**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | *  | WT Docket No. 02-325         |
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| CenturyTel Wireless, Inc. and    | ** |                              |
| CenturyTel, Inc. )               |    |                              |
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| ) File No. 0000523796            | *) |                              |
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| Request for a Waiver of Cellular |    |                              |
| Cross- Interest Rule, Section    | *  |                              |
| 22.942 of the Commission's Rules | *) |                              |
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**MEMORANDUM OPINION AND ORDER**

**Adopted: January 31, 2003 Released: January 31, 2003**

By the Chief, Wireless Telecommunications Bureau:

# INTRODUCTION

1.  On October 4, 2002, CenturyTel Wireless, Inc. ("CenturyTel
    Wireless"), a wholly-owned subsidiary of ALLTEL Communications, Inc.
    ("ALLTEL"), and CenturyTel, Inc. (collectively, the "Petitioners")
    filed a petition ("Petition") seeking a waiver of section 22.942 of
    the Commission's rules ("Cellular Cross-Interest Rule") to allow
    CenturyTel Wireless to acquire a limited partnership interest in
    Lafayette MSA LP ("Lafayette") from CenturyTel, Inc.[^1] The
    Petitioners allege, *inter alia*, that waiver of the Cellular
    Cross-Interest Rule is appropriate, because the acquisition of the
    interest in Lafayette by CenturyTel Wireless would not lead to
    competitive harm.[^2] For the reasons discussed herein, we grant the
    Petition.

# BACKGROUND

2.  On March 28, 2002, CenturyTel, Inc. and ALLTEL filed applications to
    assign substantially all of CenturyTel, Inc.'s cellular interests to
    ALLTEL.[^3] This transaction, which was approved by the Commission
    on June 12, 2002,[^4] did not include CenturyTel, Inc.'s 49-percent
    non-controlling limited partnership interest ("Interest") in
    Lafayette, because ALLTEL's acquisition of the Interest in Lafayette
    is prohibited by the Cellular Cross-Interest Rule.[^5] The
    Petitioners elected to exempt the Lafayette Interest from the
    transaction, so that the closing of the transaction would not be
    delayed by the filing and Commission's consideration of a waiver
    request of the Cellular Cross-Interest Rule.[^6]

3.  The Cellular Cross-Interest Rule states that a party that has a
    controlling interest in "a licensee for one channel block in a
    \[cellular geographic service area ("CGSA")\] may have a direct or
    indirect ownership interest of 5 percent or less in the licensee . .
    . for the other channel block in an overlapping CGSA."[^7] ALLTEL is
    precluded from acquiring CenturyTel Inc.'s Interest in Lafayette
    without a waiver of the Cellular Cross-Interest Rule, because
    ALLTEL's wholly-owned subsidiary, Radiofone Inc. ("Radiofone"),
    holds a 100-percent interest in the A-side cellular license for a
    portion of the Louisiana-6 Rural Service Area ("RSA"), and Lafayette
    holds the B-block cellular licenses for an overlapping portion of
    the same RSA.[^8] The licensed geographic overlap area between
    Lafayette and Radiofone is limited to a geographically partitioned
    portion of the Louisiana-6 RSA, which includes Iberville Parish,
    Louisiana ("Overlap Area").[^9] The Overlap Area within Iberville
    Parish is adjacent to West Baton Rouge Parish, which is within the
    Baton Rouge Metropolitan Statistical Areas ("MSA").[^10] The Overlap
    Area covers approximately 396 square miles and has a population of
    fewer than 30,000 residents.[^11]

4.  ALLTEL provides wireline telephony service including local telephone
    service, long distance, internet access (DSL), and commercial mobile
    radio service ("CMRS") telephony services, including interconnected
    mobile voice and paging. ALLTEL offers interconnected mobile voice
    services in the southeast and portions of the midwest and
    southwest.[^12] As of September 30, 2002, ALLTEL served
    approximately 7.5 million mobile telephony customers.[^13] After the
    transaction, ALLTEL would continue to have a 100-percent indirect
    ownership interest in Radiofone, and will acquire the 49-percent
    limited partnership interest in the other cellular licensee,
    Lafayette. Lafayette is a limited partnership comprised of two
    partners. CenturyTel Inc. holds a 49-percent noncontrolling limited
    partnership interest in Lafayette, and Cingular Wireless, LLC, the
    general partner, holds the remaining 51-percent interest.[^14] As
    the general partner, Cingular has full control over Lafayette's
    day-to-day operation and management.[^15] Additionally, Cingular
    markets the facilities-based interconnected mobile voice service
    offered using the Lafayette spectrum under its own brandname.[^16]

5.  On October 17, 2002, the Wireless Telecommunications Bureau
    ("Bureau") issued a Public Notice to establish a pleading cycle to
    enable interested parties to comment on the Petition.[^17] In
    response to this Public Notice, three comments were filed supporting
    the waiver and one comment was filed requesting that we deny the
    Petition.[^18] The Petitioners filed an opposition to the filed
    comments, dated December 2, 2002,[^19] and no replies were filed in
    response to the Petitioners' opposition.

#  DISCUSSION

6.  As discussed below, we find that the waiver of the Cellular
    Cross-Interest Rule as requested in the Petition is in the public
    interest and does not pose an undue risk of harm to competition in
    the overlap portion of Iberville Parish, Louisiana.

## Standard for Waiver of the Cellular Cross-Interest Rule

7.  In the 2000 Biennial Review Spectrum Aggregation Limits
    proceeding,[^20] the Commission eliminated the Cellular
    Cross-Interest Rule in MSAs.[^21] The Commission concluded that
    cellular carriers no longer have significant first-mover advantages
    or possess market power in MSAs,[^22] and that the presence of
    numerous competitive choices for consumers in urban markets made the
    Cellular Cross-Interest Rule unnecessary to protect competition in
    more urban areas.[^23] The Commission also found that the services
    offered by cellular and broadband PCS providers in MSAs are
    indistinguishable to consumers in those markets.[^24] Ultimately,
    the Commission held that there was no reason to view the combination
    of cellular licenses in MSAs less favorably than other combinations
    of CMRS licensees.[^25]

8.  The Commission, however, retained the Cellular Cross-Interest Rule
    in RSAs, because it concluded that cellular incumbents continued to
    dominate the rural marketplace.[^26] Thus, a combination of
    interests in cellular licensees would be more likely to result in a
    significant reduction in competition.[^27] The Commission stated,
    however, that it would "entertain and be inclined to grant waivers
    of the \[Cellular Cross-Interest Rule\] for those RSAs that exhibit
    market conditions under which cellular cross-interests may be
    permissible without significant likelihood of substantial
    competitive harm."[^28]

## Competitive Analysis

9.  In determining whether the waiver of the Cellular Cross-Interest
    Rule for the applicable portion of Iberville Parish, Louisiana would
    create a "significant likelihood of substantial competitive
    harm,"[^29] and therefore, whether it is in the public
    interest,[^30] we must consider the competitive effects of the
    transaction.

### Geographic and Product Market Definitions

10. The relevant product market for this transaction is interconnected
    mobile voice. We define the interconnected mobile voice product
    market as consisting of all commercially available two-way, mobile
    voice services, providing access to the public switched telephone
    network via terrestrial systems.[^31] These services are currently
    provided by cellular, broadband personal communications services
    ("PCS"), and Specialized Mobile Radio licensees.[^32]

11. The Petitioners and a commenter argue that the appropriate
    geographic market is broader than the Overlap Area, and therefore
    that the competitive implications of the waiver request should be
    analyzed using the Baton Rouge Basic Trading Area ("BTA").[^33] No
    party argues for a narrower geographic market. We agree with all
    those who addressed the question of geographic market that the
    relevant market is broader than the Overlap Area. Rather than
    employing the Baton Rouge BTA as the relevant local market, however,
    in this case we use a Broader Baton Rouge Area geographic market
    that encompasses all the parishes adjacent to the Iberville Parish,
    including the City of Baton Rouge, that have similar market
    conditions.[^34] Specifically, throughout this area the same six
    interconnected mobile voice operators provide service: ALLTEL,
    Cingular, AWS, Nextel Communications, Sprint PCS, and Verizon
    Wireless.[^35] Additionally, it appears no operator engages in
    geographic differential pricing within this area. Consumers face the
    same set of price/service options regardless of where they live in
    this region.[^36]

12. While we use Broader Baton Rouge Area geographic market in the
    analysis below, we note that we would not have reached a different
    result if the Baton Rouge BTA---or any other region of similar or
    larger size---had been found to be the relevant geographic market.

### Nature and Implications of Transaction

13. Under the terms of the Limited Partnership Agreement,[^37] the
    general partner, Cingular, retains operational control of Lafayette,
    which will continue to offer service under the Cingular brand
    name.[^38] ALLTEL will merely be replacing CenturyTel, Inc. as the
    minority partner without control. Therefore, post-transaction there
    will not be a change in the control of the Lafayette partnership.
    Nor will the transaction result in the loss of an independent
    service provider to customers in this area. The subscriber-based
    market shares of firms that offers service in the Broader Baton
    Rouge Area (or in the Overlap Area itself) will not change. And
    since market shares remain unchanged post-transaction,
    concentration---as measured, for example, by the
    Herfindahl-Hirschman Index ("HHI")---will not change.[^39] In sum,
    this transaction is not in the nature of a horizontal consolidation.
    The number of competitors is not reduced, and concentration not
    increased, in any market.[^40]

14. The one commenter opposing this waiver request argues that ALLTEL
    should not be able to control both cellular licenses in
    Louisiana-6.[^41] As the discussion above makes clear, however,
    granting the waiver would not have this result.

15. The possible competitive concerns with this transaction, rather, are
    that transferring the 49-percent non-controlling interest to the
    other cellular licensee in this area could harm competition by
    either (1) giving the Lafayette partners, Cingular and ALLTEL, a
    greater incentive to behave in a collusive manner, or (2) giving
    ALLTEL a unilateral incentive to compete less aggressively against
    Cingular because it earns a share of Cingular's profits through its
    ownership in Lafayette.

16. We conclude that this transaction is unlikely to have either of
    these effects. The size of the Overlap Area is so small relative to
    the Broader Baton Rouge Area that it is implausible that either
    ALLTEL's or Cingular's incentives will be altered in a material way.
    The Overlap Area covers approximately 396 square miles and has a
    population of roughly 30,000 residents.[^42] This is about 14
    percent of the square miles of the Broader Baton Rouge Area, and
    less than 5 percent of the approximately 680,800 residents.[^43] The
    Lafayette partnership operates a total of six towers, only three of
    which are in the Overlap Area.[^44]

17. Consistent with this analysis, the petitioners, and a commenter,
    argue that the Overlap Area is small relative to the Baton Rouge
    market and that it would be unlikely that ALLTEL would be able to
    charge discriminatory prices in the Overlap Area.[^45] Additionally,
    one commenter supports this assertion by describing the Overlap Area
    as being small, very rural, and mostly swamp.[^46]

18. To further support their argument that the Overlap Area is
    competitive, the Petitioners, and one commenter, present pricing
    information for Iberville Parish.[^47] The Petitioners argue that
    there is pricing parity among the six competitors and that the two
    cellular carriers, ALLTEL and Cingular, charge less than the average
    per-anytime-minute rate of the other carriers in the market.[^48]
    The Petitioners, and a Commenter, also argue that carriers set rates
    based on a much broader geographic market.[^49] We agree with the
    Commenters that there is little price differentiation between
    providers and that interconnected mobile telephony rates are set
    over a much broader area than Iberville Parish or the Broader Baton
    Rouge Area.

    Finally, even if this transaction creates an incentive (1) for the
    two cellular licensees to behave in an anticompetitive manner,
    attempting collusive or parallel behavior, or (2) for ALLTEL to
    unilaterally compete less aggressively, it is not clear that harm to
    consumers would result. Any attempt to increase prices or reduce
    service quantity or quality could likely be rendered ineffective by
    competition from the other four providers in the Broader Baton Rouge
    Area.

## Conclusion

19. We agree with the Petitioners and Commenters that the market is in
    general competitive with six providers offering service at similar
    prices. We find that, as the Overlap Area is extremely small in
    terms of area and population to the Broader Baton Rouge Area, it is
    unlikely that Cingular and ALLTEL would have the ability or
    incentive successfully to charge discriminatory prices in either the
    Overlap Area or in the Broader Baton Rouge Area. Thus, we find that
    the proposed transaction does not involve a substantial likelihood
    of significant competitive harm, and that waiver of the rule is
    appropriate in these circumstances.

# ORDERING CLAUSES

20. Accordingly, IT IS ORDERED that pursuant to sections 0.331 and 1.925
    of the Commission's rules, 47 C.F.R. §§ 0.331, 1.925, the request
    for waiver of section 22.942 of the Commission's rules, 47 C.F.R. §
    22.942, filed by CenturyTel Wireless, Inc. and CenturyTel, Inc. is
    GRANTED.

    FEDERAL COMMUNICATIONS COMMISSION

    Thomas J. Sugrue

    Chief, Wireless Telecommunications Bureau

[^1]: 47 C.F.R. § 22.942.

[^2]: *See* CenturyTel Wireless Inc. and CenturyTel Inc. Petition for
    Waiver of the Cellular Cross-Interest Rule, WT Docket No. 325, at 2,
    6 (filed Oct. 4, 2002) ("Petition"). The Petition is available on
    the Commission's Electronic Comment Filing System ("ECFS").

[^3]: *See* ALLTEL Communications, Inc. and CenturyTel, Inc. Seek FCC
    Consent to Transfer Control of Licenses, WT Docket No. 02-85, DA
    02-932 (rel. Apr. 23, 2002).

[^4]: *See* Wireless Telecommunications Bureau Grants Consent For the
    Transfer of Control of Licenses from CenturyTel, Inc. to ALLTEL
    Communications, Inc., WT Docket No. 02-85, DA 02-1366 (rel. June 12,
    2002). The transaction was consummated by the Petitioners on August
    1, 2002. *See, e.g.,* Application No. 0001012659, filed by ALLTEL
    Communications, Inc. (Aug. 29, 2002).

[^5]: *See* Petition at 3-4.

[^6]: *See id.*

[^7]: 47 C.F.R. § 22.942.

[^8]: *See* Petition at 2.

[^9]: *See id.* at 11. This portion includes the city of Plaquemine, the
    county seat of Iberville Parish. *See id.*

[^10]: *See id.*at 3.

[^11]: *See id.*

[^12]: *See* http://www.alltel.com/news_information/maps/maps.html (last
    visited Dec. 26, 2002).

[^13]: *See* ALLTEL Corporation, Form 10Q, at 18 (filed Nov. 13, 2002)
    *available at* http://www.sec.gov/edgar/searchedgar/webusers.htm
    (filing with the United States Securities and Exchange Commission
    for the quarterly period ending September 30, 2002).

[^14]: *See* Petition at 7.

[^15]: *See* *id.* at 6, 7.

[^16]: *See* http://www.cingular.com (reporting coverage by Cingular for
    zip codes associated with the Overlap Area in Iberville Parish).

[^17]: *See* Comment Sought on CenturyTel Wireless, Inc. and CenturyTel
    Inc., Petition for Waiver of Cellular Cross Interest Rule*, Public
    Notice*, DA 02-2723 (rel. Oct. 17, 2002).

[^18]: CenturyTel Wireless, Inc. and CenturyTel, Inc. Petition for
    Waiver of the Cellular Cross-Ownership Rule, *Comments*, filed by
    Dobson Communications Corporation, Western Wireless Corporation and
    Rural Cellular Corporation (Nov. 18, 2002) ("Dobson, Western
    Wireless, and RCC Comments") (supporting the waiver of the Cellular
    Cross-Interest Rule); CenturyTel Wireless, Inc. Petition for Partial
    Waiver of the Cellular Cross-Interest Rule, *Comments of AT&T
    Wireless Services, Inc. in Support of CenturyTel Wireless, Inc. and
    CenturyTel, Inc. Petition for Waiver of Cellular Cross-Interest
    Rule* (Nov. 18, 2002) ("AWS Comments") (same); Daniel R. Newcomb,
    *Comment* (Oct. 22, 2002) ("Newcomb Comment") (same); Daniel Welter,
    *Comment* (Oct. 28, 2002) ("Welter Comment") (opposing waiver of the
    Cellular Cross-Interest Rule). These Comments are available on ECFS.

[^19]: CenturyTel Wireless, Inc. Petition for Partial Waiver of the
    Cellular Cross-Interest Rule, *Opposition and Further Comments of
    CenturyTel Wireless and CenturyTel, Inc.*, (Dec. 2, 2002).

[^20]: 2000 Biennial Regulatory Review Spectrum Aggregation Limits For
    Commercial Mobile Radio Services, *Report and Order*, WT Docket No.
    01-14, 16 FCC Rcd. 22, 668 (2001).

[^21]: *See id.* at 22,669, 22,671, ¶¶ 2, 7.

[^22]: *See id.* at 22,669, 22,671, 22,707, ¶¶ 2, 7, 86.

[^23]: *See id.* at 22,707, ¶ 84. At that time, "\[i\]n MSAs, eighty-six
    percent of counties have four or more facilities-based CMRS
    providers that are offering service in some part of the county.
    Forty of the fifty most populous MSAs have six nationwide carriers,
    counting Nextel, with the remaining ten MSAs having five nationwide
    carriers." *Id.* at 22,707-08, ¶ 86.

[^24]: *See id.* at 22,707-08, ¶ 86.

[^25]: *See id.* at 22,708, ¶ 87.

[^26]: *See id.* at 22,669, 22,707-08, ¶¶ 2, 88, 89.

[^27]: *See id.* at 22,671, 22,708, ¶ 7, 89. In seventy-six percent of
    RSA counties, no more than one broadband PCS provider is competing
    with the cellular incumbents in any part of the county. Fifty-six
    percent of RSA counties have two or fewer facilities-based providers
    of mobile telephony offering service, presumably in most instances
    the two cellular licensees. *See id.* at 22,708, ¶ 89.

[^28]: *Id.* at 22,669, ¶ 2. *See also id*. at 22,671, 22,708, 22,709,
    ¶¶ 7, 88, 90.

[^29]: *Id.* at 22,669, ¶ 2.

[^30]: *See* 47 C.F.R. § 1.925.

[^31]: *See* Applications of Chadmoore Wireless Groups, Inc. and Various
    Subsidiaries of Nextel Communications, Inc. WT Docket No. 01-193,
    *Memorandum Opinion and Order*, 16 FCC Rcd. 21,105, at 21,110, ¶ 14
    ("Chadmoore Order"); Implementation of Section 6002(b) of the
    Omnibus Budget Reconciliation Act of 1993, *Seventh Report*, FCC
    02-179, at 9 (rel. July 3, 2002) ("*Seventh Annual CMRS Competition
    Report*").

[^32]: *See Seventh Annual CMRS Competition Report* at 9; Chadmoore
    Order, 16 FCC Rcd. at 21,110, ¶ 14.

[^33]: *See* Petition at 12-14; AWS Comments at 3-5. BTAs are Material
    Copyright © 1992 Rand McNally and Company. Rights granted pursuant
    to a license from Rand McNally and Company through an arrangement
    with the Commission. BTAs are geographic areas drawn based on the
    counties in which residents of a BTA make the bulk of their shopping
    goods purchases.

[^34]: The Broader Baton Rouge Area is a collection of parishes adjacent
    to Iberville Parish with the same carriers offering facilities-based
    interconnected mobile telephony services in at least part of the
    county. The Broader Baton Rouge Area includes Ascension Parish,
    Assumption Parish, East Baton Rouge Parish, Iberville Parish,
    Livingston Parish, St. James Parish, and West Baton Rouge Parish.

[^35]: *See* Petition at 11; *see also* Dobson, Western Wireless, and
    RCC Comments at 3-4; AWS Comments at 3.

[^36]: *See* Petition at 12-14; *see also* AWS Comments at 3-4.

[^37]: Agreement Establishing Lafayette MSA Limited Partnership among
    Lafayette CGSA, Inc. and Century Telephone Enterprises, Inc. (Mar.
    8, 1990) ("Limited Partnership Agreement"). The Limited Partnership
    Agreement is attached to the Petition as an exhibit.

[^38]: *See id.* §§ 4.1, 7.2; *see also* Petition at 7-8. The Limited
    Partnership Agreement does provide the limited partner with passive
    investor protections. *See* Limited Partnership Agreement, at § 4.2.
    These provisions, however, would not confer control of Lafayette to
    ALLTEL.

[^39]: The HHI is $\sum_{i = 1}^{n}x_{i}^{2}$ where $x_{i}$ is usually
    the output-based market share of carrier *i*, and *n* is the number
    of carriers in the market. The HHI can range from nearly zero in the
    case of an atomistic market of 10,000 in the case of pure monopoly.
    Because the HHI is based on the squares of the market shares of the
    carriers, it gives proportionately greater weight to carriers with
    large market shares. A change in concentration resulting from a
    transaction is measured by the difference between the post- and
    pre-transaction HHIs. Department of Justice and Federal Trade
    Commission, 1992 Horizontal Merger Guidelines, 57 Fed. Reg. 41552,
    41557-58.

[^40]: Further, after this transaction, ALLTEL will be attributed with
    each of the 25 MHZ cellular blocks, for a total of 50 MHz in the
    Overlap Area. This total falls below the previous spectrum cap
    threshold of 55 MHz. *See* 1998 Biennial Regulatory Review Spectrum
    Aggregation Limits for Wireless Telecommunications Carriers, *Report
    and Order*, WT Docket No. 98-205, 15 FCC Rcd. 9219, 9222, 9223,
    9249, ¶¶ 2, 6, 66 (1999) (raising the Spectrum Cap limit to 55 MHz
    in RSAs).

[^41]: Welter Comment.

[^42]: *See* Petition at 3.

[^43]: For population and area statistics for the Overlap Area, see
    Petition at 3, 10. For population and area statistics for the
    Broader Baton Rouge area, see U.S. Census Bureau, Census 2000,
    Population, Housing Units, Area, and Density 2000, *available at*
    www.census.gov/census2000/states/la.html.

[^44]: *See* Petition at LA-06 Overlap Area Map.

[^45]: *See* Petition at 10-14; *see also* AWS at 3.

[^46]: *See* Newcomb Comment.

[^47]: *See* Petition at 11; s*ee* *also* AWS Comments at 3-4.

[^48]: *See* Petition at 11.

[^49]: *See* Petition at 12-14; s*ee* *also* AWS Comments at 3-4.