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                            Before the
                Federal Communications Commission
                      Washington, D.C. 20554

In the Matter of                )
                                )
Policy and Rules Concerning the )       
Interstate Interexchange Marketplace)        CC Docket No. 96-61
                                )
Implementation of Section 254(g))
of the Communications Act of 1934,)
as Amended                      )
                                )
Petitions for Forbearance       )

                  MEMORANDUM OPINION AND ORDER 

Adopted:  December 31, 1998             
     Released:  December 31, 1998  

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

                        TABLE OF CONTENTS

                                                  Paragraph No.
                                                               
I.   INTRODUCTION  . . . . . . . . . . . . . . . . . . . . . . .1

II.  BACKGROUND  . . . . . . . . . . . . . . . . . . . . . . . .4

III. PETITIONS FOR RECONSIDERATION . . . . . . . . . . . . . . .9

               A.   Applicability of Section 254(g) to Interstate, Interexchange Services
          of CMRS Providers  . . . . . . . . . . . . . . . . . . . . . . .9
               B.   Intra-MTA Calls  . . . . . . . . . . . . . . . . . . 22
               C    Other Reconsideration Issues . . . . . . . . . . . . 25

IV.  PETITIONS FOR FORBEARANCE . . . . . . . . . . . . . . . . 26

               A.   Applicability of Section 254(g) to Interstate, Interexchange Services
          of CMRS Providers  . . . . . . . . . . . . . . . . . . . . . . 26
               B.   Other Forbearance Issues . . . . . . . . . . . . . . 37

V.   ORDERING CLAUSES. . . . . . . . . . . . . . . . . . . . . 38

               Appendix A.    List of Parties
               Appendix B.    Supplemental Final Regulatory Flexibility Act Analysis

                         I.  INTRODUCTION

     1.   In this order, we address seven petitions for reconsideration or, in the alternative,
petitions for forbearance, of the Commission's Rate Integration Reconsideration Order, in which
we found that the rate integration requirements of section 254(g) of the Communications Act of
1934, as amended ("Act"), apply to the interstate, interexchange services of Commercial Mobile
Radio Service ("CMRS") providers.  The petitioners request that we reconsider that determination. 
In the alternative, if we find that section 254(g) applies to CMRS providers, the petitioners request
that we forbear from applying section 254(g) to the interstate, interexchange services offered by
CMRS providers pursuant to section 10 of the Act.

     2.   In this order, we reaffirm our earlier determination that, based on the plain language
of the statute, the rate integration requirements of section 254(g) apply to interstate, interexchange
services offered by CMRS providers, and therefore deny the petitions for reconsideration of this
determination.  We clarify, however, that CMRS traffic within a major trading area (MTA)(intra-
MTA traffic) is not "interexchange" traffic and thus not subject to the rate integration requirements
of section 254(g).  We deny the petitions seeking forbearance from the application of rate integration
to separately-billed toll charges.  On the basis of the record before us, we find that forbearance from
rate integration of separately-billed toll charges is not consistent with the public interest prong of the
three-part forbearance test.  We also deny the other requests for forbearance relief from rate
integration. With respect to these issues, we determine that we have insufficient information on which
to determine whether the test for the grant of forbearance under section 10 of the Act is satisfied.

     3.   We also here state our intent to issue a Further Notice seeking comment on issues
relating to airtime and roaming charges associated with interstate, interexchange calls for which a
separate charge is stated; wide-area CMRS calling plans; and the affiliation requirements that should
be applicable to services subject to the rate integration requirement.  Pending further rulemaking, we
keep in place the Order adopted by the Commission on October 2, 1997, in which the Commission
stayed the application of the requirement that providers of interstate, interexchange services integrate
rates across affiliates, as well as application of rate integration requirements with respect to wide area
rate plans offered by CMRS providers.

                         II.  BACKGROUND

     4.   CMRS providers serve customers using mobile phone units that may originate or
receive calls at locations within range of a compatible cell transmitter site.  CMRS customers
generally pay a flat monthly fee and an airtime charge for service within a defined local calling area. 
Some of these plans may include a specified number of local airtime minutes as part of the flat
monthly charge.  If a customer makes a long-distance call from within its local calling area, the
customer may also pay a long-distance charge.  When roaming, the customer also will generally pay
a roaming charge for originating a call, or receiving a call, outside its plan's service area.  If making
a call when roaming, a customer will generally pay a long-distance charge for terminating a call
outside the local calling area in which the call was originated.  Conversely, if a customer receives a
call from outside the local calling area of the roamed upon carrier, a customer may be assessed a toll
charge for transmitting the call from the customer's home switch to the switch of the roamed upon
carrier.  Many CMRS providers offer wide-area calling plans that permit customers to make calls
without roaming or long-distance charges over a calling area wider than the local calling area.  These
wide-area calling plans may be regional, or they may offer national coverage.  Prior to the 1996 Act,
the Commission had not applied any rate integration obligations to CMRS providers and had forborne
from, inter alia, applying sections 203-205 to CMRS services.

     5.   In the 1996 Act, Congress enacted section 254(g), which, as relevant to this order,
requires that a "provider of interstate,  interexchange service shall provide such services to its
subscribers in each state at rates no higher than the rates charged to its subscribers in any other
state."  In March 1996, we released a notice of proposed rulemaking seeking comment on, inter
alia, proposed rules to implement the rate integration provision of section 254(g).  

     6.   On August 7, 1996, in the Rate Integration Order, the Commission adopted a rate
integration rule that reiterated the language of section  254(g).  The Commission stated that this rule
would incorporate its existing rate  integration policy, and would apply to all interstate, interexchange
services, as  defined in the Act, and to all providers of these services.  We interpreted the term
"provider," as used in  section 254(g), "to include parent companies that, through affiliates, provide 
service in more than one state."  Although we did not expressly address application of rate
integration to CMRS providers, we did  determine, inter alia, that American Mobile Satellite Carriers
Subsidiary  Corp. ("AMSC") is required to integrate rates  charged for its offshore services into the
rate structure offered for its  mainland services because its services appear to fall within the definition
of interstate, interexchange telecommunications services subject to section 254(g).

     7.   On July 30, 1997, the Commission denied  several petitions for reconsideration of the
Rate Integration Order.  The Commission clarified that the rules  implementing section 254(g)
require carriers to integrate their rates across  affiliates, but do not require a carrier to integrate an
interstate,  interexchange CMRS service with other interstate, interexchange service  offerings. The
Commission stated that its rate integration rules require CMRS  providers to provide interstate,
interexchange CMRS services on an integrated  basis in all states in which they provide services. 

     8.   On October 2, 1997, the Commission stayed application of the requirement that
CMRS providers  of interstate, interexchange services integrate rates across affiliates pending further
reconsideration.  The Commission also stayed, pending reconsideration, the application of rate
integration requirements with respect to wide-area rate plans offered by CMRS providers.           
                      
                II.  PETITIONS FOR RECONSIDERATION

     A.   Applicability of Section 254(g) to Interstate, Interexchange Services of CMRS
     Providers

     9.   Initially, we address the claims of the petitioners that we erred in the Rate Integration
Reconsideration Order in clarifying that the rate integration provision of section 254(g) applies to
interstate, interexchange services offered by CMRS providers.  The petitioners argue that the
Commission has never applied rate integration to CMRS services,  and contend that Congress did
not intend to extend rate integration to interstate, interexchange services offered by CMRS
providers. The petitioners claim that Congress intended only to codify the Commission's then-
current policy of requiring wireline carriers to integrate the rates of their interstate, interexchange
services.  As support, the petitioners cite to language in the legislative history stating that "[t]he
conferees intend the Commission's rules to require geographic rate averaging and rate integration,
and to incorporate the policies contained in the Commission's proceeding entitled "Integration of
Rates and Services for the Provision of Communications by Authorized Common Carriers between
the United States Mainland and the Offshore Points of Hawaii, Alaska and Puerto Rico/Virgin Islands
(61 FCC 2d 380 (1976))."  According to the petitioners, because of the differences between wireline
and wireless services and the difficulties of applying rate integration to wireless services, Congress
could not have intended to take away the customer benefits of competitive response and pricing
flexibility that exist in the competitive CMRS market.  In addition, some of the petitioners point to
language of the Rate Integration Order itself, where the Commission stated that it was adopting its
existing policies on rate integration as further evidence that the Commission did not intend rate
integration to apply to CMRS providers.  

     10.  We decline to reconsider our determination that the rate integration requirement of
section 254(g) applies to CMRS providers.  Section 254(g) requires that "[a] provider of interstate
interexchange services shall provide its services to subscribers in a state at rates no  higher than
provided to subscribers in any other state."  The language of section 254(g), as Alaska and Hawaii
note, on its face unambiguously applies to all providers of interstate, interexchange services.  Thus,
section 254 (g) applies to the interstate, interexchange services offered by CMRS providers.  If
Congress had intended to exempt CMRS providers, it presumably would have done so expressly as
it did in other sections of the Act.  Thus, we reaffirm our earlier determinations that the rate
integration language of section 254(g) applies to all providers of interstate, interexchange services,
including CMRS providers.  We conclude that any reference to the existing rate integration policy
by Congress or by this Commission merely identified the overarching policy under consideration, and
was not intended to exempt from application of that policy any carrier or class of carriers, as the
petitioning parties suggest.  

     11.  Because the language of the statute is unambiguous and plainly applies to CMRS
providers, we need not examine the legislative history of section 254(g).  Assuming, arguendo, some
ambiguity in the statutory language, thus requiring an examination of the legislative history, we find
nothing in that legislative history that unambiguously indicates that CMRS providers are exempted
from section 254(g).   The language referenced by the CMRS providers could readily be read as
identifying the policy to be applied to all providers of interstate, interexchange services as reasonably
as it could be read to suggest the codification of rate integration as applied to the wireline industry. 
 

     12.  Similarly, we reject the argument raised by AirTouch that Congress did not intend rate
integration to apply to CMRS providers because rate integration is unnecessary to achieve the policy
goals underlying section 254(g).  AirTouch states that rate integration is designed to enable
subscribers in rural and offshore areas to obtain some of the benefits of rate decreases created by
competitive pressures on access charges and long-distance rates in more urban areas, and to protect
customers in those areas from bearing the full burden of higher local exchange costs.  AirTouch
appears to conflate rate integration with rate averaging.  Rate averaging, which is also required by
section 254(g), does have the described effect of protecting customers in high cost local exchange
areas from bearing the full burden of those costs.  Rate integration, on the other hand, generally
focuses on the distance-sensitive aspects of the rate structures for interexchange services.  It protects
noncontiguous parts of the United States, such as Alaska and Hawaii, from being discriminated
against because they are not part of the contiguous 48 states.  AirTouch's focus on exchange cost
differences is, therefore, misplaced and we disagree with its interpretation of the statute.

     13.  Next, AirTouch contends that CMRS providers are not deemed to be interexchange
carriers as that term is understood by Congress, the Commission, and the industry; rather, CMRS
providers are considered to be a different class of carrier and an economic interest group separate
from providers of interstate, interexchange services.  In support of this position, AirTouch  observes
that CMRS providers do not pay access charges, are not listed as interexchange carriers on LEC
equal access ballots, and were not discussed when the Commission considered detariffing for
nondominant interexchange carriers.  Several CMRS providers assert that CMRS services do not
readily fit into the exchange/interexchange mold.  Primeco argues that CMRS providers can be
excluded from rate integration obligations as a class based on the unique characteristics of the
industry.

     14.  Although CMRS providers may be characterized as providers of exchange and
exchange access services, that characterization does not preclude a finding that some of a CMRS
provider's service offerings are interstate, interexchange services.  While CMRS providers do not pay
access charges for originating or terminating local exchange calls, CMRS providers do pay access
charges when an interexchange call originates or terminates on landline facilities.  Similarly, that, in
some instances, CMRS providers are regulated in a manner different from other carriers, does not
compel a conclusion that the interstate, interexchange services of CMRS providers are not subject
to the rate integration requirements of section 254(g). 

     15.  We also reject the argument that applying section 254(g) to CMRS providers is
inconsistent with section 332 of the Act because it allegedly undermines the distinct deregulatory
paradigm applicable to CMRS providers.  Bell Atlantic Mobile asserts that the price regulation
required by section 254(g) is precisely that which the Commission and Congress have deemed
unnecessary and harmful to the public interest in the CMRS context.  Section 332(c), however,
expressly provides that sections 201 and 202 of the Act shall continue to apply to CMRS providers. 
Section 201(b) requires just and reasonable rates and 202(a) prohibits rates that are unreasonably
discriminatory.  These requirements necessarily imply some degree of regulatory concern with prices;
section 332 cannot, therefore, be read to bar every form of oversight over CMRS rates.  Furthermore,
the rate integration policy codified in section 254(g) derived from section 202(a) the requirement that
rates not be unreasonably discriminatory.  Finally, we note that other provisions of Title II of the Act
apply to CMRS providers.  For example, the interconnection requirements of section 251(a) clearly
apply to CMRS providers; CMRS providers are as capable as any other carrier of invoking the
protections of section 253; and, CMRS providers are among the providers of interstate services who
are required to make universal service contributions pursuant to section 254(d).  Thus, we conclude
that the application of section 254(g) to CMRS providers is not inconsistent with section 332.

     16.  We find unpersuasive the argument that, because we held that CMRS rates did not
have to be integrated with the rates of affiliated long-distance providers, we did not intend rate
integration to apply to CMRS providers.  Rather, that decision addresses the issue of how rate
integration should be applied to different interstate, interexchange services, and was consistent with
the long-standing Commission practice of applying rate integration on a service-by-service basis. 
That decision does not address the question of whether rate integration should apply to CMRS
providers at all.  Similarly, CMRS providers' exemption  from the equal access requirements
applicable to incumbent LECs does not, as some CMRS providers suggest, address whether CMRS
providers provide interstate, interexchange services and thus whether rate integration should apply
to CMRS providers.

     17.  Several CMRS providers allege that the Commission gave inadequate notice to permit
application of section 254(g) to CMRS providers.  They state that CMRS providers were only 
mentioned in a footnote, noting that similar notice was found to be inadequate in McElroy
Electronics Corp. v. FCC.  These parties assert that adequate notice required specific mention of
the applicability of rate integration to CMRS providers because applying rate integration to CMRS
providers goes beyond the existing policy.  AirTouch states that only one cellular party filed
comments in response to the notice, and BellSouth states that no party  addressed the issue of
extending rate integration to CMRS providers. Several CMRS providers note that the initial
discussion of applying rate integration to CMRS providers occurred in the Rate Integration
Reconsideration Order.  BellSouth asserts that, because of the significant differences between
CMRS and wireline carriers, the lack of discussion of how rate integration would be implemented in
the CMRS context establishes that the Commission did not address the link between the facts and the
policy choice in applying section 254(g) to the CMRS industry.  

     18.  As we stated in the Rate Integration Stay Order, we do not agree that inadequate
notice was given to hold that the rate integration requirements of section 254(g) apply to CMRS
providers.  The language of section 254(g) applies to providers of  interexchange telecommunications
services with no exceptions enumerated.  Elsewhere in the Act, as we noted above, when Congress
wanted to exempt CMRS providers from a requirement of the Act, it did so expressly.  The words
of the statute clearly encompass CMRS providers and legally obligate them to integrate their
interstate, interexchange services.  Our rule, implementing section 254(g), merely reiterated the
precise terms of the statute.  Further, we note that the Rate Averaging and Rate Integration NPRM
stated that an interexchange call includes all means of connecting two points, "wireline or  wireless." 
Specific notice of our intent to apply the plain language of the statute was not required.  We,
therefore, find no relevant lack of notice regarding the  application of rate integration requirements
to providers of CMRS services.   

     19.  Our conclusion that adequate notice was given of the application of section 254(g)
to CMRS providers is not altered by  the fact that no party commented on the application of rate
integration to CMRS providers.  As noted above, section 254(g), by its own terms, applies to
providers of interexchange services.  CMRS providers, therefore, should have been on notice that the
rulemaking proceeding could affect their interests.  Although rate integration had not previously been
applied to CMRS providers, the CMRS industry had been subject to the rate regulation of section
202(a) of the Act and, thus, the industry should have been alert to the broad scope of section 254(g),
which has its origins in section 202(a).  Moreover, section 254(g) was enacted as part of the 1996
Act; therefore, the application of that section to the CMRS industry does not represent a change in
Commission policy requiring more specific notice.  Finally, we conclude that because we only codified
the language of section 254(g), we find no issue concerning the adequacy of the record to support
adoption of the rule.  

     20.  In any event, we find that the present reconsideration record supports the conclusion
that section 254(g) applies to CMRS providers.  We note that we stayed application of the affiliation
requirement and application of rate integration to wide-area plans, the two cases in which we believe
we would benefit from a fuller record.  We continue to believe a fuller record on these two issues
would be beneficial and, therefore, will seek further comment on those issues to develop a better
record in a separate proceeding.  

     21.  AirTouch notes that CMRS carriers are not mentioned in the regulatory flexibility
analysis assessing the administrative burden of regulations on industry, and asserts that this reflects
a lack of intent that section 254(g) be applied to CMRS providers.  While the Final Regulatory
Flexibility Act analysis in the Rate Integration Order did not assess the administrative burden of
regulations on CMRS providers, as AirTouch indicates, the omission does not evidence a lack of
intent to apply section 254(g) to CMRS providers.  We have prepared a Supplemental Final
Regulatory Flexibility Act analysis to redress our inadvertent oversight.  No party has claimed that
the omission caused material harm.  Indeed, in the Rate Integration Stay Order, we stayed application
of the rate integration requirement to wide-area plans and across affiliates.  Accordingly, those
requirements had no impact on small entities.      

     B.   Intra-MTA Calls

     22.  In their petitions for reconsideration, the petitioners request that we clarify the
treatment of traffic that originates and terminates within an MTA.  CMRS providers oppose applying
rate integration to calls within the MTA in which the CMRS provider is licensed, although, in many
cases, the licensed area will not correspond to a telephone company exchange area, or to state
boundaries.  Alaska and Hawaii do not oppose excluding all calls that originate and terminate in the
same MTA from the rate integration requirement.      

     23.  We conclude that treating intra-MTA calls as not being subject to rate integration is
consistent with the definition of "telephone exchange service." The Act defines "telephone exchange
service" as "service within a telephone exchange, or within a connected system of telephone
exchanges within the same exchange area . . . and which is covered by the exchange service charge,
or . . . comparable service provided through a system of switches, transmission equipment, or other
facilities (or combination thereof) by which a subscriber can originate and terminate a
telecommunications service."  In the Local Competition Order, we concluded that cellular,
broadband PCS, and covered SMR providers fall within at least the second part of this definition
because they provide "comparable service" to telephone exchange service.  Our determination was
based on the finding that, as a general matter, CMRS carriers provide local, two-way switched voice
service as a principal part of their business.  Treating intra-MTA CMRS calls as local also is
consistent with our conclusion in the Local Competition Order that MTAs defined the area in which
reciprocal compensation applies to interconnections between incumbent LECs and CMRS
providers.  Because of the mobility of CMRS customers, the MTA, rather than a  smaller area, such
as the CMRS provider's license area or a wireline exchange area, reflects the minimum area in which
customers may be expected to travel and within which they would expect not to pay toll charges. 
Pursuant to this approach, calls within an MTA that would be interstate will not be treated as
interexchange.  

     24.  We provide two further clarifications that follow from the finding that traffic that
originates and terminates within an MTA does not constitute interexchange service.  First, we clarify
that when a customer is roaming, a call within the MTA of the roamed upon CMRS provider is not
"interexchange." This clarification ensures that intra-MTA calls are not "interexchange" service, thus
triggering rate integration, regardless of the location of the customer. Second, we clarify that when
a CMRS provider performs only an exchange access function, and an unaffiliated interexchange
carrier transports and bills for the call to a destination in a different state outside the MTA, that
exchange access function is not "interstate, interexchange" for purposes of section 254(g).  We
conclude that this clarification is necessary to ensure that our treatment here is akin to our treatment
of incumbent LEC access charges, which are not required to be integrated. 

     C.   Other Reconsideration Issues

     25.  Several CMRS providers seek clarification or reconsideration of the application of rate
integration to roaming and airtime charges.  We plan to seek additional comment on these issues in
a Further Notice.  Two additional sets of issues remain: (1) the treatment of wide-area calling plans;
and, (2) the affiliation requirements applicable to CMRS providers for purposes of determining
compliance with rate integration.  We will resolve these issues on the basis of the more complete
record developed in response to the Further Notice.  

                  IV.  PETITIONS FOR FORBEARANCE

     A.   Applicability of Section 254(g) to Interstate, Interexchange Services of CMRS
     Providers

     26.  The petitions for forbearance generally request that we forbear from applying the rate
integration provisions of section 254(g) to interstate, interexchange services offered by CMRS
providers, if the Commission concludes that section 254(g) applies to those services.  Section 10(a)
of the Act sets forth a three-part standard to be applied in addressing petitions for forbearance: a
carrier may petition the Commission for forbearance from any statutory provision or regulation, and
the  Commission shall grant such petition if it determines that:  (1) enforcement of  the requirement
is not necessary to ensure that rates are just and reasonable,  and are not unjustly and unreasonably
discriminatory; (2) the regulation is not  necessary to protect consumers; and (3) forbearance is
consistent with the  public interest.  Section 10 further provides that the Commission "shall  consider
whether forbearance from enforcing the regulation will promote  competitive market conditions,
including the extent to which such forbearance will enhance competition among providers of
telecommunications services."  As fully discussed below, we conclude that the petitioners have not
met the standard for the grant of forbearance and, for this reason, we must deny their petitions. 

     27.  The petitioners generally argue that the requirements of section 10 are satisfied
because competitive conditions in the industry prevent CMRS providers from charging excessive
rates, or rates that would discriminate.  PCIA, AT&T Wireless, and CTIA argue that the
Commission has previously found that competitive forces exist in the CMRS market that are driving
down the price of mobile services, and that those findings require the Commission to forbear in the
present case.  CMRS rates have declined 64 percent since 1987, according to some CMRS
providers.  CTIA asserts that CMRS providers lack the market power necessary to maintain
interstate rates above market prices.  Primeco states that a 1996 Yankee Group study found that
PCS rates are 15 to 30 percent lower than rates of incumbent cellular providers.  Several petitioners
argue that regulation will increase prices, reduce consumer choice, and lessen competition.   

     28.  Hawaii and Alaska, on the other hand, oppose granting forbearance.  They argue, that,
if the Commission forbears from applying the rate integration policy to CMRS providers, offshore
points would pay high, discriminatory CMRS rates, in violation of section 254(g).  Hawaii argues that
competition cannot be the only factor to be considered in determining whether forbearance is
appropriate.  Alaska argues that by codifying geographic rate averaging and rate integration,
Congress recognized that rate integration is a fundamentally important national telecommunications
policy necessary to provide consumers in rural and high-cost areas access to interexchange services
at affordable and nondiscriminatory rates.  Alaska and Hawaii assert that the public interest would
not be served by a ruling contrary to the clear language of section 254(g).

     29.  We conclude that the petitioners have not met their burden with respect to the first
and second prongs of the forbearance standard.  We are concerned that, without rate integration,
CMRS providers would, when consistent with their economic interests, discriminate against the
offshore points.  Our concerns are not eliminated by the CMRS providers' claims that CMRS rates
are falling, or that PCS rates are lower than cellular rates.  Similarly, CMRS providers' few cited
anecdotal instances of the offering of rates that comply with the rate integration requirement of
section 254(g) do not ensure that such rates will be offered by all CMRS providers in the future. 
Moreover, although CMRS providers contend generally that rate integration would interfere with
competition, resulting in less consumer choice, we find no specific persuasive arguments on this
record to support those contentions.  

     30.  Specifically, we find that the petitioners have not shown that, in the absence of rate
integration, CMRS rates will be just and reasonable and not unjustly or unreasonably discriminatory. 
Indeed, we conclude that rate integration is necessary to ensure that nondiscriminatory charges and
practices are offered with respect to CMRS services to and from the offshore points. Moreover, as
noted by Alaska, even if rate integrated service plans are available in all parts of the United States,
nothing in the record suggests that the existence of the rate integration requirement is not a significant
cause of that condition.  We also agree that there is no evidence to show that rate integration is not
necessary for the protection of consumers.  Alaska notes, for example, that Bell Atlantic Mobile's
argument that consumers benefit from its plan offering one long-distance rate is misplaced because
Bell Atlantic Mobile does not offer service to subscribers in Alaska and Hawaii.  Thus, although the
cost to a Bell Atlantic Mobile customer calling Alaska or Hawaii might be the same as the cost of a
call elsewhere in the continental United States, that fact does not protect the interests of consumers
in Alaska or Hawaii because they generally would not be paying the long distance charges. 

     31.  We also agree with Hawaii and Alaska that a broad grant of forbearance would not
be consistent with the public interest, as required by the third prong of the forbearance standard. The
public interest here, as reflected by the inclusion of CMRS providers in section 254(g), is the
integration of offshore points into the interexchange rate patterns of CMRS services to prevent
discrimination against those locations.  Therefore, in order to satisfy the public interest, CMRS
providers must explain how the benefits of section 254(g) can be attained if we forbear from applying
the rate integration requirement of section 254(g) to the interstate, interexchange services of CMRS
providers.  We conclude that the petitioners have not made the required demonstration.

     32.  The argument against forbearance is particularly compelling with respect to separately-
stated long distance charges.  Many CMRS providers offer service plans that include a toll charge
assessed for a long-distance call that is separate from the airtime charge. When the CMRS provider
provides the link to the distant location, either through its own facilities or through the resale of a
long-distance provider's service, and bills separately for that service, we find that the CMRS provider
is providing an interexchange service.  If that call terminates in a state different from the state in
which the call originates, the service is an interstate, interexchange service covered by the rate
integration requirement of section 254(g).  

     33.  We conclude that it would not be consistent with just and reasonable rates, the
protection of consumers, and the public interest to forbear from applying the rate integration
requirement of section 254(g) to separately-stated toll charges for interstate, interexchange services
provided by CMRS providers.  For separately stated CMRS toll charges, we do not see how the
policy considerations regarding rate integration differ materially from those in the non-CMRS
context.  Applying rate integration of separately-stated toll charges appears to be at the heart of the
congressional policy of section 254(g)), which was enacted despite the existence of multiple
interexchange carriers.

     34.  Pursuant to section 160(b), we also have considered whether forbearance from
enforcing the rate integration requirement of section 254(g) will promote competitive market
conditions.  Although CMRS providers contend that rate integration would interfere with
competition, we find no persuasive record evidence to support that contention or, conversely, that
competitive conditions will be promoted in the absence of rate integration.  Moreover, we agree that
forbearance from rate integration cannot be justified on competitive conditions alone.  Hawaii
correctly notes we have previously rejected this argument.  Prior to the enactment of section 254(g),
we already had determined that all IXCs were non-dominant in the domestic market and had found
that most major segments of the interexchange market were subject to substantial competition. 
Nothing suggests that Congress was unaware of the state of competition in the interexchange market
in enacting section 254(g).  Indeed, we find that Congress's enactment of section 254(g), even after
the Commission's determination that major segments of the interexchange market were subject to
substantial competition, establishes the importance Congress placed on a nationwide policy of rate
integration that was applicable to all providers of interstate, interexchange services.   

     35.  Contrary to the assertions of several CMRS providers, our finding in the CMRS
Forbearance Order, that there was sufficient competition in the CMRS market to justify
forbearance from, inter alia, the tariffing requirements of section 203-205, do not require forbearance
with respect to section 254(g).  The CMRS Forbearance Order, adopted pursuant to section 332,
primarily addressed the tariff filing requirement and its competitive implications.   The rate integration
requirement of section 254(g) creates a substantive pricing requirement which raises different
competitive considerations than do tariff requirements.  Moreover, section 332(c), by its terms,
prohibits forbearance from application of section 202(a) to the CMRS industry.  We note that 254(g)
has its origins in section 202(a).  Accordingly, we find that our forbearance in the tariffing context
has no relevance to the question of forbearance here.

     36.  In sum, we conclude that the petitioners have not demonstrated that forbearance from
applying the rate integration requirements of section 254(g) is consistent with just and reasonable or
not unjustly or unreasonably discriminatory rates in the CMRS context, the protection of consumers,
and the public interest.  Similarly, we have not found that forbearance from enforcing the rate
integration requirement of section 254(g) would promote competitive market conditions. 
Accordingly, we cannot grant the forbearance requests.  In a separate proceeding, we will seek
further comment on ways in which the rate integration requirement of section 254(g) should be
applied to CMRS offerings.  The expanded record evidence about the nature of CMRS services and
the ownership arrangements within the industry will permit us to more fully evaluate rate integration
in the CMRS context, develop rules specific to CMRS services, or, if appropriate, forbear in some
instances.  

     B.   Other Forbearance Issues

     37.  The forbearance petitions generally sought forbearance from the application of rate
integration to all interstate, interexchange services offered by CMRS providers.  In addition, several
CMRS providers argue that, if we do not forbear totally from applying rate integration to interstate,
interexchange offerings of CMRS providers, we should apply rate integration only to services for
which the long-distance charges are separately billed.  We conclude that the present record does not
establish that the forbearance standard of section 10 of the Act has been met with respect to this
matter.  For example, the record does not establish that forbearance would be consistent with the
public interest.  In addition, the record does not provide sufficient information to determine whether
certain types of airtime or roaming charges, or some wide-area calling plans, fall within the definition
of interexchange services to which rate integration would apply; and, how different affiliation
requirements would affect the CMRS industry.  We seek comment on these issues in a separate
rulemaking proceeding that will permit us to develop rules specific to CMRS services.  Accordingly,
we deny the remaining requests of the petitions for forbearance as inconsistent with just and
reasonable rates or not unjustly or reasonably discriminatory rates; the protection of consumers; and
the public interest.  

                       V.  ORDERING CLAUSES

     38.  Accordingly, IT IS ORDERED, that the Petitions for Reconsideration filed by
AirTouch Communications, Cellular Telecommunications Industry Association, PrimeCo Personal
Communications, L.P., Personal Communications Industry Association, Telephone and Data Systems,
Inc., BellSouth Corporation, and Bell Atlantic Mobile, Inc. ARE DENIED TO THE EXTENT
INDICATED HEREIN.

     39.  IT IS FURTHER ORDERED that the Petitions for Forbearance filed by AirTouch
Communications, Cellular Telecommunications Industry Association, PrimeCo Personal
Communications, L.P., Personal Communications Industry Association, Telephone and Data Systems,
Inc., BellSouth Corporation, and Bell Atlantic Mobile, Inc. ARE DENIED. 

     40.  IT IS FURTHER ORDERED that the Commission's Office of Public Affairs,
Reference Operations Division, SHALL SEND a copy of this Memorandum Opinion and Order,
including the Supplemental Final Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy
of the Small Business Administration.
               

                         FEDERAL COMMUNICATIONS COMMISSION

                         Magalie Roman Salas
                         Secretary                            APPENDIX A

Petitions for Reconsideration, or,
In the Alternative, Petitions for Forbearance

AirTouch Communications ("AirTouch")
Bell Atlantic Mobile, Inc. ("Bell Atlantic Mobile") 
BellSouth Corporation ("BellSouth")
Cellular Telecommunications Industry Association ("CTIA")
PrimeCo Personal Communications, L.P. ("Primeco")
Personal Communications Industry Association ("PCIA")
Telephone and Data Systems, Inc. ("TDS")

Comments/Oppositions 

AT&T Wireless Services, Inc. ("AT&T Wireless") 
Comcast Cellular Communications, Inc. ("Comcast")
State of Alaska ("Alaska")
State of Hawaii ("Hawaii")
U S West, Inc. ("U S West")

Reply Comments

AirTouch 
BellSouth 
CTIA 
Centennial Cellular Corp. ("Centennial")
Commonwealth of the Northern Mariana Islands ("Commonwealth")
PrimeCo
Southwestern Bell Mobile Systems, Inc. 
U S West                            APPENDIX B

      Supplemental Final Regulatory Flexibility Act Analysis

     41.  As required by the Regulatory Flexibility Act (RFA), the Commission incorporated
an Initial Regulatory Flexibility Analysis (IRFA) in the Further Notice in this docket.  The
Commission sought written public comment on the proposals in the Further Notice, including
comment on the IRFA.  The Commission prepared a Final Regulatory Flexibility Analysis (FRFA)
of the possible significant economic impact the Rate Integration Order might have on small entities. 
The FRFA did not, however, analyze the possible significant economic impact the Rate Integration
Order might have on CMRS providers that were small entities.  The Commission has prepared this
supplemental FRFA of the possible significant economic impact the Rate Integration Order might
have on CMRS providers that are small entities, in conformance with the RFA.  

A.   Need for and Objectives of Rules

     42.  In the 1996 Act, Congress directed the Commission to develop rules implementing
the provisions of section 254(g) within six months of its enactment.  The Commission adopted rules
implementing the provisions of section 254(g) in the Rate Integration Order.  The objective of these
rules is to incorporate the policies of geographic rate averaging and rate integration of interexchange
services in order to ensure that subscribers in rural and high cost areas throughout the Nation are able
to continue to receive both intrastate and interstate interexchange services at rates no higher than
those paid by urban subscribers.

     B.   Summary of Significant Issues Raised by the Public Comments to the IRFA

     43.  The IRFA solicited comment on alternatives to our proposed rules that would
minimize the impact on small entities consistent with the objectives of this proceeding.  No comments
were submitted directly in response to the IRFA.  We have, however, kept small entities in mind as
we considered the more general comments filed in this proceeding, as discussed below.

     C.   Description and Estimate of Number of Small Entities to Which the Rules Will
     Apply

     44.  The RFA directs agencies to provide a description of and, where feasible, an estimate
of the number of small entities that may be affected by the proposed rules, if adopted.  The RFA
generally defines the term "small entity " as having the same meaning as the terms "small business,"
"small organization," and "small governmental jurisdiction."  In addition, the term "small business"
has the same meaning as the term "small business concern" 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) satisfies any additional criteria established by the Small Business
Administration (SBA).   

               (a)  Cellular Radio Telephone Service

     45.  The Commission has not 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 companies.  This definition provides that a small entity is a
radiotelephone company employing no more than 1,500 persons.  According to the 1992 census,
which is the most recent information available, only 12 radiotelephone firms out of a total of 1,178
such firms which operated during 1992 had 1,000 or more employees.  Therefore, even if all 12 of
these large firms were cellular telephone companies, all of the remainder were small businesses under
the SBA's definition.  We assume that, for purposes of our evaluations and conclusions in this
Supplemental FRFA, all of the current cellular licensees are small entities, as that term is defined by
the SBA.  Although there are 1,758 cellular licenses, we do not know the number of cellular
licensees, since a cellular licensee may own several licenses.

               (b)  Broadband Personal Communications Service

     46.  The broadband PCS spectrum is divided into six frequency blocks designated A
through F.  Pursuant to Section 24.720(b) of the Commission's Rules, the Commission has defined
``small entity'' for Block C and Block F licensees as firms that had average gross revenues of less than
$40 million in the three previous calendar years.  This regulation defining ``small entity'' in the context
of broadband PCS auctions has been approved by the SBA.

     47.  The Commission has auctioned broadband PCS licenses in all of its spectrum blocks
A through F.  We do not have sufficient data to determine how many small businesses under the
Commission's definition bid successfully for licenses in Blocks A and B.  As of now, there are 90 non-
defaulting winning bidders that qualify as small entities in the Block C auction and 93 non-defaulting
winning bidders that qualify as small entities in the D, E, and F Block auctions.  Based on this
information, we conclude that the number of broadband PCS licensees that would be affected by the
evaluations and conclusions in this Supplemental FRFA includes the 183 non-defaulting winning
bidders that qualify as small entities in the C, D, E, and F Block broadband PCS auctions.

               (c)  Specialized Mobile Radio

     48.  Pursuant to Section 90.814(b)(1) of the Commission's Rules,  the Commission has
defined ``small entity'' for geographic area 800 MHz and 900 MHz SMR licenses as firms that had
average gross revenues of no more than $15 million in the three previous calendar years.  This
regulation defining ``small entity'' in the context of 800 MHz and 900 MHz SMR has been approved
by the SBA.

     49.  The section 254(g) requirements apply to SMR providers in the 800 MHz and 900
MHz bands. We do not know how many firms provide 800 MHz or 900 MHz geographic area SMR
service, nor how many of these providers have annual revenues no more than $15 million.

     50.  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 under the Commission's
definition in the 900 MHz auction.  Based on this information, we conclude that the number of
geographic area SMR licensees affected by section 254(g) includes these 60 small entities.

     51.  A total of 525 licenses were auctioned for the upper 200 channels in the 800 MHz
geographic area SMR auction.  There were 62 qualifying bidders, of which 52 were small businesses. 
The Commission 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 to estimate, moreover,
how many small entities within the SBA's definition will win these lower channel licenses.  Given the
facts that nearly all radiotelephone companies have fewer than 1,000 employees and that no reliable
estimate of the number of prospective 800 MHz SMR licensees can be made, we assume, for
purposes of our evaluations and conclusions in this Supplemental FRFA, that all of the licenses for
the  lower 230 channels will be awarded to small entities, as that term is defined by the SBA.

               (d)  220 MHz Service

     52.  The Commission has classified providers of 220 MHz service into Phase I and Phase
II licensees.  There are approximately 2,800 non-nationwide Phase I licensees and 4 nationwide
licensees currently authorized to operate in the 220 MHz band.  The Commission recently conducted
the Phase II auction.  There were 54 qualified bidders, of which 47 were small businesses. 

     53.  At this time, however, there is no basis upon which to estimate definitively the number
of phase I 220 MHz service licensees that are small businesses.  To estimate the number of such
entities that are small businesses, we apply the definition of a small entity under SBA rules applicable
to radiotelephone companies.  This definition  provides that a small entity is a radiotelephone
company employing no more than 1,500 persons.  According to the 1992 Census, which is the most
recent information available, only 12 out of a total 1,178 radiotelephone firms which operated during
1992 had 1,000 or more employees   and these may or may not be small entities, depending on
whether they employed more or less than 1,500 employees.  But 1,166 radiotelephone firms had
fewer than 1,000 employees and therefore, under the SBA definition, are small entities.  However,
we do not know how many of these 1,166 firms are likely to be involved in the phase I 220 MHz
service.

               (e)  Mobile Satellite Services (MSS) 

     54.  The Commission has not developed a definition of small entities applicable to licensees
in the international services.  Therefore, the applicable definition of small entity is the definition under
the SBA rules applicable to Communications Services, Not Elsewhere Classified (NEC).  This
definition provides that a small entity is expressed as one with $11.0 million or less in annual
receipts.  According to the Census Bureau, there were a total of 848 communications services,
NEC in operation in 1992, and a total of 775 had annual receipts of less than $9.999 million.

     55.  Mobile Satellite Services or Mobile Satellite Earth Stations are intended to be used
while in motion or during halts at unspecified points.  These stations operate as part of a network that
includes a fixed hub or stations.  The stations that are capable of transmitting while a platform is
moving are included under Section 20.7(c) of the Commission's Rules as mobile services within the
meaning of Sections 3(27) and 332 of the Communications Act.  Those MSS services are treated
as CMRS if they connect to the Public Switched Network (PSN) and also satisfy other criteria of
Section 332.  Facilities provided through a transportable platform that cannot move when the
communications service is offered are excluded from Section 20.7(c).

     56.  The MSS networks may provide a variety of land, maritime and aeronautical voice and
data services.  There are eight mobile satellite licensees.  At this time, we are unable to make a precise
estimate of the number of small businesses that are mobile satellite earth station licensees. 

               (f)  Paging Service

     57.  The Commission has adopted a two-tier definition of small businesses in the context
of auctioning licenses in the paging service. A small business is defined as either (1) a entity that,
together with its affiliates and controlling principals, has average gross revenues for the three
preceding years of not more than $3 million; or (2) an entity that, together with affiliates and
controlling principals, has average gross revenues for the three preceding calendar years of not more
than $15 million.  The SBA has approved this definition for paging companies.

     58.  The Commission estimates that the total current number of paging carriers is
approximately 600.  In addition, the Commission anticipates that a total of 16,630 non-nationwide
geographic area licenses will be granted or auctioned.  The geographic area licenses will consist of
2,550 Major Trading Area (MTA) licenses and 14,080 Economic Area (EA) licenses.  In addition to
the 47 Rand McNally MTAs, the Commission is licensing Alaska as a separate MTA and adding three
MTAs for the U.S. territories, for a total of 51 MTAs.  No auctions of paging licenses have been held
yet, and there is no basis to determine the number of licenses that will be awarded to small entities. 
Given the fact that no reliable estimate of the number of paging licensees can be made, we assume,
for purposes of this Supplemental FRFA, that all of the current licensees and the 16,630 geographic
area paging licensees either are or will consist of small entities, as that term is defined by the SBA.

     (g)  Narrowband PCS

     59.  The Commission has auctioned nationwide and regional licenses for narrowband PCS. 
The Commission does not have sufficient information to determine whether any of these licensees are
small businesses within the SBA-approved definition.  At present, there have been no auctions held
for the MTA and Basic Trading Area (BTA) narrowband PCS licenses.  The Commission anticipates
a total of 561 MTA licensees and 2,958 BTA licensees will be awarded in the auctions.  Those
auctions, however, have not yet been scheduled.  Given that nearly all radiotelephone companies have
fewer than 1,500 employees and that no reliable estimate of the number of prospective MTA and
BTA narrowband licensees can be made, we assume, that all of the licensees will be awarded to small
entities, as that term is defined by the SBA.

     (h)  Air-Ground Radiotelephone Service

     60.  The Commission has not adopted a definition of small business specific to the Air-
Ground Radiotelephone Service, which is defined in Section 22.99 of the Commission's rules. 
Accordingly, we will use the SBA's definition applicable to radiotelephone companies, i.e., an entity
employing no more than 1,500 persons.  There are approximately 100 licensees in the Air-Ground
Radiotelephone Service, and we estimate that almost all of them qualify as small under the SBA
definition.
     
     D.   Description of Projected Reporting, Recordkeeping, and Other Compliance Requirements 

     61.  In the Rate Integration Order, and the Rate Integration Reconsideration Order, we
determined that section 254(g) applied to interstate, interexchange services offered by CMRS
providers.  We expect that those orders impose no significant new reporting or recordkeeping 
requirements on CMRS providers.  Those orders, however, require CMRS providers to comply with
the rate averaging and rate integration requirement of section 254(g) in their service offerings. CMRS
providers, however, do not file tariffs except on some international routes.  

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

     62.  Section 254(g) reflects a congressional determination that the country's higher-cost,
lower-volume markets should share in the technological advances and increased competition
characteristic of the nation's telecommunications industry as a whole, and that interexchange rates
should be provided throughout the nation on a geographically averaged and rate- integrated basis. 
We have decided that the statutory objectives of section 254(g) require us to apply our rules to all
providers of interexchange service, including small ones.  We have chosen, however, to allow carriers
to offer private line service and temporary promotions on a de-averaged basis.  In so doing, we have
minimized the impact our rules might otherwise have had, and enable carriers to use such devices to
enter new markets.  

     63.  In addition, the Commission considered reducing the burdens on small carriers by
exempting them from compliance through forbearance.  However, we do not believe that forbearing
at this time would be consistent with the Congressional goals that underlie Section 254(g).  We could
also have reduced burdens on small carriers by establishing cost-support mechanisms.  However, the
present record does not justify any such cost-support mechanisms.  Accordingly, we decline to adopt
these alternative measures for small carriers.
     
     F.   Report to Congress

     64.  The Commission will send a copy of this order, including the supplemental FRFA, in
a report to be sent to Congress pursuant to the Small Business Regulatory Enforcement Fairness Act
of 1996.  A summary of this Memorandum Opinion and Order and this Supplemental FRFA will
also be published in the Federal Register, and will be sent to the Chief Counsel for Advocacy of the
Small Business Administration.