**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

In the Matter of )

)

Requests for Waiver of Section 101.1003(a) )

of the Commission's Rules Establishing )

Eligibility Restrictions on Incumbent )

LECs and Cable Operators in the )

Local Multipoint Distribution Service )

**MEMORANDUM OPINION AND ORDER**

**Adopted:** August 17, 1999 **Released:** August 17, 1999

By the Chief, Wireless Telecommunications Bureau:

1\. The Wireless Telecommunications Bureau ("Bureau") has before it five
petitions for reconsideration of an *Order* denying ten requests for
waiver of Section 101.1003(a) of the Commission's Rules.[^1] For the
reasons discussed below, we deny these petitions for reconsideration.

2\. [Background]{.underline}. Section 101.1003(a) of the Commission's
Rules imposes a temporary ownership restriction on incumbent local
exchange carriers (LECs) and incumbent cable operators that win certain
in-region Local Multipoint Distribution Service (LMDS) licenses in
Commission auctions.[^2] The restriction applies to any such entity that
wins an A block license in a Basic Trading Area (BTA) with a population
that significantly overlaps the incumbent's service area.[^3] Within 90
days of the final grant of the license, which is contingent upon
compliance with the rule,[^4] the incumbent must partition and divest
the overlapping portion of either its incumbent service area or its LMDS
service area.[^5] Nine rural LECs that won A block licenses applied for
waivers of Section 101.1003(a).[^6] The Bureau sought comment on these
waiver requests,[^7] and, after carefully considering the record, the
Auctions and Industry Analysis Division and Public Safety and Private
Wireless Division ("Divisions") denied the waiver requests and granted
the applicants' licenses subject to their compliance with the rule.[^8]

3\. [Discussion]{.underline}. Waiver requests must demonstrate either
that "the underlying purpose of the rule will not be served or will be
frustrated by its application in a particular case, and that grant of
the waiver is otherwise in the public interest," or that "the unique
facts and circumstances of a particular case render application of the
rule inequitable, unduly burdensome, or otherwise contrary to the public
interest and an applicant has shown the lack of a reasonable
alternative."[^9] The Divisions found that the waiver applicants failed
to meet either prong of the rule.[^10] Specifically, they found that: 1)
all of the waiver requests were predicated on facts or arguments related
to the applicants' status as rural LECs;[^11] 2) the Commission had
already rejected those arguments during the LMDS rulemaking and affirmed
the denial on reconsideration; and 3) the waiver applicants had not
supplied any new facts or arguments in support of their waiver
requests.[^12] Petitioners now renew many of the same or make
substantially similar arguments in their petitions for
reconsideration.[^13] Petitioners have not, however, offered new
information to persuade us that the underlying decision regarding these
issues was erroneous. We therefore address only those arguments raised
in the petitions for reconsideration that the Divisions have not already
considered and rejected.

4\. Petitioners[^14] argue that the Divisions failed to address the
specific facts and circumstances that supported their waiver requests
under the "hard look" standard set forth in *WAIT Radio v. FCC*.[^15] We
disagree. As the court stated in *WAIT* *Radio*, "the very essence of
waiver is the assumed validity of the general rule."[^16] Therefore, "an
applicant for waiver faces a high hurdle even at the starting
gate."[^17] In this case, both the Commission and the Court of Appeals
for the D.C. Circuit upheld the restriction as applied to all rural
LECs.[^18] In basing their waiver requests exclusively on their rural
LEC status and the rural nature of their BTAs, therefore, Petitioners
failed to demonstrate either unique circumstances making application of
the rule inequitable, unduly burdensome, or otherwise contrary to the
public interest; or why application of the rule would frustrate its
underlying purpose.[^19] Moreover, although it is not unusual for the
Divisions to address multiple waiver requests in a single order,[^20] as
Craw-Kan, Northern and CTTI suggest, we note that it was particularly
appropriate here given the degree of similarity among the waiver
requests.[^21] We nevertheless find that the Divisions carefully
considered each individual application and all comments filed in the
record.[^22]

5\. Petitioners also argue that because the population overlaps in their
respective BTAs are "minimal," a waiver will not raise the
anti-competitive concerns that the eligibility restriction was designed
to address, and that in any case, as rural LECs, they lack the ability
and incentive to engage in anti-competitive behavior.[^23] We disagree.
With regard to the first issue, these petitioners made similar arguments
in their underlying waiver requests, which were not addressed because
there is no *de minimis* exception to the rule, and, as stated above,
they had not otherwise made the required showing under either prong of
Section 101.23.[^24] With regard to the second argument, after extensive
analysis, the Commission concluded that "*all* incumbent LECs and cable
operators would have incentives to attempt to foreclose competitive
entry in their respective markets."[^25] In criticizing this conclusion,
Petitioners challenge the applicability of the rule to rural LECs,[^26]
but fail to demonstrate either unique facts about their individual
circumstances (beyond claiming that their BTAs are among the most
sparsely-populated), or why the underlying purpose of the rule will not
be served in their cases. We therefore reject these assertions.

6\. Craw-Kan, CTTI, and Northern claim that their population overlaps
are particularly negligible because the Commission originally proposed a
20 percent benchmark, and adopted a 10 percent benchmark "largely 'for
the sake of overall simplicity, ease of compliance, and administrative
efficiency to conform with the overlap rule applicable to the CMRS
spectrum cap.'"[^27] This was an inappropriate objective, they claim,
since LMDS is a fixed service, and "an overlap in a fixed service
arguably has less impact than the same amount of overlap of mobile
services."[^28] We find these arguments unpersuasive. As an initial
matter, although the Commission originally proposed the use of a 20
percent benchmark, its intent was to elicit comment on the use of the
benchmark contained in the former broadband PCS-cellular cross-ownership
rule (now contained in the CMRS spectrum cap rule), which is 10
percent.[^29] Moreover, the Commission acknowledged this inadvertent
mischaracterization of the PCS rule in the *LMDS Second Report and
Order*.[^30] In addition, the Commission sought comment on the use of
the broadband PCS-cellular rule because it found that LMDS and PCS
"involved similar competitive concerns."[^31] More important, however,
Petitioners' argument regarding mobile and fixed services is flawed
because it challenges the validity of the eligibility restriction, but
provides no basis for their individual waiver requests. These concerns
would have been more appropriately raised during the LMDS rulemaking,
when the Commission twice sought comment on applying an eligibility
restriction to incumbent LECs and cable operators.[^32]

7\. Finally, Craw-Kan, CTTI, and Northern also claim that the 10 percent
overlap benchmark inequitably penalizes small incumbents, such as
themselves, that acquired A block licenses in what they characterize as
"small" BTAs.[^33] In such circumstances, they argue, there is an
increased likelihood that small incumbents will exceed the 10 percent
overlap benchmark, an inequality that is "exactly what waivers are
designed to rectify."[^34] This contention is another way of arguing
that rural LECs should be excluded from the eligibility restriction. The
Commission has twice rejected this argument, and it is therefore an
insufficient basis for a waiver absent a demonstration that the
Commission's concerns regarding anti-competitive behavior are not
present in these particular cases, or that other unique facts or
circumstances exist. Petitioners have not provided this information, and
we therefore reject this argument.

**ORDERING CLAUSES**

8\. Accordingly, IT IS ORDERED that the petitions for reconsideration of
the *LMDS Waiver Order* filed by Central Texas Telephone Investments,
Inc., Craw-Kan Telephone Cooperative, Inc., GW Wireless, Inc., Northern
Communications, Inc., and Venture Wireless, Inc., ARE HEREBY DENIED*.*

9\. This action is taken pursuant to delegated authority as set forth in
47 U.S.C.

§ 155(c) and 47 C.F.R. §§ 0.331 and 1.106.

FEDERAL COMMUNICATIONS COMMISSION

Thomas J. Sugrue

Chief, Wireless Telecommunications Bureau

######### APPENDIX

[Parties Filing Petitions for Reconsideration]{.underline}

Central Texas Telephone Investments, Inc. ("CTTI")

Craw-Kan Telephone Cooperative, Inc. ("Craw-Kan")

GW Wireless, Inc. ("GW Wireless")

Northern Communications, Inc. ("Northern")

Venture Wireless, Inc. ("Venture Wireless")

[Parties Filing Oppositions to Petitions for
Reconsideration]{.underline}

Brownwood Television Cable Service, Inc. ("Brownwood")

[Parties Filing Replies to Oppositions to Petitions for
Reconsideration]{.underline}

Central Texas Telephone Investments, Inc. ("CTTI")

[^1]: ^?^ *See* Requests for Waiver of the Commission's Rules
    Establishing Eligibility Restrictions on Incumbent LECs and Cable
    Operators in the Local Multipoint Distribution Service, *Order*, 13
    FCC Rcd 18694 (WTB 1998) ("*LMDS Waiver Order*"). The following
    parties (collectively, "Petitioners") filed petitions for
    reconsideration of the *LMDS Waiver Order*: Central Texas Telephone
    Investments, Inc. ("CTTI"); Craw-Kan Telephone Cooperative, Inc.
    ("Craw-Kan"); GW Wireless, Inc. ("GW Wireless"); Northern
    Communications, Inc. ("Northern"); and Venture Wireless, Inc.
    ("Venture Wireless"). In addition, Brownwood Television Cable
    Service, Inc. ("Brownwood") filed an Opposition to CTTI's Petition
    for Reconsideration, arguing that CTTI's Petition is procedurally
    defective and substantively deficient, and CTTI filed a Reply to
    Brownwood's Opposition disputing these contentions.

[^2]: ^?^ *See* 47 C.F.R. § 101.1003(a).

[^3]: ^?^ A "significant overlap" occurs when 10 percent or more of the
    LMDS BTA population, as determined by 1990 census figures, is
    located within the incumbent\'s authorized or franchised LEC or
    cable television service area. *See* 47 C.F.R. § 101.1003(d).

[^4]: ^?^ *See* 47 C.F.R. § 101.1003(f)(3)-(6).

[^5]: ^?^ If an incumbent is unable to find a buyer in that time period,
    divestiture may be made to an interim trustee provided the incumbent
    has no interest in or control of the trustee, and the trustee may
    dispose of the divested portion of the license as it sees fit. *See*
    47 C.F.R. § 101.1003(f)(1).

[^6]: ^?^ *See* Appendix A of the *LMDS Waiver Order*, 13 FCC Rcd at
    18708.

[^7]: ^?^ *See* "Wireless Telecommunications Bureau Seeks Comment on
    Requests for Waiver of Incumbent LEC/Cable Eligibility
    Restrictions," *Public Notice*, 13 FCC Rcd 10944 (WTB 1998).

[^8]: ^?^ As of December 23, 1998, all Petitioners had filed
    partitioning or divestiture agreements with the Commission, as
    required by Section 101.1003(f)(4) of the Commission's Rules.

[^9]: ^?^ 47 C.F.R. § 101.23. *See also* Virginia Tech Foundation, Inc.,
    Petition for Reconsideration of Request for Waiver of Section
    101.1112(g)--Auction No. 17, Local Multipoint Distribution Service,
    *Order*, 13 FCC Rcd 4535, 4536 (WTB 1998). We note that as of
    February 12, 1999, Section 1.925 of the Commission's Rules replaced
    Section 101.23. *See* *In re* Biennial Regulatory Review--Amendment
    of Parts 0, 1, 13, 22, 24, 26, 27, 80, 87, 90, 95, 97, and 101 of
    the Commission's Rules to Facilitate the Development and Use of the
    Universal Licensing System in the Wireless Telecommunications
    Services, *Report and Order*, 13 FCC Rcd 21027 (1998).

[^10]: ^?^ Contrary to Venture's and GW Wireless's assertions that the
    Divisions denied their waiver requests on grounds that they had not
    met the requirements of both subsections (a) and (b) of Section
    101.23, the Divisions stated in the *LMDS Waiver Order* that waiver
    applicants must meet *either* prong, and that none of the waiver
    applicants had done so. *See LMDS Waiver Order*, 13 FCC Rcd at
    18699, ¶ 7.

[^11]: ^?^ For example, several waiver applicants claimed that any
    restrictions on their ability to utilize "alternative technologies"
    such as LMDS to deliver services to their members would undermine
    the policy goals of the rule, and that application of the rule to
    rural LECs conflicts with the Commission's statutory mandate to
    promote the delivery of advanced services to rural America. *See
    LMDS Waiver Order*, 13 FCC Rcd at 18700-01, ¶¶ 9-10. Others argued
    that because they are subscriber-owned cooperatives, it would be
    difficult to choose a portion of the BTA to partition, *see id.* at
    18702, ¶ 11; that the population of the partitioned portion would be
    unfairly deprived of LMDS service since no other entities would be
    interested in providing service to these areas, *see* *id.* at
    18703, ¶ 13; and that only rural LECs, and especially member-owned
    cooperatives, have the incentive to provide LMDS service to rural
    America, *see id.* at 18700, ¶ 9.

[^12]: ^?^ *See, e.g., LMDS Waiver Order*, 13 FCC Rcd at 18701, ¶ 10.
    *See also* 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, *Third Order on Reconsideration*, 13 FCC Rcd
    4856, 4897, ¶ 92, 4900, ¶¶ 99-100 (1998) (*"LMDS Third Order on
    Reconsideration"*) (rejecting argument that unless rural LECs are
    exempt from the restriction, the rural areas they serve will not
    receive LMDS services); *id.* at 4894-98, ¶¶ 85-94 (rejecting
    argument that the Commission failed to consider its obligations
    under Section 309(j) of the Communications Act in deciding to
    subject rural LECs to the eligibility restriction); *id.* at
    4903-04, ¶¶ 108-110 (rejecting argument that the Commission failed
    to balance the goals of the Telecommunications Act of 1996 with
    other statutory goals, such as universal service); *id.* at 4897, ¶
    93 (rejecting assertion that no competitors would be interested in
    providing LMDS to rural areas). With regard to the last issue, we
    also note that there were no unsold licenses in the most recent LMDS
    auction, indicating a strong interest in the provision of LMDS
    service. *See* "Local Multipoint Distribution Service Auction
    Closes," *Public Notice*, DA 99-927 (released May 14, 1999).

[^13]: ^?^ For example, Petitioners argue that divestiture will
    undermine the purpose of the rule by delaying service to the
    divested areas, which, they argue, are not attractive to other LMDS
    providers, *see, e.g.,* Craw-Kan, CTTI, and Northern Petitions at
    7-9 and GW Wireless Petition at 5; and that denial of their waiver
    requests would be contrary to various provisions of the
    Telecommunications Act of 1996, as codified in sections 309(j)(3)
    and 706 of the Communications Act, *see, e.g.,* Craw-Kan, CTTI and
    Northern Petitions at 17-19 and GW Wireless Petition at 11-13.
    Craw-Kan, CTTI, and Northern also claim that partitioning is not a
    viable alternative for them because it would require that some
    cooperative members receive LMDS service while others do not,
    resulting in disparate treatment of "similarly-situated
    individuals." *See* Craw-Kan and Northern Petitions at 14-15 and
    CTTI Petition at 15-16. In addition, all petitioners assert that
    partitioning is not a reasonable alternative because the cost to
    operate a stand-alone LMDS system serving only the partitioned areas
    (*e.g.*, portions of their LEC service areas) would be prohibitive.
    *See, e.g.,* GW Wireless Petition at 8-9; Craw-Kan and Northern
    Petitions at 6-10; and CTTI Petition at 6-11.

[^14]: ^?^ *See, e.g.*, Craw-Kan, CTTI, and Northern Petitions at 5; GW
    Wireless Petition at 5, 11.

[^15]: ^?^ 418 F.2d 1153 (D.C. Cir. 1969) ("*WAIT Radio*"). *See also*
    BellSouth Corp. and BellSouth Wireless, Inc. v. FCC, 162 F.3d 1215
    (D.C. Cir. 1999) ("*BellSouth*") (upholding the Commission's denial
    of a waiver request).

[^16]: ^?^ 418 F.2d at 1157.

[^17]: ^?^ *Id.* at 1158.

[^18]: ^?^ The Commission specifically concluded that "\[t\]here was no
    basis to find that rural LECs would not have the same opportunities
    and incentives for anti-competitive use of LMDS licenses as other
    incumbent LECs." *See LMDS Third Order on Reconsideration*, 13 FCC
    Rcd at 4897, ¶ 93. *See also* Melcher v. FCC, 134 F.3d 1143 (D.C.
    Cir. 1998).

[^19]: ^?^ For example, GW Wireless claims that it provided facts about
    its remote service area and indicated that the overlap area
    comprised only the outlying rural portions of its BTA. *See* GW
    Wireless Petition at 5. These facts, however, do not distinguish it
    from other LMDS licensees, several of which are rural LECs serving
    low-density areas that are outside the largest city or population
    center in their BTAs. As the Divisions noted in the *LMDS Waiver
    Order*, the Commission determined that such entities should not be
    excluded from the rule.

[^20]: ^?^ *See, e.g.,* Requests for Waiver of Section 24.711(b)(3) of
    the Commission\'s Rules Establishing the Interest Rate on
    Installment Payments for C Block PCS Licensees, *Order*, 13 FCC Rcd
    10230 (WTB 1998) (denying 17 waiver requests); Requests for Waivers
    in the First Auction of 594 Interactive Video and Data Service
    Licenses, *Order*, 9 FCC Rcd 6384 (WTB 1994) (denying 13 waiver
    requests).

[^21]: ^?^ Although the arguments raised in the waiver applications were
    very similar, the degree of overlap varied widely among the subject
    BTAs. As we discuss herein, however, there is no *de minimis*
    exception to the rule. Thus, while the existence of overlap is
    significant, the degree of overlap is not. *See LMDS Waiver Order*,
    13 FCC Rcd at 18700, ¶ 8, n. 44. *See also* *BellSouth*, 162 F.3d at
    1224 (upholding the Commission's denial of request for *de minimis*
    waiver of the CMRS spectrum cap).

[^22]: ^?^ *See supra* note 7.

[^23]: ^?^ *See, e.g.*, Craw-Kan and Northern Petitions at 19; CTTI
    Petition at 20; GW Wireless Petition at 11. In addition, in an
    Erratum to its Petition, Venture Wireless states that it had
    previously miscalculated the population overlap in its Aberdeen, SD
    and Huron, SD BTAs, and that the correct percentages respectively
    are 12.91% and 14.23%, as opposed to 32% and 18%. This correction,
    Venture Wireless argues, strengthens its argument that "it has only
    *de minimis* overlap. . . and. . . lacks the ability to suppress the
    provision of LMDS service in an anti-competitive fashion." Venture
    Wireless Erratum at 2-3.

[^24]: ^?^ *See* *LMDS Third Order on Reconsideration*, 13 FCC Rcd at
    4900, ¶¶ 98-100 ("In adopting the 10 percent threshold, the
    Commission concluded that an overlap of less than 10 percent of the
    population is sufficiently small that the potential for exercise of
    undue market power by the incumbent LEC or incumbent cable company
    is slight. . . . \[E\]ven a small rural LEC may not hold an LMDS
    license if 10 percent or more of the population of the LMDS license
    area is within the rural LEC's telephone service area.")

[^25]: ^?^ *See id.* at 4897, ¶ 92 (emphasis added). In addition, the
    Commission concluded that "there was no basis to find that rural
    LECs would not have the same opportunities and incentives for
    anti-competitive use of LMDS licenses as other incumbent LECs and,
    accordingly. . . determined to treat them no differently than other
    monopoly providers to achieve the goals. . . set forth in Section
    309(j)." *Id*. at 4897, ¶ 93. The Commission also concluded that
    rural LECs, many of which are subscriber-owned cooperatives, did not
    make the case that they are the only entities able and/or willing to
    provide LMDS service in their service areas. *See* *LMDS Waiver
    Order*, 13 FCC Rcd at 18701, *¶* 10. *See also* 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, *Second
    Report and Order, Order on Reconsideration, and Fifth Notice of
    Proposed Rulemaking*, 12 FCC Rcd 12545, 12625, ¶ 179 (1997) *("LMDS
    Second Report and Order")*; *LMDS Third Order on Reconsideration*,
    13 FCC Rcd at 4897, ¶ 92; 4900, ¶ 100.

[^26]: ^?^ For example, CTTI, Craw-Kan, and Northern assert that the
    "minimal" amount of overlap in their service areas alone prevents
    them from acting in an anti-competitive manner. *See* Craw-Kan and
    Northern Petitions at 19; CTTI Petition at 20. GW Wireless cites
    comments that were filed by its parent company, Golden West
    Telecommunications Cooperative, Inc. ("Golden West") in support of
    its waiver petition. *See* GW Wireless Petition at 3. In those
    comments, however, Golden West merely claimed that "\[s\]ince the
    owners of the cooperative are its customers, the concern which forms
    the basis for the LMDS/LEC cross-ownership restriction\--that the
    telephone company will behave in an anti-competitive manner\--does
    not apply." Golden West also claims that its "long and undisputed
    tradition of community service" should reassure the Commission that
    it will make effective use of LMDS technology. Neither claim,
    however, amounts to an affirmative showing that rural LECs lack the
    incentive to act in an anti-competitive manner.

[^27]: ^?^ *See* Craw-Kan and Northern Petitions at 19-20; CTTI Petition
    at 20-21 (*citing* *LMDS Second Report and Order*, 12 FCC Rcd at
    12629, ¶ 188).

[^28]: ^?^ The difference, they assert, is that in mobile services,
    "control of part of the service area has the potential to affect
    subscriber behavior throughout the service area. . . .
    \[t\]herefore, a smaller amount of overlap has the potential to
    affect the service area as a whole." In fixed services, however,
    "the overlap affects only the actual overlap area. . . . \[t\]here
    is no impact on the service area as a whole." Craw-Kan and Northern
    Petitions at 19; CTTI Petition at 21.

[^29]: ^?^ *See* Rulemaking to Amend Parts 1, 2, 21, and 25 of the
    Commission's Rules to Redesignate the 27.5-29.5 GHz Frequency Band,
    to Reallocate the 29.5-30.0 GHz Frequency Band, to Establish Rules
    and Policies for Local Multipoint Distribution Service and For Fixed
    Satellite Services, *First Report and Order and Fourth Notice of
    Proposed Rulemaking*, 11 FCC Rcd 19005, 19056 ¶ 132 ("*LMDS Fourth
    NPRM*"). *See also* 47 C.F.R. § 20.6(c).

[^30]: ^?^ *See* *LMDS Second Report and Order*, 12 FCC Rcd at 12629, ¶
    187.

[^31]: ^?^ *See* *LMDS Fourth NPRM*, 11 FCC Rcd at 19056, ¶ 132; *LMDS
    Third Order on Reconsideration,* 13 FCC Rcd at 4885-86, ¶ 66. The
    Commission has noted that it "modified the cellular-broadband PCS
    cross-ownership rule only as necessary to apply its provisions to
    incumbent LECs and cable companies in the context of the LMDS
    eligibility restriction." *LMDS Third Order on Reconsideration*, 13
    FCC Rcd 4866, ¶ 18.

[^32]: ^?^ *See* Rulemaking to Amend Parts 1, 2, 21, and 25 of the
    Commission's Rules to Redesignate the 27.5---29.5 GHz Frequency
    Band, to Reallocate the 29.5--30.0 GHz Frequency Band, to Establish
    Rules and Policies for Local Multipoint Distribution Service and for
    Fixed Satellite Services and Suite 12 Group Petition for Pioneer\'s
    Preference, *Third Notice of Proposed Rulemaking and Supplemental
    Tentative Decision*, 11 FCC Rcd 53, 89-92, ¶¶ 97-105 (1995); *LMDS
    Fourth NPRM*, 11 FCC Rcd at 19056, ¶ 132. *See also LMDS Third Order
    on Reconsideration*, 13 FCC Rcd at 4866, ¶ 18.

[^33]: ^?^ *See* Craw-Kan and Northern Petitions at 14-15; CTTI Petition
    at 15-16. Specifically, these petitioners characterize their BTAs as
    "rural and low population density areas." Craw-Kan and Northern
    Petitions at 15; CTTI Petition at 16.

[^34]: ^?^ *See* Craw-Kan and Northern Petitions at 14; CTTI Petition at
    15.