggregation by Commercial Mobile Radio Services Licensees;
    Implementation of Section 257 of the Communications Act \--
    Elimination of Market Entry Barriers, WT Docket No. 96-148, GN
    Docket No. 96-113, *Second Report and Order*, FCC 00-141 (rel. May
    19, 2000) (*Cellular Disaggregation Order*). To the extent that
    either cellular carrier disaggregates a portion of its spectrum on
    its channel block to another entity, there could be three, or more,
    cellular carriers in one geographic area. Our *Cellular
    Disaggregation Order* does not address the effect of disaggregation
    on the cross-interest rule. Accordingly, we seek comment below on
    how disaggregation may affect application of the rule. *See infra*
    para. 55.

[^34]: 47 C.F.R. § 22.942(a).

[^35]: *Id*. § 22.942(d)(1), (2). Other rules for determining
    attributable interests are set forth elsewhere in section 22.942(d).
    *See id*. § 22.942(d)(3)-(9).

[^36]: *Id*. § 22.942(b).

[^37]: *First Biennial Review Order*, 15 FCC Rcd at 9232 ¶ 25, 9251 ¶
    71.

[^38]: *Id*. at 9251-52 ¶¶ 70-72.

[^39]: *Id*. at 9252 ¶ 73. Specifically, in the absence of the cellular
    cross-interest rule, cellular carriers in MSAs would be permitted to
    acquire up to a 20 percent non-controlling interest in the market's
    other cellular licensee without triggering the spectrum cap's
    attribution standard; and, because the spectrum cap had been
    increased to 55 MHz in rural areas, a single entity could control
    both 25 MHz cellular licensees in an RSA. *Id*.

[^40]: As originally adopted, the Commission prohibited an entity with a
    controlling interest in the license for one cellular channel block
    from having any interest in the license for the other channel block
    in overlapping CGSAs. A single entity could, however, have interests
    of 5 percent or less in both channel blocks, so long as neither of
    those interests was controlling. 47 C.F.R. § 22.942(a) (1999).

[^41]: *See supra* text accompanying notes 33-35.

[^42]: Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56
    (1996) (1996 Act).

[^43]: *See* Joint Managers' Statement, S. Conf. Rep. No. 104-230,
    104^th^ Cong., 2d Sess. 113 (1996) at 1 (stating that the 1996 Act
    would establish a "pro-competitive, deregulatory national policy
    framework").

[^44]: 47 U.S.C. § 161(a)(1), (2); *see also* section 402(a) of the 1996
    Act, 110 Stat. 56 (1996).

[^45]: 47 U.S.C*.* § 161(b).

[^46]: In our recently released Updated Staff Report on the biennial
    regulatory review 2000, we noted that the review of regulations
    undertaken in the 2000 biennial review builds upon the work
    completed in the 1998 biennial review. In the Matter of the 2000
    Biennial Regulatory Review, CC Docket No. 00-175, *Report*, FCC
    00-456 (rel. Jan. 17, 2001) ¶ 11 (*2000 Staff Report*).

[^47]: Prior to release of our *2000 Staff Report*, we received comments
    from representatives of the CMRS industry that the section 11
    biennial review criteria support the elimination of the spectrum
    cap. *See id*. app. IV at 33 n.85 (referencing Comments of Alloy at
    p. 5 and Comments of CTIA at p. 3). We incorporate by reference all
    comments on the spectrum cap that we received in our *2000 Staff
    Report* proceeding.

[^48]: Implementation of Section 6002(b) of the Omnibus Budget
    Reconciliation Act of 1993; Annual Report and Analysis of
    Competitive Market Conditions With Respect to Commercial Mobile
    Services, *Fifth Report*, FCC 00-289 (rel. Aug. 18, 2000) (*Fifth
    Annual CMRS Competition Report*).

[^49]: The *Fifth Annual CMRS Competition Report* relied to a large
    extent on 1999 data and figures to assess the overall state of CMRS
    competition and industry development. *See, e.g., id*. at 4-7.

[^50]: *Id*. at 4.

[^51]: CTIA\'s most recent Semi-Annual Wireless Industry Survey
    tabulating total subscribership as of June 2000 is available at
    <http://www.wow-com.com/statsurv/survey/wireless.cfm>.

[^52]: *Fifth Annual CMRS Competition Report* at 6. Because our analysis
    was limited to publicly available sources of information, this
    coverage percentage is based on the number of operators serving any
    portion of a particular county. Although the three or more
    identified operators may not necessarily all be providing service to
    the same portion of the county, we note that this analysis was
    nonetheless a more precise picture of network deployments than in
    prior years' reports where our analysis was based on BTAs. *Id*. at
    17-18.

[^53]: *Id.* at 6.

[^54]: *Id.* at 10-12.

[^55]: *See, e.g., id*.

[^56]: *Id*. at 27-28.

[^57]: *See, e.g., id*. at 13.

[^58]: *See, e.g., id.* at 14.

[^59]: *Id*. at 22 (finding that non-cellular carriers had claimed
    between 50 and 64 percent of the industry's total new subscribers,
    and that this figure was expected to increase to 75 percent by
    mid-decade).

[^60]: We provided data in the *Fifth Annual CMRS Competition Report*
    that cellular licensees had approximately 75 percent of mobile
    telephone subscribers nationwide at the end of 1999. *See id.* at
    B-9 (table comparing tabulated figures for cellular subscribership
    with total cellular, broadband PCS, and SMR subscribership).

[^61]: *See* *First Biennial Review Order*, 15 FCC Rcd at 9231 ¶ 23.

[^62]: *Id*. at 9240 ¶¶ 43, 44.

[^63]: *See* *Fifth Annual CMRS Competition Report* at 18-20.

[^64]: *Id*. at 22-23.

[^65]: *Id*. at 33-35.

[^66]: *See supra* para. 5-6.

[^67]: *See supra* para. 14.

[^68]: *See* discussion *infra* part III.B.2.

[^69]: Although our past orders have generally focused on competitive
    conditions in the market for mobile voice telephone services, *see,
    e.g., First Biennial Review Order,* 15 FCC Rcd at 9241 ¶ 46, the cap
    is not limited to CMRS spectrum used for real-time, two-way switched
    telephone service; it applies so long as cellular, broadband PCS, or
    SMR spectrum is used for any service within the definition of CMRS.
    *See First Biennial Review Order,* 15 FCC Rcd at 9227 ¶ 13, 9241 ¶
    46; *see also* *BellSouth MO&O*, 12 FCC Rcd at 14037 ¶ 10, 14040 ¶
    14; *BellSouth Corp. v. FCC*, 162 F.3d at 1222-24.

[^70]: 47 U.S.C. § 310(d).

[^71]: To the extent that we decide to eliminate the spectrum cap and
    rely on the section 310(d) review process, we note that attribution
    and ownership issues could also arise outside that process if
    licensees are permitted to lease spectrum usage rights without prior
    section 310(d) approval. *See* Promoting Efficient Use of Spectrum
    Through Elimination of Barriers to the Development of Secondary
    Markets, WT Docket No. 00-230, *Notice of Proposed Rulemaking*, FCC
    00-402 (rel. Nov. 27, 2000) (*Secondary Markets NPRM*). *See also
    infra* para. 53.

[^72]: *Cf.* 47 C.F.R. § 73.3555 (multiple ownership rule applicable to
    broadcast stations).

[^73]: *See also infra* para. 30, 38.

[^74]: *First Biennial Review Order*, 15 FCC Rcd at 9244-46 ¶¶ 56-57.

[^75]: *See, e.g*., United States v. SBC Communications Inc. and
    Ameritech Corporation, No. 1:99CV00715 (D.D.C. filed Aug. 2, 1999)
    (final judgement); United States v. SBC Communications Inc. and
    BellSouth Corporation, No. 1:00CV02073(PLF) (D.D.C. filed Aug. 30,
    2000) (final judgement). Indeed, some DOJ consent decrees require
    the spin-off of overlapping spectrum licenses to a level below that
    required by our spectrum aggregation limits. *See* United States v.
    Bell Atlantic Corporation, GTE Corporation, and Vodafone AirTouch
    PLC, No. 1:99CV01119(LFO) (D.D.C. filed Apr. 18, 2000) (final
    judgement).

[^76]: *See, e.g.,* *First Biennial Review Order*, 15 FCC Rcd at 9245-46
    ¶ 57.

[^77]: *See* *id.* at 9232 ¶ 26 n.75. We also note that we have utilized
    sunsets in other CMRS rules, s*ee, e.g*., 47 C.F.R. § 20.20(f)
    (sunset of the separate affiliate requirements for incumbent local
    exchange carrier (ILEC) provision of in-region broadband CMRS); §
    20.12(b) (sunset of the CMRS resale rule), and LMDS ownership rules,
    § 101.1003 (sunset of LMDS eligibility restrictions for ILECs).

[^78]: We note that under a 55 or 60 MHz spectrum cap, the cellular
    cross-interest rule would still prevent two cellular carriers from
    combining.

[^79]: *See, e.g.*, *First Biennial Review Order*, 15 FCC Rcd at 9256 ¶
    83.

[^80]: *See, e.g.,* *Fifth Annual CMRS Competition Report* at 15-16.

[^81]: *See supra* text accompanying note 59. We note that the cellular
    licensees' market share of customers does not include additional
    customers that some of these same licensees serve by virtue of PCS
    licenses. *See Fifth Annual CMRS Competition Report* at B-9 (showing
    that several cellular licensees also serve mobile telephone
    customers under PCS licenses).

[^82]: *See, e.g., id.* at 29.

[^83]: *See, e.g., id*.

[^84]: *See generally supra* para. 19-20.

[^85]: *See* 47 U.S.C. §§ 251-261 (Development of Competitive Markets);
    Joint Managers\' Statement, S. Conf. Rep. No. 104-230, 104th Cong.
    2d Sess. (1996).

[^86]: *See First Biennial Review Order,* 15 FCC Rcd at 9248-49 ¶ 64.

[^87]: *See supra* para. 18.

[^88]: Whereas fixed wireless services compete with wireline services,
    there are no close substitutes for mobile wireless services --
    mobility is a unique attribute of spectrum below 3 GHz. The scarcity
    of this spectrum relative to demand is evidenced by the increasing
    market value of broadband CMRS licenses. For example, the on-going
    Auction No. 35 of C and F block PCS licenses is producing net high
    bids that are substantially higher than those that have prevailed in
    any previous spectrum auctions. *See, e.g.*, Auction No. 35 Summary
    Measures by Round, *available a*t
    <http://www.fcc.gov/wtb/auctions/c> f blk/35press2.pdf.

[^89]: *See, e.g*., *CMRS Spectrum Cap Report and Order*, 11 FCC Rcd at
    7871 ¶ 99 ("CMRS markets have significant barriers to entry, most
    notably the need for spectrum, the expense of obtaining the license
    and the high costs of construction and operation of new
    communications systems."). In evaluating the prospects for broadband
    CMRS competition, our focus has been on "the allocation of a scarce
    resource, spectrum," to ensure that incumbent broadband CMRS
    licensees could not aggregate such quantities of spectrum that the
    disciplining force of market entry would be thwarted. *First
    Biennial Review Order*, 15 FCC Rcd at 9233 ¶ 29; *see also* *CMRS
    Spectrum Cap Report and Order*, 11 FCC Rcd at 7871, 73 ¶¶ 99, 101

[^90]: *See, e.g*., 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, CC Docket No. 92-297, *Third Report and Order
    and Memorandum Opinion and Order*, 15 FCC Rcd 11857 (2000).

[^91]: *See generally* Amendment of the Commission's Rules Regarding
    Installment Payment Financing for Personal Communications Services
    (PCS) Licensees, WT Docket No. 97-82, *Sixth Report and Order and
    Order on Reconsideration*, FCC 00-313 (rel. Aug. 29, 2000) (*PCS
    Sixth Report and Order*).

[^92]: *Id*. at ¶¶ 15, 60.

[^93]: *See* *700 MHz First Report and Order*, 15 FCC Rcd at 497-98 ¶
    52.

[^94]: Amendment of the Commission's Rules to Establish New Personal
    Communications Services, Narrowband PCS, GEN Docket No. 90-314, ET
    Docket No. 92-100, *Second Report and Order and Second Further
    Notice of Proposed Rulemaking*, 15 FCC Rcd 10456, 10464-65 ¶ 16
    (2000).

[^95]: *Id*. at 10464-65 ¶¶ 16-18.

[^96]: *See* *Fifth Annual CMRS Competition Report* at 36-44.

[^97]: *First Biennial Review Order*, 15 FCC Rcd at 9242-43 ¶¶ 49-53,
    9244 ¶ 55.

[^98]: *Id*.

[^99]: *See id.*

[^100]: *BellSouth Corp. v. FCC*, 162 F.3d at 1225.

[^101]: *See* *First Biennial Review Order*, 15 FCC Rcd at 9243 ¶ 52,
    9255-56 ¶ 82. We concluded that bright-line rules with a waiver
    process would create more regulatory certainty than would unguided
    case-by-case review for anticompetitive consolidations or
    post-auction issuance of licenses. *See generally id.* at 9242-46 ¶¶
    49-58; *Biennial CMRS Spectrum Cap MO&O* at ¶ 12.

[^102]: 47 U.S.C. § 337; s*ee, e.g.*, *700 MHz First Report and Order*.

[^103]: *See generally* Amendment of Part 2 of the Commission's Rules to
    Allocate Spectrum Below 3 GHz for Mobile and Fixed Services to
    Support the Introduction of New Advanced Wireless Services,
    including Third Generation Wireless Systems, ET Docket No. 00-258,
    *Notice of Proposed Rulemaking*, FCC 00-455 (rel. Jan. 5, 2001).

[^104]: *First Biennial Review Order*, 15 FCC Rcd at 9234-35 ¶ 31.

[^105]: *See supra* para. 26.

[^106]: *First Biennial Review Order*, 15 FCC Rcd at 9248 ¶ 62.

[^107]: *Fifth Annual CMRS Competition Report* at 38-44.

[^108]: *Id*. at 77.

[^109]: *See* *First Biennial Review Order*, 15 FCC Rcd at 9256-57 ¶ 84.

[^110]: *Id*. at 9233 ¶ 29 n.78 (citing *CMRS Spectrum Cap Report and
    Order,* 11 FCC Rcd at 7869 ¶ 95 in explaining that the Commission
    should remain focused on the longer term in pursuing its competitive
    objectives).

[^111]: *See* *id.* at 9247-48 ¶ 61. Although carriers have the
    flexibility to use cellular, broadband PCS, and SMR spectrum for a
    variety of service offerings, CMRS carriers are not limited to this
    spectrum for purposes of providing services that can substitute for
    local wireline service. *See id.*

[^112]: We note that some carriers requested waiver of or forbearance
    from applying the cap to PCS C and F Block licenses currently being
    auctioned in Auction No. 35, alleging that the cap would impair
    their ability to deploy advanced wireless services. However, we have
    previously determined that the generalized assertions in these
    requests were not sufficiently specific to satisfy the waiver
    standard set forth in the *First Biennial Review Order* or in the
    Commission\'s rules. *See* *PCS Sixth Report and Order* at ¶ 59.

[^113]: This waiver standard is distinct from the limited instances in
    the past where the Commission has granted temporary waivers to
    carriers assembling nationwide networks to allow them to maintain
    operations during the divestiture process.

[^114]: *See, e.g*., "Public Forum Streamlining FCC Review of
    Applications Relating to Mergers*," Public Notice*, DA 00-334 (rel.
    Feb. 18, 2000).

[^115]: *See, e.g.,* *Fifth Annual CMRS Competition Report* at 18, 29.

[^116]: *See* *First Biennial Review Order*, 15 FCC Rcd at 9256-57 ¶ 84.

[^117]: *See* Sam Paltridge, *Cellular Mobile Pricing Structures and
    Trends*, OECD, May 2000, at 16, *available at*
    http://www.oecd.org/dsti/sti/it/. According to this OECD study,
    between 1989 and 1999 the number of mobile operator "equivalents"
    competing in the markets of OECD Member Countries increased from 35
    to 94. The last mobile monopoly in the OECD area was eliminated in
    1998. The study also predicted that, by the year 2000, there would
    be only three to four OECD Member countries with mobile duopolies,
    and that more than half the OECD countries would have four or more
    operators by the end of 2000.

[^118]: Germany and Austria have licensed six 3G operators. *See*
    *European 3G Auction Guide*, Financial Times, August 15, 2000
    (updated periodically), *available at*
    http://news.ft.com/news/industries/telecommunications.

[^119]: The number of incumbent mobile operators in these countries
    prior to the 3G licensing process is provided in Sam Paltridge,
    *Cellular Mobile Pricing Structures and Trends*, OECD, May 2000, at
    76.

[^120]: In particular, in both Germany and Austria small blocks of
    paired and unpaired spectrum were offered for auction so that the
    number and size of 3G licenses would be determined through the
    auction process. However, to prevent excessive concentration, the
    auction rules restricted individual bidders to winning a maximum of
    three blocks of 10 MHz each, or 30 MHz total, of paired spectrum.
    *Rules for Conduct of the Auction for the Award of Licenses for
    UMTS/IMT-2000 3G Mobile Communications*, Ruling by the President's
    Chamber, Feb. 18, 2000, at 3-9, *available at*
    http://www.regtp.de/en/reg_tele/start/fs_05.html; Telekom Control
    Auction Web Site, *available at*
    http://www.tkc.at/www/tkc_main.nsf/pages/Willkommen-e. Given the
    total amount of paired spectrum offered for auction in Germany and
    Austria, this bidding limit ensured a minimum of four competitors in
    each market. Ultimately, all the successful bidders in both the
    German and Austrian auctions ended up with 20 MHz of paired
    spectrum, the minimum required to obtain a license. As a result,
    both auctions resulted in the award of six licenses.

[^121]: On 3G licensing in Japan, see *The Principles on Radio Station
    Licenses for IMT-2000*, Press Release, The Ministry of Posts and
    Telecommunications of Japan, Dec. 10, 1999, available at
    http://www.mpt.go.jp/pressrelease/english/telecomm/news991210.html.
    Brazil's duopoly policy in mobile telecommunications services is
    detailed in Felix Gilman, *International Spectrum Auction Handbook:
    Policies for Licensing Radio Spectrum in Nations around the World*,
    Telecommunications Reports International, Inc., 2000, at 60-64.
    Brazil plans to end the mobile duopoly in 2001 with the auction of
    three additional mobile licenses in each region. *See* Nathalia
    Jabur, *Brazil Seeks US\$3.4 Billion for Mobile*, Reuters, November
    29, 2000. In July 2000, the Chinese government ordered the military
    to surrender control of a third mobile operator, Great Wall Telecom,
    to China United Telecommunications Corp. (China Unicom), the second
    largest mobile operator in China. Matt Pottinger, *Chinese Military
    to Hand Mobile Business to Unicom*, Reuters, July 13, 2000.

[^122]: *ERO Information Document on GSM Frequency Utilisation within
    Europe*, European Radiocommunications Office, March 2000, *available
    at* <http://www.ero.dk/>. The only two Western European countries in
    which the total amount of spectrum available for first- and
    second-generation mobile communications services combined exceeds
    180 MHz are the United Kingdom (nearly 225 MHz) and the Netherlands
    (nearly 212 MHz). In the remaining Western European countries, the
    total amount of first- and second-generation mobile spectrum is less
    than 180 MHz.

[^123]: This estimate includes Austria, Belgium, Denmark, Finland,
    France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal,
    Spain, Sweden, Switzerland and the United Kingdom. The total amount
    of mobile telephony spectrum in Norway is relatively low because
    Norway has a duopoly in second-generation mobile services. The total
    amount of first- and second-generation mobile spectrum available in
    these countries is provided in *ERO Information Document on GSM
    Frequency Utilisation within Europe*, European Radiocommunications
    Office, March 2000. Information about the amount of 3G spectrum
    available in these countries comes from the web sites of the
    relevant national regulatory authorities.

[^124]: *Id*. In particular, the average amount of spectrum assigned to
    individual operators for first- and second-generation mobile
    services is less than 45 MHz in Austria, Belgium, Denmark, Finland,
    Germany, Greece, Italy, Netherlands, Norway, Portugal, and Sweden.
    We estimate that the average assignment of first- and
    second-generation mobile spectrum combined exceeds 45 MHz in the
    United Kingdom, France, Switzerland, Spain and Ireland. The average
    assignment of spectrum designated for second-generation mobile
    services (that is, excluding spectrum for first-generation analog
    services) exceeds 45 MHz in only three of these countries, the
    United Kingdom, France and Switzerland.

[^125]: Information about the size of 3G licenses comes from the web
    sites of the relevant national regulatory authorities. In the United
    Kingdom, the largest license, 35 MHz, was reserved for a new
    entrant. In Italy, if new entrants succeeded in winning one of five
    25 MHz licenses offered for auction, they became eligible to
    purchase one of two additional 10 MHz blocks of spectrum reserved
    for new entrants. In the remaining countries, licenses were open to
    incumbents and new entrants on an equal basis regardless of size.

[^126]: The amount of first- and second-generation mobile spectrum
    assigned to individual incumbent European operators is provided in
    *ERO Information Document on GSM Frequency Utilisation within
    Europe*, European Radiocommunications Office, March 2000.
    Information about the amount of 3G spectrum assigned to these
    operators comes from the web sites of the relevant national
    regulatory authorities.

[^127]: Felix Gilman, *International Spectrum Auction Handbook: Policies
    for Licensing Radio Spectrum in Nations around the World*,
    Telecommunications Reports International, Inc., 2000, at 54, 91,
    132.

[^128]: *Id*. at 132.

[^129]: *Id*. at 57, 91.

[^130]: For example, in May 1999, the ACCC decided to block a bid by C&W
    Optus to take over AAPT Ltd, based in part on the ground that C&W
    Optus would thereby have gained access to spectrum that it had been
    prohibited from acquiring under spectrum aggregation limits that had
    applied to the earlier PCS and LMDS auctions. *Id*. at 57.

[^131]: The EU has drafted legislation that would permit Member States
    to make provision for licensees to trade rights to use radio
    spectrum, but only where such rights have been assigned by national
    regulatory authorities through an auction. Article 8.4, Proposal for
    a Directive of the European Parliament and of the Council on a
    common regulatory framework for electronic communications networks
    and services, Commission of the European Communities, July 12, 2000,
    at 20, *available at*
    http://europa.eu.int/ISPO/infosoc/telecompolicy/review99/Welcome.html.

[^132]: Similarly, commenters should address any possible interim
    modifications that would benefit the public interest in the event
    that we decide to sunset our spectrum aggregation limits in the
    future.

[^133]: *See supra* para. 22, 39.

[^134]: *See generally* discussion *supra* para. 14-15.

[^135]: 47 C.F.R. § 20.6(c).

[^136]: *Id*. § 20.6(b).

[^137]: *Id*.

[^138]: *Id*.

[^139]: *See* *CMRS Third Report and Order*, 9 FCC Rcd at 8112-14 ¶¶
    270-75.

[^140]: Section 20.6(c) only compares an SMR "service area" to a PCS
    "licensed service area"; because SMR is no longer licensed only on a
    station-defined basis, the rule may need to be modified to apply to
    SMR "*licensed* service areas" (which would include station-defined
    and geographic based authorizations).

[^141]: *See generally CMRS Spectrum Cap Report and Order*, 11 FCC Rcd
    at 7879-87 ¶¶ 117-32.

[^142]: *Id.*

[^143]: *See Secondary Markets NPRM* at ¶ 49.

[^144]: *See, e.g.,* *First Biennial Review Order*, 15 FCC Rcd at 9257 ¶
    85.

[^145]: For example, a 25 MHz cellular carrier could theoretically
    combine with a carrier holding 10 MHz of cellular spectrum on the
    other channel block, while the carrier holding the remaining 15 MHz
    of cellular spectrum in that market could pair with a 30 MHz PCS
    licensee without triggering the 45 MHz general CMRS spectrum cap.

[^146]: *See generally Cellular Disaggregation Order*.

[^147]: *See* 47 C.F.R. § 1.919.

[^148]: *See* *id*. § 20.6(e)(4)(A).

[^149]: *See* 5 U.S.C. § 603.

[^150]: *See id*. § 603(a).

[^151]: *See generally* 47 C.F.R. §§ 1.1202, 1.1203, 1.1206.

[^152]: *Id*. §§ 1.415, 1.419.

[^153]: *See* Electronic Filing of Documents in Rulemaking Proceedings,
    63 Fed. Reg. 24,121 (1998).

[^154]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. § 601 *et. seq*.,
    has been amended by the Contract With America Advancement Act of
    1996, Pub. L. No. 104-121, 110 Stat. 847 (1996) (CWAAA). Title II of
    the CWAAA is the Small Business Regulatory Enforcement Fairness Act
    of 1996 (SBREFA).

[^155]: *See* 5 U.S.C. § 603(a).

[^156]: *Id*.

[^157]: 47 U.S.C. § 161.

[^158]: *Id*. § 20.6.

[^159]: *Id*. § 22.942.

[^160]: 5 U.S.C. § 603(b)(3).

[^161]: *Id*. § 601(6).

[^162]: *Id*. § 601(3) (incorporating by reference the definition of
    "small business concern" in 15 U.S.C. § 632). Pursuant to the RFA,
    the statutory definition of a small business applies "unless an
    agency, after consultation with the Office of Advocacy of the Small
    Business Administration and after opportunity for public comment,
    establishes one or more definitions of such term which are
    appropriate to the activities of the agency and publishes such
    definition(s) in the Federal Register." *Id*.

[^163]: Small Business Act, 15 U.S.C. § 632 (1996).

[^164]: 13 C.F.R. § 121.201, SIC code 4812.

[^165]: *1992 Census, Series UC92-S-1*, at Table 5, SIC code 4812.

[^166]: *See* Amendment of Parts 20 and 24 of the Commission's Rules \--
    Broadband PCS Competitive Bidding and the Commercial Mobile Radio
    Service Spectrum Cap; Amendment of the Commission\'s Cellular/PCS
    Cross-Ownership Rule, WT Docket 96-59, GN Docket 90-314, *Report and
    Order*, 11 FCC Rcd 7824, 7850-52 ¶¶ 57-60 (1996) (*CMRS Spectrum Cap
    Report and Order*); *see also* 47 C.F.R. § 24.720(b).

[^167]: *See* *CMRS Spectrum Cap Report and Order,* 11 FCC Rcd at 7852 ¶
    60.

[^168]: *See*, *e.g*., Implementation of Section 309(j) of the
    Communications Act \-- Competitive Bidding, PP Docket No. 93-253,
    *Fifth Report and Order*, 9 FCC Rcd 5532, 5581-84 (1994).

[^169]: FCC News, *Broadband PCS, D, E and F Block Auction Closes*, No.
    71744 (released Jan. 14, 1997).

[^170]: *Id*. § 90.814(b)(1).

[^171]: 47 C.F.R. § 90.814(b)(1).

[^172]: See Separate Statement of Commissioner Harold Furchtgott-Roth,
    1998 Biennial Review, Spectrum Aggregation Limits for Wireless
    Carriers, Memorandum Opinion and Order on Reconsideration, WT Docket
    No. 98-205 (rel. Nov. 8, 2000); Separate Statement of Commissioner
    Harold Furchtgott-Roth in 1998 Biennial Review, Spectrum Aggregation
    Limits for Wireless Telecommunications Carriers, 15 FCC Rcd 9219
    (1999).