Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

In the Matter of )

)

1998 Biennial Regulatory Review ) WT Docket 98-205

Spectrum Aggregation Limits for )

Wireless Telecommunications Carriers )

)

Cellular Telecommunications Industry )

Association's Petition for )

Forbearance From the 45 MHz )

CMRS Spectrum Cap )

)

Amendment of Parts 20 and 24 of the ) WT Docket No. 96-59

Commission's Rules---Broadband PCS )

Competitive Bidding and Commercial )

Mobile Radio Service Spectrum Cap )

)

Implementation of Sections 3(n) and ) GN Docket No. 93-252

332 of the Communications Act )

)

Regulatory Treatment of Mobile Services )

# REPORT AND ORDER {#report-and-order .unnumbered}

Adopted: September 15, 1999 Released: September 22, 1999

**By the Commission:** Commissioner Furchtgott-Roth concurring in part,
dissenting in part and issuing a statement; Commissioner Powell issuing
a separate statement.

Paragraph

I. INTRODUCTION 1

II\. executive summary 5

III\. background 8

A. CMRS Spectrum Cap 8

B. Cellular Cross-Interest Rule 14

C. Notice of Proposed Rulemaking 16

IV\. Discussion 20

A. Assessment of the Need for the Spectrum Cap and Cellular
Cross-Interest Rules 20

1\. Public Policy Objectives 21

2\. Current State of CMRS Competition and the Spectrum Cap 23

3\. Assessment of the State of CMRS Competition and the Effects of
Possible Spectrum Consolidation 27

a\. Analytical Framework 28

b\. Discussion 31

4\. Benefits of Bright-Line Rules Over Alternative Regulatory Tools 49

a\. Benefits of Regulatory Certainty and Regulatory Efficiency 50

b\. Benefits of Preventing Spectrum Re-Concentration When Section 310(d)
Review is Not Available 54

c\. Benefits for Ongoing Spectrum Management 55

d\. Benefits Not Afforded By Antitrust Review 56

e\. Benefits Not Afforded by Regulation of Market Behavior 58

5\. Public Interest Costs 59

B. Modifications to the Cellular Cross-Interest and Spectrum Cap Rules
66

1\. Modifications to Cellular Cross-Interest Rule 67

2\. Modifications to Spectrum Cap Rule 77

a\. Overview 77

b\. Spectrum Aggregation Limit 78

c\. Attribution 86

d\. Significant Overlap 108

e\. SMR Spectrum Aggregation Limits 113

f\. Divestiture 116

C. CTIA Forbearance Petition 118

1\. Background 118

2\. Discussion 121

V. Other issues 128

A. Third FNPRM in GN Docket 93-252 128

B. Separate Cap for SMR 131

C. Pending Petitions for Reconsideration 134

VI\. Procedural issues 136

A. Regulatory Flexibility Analysis 136

B. Paperwork Reduction Act Analysis 137

VII\. ordering clauses 138

APPENDIX A: PARTIES FILING COMMENTS IN WT DOCKET 98-205

APPENDIX B: FINAL RULES

APPENDIX C: FINAL REGULATORY FLEXIBILITY ANALYSIS

#  INTRODUCTION

1 In this Report and Order, the Commission completes our re-assessment
of the 45 MHz Commercial Mobile Radio Service (CMRS) spectrum cap and
cellular cross-interest rules initiated as part of our 1998 biennial
review of the Commission\'s regulations pursuant to section 11 of the
Communications Act, as amended (Act).[^1] After careful analysis and
extensive review of the rules and the record in this proceeding, we
conclude that at this time the spectrum cap and cellular cross-interest
rules continue to be necessary to promote and protect competition in
CMRS markets. However, we find that it is appropriate to modify both
rules to allow some greater cross-ownership at this time. We also adopt
a modest increase in the spectrum cap's current aggregation limit in
rural areas to reflect the differing costs and benefits of limits on
spectrum aggregation in rural areas.

2 The CMRS spectrum cap, set out in section 20.6 of the Commission\'s
rules,[^2] governs the amount of CMRS spectrum that can be licensed to a
single entity within a particular geographic area. Pursuant to section
20.6, a single entity may acquire attributable interests in the licenses
of broadband Personal Communications Service (PCS), cellular, and
Specialized Mobile Radio (SMR) services that cumulatively do not exceed
45 MHz of spectrum within the same geographic area.[^3] We recognize the
substantial increase in competition in CMRS markets since the adoption
of the spectrum cap in 1994. However, we do not find that we can rely
solely on case-by-case review of transfers of control and assignments to
ensure that competition in these markets continues to develop. We find
that, as a general matter, the aggregation limit should be maintained at
45 MHz at this time. We believe, however, that the cap can be raised to
55 MHz in rural areas, which should facilitate the deployment of
service, particularly PCS, to rural areas without presenting a
significant risk to competition in those areas. We also find that the
establishment of a separate, higher attribution benchmark for passive
institutional investors will increase the availability of capital to all
CMRS carriers.

3 The cellular cross-interest rule, set out in section 22.942 of our
rules,[^4] limits the ability of a party to have ownership interests in
both cellular carriers in overlapping cellular geographic service areas
(CGSAs). Although the two cellular carriers are no longer the only
providers of mobile voice service in most areas, they still have the
predominant share of subscribers in every one of these markets. Based on
the cellular carriers' continuing disproportionate market presence, we
find that at this time the cellular cross-interest rule is still
necessary to protect and promote competition. We believe, however, that
the attribution benchmarks used in the cellular cross-interest rule may
be relaxed without significant risk to competition.

4 We will continue to reassess CMRS markets periodically and determine
if it is appropriate to modify further or eliminate the spectrum cap and
the cellular cross-interest rules. CMRS markets are rapidly changing.
PCS and digital SMR are becoming available in more and more areas, both
services are attracting more and more subscribers, and market share
differences between these new competitors and cellular carriers are
narrowing. We will continue to track these changes and report on the
evolving level of competition in CMRS markets as part of our annual
reports on the state of CMRS competition.[^5] We will review the need
for the spectrum cap and cellular cross-interest rules as part of our
year 2000 biennial regulatory review, pursuant to section 11 of the
Act.[^6]

#  executive summary

5 In this Report and Order, we conclude that the spectrum cap and
cellular cross-interest rules are currently necessary and efficient
means to promote and protect competition in CMRS markets. After
extensive review of the level of competition in these markets, we find
that at this time the public interest is better served by the continued
use of bright-line levels of acceptable ownership, rather than relying
solely on case-by-case review of proposed ownership arrangements. We
find, however, that the spectrum cap and cellular cross-interest rules
should be modified in certain respects as described below.

6 We make the following changes to our rules:

-   We adopt a 55 MHz spectrum aggregation limit for licensees serving
    rural areas, defined as Rural Service Areas (RSAs).

-   For purposes of the spectrum cap, we establish a separate
    attribution benchmark of 40 percent for passive institutional
    investors.

-   We amend the spectrum cap rule to attribute ownership interests held
    in a trust to the grantor, the beneficiary, and the trustee of the
    trust. We will continue to allow short-term trusts to be used as
    part of an approved divestiture plan to come into compliance with
    our rules.

-   We amend the cellular cross-interest rule to allow a party with a
    controlling interest or an otherwise attributable interest in a
    cellular licensee to have a non-controlling or otherwise
    non-attributable direct or indirect ownership interest of up to 5
    percent in another cellular licensee in overlapping CGSAs.

-   We amend the cellular cross-interest rule to allow a party to have a
    non-controlling or an otherwise non-attributable direct or indirect
    ownership interest of up to 20 percent in both cellular licensees in
    overlapping CGSAs.

7 As part of this proceeding, the Commission also reviewed a petition to
forbear from enforcement of the CMRS spectrum cap filed by the Cellular
Telecommunications Industry Association (CTIA).[^7] Based on the record
and our analysis of CMRS markets, we find that the spectrum cap serves
the public interest and is necessary to ensure that the charges,
practices, classifications, or regulations by, for, or in connection
with telecommunications carriers or telecommunications services are just
and reasonable and are not unjustly or unreasonably discriminatory, and
to protect consumers. Consequently, we deny the CTIA request that we
forbear from enforcing the spectrum cap at this time.

#  background

## CMRS Spectrum Cap

8 [The CMRS Spectrum Cap]{.underline}. Under the CMRS spectrum cap,
"\[n\]o 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."[^8] A "significant overlap"
of a PCS licensed service area and CGSA(s) and SMR service area(s)
occurs when at least ten percent of the population of the PCS licensed
service area is within the cellular geographic service area and/or SMR
service area(s).[^9] Therefore, a carrier's spectrum counts toward the
spectrum cap if the carrier is licensed to serve 10 percent or more of
the population of the designated service area. Under the CMRS spectrum
cap, ownership interests of 20 percent or more (40 percent if held by a
small business or rural telephone company), including general and
limited partnership interests, voting and non-voting stock interests or
any other equity interest, are considered attributable.[^10] 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.[^11] Stock interests held in trust are attributable only to
those who have or share the power to vote or sell the stock.[^12] 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.[^13]

9 [History of the Spectrum Cap]{.underline}. The CMRS spectrum cap was
established in 1994 in the *CMRS Third Report and Order* as part of the
implementation of the deregulated CMRS regime enacted by the Omnibus
Budget Reconciliation Act of 1993 (1993 Budget Act).[^14] Prior to the
adoption of the CMRS spectrum cap, the Commission had imposed
service-specific limitations on aggregation of broadband PCS spectrum
and on cellular/PCS cross-ownership.[^15] In adopting a general,
multiple service cap in addition to the PCS/cellular ownership rules,
the Commission explained that an overall spectrum cap for CMRS would add
certainty to the marketplace without sacrificing the benefits of
pro-competitive and efficiency-enhancing aggregation.[^16] The
Commission found that if licensees were to aggregate sufficient amounts
of CMRS spectrum, it would be possible for them, unilaterally or in
combination, to exclude efficient competitors, to reduce the quantity or
quality of services provided, or to increase prices to the detriment of
consumers. The Commission concluded that the imposition of a cap on the
amount of spectrum that a single entity can control in any one
geographic area would limit its ability to increase prices
artificially.[^17] The Commission also found that a cap on broadband
PCS, SMR, and cellular licensees, would "prevent licensees from
artificially withholding capacity from the market."[^18] The Commission
found that a 45 MHz cap provided a \"minimally intrusive means\" for
ensuring that the mobile communications marketplace remained competitive
and preserved incentives for efficiency and innovation.[^19] The
Commission adopted a 20 percent cross-ownership attribution rule for the
CMRS spectrum cap in order to be consistent with the attribution rules
in the PCS/cellular cross-ownership rule.[^20] The Commission also
adopted a ten percent population overlap threshold, consistent with the
standards used in the PCS/cellular cross-ownership rule.[^21]

10 In the *CMRS Fourth Report and Order*, the Commission further
clarified that certain business relationships could give rise to
attributable ownership interests for purposes of the CMRS spectrum cap.
The Commission found that management agreements that authorize managers
of cellular, broadband PCS or SMR systems to engage in practices or
activities that determine or significantly influence the nature and
types of services offered, the terms on which services are offered, or
the prices charged for such services, give the managers an attributable
interest in that licensee.[^22] The Commission also concluded that joint
marketing agreements that affect pricing or service offerings are
attributable.[^23]

11 In 1996, the Commission reaffirmed the basic tenets of the CMRS
spectrum cap and provided additional economic rationale for its use in
the *CMRS Spectrum Cap Report and Order*.[^24] Specifically, the
Commission analyzed potential market concentration using the
Herfindahl-Hirschman Index (HHI) and found that a 45 MHz spectrum cap
was necessary to prevent CMRS markets from becoming highly
concentrated.[^25] The Commission found that such a spectrum cap would
help ensure competition and would address concerns about potential
anticompetitive behavior in CMRS markets.[^26] Based on that analysis
the Commission found that the 45 MHz CMRS spectrum cap provided
sufficient means to promote and protect competition and that it
therefore could eliminate the PCS/cellular cross-ownership rule and the
40 MHz PCS spectrum cap.[^27]

12 The Commission also reconsidered the ownership and geographic
attribution provisions of the CMRS spectrum cap in the *CMRS Spectrum
Cap Report and Order*. Although the Commission decided not to alter the
20 percent ownership attribution standard, it did adopt a four-pronged
test under which it would review requests for waiver of the
standard.[^28] The Commission also eliminated the 40 percent attribution
threshold for ownership interests held by minorities and women, but
maintained it for small businesses and rural telephone companies.[^29]
In considering changes to the geographic attribution standard, the
Commission declined to alter the 10 percent overlap definition because
it found "that an overlap of 10 percent of the population is
sufficiently small that the potential for exercise of undue market power
by the cellular operator is slight."[^30] In addition, the Commission
expanded the divestiture provisions by allowing parties with
non-controlling, attributable interests in CMRS licensees to have an
attributable or controlling interest in another CMRS application that
would exceed the 45 MHz spectrum cap so long as they followed our
post-licensing divestiture procedures.[^31]

13 The Commission has also clarified that the CMRS spectrum cap is not
limited to real-time, two-way switched telephone service, but covers a
variety of services within the definition of CMRS. In the *BellSouth
MO&O* in 1997, the Commission explained that because SMR technology
potentially enables SMR licensees to offer services that are nearly
identical to those offered by broadband PCS and cellular licensees, all
SMR services are subject to the CMRS spectrum cap to guard against
spectrum aggregation that could confer undue market power.[^32] The D.C.
Circuit affirmed this position, and declined to impose a distinction
between voice and non‑voice SMR in the context of spectrum acquisition.
The court instead found the inclusion of all SMR spectrum in the cap,
including those frequencies used to provide data services, to be
reasonable.[^33] The court approved the Commission\'s view that the cap
served to guard against the excessive accumulation of CMRS spectrum,
regardless of the use to which spectrum currently was dedicated.
Further, the court found that "\[a\] spectrum cap, unlike many other
regulations, might actually require a bright-line rule to be effective"
and upheld the Commission's denial of BellSouth's waiver request.[^34]

## Cellular Cross-Interest Rule

14 [The Rule]{.underline}. Section 22.942 of the Commission's rules
prohibits any person from having a direct or indirect ownership interest
in licensees for both cellular channel blocks in overlapping CGSAs.[^35]
A party with a controlling interest in a licensee for one cellular
channel block may not have any direct or indirect ownership interest in
the licensee for the other channel block in the same geographic
area.[^36] A party may, however, have a direct or indirect ownership
interest of five percent or less in the licensees for both channel
blocks so long as neither of those interests is controlling.[^37]
Divestiture of interests as a result of an assignment of authorization
or transfer of control must occur prior to the consummation of the
transfer or assignment.[^38]

15 [History of the Cellular Cross-Interest Rule]{.underline}. The
cellular cross-interest rule was adopted in 1991.[^39] At that time
cellular licensees were the predominant providers of mobile voice
services. In adopting the cross-interest rule the Commission stated that
"in a service where only two cellular carriers are licensed per market,
the licensee on one frequency block in a market should not own an
interest in the other frequency block in the same market."[^40]
Consequently, \"\[i\]n order to guarantee the competitive nature of the
cellular industry and to foster the development of competing systems\"
the Commission adopted restrictions on a party\'s ability to hold
ownership interests in both cellular licensees in the same geographic
area.[^41]

## Notice of Proposed Rulemaking

16 In the Notice of Proposed Rulemaking (*NPRM*) in this
proceeding,[^42] we initiated this re-evaluation of the CMRS spectrum
cap as part of our 1998 biennial regulatory review. The *NPRM* also
sought comment on whether to retain, modify, or repeal the cellular
cross-interest rule. In addition, the *NPRM* incorporated a petition
filed by CTIA on September 30, 1998, requesting that the Commission
forbear from enforcing the CMRS spectrum cap pursuant to section 10 of
the Communications Act.[^43]

17 The *NPRM* requested comment on whether the Commission should retain,
modify or repeal the spectrum cap. The *NPRM* discussed the changes
occurring in CMRS markets, and sought comment on whether the CMRS
spectrum cap in its current form continues to make economic and
regulatory sense given those changes. Specific options set forth in the
*NPRM* included: (1) modification of the significant overlap
threshold;[^44] (2) modification of the 45 MHz limitation;[^45] (3)
modification of the ownership attribution thresholds;[^46] (4)
forbearance from enforcing the spectrum cap;[^47] (5) sunsetting the
spectrum cap;[^48] and (6) elimination of the spectrum cap.[^49]

18 In the *NPRM* we stated our intent to consolidate in this proceeding
certain spectrum-cap-related issues pending in other proceedings, and
accordingly incorporated the records of those proceedings into this one.
We therefore also consider here certain issues raised by: (1) a petition
for reconsideration of the *CMRS Third Report and Order* filed by SMR
Won;[^50] (2) a petition for reconsideration of the *CMRS Fourth Report
and Order* filed by McCaw Cellular;[^51] (3) petitions for
reconsideration of the *CMRS Spectrum Cap Report and Order* filed by
Omnipoint and Radiofone;[^52] (4) the pending *Third FNPRM* in GN Docket
No. 93-252;[^53] and (5) a CTIA petition seeking forbearance from
applying section 20.6 of the Commission's rules. [^54] We also noted
that there were three pending requests for waiver of the spectrum cap
filed by Western PCS I License Corporation, Western PCS II License
Corporation, and Triton Communications.[^55]

19 Twenty-five parties filed comments on the *NPRM*, and fifteen parties
filed reply comments. Those parties, and the abbreviated names used in
this Order, are set forth in Appendix A.[^56]

#  Discussion

## Assessment of the Need for the Spectrum Cap and Cellular Cross-Interest Rules

20 We conclude that bright-line spectrum cap and cellular cross-interest
rules remain necessary to serve the public interest at this time. When
the Commission first decided to introduce additional competition in CMRS
markets in 1994, it formulated the spectrum cap rule in part to ensure
that licenses would be distributed among a diverse group of entities.
The Commission also indicated that it sought to "maximize the number of
opportunities for new viable competitors to emerge."[^57] In the *CMRS
Third Report and Order*, the Commission stated that it devised a
spectrum cap rule out of concern "that excessive aggregation by any one
or several CMRS licensees could reduce competition by precluding entry
\[of\] other service providers and might thus confer excessive market
power on incumbents."[^58] In declining to eliminate the spectrum cap
and cellular cross-interest rules, we agree with commenters in this
proceeding who express concern that such aggregation could result in
consolidation among current or future CMRS competitors and,
particularly, that the number of facilities-based providers operating in
individual markets could decline.[^59] We also determine that both our
spectrum cap and cellular cross-interest rules are appropriate and
effective tools to be used in conjunction with our section 310(d)
case-by-case reviews as we evaluate proposed mergers and acquisitions.

### Public Policy Objectives

21 At its inception, the CMRS spectrum cap was designed to "discourage
anticompetitive behavior while at the same time maintaining incentives
for innovation and efficiency."[^60] The Commission also determined that
the rule "furthers the public interest by promoting competition in CMRS
services, allowing review of CMRS acquisitions in an administratively
simple manner, and lending certainty to the marketplace."[^61] In its
reaffirmation of the rule in the *CMRS Spectrum Cap Report and Order*,
the Commission also found that the cap "furthers the goal of diversity
of ownership that we are mandated to promote under section 309(j)" of
the Act.[^62] In adopting the cellular cross-interest rule, the
Commission found that the rule was needed "\[i\]n order to guarantee the
competitive nature of the cellular industry and to foster the
development of competing systems."[^63]

22 As stated in the *NPRM*, our re-evaluation of the need for CMRS
spectrum aggregation limits and cellular cross-interest limits is guided
by four central principles.[^64] First, the operation of market forces
generally better serves the public interest than regulation. As a
general matter of principle, we prefer to place ultimate reliance on the
market, rather than on regulation, to direct the course of development
in the CMRS and other markets. Second, we intend to foster vigorous
competition in all telecommunications markets, consistent with the
central Congressional mandate of the 1996 Act. In particular, we wish to
ensure that there are no regulatory impediments to the evolution of
wireless carriers into more effective competitors vis-à-vis the local
wireline telephone companies. Third, we seek to secure the benefits of
modern telecommunication services, including wireless services, for all
areas of our Nation, including high-cost and rural areas. Finally, our
regulations must promote, rather than impede, the introduction of
innovative services and technological advances.

### Current State of CMRS Competition and the Spectrum Cap

23 As we described in the *Fourth Annual CMRS Competition Report*, there
is considerable evidence that competition is steadily growing in many
CMRS markets. [^65] Newer broadband PCS licensees continue to inaugurate
services while operational carriers expand their footprints. Most
cellular carriers are upgrading their networks by converting to digital
technology and thereby expanding their network capacity. Growth is also
accelerating in the provision of data services as part of CMRS. As a
consequence, prices are falling, usage is expanding, and service options
are growing. In some cities, as many as seven independent
facilities-based providers are now competing for business in mobile
voice markets.[^66]

24 Commenters generally agree that considerable progress has been made
in recent years toward more competitive CMRS markets.[^67] There is also
general agreement that further progress toward competitive CMRS markets
can be anticipated.[^68] Nevertheless, commenters remain sharply divided
in their assessments of the current state of competition in these
markets. Commenters express disagreement with respect to appropriate
product market definition, barriers to entry, and the dynamic effects of
technological change in these markets. Those favoring retention of a
spectrum cap typically distinguish among the various wireless product
markets and highlight barriers to entry over the near term, most
notably, the need to secure spectrum rights before they can enter these
markets.[^69] Commenters favoring elimination of the cap tend to define
markets broadly, raise *de novo* entry prospects associated with future
spectrum auctions,[^70] and predict dramatic changes from the adoption
of third generation (3G) wireless network technologies, such at
IMT-2000.[^71]

25 Although we agree that competition is increasing in CMRS markets, we
find that there remain significant reasons to be concerned about the
effects of undue concentration of CMRS spectrum. Even in major
metropolitan markets, where numerous competitors are offering mobile
voice services, in almost all markets the two cellular carriers still
have in excess of 70 percent of the customers.[^72] In addition, the
amount of CMRS spectrum is fixed, and the discipline of market forces is
tempered by the reality that would-be market entrants must obtain
spectrum rights, which in practical terms requires that they find
willing sellers.

26 We also observe that, by and large, the current 45 MHz spectrum
aggregation limit does not appear to be constraining carriers.
Generally, PCS carriers have not yet deployed capacity up to the limits
of their licensed capacity. In addition, very few cellular carriers have
acquired spectrum up to the permissible limit.[^73] We also have
received only a handful of waiver requests to exceed the cap.[^74]
Consequently, at least for now, we determine that our spectrum cap rule
has not significantly constrained carriers in their ability to provide
service at low cost, deploy new services, or commit to innovation.
Recognizing the speed with which the industry is changing and the
biennial review mandate of the 1996 Act, however, we will revisit these
issues as part of our year 2000 biennial review.[^75]

### Assessment of the State of CMRS Competition and the Effects of Possible Spectrum Consolidation

27 In general, we find, based on the evidence we discuss below, that the
provision of CMRS remains concentrated among relatively few providers,
even in urban markets. We recognize that this situation is changing as
new entrants into these markets begin offering services and competing
for customers. Nevertheless, many firms that have been awarded licenses
recently have not yet begun, or still are in the early stages of, their
network build-out. As a consequence of the concentration currently
prevailing in the CMRS sector, and the risks we associate with
concentrated markets, we seek to foster more vigorous competition in
markets in which adequate competition has not yet been realized, and to
inhibit the erosion of competition from undue consolidation of spectrum
in markets in which competitive conditions may have advanced
significantly.

#### Analytical Framework

28 In determining whether to eliminate, sunset, or modify the spectrum
cap and cellular cross-interest rules we take into consideration several
factors. One factor that must be considered is the ease or difficulty
with which competitors can enter CMRS markets. The *Merger
Guidelines,*[^76] which provide a framework for evaluating prospects for
entry into a particular market, deem a merger unlikely to create or
enhance market power or facilitate its exercise, if entry into the
relevant market "is so easy that market participants . . . could not
profitably maintain a price increase above pre-merger levels. Such entry
likely will deter an anticompetitive merger in its incipiency, or deter
or counteract the competitive effects of concern."[^77] In this respect,
we are mindful 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. This and other barriers that limit the ability of firms to respond
with adequate certainty, timeliness and sufficiency to undermine
anticompetitive behavior over the near term.

29 Our assessment must also take into account the effect of the relevant
rules on the long-term prospects for competition in CMRS markets. From
its initial consideration of a spectrum cap, the Commission has focused
on the long-term objective of fostering competition. Moreover, because
the Commission's emphasis in considering the prospects for CMRS
competition was on the allocation of a scarce resource, spectrum, rather
than on market share, we used economic analysis to examine alternative
scenarios for the distribution of CMRS spectrum among licensees. By
using allocated spectrum, rather than current productive capacity, as
measures for market share, we examined conditions of potential
competition in these markets rather than actual competition. In
conducting this analysis, the Commission found acceptable the prospect
of some post-auction spectrum aggregation in any one market, so long as
no single entity held an attributable interest in more than 45 MHz of
CMRS spectrum.[^78] Particularly given the deployment of new broadband
PCS licenses as of 1996, the *CMRS Spectrum Cap Report and Order*
appropriately addressed the long-term objectives of fostering
competition, since most mobile phone users at that point had only two
service providers from which to choose. Even today, the state of
competitive development in CMRS markets requires that we remain focused
on the longer term in pursuing our competition objectives.

30 Finally, when evaluating the spectrum cap and cellular cross-interest
rules, we must consider the potential risk of re-concentration in CMRS
markets. We are particularly concerned about the possibility of
coordinated behavior among CMRS carriers. The economic literature offers
some guidance in assessing the likelihood of coordinated interaction
among competitors. For example, one author, Reinhard Selten, employs
game theory and a simple model of cooperative behavior to explore the
boundary between too few and many competitors.[^79] Under his
assumptions, he finds that the probability of cartel behavior is 100
percent for up to four competitors. If there are five competitors, the
likelihood of a cartel falls to 22 percent. For six or more competitors,
the probability declines further to about 1 percent or less. Without
endorsing it as being fully applicable to CMRS, we note that Selten's
study points up the risks to competition were we to change our policy to
permit a reduction in the number of carriers in any particular market.

#### Discussion

31 *Market Entry*. Applying the above criteria, we conclude that our
spectrum cap and cellular cross-interest rules continue to be necessary
to ensure long-term competition within the CMRS sector. First, with
respect to market entry, "entry is . . . easy if entry would be timely,
likely, and sufficient in its magnitude, character and scope to deter or
counteract the competitive effects of concern."[^80] In particular, we
note that antitrust authorities "will consider timely only those
committed entry alternatives that can be achieved within two years from
initial planning to significant market impact."[^81] Because a license
for use of government spectrum is required to provide CMRS, we must
conclude that entry into CMRS markets is not "easy."

Markets function optimally only if one or more firms are able to enter a
market or expand current production swiftly and effectively in response
to the elevation of prices (or degradation of service) by one or more
firms attempting to exercise market power.[^82] Commenters generally
recognize that there are numerous entry barriers relating to the
provision of CMRS, including acquisition of spectrum rights, financing,
and access to tower sites,[^83] although there is debate over the
magnitude of these barriers.[^84] In any event, we believe that barriers
to entry are significant, and that the current state of competition
requires continued vigilance over at least the near term.

32 *Prospects for Long-Term Competition.* Turning to the second factor,
long-term prospects for competition, there is little dispute in the
record that considerable progress has been made toward the goal of
promoting competition in CMRS markets, but many commenters question
whether an adequate array of competitive options is now available to all
of the nation's wireless consumers.[^85] While commenters generally
agree that the creation of the spectrum cap rule helped competition in
mobile voice markets develop out of a duopoly environment, disagreement
exists regarding the extent to which competition has been achieved.[^86]
Several commenters contend that with the initial licensing of PCS
spectrum now largely completed, our objectives have essentially been
accomplished.[^87] Some commenters argue that with the completion of the
recent supplemental auction of C-block licenses, even further progress
toward our goals has been achieved. We cannot agree, however, that
merely making spectrum available completes the task of promoting
competition.

33 The Commission has had prior occasion to point out the continuing
need to promote competition and the entrance of new participants in the
CMRS markets even after broadband licenses were awarded. In the *CMRS
Spectrum Cap Report and Order*, for example, we stated that "the 45-MHz
\[spectrum\] cap will continue to serve \[our\] objectives in future
auctions and the post-auction market."[^88] In the *Broadband PCS
Reconsideration Order*, we emphasized that our goal in crafting
limitations on spectrum aggregation was not solely "to prevent
anticompetitive behavior which may or may not materialize but rather to
promote competition. . . . We conclude that the public interest would be
best served by maximizing the number of viable new entrants in a given
market."[^89] Given the ongoing impediments to entry into broadband CMRS
markets, we believe that our spectrum cap and cellular cross-interest
rules continue to serve our competition goals.

34 Moreover, despite enormous progress in the past few years, the
broadband PCS sector remains in the early stages of deployment. While
many carriers are offering service now, facilities-based coverage often
is provided only to a portion of a new carrier's potential market.
Additionally, many licensees have yet to begin offering service at all,
and some have yet to begin constructing their networks. In this regard,
we find while our public interest standard and the Sherman and Clayton
Acts can deal with potential rather than actual competition, the
spectrum cap is a particularly effective way of addressing concerns
related to the loss of potential competition.

35 Our concern that competition in CMRS markets is not fully developed
is supported by the fact that, as conventional analyses of market
concentration show, even the largest urban markets for mobile telephone
services remain quite concentrated. We find persuasive the submissions
by several commenters with data on market concentration in urban markets
for mobile voice services. For example, HAI, on behalf of PCIA,
calculated HHIs -- using estimated shares of subscribers \-- for eight
markets within the nation's 200 largest MSAs/CMSAs, two from each
quartile.[^90] In all eight markets, HHIs were found to exceed 3000,
well above the Department of Justice threshold for highly concentrated
markets. Moreover, PCIA's data also show both cellular carriers have a
combined market share exceeding 70 percent in almost every market.[^91]

36 On behalf of Sprint PCS, John Hayes of Charles River Associates (CRA)
calculated HHIs for the nation's 25 largest markets using customer
subscription data compiled in January 1998, July 1998, and
January/February 1999.[^92] His analysis shows that HHIs in the largest
metropolitan markets range between 2569 and 4511.[^93] CRA also
furnishes detailed data on market shares for the Chicago PMSA.[^94] We
summarize recent analyses of market concentration in the Chicago area in
Table 1.

**Table 1. Estimated HHIs for Mobile Voice Services in Metropolitan
Chicago**

  -------------------------- ------------ -------------------------------
  **Source (date)**          **HHI**      **Citation**

  **Sprint PCS (January      4119         Comments, Hayes Attachment at 8
  1998)**                                 

  **Sprint PCS (July 1998)** 3862         Comments, Hayes Attachment at 8

  **Sprint PCS (January      3360         Aug. 13, 1999 submission[^95]
  1999)**                                 

  **PCIA ("early" 1999)**    3331         May 6, 1999 submission[^96]

  **Department of Justice    3200-4100    CIS, *USA vs. SBC and
  (1999)**                                Ameritech*[^97]
  -------------------------- ------------ -------------------------------

37 Finally, the Department of Justice recently examined several markets
for wireless mobile telephone services in connection with three proposed
telecom acquisitions: AT&T's acquisition of TCI, Inc., SBC's merger with
Ameritech, and the acquisition by GTE of certain Ameritech properties.
In their review of the SBC/Ameritech merger, DOJ found that market
concentration in the fourteen markets in which SBC and Ameritech both
control cellular licenses was "in the range of 3200 to 4100, well above
the 1800 threshold at which the Department normally considers a market
to be concentrated."[^98]

38 The data in the record indicate that in most of the nation's 200
largest markets the two cellular companies together have in excess of 70
percent of mobile phone subscribers.[^99] Given the limited deployment
of PCS in less densely populated areas, one of these two firms, and in
many cases both, likely command market shares in excess of 35 percent.
CTIA itself acknowledges that concerns over market power begin to arise
when firms hold 35 percent or more of the market.[^100]

39 Crandall and Gertner caution against using HHIs because the CMRS
sector is such a dynamic industry.[^101] Even PCIA's expert notes that,
"where competitors have entered markets recently and are expanding their
share, such as in many wireless telephony markets, market share data
will tend to understate the future competitive significance of recent
entrants."[^102] In its recent review of competitive conditions in the
CMRS sector, the Commission reported that in the last two quarters of
1998, one analyst found that new entrants account for more than 45
percent of the sector's subscriber growth.[^103] This analyst expects
that during 1999 combined PCS and digital SMR providers will account for
54 percent of total net additions of wireless subscribers, versus 46
percent for the cellular incumbents.[^104] These data provide important
evidence that static measures of market share---which currently would
ascribe over 85 percent of the market to cellular firms[^105]---do not
fully describe competitive conditions in these markets. As a result of
these findings, we recognize that conditions are changing rapidly.
Accordingly, as indicated above, we propose to re-examine the arguments
for retaining the spectrum cap and the cellular cross-interest rule as
part of our year 2000 biennial review. In the meantime, however, we
believe that current levels of market concentration reinforce our view
that increases in concentration could threaten competition and harm the
public interest.

40 Similarly, we are not persuaded by the arguments of commenters who
urge elimination of the cap based on information other than market
shares or concentration as evidence of the competitive nature of CMRS
markets. They point to pricing trends, customer churn (switching of
vendors), and the incentives associated with carriers having excess
capacity.[^106] Many commenters point generally to falling prices as
evidence of robust competition in the market for mobile telephone
services.[^107] Several other commenters argue that customers routinely
switch carriers, and that this behavior constitutes evidence of vibrant
competition.[^108] However, the critical issue is whether these and
other indicia of increased competition would be threatened by a
reconsolidation of the industry. We agree with those commenters who
contend that eliminating the spectrum cap at this time could pose such a
threat, by enabling reconsolidation to occur.

41 Finally, while we agree with commenters who argue that the use of
historical or contemporaneous data on market performance potentially
understates the potential competitive impact of new entrants in a
dynamic industry and overstates the risks of anticompetitive
conduct,[^109] we remain concerned about the effects of possible
consolidation of CMRS spectrum over the next two years. We are concerned
that if we abandon our ownership rules at this time, the competitive
success we have seen in these markets may be reversed.

42 *Reconsolidation.* Given the current levels of market concentration
discussed above,[^110] we are particularly concerned that any
reconsolidation in the CMRS markets would either "potentially raise
significant competitive concerns" or "create or enhance market power or
facilitate its exercise."[^111] In mature industries, the typical
indicia of market power being exercised would be curtailed usage,
increased prices, or degraded service. Because of the dynamic nature of
CMRS markets, however, we think it more likely that any exercise of
market power would be evidenced by a slowing in the rate of growth of
new customers and usage, prices falling less rapidly than would
otherwise occur, or delays in the introduction of newer services.[^112]

43 In this regard, we reject the view of commenters who suggest that
consolidation of CMRS markets to as few as three competitors would not
adversely affect CMRS competition. Economic consultants for Bell
Atlantic contend that their analyses of cellular pricing data show that
entry by a third competitor in each market prompted large price
declines, but that subsequent entry by fourth and fifth carriers
resulted in little or no appreciable further decline in prices.[^113]
However, a study conducted by the Yankee Group, and submitted by PCIA,
shows that the bundled price per minute for cellular service declined
appreciably with the launch of the first PCS carrier in a market, and
also declined significantly further when the second and third PCS
carriers entered the market.[^114] In New York, for example, the study
found that the average bundled price per minute dropped 18 percent after
the first PCS carrier entered the market, and fell a further 30 percent
after the second PCS carrier began providing service.[^115]

44 We believe that significant benefits of competition are unlikely to
be exhausted with the entry of a third carrier. First, the value of
additional entry by fourth and fifth competitors need not be manifested
solely through falling prices. The benefits of further entry may appear
in the form of improved quality, product innovation, and product
differentiation. DOJ has itself recognized the differentiated nature of
wireless offerings by mobile voice operators.[^116] For example, entry
by Nextel introduces a market to the benefits of group conferencing
capability. Second, economic theory generally supports the view that
additional entry, and the installation of additional capacity, will
afford consumers additional benefits, whether through pricing or
otherwise. We are persuaded, and PCIA appears to agree,[^117] that if
mobile voice markets were to stabilize as three-firm oligopolies,
recently observed price competition could be reduced or eliminated.
Finally, we also draw upon our experience in other telecommunications
markets, where consumers generally have benefited from their ability to
choose from among more than three firms to obtain the services they
desire.[^118]

45 We are also not persuaded that, as one commenter argues, the
existence of nationwide service and pricing plans "substantially
eliminates any concern that carriers would amass spectrum in an effort
to extract monopoly rents."[^119] While nationwide plans are becoming an
important element in the marketplace, carriers still conduct local
marketing strategies that govern the terms on which most consumers
obtain service. CMRS carriers retain the ability to conduct promotions
on a localized level, and they do so regularly. Particularly in their
negotiations with business customers, pricing can be tailored to local
market conditions. The fact, therefore, that a major service provider
may offer nationwide service and pricing plans does not, in our view,
mean that we should be unconcerned about its level of spectrum
accumulation in a particular market. To the contrary, we conclude that
the control of excessive spectrum by any single market participant would
be a matter of serious concern.

46 At this time, we also reject arguments by commenters for a more
broadly defined product market.[^120] Consumers obtain mobile phone
services principally from cellular, PCS and digital SMR carriers.[^121]
While consumers may be considering other services as alternatives, no
evidence was provided suggesting that these alternatives are capable of
constraining competitive behavior in this product market. In connection
with various merger reviews, the Commission has previously defined
interconnected mobile voice telephone services as a separate product
market.[^122] In general, commenters appear to share the Commission's
view that our focus on competitive conditions in the market for mobile
voice telephone services is appropriate. Most commenters focused their
discussion on conditions in the market for this service. Several
expressly affirmed a view that mobile telephone service constitutes a
relevant product market.[^123] We also take notice that, within the last
year, DOJ has examined competitive conditions in mobile telephone
markets in connection with their reviews of three large telecom mergers:
AT&T-TCI, SBC-Ameritech, and BA-GTE. In each case, DOJ determined that
mobile telephone services constituted a relevant product market. In
AT&T-TCI, DOJ found that cellular, PCS, and digital SMR firms compete
against each other for business in these markets.[^124]

47 We share those commenters' optimism regarding the industry's
innovative capabilities, and of its expectations of service convergence.
Firms are undoubtedly expanding the range of services that they offer.
However, in the case of mobile voice telephone service, for example, no
commenter furnished evidence that consumers perceive any particular
alternative communication service as sufficiently interchangeable, such
that it could impede a hypothetical monopolist of mobile voice services
from profitably elevating prices---the standard test for defining a
market. In particular, no evidence was submitted that consumers are
switching between mobile voice telephone services and other services in
response to changes in relative prices.[^125]

48 In summary, we are concerned about the possibility that increased
aggregation of spectrum, and the resulting consolidation among CMRS
providers, could have adverse effects on competition. Generally,
diminished competition tends to result in higher prices, reduced product
quality, and less innovation. In the CMRS markets, we have seen
substantial progress in competitive conditions as the result of the
recent influx of new entrants. Our concern in this proceeding is that if
these markets begin to re-consolidate this excellent progress may slow
or cease altogether. We also recognize the potential for concentrated
markets to facilitate the exercise of anticompetitive or collusive
behavior by market participants. Competition, while growing steadily, is
still developing as new licensees enter these markets. Ultimately, we do
not want to place in jeopardy the substantial benefits of greater
competition in CMRS markets just as they are beginning to be realized.
At the present stage of development of CMRS markets, we find that these
risks pose a significant threat to our goals of promoting and protecting
competition in CMRS markets. [^126]

### Benefits of Bright-Line Rules Over Alternative Regulatory Tools 

49 We also conclude that the benefits of the bright-line spectrum cap
and cellular cross-interest rules in addressing concerns about increased
spectrum aggregation continue to make these approaches preferable to
exclusive reliance on case-by-case review under section 310(d).

#### Benefits of Regulatory Certainty and Regulatory Efficiency

50 We believe that the spectrum cap and cross-ownership rules are
efficient means to promote and protect competition in CMRS markets,
particularly in view of the competitive concerns discussed above. By
setting bright lines for permissible ownership interests, the rules

benefit the public, the telecommunications industry, and the Commission
by providing regulatory certainty and facilitating more rapid processing
of transactions.[^127]

51 Providing regulatory certainty is particularly important in an
environment in which there is likely to be widespread restructuring of
CMRS spectrum holdings, for example, in apparent efforts to create
national footprints or as the by-product of larger mergers within the
telecommunications industry. We also agree with numerous commenters who
assert that regulatory certainty is critical to providing the industry
with incentives to make investments, including in new technologies such
as 3G service.[^128] Moreover, we believe that continuing to provide
bright-line guidance as to permissible ownership interests will assist
CMRS service providers to structure their transactions and plan their
investments efficiently, based on their knowledge of the relevant
regulatory requirements. This, in turn, will facilitate obtaining
financing for such transactions and investments.

52 Our bright-line rules also promote regulatory efficiency, both by
speeding the processing of transfers of control and assignment of
licenses and by conserving the resources of the Commission and of
interested parties. Abandoning our spectrum cap and cross-interest rules
inevitably would lengthen our review process. Given the rapid pace of
developments in the telecommunications industry, we believe that any
advantages that might accrue to market participants from individualized
review of spectrum concentration are outweighed by the advantages to
them of a shorter review period for their transactions.[^129] We note in
that regard that any party that believes that an individualized analysis
is appropriate in its case may request a waiver of our spectrum cap and
cross-interest rules.

53 Additionally, we agree with the concerns raised by several commenters
as to the burdens on the resources of the Commission and of interested
parties that are inherent in case-by-case determinations regarding
permissible ownership structures.[^130] The SBA, for example, suggests
that case-by-case analysis is especially expensive and time-consuming
for small businesses, who often do not have the requisite
resources.[^131] Similarly, PCIA urges that newer entrants do not have
the resources of larger incumbents to fight protracted legal battles,
which it contends are particularly characteristic of antitrust
reviews.[^132]

#### Benefits of Preventing Spectrum Re-Concentration When Section 310(d) Review is Not Available

54 We further conclude that the spectrum cap serves important public
interest goals that are not covered by section 310(d). The Commission
does not have the opportunity to review under section 310(d) certain
kinds of transactions that may result in re-concentration of spectrum.
For example, our review authority under section 310(d) would not extend
to a transaction in which less-than-controlling interest in a licensee
was transferred, even if the holder of one cellular license in a
particular service area obtained a substantial interest in the other
cellular block in that market. Such a transaction nonetheless could give
rise to competitive concerns, for the reasons that we discuss
below.[^133] Because certain types of transactions that may
re-concentrate spectrum and reduce incentives to compete would not be
reviewable under section 310(d), we disagree with commenters who suggest
that section 310(d) is, by itself, an adequate substitute for our
spectrum cap and cross-interest rules.[^134]

#### Benefits for Ongoing Spectrum Management

55 We also conclude that bright-line rules are useful for the
Commission's ongoing spectrum management purposes. For example,
bright-line rules greatly expedite the assignment of spectrum using
auctions. They are considerably less costly from a public interest
perspective than attempting to decide on a case-by-case basis whether a
particular bidder's acquisition of a certain amount of spectrum in a
service area would result in undue spectrum concentration. Making that
decision with respect to each bidder for a particular service area
before the start of an auction would significantly and unnecessarily
delay auctions. Even making the decision only with respect to auction
winners could delay substantially the assignment of licenses and, if
undue concentration were found, presumably would require an entire
re-auction. Accordingly, we do not believe that it would be efficient to
allow auction bidders to acquire spectrum in excess of the limits
imposed by our rules, leaving resulting competitive concerns to be
resolved by the Commission on an individual basis at some point in the
bidding or licensing process.

#### Benefits Not Afforded By Antitrust Review

56 The availability on a case-by-case basis of antitrust review, which
several commenters raise,[^135] does not change our conclusions as to
the benefits of our spectrum cap and cross-interest rules. We already
have discussed the advantages in general of our bright-line rules over a
case-by-case approach.[^136] Additionally, we note that we typically
have conducted a competitive analysis as part of our public interest
analysis under section 310(d), notwithstanding any independent antitrust
review. The courts have acknowledged our authority to engage in such an
analysis.[^137] We do not disagree with commenters that the availability
of case-by-case antitrust review constitutes a valuable tool in
furthering our competitive goals. We believe, however, that it is
important for us to retain our ability to employ more than one
regulatory tool, where necessary in the public interest, to protect and
promote competition in those areas within our particular expertise,
including spectrum mangement.[^138]

57 Moreover, for reasons related to resource constraints or procedural
priorities, other agencies with antitrust authority may choose not to
give detailed review to a particular merger that, from this Commission's
perspective, may adversely affect competition in CMRS markets, or may
otherwise be contrary to the public interest.[^139] Our spectrum cap and
cross-interest rules were designed specifically for use in these
markets. The spectrum cap rule, in particular, was expressly conceived
to achieve long-term objectives that stressed the beneficial role of new
entrants. By contrast, antitrust laws were written primarily to address
concerns involving mergers that threaten to curtail actual
competition.[^140] Accordingly, we do not believe that the antitrust
laws should be the exclusive tool for addressing competition issues of
the nature we confront in CMRS markets.[^141]

#### Benefits Not Afforded by Regulation of Market Behavior

58 Finally, we note that several commenters identified alternative
regulatory tools that the Commission has at its disposal, in addition to
its public interest authority under section 310(d). These include: (a)
the Commission's build-out requirements, which, it is suggested, serve
to thwart attempts to warehouse spectrum;[^142] (b) resale obligations,
as a means for preserving service options in areas where spectrum
aggregation results in fewer facilities-based competitors;[^143] (c)
sections 201 and 202, to ensure just, reasonable, and nondiscriminatory
practices on the part of CMRS carriers;[^144] and (d) the Commission's
complaint and enforcement procedures under section 208 of the Act.[^145]
We agree with these commenters to the extent that we recognize the
importance of retaining our flexibility to employ a variety of
regulatory tools where particular circumstances may make alternative
approaches useful. We are not persuaded, however, that the alternatives
suggested by commenters, individually or collectively, constitute an
adequate substitute for our spectrum cap and cross-interest rules as
efficient means for promoting and protecting competition in the CMRS
sector. Indeed, the greater competition that the spectrum cap promotes
makes reliance on those other, arguably more intrusive, regulatory
tools, which focus principally on controlling licensees' market
behavior, less necessary and less frequent. As a general matter, we
believe the better approach is to have rules that promote competition
and let competition regulate market behavior, rather than rely in the
first instance on this Commission to directly regulate such behavior
even if we have the legal authority to do so.

### Public Interest Costs

59 [Background]{.underline}. In the *NPRM*, the Commission emphasized
that our regulation must promote, rather than impede, the introduction
of innovative services and technological advances.[^146] We invited
comment on whether the spectrum cap rule has promoted the ability of
wireless providers to enter into and compete in markets other than
mobile voice service.[^147] Additionally, we asked whether the spectrum
cap rule serves as a barrier to firms that wish to offer additional
services.[^148] We also asked whether relaxation of the cap might "allow
efficient deployment of third-generation wireless services that would be
prevented under the present cap."[^149] In addition, in the *NPRM*, we
noted that a significant public interest factor in our decisionmaking on
CMRS spectrum aggregation is the prospect for CMRS providers to compete
against incumbent local exchange carriers (LECs), and invited comment on
whether relaxing the spectrum cap rule would promote wireless
competition in local exchange markets.[^150] Finally, the *NPRM* invited
comment on whether efficiency benefits would flow from changes in the
rule that might counterbalance concerns regarding possible
anticompetitive effects resulting from increased geographic
concentration of ownership.[^151]

60 [Discussion]{.underline}. Some parties argue that there are potential
public interest costs associated with the use of the spectrum cap and
cellular cross-ownership rules and that such costs warrant the
elimination of those rules. We conclude, however, that we can address
adequately the concerns raised by these parties by resetting the
parameters of the cross-interest and the spectrum cap rules in certain
markets, through future spectrum allocations, and by other means.

61 *New and Innovative Services*. Some parties claim that the current
cap impairs the ability of wireless carriers to use existing spectrum to
develop 3G and other advanced services, such as high-speed internet
access.[^152] While these possibilities are a concern to us, we do not
believe these claims provide a basis for lifting the spectrum cap at the
present time. Initially, we note that the assertions in the record along
these lines are very general and do not provide any concrete evidence
regarding the amount of spectrum that will be needed for 3G technologies
or exactly when carriers will need access to that spectrum.[^153] Our
analysis shows that there are very few markets in which carriers have
spectrum holdings that are approaching the cap, which suggests the cap
is in most cases not a binding constraint, at least not at the present
time. Moreover, as parties explain, there are numerous alternatives to
CMRS spectrum that can be used to provide certain types of new
services.[^154] For example, Local Multipoint Distribution Service
(LMDS), Digital Electronic Message Service (DEMS), 39 GHz, and
Multichannel Lultipoint Distribution Service (MMDS) are suitable for
delivering fixed access services. We also note that no party has
submitted an application for waiver to enable it to use additional
spectrum to implement a business plan for the development of 3G
services.[^155]

62 In addition, in our view any disincentives toward the development of
new services that arguably may be caused by the current spectrum cap
must be weighed against the disincentives toward the development of new
services that would exist in a regulatory world without the current
spectrum cap. As the Commission recognized in the *CMRS Spectrum Cap
Report and Order*, "\[a\]t some point, however, horizontal concentration
starts to work against those goals \[of efficiencies and economies\]
because it results in fewer competitors, less innovation and
experimentation, higher prices and lower quality, and these
disadvantages outweigh any advantages in terms of economies and
efficiency."[^156] Also, we believe that in many ways the spectrum cap
rule has in fact encouraged innovations, such as the development of
multi-modal handsets, the creation of partnerships resulting in better
roaming packages, and the upgrading of networks and service offerings
with the conversion to digital systems.

63 Finally, we expect to make available in the near future additional
spectrum for the provision of 3G and other advanced wireless
services.[^157] We will be initiating proceedings to allocate spectrum
for those services. We believe it is more appropriate to address
spectrum requirements for 3G and other advanced services in the context
of a spectrum allocation proceeding than in this proceeding. In the
allocation proceeding we will consider whether any newly allocated
spectrum should be included in the cap. If we decide to include the
newly allocated spectrum under the cap, we will determine in that
proceeding how the cap should be adjusted to reflect that additional
spectrum.

64 *Competition with Wireline Services*. We find that the record does
not indicate the need to raise the spectrum cap to realize the potential
of wireless service as a source of competition to wireline service.
Although some parties argue that the spectrum cap deters investment in
technologies that may compete with wireline offerings,[^158] we find
that at least theorectically, it is equally plausible that the spectrum
cap encourages that development of wireless services that can compete
with wireline services. By guarding against the concentration of
ownership in a market, the spectrum cap rule helps to ensure that a
significant number of wireless licensees will compete in that market. We
believe, as noted by TRA, that the likelihood of at least one licensee
focusing on wireless local loop service increases with the number of
wireless licensees.[^159] Moreover, we note that without more CMRS
carriers in each market, one of the few carriers with the ability to
challenge the incumbent LEC would likely be the incumbent LEC's wireless
arm, which also has the least incentive to compete.[^160] Finally, we
observe that, for purposes of providing services that can substitute for
local wireline service (*e.g*., fixed wireless services), there are
numerous alternatives to the use of CMRS spectrum.[^161]

65 *Additional Efficiencies*. We find that there is no showing in the
record that raising the cap would allow the realization of significant
additional efficiencies. First, we note that the record indicates that
few carriers have accumulated as much as 45 MHz of spectrum in any one
market and that, in general, carriers with 45 MHz are not currently
using their entire spectrum allocation.[^162] Second, we find that
raising the spectrum cap would not necessarily result in significant
improvement in allocation of resources because digitalization and other
capacity-enhancing innovations have permitted more efficient allocation
by carriers of existing spectrum under the cap.[^163]

## Modifications to the Cellular Cross-Interest and Spectrum Cap Rules

66 As we have just discussed, the spectrum cap and cellular
cross-interest rules continue to be necessary to promote and protect
competition in CMRS markets at this time. After careful analysis and
extensive review of the rules and the record in this proceeding,
however, we believe that the rules can be relaxed to allow some
additional cross-ownership interests without significantly increasing
the risk of undue market concentration or anticompetitive behavior by
licensees. Specifically, we amend the cellular cross-interest rule to
allow greater cross-ownership between cellular carriers in overlapping
CGSAs. We amend the spectrum cap to allow a licensee to have an
attributable interest in up to 55 MHz in rural areas, and adopt a
separate equity benchmark of 40 percent for holdings by passive
institutional investors

### Modifications to Cellular Cross-Interest Rule

67 [Background]{.underline}. The cellular cross-interest rule is set out
in section 22.942 of the Commission\'s rules and places limits on any
person having certain direct or indirect ownership interest in licenses
for both cellular channel blocks in overlapping cellular geographic
service areas (CGSAs).[^164] A party with a controlling interest in a
license for one cellular channel block may not have any direct or
indirect ownership interest in the license for the other channel block
in the same geographic area. A party may, however, have a direct or
indirect ownership interest of five percent or less in the licenses for
both channel blocks so long as neither is a controlling interest.[^165]
Divestiture of interests as a result of an assignment of authorization
or transfer of control must occur prior to the consummation of the
transfer or assignment.[^166]

68 In the *NPRM*, we sought comment on whether we should retain, modify,
or repeal the cellular cross-interest rule given the changes in mobile
voice markets, and the fact that many markets no longer consist
primarily of cellular duopolies, as they did in 1991 when the rule was
first adopted.[^167] More specifically, we sought comment on whether the
CMRS spectrum cap rule provides sufficient protection from
anticompetitive behavior by cellular licensees in the same market and
whether we should eliminate the cellular cross-ownership rule if we
decide to eliminate or raise the CMRS spectrum cap.[^168] Because there
are some markets in which no PCS provider has initiated service yet, we
also sought comment on whether to apply the cellular cross-interest
rules only in some, but not all, markets, and, if so, what would be an
appropriate threshold for determining in which markets the rule would
not apply.[^169] We also sought comment on whether we should relax the
current attribution rules related to this rule.[^170]

69 RTG and Western Wireless assert that the competitive advantages
enjoyed by cellular providers that led to the adoption of the cellular
cross-interest rule are being eroded by the addition of new service
providers and increased competition in CMRS markets, and thus the rule
is no longer necessary.[^171] GTE and TDS, however, argue that since
there are still many cellular markets, particularly in rural areas, in
which broadband PCS or digital SMR service has not been introduced, the
rule should be retained, at least for an interim period.[^172] TRA and
Wireless One support retention of the rule, arguing that the cellular
cross-ownership rule promotes facilities-based competition and that
competition would be seriously limited if the cellular carriers were
allowed to join forces.[^173] SBCW, on the other hand, cites to concerns
of parity between CMRS services as justification for elimination of the
cellular cross-ownership rule since there is no similar restriction on
broadband PCS or SMR licensees.[^174] Although TDS supports the
retention of the rule, it argues that the attribution rules should be
relaxed to match those used for the spectrum cap.[^175]

70 [Discussion]{.underline}. We conclude that the cellular
cross-interest rule is still necessary at this time, given the strong
market position held by the two cellular carriers in virtually all
markets. The two cellular carriers still have the vast majority of
subscribers in all markets and are still the only providers of mobile
telephone service in many markets. We recognize, however, that the
cellular carriers' relative market position has diminished and continues
to do so as PCS and digital SMR service providers initiate service in
more areas of the country and attract more subscribers. We therefore
will reassess the need for a separate cellular cross-interest rule as
part of our year 2000 biennial review, by which time we expect that the
market positions of the two cellular carriers and PCS and digital SMR
service providers will have narrowed further. In the meantime, we
believe it is appropriate now to relax the attribution benchmarks used
with the cellular cross-interest rule.

71 Although the structure of mobile voice markets has changed since the
Commission adopted the cellular cross-interest rule in 1991, and the
market shares for the two cellular carriers are eroding with the
introduction of competition by PCS and digital SMR, the two cellular
carriers are still the predominant players in each market. As the
Commission recently reported, "\[w\]hile non-cellular mobile telephone
operators have made significant inroads into the mobile telephone
sector, they are still a relatively small portion of the whole
sector."[^176] For example, we found that at the end of 1998, cellular
operators had approximately 86 percent of the mobile telephone
subscribers nationwide, while broadband PCS had about ten percent and
digital SMR had just over four percent.[^177] As the market data
submitted by PCIA demonstrates, there are still many markets where
broadband PCS is not yet being offered.[^178] According to these data,
even in the market where PCS has been most successful, PCS carriers have
only about 30 percent of the subscribers.[^179] Further, the Commission
has found that there is a consensus of analysts that while the cellular
carriers' subscribership share will continue to decline, it will likely
still be near 70 percent in 2002.[^180]

72 Based on our review of the data on the market shares of the cellular
carriers, we find that it is necessary to retain the cellular
cross-interest rule at this time. Although the cellular carriers do not
have the same market power that they did when the rule was adopted, we
believe that most cross-ownership situations between the two cellular
carriers would pose a substantial threat to competition in CMRS markets.
We therefore believe that it is premature to remove the cellular
cross-interest rule.

73 We also find that it is necessary to maintain a separate cellular
cross-interest rule, and not rely solely upon the spectrum cap. The
spectrum cap prohibits the two cellular licensees from having an
attributable interest in each other because that would exceed the 45 MHz
limitation. Reliance on the cap without the cellular cross-interest rule
would allow a party to have an attributable interest in one of the
cellular licensees, including control, and up to 20 percent equity
ownership interest in the other cellular licensee in the same market. We
find that such a high ownership interest by one cellular licensee in the
other cellular licensee would pose a substantial threat to competition.
It is also not appropriate for us to rely solely on the spectrum cap
because we have today modified the spectrum cap to allow a licensee to
have an attributable interest in up to 55 MHz in rural areas, defined as
RSAs.[^181] Without a separate cross-interest rule, this new provision
of the spectrum cap would allow a licensee to control both cellular
licenses in an RSA. As we discuss below, the purposes of increasing the
spectrum aggregation limit in rural areas are to allow licensees in
those areas access to additional spectrum for enhanced or expanded
services, and to partner with other carriers, particularly PCS, to
better provide services to rural areas. Allowing the two cellular
carriers to merge or have significant ownership interests in each other
would not serve those purposes and would likely reduce the limited
competition in those markets. We will, however, review the need for this
rule as part of our year 2000 biennial review. Given the rapid ongoing
changes in CMRS markets, the market position of the cellular carriers
may have diminished by then to a point where there will no longer be a
need for a separate cross-interest rule for cellular carriers.

74 Finally, although CMRS markets are not yet sufficiently competitive
to eliminate the cross-interest rule, we believe that given increased
competition it is appropriate to relax the attribution benchmarks used
in the rule. Currently a party with a controlling interest in one of the
cellular licensees may not have any direct or indirect ownership
interest in the other licensee in that CGSA. We amend the rule to allow
a party with a controlling or otherwise attributable interest in one of
the cellular licensees to have a non-controlling or otherwise
non-attributable direct or indirect ownership of up to five percent in
the other cellular licensee in the CGSA. We do not believe that such a
cross-ownership limit would generally pose a significant threat to
competition. We continue to insist that a party with a controlling
interest in one cellular licensee in a CGSA may not have a controlling
interest, no matter how small, in the other licensee in that market.

75 Similarly, we amend the rule to allow a party to have a
non-controlling or otherwise non-attributable direct or indirect
ownership interest of up to 20 percent in both licensees in the same
CGSA. The current rule allows a party to have up to a five percent
non-controlling interest in both licensees. We believe that given the
trend towards more competitive markets, we can relax this attribution
level and use the general attribution benchmark set out in the spectrum
cap.[^182] This is a first step towards reliance on the spectrum cap
alone when the market position of the cellular carriers makes it
appropriate to eliminate the cellular cross-interest rule altogether.

76 We also amend the attribution rules relating to the cellular
cross-interest rule to bring them in line with the spectrum cap
attribution rules in certain other respects. The spectrum cap
attribution rules also apply to interests in the two cellular licensees.
For example, the attribution rules of the spectrum cap would prohibit
cellular licensees in the same CGSA from having joint officers or
directors even though the cross-interest rule does not address that
issue.[^183] Due to our adoption of a 55 MHz spectrum limitation for
RSAs, various attribution requirements set out in the cap would no
longer apply to cellular cross-ownership interests in rural areas.
Because we believe that allowing those types of interests, such as joint
officers or directors or joint operating or marketing arrangements,
would cause competitive concerns we amend the rule specifically to
prohibit these types of ownership interests.

### Modifications to Spectrum Cap Rule

#### Overview

77 While we conclude that the spectrum cap should be retained, upon
review of the record and re-evaluation of the various components of
section 20.6, we further conclude that some modifications of the
spectrum cap are warranted. As an initial matter, we find that the cap
should not generally be raised above 45 MHz. We conclude, however, that
an exception should be made in rural areas, defined as RSAs, where a 55
MHz cap will provide additional benefits to the carriers and consumers
without substantial risk of anticompetitive conduct. We also amend the
attribution provisions of the rule to establish a separate benchmark of
40 percent for equity interests held by passive institutional investors.
Finally, we adopt other changes to the rule to clarify which SMR
spectrum comes under the cap and to clarify the divestiture provisions
of the rule.

#### Spectrum Aggregation Limit

78 [Background]{.underline}. In the *NPRM*, we sought comment on
whether, if we retain a spectrum cap, a 45 MHz limitation is appropriate
given increased competition in the CMRS marketplace, or, if not, what
would be an appropriate spectrum aggregation limitation in light of
current and future prospects for competition in CMRS markets.[^184] We
also sought comment on whether to raise the 45 MHz limitation when
competition in relevant markets reaches a particular level, possibly
based on the number of competitors that would remain in a market after
the transfer or control or assignment.[^185] Similarly, we asked for
comment on the benefits of allowing licensees serving rural, high-cost
areas to hold more than 45 MHz of broadband CMRS spectrum in those areas
and how we should define those areas.[^186]

79 Most commenters focused on whether to retain or eliminate the
spectrum cap entirely and did not specifically address whether to adjust
the 45 MHz limit. Omnipoint, however, supports retention of an
aggregation limit but suggests raising the limit to 70 MHz.[^187] It
argues that while elimination of the cap could lead to anticompetitive
results, raising the cap to 70 MHz would allow carriers to develop
economies of scale and partnering arrangements while still ensuring at
least three competitive carriers in each market.[^188] RTG, while
supporting elimination of the cap, states that at a minimum the cap
should be raised to 90 MHz. A 90 MHz cap would allow a carrier to
acquire two cellular and one 30 MHz PCS license, a combination, which
according to RTG, would allow the provision of advanced voice and data
services, including high-speed Internet access and teleconferencing to
rural markets.[^189] SBA concurs with raising the cap, but recommends an
aggregation limit that would ensure at least three or four competitors
would exist in every market.[^190] Triton states that the cap should be
raised to 55 MHz in rural areas, or the overlap standard increased to 50
percent, or both.[^191]

80 [Discussion]{.underline}. We conclude that the spectrum aggregation
limit should remain at 45 MHz in most areas. This limitation strikes an
appropriate balance between the benefits of spectrum aggregation, and
the risk of undue economic concentration in the CMRS markets.[^192] In
re-evaluating the rule in the *CMRS Spectrum Cap Report and Order,* the
Commission set out the economic arguments why a 45-MHz aggregation limit
strikes an appropriate balance between the concern about undue market
concentration and the benefits of spectrum aggregation.[^193] No
commenter has persuaded us that this economic analysis is not still
valid. The current cap allows carriers to aggregate up to 45 MHz in a
geographic area. This allows cellular carriers, who may be capacity
constrained, to obtain up to an additional 20 MHz of PCS or SMR spectrum
to provide expanded or enhanced services.[^194] When the allocated
spectrum is fully used, this aggregation limit allows for at least four
mobile telephone service providers in each area. Such a market would
have an HHI no greater than 2500 with four firms fully utilizing 45 MHz
each.[^195]

81 We further conclude that in major markets any alleged detriments of a
45 MHz spectrum cap cited by some commenters do not outweigh the
benefits of a 45 MHz cap. We are not persuaded that the cap has
constrained the ability of carriers to provide services.[^196] As we
noted above, there are very few markets in which carriers have spectrum
up to the cap, and we have received only a handful of requests for
waiver of the spectrum cap.[^197]

82 Regarding the deployment of new, third-generation (3G) technologies,
we will be initiating a proceeding in the near future to consider the
allocation of spectrum for such services.[^198] We believe that it is
more appropriate to consider arguments relating to increasing the
spectrum cap to provide additional spectrum for 3G or other advanced
services in that allocation proceeding. At that time we will decide
whether to include any newly allocated spectrum in the cap, and, if so,
we will adjust the cap accordingly. We believe this is a better approach
than the one suggested by some carriers of raising the cap now in
anticipation of new 3G services being offered and 3G spectrum being
allocated in the future.[^199] However, some carriers assert that they
have an immediate need to access additional existing CMRS spectrum to
offer new services.[^200] Therefore, to the extent that a carrier can
credibly demonstrate that in a particular geographic area the spectrum
cap is currently having a significant adverse affect on its ability to
provide 3G or other advanced services, we will consider granting a
waiver of the cap for that geographic area. We urge carriers requesting
waivers to clearly identify what additional services they would provide
if the spectrum cap were waived, and why such services can not be
provided without exceeding the cap. In evaluating a waiver request the
Commission will also take into account any potential adverse affects of
granting the waiver, such as diminution of competition, as well as the
potential benefits from the provision of advanced mobile services.[^201]

83 We are also concerned that raising the cap to a higher level, as
suggested by some commenters, could lead to unacceptable concentration
of these markets. Adoption of a 90 MHz cap, as suggested by RTG, could
lead to a market with only two competitors, both with 90 MHz. That
would, in essence, re-institute the cellular duopoly that the Commission
sought to eliminate by establishing PCS. As we have extensively
documented, the introduction of new providers and the end of the
cellular duopoly has led to substantial consumer benefits through
reductions in the price of service and in new and enhanced services. We
also reject Omnipoint's suggestion to raise the cap to 70 MHz, which
would allow the re-concentration of the market to three carriers. While
a third competitor in a market provides benefits relative to a duopoly,
such a market would still be highly concentrated,[^202] and would be
less competitive than many markets are today. Even a 50 MHz cap or 55
MHz cap, while maintaining at least four competitors, could lead to
excessive concentration in most markets. For example, while a 55 MHz cap
would allow for four carriers, in practice such a cap could lead to only
three significant players in a market if 165 MHz out of 180 MHz is used
by the three carriers, leaving only 15 MHz of spectrum for a fourth
competitor.

84 We find, however, that the economics of serving rural areas are
different, and adopt a 55 MHz aggregation limit for those areas. For
purposes of the spectrum cap rule, we define rural areas as Rural
Service Areas (RSAs).[^203] In the *NPRM*, we underscored our intention
to secure the benefits of modern telecommunication services, including
wireless services, for high-cost and rural areas.[^204] In such areas,
competition among mobile phone service providers remains largely
underdeveloped, and it appears that in many markets consumers are able
to obtain facilities-based mobile phone services only from the two
incumbent cellular carriers.[^205] A 55 MHz aggregation limit in rural
areas will permit carriers serving these areas to achieve economies of
scope and will allow greater partnering between PCS and cellular in
those areas, thereby helping to make competition in rural areas more
vigorous.[^206] Such partnering may enable carriers to reduce roaming
charges that rural subscribers now incur when traveling to urban areas,
and when urban residents travel to rural areas. Partnering may also
allow further deployment of PCS and other broadband services to rural
areas.[^207] In addition, the economics of serving high-cost and
low-density areas makes it is unreasonable to expect a large number of
independent carriers to be viable.[^208] As a result, the opportunity
cost of rural spectrum rights is likely near zero, and the risks of
anticompetitive conduct by foreclosing entry through the monopolization
of spectrum are low.

85 We decline to adopt a market-by-market approach. As discussed in the
*NPRM,* under such an approach, the spectrum cap would not be enforced
in certain markets, such as those with five or more operational
competitors, but would be in place for other markets.[^209] Although a
market-by-market approach may have initial appeal, as the commenters
pointed out, there are potential difficulties in implementation,
including determining the appropriate geographic area to use since each
service uses different market areas. Moreover, even with specific
guidelines, this approach would likely result in numerous and
time-consuming case-by-case reviews of proposed consolidations. In
addition, a market-by-market approach may lead to a "first mover"
environment in which the first consolidation may be permitted, whereas
subsequent ones would likely be blocked. This could lead firms to seek
to consolidate rapidly lest they be blocked by prior consolidation of
rival firms.

#### Attribution

86 [Background]{.underline}. Under the CMRS spectrum cap, ownership
interests of 20 percent or more (40 percent if held by a small business
or rural telephone company), including general and limited partnership
interests, voting and non-voting stock interests or any other equity
interest are considered attributable.[^210] 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.[^211] Stock interests
held in trust are attributable only to those who have or share the power
to vote or sell the stock.[^212] Debt does not constitute an
attributable interest, nor are securities affording potential future
equity interests (such as warrants, options, or convertible debentures)
considered attributable until they are converted or exercised.[^213] The
attribution rules also set forth a four-pronged test for waivers of the
attribution for investors with non-controlling, minority interests where
the licensee is controlled by a single majority shareholder or
controlling general partner.[^214]

87 In the *NPRM*, we sought comment on whether we should modify any or
all of the attribution criteria.[^215] Specifically, we sought comment
on whether to modify the 20 percent ownership benchmark and the effect
that a 20 percent attribution standard has on the ability of CMRS
providers to obtain capital.[^216] We also sought comment on whether we
should increase the benchmark as it applies to the amount of non-voting
equity interest, or interest held by a limited partner and whether to
continue to have a separate 40 percent attribution standard for
investments held by small businesses or rural telephone.[^217] Finally,
we sought comment on whether we should retain or modify the waiver test
for single majority shareholder situations.[^218]

88 Only a few commenters specifically discussed possible modifications
to the attribution rules. AT&T argues that current rules attributing
equity ownership of 20 percent or more impose artificial barriers on
competition by making it more difficult and costly to attract investment
capital, which chills the timely roll-out of wireless services to
unserved and underserved consumers.[^219] It also contends that rules
that make management agreements attributable deprive new entrants of
management expertise.[^220] AT&T thus asserts that the attribution rules
should be changed so that investments up to *de facto* control would not
be attributable.[^221] Triton agrees that the attribution rules tend to
discourage investment, and supports the replacement of the current
standards with a control test.[^222] Sonera requests that an otherwise
unaffiliated entity should not be attributed with the holdings of a
licensee with which it holds minority, insulated interests in another
geographic area.[^223] Chase requests that the Commission establish a
rule that non-controlling interests held by institutional investors are
not attributable.[^224] Chase also suggests that the CMRS attribution
rules more closely conform to the broadcast attribution rules by (1) not
attributing ownership interests of limited partners who are not
materially involved with the licensee's activities, (2) adopting a
single majority shareholder exception, and (3) allowing a single entity
to have both an attributable interest in one company and a
non-attributable interest of up to 33 percent in a licensee in the same
geographic area.[^225]

89 [Discussion]{.underline}. In reviewing the attribution benchmarks
used with the spectrum cap, we make several changes to clarify the rules
and to increase the availability of capital to CMRS carriers. We note
that the change in the aggregation limit to 55 MHz for rural areas
adopted today will increase the availability of capital to CMRS carriers
serving rural areas independent of the changes we make to the
attribution rules.

90 *Control and Influence.* Attribution rules address the ability of an
investor to control or influence the actions of a licensee in ways that
may dampen competition in a market. They represent a balance between our
concerns about an investor's ability to influence a licensee in an
anticompetitive manner and the need of licensees to attract capital to
build their systems and provide service to consumers. The Commission has
historically found that an investor can influence a licensee with less
than a controlling interest.

91 We therefore decline to adopt the control standard suggested by AT&T
and Triton. These proposals do not take into account the variety of ways
that an investor can exert influence or control over a licensee. An
individual or firm does not need actual operational control over (or to
be in the management) of a licensee in order to exert influence over
that licensee. Further, our concerns about anticompetitive behavior are
not limited to what influence the party may exert on the licensee, but
also how another licensee may act in the market if it has a significant
interest in one of the other providers in that market. A carrier may
price its services differently if it has a substantial, yet
non-controlling interest in another carrier in the same market. Under
such circumstances, it may believe that it can recover some of the
revenues it would otherwise lose by its actions through its partial
ownership in the other carrier. That type of activity becomes even more
fruitful to a carrier as its stake in the other carrier increases. Such
actions would also restrict the competition between the two carriers and
the resultant benefits to consumers from robust competition.

92 Another difficulty with use of a control test is the burden it would
place on the Commission and industry. As we discussed in the context of
the general spectrum cap rule, a bright-line test provides benefits to
the Commission and industry, as well as the public. A control test, in
contrast, would be highly inefficient and would not provide regulatory
certainty. Under a control test, there are a multitude of variables that
the Commission would have to weigh before a determination of non-control
can be made. The Commission would have to engage in frequent
case-by-case determinations of control that would be time-consuming,
fact-specific, and subjective. We find that a bright-line attribution
test avoids these administrative burdens.

93 Similarly, we decline to adopt an exception for insulated partners,
as requested by Chase.[^226] As we just discussed, a party with a
significant non-controlling ownership interest may have the ability and
incentive to act in an anticompetitive manner. Although the fact that a
partner is insulated may have an effect on the ability of that partner
to directly influence the licensee, it does not address our concerns
regarding unilateral action by the limited partner.

94 We also will not adopt a single majority shareholder exception, but
will maintain our test for waiving the attribution rules in situations
where there is a single majority shareholder. The fact that there may be
a single majority shareholder does not change the ability or motive for
a party with a significant non-controlling interest to engage in
anticompetitive behavior. The non-controlling owner may still have
ability to influence the licensee and may still have the ability to
engage in undesireable unilateral conduct by recouping revenues through
its ownership of another carrier in the market. We do recognize,
however, that there may be instances in which a non-controlling interest
in a licensee may not provide any incentive or ability for
anticompetitive conduct. In the *CMRS Spectrum Cap Report and Order,*
the Commission adopted a four-pronged test to determine when the
existence of a single majority shareholder mitigates the competitive
impact of common ownership and the ability of the non-controlling
interest holder to influence the licensee.[^227] Under that test, if the
non-controlling interest holder can show that there is an unaffiliated
single majority shareholder, that the non-

controlling interest holder has no ability to influence the licensee,
and that it is not likely to act in an anticompetitive manner, the
Commission may waive the attribution rules.[^228]

95 In balancing the need to facilitate capital flows to support
deployment of service and our concerns about anticompetitive influences
from cross-ownership interests, the Commission chose a 20 percent
attribution level for broadband CMRS.[^229] This is significantly higher
than the benchmarks used by the Commission in other contexts. For
example, the Commission recently upheld the use of a five percent
benchmark for equity ownership in our broadcast attribution rules.[^230]
The Commission initially chose a 20 percent benchmark in recognition of
the large capital requirements in deploying a CMRS system. The
attribution level was set at 20 percent also to account for the
Commission's policy in the early days of the cellular industry to
encourage the formation of settlement groups\--a historic anomaly that
has no counterpoint in the PCS context. In light of this history, the
Commission found that it would be unfair and unduly restrictive to use a
five percent limit for the spectrum cap. None of the commenters have
demonstrated why the Commission should alter this general equity
benchmark at this time.

96 We also decline to adopt Triton's suggestions that we change the
spectrum cap attribution rules to more closely conform to the broadcast
attribution rules.[^231] Although the spectrum cap attribution rules
find their roots in the broadcast attribution rules, they differ, in
some respects, due to the different policy concerns that led to their
adoption. The primary basis for the spectrum cap attribution rules is
the Commission's concern with potential anticompetitive conduct by CMRS
carriers. In broadcasting and cable, the Commission also has concerns
regarding programming diversity. As a result, certain cross-ownership
interests that may be acceptable in broadcasting are inappropriate for
CMRS markets. For example, in the broadcast context, the Commission may
be less concerned with significant non-controlling ownership when there
is a single majority shareholder in charge of programming decisions. In
a CMRS setting, the same situation with a non-controlling but
significant owner may still be able to leverage its ownership to act
anticompetitively in the market.

97 Additionally, we decline to accept suggestions that we modify the
attribution rules with respect to directors.[^232] We already have
discussed our concerns about the ability of non-controlling interests to
achieve influence and the potential effects of the non-controlling
interest on the market behavior of the licensee holding such interest.
We find that common directors can lead to the same types of concerns.
Directors, in general, may posses the ability and incentive to use their
positions of authority and influence to coordinate behavior of the
licensees on whose boards they sit, and can be a conduit to pass
non-public information between the licensees on whose boards they
sit.[^233] The record in this proceeding specifically addressing
director attribution is thin and certainly is not sufficient to justify
any generally-applicable relaxation of our attribution rules in that
regard. We would consider granting a waiver, however, in a particular
case if the specific circumstances of a directorship allay the concerns
that we have identified.

98 Finally, we address ownership interests linked through partnerships.
Sonera requests that we clarify this issue and argues that the rules
should not attribute overlapping spectrum interests held by otherwise
unaffiliated entities solely because those entities each hold minority,
insulated interests in the same licensee elsewhere.[^234] As we
discussed above, the attribution rules are meant to address multiple
concerns. One of those concerns recognizes that a non-controlling
interest holder may be able to influence the licensee. Even a limited
partner has various avenues for influencing other partner(s), including
the general partner, and may thereby direct the manner in which the
license is operated. For those reasons, we attribute limited partnership
interests.[^235] Any partnership can provide the means for one licensee
to influence the actions of its partner in another market where both
have interests. In particular, either partner could seize on the goals
of their partner in one market to influence the actions of its partner
in the other market to anticompetitive effect. Of course, not all
partnerships will provide an opportunity for exercising such influence.
Consequently, we believe that it is most appropriate to evaluate these
ownership relationships on a case-by-case basis.[^236]

99 *Waiver Test.* The spectrum cap rule also includes a four-pronged
test for waiving attribution for investors with non-controlling,
minority interests where the licensee is controlled by a single majority
shareholder or controlling general partner.[^237] Although we retain the
existing waiver test, and no parties specifically commented on the
waiver test, we nevertheless find that it would be beneficial to parties
that may seek such a waiver to discuss the analytical approach that we
believe is appropriate for reviewing such a waiver request.

100 In considering whether a petitioner has met the second prong of the
test, we will examine actual competitive conditions in the relevant
markets at issue to determine whether an interest holder is likely to
affect the market in an anticompetitive manner. In assessing competitive
conditions in each relevant market, we believe that it is necessary to
distinguish between spectrum that has merely been licensed, and spectrum
that is currently in commercial use or will imminently be used to
provide relevant services. In particular, we believe that relevant
market participants consist only of those providers currently offering
service and other licensees that have both announced plans to commence
commercial operations and have declared their intentions of competing in
the relevant product markets. Consequently, in arguing that its
less-than-controlling minority interest should not be attributed, we
expect petitioners to provide us with evidence documenting the carriers
that are providing service in the relevant markets at issue or are
anticipated to be providing service in a timely and sufficient manner in
those markets.

101 Regarding the third prong of the test, in a situation involving a
limited partner, we will look to the criteria set forth in the
*Attribution Reconsideration Order* to determine whether the interest
holder is involved in the licensee's operation and has the ability to
influence the licensee on a regular basis.[^238] Such criteria include a
condition that the interest holder cannot communicate with the licensee
on matters related to the day-to-day operations of the business and
cannot be an employee of the partnership.[^239] We also believe,
however, that if the partnership agreement does not comply with the
attribution criteria, the limited partner should be allowed to satisfy
the third prong if it can show in other ways that it has no influence or
control over the partnership.[^240]

102 *Passive Institutional Investors.* Unlike our attribution rules for
broadcast licensees and cable operators,[^241] the current spectrum cap
attribution rules do not distinguish between passive institutional
investors and other investors. We find that allowing passive
institutional investors to have a larger ownership interest in licensees
should facilitate access to capital for licensees, and therefore we
adopt a separate attribution benchmark for passive institutional
investors. In connection with the broadcast and cable attribution rules,
the Commission has found that passive institutional investors, such as
banks or insurance companies, can have a greater interest in a licensee
without incurring substantial risk that investors who should be counted
for purpose of applying the ownership rules will avoid attribution. As
the Commission has stated with regard to broadcast licensees:

> passive institutional investors generally invest funds on behalf of
> others, play passive investment roles, and are generally prohibited
> either by law or by fiduciary duties from becoming involved in the
> operation or control of the companies in which they invest. To ensure
> these institutional investors maintain a truly passive role in the
> affairs of the licensee, we require them to refrain from contact or
> communication with the licensee on any matters pertaining to the
> operation of its stations, and we prohibit such investors or their
> representatives from acting either as officers or directors of the
> licensee corporation.[^242]

We find the same reasoning supports a separate attribution benchmark for
passive institutional investors in CMRS licensees.

103 We establish the benchmark for passive institutional investors at 40
percent of the outstanding voting stock of a corporation. This is higher
than the 20 percent benchmark recently adopted in the broadcast
attribution rules,[^243] but is an appropriate level for CMRS markets.
We currently use a 40 percent benchmark for interest held by small
companies and rural telephone companies,[^244] as defined in our
rules,[^245] and believe that it is reasonable to treat passive
institutional investors in a like manner. Institutional investors that
choose not to comply with the requirements for a passive investment set
out in the rule will still be able to hold up to 20 percent of the
outstanding stock in a licensee without attribution under the general
attribution benchmark.[^246]

104 *Trusts.* In reviewing the attribution rules used with the spectrum
cap, we find it appropriate to adjust our rule regarding the use of
trusts. As we discussed above, in establishing the attribution rules we
are concerned not only with instances in which a party with a
less-than-controlling interest can influence a licensee to act in an
anticompetitive manner, but also with interests that may lead the
interest holder to act unilaterally in an anticompetitive manner. In
re-evaluating our attribution rules, we find that the beneficiary
maintains an economic interest in the licensee, as well as potentially
other interests in the same market. These overlapping interests could
provide it with incentives to undertake actions that may impinge on
competition in the relevant market, since its actions can affect the
benefits it receives from the trust.

105 "\[A\] voting trust, as commonly understood is a device whereby
persons owning stock with voting powers divorce the voting rights
thereof from the ownership, retaining the ownership to all intents and
purposes and transferring the voting rights to trustees in whom the
voting rights of all depositors in the trust are pooled."[^247] In other
words, ownership comprises at least two parts: control of the asset, in
this case voting rights, and economic benefit from the asset. In a
voting trust the grantor gives up the control aspect of ownership, but
maintains the economic benefit. By using a voting trust, a grantor
retains an economic ownership of the license, as it receives profits or
losses from the operation of the system through the trustee.

106 Consequently, we will amend our attribution rules so that stock
interests held in trust will be attributable to both the trustee and the
beneficiary. We will grandfather any trust agreements that meet the
requirements of the old rule that were in effect on September 14, 1999.
For any trust agreements entered into beginning September 15, 1999,
stock interests held in trust will be attributed to the trustee,
grantor, and the beneficiary of the trust. Those interests will still be
subject to the general attribution benchmark, so that if the stock
interests in the trust are less than 20 percent of the stock of the
company, they will not be attributable.[^248]

107 We will still allow the use of trusts for the purpose of divesting
an otherwise impermissible interest. A trust used for divestiture must
be of short duration (no longer than six months) and the terms of the
trust must be approved by the Commission prior to the transfer of the
assets to the trust. We delegate authority to the Wireless
Telecommunications Bureau to review proposed trusts to ensure that they
comply with our rules.

#### Significant Overlap

108 [Background]{.underline}. The CMRS spectrum cap prohibits a licensee
from having more than 45 MHz of spectrum in broadband PCS, cellular or
SMR services with significant overlap in a geographic area.[^249] A
"significant overlap" occurs when at least ten percent of the population
of the PCS licensed service area is within the cellular geographic
service area and/or SMR service area(s).[^250] Therefore, a carrier\'s
spectrum counts toward the spectrum cap if the carrier is licensed to
serve 10 percent or more of the population of the designated service
area.[^251]

109 In the *NPRM*, we sought comment on whether a geographic overlap
standard of greater than a 10 percent overlap should be adopted, and, if
so, what would be a more appropriate standard. We also sought comment on
whether to permit carriers in high-cost and under-served markets to have
a greater than 10 percent population overlap, and how we should define
high-cost and under-served markets for purpose of the significant
overlap threshold. We also sought comment on whether, in the
alternative, there is a mechanism for triggering the application of a
spectrum cap in given geographic areas that might be superior to our
current significant overlap standard.[^252]

110 Few commenters specifically discussed the geographic overlap
threshold. SBCW argues that the concerns that led to the creation of the
ten-percent standard never materialized, and that it is more appropriate
to eliminate the cap than to change the overlap provision.[^253] It
further argues that applying a different limitation to rural areas could
result in uneven and unequal regulation.[^254] Triton, on the other
hand, suggests that the Commission increase the overlap standard in
rural areas or increase the aggregation limit, or both, in order to
facilitate access to capital for carriers serving rural areas.[^255]

111 [Discussion]{.underline}. We will not alter the 10 percent overlap
threshold for the CMRS spectrum cap. The Commission has found a 10
percent standard to be an appropriate demarcation point for
circumstances where an overlap raises competitive concerns in several
contexts concerning wireless service.[^256] In those decisions, as well
as in the *CMRS Spectrum Cap Report and Order*, the Commission stated
that the potential for the exercise of such market power was slight with
a 10 percent population overlap, but was concerned that a greater
overlap might lead to anticompetitive practices.[^257] Neither of the
parties that addressed this issue has shown that a greater attribution
threshold would not raise competitive concerns given our retention of an
aggregation limit. We also note that, as a general matter, it is
preferable to have rules for wireless spectrum that are consistent to
facilitate ease of compliance and administrative efficiency. Maintaining
a 10 percent rule would be consistent with the threshold used in other
areas.

112 We recognize, however, that there may be circumstances in which an
overlap of 10 percent or greater would not raise competitive concerns,
and may even facilitate the provision of new, enhanced or expanded
services to consumers. To the extent that a party can show that in a
particular context an overlap of 10 percent or greater would not
adversely affect competition in the market at issue, we will consider a
request for a limited waiver of the overlap threshold. Finally, as we
discuss in other parts of this Order, we agree with Triton that steps
are needed to facilitate access to capital for carriers serving rural
areas. We believe, however, that the increase in the aggregation limit
for rural areas to 55 MHz and the changes to the attribution rules
adopted in this Order provide a more reasonable means to increase the
availability of capital to carriers serving rural areas than altering
the overlap threshold, which could allow for anticompetitive practices
in substantial areas.

#### SMR Spectrum Aggregation Limits

113 [Background]{.underline}. The spectrum cap requires that, in
calculating the amount of attributable SMR 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
radio services. 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). There is a
limitation of 10 MHz of 800-MHz SMR spectrum to be attributed to an
entity for purposes of determining compliance with the cap.[^258]

114 In response to the *Third FNPRM* in GN Docket No. 93-252,[^259]
Advanced MobileComm, Inc. (AMI) requests that the Commission revise the
language regarding the calculation of SMR spectrum in two respects.
First, AMI argues that the 10-MHz limit on attribution of SMR spectrum
was intended to apply to both the 800- and 900-MHz bands combined, not
to the 800-MHz band alone. AMI cites pertinent portions of the *CMRS
Third Report and Order,* which adopted section 20.6(b), that state the
Commission\'s intention to attribute to an entity \"a maximum of 10 MHz
of SMR spectrum, including both 800- and 900-MHz spectrum, for the
purposes of determining compliance."[^260] Second, AMI asks that we
clarify section 20.6(b) to remove any possible ambiguity concerning the
multiple counting of SMR channels toward the spectrum cap in situations
where a specific channel is licensed to the same licensee at more than
one location within a relevant geographic area. AMI argues that in
situations where an SMR licensee holds two or more licenses for the same
frequency within a particular area, or obtains a wide area license and
reuses the frequency within that market, this spectrum should only be
counted once for the purpose of determining compliance with the spectrum
cap. No parties filing comments on the *NPRM* addressed this
issue.[^261]

115 [Discussion]{.underline}. We agree with AMI that the wording of
section 20.6(b) does not accurately reflect the Commission's intent in
the *CMRS Third Report and Order,* and we will revise the language to
clarify that the cap includes 800- and 900-MHz SMR spectrum combined. We
are also revising section 20.6(b) of our rules to provide that any
discrete 800- or 900-MHz channel shall be counted only once per licensee
within the relevant geographic area, even if the licensee in question
uses the same channel at more than one location.

#### Divestiture

116 [Background]{.underline}. The spectrum cap limits the amount of
attributable spectrum that a licensee may have in a geographic area. As
a general matter, a licensee obtaining an attributable interest in
spectrum, either through a transfer of control, assignment or other
attributable event, that would cause it to exceed the aggregation limit,
must divest sufficient interests prior to obtaining that additional
interest so that it remains in compliance. The rule, however, sets out
limited circumstances in which a licensee may have an additional 90 days
from final grant of the license to come into compliance with the
spectrum cap.[^262] No parties addressed issues related to this
divestiture provision in their comments.

117 [Discussion]{.underline}. We are adopting several changes to the
rule to clarify the divestiture provision. First, we clarify that a
licensee must divest sufficient attributable interests to maintain
compliance with the spectrum cap prior to consummation of the
transaction or final grant of the assignment that would give them an
attributable interest in excess of the cap, unless they qualify for the
additional ninety-day divestiture period. Second, we also clarify that a
licensee need meet only one of the three conditions set out in the rule
to qualify for the additional ninety-day divestiture period. Third, in
conjunction with our changes to the attribution rules regarding the use
of trusts, we clarify that a licensee may use a trust for divestiture
purposes if the trust is of limited duration (six months or less)[^263]
and the terms of the trust are approved by the Commission prior to the
transfer of the assets to the trust. The applicant must not have any
interest in or control of the trustee. The trust agreement must clearly
state that there will be no communications with the trustee regarding
the management or operation of the subject facilities, and must give the
trustee authority to dispose of the license as the trustee sees fit.
Consistent

with section 0.5(c) of the Commisison's rules,[^264] we delegate
authority to the Wireless Telecommunications Bureau to review proposed
trusts to ensure that they comply with our rules.

## CTIA Forbearance Petition

### Background

118 On September 30, 1998, the Cellular Telecommunications Industry
Association filed a Petition for Forbearance (CTIA Forbearance
Petition). CTIA requests that the Commission use its authority under
section 10 of the Act[^265] to forbear from applying section 20.6 of the
Commission\'s rules.[^266] CTIA urges the Commission to rely upon a
case-by-case determination of permissible levels of horizontal ownership
as part of the section 310(d)[^267] license transfer review.[^268]

119 In the *NPRM*, we sought comment on the CTIA Forbearance Petition,
particularly whether CTIA\'s arguments meet the standards of section 10
for forbearance from the spectrum cap.[^269] Because we are reviewing
the CTIA Forbearance Petition in the context of our comprehensive
re-evaluation of the spectrum cap, we also sought comment on the
advantages or disadvantages of forbearing from the cap rather than
modifying, sunsetting, or eliminating it.[^270]

120 The commenters that specifically addressed the forbearance issue
generally took the same position that they did on whether to eliminate
the spectrum cap. Commenters that support retention of a spectrum cap
oppose forbearance and argue that CTIA has not met the requirements of
section 10.[^271] The commenters that oppose the cap generally support
forbearance.[^272] In contrast, BellSouth opposes the cap but does not
support forbearance. It is concerned that forbearance will create
uncertainty in the market, and argues that if there is an adequate case
to forbear, the rule should be eliminated.[^273] SBCW argues that if the
Commission forbears from enforcement of the cap, it should also sunset
the cap to lend certainty to forbearance.[^274]

### Discussion

121 Under section 10, we must forbear from applying any regulation or
provision of the Act to a telecommunications carrier or service, or
class of telecommunications carriers or services, in any or some of its
geographic markets, if a three-pronged test is met. Specifically,
section 10 requires forbearance, notwithstanding section
332(c)(1)(A),[^275] if the Commission determines that:

\(1\) enforcement of such regulation or provision is not necessary to
ensure that the charges, practices, classifications, or regulations by,
for, or in connection with that telecommunications carrier or
telecommunications service are just and reasonable and are not unjustly
or unreasonably discriminatory;

\(2\) enforcement of such regulation or provision is not necessary for
the protection of consumers; and

\(3\) forbearance from applying such provision or regulation is
consistent with the public interest.[^276]

122 CTIA makes two arguments to support its claim that enforcement of
the spectrum cap rule is not necessary to ensure that the charges,
practices, classifications, or regulations by, for, or in connection
with that telecommunications carrier or telecommunications service are
just and reasonable and are not unjustly or unreasonably discriminatory.
First, CTIA contends that the CMRS market is sufficiently competitive
that market forces will restrain carriers from acting
anitcompetitively.[^277] Second, CTIA argues that principles of
antitrust law and economics provide adequate protection against the
possibility of excessive concentration that the spectrum cap was
designed to safeguard against.[^278]

123 As we have discussed above, upon review of the record in this
proceeding, we find that enforcement of the spectrum cap continues to be
in the public interest. Thus, we will not forbear from enforcement of
the spectrum cap rule at this time. While CMRS markets are becoming more
competitive, we do not find, for the reasons discussed above, that we
can rely on market forces alone to constrain anticompetitive practices
by CMRS carriers. The spectrum cap still plays an important role in
protecting and promoting competition within CMRS markets, and ensuring
that rates and practices of CMRS carriers are reasonable. We also do not
find, as we discussed above, that reliance on case-by-case review under
antitrust law and our section 310(d) authority are an adequate
substitute for the spectrum cap. Particularly under circumstances where
a party is transferring unbuilt spectrum or a system that is not
operational or lacks customers, antitrust review can be especially
burdensome. Similarly, reliance on review under section 310(d) would not
bring to the Commission's attention many cross-ownership situations
comprising less than control yet raising competitive concerns.
Consequently, we find that the spectrum cap rule is necessary to ensure
that the charges, practices, classifications, or regulations by, for, or
in connection with that telecommunications carrier or telecommunications
service are just and reasonable and are not unjustly or unreasonably
discriminatory.

124 CTIA also relies upon the competitive forces in CMRS markets to
argue that the second prong of the section 10 forbearance standard is
met.[^279] CTIA argues that enforcement of the spectrum cap is not
necessary for the protection of consumers.[^280] CTIA contends that the
Commission's section 310(d) authority is an appropriate vehicle for the
Commission to effectuate the "ideal approach \[which\] is to judge
spectrum combinations on a case-by-case basis taking into account all of
the relevant variables bearing upon competition and efficiency,
including the service area overlap, the populations in the respective
service areas, and the quantity of spectrum currently allocated to and
... sought to be acquired by the licensee."[^281] CTIA continues, "the
bright-line, inflexible nature of the cap should yield to a more
tailored, case-by-case approach."[^282] CTIA considers this flexible
approach to be less restrictive, and thus better able to serve
consumers.[^283]

125 We find the spectrum cap is necessary for the protection of
consumers. As we discuss above in addressing the first prong of section
10, we find the spectrum cap is necessary to ensure that carriers do not
act in a manner that could lead to the imposition of unreasonable rates
or practices. Although CMRS markets are growing increasingly more
competitive as more carriers enter the market, we do not find we can
rely solely on market forces to protect consumers. Thus, we find the
spectrum cap serves a necessary purpose in protecting consumers by
promoting and protecting competition.

126 CTIA argues that the third prong of the section 10 forbearance
standard is met because forbearance is consistent with the public
interest.[^284] CTIA argues that the public interest is better served by
a case-by-case determination of permissible ownership structures.[^285]
According to CTIA, rigid ownership limitations endanger innovation and
efficiency and outweigh the administrative burdens associated with
reliance upon a case-by-case approach to market concentration
issues.[^286]

127 We find the spectrum cap serves the public interest. In evaluating
whether forbearance is consistent with the public interest, the
Commission considers whether forbearance from enforcing the provision or
regulation will promote competitive market conditions, including the
extent to which forbearance will enhance competition among
providers.[^287] In making this assessment, the Commission may consider
the benefits a regulation bestows upon the public, along with any
potential detrimental effects or costs of enforcing a provision.[^288]
Unlike CTIA, we believe that a bright-line test serves the public
interest in this circumstance. As the D.C. Circuit Court recently
recognized, "\[a\] spectrum cap, unlike many other regulations, might
actually require a bright-line rule to be effective."[^289] A
bright-line test provides both the Commission and industry with
regulatory certainty in dealing with possible cross-ownership
situations. As such, it reduces burdens placed on both the Commission
and industry. It gives industry advance notice of which types of
cross-ownership situations the Commission finds would be
anticompetitive. Use of a case-by-case review would eventually lead to
an understanding of which types of cross-ownership interests the
Commission believes are anticompetitive, but 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. Under the spectrum cap rule, a party that
believes its proposed cross-ownership interest would not be
anticompetitive and would serve the public interest is still able to
make its case to the Commission through a request for waiver of the cap.
On balance, we find that our use of bright-line tools better serve the
public interest than a case-by-case approach.

#  Other issues

## Third FNPRM in GN Docket 93-252

128 [Background]{.underline}. The spectrum cap only applies to spectrum
for broadband PCS, cellular and SMR regulated as CMRS.[^290] In 1995,
the Commission issued the *Third FNPRM* in GN Docket No. 93-252,[^291]
in which the Commission examined whether the spectrum cap should be
extended to all cellular, SMR, and broadband PCS providers regardless of
whether they are classified as Private Mobile Radio Services
(PMRS)[^292] or CMRS providers.[^293] The Commission questioned whether
the applicability of the spectrum cap should turn on the CMRS/PMRS
distinction, and proposed that the spectrum cap be revised to apply to
all cellular, SMR, and broadband PCS licensees regardless of regulatory
classification.[^294] The Commission also sought comments on when to
apply the spectrum cap to SMR licensees that were then regulated as PMRS
providers but would be treated as CMRS carriers starting in August 10,
1996, the end of the period for reclassifying certain PMRS providers as
CMRS carriers.[^295]

129 Ten parties filed comments or reply comments in response to the
*Third FNPRM*.[^296] Several commenters support extending the spectrum
cap to all cellular, SMR, and broadband PCS providers, regardless of
their regulatory classification.[^297] These commenters contend that
including PMRS operators utilizing cellular, SMR, and broadband PCS
channels within the spectrum cap will assist in promoting the regulatory
symmetry goals mandated by section 332.[^298] AMTA and CTIA, however,
oppose the Commission\'s proposal to expand the spectrum cap to include
PMRS.[^299] CTIA recommends that the Commission not impose additional
limitations on CMRS providers who choose to provide their customers with
supplemental and enhanced services through PMRS offerings.[^300] AMTA
argues that PMRS services are not fully competitive with CMRS offerings
under the Commission\'s regulatory framework, because PMRS offerings
cannot be offered to the public or a substantial portion of the public,
or cannot include interconnection with the Public Switched Telephone
Network (PSTN).[^301] No parties filing comments on the *NPRM* addressed
this issue.

130 [Discussion]{.underline}. We find that such a rule change is
unnecessary at this time.[^302]

Under the definitions of CMRS and PMRS contained in the statute and our
regulations, mobile service that is the functional equivalent of CMRS
will be treated as CMRS. [^303] To the extent that a licensee provides
service that is the functional equivalent of CMRS in the frequency bands
included within the spectrum cap it will be treated as CMRS and thus
subject to the cap. Therefore, we will not include PMRS under the
spectrum cap.

## Separate Cap for SMR

131 [Background]{.underline}. Southern contends that the CMRS spectrum
cap is inadequate to protect competition in the SMR services and should
be replaced by a narrowly tailored, service specific limitation that
would address the market power problem in the SMR service.[^304] It
cites to the Wireless Bureau's decision in *Pittencrieff* to show that
dispatch service constitutes a distinct market and that Nextel is
achieving market power in that market.[^305] Southern requests that the
Commission adopt a Presumptive SMR Spectrum Cap of 15 MHz of 800 MHz
frequencies that are subject to auction or authorized for commercial use
in any Economic Area (EA).[^306] According to Southern, 15 MHz
represents approximately 70 percent of the 800 MHz spectrum auctioned or
scheduled for auction, and that limiting a single entity to no more than
15 MHz would ensure that the SMR market could benefit from
competition.[^307] Southern suggests that at a minimum the Commission
should condition participation in future auctions upon acceptance by
participants of this presumptive SMR spectrum cap.[^308]

132 Nextel takes exception to Southern's proposal and argues that a
separate spectrum cap for SMR service would inhibit the ability of SMR
providers to compete with cellular and broadband PCS providers. Nextel
states that Southern has mischarterized the findings in *Pittencrieff*,
and that the Wireless Bureau actually found that the CMRS market, not
solely the SMR market, is the appropriate product market for
analysis.[^309] Nextel contends that the ability of SMR providers to
aggregate 800 MHz spectrum makes it possible for them to provide
competition to cellular and broadband PCS, not only on a local basis but
also in regional and national markets.[^310] It argues that a separate
800 MHz SMR spectrum cap would place SMR providers at a significant
competitive disadvantage to other broadband CMRS providers by
restricting them to a limited amount of spectrum, and thus a limited
system capacity.[^311]

133 [Discussion]{.underline}. We decline to adopt a separate spectrum
cap for SMR services using 800 MHz frequencies. We find that the
appropriate service(s) for a spectrum cap are all broadband CMRS, as
CMRS carriers generally compete or have the potential to compete against
each other. We can decide on a case-by-case basis under authority
pursuant to section 310(d) whether a different market definition is
appropriate in the context of a specific ownership situation.

## Pending Petitions for Reconsideration

134 [Background]{.underline}. As we set out in the *NPRM*, there are
four petitions for reconsideration of previous Commissions Orders
regarding the CMRS spectrum cap which are still pending.[^312] With one
exception, no parties filing comments on the *NPRM* addressed any of
these petitions. In its comments on the *NPRM*, Omnipoint states that
the successful buildout of PCS systems and the level of competition in
CMRS markets suggests that the re-imposition of the PCS/cellular
cross-ownership rule would serve no useful purpose at this time, and
thus its petition for reconsideration is largely moot.[^313]

135 [Discussion]{.underline}. In this Report and Order we have conducted
a comprehensive review of the spectrum cap. For the reasons discussed
herein, we find that the use of a spectrum aggregation limit for
broadband CMRS services serves the public interest and advances the
goals of the Commission including the promotion of competition, the
protect of existing competition, and provision of new and enhanced
services to consumers throughout the country. Given our thorough
re-examination of the cap and our findings regarding its public interest
benefit, we find the petitions for reconsideration to be moot and
consequently dismiss them.

#  Procedural issues

## Regulatory Flexibility Analysis

136 The Final Regulatory Flexibility Analysis pursuant to the Regulatory
Flexibility Act, 5 U.S.C. § 604, is contained in Appendix C.

## Paperwork Reduction Act Analysis 

137 This Report and Order has been analyzed with respect to the
Paperwork Reduction Act of 1995, Pub. L. No. 104-13, and does not
contain any new or modified information collections subject to Office of
Management and Budget review.

#  ordering clauses

138 Accordingly, IT IS ORDERED that, pursuant to sections 4(i), 11 and
332 of the Communications Act of 1934, as amended, 47 U.S.C. §§ 154(i),
161 and 332, this Report and Order is hereby ADOPTED, and sections 20.6
and 22.942 of the Commission\'s Rules, 47 C.F.R. §§ 20.6, 22.942, ARE
AMENDED as set forth in Appendix B, effective 30 days after publication
of a summary in the Federal Register.

139 IT IS FURTHER ORDERED that, pursuant to sections 1, 2, 4, and 10 of
the Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 152, 154
and 160, the Petition for Forbearance filed by the Cellular
Telecommunications Industry Association IS DENIED.

140 IT IS FURTHER ORDERED that the Petition for Partial Reconsideration
of the Third Report and Order in GN Docket No. 93-252 filed by SMR Won
IS DISMISSED AS MOOT to the extent discussed herein.

141 IT IS FURTHER ORDERED that the Petition for Reconsideration of the
Fourth Report and Order in GN Docket No. 93-252 filed by McCaw
Comunications, Inc. IS DISMISSED AS MOOT.

142 IT IS FURTHER ORDERED that the Petition for Reconsideration of the
Report and Order in WT Docket No. 96-59 filed by Omnipoint Corporation
IS DISMISSED AS MOOT.

143 IT IS FURTHER ORDERED that the Petition for Reconsideration of the
Report and Order in WT Docket No. 96-59 filed by Radiofone, Inc. IS
DISMISSED AS MOOT.

144 IT IS FURTHER ORDERED pursuant to section 5(c) of the Communications
Act of 1934, as amended, 47 U.S.C. § 155(c), and sections 0.5(c), 0.131
and 0.331 of the Commission's rules, 47 C.F.R. §§ 0.5(c), 0.131, 0.331,
the Chief of the Wireless Telecommunications Bureau IS GRANTED DELEGATED
AUTHORITY to review and approve proposals to hold ownership interests in
broadband Personal Communications Service, cellular, and Special Mobile
Radio services licenses regulated as Commercial Mobile Radio Services in
a trust to ensure that the trust complies with the Commission's rules.

145 IT IS FURTHER ORDERED that the Commission's Office of Public
Affairs, Reference Operations Division, SHALL SEND a copy of this REPORT
AND ORDER, including the final regulatory flexibility analysis, to the
Chief Counsel for Advocacy of the Small Business Administration, in
accordance with paragraph 603(a) of the Regulatory Flexibility Act, 5
U.S.C. §§ 601 *et seq.*

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

# APPENDIX A  {#appendix-a .unnumbered}

# PARTIES FILING COMMENTS IN WT DOCKET 98-205 {#parties-filing-comments-in-wt-docket-98-205 .unnumbered}

## Comments:

Number range level0Number range level1Number range level2Number range
level3Number range level4Number range level5Number range level6Number
range level71. AirTouch (AirTouch)

2\. America One Communications Inc. (America One)

3\. AT&T Wireless (AT&T)

4\. Bell Atlantic Mobile (Bell Atlantic)

5\. BellSouth Corporation (BellSouth)

6\. Cellular Telecommunications Industry Association (CTIA)

7\. Chase Capital Partners (Chase)

8\. D&E Communications, Inc. (D&E Communications)

9\. Digiph PCS Inc. (Digiph)

10\. GTE Service Corporation (GTE)

11\. MCI Worldcom (MCI)

12\. Northcoast Communications (Northcoast)

13\. Omnipoint (Omnipoint)

14\. Personal Communications Industry Association (PCIA)

15\. Radiofone (Radiofone)

16\. Rural Telecommunications Group (RTG)

17\. SBC Wireless, Inc. (SBCW)

18\. Sonera Ltd. (Sonera)

19\. Southern Communications Services (Southern)

20\. Sprint PCS (Sprint PCS)

21\. Telecommunications Resellers Association (TRA)

22\. Telephone and Data Systems, Inc. (TDS)

23\. Triton Cellular Partners (Triton)

24\. Western Wireless Corporation (Western Wireless)

25\. Wireless One Technologies (Wireless One)

## Reply Comments:

Number range level0Number range level1Number range level2Number range
level3Number range level4Number range level5Number range level6Number
range level71. Bell Atlantic Mobile (Bell Atlantic)

2\. BellSouth Corporation (BellSouth)

3\. Cellular Telecommunications Industry Association (CTIA)

4\. Chariton Valley Wireless Services (Chariton)

5\. D&E Communications, Inc. (D&E)

6\. GTE Service Corporation (GTE)

7\. Nextel Communications, Inc. (Nextel)

8\. Personal Communications Industry Association (PCIA)

9\. Rural Telephone Group (RTG)

10\. SBC Wireless, Inc. (SBCW)

11\. Telephone and Data Systems, Inc. (TDS)

12\. Triton Cellular Partners (Triton)

13\. U.S. Small Business Administration (SBA)

14\. US West Wireless (US West)

15\. Western Wireless Corporation (Western Wireless)

## Economic Analysis submitted by commenters

1\. Economists, Inc. (Economists Inc.) (attachment to AT&T comments)

2.  Declaration of Robert W. Crandall and Robert H. Gertner (Crandall &
    Gertner) (attached to Bell Atlantic comments)

3.  Declaration of Dr. Charles L. Jackson (Jackson) (attached to Bell
    Atlantic comments)

4.  Declaration of J. Gregory Sidak and David J. Teece (Sidak & Teece)
    (attached to GTE comments)

5.  John B. Hays, CMRS HHIs from Customer Data (Hays) (attached to
    Sprint PCS comments)

6.  Reply Declaration of Robert W. Crandall and Robert H. Gertner
    (Crandall & Gertner reply) (attached to Bell Atlantic reply
    comments)

7.  Telecompetiton Market Data Report for PCIA, revised 1-1-99
    (Telecompetition) (attached to PCIA reply comments)

# APPENDIX B  {#appendix-b .unnumbered}

# FINAL RULES {#final-rules .unnumbered}

# AMENDMENTS TO THE CODE OF FEDERAL REGULATIONS {#amendments-to-the-code-of-federal-regulations .unnumbered}

1\. Part 20 of Title 47 of the Code of Federal Regulations is amended as
follows:

**PART 20 -- COMMERCIAL MOBILE RADIO SERVICES**

2.  The authority citation for Part 20 continues to read as follows:

> AUTHORITY: 47 U.S.C. 154, 160, 251-54, 303, and 332 unless otherwise
> noted.
>
> 3\. Section 20.6 is amended to read as follows:

**Sec. 20.6 CMRS spectrum aggregation limit**.

\(a\) *Spectrum limitation*.

No licensee in the broadband PCS, cellular, or SMR services (including
all parties under common control) regulated as CMRS (see 47 C.F.R. §
20.9) 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), as defined in 47 C.F.R. § 22.909, 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.

\(b\) *SMR spectrum*.

To calculate the amount of attributable SMR spectrum for purposes of
paragraph (a) of this section, an entity must count all 800 MHz and 900
MHz channels located at any SMR base station inside the geographic area
(MTA or BTA) where there is significant overlap. All 800 MHz channels
located on at 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);
provided that any discrete 800 or 900 MHz channel shall be counted only
once per licensee within the geographic area, even if the licensee in
question utilizes the same channel at more than one location within the
relevant geographic area. No more than 10 MHz of SMR spectrum in the 800
and 900 MHz SMR services will be attributed to an entity when
determining compliance with the cap.

\(c\) *Significant overlap*.

\(1\) For purposes of paragraph (a) of this section, significant overlap
of a PCS licensed service area and CGSA(s) (as defined in Sec. 22.911 of
this chapter) or SMR service area(s) occurs when at least 10 percent of
the population of the PCS licensed service area for the counties
contained therein, as determined by the latest available decennial
census figures as complied by the Bureau of the Census, is within the
CGSA(s) and/or SMR service area(s).

\(2\) The Commission shall presume that an SMR service area covers less
than 10 percent of the population of a PCS service area if none of the
base stations of the SMR licensee are located within the PCS service
area. For an SMR licensee\'s base stations that are located within a PCS
service area, the channels licensed at those sites will be presumed to
cover 10 percent of the population of the PCS service area, unless the
licensee shows that its protected service contour for all of its base
stations covers less than 10 percent of the population of the PCS
service area.

\(d\) *Ownership attribution*.

For purposes of paragraph (a) of this section, ownership and other
interests in broadband PCS licensees, cellular licensees, or SMR
licensees will be attributed to their holders pursuant to the following
criteria:

\(1\) Controlling interest shall be attributable. Controlling interest
means majority voting equity ownership, any general partnership
interest, or any means of actual working control (including negative
control) over the operation of the licensee, in whatever manner
exercised.

\(2\) Partnership and other ownership interests and any stock interest
amounting to 20 percent or more of the equity, or outstanding stock, or
outstanding voting stock of a broadband PCS, cellular or SMR licensee
shall be attributed, except that ownership will not be attributed unless
the partnership and other ownership interests and any stock interest
amount to at least 40 percent of the equity, or outstanding stock, or
outstanding voting stock of a broadband PCS, cellular or SMR licensee if
the ownership interest is held by a small business or a rural telephone
company, as these terms are defined in Sec. 1.2110 of this chapter or
other related provisions of the Commission\'s rules, or if the ownership
interest is held by an entity with a non-controlling equity interest in
a broadband PCS licensee or applicant that is a small business.

\(3\) Investment companies, as defined in 15 U.S.C. 80a-3, insurance
companies and banks holding stock through their trust departments in
trust accounts will be considered to have an attributable interest only
if they hold 40 percent or more of the outstanding voting stock of a
corporate broadband PCS, cellular or SMR licensee, or if any of the
officers or directors of the broadband PCS, cellular or SMR licensee are
representatives of the investment company, insurance company or bank
concerned. Holdings by a bank or insurance company will be aggregated if
the bank or insurance company has any right to determine how the stock
will be voted. Holdings by investment companies will be aggregated if
under common management.

\(4\) Non-voting stock shall be attributed as an interest in the issuing
entity if in excess of the amounts set forth in paragraph (d)(2) of this
section.

\(5\) Debt and instruments such as warrants, convertible debentures,
options, or other interests (except non-voting stock) with rights of
conversion to voting interests shall not be attributed unless and until
converted, except that this provision does not apply in determining
whether an entity is a small business, a rural telephone company, or a
business owned by minorities and/or women, as these terms are defined in
Sec. 1.2110 of this chapter or other related provisions of the
Commission\'s rules.

\(6\) Limited partnership interests shall be attributed to limited
partners and shall be calculated according to both the percentage of
equity paid in and the percentage of distribution of profits and losses.

\(7\) Officers and directors of a broadband PCS licensee or applicant,
cellular licensee, or SMR licensee shall be considered to have an
attributable interest in the entity with which they are so associated.
The officers and directors of an entity that controls a broadband PCS

licensee or applicant, a cellular licensee, or an SMR licensee shall be
considered to have an attributable interest in the broadband PCS
licensee or applicant, cellular licensee, or SMR licensee.

\(8\) Ownership interests that are held indirectly by any party through
one or more intervening corporations will be determined by successive
multiplication of the ownership percentages for each link in the
vertical ownership chain and application of the relevant attribution
benchmark to the resulting product, except that if the ownership
percentage for an interest in any link in the chain exceeds 50 percent
or represents actual control, it shall be treated as if it were a 100
percent interest. \[For example, if A owns 20% of B, and B owns 40% of
licensee C, then A's interest in licensee C would be 8%. If A owns 20%
of B, and B owns 51% of licensee C, then A's interest in licensee C
would be 20% because B's ownership of C exceeds 50%.\]

\(9\) Any person who manages the operations of a broadband PCS,
cellular, or SMR licensee pursuant to a management agreement shall be
considered to have an attributable interest in such licensee if such
person, or its affiliate, has authority to make decisions or otherwise
engage in practices or activities that determine, or significantly
influence,

\(i\) The nature or types of services offered by such licensee;

\(ii\) The terms upon which such services are offered; or

\(iii\) The prices charged for such services.

\(10\) Any licensee or its affiliate who enters into a joint marketing
arrangements with a broadband PCS, cellular, or SMR licensee, or its
affiliate shall be considered to have an attributable interest, if such
licensee, or its affiliate, has authority to make decisions or otherwise
engage in practices or activities that determine, or significantly
influence,

\(i\) The nature or types of services offered by such licensee;

\(ii\) The terms upon which such services are offered; or

\(iii\) The prices charged for such services.

\(e\) *Divestiture*.

\(1\) Divestiture of interests as a result of a transfer of control or
assignment of authorization must occur prior to consummating the
transfer or assignment, except that a licensee that meets the
requirements set forth in paragraph (e)(2) shall have 90 days from final
grant to come into compliance with the spectrum aggregation limit.

\(2\) An applicant with:

\(A\) controlling or attributable ownership interests in broadband PCS,
cellular, and/or SMR licenses where the geographic license areas cover
20 percent or less of the applicant\'s service area population;

\(B\) attributable interests in broadband PCS, cellular, and/or SMR
licenses solely due to management agreements or joint marketing
agreements; or

\(C\) non-controlling attributable interests in broadband PCS, cellular,
and/or SMR licenses, regardless of the degree to which the geographic
license areas cover the applicant\'s service area population,

shall be eligible to have its application granted subject to a condition
that the licensee shall come into compliance with the spectrum
limitation set out in paragraph (a) within ninety (90) days after final
grant. For purposes of this paragraph, a "non-controlling attributable
interest" is one in which the holder has less than a fifty (50) percent
voting interest and there is an unaffiliated single holder of a fifty
(50) percent or greater voting interest.

\(3\) The applicant for a license that, if granted, would exceed the
spectrum aggregation limitation in paragraph (a) of this section shall
certify on its application that it and all parties to the application
will come into compliance with this limitation. If such an applicant is
a successful bidder in an auction, it must submit with its long-form
application a signed statement describing its efforts to date and future
plans to come into compliance with the spectrum aggregation limitation.
A similar statement must also be included with any application for
assignment of licenses or transfer of control that, if granted, would
exceed the spectrum aggregation limit.

\(4\) (A) Parties holding controlling interests in broadband PCS,
cellular, and/or SMR licensees that conflict with the attribution
threshold or geographic overlap limitations set forth in this section
will be considered to have come into compliance if they have submitted
to the Commission an application for assignment of license or transfer
of control of the conflicting licensee (see Secs. 24.839 of this chapter
(PCS), 22.39 of this chapter (cellular), 90.158 of this chapter (SMR))
by which, if granted, such parties no longer would have an attributable
interest in the conflicting license. Divestiture may be to an interim
trustee if a buyer has not been secured in the required period of time,
as long as the applicant has no interest in or control of the trustee,
and the trustee may dispose of the license as it sees fit. Where parties
to broadband PCS, cellular, or SMR applications hold less than
controlling (but still attributable) interests in broadband PCS,
cellular, or SMR licensee(s), they shall submit a certification that the
applicant and all parties to the application have come into compliance
with the limitations on spectrum aggregation set forth in this section.

\(B\) Applicants that meet the requirements of paragraph (e)(2) must
tender to the Commission within ninety (90) days of final grant of the
initial license, such an assignment or transfer application or, in the
case of less than controlling (but still attributable) interests, a
written certification that the applicant and all parties to the
application have come into compliance with the limitations on spectrum
aggregation set forth in this section. If no such transfer or assignment
application or certification is tendered to the Commission within ninety
(90) days of final grant of the initial license, the Commission may
consider the certification and the divestiture statement to be material,
bad faith misrepresentations and shall invoke the condition on the
initial license or the assignment or transfer, cancelling or rescinding
it automatically, shall retain all monies paid to the Commission, and,
based on the facts presented, shall take any other action it may deem
appropriate.

Note 1 to Sec. 20.6: For purposes of the ownership attribution limit,
all ownership interests in operations that serve at least 10 percent of
the population of the PCS service area should be included in determining
the extent of a PCS applicant\'s cellular or SMR ownership.

Note 2 to Sec. 20.6: When a party owns an attributable interest in more
than one cellular or SMR system that overlaps a PCS service area, the
total population in the overlap area will apply on a cumulative basis.

Note 3 to Sec. 20.6: Waivers of Sec. 20.6(d) may be granted upon an
affirmative showing:

\(1\) That the interest holder has less than a 50 percent voting
interest in the licensee and there is an unaffiliated single holder of a
50 percent or greater voting interest;

\(2\) That the interest holder is not likely to affect the local market
in an anticompetitive manner;

\(3\) That the interest holder is not involved in the operations of the
licensee and does not have the ability to influence the licensee on a
regular basis; and

\(4\) That grant of a waiver is in the public interest because the
benefits to the public of common ownership outweigh any potential
anticompetitive harm to the market.

3.  Subpart H, of Part 22 of Title 47 of the Code of Federal Regulations
    is amended as follows:

> **Subpart H -- Cellular Radiotelephone Service**

4.  The authority citation for Part 22 continues to read as follows:

> AUTHORITY: 47 U.S.C. 154, 222, 303, 309, and 332.

5.  Section 22.942 is amended to read as follows:

**Sec. 22.942 Limitations on interests in licensees for both channel
blocks in an area.**

\(a\) *Controlling Interests.* A licensee, an individual or entity that
owns a controlling or otherwise attributable interest in a licensee, or
an individual or entity that actually controls a licensee for one
channel block in a CGSA may have an direct or indirect ownership
interest of 5 percent or less in the licensee, an individual or entity
that owns a controlling or otherwise attributable interest in a
licensee, or an individual or entity that actually controls a licensee
for the other channel block in an overlapping CGSA.

\(b\) *Non-Controlling Interests.* A direct or indirect non-attributable
interest in both systems is excluded from the general rule prohibiting
multiple ownership interests.

\(c\) *Divestiture.* Divestiture of interests as a result of a transfer
of control or assignment of authorization must occur prior to
consummating the transfer or assignment.

\(d\) *Ownership attribution*.

For purposes of paragraphs (a) and (b) of this section, ownership and
other interests cellular licensees will be attributed to their holders
pursuant to the following criteria:

\(1\) Controlling interest shall be attributable. Controlling interest
means majority voting equity ownership, any general partnership
interest, or any means of actual working control (including negative
control) over the operation of the licensee, in whatever manner
exercised.

\(2\) Partnership and other ownership interests and any stock interest
amounting to 20 percent or more of the equity, or outstanding stock, or
outstanding voting stock of a cellular licensee shall be attributed.

\(3\) Non-voting stock shall be attributed as an interest in the issuing
entity if in excess of the amounts set forth in paragraph (d)(2) of this
section.

\(4\) Debt and instruments such as warrants, convertible debentures,
options, or other interests (except non-voting stock) with rights of
conversion to voting interests shall not be attributed unless and until
converted.

\(5\) Limited partnership interests shall be attributed to limited
partners and shall be calculated according to both the percentage of
equity paid in and the percentage of distribution of profits and losses.

\(6\) Officers and directors of a cellular licensee shall be considered
to have an attributable interest in the entity with which they are so
associated. The officers and directors of an entity that controls a
cellular licensee shall be considered to have an attributable interest
in the cellular licensee.

\(7\) Ownership interests that are held indirectly by any party through
one or more intervening corporations will be determined by successive
multiplication of the ownership percentages for each link in the
vertical ownership chain and application of the relevant attribution
benchmark to the resulting product, except that if the ownership
percentage for an interest in any link in the chain exceeds 50 percent
or represents actual control, it shall be treated as if it were a 100
percent interest. \[For example, if A owns 20% of B, and B owns 40% of
licensee C, then A's interest in licensee C would be 8%. If A owns 20%
of B, and B owns 51% of licensee C, then A's interest in licensee C
would be 20% because B's ownership of C exceeds 50%.\]

\(8\) Any person who manages the operations of a cellular licensee
pursuant to a management agreement shall be considered to have an
attributable interest in such licensee if such person, or its affiliate,
has authority to make decisions or otherwise engage in practices or
activities that determine, or significantly influence,

\(i\) The nature or types of services offered by such licensee;

\(ii\) The terms upon which such services are offered; or

\(iii\) The prices charged for such services.

\(9\) Any licensee or its affiliate who enters into a joint marketing
arrangements with a cellular, licensee, or its affiliate shall be
considered to have an attributable interest, if such licensee, or its
affiliate, has authority to make decisions or otherwise engage in
practices or activities that determine, or significantly influence,

\(i\) The nature or types of services offered by such licensee;

\(ii\) The terms upon which such services are offered; or

\(iii\) The prices charged for such services.

# APPENDIX C {#appendix-c .unnumbered}

# FINAL REGULATORY FLEXIBILITY ANALYSIS {#final-regulatory-flexibility-analysis .unnumbered}

As required by the Regulatory Flexibility Act, 5 U.S.C. § 603 (RFA), an
Initial Regulatory Flexibility Analysis (IRFA) was incorporated in the
Notice of Proposed Rulemaking (*Notice*) in WT Docket No. 98-205.[^314]
The Commission sought written comments on the proposals in the *Notice*,
including the IRFA. The Commission\'s Final Regulatory Flexibility
Analysis for the Report and Order conforms to the RFA, as amended by the
Contract With America Advancement Act of 1996.[^315]

## Need for and purpose of the action

The Report and Order in this docket concludes CMRS spectrum cap and
cellular cross-interest rules continue to be an appropriate and
effective tools to promote and protect competition in CMRS markets. The
recent and rapid growth of competition in these markets -- resulting
from Commission decisions to allocate spectrum for PCS and assign
licenses subject to the spectrum cap (thereby assuring multiple
providers in most markets) -- has been a great success. The Commission
finds that undue consolidation of CMRS ownership would jeopardize the
continued realization of these benefits. The Commission concludes that
the public interest is better served by the continued use of a
bright-line test of spectrum ownership rather than by exclusive reliance
on case-by-case review of proposed ownership arrangements. The
Commission finds that it is not sufficient to rely solely on
case-by-case review of CMRS transactions, whether through the
Commission's section 310(d) transfer of control process or antitrust
review, to protect and promote competition in CMRS markets. Therefore,
the Commission concludes that the spectrum cap and cellular
cross-interest rules continue to play an important role in guiding the
development of competition and services in CMRS markets.

Although the Commission concludes in the Report and Order that the
spectrum cap and cellular cross-interest rules should be retained, it
finds that the rules can be modified to allow certain additional
cross-ownership interests without significantly increasing the risk of
undue market concentration or anticompetitive behavior by licensees.
Consequently, in the Report and Order the Commission makes the following
modifications to the spectrum cap and cellular cross-interest rules: (1)
adopts a 55 MHz spectrum aggregation limit for licensees serving rural
areas, defined as Rural Service Areas (RSAs); (2) allows up to 40
percent investment for passive institutional investors (as opposed to 20
percent for other investors); and (3) amends the cellular cross-interest
rule to allow a cellular investor to have a limited non-controlling
interest in the other cellular license in the same market. Finally, the
Commission states that it will reevaluate the continuing need for these
rules as part of our year 2000 biennial review.

Finally, for the reasons outlined above, the Commission finds that
enforcement of the spectrum cap continues to be in the public interest,
and therefore denies a request to forbear from enforcing the spectrum
cap filed by the Cellular Telecommunications Industry Association
pursuant to Section 10 of the Communications Act, as amended.[^316]

## Issues raised in response to the IRFA 

The Commission sought comment generally on the IRFA. No comments were
submitted specifically in response to the IRFA.

## Description and estimates of the number of small entities to which the rules adopted in this Report and Order will apply

The RFA directs agencies to provide a description of and, where
feasible, an estimate of the number of small entities that will be
affected by our rules.[^317] The RFA generally defines the term \"small
entity\" as having the same meaning as the terms \"small business,\"
\"small organization,\" and \"small governmental jurisdiction.\"[^318] A
small organization is generally \"any not-for-profit enterprise which is
independently owned and operated and is not dominant in its
field.\"[^319] Nationwide, there are 275,801 small organizations.[^320]
\"Small governmental jurisdiction\" generally means \"governments of
cities, counties, towns, townships, villages, school districts, or
special districts, with a population of less than 50,000.\"[^321] As of
1992, there were 85,006 such jurisdictions in the United States.[^322]

In addition, the term \"small business\" has the same meaning as the
term \"small business concern\" under Section 3 of the Small Business
Act.[^323] Under the Small Business Act, a \"small business concern\" is
one which: (1) is independently owned and operated; (2) is not dominant
in its field of operation; and (3) meets any additional criteria
established by the Small Business Administration (SBA).[^324]

The rule changes adopted in this Report and Order will affect all small
businesses that currently are or may become licensees of the broadband
PCS, cellular and/or specialized mobile radio (SMR) services. The
Commission estimates the following number of small entities may be
affected by the proposed rule changes:

*Cellular Licensees*. 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.[^325] 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.[^326] 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 *Trends in Telephone Service* data, 732 carriers
reported that they were engaged in the provision of either cellular
service or Personal Communications Service (PCS) services, which are
placed together in the data.[^327] 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 732
small cellular service carriers that may be affected by the policies
adopted in this Report and Order.

*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.[^328] For Block F, an additional classification for "very small
business" was added and is defined as an entity that, together with
their affiliates, has average gross revenues of not more than \$15
million for the preceding three calendar years.[^329] These regulations
defining "small entity" in the context of broadband PCS auctions have
been approved by the SBA.[^330] 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
won approximately 40% of the 1,479 licenses for Blocks D, E, and
F.[^331] 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, for a total of 183
small entity PCS providers as defined by the SBA and the Commission\'s
auction rules.

*SMR Licensees.* Pursuant to 47 C.F.R. § 90.814(b)(1), the Commission
has defined \"small entity\" in auctions for geographic area 800 MHz and
900 MHz SMR licenses as a firm that had average annual gross revenues of
less than \$15 million in the three previous calendar years. This
definition of a \"small entity\" in the context of 900 MHz SMR has been
approved by the SBA.[^332] Approval concerning 800 MHz SMR is being
sought. The rules adopted in this *Reconsideration* may apply to SMR
providers in the 800 MHz and 900 MHz bands that either hold geographic
area licenses or have obtained extended implementation authorizations.
We do not know how many firms provide 800 MHz or 900 MHz geographic area
SMR service pursuant to extended implementation authorizations, nor how
many of these providers have annual revenues of less than \$15 million.
We assume, for purposes of this FRFA, that all of the extended
implementation authorizations may be held by small entities, which may
be affected by the policies adopted in this Report and Order.

The Commission recently held auctions for geographic area licenses in
the 900 MHz SMR band. There were 60 winning bidders who qualified as
small entities in the 900 MHz auction. Based on this information, we
conclude that the number of geographic area SMR licensees affected by
the rule adopted in this *Reconsideration* includes these 60 small
entities. No auctions have been held for 800 MHz geographic area SMR
licenses. Therefore, no small entities currently hold these licenses. A
total of 525 licenses will be awarded for the upper 200 channels in the
800 MHz geographic area SMR auction. The Commission, however, has not
yet determined how many licenses will be awarded for the lower 230
channels in the 800 MHz geographic area SMR auction. There is no basis,
moreover, on which to estimate how many small entities will win these
licenses. Given that nearly all radiotelephone companies have fewer than
1,000 employees and that no reliable estimate of the number of
prospective 800 MHz licensees can be made, we assume, for purposes of
this FRFA, that all of the licenses may be awarded to small entities
who, thus, may be affected by the decisions adopted in this Report and
Order.

## Reporting, recordkeeping, and other compliance requirements: 

The rules adopted in this Report and Order pose no additional reporting,
record keeping or other compliance measures.

## Steps taken to minimize burdens on small entities and significant alternatives considered 

In the Report and Order, the Commission concludes that retention of the
CMRS spectrum cap and cellular cross-interest rules serves the public
interest. The Commission concludes that the benefits of these
bright-line tests in addressing concerns about increased spectrum
aggregation continue 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, the rules benefit the public,
the telecommunications industry and the Commission by providing
regulatory certainty and facilitating more rapid processing of
transactions.

The Commission finds that the CMRS spectrum cap and cellular
cross-interest rule promote regulatory efficiency, both by speeding the
processing of transfers of control and assignment of licenses and by
conserving the resources of the Commission and of interested parties.
Moving from the spectrum cap and cross-interest rules to case-by-case
review inevitably would lengthen the review process. The Commission
recognized the concerns raised by several commenters about the burdens
on the resources of the Commission and of interested parties that are
inherent in case-by-case determinations regarding permissible ownership
structures. For example, case-by-case analysis is especially expensive
and time-consuming for small businesses, which often do not have the
requisite resources.

## Report to Congress 

The Commission shall send a copy of the Report and Order, including a
copy of this Final Regulatory Flexibility Analysis, in a report to
Congress pursuant to Section 251 of the Small Business Regulatory
Enforcement Fairness Act of 1996, 5 U.S.C. § 801(a)(1)(A). In addition,
the Commission shall send a copy of this Report and Order, including
this Final Regulatory Flexibility Analysis, to the Chief Counsel for
Advocacy of the Small Business Administration. A copy of this Regulatory
Flexibility Analysis will also be published in the Federal Register.

# Statement of Commissioner Harold W. Furchtgott-Roth {#statement-of-commissioner-harold-w.-furchtgott-roth .unnumbered}

> **In the Matter of 1998 Biennial Regulatory Review -- Spectrum
> Aggregation Limits for Wireless Telecommunications Carriers,** WT
> Docket No. 98-205, GN Docket No. 93-252, *Report and Order*.

This Commission scarcely adopts an order on wireless matters these days
that doesn't tout the remarkable growth of competition in this nation's
wireless markets. Today's Report and Order is no exception.[^333] Yet
today's decision \-- to leave largely intact several provisions of our
CMRS regulatory framework \-- runs the risk of paying mere lip service
to these significant competitive trends. While parts of the Report and
Order are modest steps in the right direction, and for that reason I
support them, I must also dissent because I believe much more
significant regulatory relaxation is justified.

Evidence supporting the increasingly bright CMRS competitive landscape
continues to accumulate.[^334] Yet, in today's decision, the Commission
perpetuates largely unchanged its 45 MHz CMRS spectrum cap and cellular
cross interest rules. These provisions have as their purported goals the
promotion and protection of competition, and the prevention of undue
concentration of CMRS spectrum. In my view, however, the facts and the
data simply do not support the retention of these rules. I would have
preferred that we simply eliminate them. Competition in the wireless
sector is flourishing, and I continue to have great faith in the
Department of Justice's ability to root out and protect consumers from
anticompetitive behavior should it arise.

I share Commissioner Powell's view, as expressed in his separate
statement in this proceeding, that there are several parts of this item
that are worthy of support. First, today's action raises the cap in
rural areas to 55 MHz, which should help accelerate the spread of
wireless innovation to these areas.[^335] Second, the Commission makes
explicit the availability of waivers of the spectrum cap where carriers
can demonstrate that the cap is seriously impeding their ability to roll
out advanced services, including 3G services.

Finally, I welcome the commitment that we make today to review the
spectrum cap and cellular cross interest rules as part of our year 2000
biennial regulatory review, under Section 11 of the Communications Act,
as amended.[^336] At the same time, however, I must continue to point
out that the Commission's 1998 biennial review (of which this order is a
part) was not as thorough as I believe it should have been.[^337] I look
forward to working with my colleagues on the Commission to ensure that
our year 2000 biennial review is as thorough and effective in
eliminating unnecessary regulation as Congress intended when it crafted
Section 11.

\*\*\*\*\*\*\*\*

**Separate Statement of Commissioner Michael Powell**

Re: 1998 Biennial Regulatory Review---Spectrum Aggregation Limits for
Wireless Telecommunications Carriers, WT Docket No. 98-205, WT Docket
No. 96-59, GN Docket No. 93-252, *Report and Order*

When we commenced this proceeding in November of last year, I thought it
was an excellent opportunity for the Commission to review whether market
conditions justify continued prospective, prophylactic regulation of the
wireless telecommunications industry. Here, we carry out part of the
mandate from the 1996 Telecommunications Act to review our ownership
rules every two years.

The Act, in section 11, further mandates that we repeal or modify any
regulation that is \"no longer necessary in the public interest as the
result of [meaningful economic competition]{.underline}.\" 47 U.S.C.
§161 (emphasis added). At the time we adopted the Notice of Proposed
Rulemaking, I applauded this effort to take a sober and realistic look
at the CMRS ownership limitations in light of the current and
foreseeable competitive environment in the wireless market.[^338] I was
expecting -- in view of the public interest guidance in section 11 and
the optimistic outlook for competition in the CMRS industry -- a repeal
or significant modification of the spectrum cap; at least a sunset.
Truthfully, this item before us today is not what I expected.

I cannot imagine any other industry segment that can better laud their
state of economic competition as "meaningful." Prices are down and
falling. Innovation, churn and penetration are up and still climbing.
And, as this item points out, the newer PCS licensees are adding more
new customers than the incumbent cellular carriers. All of this seems
pretty "meaningful" to me. Yet, as the record in this proceeding
reveals, there are still some lingering concerns left over from the
vestiges of the original cellular duopoly, which -- if you measure
market share in terms of subscribers -- still has the lion's share. So,
despite the positive state of competition in this segment, I had thought
back when we started this review that, if *we* can meet the burden of
showing that the cap is still necessary in the public interest, then we
may keep it. I also said that this cap should not last forever, but if
we do nothing this time, we would have to review it again.

Well, this time we are not doing much to modify or eliminate the rule
and I do not necessarily agree with all of the findings and competitive
analysis in the item. For example, I think that the barriers to
"reconsolidation" (including searching for and finding a willing seller,
capital constraints, technical compatibility issues, and FCC and
antitrust review) are pretty high. Thus, I do not think that elimination
of the cap will result in massive consolidation at the local level
immediately. However, I believe that the Wireless Bureau has presented
an economic analysis that does the best job possible of explaining why
the rule should stay in place for the time being. The item meets the
burden by clearly recognizing that, "at this time," there are a few good
reasons left for leaving the cap in place at least a little longer,
including our continued, important role as the public's spectrum
manager.

Most importantly, in the spirit of compromise, the item recognizes three
things that I find somewhat comforting in my decision today to support
this item:

[First]{.underline}, we expect to make available "in the near future"
additional spectrum for the provision of third generation (3G) wireless
services and other advanced mobile wireless services. I strongly
encourage the prompt completion of any allocation and licensing
proceedings, in coordination with international developments, so that
carriers in the U.S. may offer our citizens such advanced, whiz-bang
services very soon.

[Second]{.underline}, since some carriers are likely to have spectrum
needs that cannot wait for additional allocations, I am also encouraged
by this Order's invitation to carriers that are spectrum-constrained to
seek waivers of the cap. Such waivers must be processed quickly and
granted when carriers show that the spectrum cap adversely affects their
ability to provide 3G or other advanced services. While this process may
tend to make our bright line a little blurry, it is important to give
carriers the opportunity to make their case for more spectrum
immediately.

[Third]{.underline}, I am pleased that our re-evaluation of this
ownership rule will once again commence next year as part of the year
2000 biennial review. I hope that we can coordinate this review with our
spectrum allocation activities and related proceedings, as well as next
year's report to Congress on CMRS competition. I also hope we can
explore a little better the meaning of "meaningful competition," which
Congress intended to replace regulation.

[^1]: 47 U.S.C. § 161. This proceeding is part of our comprehensive
    review of existing Commission regulations to determine whether our
    rules continue to make economic and regulatory sense, pursuant to
    section 11. In the Telecommunications Act of 1996, Telecommunication
    Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996 Act), Congress
    sought to enhance competition in local and other telecommunications
    markets and recognized that the achievement of that goal would
    lessen the need for regulation of the industry. For that reason,
    Congress charged the Commission with reviewing regulations it
    applies to providers of telecommunications services on a biennial
    basis 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." 47 U.S.C. §
    161(a)(2); *see also* section 202(h) of the 1996 Act, 110 Stat. 56
    (1996). If we find that a regulation is no longer in the public
    interest, we have an affirmative obligation to repeal or modify that
    regulation. 47 U.S.C. § 161(b).

[^2]: 47 C.F.R. § 20.6.

[^3]: 47 C.F.R. § 20.6(a).

[^4]: 47 C.F.R. § 22.942.

[^5]: *See* 47 U.S.C. § 332(c)(1)(C) ("The Commission shall review
    competitive market conditions with respect to commercial mobile
    services and shall include in its annual report an analysis of those
    conditions. Such analysis shall include an identification of the
    number of competitors in various commercial mobile services, an
    analysis of whether or not there is effective competition, an
    analysis of whether any such competitors have a dominant share of
    the market for such services, and a statement of whether additional
    providers or classes of providers in those services would be likely
    to enhance competition.").

[^6]: 47 U.S.C. § 161.

[^7]: Petition for Forbearance From the 45 MHz CMRS Spectrum Cap,
    Petition for Forbearance of the Cellular Telecommunications Industry
    Association, filed Sept. 30, 1998 (CTIA Forbearance Petition).

[^8]: 47 C.F.R. § 20.6(a). Under the current rule, no more than 10 MHz
    of SMR spectrum in the 800 MHz service will be attributed to an
    entity when determining compliance with the cap. 47 C.F.R. §
    20.6(b).

[^9]: 47 C.F.R. § 20.6(c).

[^10]: 47 C.F.R. § 20.6(d)(2). In addition, ownership interests held by
    an entity with a non-controlling equity interest up to 40 percent in
    a broadband PCS licensee or applicant that is a small business are
    not attributable. 47 C.F.R. § 20.6(d)(2). Ownership interests held
    through successive subsidiaries are calculated by using a
    multiplier. 47 C.F.R. § 20.6(d)(8).

[^11]: 47 C.F.R. § 20.6(d)(7), (9), (10).

[^12]: 47 C.F.R. § 20.6(d)(3).

[^13]: 47 C.F.R. § 20.6(d)(5).

[^14]: Implementation Of Sections 3(N) and 332 of the Communications
    Act, Regulatory Treatment Of Mobile Services, GN Docket No. 93-252,
    Amendment of Part 90 of the Commission's Rules to Facilitate Future
    Development of SMR Systems In The 800 MHz Frequency Band PR Docket
    No. 93-144, Amendment of Parts 2 and 90 of the Commission's Rules to
    Provide for the Use Of 200 Channels Outside the Designated Filing
    Areas in the 896-901 MHz And 935-940 MHz Band Allotted to the
    Specialized Mobile Radio Pool PR Docket No. 89-553, *Third Report
    and Order*, 9 FCC Rcd. 7988, 7992 (1994) *(CMRS Third Report and
    Order*) (citing Omnibus Budget Reconciliation Act of 1993, Pub. L.
    No. 103-66, Title VI § 6002(b), 107 Stat. 312 (1993)).

[^15]: Amendment of the Commission\'s Rules to Establish New Personal
    Communications Services, GEN Docket No. 90-314, *Second Report and
    Order*, 8 FCC Rcd 7700, 7728 ¶ 61, 7745 ¶ 106 (1993) (*Broadband PCS
    Second Report and Order*) (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, GEN Docket No. 90-314,
    *Memorandum Opinion and Order*, 9 FCC Rcd 4957, 4984 ¶ 67 (1994)
    (*Broadband PCS Reconsideration Order*) (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).

[^16]: *CMRS Third Report and Order*, 9 FCC Rcd at 8100-8107.

[^17]: *Id.* at 8104 ¶ 248.

[^18]: *Id.* at 8108 ¶ 258.

[^19]: *Id.* at 7999 ¶ 16.

[^20]: *Id.* at 8114 ¶ 276.

[^21]: *Id.* at 8116-17 ¶ 281.

[^22]: Implementation of Sections 3(n) and 332 of the Communications
    Act, Regulatory Treatment of Mobile Services, GN Docket No. 93-252,
    *Fourth Report and Order*, 9 FCC Rcd 7123, 7128 ¶ 25 (1994) (*CMRS
    Fourth Report and Order*).

[^23]: *Id.* at 7129-30 ¶ 30.

[^24]: 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, 7864-87 (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).

[^25]: *CMRS Spectrum Cap Report and Order*, 11 FCC Rcd at 7869-73 ¶¶
    96-100.

[^26]: *Id.* at 7875 ¶ 104.

[^27]: *Id.* at 7875 ¶ 105.

[^28]: *Id.* at 7887 ¶ 131.

[^29]: *Id.* at 7828 ¶ 4, 7880 ¶ 117.

[^30]: *Id*. at 7876 ¶ 107.

[^31]: *Id.* at 7886 ¶ 130.

[^32]: *BellSouth MO&O*, 12 FCC Rcd at 14037 ¶ 10, 14040 ¶ 14.

[^33]: *BellSouth v. FCC,* 162 F.3d at 1222-24.

[^34]: *Id.* at 1225.

[^35]: 47 C.F.R. § 22.942.

[^36]: 47 C.F.R. § 22.942.

[^37]: 47 C.F.R. § 22.942(a).

[^38]: 47 C.F.R. § 22.942(b).

[^39]: 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, 6628-29 (1991) (*Cellular
    First Report and Order*). The rule initially was codified at 47
    C.F.R. § 22.902(b)(5), but subsequently was moved, without revision,
    to 47 C.F.R. § 22.942. Revision of Part 22 of the Commission\'s
    Rules Governing the Public Mobile Services, CC Docket 92-115,
    *Report and Order*, 9 FCC Rcd 6513, 6574 (1994).

[^40]: *Cellular First Report and Order,* 6 FCC Rcd at 6628 ¶ 103.

[^41]: *Id.* at ¶ 104.

[^42]: 1998 Biennial Regulatory Review -- Spectrum Aggregation Limits
    for Wireless Telecommunications cariers, WT Docket No. 98-205,
    *Notice of Proposed* Rulemaking, 13 FCC Rcd 25132 (1998) (*NPRM*).

[^43]: *Id.* at 25134-35 ¶ 5, 25147 ¶ 29.

[^44]: *Id* at 25156-57 ¶¶ 50-53.

[^45]: *Id.* at 25157-59 ¶¶ 54-58.

[^46]: *Id.* at 25159-61 ¶¶ 59-62.

[^47]: *Id.* at 25161-63 ¶¶ 63-70.

[^48]: *Id.* at 25163-64 ¶¶ 71-73.

[^49]: *Id.* at 25164-66 ¶¶ 74-78.

[^50]: *Id.* at 25142-43 ¶ 20. SMR Won's petition also raised other
    issues regarding the *CMRS Third Report and Order*. Those issues
    will be addressed in a separate proceeding.

[^51]: *NPRM* at 25143 ¶ 21.

[^52]: *Id.* at 25143-44 ¶¶ 22-24. Radiofone's petition also raised
    other issues relating to the *CMRS Spectrum Cap Report and Order*.
    Those issues will be addressed in a separate proceeding.

[^53]: *Id.* at 25146-47 ¶ 28. Implementation of Sections 3(n) and 332
    of the Communications Act ‑- Regulatory Treatment of Mobile
    Services, GN Docket No. 93‑252, *Third Further Notice of Proposed
    Rulemaking,* 10 FCC Rcd 6880 (1995) (*Third FNPRM*).

[^54]: *NPRM* at 25147, 25161-63 ¶ 29, 63-70 (citing CTIA Forbearance
    Petition).

[^55]: *NPRM* at 25144-46 ¶¶ 25-27. After release of the NPRM, five
    parties filed requests for waiver of the spectrum cap in conjunction
    with winning bids in Auction No. 22. *See* Pioneer Telephone
    Association, Inc. *et al;* Requests for Waiver of Section 20.6 of
    the Commission's Rules, *Order*, DA 99-1823 (CWD rel. Sep. 8, 1999).

[^56]: Donald R. Newcomb and Southeast Telephone filed informal
    comments. In addition, Cellular Communications of Puerto Rico, Inc.
    (CCPR) filed an *ex parte* letter. Letter from Sara F. Seidman,
    counsel for CCPR, to Thomas J. Sugrue, FCC, dated Apr. 22, 1999.

[^57]: Amendment of the Commission's Rules to Establish New Personal
    Communications Services, RM-7140, RM-7175, RM-7618 FCC 94-144, GN
    Docket No. 90-314, *Memorandum Opinion and Order*, 9 FCC Rcd 4957,
    4979 ¶ 53 (1994) *(PCS Memorandum Opinion and Order)*.

[^58]: *CMRS* *Third Report and Order,* 9 FCC Rcd at 8101 ¶ 240.

[^59]: As PCIA notes, we have recognized that "while aggregation of
    spectrum allows efficiencies and economies, there is a point at
    which aggregation results in less innovation and higher prices."
    PCIA comments at 5 (citing *CMRS Spectrum Cap Report and Order,* 11
    FCC Rcd at 7869 ¶ 95). *See also* Northcoast comments at 4; TRA
    comments at 4-5.

[^60]: *CMRS Third Report and Order*, 9 FCC Rcd at 8105 ¶ 251.

[^61]: *Id.*

[^62]: *CMRS Spectrum Cap Report and Order,* 11 FCC Rcd. at 7873 ¶ 102
    (citing 47 U.S.C. § 309(j)).

[^63]: *Id.* at ¶ 104.

[^64]: *NPRM*, 13 FCC Rcd at 25135 ¶ 5.

[^65]: 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, *Fourth Report*, FCC 99-136 (rel. June 24, 1999) at 20-23,
    25 (*Fourth Annual CMRS Competition Report*).

[^66]: *See* D&E comments at 5, 9; Digiph comments at 2.

[^67]: *See, e.g.,* Digiph comments at 2,4; North Coast comments at 3;
    Omnipoint comments at 3-4; Radiofone comments at 5; RTG comments at
    5; SBCW comments at 4; Crandall & Gertner at 5-6.

[^68]: Digiph comments at 3; TDS comments at 3.

[^69]: *See, e.g.,* D&E Communications comments at 8.

[^70]: Crandall & Gertner at 4 ¶ 15, 16 ¶ 49.

[^71]: *See, e.g.,* BellSouth comments at 10; GTE comments at 19-22;
    SBCW comments at 9-10.

[^72]: *See* letter from Brent H. Weingardt, PCIA, to Magalie Roman
    Salas, FCC, dated Aug 25, 1999, Attachment (Telecompetion, Market
    Data Report, Aug. 23, 1999)(in all but 15 of the top 203 MSAs the
    two celular carriers have 70 percent of more of subscribers); PCIA
    reply comments, Attachment A (Telecompetiton). *See also* *Fourth
    Annual CMRS Competition Report* at 9 (at end of 1998, cellular
    carriers had approximately 86 percent of mobile telephone
    subscribers nationwide).

[^73]: *See* Sprint PCS comments at 14.

[^74]: *See* *NPRM*, 13 FCC Rcd at 25144-46 ¶¶ 25-27. Subsequent to
    release of the *NPRM*, five parties have filed requests for waiver
    of the spectrum cap in conjunction with winning bids in Auction 22.
    *See* Pioneer Telephone Association, Inc. *et al;* Requests for
    Waiver of Section 20.6 of the Commission's Rules, *Order*, DA
    99-1823 (CWD rel. Sep. 8, 1999).

[^75]: We decline to adopt a sunset for either the spectrum cap or the
    cellular cross-interest rule at this time. *See NPRM* at 25162-63 ¶
    67. As we discuss in this Order, competition in CMRS markets is
    changing rapidly. We do not believe that at this time we can
    accurately predict when it would be proper to eliminate either of
    these two rules. We believe it is more appropriate at this time to
    reassess the state of CMRS markets, and the continuing need for
    these rules, as part of our year 2000 biennial review.

[^76]: \[1992\] Department of Justice -- Federal Trade Commission
    Horizontal Merger Guidelines, 4 Trade Reg. Rep. (CCH) (*Merger
    Guidelines*).

[^77]: *Merger Guidelines* at § 3.0.

[^78]: *CMRS Spectrum Cap Report and Order*, 11 FCC Rcd at 7869 ¶ 95. We
    noted that "\[u\]p to a point, horizontal concentration can allow
    efficiencies and economies that would not be achievable otherwise,
    and can therefore be pro-competitive, pro-consumer, and in the
    public interest." *Id.* For purposes of identifying this point, we
    even found "useful" measures of market concentration,
    notwithstanding the absence of data on the actual performance of
    broadband PCS carriers, which were then "under construction in
    almost all markets." *Id.* at ¶ 96. Thus, we calculated market
    concentration based on allocated spectrum, rather than on any then
    current measures of productive ability. *Id.*

[^79]: Reinhard Selten, "A Simple Model of Imperfect Competition, where
    4 Are Few and 6 Are Many," International Journal of Game Theory
    (1973), at 141-201, cited by America One Communications in *ex
    parte*. *See* attachment to letter from Henry Goldberg, counsel for
    America One, to Magalie Roman Salas, FCC, in CC Docket No. 94-54,
    dated August 5, 1999.

[^80]: *Merger Guidelines* at § 3.0.

[^81]: *Id.* at § 3.2.

[^82]: *Id.* at § 3.0.

[^83]: GTE comments at 16; D&E comments at 7 n.21; PCIA comments at 7;
    PCIA reply comments at 15 n. 39.

[^84]: PCIA argues that "there is no doubt that barriers to entry in
    this market are high," since it may take years for equipment to be
    designed, tested and commercially available that would enable a new
    entrant to provide services not already being offered in the
    spectrum band in which it is licensed. PCIA reply comments at 15 n.
    39. Sidak and Teece contend that the incremental cost of cell sites
    and tower siting are both on the decline, but do not address the
    absolute level of those costs or the costs of spectrum rights. GTE
    comments at 16; GTE reply comments at 12-13. Moreover, at least one
    wireless analyst believes that these costs will rise for new
    entrants, as growing demand for wireless connectivity generally and
    for wireless data in particular increases demand for tower and cell
    sites. *See* John Bensche, "Seizing the Narrows," Lehman Brothers
    (July 30, 1999).

[^85]: TDS comments at 3-4. *See also* BellSouth comments at 11; Western
    Wireless comments at 4.

[^86]: North Coast comments at 4; Wireless One comments at 3; SBA reply
    comments at 4. However, AirTouch contends that the Commission should
    avoid overstating the extent to which the rule has contributed to
    the successful growth of the CMRS sector. Instead, it attributes
    industry growth to the allocation and auctioning of more spectrum,
    rapid technological advances, and narrowly focused regulation such
    as build-out benchmarks. AirTouch comments at 10. *See also* Western
    Wireless comments at i.

[^87]: Bell Atlantic Mobile comments at 15-16; Omnipoint comments at 4.

[^88]: *CMRS Spectrum Cap Report and Order* at ¶ 102.

[^89]: *Broadband PCS Reconsideration Order*, 9 FCC Rcd at 4998-4999.

[^90]: PCIA reply comments at 9-10.

[^91]: PCIA reply comments at 10. While we are inclined to assume that
    the shares reported by PCIA and Telecompetition for individual
    markets may be subject to measurement error, when aggregated, these
    data covering the 200 largest urban markets comport well with data
    for the entire nation. *See Fourth Annual CMRS Competition Report*
    at 9. The PCIA data yield an 81.5 percent share for cellular
    carriers in these 200 markets, compared with 86 percent nationwide.
    Given the urban deployment strategy being adopted by most PCS
    carriers, we would expect to observe a lower cellular share in the
    PCIA sample.

[^92]: Hayes at 8, Table 1; letter from Jonathan Chambers, Sprint PCS,
    to Magalie Roman Salas, FCC, dated Aug. 13, 1999, Attachment (John
    B. Hays, HHIs in Top 25 MSAs & PMSAs).

[^93]: Letter from John Chambers, Sprint PCS, to Magalie Roman Salas,
    FCC, dated Aug. 13, 1999, Attachment.

[^94]: Hayes at Table 2. According to Donaldson Lufkin & Jenrette,
    entities controlling CMRS licenses in the Chicago market include
    SBC, Ameritech (sale pending to GTE), AT&T Wireless, PCS PrimeCo
    (accruing to Vodafone AirTouch), Sprint PCS (with two licenses), and
    Nextel. Other licensees are Cook Inlet and NextWave. Donaldson
    Lufkin & Jenrette, The Global Wireless Communications Industry
    (Summer 1999).

[^95]: Letter from John Chambers, Sprint PCS, to Magalie Roman Salas,
    FCC, dated Aug. 13, 1999, Attachment.

[^96]: Letter from Brent H. Weingardt, PCIA, to Magalie Roman Salas,
    FCC, dated May 6, 1999, Attachment (An Analysis of Market
    Concentration in the Cellular, PCS and ESMR Markets, dated May 5,
    1999) at 2.

[^97]: Competitive Impact Statement, *United States v. Southwestern Bell
    Co. and Ameritech Corporation*, Civil No. 99-0715 (TPJ) at 9 (filed
    April 16, 1999).

[^98]: *Id.* DOJ reviewed the following markets: Chicago, IL MSA; St.
    Louis, MO-IL MSA; Gary-Hammond-East Chicago, IN MSA; Springfield, IL
    MSA; Champaign-Urban-Rantoul, IL MSA; Bloomington-Normal, IL MSA;
    Decatur, IL MSA; Illinois RSA 2 -- Bureau; Illinois RSA 5 -- Mason;
    Illinois RSA 6 -- Montgomery; Missouri RSA 8 -- Callaway; Missouri
    RSA 12 -- Maries; Missouri RSA 18 -- Perry; and, Missouri RSA 19 --
    Stoddard.

[^99]: *See* letter from Brent H. Weingardt, PCIA, to Magalie Roman
    Salas, FCC, dated Aug. 25, 1999; Attachment (Telecompetition, Market
    Data Report, Aug. 23, 1999) (in 188 of the top 203 markets the two
    cellular carriers combined have 70 percent or more of total CMRS
    subscribers). *See also* PCIA Reply Comments at 2-3; Telecompetition
    at 19-24.

[^100]: CTIA comments at 5-6.

[^101]: Bell Atlantic comments at 17.

[^102]: Hayes at 5, as cited in Bell Atlantic reply comments at 6 ¶ 11.

[^103]: *Fourth Annual CMRS Competition Report* at 23.

[^104]: Donaldson Lufkin & Jenrette, The Global Wireless Communications
    Industry (Summer 1999) at 22, Table 6; *see also* 15, Table 2C.

[^105]: *See* *Fourth Annual CMRS Competition Report* at 9 (according to
    one estimate, at the end of 1998, cellular operators had
    approximately 86 percent of the mobile telephone subscribers);
    letter from Brent H. Weingardt, PCIA, to Magalie Roman Salas, dated
    Aug. 25, 1998, at 1 (Telecompetition report shows cellular has 88
    percent market share in top 203 MSAs).

[^106]: *See, e.g*., AirTouch comments at 7*;* AT&T Wireless comments at
    9; GTE comments at 13-16; Western Wireless comments at 5-6.

[^107]: America One comments at 4; TRA comments at 5; Western Wireless
    comments at i, 5; Western Wireless reply comments at i.

[^108]: AirTouch comments at i, 7; TRA comments at 7; Western Wireless
    reply comments at 10-11.

[^109]: *See* Bell Atlantic comments at 17; AirTouch comments at 7;
    Western Wireless reply comments at 10-11.

[^110]: *See supra* ¶¶ 35-38.

[^111]: *Merger Guidelines* at §§ 1.51, 2.0. The guidelines describe
    these concerns with respect to acquisitions that increase
    post-merger HHIs increasing by at least 50 or 100 points,
    respectively.

[^112]: Competition in a particular market may be diminished through
    either the unilateral actions of one firm or coordinated interaction
    among a number of service providers. The fact that we conclude that
    no single CMRS carrier will likely be able to foreclose competition
    entirely does not alleviate our concerns about market concentration.
    We also recognize risks associated with unilateral exercise of
    market power in the provision of CMRS services by a single market
    participant. As firms acquire additional financial interests in
    other operators competing within a given market, their incentives
    will shift. We also believe that the risks to competition in CMRS
    markets may stem from the possibility of tacit or explicit collusion
    among market participants. In either case, we are concerned that
    excessive concentration of the market might slow or halt the decline
    in prices, the increase in output, and the introduction of new
    services for consumers. Further, we are not persuaded by commenters'
    arguments that the Commission can forestall any adverse competitive
    impacts from spectrum concentration simply by making additional
    spectrum available. *See* Bell Atlantic comments at 2, 11, 32
    (citing Crandall/Gertner at ¶ 39); Crandall & Gertner reply at 2-3;
    Bell Atlantic reply comments at 5; BellSouth comments at 10. While
    we are fully committed to making additional spectrum available, any
    resulting new market entry is unlikely to be sufficiently timely or
    sufficiently certain to discipline markets adequately in the near
    term.

[^113]: Crandall & Gertner at 8-10. Crandall & Gertner also present data
    showing declining prices in the same markets where Hayes shows no
    change in HHIs. Crandall & Gertner reply at 7 ¶ 12, Table 1.

[^114]: *See* letter from Brent H. Weingardt, PCIA, to Magalie Roman
    Salas, FCC, dated Sep. 3, 1999, Attachment (Yankee Group, The Impact
    of PCS Service on U.S. Wireless Pricing, Aug 18, 1999) at 6.

[^115]: *Id.* at 14.

[^116]: Competitive Impact Statement, *United States v. AT&T Corporation
    and Tele-Communications, Inc.,* at 6-7 (filed Dec. 30, 1998).

[^117]: PCIA reply comments at 14.

[^118]: To cite just one example, we note the competition in the market
    for domestic interexchange (long distance) services.

[^119]: Sidak & Teece at ¶ 20.

[^120]: CTIA comments at 16-17; Radiofone comments at 4; SBCW comments
    at 5; Economists, Inc. at 6.

[^121]: In rural areas, some interconnected service is also available
    from analog SMR operators. *Fourth Annual CMRS* *Competition Report*
    at 34.

[^122]: Craig O. McCaw and American Telephone and Telegraph Company,
    Application For Consent to the Transfer of Control of McCaw Cellular
    Communications, Inc. and its Subsidiaries*, Memorandum Opinion and
    Order,* 9 FCC Rcd 5836 (1994) (*McCaw*), *reconsideration denied on
    other grounds, Memorandum Opinion and Order on Reconsideration,* 10
    FCC Rcd 11786 (1995), *aff'd sub nom. SBC Comm., Inc. v. FCC*, 56
    F.3d 1484 (D.C. Cir. 1995). In the AT&T/McCaw merger, the Commission
    defined relevant product and geographic markets as "interexchange
    services in U.S., local cellular service in each MSA or RSA, and the
    manufacture of cellular network equipment in North America."
    *McCaw*, 9 FCC Rcd 5836, 5843‑44 & n.25.

[^123]: Sprint PCS declares that "for purposes of the spectrum cap, the
    relevant market is the mobile telephony market, not the local
    telecommunications market generally." Sprint PCS comments at 6 n.
    17.

[^124]: Competitive Impact Statement, *United States of America versus
    AT&T Corp. and Tele-Communications, Inc.* at 5-6. While some
    commenters argued for a more broadly defined product market, they
    provided no evidence of the nature required to adequately support
    alternative market definitions.

[^125]: We recognize that some new services, such as two-way messaging,
    may provide sufficient functionality to compete effectively in this
    market. However, we received no evidence that the market for this
    service would be large enough to constrain a monopoly provider of
    mobile voice services from profitably elevating prices. Other
    services, such as satellite-based mobile voice telephone services,
    are at this time far too expensive in terms of airtime and equipment
    prices to deter anticompetitive pricing by mass-market mobile voice
    service providers.

[^126]: We note that CTIA recognizes that the risk of anticompetitive or
    collusive behavior grows as market concentration increases. CTIA
    comments at 7.

[^127]: The D.C. Circuit also has recognized that a spectrum cap may be
    most effectively administered through a bright line rule. *BellSouth
    v. FCC*, 162 F.3d at 1225.

[^128]: BellSouth comments at 15, 19; BellSouth reply comments at 13;
    *see also* Chase comments at n.2; PCIA comments at 18; CTIA reply
    comments at 15; Omnipoint comments at 6; SBCW comments at 3; TDS
    reply comments at 2, 7, 9; Sprint PCS comments at 2.

[^129]: Thus we are not persuaded by CITA's argument that a case-by-case
    approach is more efficient and effective than reliance on a spectrum
    cap rule. *See* CTIA reply comments at 13.

[^130]: *See* Wireless One comments at 5; Sprint PCS comments at 2.

[^131]: SBA reply comments at 6.

[^132]: PCIA comments at 16.

[^133]: *See* ¶¶ 90-98 *infra. See also CMRS Spectrum Cap Report and
    Order*, 11 FCC Rcd 7882 ¶ 121.

[^134]: *See* AirTouch comments at 14-15; BellSouth comments at 14; CTIA
    comments at 22; GTE comments at 29-32; Radiofone comments at 5; SBCW
    comments at 8.

[^135]: AirTouch comments at 14; Bell Atlantic Mobile comments at 14;
    Bell Atlantic Mobile reply comments at 9; Crandall & Gertner Reply
    at 3 ¶ 4; BellSouth comments at 14; CTIA comments at 3, 22-23; SBCW
    comments at 8. Several commenters also identified opportunities to
    seek private remedies. Bell Atlantic Mobile comments at 2, 14; Bell
    Atlantic Mobile reply comments at 9; GTE comments at 27, 31.

[^136]: *Supra* at ¶¶ 50-53.

[^137]: *See*, *e.g.*, *SBC Communications Inc. v. FCC*, 56 F.3d 1484,
    1490-91 (D.C. Cir. 1995) (*SBC*); *see also United States v. FCC*,
    652 F.2d 72, 81-82 (1980) ("competitive considerations are an
    important element of the 'public interest' standard") (citations and
    interior quotation marks omitted). Numerous commenters also pointed
    to the Commission's ability to conduct competitive reviews under its
    public interest authority. AirTouch comments at 14-15; BellSouth
    comments at 14; CTIA comments at 22; GTE at 29-32; Radiofone
    comments at 5; SBCW comments at 8.

[^138]: We do not accept the proposition that all transfers resulting in
    consolidation of spectrum below the spectrum aggregation limit
    should be exempt from section 310(d) review. We can envision
    circumstances under which a transfer could raise competitive
    concerns notwithstanding compliance with the spectrum cap.
    Accordingly, we reject proposals to adopt a processing threshold in
    lieu of our spectrum cap rule, whereby, for example, only
    transactions taking a firm's spectrum interests above a specified
    level would be subject to public interest review or where different
    standards of review would apply to different levels of
    concentration. *See, e.g,* AT&T comments at 13-14; BellSouth
    comments at 15. We note, however, as has been our practice in the
    past, if a licensee would continue to be in compliance with the
    spectrum cap after a proposed assignment or transfer of control, in
    reviewing the application we would generally presume that it does
    not cause an undue risk on market concentration unless specific
    evidence to the contrary is presented by either interested parties
    or through review by Commission staff.

[^139]: We also note that there may be a small class of transactions
    that would be covered by our spectrum cap and cross-interest rules
    but that would not meet the threshold requirements of the
    Hart-Scott-Rodino Act, 15 U.S.C. § 18a, and thus would not receive
    routine antitrust review.

[^140]: Herbert Hovenkamp, Federal Antitrust Policy (1994), § 13.4, at
    512. *See also* Applications of NYNEX Corporation and Bell Atlantic
    Corporation, *Order*, 12 FCC Rcd 19985, 20023 ¶ 67 (1997). Although
    the Supreme Court has theorized that two kinds of potential
    competition may be within the reach of section 7 of the Clayton Act,
    no court has yet decided whether section 7 authorizes a claim that a
    merger is illegal because it eliminated actual potential
    competition. *See* *U.S. v. Marine Bancorp.,* 418 U.S. 602 (1974);
    *see also, e.g.,* *Tenneco, Inc. v. FTC,* 689 F.2d 346, 352-55 (2d
    Cir. 1982); *Mercantile Texas Corp. v. Board of Governors,* 638 F.2d
    125, 1265 (5^th^ Cir Unit A 1981); *FTC v. Atlantic Richfield*, 549
    F.2d 289, 293-94 (4^th^ Cir. 1977).

[^141]: *See SBC*, 56 F.3d at1490 (upholding Commission's approval of a
    merger based both upon antitrust principles and upon considerations
    "beyond the scope of antitrust law" including "the development of
    the telecommunications industry, technical innovation, . . . \[and\]
    investment in infrastructure").

[^142]: Bell Atlantic reply comments at 3 ¶ 4; Western Wireless reply
    comments at 12.

[^143]: America One comments at 4.

[^144]: CTIA comments at 4-5.

[^145]: AirTouch comments at 15; BellSouth comments at 14; Western
    Wireless reply comments at 16.

[^146]: *NPRM*, 13 FCC at 25135 ¶ 5.

[^147]: *Id.* at 25155 ¶ 47.

[^148]: *Id.* at ¶ 48.

[^149]: *Id.* at 25153-54 ¶ 43.

[^150]: *See NPRM* at 25152-53 ¶ 43, 25154-55 ¶¶ 47-48.

[^151]: *Id.* at 25152-53 ¶ 43.

[^152]: GTE comments at 20; GTE reply comments at 16-19; CTIA comments
    at 3; SBCW comments at 4, 11; Omnipoint comments at 4; RTG comments
    at 9; Western Wireless comments at 9 n 16.

[^153]: *See, e.g*, Crandall & Gertner Decl. at 21 ¶ 62.

[^154]: PCIA reply comments at 15 n 39.

[^155]: To the extent that a licensee can demonstrate that compliance
    with the spectrum cap limits its ability to implement 3G or other
    advanced services in a particular geographic area in an timely and
    efficient manner, we would consider grant of a waiver of the
    spectrum cap for that carrier in that geographic area.

[^156]: *CMRS Spectrum Cap Report and Order*, 11 FCC Rcd at 7869 ¶ 95.

[^157]: *See* Commission Staff Seek Comment on Spectrum Issues Related
    to Third Generation Wireless/IMT-2000, *Public Notice*, DA 98-1703
    (rel. Aug. 26, 1998). We also note that there is potentially more
    spectrum available for CMRS in addition to the planned 3G
    allocation. For example, in the *Channel 60-69 (Commercial) NPRM*
    the Commission sought comment on whether to allow mobile, as well as
    fixed, services in those bands. Service Rules for the 746-764 and
    776-794 MHz bands, and Revision to Part 27 of the Commission's
    Rules, WT Docket 99-168, *Notice of Proposed Rulemaking*, FCC 99-97
    (rel. June 3, 1999). That and other pending or contemplated
    proceedings may furnish additional sources of spectrum for 3G.

[^158]: BellSouth comments at 8; Bell Atlantic comments at 33-34.

[^159]: TRA comments at 10.

[^160]: *See* MCI comments at 4; *see also* TRA comments at 9.

[^161]: PCIA reply comments at 15 n 39.

[^162]: *See* Sprint PCS comments at 5; *see also* GTE reply comments at
    19.

[^163]: *See, e.g.*, Sprint PCS comments at 13.

[^164]: 47 C.F.R. § 22.942.

[^165]: 47 C.F.R. § 22.942(a).

[^166]: 47 C.F.R. § 22.942(b).

[^167]: *NPRM*, 13 FCC Rcd at 25167 ¶ 81.

[^168]: *Id.* ¶ 82.

[^169]: *Id.* ¶ 83.

[^170]: *Id.* at 25167-68 ¶ 84.

[^171]: RTG comments at 13; Western Wireless comments at 16.

[^172]: GTE comments at 30; TDS comments at 6; GTE reply comments at
    24-25.

[^173]: TRA comments at 13; Wireless One comments at 7.

[^174]: SBCW comments at 14.

[^175]: TDS comments at 6-7.

[^176]: *Fourth Annual CMRS Competition Report* at 9.

[^177]: *Fourth Annual CMRS Competition Report* at 9 (citing Dennis
    Leibowitz, et al., The Wireless Communications Industry, Donaldson
    Luftkin & Jenrette, Winter 1998/1999 at 18).

[^178]: PCIA reply comments, Attachment A. *See also Fourth Annual CMRS
    Competition Report* at (B-16)-(B-20).

[^179]: *See* letter from Brent H. Weingardt, PCIA, to Magalie Roman
    Salas, FCC, dated Aug. 25, 1999, Attachment (in only 4 of the top
    203 markets do the PCS carriers have a combined market share in
    excess of 30 percent). *See also PCIA* reply comments, Attachment A
    at 24.

[^180]: 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, *Third Report*, FCC 98-91 (rel. June 11, 1998), at B-8.

[^181]: *See* ¶ 84 *infra.*

[^182]: *See* 47 C.F.R. § 20.6(d)(2).

[^183]: *See* 47 C.F.R. § 20.6(d)(7).

[^184]: *NPRM,* 13 FCC Rcd at 25158 ¶ 55.

[^185]: *Id.* ¶ 56.

[^186]: *Id.* at 25158-59 ¶ 57.

[^187]: Omnipoint comments at 5.

[^188]: *Id.* at 5-6.

[^189]: RTG comments at 11.

[^190]: SBA reply comments at 5.

[^191]: Triton comments at 6.

[^192]: As has been our practice in the past, if a licensee would
    continue to be in compliance with the spectrum cap after a proposed
    assignment or transfer of control, in reviewing the application we
    would generally presume that it does not cause an undue risk on
    market concentration unless specific evidence to the contrary is
    presented by either interested parties or through review by
    Commission staff.

[^193]: *CMRS Spectrum Cap Report and Order*, 11 FCC Rcd at 7869-73 ¶¶
    95-101.

[^194]: To the extent that a carrier can demonstrate that it requires
    more than 45 MHz of broadband CMRS spectrum -- 55 MHz in rural areas
    -- in a particular geographic area ,we will consider waiving the
    spectrum cap for that carrier in that geographic area.

[^195]: This HHI is derived using allocated spectrum to measure market
    share. As discussed previously, revenues or subscribers may not be
    evenly distributed among market participants based on their
    allocated spectrum, so HHIs measured more appropriately may be
    higher. *See CMRS Spectrum Cap Report and Order*, 11 FCC Rcd at 7872
    ¶ 100.

[^196]: *See* Bell Atlantic reply at 10; GTE reply comments at 19. *But
    see* SBCW comments at 10; US West reply comments at 4.

[^197]: *See supra* at ¶ 26.

[^198]: *See* Commission Staff Seek Comment on Spectrum Issues Related
    to Third Generation Wireless/IMT-2000, *Public Notice*, DA 98-1703
    (rel. Aug. 26, 1998). We also note that there is potentially more
    spectrum available for CMRS in addition to the planned 3G
    allocation. For example, in the *Channel 60-69 (Commercial) NPRM*
    the Commission sought comment on whether to allow mobile, as well as
    fixed, services in those bands. Service Rules for the 746-764 and
    776-794 MHz bands, and Revision to Part 27 of the Commission's
    Rules, WT Docket 99-168, *Notice of Proposed Rulemaking*, FCC 99-97
    (rel. June 3, 1999). That and other pending or contemplated
    proceedings may furnish additional sources of spectrum for 3G.

[^199]: *See, e.g.,* AirTouch comments at 16; BellSouth comments at
    10-11; GTE comments at 20-22.

[^200]: *See, e.g.,* letter from Ben G. Almond, BellSouth, to Magalie
    Roman Salas, FCC, dated Sep. 1, 1999; letter from Thomas E. Wheeler,
    CTIA, to FCC Chairman and Commissioners, dated Sep. 3, 1999.

[^201]: *See* 47 C.F.R. § 1.925 (1999) (63 Fed. Reg. 68904, 68926-27
    (Dec. 14, 1998)).

[^202]: A market with two CMRS providers with 70 MHz each would have
    HHIs ranging upwards from 3148. A market with three CMRS providers
    with 60 MHz each would have an HHI not lower than 3333.

[^203]: RSAs are defined in 47 C.F.R. § 22.909(b). Other market
    designations used by the Commission for CMRS, such as Economic Areas
    (EAs), combine urbanized and rural areas, while MSAs and RSAs are
    defined expressly to distinguish between rural and urban areas.

[^204]: *NPRM*, 13 FCC at 25135 ¶ 5.

[^205]: BellSouth comments at 11; D&E comments at 2, 5, 6; Western
    Wireless comments at 4; TDS comments at 6.

[^206]: *See, e.g.,* BellSouth comments at 13; Bell Atlantic comments at
    18-21; RTG reply comments at 2.

[^207]: *See, e.g.,* BellSouth comments at 8; Triton comments at 10; RTG
    reply comments at 5-6.

[^208]: *See, e.g.,* Chariton reply comments at 2; RTG reply comments at
    1.

[^209]: *NPRM*, 13 FCC Rcd at 25164 ¶ 72.

[^210]: 47 C.F.R. § 20.6(d)(2). Ownership interests held through
    successive subsidiaries are calculated through use of a multiplier.
    47 C.F.R. § 20.6(d)(8).

[^211]: 47 C.F.R. § 20.6(d)(7), (9), (10).

[^212]: 47 C.F.R. § 20.6(d)(3).

[^213]: 47 C.F.R. § 20.6(d)(5).

[^214]: "Waivers of § 20.6(d) may be granted upon an affirmative
    showing:

    \(1\) That the interest holder has less than a 50 percent voting
    interest in the license and there is an unaffiliated single holder
    of a 50 percent or greater voting interest;

    \(2\) That the interest holder is not likely to affect the local
    market in an anticompetitive manner;

    \(3\) That the interest holder is not involved in the operations of
    the licensee and does not have the ability to influence the licensee
    on a regular basis; and

    \(4\) That grant of a waiver is in the public interest because the
    benefits to the public of common ownership outweigh any potential
    anticompetitive harm to the market."

    47 C.F.R. § 20.6, note 3.

[^215]: *NPRM,* 13 FCC Rcd at 25159 ¶ 59, 25160 ¶ 61.

[^216]: *Id.* at 25159-60 ¶ 60.

[^217]: *Id.*

[^218]: *Id.* at 25161 ¶62.

[^219]: AT&T comments at 12.

[^220]: *Id.* at 11.

[^221]: AT&T comments at 10.

[^222]: Triton comments at 6; Triton reply comments at 1-2.

[^223]: Sonera comments at 3. Sonera states that WTB staff have told
    Sonera and Aerial Communications that they would be attributed with
    the spectrum that the other holds in the Charlotte BTA because of a
    joint partnership they are both part of with a licensee in the
    Dallas BTA. *Id.* at 2.

[^224]: Chase comments at 6-8.

[^225]: Chase comments at 8-9 (citing *Roy M. Speer*, 11 FCC Rcd 18393
    (1996)).

[^226]: Chase comments at 8.

[^227]: *CMRS Spectrum Cap Report and Order*, 11 FCC Rcd at 7881-82 ¶
    120, 7886-87 ¶¶ 130-31.

[^228]: 47 C.F.R. § 20.6 note 3.

[^229]: *See, e.g.,* Amendment of the Commission\'s Rules to Establish
    New Personal Communications Services, *Memorandum Opinion and
    Order*, 9 FCC Rcd 4957 ¶ 119 (1994). *See also Third Memorandum
    Opinion and Order*, GN Docket No. 90‑314, 9 FCC Rcd 6908 at n.64
    (1994) (the attribution standard for cellular interests other than
    designated entities is set at 20 percent to account for our policy
    in the early days of the cellular industry to encourage the
    formation of settlement groups‑‑a historic anomaly that has no
    counterpoint in the PCS context. Attributions levels are set higher
    for designated entities in accordance with our statutory mandate to
    promote opportunities in PCS for such entities); *Memorandum Opinion
    and Order*, GN Docket No. 90-314, 9 FCC Rcd 4957 at ¶¶ 107, 110
    (1994) (The 20 percent ownership attribution standard for cellular
    operators was adopted, in part, because settlements during the
    initial phase of cellular licensing resulted in partial and often
    non‑controlling interests in those licensees. In light of this
    history, it would be unfair and unduly restrictive to place the same
    5 percent limit on cellular/PCS cross‑ownership. For this reason, we
    decided to allow a 20 percent cellular ownership interest.); *Second
    Report and Order*, GN Docket No. 90-314, 8 FCC Rcd 7700 at ¶¶
    107-109 (1993) (settlements encouraged by the Commission during the
    initial phase of cellular licensing may have resulted in the
    creation of certain partial, often passive ownership interest in
    cellular licensees, and we were concerned that we not foreclose such
    partial owners from participating in PCS). The narrowband PCS rules
    use a 5 percent attribution level, with 10 percent permitted for
    institutional investors. *See* 47 C.F.R. § 24.101.

[^230]: Review of the Commission's Regulations Governing Attribution of
    Broadcast and Cable/MDS Interests, MM Dockets 94-150, 92-51, 87-154,
    *Report and Order*, FCC 99-207 (rel. Aug. 6, 1999) ¶¶ 8-15.

[^231]: Triton comments at 8-9.

[^232]: *See* AT&T comments at 10 n. 37; Chase comments at 6 (Chase only
    argues that directors from non-controlling institutional investors
    should not be attributed).

[^233]: For that reason, the broadcast and cable attribution rules also
    attribute directors. *See* 47 C.F.R. §§ 73.3555 note 2(h), 76.501
    note 2(h).

[^234]: Sonera comments at 3.

[^235]: *See* 47 C.F.R. § 20.6(d)(6).

[^236]: Parties involved with joint ventures, even in other geographic
    areas, with another licensee in the same market should seek a
    determination from the Commission regarding whether such interests
    are permissible under the spectrum cap.

[^237]: "Waivers of § 20.6(d) may be granted upon an affirmative
    showing:

    \(1\) That the interest holder has less than a 50 percent voting
    interest in the license and there is an unaffiliated single holder
    of a 50 percent or greater voting interest;

    \(2\) That the interest holder is not likely to affect the local
    market in an anticompetitive manner;

    \(3\) That the interest holder is not involved in the operations of
    the licensee and does not have the ability to influence the licensee
    on a regular basis; and

    \(4\) That grant of a waiver is in the public interest because the
    benefits to the public of common ownership outweigh any potential
    anticompetitive harm to the market."

    47 C.F.R. 20.6, note 3.

[^238]: *Attribution of Ownership Interests,* 97 FCC 2d 997, 1023
    (1984); *see also* *Attribution Reconsideration Order,* 58 Rad. Reg.
    2d 604, ¶ 44 n.60 (attribution criteria may be incorporated in the
    certificate of limited partnership).

[^239]: For a limited partner to be insulated under the attribution
    criteria, the partnership agreement should:

     specify that the exempt limited partner cannot act as an employee
    of the limited partnership if his or her functions, directly or
    indirectly, relate to the \[ \] enterprises of the company;

     bar an exempt limited partner from serving, in any material
    capacity, as an independent contractor or agent with respect to the
    partnership\'s \[ \] enterprises;

     restrict the exempt limited partner from communicating with the
    licensee or the general partner on matters pertaining to the
    day-to-day operation of its business;

     permit the exempt limited partner to vote on the admission of
    additional general partners, but empower the general partner to veto
    any such admission;

     either prohibit the exempt limited partner from voting on the
    removal of a general partner or limit this right to situations where
    the general partner is subject to bankruptcy proceedings . . . or is
    adjudicated incompetent by a court of competent jurisdiction, . . .
    or where there is a finding by an independent party that the general
    partner has engaged in malfeasance, criminal conduct or wanton or
    willful neglect;

     with the exception of permitting a limited partner to make loans
    to, or act as a surety for the business, bar the exempt limited
    partner from performing any services for the limited partnership
    materially relating to its \[ \] activities; and,

    state, in express terms, that the exempt limited partner is
    prohibited from becoming actively involved in the management or
    operation of the \[ \] business of the partnership.

    > *Attribution Reconsideration Order*, 58 Rad. Reg. 2d at 619-20
    > (notes omitted); *Attribution Further Reconsideration,* 1 FCC Rcd
    > 802, 803 (1986).

[^240]: *See* Request for Declaratory Ruling Concerning the Citizenship
    Requirements of Sections 310(b)(3) and (4) of the Communications Act
    of 1934, as amended, *Declaratory Ruling,* 103 FCC 2d 511, 520-21,
    n.43 (1985) (*Wilner & Scheiner*).

[^241]: *See* 47 C.F.R. § 73.3555 note 2; 47 C.F.R. § 76.501 note 2.

[^242]: *Attribution of Ownership Interests*, 97 FCC 2d at 1012-14
    (footnotes omitted).

[^243]: Review of the Commission's Regulations Governing Attribution of
    Broadcast and Cable/MDS Interests, MM Dockets 94-150, 92-51, 87-154,
    *Report and Order*, FCC 99-207 (rel. Aug. 6,1999) ¶¶ 17-22.

[^244]: 47 C.F.R. § 20.6(d)(2).

[^245]: *See* 47 C.F.R. § 1.2110.

[^246]: 47 C.F.R. § 20.6(d)(2).

[^247]: 18A Am Jur 2d 928 (Corporations § 1124). *See also* 76 Am Jur 2d
    43 (Trusts § 11).

[^248]: If either the trustee or the beneficiary hold stock outside of
    the trust, those holdings will be combined with the holdings of the
    trust to determine if the 20 percent threshold has been met.

[^249]: 47 C.F.R. § 20.6(c).

[^250]: *Id.*

[^251]: If the significant overlap is between 10 and 20 percent, the
    divestiture provision of the CMRS spectrum cap allows the licensee
    up to ninety days from the final grant of license that causes the
    licensee to exceed the 45 MHz limit, to come into compliance with
    section 20.6. 47 C.F.R. § 20.6(e).

[^252]: *NPRM*, 13 FCC Rcd at 25157 ¶ 53.

[^253]: SBCW comments at 11.

[^254]: *Id.*

[^255]: Triton comments at 6.

[^256]: *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 Freqency 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 92-297, *Second Report and Order,
    Order on Reconsideration and Fifth Notice of Proposed Rulemaking*,
    FC 97-82 (1997) (*LMDS Second Report and Order*) at ¶¶ 186-88;
    *recon. Second Order on Reconsideration*, FCC 97-323 (1997);
    Amendment of the Commission's Rules to Establish Competitive
    Safeguards for Local Exchange Carrier Provision of Commercial Mobile
    Radio Services, WT Docket No. 96-162, *Report and Order*, 12 FCC Rcd
    15668 ¶ 43 (1997) *recon.* FCC 99-102 (rel. June 30, 1999) *recons
    pending, appeal pending sub nom.* GTE of the Midwest Inc. v. FCC &
    USA, No. 98-3167 (6^th^ Cir. filed Dec. 12, 1997).

[^257]: *CMRS Spectrum Cap Report and Order*, 11 FCC Rcd at 7876 ¶ 107.

[^258]: 47 C.F.R. § 20.6(b).

[^259]: Implementation of Sections 3(n) and 332 of the Communications
    Act ‑- Regulatory Treatment of Mobile Services, GN Docket No.
    93‑252, *Third Further Notice of Proposed Rulemaking,* 10 FCC Rcd
    6880 (1995) (*Third FNPRM*).

[^260]: *CMRS Third Report and Order,* 9 FCC Red at 8000 ¶ 17. *See also
    id.*, at 8114-15, ¶ 275.

[^261]: In the *NPRM,* the Commission stated that it was incorporating
    the records of several pending proceedings concerning the spectrum
    cap, including the *Third FNPRM*, and would resolve those proceeding
    in this Order. *NPRM*, 13 FCC Rcd at 25142 ¶ 19, 25146-47 ¶ 28.

[^262]: 47 C.F.R. § 20.6(e).

[^263]: If the license(s) are not transferred from the trust before the
    trust expires, the licenses will be cancelled.

[^264]: 47 C.F.R. § 0.5(c).

[^265]: 47 U.S.C. § 160(a)(1-3).

[^266]: *See* 47 C.F.R. §20.6.

[^267]: 47 U.S.C. 310(d) requires the Commission to find that a proposed
    license transfer or assignment would serve the public interest,
    convenience and necessity.

[^268]: CTIA Forbearance Petition at 3.

[^269]: *NPRM*, 13 FCC Rcd at 25163 ¶ 68.

[^270]: *Id.* ¶ 69.

[^271]: *See, e.g.,* MCI comments at 6-7; Sprint PCS comments at 15; TRA
    comments at 13; Wireless One comments at 5-6.

[^272]: *See* Radiofone comments at 2-3; RTG comments at 6-9; Western
    Wireless comments at 12-13.

[^273]: BellSouth comments at 18.

[^274]: SBCW comments at 12.

[^275]: 47 U.S.C. § 332(c)(1)(A) (Commission may not forbear from
    applying sections 201, 202 and 208 to CMRS providers).

[^276]: 47 U.S.C. § 160(a)(1)-(3).

[^277]: CTIA Forbearance Petition at 7-8; CTIA comments at 4-5.

[^278]: CTIA Forbearance Petition at 9-17; CTIA comments at 5-10.

[^279]: CTIA comments at 10, 1-14. *See also* Radiofone comments at 2;
    RTG comments at 8.

[^280]: 47 U.S.C. § 160(a)(2).

[^281]: CTIA Forbearance Petition at 19.

[^282]: *Id.*

[^283]: *Id.* at 18.

[^284]: 47 U.S.C. § 160(a)(3).

[^285]: CTIA Forbearance Petition at 21; CTIA comments at 17-21.

[^286]: CTIA Forbearance Petition at 25; CTIA comments at 15-16.

[^287]: 47 U.S.C. §§ 160(a)(3), (b).

[^288]: See Biennial Regulatory Review \-- Elimination or Streamlining
    of Unnecessary and Obsolete CMRS Regulations; Forbearance from
    Applying Provisions of the Communications Act to Wireless
    Telecommunications Carriers, WT Docket 98-100, *Memorandum Opinion
    and Order and Notice of Proposed Rulemaking*, FCC 98-134 (rel. July
    2, 1998) at ¶ 27, *reconsideration pending*.

[^289]: *BellSouth v. FCC*, 162 F.3d at 1225.

[^290]: 47 C.F.R. § 20.6(a).

[^291]: *Third FNPRM,* 10 FCC Rcd 6880.

[^292]: PMRS is defined as a mobile service that is neither a commercial
    mobile radio service nor the functional equivalent of a service that
    meets the definition of commercial mobile radio service. PMRS
    includes, but is not limited to, not-for-profit land mobile radio
    and paging services that serve the licensee\'s internal
    communications needs as defined in Part 90; mobile radio service
    offered to a restricted class of eligible users; 220-222 MHz land
    mobile service and automatic vehicle monitoring systems that do not
    offer interconnected service or that are not-for-profit; Personal
    Radio Services under Part 95; Maritime Service Stations under Part
    80; and Aviation Service Stations under Part 87. *See* 47 C.F.R. §
    20.3.

[^293]: *Third FNPRM,* 10 FCC Rcd at 6881 ¶ 3.

[^294]: *Id.*

[^295]: *Id.* at 6880 ¶ 1, 6882 ¶ 4. *See also* Omnibus Budget
    Reconcialiation Act of 1993, Pub. L. No. 103-66, Title VI § 6002(b),
    107 Stat. 312 (1993)**;** Implementation of Sections 3(n) and 332 of
    the Communications Act, Regulatory Treatment of Mobile Services, GN
    Docket 93-252, *First Report and Order*, 9 FCC Rcd 1056 (1994)
    (setting out transition for certain existing private carriers to
    CMRS status).

[^296]: Comments were filed on June 5, 1995, by Advanced MobileComm,
    Inc.; AirTouch Communications, Inc.; American Mobile
    Telecommunications Association, Inc.; CTIA; GTE Service Corporation
    (GTE); McCaw Cellular Communications, Inc; Nextel Communications,
    Inc.; Pacific Telesis Mobile Services and Pacific Bell Mobile
    Services (PacTel/PacBell); and PCS PrimeCo, L.P. (PCS PrimeCo).
    Rural Cellular Association (RCA) filed Reply Comments on June 26,
    1995.

[^297]: *See* GTE comments at 1-2; PacTel/PacBell comments at 1; PCS
    PrimeCo comments at 1; AirTouch comments at 1-2; McCaw comments at
    1-3; RCA\'s reply comments at 1-3.

[^298]: *See* GTE comments at 2; and McCaw comments at 2.

[^299]: AMTA comments at 4; CTIA comments at 2-3.

[^300]: CTIA comments at 8-9.

[^301]: AMTA comments at 4.

[^302]: At the time the Commission issued the *Third FNPRM* the mobile
    telecommunications industry was in the midst of the transition to
    the new regulatory scheme for mobile services enacted in the Omnibus
    Budget Act Reconciliation Act of 1993. At that time certain carriers
    that had been previously treated as private service providers were
    undergoing reclassification to CMRS regulatory status. That
    transition has subsequently been completed. *See* Information for
    Part 90 Licensees Subject to Reclassification as Commercial Mobile
    Radio Service Providers on August 10, 1996 -- Wireless Bureau
    Answers Frequently Asked Questions Reagrding CMRS Status, *Public
    Notice*, 11 FCC Rcd 9267 (1996).

[^303]: 47 U.S.C. § 332(d); 47 C.F.R. § 20.3.

[^304]: Southern comments at 3.

[^305]: *Id.* (citing In Re Applications of Pittencrieff Communications,
    Inc. and Nextel Communications, Inc., *Memorandum Opinion and
    Order*, 13 FCC Rcd 8935 (WTB 1997) (*Pittencrieff*)).

[^306]: *Id.* at 4.

[^307]: *Id.*

[^308]: *Id.*

[^309]: Nextel reply comments at 9 (citing *Pittencrieff*, 13 FCC Rcd at
    8945 ¶ 21).

[^310]: *Id.* at 14.

[^311]: *Id.* at 12.

[^312]: Those four petitions are: a petition for reconsideration of the
    *CMRS Third Report and Order* filed by SMR Won; a petition for
    reconsideration of the *CMRS Fourth Report and Order* filed by McCaw
    Cellular; and, two petitions for reconsideration of the *CMRS
    Spectrum Cap Report and Order* filed by Omnipoint and Radiofone
    respectively. *NPRM,* 13 FCC Rcd at 25142-44 ¶¶ 20-24.

[^313]: Omnipoint comments at 1-2 n. 2.

[^314]: 1998 Biennial Regulatory Review -- Spectrum Aggregation Limits
    for Wireless Telecommunications Carriers, WT Docket No. 98-205,
    *Notice of Proposed Rulemaking*, 13FCC Rcd 25132 (1998).

[^315]: Pub. L. No. 104-121, 110 Stat. 847 (1996), Title II of the CWAAA
    is the \"Small Business Regulatory Enforcement Fairness Act of
    1996\" (SBREFA), *codified at* 5 U.S.C. § 601 *et seq.*

[^316]: 47 U.S.C. § 160.

[^317]: 5 U.S.C. §§ 603(b)(3), 604(a)(3).

[^318]: 5 U.S.C. § 601(6).

[^319]: 5 U.S.C. § 601(4).

[^320]: 1992 Economic Census, U.S. Bureau of the Census, Table 6
    (special tabulation of data under contract to Office of Advocacy of
    the U.S. Small Business Administration).

[^321]: 5 U.S.C. § 601(5).

[^322]: U.S. Department of Commerce, Bureau of the Census, \"1992 Census
    of Governments.\"

[^323]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    \"small business concern\" in 15 U.S.C. § 632).

[^324]: 15 U.S.C. § 632.

[^325]: 13 C.F.R. §121.201, SIC code 4812.

[^326]: *1992 Census,* Series UC92-S-1, at Table 5, SIC code 4812.

[^327]: *Trends in Telephone Service*, Table 19.3 (Feb. 19, 1999).

[^328]: *See* Amendment of Parts 20 and 24 of the Commission\'s Rules -
    Broadband PCS Competitive Bidding and the Commercial Mobile Radio
    Service Spectrum Cap, WT Docket No. 96-59; Amendment of the
    Commission\'s Cellular/PCS Cross-Ownership Rule, GN Docket 90-314,
    Report and Order, 11 FCC Rcd 7824, 7850-52 (paras. 57-60) (1996);
    *see also* Section 24.720(b) of the Commission\'s Rules, 47 C.F.R.
    §24.720(b).

[^329]: *See Id.* at 7852 (para. 60).

[^330]: *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 (paras. 114-20)
    (1994).

[^331]: FCC News, *Broadband PCS, D, E and F Block Auction Closes*, No.
    71744 (released Jan. 14, 1997).

[^332]: *See* Amendment of Parts 2 and 90 of the Commission\'s Rules to
    Provide for the use of 200 Channels Outside the Designated Filing
    Areas in the 896-911 MHz and the 935-940 MHz Bands Allotted to the
    Specialized Mobile Radio Pool, PR Docket No. 89-583, *Second Order
    on Reconsideration and Seventh Report and Order,* 11 FCC Rcd 2639,
    2693-702 (1995); Amendment of Part 90 of the Commission\'s Rules to
    Facilitate Future Development of SMR Systems in the 800 MHz
    Frequency Band, PR Docket No. 93-144, *First Report and Order,
    Eighth Report and Order, and Second Further Notice of Proposed
    Rulemaking,* 11 FCC Rcd 1463 (1995).

[^333]: As today's order acknowledges, CMRS "prices are falling, usage
    is expanding, and service options are growing. In some cities, as
    many as seven independent facilities-based providers are now
    competing for business in mobile voice markets." Report and Order at
    ¶ 23.

[^334]: *See, e.g.,* Implementation of Section 6002(b) of the Omnibus
    Reconciliation Act of 1993 - Annual Report and Analysis of
    Competitive Market Conditions with Respect to Commercial Mobile
    Services, Fourth Report, FCC 99-136 (rel. June 24, 1999) at 63
    (noting that the mobile telephony market continues to make \"steady
    competitive progress,\" and highlighting the results of one study
    showing that the average price per minute of mobile telephone
    service has declined over 40% between the end of 1995 and the end of
    1998).

[^335]: I would, however, note the irony that we have chosen to relax
    our rules in rural areas -- which generally have not benefited from
    the entry of additional competitors to the two cellular incumbents
    -- while other areas of the country that have benefited from entry
    by PCS and SMR providers remain subject to the rule. Better to raise
    the cap to 55 MHz in all areas, or better still eliminate it
    altogether.

[^336]: 47 U.S.C. § 161 (a).

[^337]: *See* my report, Implementation of Section 11 by the Federal
    Communications Commission (Dec. 21, 1998), which can be found on the
    FCC web site at
    http://www.fcc.gov/commissioners/furchtgott-roth/reports/sect11.html.

[^338]: *See* 1998 Biennial Regulatory Review-Spectrum Aggregation
    Limits for Wireless Telecommunications Carriers, *Notice of Proposed
    Rulemaking*, 13 FCC Rcd 25132 (1998) (Separate Statement of
    Commissioner Michael Powell).