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 Federal  Communications  Commission  FCC  01-  28 
 Before  the  Federal  Communications  Commission 
 Washington,  D.  C.  20554 


 In  the  Matter  of 
 2000  Biennial  Regulatory  Review  Spectrum  Aggregation  Limits 
 for  Commercial  Mobile  Radio  Services 


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 WT  Docket  No.  01-  14 


 NOTICE  OF  PROPOSED  RULE  MAKING 
 Adopted:  January  19,  2001  Released:  January  23,  2001 
 Comment  Date:  [60  days  after  publication  in  the  Federal  Register] 
 Reply  Comment  Date:  [30  days  after  comment  date] 


 By  the  Commission:  Commissioner  Furchtgott-  Roth  concurring  and  issuing  a  separate  statement. 
 TABLE  OF  CONTENTS 
 Heading  Paragraph  # 
 I.  INTRODUCTION.............................................................................................................................  1 
 II.  BACKGROUND...............................................................................................................................  2 
 A.  CMRS  Spectrum  Cap  ..................................................................................................................  2 
 B.  Cellular  Cross-  Interest  Rule.........................................................................................................  9 
 III.  DISCUSSION  .................................................................................................................................  11 
 A.  Section  11  Review  of  CMRS  Spectrum  Aggregation  Limits.......................................................  11 
 B.  Reexamination  and  Public  Interest  Determination......................................................................  13 
 1.  Development  of  Meaningful  Economic  Competition  ...........................................................  14 
 2.  Spectrum  Management  and  Other  Regulatory  Considerations  ..............................................  26 
 3.  International  Developments.................................................................................................  40 
 C.  Possible  Modifications  to  the  CMRS  Spectrum  Cap  and  Cellular  Cross-  Interest  Rule.................  46 
 1.  Possible  Modifications  to  the  CMRS  Spectrum  Cap  ............................................................  47 
 2.  Possible  Modifications  to  the  Cellular  Cross-  Interest  Rule...................................................  54 
 IV.  CONCLUSION...............................................................................................................................  58 
 V.  PROCEDURAL  MATTERS............................................................................................................  59 
 A.  Regulatory  Flexibility  Act  .........................................................................................................  59 
 B.  Ex  Parte  Rules...........................................................................................................................  60 
 C.  Filing  Procedures.......................................................................................................................  61 
 VI.  ORDERING  CLAUSES  ..................................................................................................................  64 
 APPENDIX:  Initial  Regulatory  Flexibility  Analysis 


 The  final  version  of  this  item  was  approved  by  the  Commission  on  January  19,  2001. 
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 I.  INTRODUCTION 
 1.  In  this  Notice  of  Proposed  Rulemaking  (NPRM),  we  begin  our  reexamination  of  the  need  for 
 Commercial  Mobile  Radio  Services  (CMRS)  spectrum  aggregation  limits  as  part  of  our  2000  biennial 
 regulatory  review  of  the  Commission's  telecommunications  regulations.  Specifically,  we  are  initiating 
 our  second  comprehensive  review  of  the  two  regulations  that  currently  limit  the  aggregation  of  broadband 
 CMRS  spectrum:  the  CMRS  spectrum  cap  and  the  cellular  cross-  interest  rule.  In  September  1999,  we 
 generally  found  that  these  spectrum  limits  were  still  necessary  to  safeguard  competition  in  CMRS 
 markets,  although  we  made  certain  modifications  to  each  of  them  to  provide  more  flexibility  in 
 permissible  investment  and  partnering  arrangements  among  carriers.  1  In  this  proceeding,  pursuant  to  the 
 mandate  of  section  11  of  the  Communications  Act  of  1934,  as  amended  (Communications  Act),  2  we  seek 
 comment  on  whether  competitive  or  other  developments  in  CMRS  markets  warrant  elimination  or 
 modification  of  one  or  both  of  these  regulations. 


 II.  BACKGROUND 
 A.  CMRS  Spectrum  Cap 
 2.  The  CMRS  spectrum  cap  rule  reads:  No  licensee  in  the  broadband  PCS,  cellular,  or  SMR 
 services  (including  all  parties  under  common  control)  regulated  as  CMRS  .  .  .  shall  have  an  attributable 
 interest  in  a  total  of  more  than  45  MHz  of  licensed  broadband  PCS,  cellular  and  SMR  spectrum  regulated 
 as  CMRS  with  significant  overlap  in  any  geographic  area,  except  that  in  Rural  Service  Areas  (RSAs),  .  .  . 
 no  licensee  shall  have  an  attributable  interest  in  a  total  of  more  than  55  MHz  of  licensed  broadband  PCS, 
 cellular,  and  SMR  spectrum  regulated  as  CMRS  with  significant  overlap  in  any  RSA.  3  No  more  than  10 
 MHz  is  attributed  to  an  entity  when  calculating  Specialized  Mobile  Radio  (SMR)  spectrum  under  the 
 cap.  4  Thus,  a  total  of  180  MHz  of  spectrum  designated  for  services  that  could  be  regulated  as  CMRS  is 
 subject  to  the  45/  55  MHz  spectrum  cap,  namely  the  120  MHz  of  broadband  Personal  Communications 
 Services  (PCS)  spectrum,  50  MHz  of  cellular  spectrum,  and  10  MHz  of  attributable  SMR  spectrum.  5 


 3.  Section  20.  6(  d)  of  the  Commissions  rules  provides  generally  that  ownership  interests  of  20 
 percent  or  more  are  deemed  attributable.  6  Once  all  the  applicable  CMRS  spectrum  attributable  to  a  given 


 1  1998  Biennial  Regulatory  Review,  Spectrum  Aggregation  Limits  for  Wireless  Telecommunications 
 Carriers,  WT  Docket  No.  98-  205,  Report  and  Order,  15  FCC  Rcd  9219,  9223    6  (1999)  (First  Biennial  Review 
 Order). 


 2  47  U.  S.  C.    161. 


 3  47  C.  F.  R.    20.  6(  a). 
 4  Id.    20.  6(  b).  This  ceiling  on  attributable  SMR  spectrum  was  adopted  in  1994  because  SMR  spectrum 
 was  highly  encumbered,  was  assigned  on  a  station-  by-  station  basis,  and  was  not  available  as  a  contiguous  block. 
 See  Implementation  of  Sections  3(  n)  and  332  of  the  Communications  Act,  Regulatory  Treatment  of  Mobile 
 Services,  GN  Docket  No.  93-  252,  Third  Report  and  Order,  9  FCC  Rcd  7988,  8112-  14    270-  75  (1994)  (CMRS 
 Third  Report  and  Order). 


 5  See,  e.  g.,  First  Biennial  Review  Order,  15  FCC  Rcd  at  9254-  55    80;  CMRS  Third  Report  and  Order,  9 
 FCC  Rcd  at  7870    97. 
 6  See  generally  47  C.  F.  R    20.  6(  d).  Specifically,  under  the  CMRS  spectrum  cap,  controlling  interests  are 
 attributable.  Id.    20.  6(  d)(  1).  Also  attributable  are  non-  controlling  ownership  interests  of  20  percent  or  more  (40 
 percent  if  held  by  a  small  business  or  rural  telephone  company,  or  a  passive  institutional  investor),  including 
 (continued.) 
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 entity  is  identified,  one  then  determines  whether  the  attributable  CMRS  spectrum  serves  markets  having  a 
 significant  overlap.  7  This  inquiry  is  complicated  by  the  fact  that  different  licensing  and  service  areas 
 are  used  for  cellular,  broadband  PCS,  and  SMR  spectrum.  8  When  a  situation  involves  both  a  PCS  license 
 and  a  cellular  or  SMR  license,  a  significant  overlap  exists  when  10  percent  or  more  of  the  population  of 
 the  designated  PCS  licensed  service  area  is  within  the  CGSA  or  SMR  service  area(  s)  in  question.  9 


 4.  In  1994,  before  the  licensing  of  PCS  and  the  advent  of  digital  SMR  service,  and  when  only 
 two  cellular  licensees  offered  mobile  voice  services  in  any  given  geographic  market,  the  Commission 
 established  a  45  MHz  CMRS  spectrum  cap  to  complement  the  then-  existing  40  MHz  broadband  PCS 
 spectrum  cap  and  the  PCS/  cellular  cross-  ownership  rule.  10  In  1996,  the  Commission  eliminated  these 
 latter  two  service-  specific  limitations  on  licensees'  ability  to  aggregate  broadband  PCS  spectrum,  and 
 determined  to  rely  solely  on  the  45  MHz  CMRS  spectrum  cap  to  ensure  that  multiple  service  providers 
 would  be  able  to  obtain  broadband  PCS  spectrum  and  facilitate  the  development  of  competitive  markets 
 for  wireless  services.  11  The  Commission  reasoned  that  the  CMRS  spectrum  cap  was  sufficient  to  avoid 


 (Continued  from  previous  page) 
 general  and  limited  partnership  interests,  voting  and  non-  voting  stock  interests  or  any  other  equity  interest,  are 
 considered  attributable.  Id.    20.6(  d)(  2),  (3),  (4),  (6).  Officers  and  directors  are  attributed  with  their  companys 
 holdings,  as  are  persons  who  manage  certain  operations  of  licensees,  and  licensees  that  enter  into  certain  joint 
 marketing  arrangements  with  other  licensees.  Id.    20.  6(  d)(  7),  (9),  (10).  Debt  does  not  constitute  an  attributable 
 interest  for  purposes  of  the  spectrum  cap,  and  securities  affording  potential  future  equity  interests  (such  as 
 warrants,  options,  or  convertible  debentures)  are  not  considered  attributable  until  they  are  converted  or  exercised. 
 Id.    20.  6(  d)(  5).  Finally,  ownership  interests  held  through  successive  subsidiaries  are  calculated  by  using  a 
 multiplier.  Id.    20.  6(  d)(  8). 


 7  Id.    20.  6(  c). 


 8  For  spectrum  cap  purposes,  the  relevant  geographic  area  for  cellular  spectrum  is  the  Cellular 
 Geographic  Service  Area  (CGSA),  i.  e.,  the  composite  32  dBu  service  area  contour  within  which  the  cellular 
 system  is  entitled  to  protection  from  interference.  See  id.    22.  911.  For  broadband  PCS  spectrum,  the  relevant 
 area  is  the  licensed  service  area,  which  can  be  either  a  Major  Trading  Area  (MTA)  or  a  Basic  Trading  Area  (BTA). 
 See  id.    24.  202.  SMR  service  can  be  licensed  by  economic  areas  (EAs),  by  MTAs,  or  by  service  area  contour. 
 BTAs  and  MTAs  are  based  on  material  copyrighted    1992  Rand  McNally  &  Company. 


 9  Id.    20.  6(  c).  Where  both  MSA  and  RSA  areas  are  included  in  a  single  PCS  licensed  area,  those  areas 
 within  MSAs  where  total  spectrum  exceeds  45  MHz  and  those  areas  within  RSAs  where  total  spectrum  exceeds  55 
 MHz  are  considered  in  the  calculation.  See  1998  Biennial  Regulatory  Review,  Spectrum  Aggregation  Limits  for 
 Wireless  Telecommunications  Carriers,  WT  Docket  No.  98-  205,  Memorandum  Opinion  and  Order  on 
 Reconsideration,  FCC  00-  376  (rel.  Nov.  8,  2000)    22  (First  Biennial  Review  MO&  O).  Where  only  PCS  licenses 
 are  involved,  however,  this  analysis  does  not  apply,  and  any  overlap  between  BTA-  licensed  and  MTA-  licensed 
 spectrum  is  considered  significant.  Situations  involving  overlap  of  CGSAs  generally  do  not  arise  because  such 
 holdings  are  generally  prohibited  under  the  cellular  cross-  interest  rule,  47  C.  F.  R.    22.  942.  See  infra  para.  9. 


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


 11  Amendment  of  Parts  20  and  24  of  the  Commissions  Rules  --  Broadband  PCS  Competitive  Bidding  and 
 the  Commercial  Mobile  Radio  Service  Spectrum  Cap;  Amendment  of  the  Commission's  Cellular/  PCS  Cross-( 
 continued.) 
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 excessive  concentration  of  licenses  and  promote  and  preserve  competition,  while  also  noting  its  belief 
 that  discouraging  anticompetitive  behavior  must  be  accomplished  while  maintaining  incentives  for 
 innovations  and  efficiency.  12 


 5.  In  the  First  Biennial  Review  Order,  issued  in  September  1999  as  part  of  the  1998  biennial 
 review,  we  decided  substantially  to  retain  the  CMRS  spectrum  cap  (and  the  cellular  cross-  interest  rule), 
 with  targeted  modifications  to  reflect  circumstances  in  rural  areas  and  to  permit  passive  institutional 
 investors  to  acquire  greater  non-  attributable  interests  in  CMRS  carriers.  13  We  considered  the  danger  that 
 increased  broadband  spectrum  aggregation  would  result  in  decreased  service  competition  and  in  forgone 
 consumer  benefits.  We  also,  however,  took  into  consideration  the  need  that  certain  carriers  expressed  for 
 additional  spectrum  to  deal  with  congestion  on  their  networks  and  to  implement  new,  advanced  services. 
 We  concluded  that  a  bright-  line  spectrum  aggregation  limit  remained  a  simple  and  effective  means  of 
 generally  maintaining  a  proper  balance  between  these  public  policy  objectives.  14  In  the  order,  we 
 recognized  that  a  major  purpose  of  the  CMRS  spectrum  cap  was  to  provide  additional  opportunities  for 
 potential  new  entrants  to  particular  CMRS  markets  to  secure  spectrum  rights  in  those  areas  and  begin 
 offering  service.  15  Specifically,  we  found  that  CMRS  markets  differ  from  certain  other 
 telecommunications  markets  with  respect  to  ease  of  entry  because  of  the  need  to  obtain  a  governmentally-granted 
 spectrum  license  to  provide  CMRS.  16  Because  CMRS  market  entry  is  subject  to  such  necessary 
 government  control,  we  found  that  unregulated  market  entry  alone  cannot  necessarily  be  relied  on  to 
 discipline  anticompetitive  conduct.  17  Thus,  we  reaffirmed  the  45  MHz  limit  as  striking  the  proper  balance 
 (in  non-  rural  areas)  in  providing  carriers  with  sufficient  spectrum  until  we  could  allocate  additional 
 amounts  suitable  for  the  provision  of  CMRS,  while  helping  assuage  the  competitive  consequences  of  the 
 spectrum-  related  barriers  to  entry  in  todays  CMRS  markets. 


 6.  The  decision  in  the  First  Biennial  Review  Order  generally  to  retain  our  spectrum  aggregation 
 limits  rested  to  a  great  extent  on  our  view  that  substantial  consumer  benefits  had  resulted  from  the 
 dramatic  increases  in  competition  in  CMRS  markets  over  the  previous  few  years.  We  found  that  our 
 spectrum  cap  policies  had  played  a  positive  role  in  the  development  of  CMRS  competition  by  ensuring 
 the  potential  participation  of  four  or  more  facilities-  based  competitors  in  most  areas.  18  In  particular,  we  (Continued  from  previous  page) 


 Ownership  Rule,  WT  Docket  96-  59,  GN  Docket  90-  314,  Report  and  Order,  11  FCC  Rcd  7824,  7869    94  (1996) 
 (CMRS  Spectrum  Cap  Report  and  Order),  recon.  12  FCC  Rcd  14031  (1997)  (BellSouth  MO&  O),  affd  sub  nom. 
 BellSouth  Corp.  v.  FCC,  162  F.  3d  1215  (D.  C.  Cir.  1999). 


 12  CMRS  Spectrum  Cap  Report  and  Order,  11  FCC  Rcd  at  7869    94-  95. 


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


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


 15  First  Biennial  Review  Order,  15  FCC  Rcd  at  9234-  35    31. 


 16  Id.  at  9233    28. 
 17  Id.  at  9234-  35    31. 
 18  Id.  at  9240    44. 
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 found  that  eliminating  these  regulations  and  enabling  reconsolidation  to  occur  could  threaten  reversal  of 
 the  trends  toward  falling  prices,  improved  service  quality,  product  innovation,  and  product 
 differentiation.  19  In  this  regard,  we  noted  the  differentiated  products  that  have  been  offered  by  multiple 
 service  providers,  and  cited  data  showing  that  the  bundled  price  per  minute  for  cellular  service  had 
 declined  significantly  with  the  entry  of  the  fourth  and  fifth  broadband  CMRS  carriers  into  a  market.  20  We 
 therefore  rejected  certain  carriers  arguments  that  we  should  raise  the  cap  (e.  g.,  to  60  MHz)  because 
 consolidation  to  three  competitors  would  not  adversely  affect  CMRS  markets,  stating  instead  that 
 significant  benefits  of  competition  are  unlikely  to  be  exhausted  with  the  entry  of  a  third  carrier.  21  We 
 also  rejected  similar  arguments  to  raise  the  cap  uniformly  to  55  MHz,  concluding  that  three  carriers  with 
 55  MHz  each,  with  15  MHz  of  spectrum  for  a  fourth  competitor,  could  result  in  a  more  highly 
 concentrated  and  less  competitive  market  than  many  CMRS  markets  were  in  1999.  22  We  based  our 
 conclusions,  at  least  in  part,  on  measurements  of  market  concentration  that  were  computed  using  customer 
 subscription  data,  and  relied  to  a  significant  degree  on  the  Herfindahl-  Hirschman  Index  (HHI),  which 
 indicated  that  all  of  the  nations  largest  CMRS  markets  were  highly  concentrated.  23 


 7.  We  further  determined  that  the  asserted  benefits  from  a  repeal  or  fundamental  modification  of 
 our  spectrum  aggregation  limits  that  would  permit  fewer  than  four  significant  competitors  in  any  given 
 market  were  unsupported.  We  noted  existing  alternative  spectrum  that  could  be  used  to  provide  certain 
 types  of  new  services,  as  well  as  the  alternative  of  allocating  more  spectrum  suitable  for  the  provision  of 
 CMRS.  24  We  described  a  waiver  process  that  could  be  used  to  meet  the  spectrum  requirements  for  third-generation 
 (3G)  and  other  advanced  wireless  services  until  we  could  allocate  additional  spectrum  for  next 
 generation  applications.  25  With  regard  to  the  possible  allocation  of  additional  spectrum  potentially 
 suitable  for  CMRS,  we  decided  that  we  would  not  necessarily  subject  any  such  spectrum  to  the  current 
 45/  55  MHz  CMRS  spectrum  cap,  but  would  consider  its  treatment  in  the  service  rules  proceedings  for 
 such  spectrum.  26  We  also  cited  our  belief  that  the  cap  "furthers  the  goal  of  diversity  of  ownership  that  we 


 19  Id.  at  9242    48. 
 20  Id.  at  9240    43,  44. 
 21  Id. 
 22  Id.  at  9256    83. 
 23  Id.  at  9236-  38    35-  38. 
 24  Id.  at  9247-  48    60-  61,  63. 
 25  Id.  at  9255-  56    82  (describing  factors  that  will  be  reviewed  when  considering  a  request  for  permanent 
 waiver  of  the  spectrum  cap  to  provide  advanced  wireless  services).  Under  this  process,  a  carrier  can  obtain  a 
 waiver  of  the  cap  if  it  can  credibly  demonstrate  in  a  particular  geographic  area  that  the  applicable  limit  is  having  a 
 significant  adverse  effect  on  its  ability  to  provide  advanced  wireless  services.  Id. 


 26  Id.  The  first  occasion  to  apply  this  approach  came  four  months  later  when  we  held  that  CMRS 
 provided  on  the  746-  764  MHz  and  776-  794  MHz  bands  would  not  be  subject  to  in-  band  spectrum  aggregation 
 limits,  nor  to  the  general  CMRS  spectrum  cap.  See  Service  Rules  for  the  746-  764  and  776-  794  MHz  Bands,  and 
 Revisions  to  Part  27  of  the  Commissions  Rules,  WT  Docket  No.  99-  168,  First  Report  and  Order,  15  FCC  Rcd 
 476  (2000)  (700  MHz  First  Report  and  Order).  We  concluded  that  excluding  the  700  MHz  bands  from  the 
 spectrum  aggregation  limits  would  best  promote  the  availability  of  spectrum  for  advanced  services  while  avoiding 
 anticompetitive  harm.  Id.  at  497-  98    52-  53;  see  also  Service  Rules  for  the  746-  764  and  776-  794  MHz  Bands, 
 and  Revisions  to  Part  27  of  the  Commissions  Rules,  WT  Docket  No.  99-  168,  Memorandum  Opinion  and  Order, 
 FCC  00-  224  (rel.  June  30,  2000)  at    73.  We  noted  that  our  decision  not  to  include  the  spectrum  in  these  bands 
 (continued.) 
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 are  mandated  to  promote  under  section  309(  j)"  of  the  Communications  Act.  27 
 8.  We  did  conclude  that  the  public  policy  tradeoffs  were  different  in  rural  areas  than  in  non-  rural 
 areas,  and  we  raised  the  cap  to  55  MHz  in  RSAs.  We  based  this  conclusion  on  findings  that  the  potential 
 consumer  benefits  in  rural  areas  from  competitive,  facilities-  based  entry  were  likely  to  be  limited  by  the 
 economics  of  offering  service  to  lower-  density  populations.  28  As  a  practical  matter,  because  many  RSAs 
 are  unlikely  to  see  four  or  more  competitors  actually  offering  service,  we  determined  that  the  costs  of 
 raising  the  cap  in  those  areas  are  likely  to  be  less  than  in  urban  and  suburban  areas.  We  found  that  a  45 
 MHz  spectrum  cap  might  affect  the  ability  of  rural  cellular  carriers  (with  25  MHz  licenses)  and  broadband 
 PCS  carriers  (with  30  MHz  licenses)  to  attain  certain  economies  of  scale  and  scope  that  could  enhance 
 efficiency  without  threatening  competition.  Therefore,  we  concluded  that  a  55  MHz  spectrum  ceiling 
 recognizes  the  reality  that  higher  concentration  through  efficiency-  enhancing  partnering  and  other 
 arrangements  is  likely  or  inevitable  in  rural  areas.  29 


 B.  Cellular  Cross-  Interest  Rule 
 9.  Adopted  originally  in  1991,  30  the  cellular  cross-  interest  rule  substantially  limits  the  ability  of 
 parties  to  have  interests  in  cellular  carriers  on  different  channel  blocks  in  a  geographic  area.  Application 
 of  the  cellular  cross-  interest  rule  requires  comparison  of  the  CGSAs  of  cellular  licensees  operating  on  A 
 Block  frequencies  with  those  of  cellular  licensees  operating  on  B  Block  frequencies.  Because  cellular 
 licensees  are  authorized  on  frequencies  in  either  one  or  the  other  of  these  channel  blocks,  31  any 
 geographic  area  generally  will  fall  within  the  CGSAs  of  no  more  than  two  cellular  licensees  (one  on  each 
 channel  block).  32  To  the  extent  licensees  on  different  channel  blocks  have  any  degree  of  overlap  between 


 (Continued  from  previous  page) 
 under  the  cap  was  premised  on  retaining  the  cap  on  the  existing  180  MHz  of  broadband  CMRS  spectrum.  See  id. 
 We  considered  the  option  of  increasing  the  spectrum  cap  and  including  the  700  MHz  bands  within  that  cap,  but 
 concluded  that  doing  so  would  risk  harmful  consolidation  of  spectrum  within  the  existing  CMRS  bands.  700  MHz  First  Report  and  Order, 
 15  FCC  Rcd  at  498    53.  By  this  decision,  we  identified  additional  suitable  spectrum  that 
 would  be  made  available  for  mid-  and  long-  term  use  by  CMRS  carriers  without  compromising  the  consumer 
 benefits  of  ensuring  multiple  facilities-  based  carriers. 


 27  First  Biennial  Review  Order,  15  FCC  Rcd  at  9230    21  (citing  CMRS  Spectrum  Cap  Report  and 
 Order,  11  FCC  Rcd  at  7873    102). 
 28  Id.  at  9256-  57    84. 


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


 31  See  47  C.  F.  R    22.  905. 


 32  We  recently  adopted  an  order  permitting  cellular  carriers  to  disaggregate  spectrum.  See  Geographic 
 Partitioning  and  Spectrum  Disaggregation  by  Commercial  Mobile  Radio  Services  Licensees;  Implementation  of 
 Section  257  of  the  Communications  Act  --  Elimination  of  Market  Entry  Barriers,  WT  Docket  No.  96-  148,  GN 
 (continued.) 
6
 Federal  Communications  Commission  FCC  01-  28 
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 their  respective  CGSAs,  section  22.942  of  the  Commission's  rules  prohibits  any  entity  from  having  a 
 direct  or  indirect  ownership  interest  of  more  than  5  percent  in  one  such  licensee  when  it  has  an 
 attributable  interest  in  the  other  licensee.  33  An  attributable  interest  is  defined  generally  to  include  an 
 ownership  interest  of  20  percent  or  more,  as  well  as  any  controlling  interest.  34  Under  the  rule,  however, 
 an  entity  may  have  non-  controlling  and  otherwise  non-  attributable  direct  or  indirect  ownership  interests  of 
 less  than  20  percent  in  licensees  for  different  channel  blocks  in  overlapping  CGSAs.  35 


 10.  As  part  of  our  1998  biennial  review  of  the  cellular  cross-  interest  rule,  we  determined  that  the 
 restriction  continued  to  be  necessary  to  protect  against  substantial  anticompetitive  threats  from  common 
 ownership  between  the  two  cellular  carriers  in  any  given  geographic  area.  We  found  that  cellular  carriers 
 served  approximately  86  percent  of  nationwide  mobile  telephone  subscribers  at  the  end  of  1998,  and 
 determined  that  in  only  a  few  major  metropolitan  markets  was  that  percentage  less  than  70  percent.  36 
 With  two  cellular  carriers  being  the  only  providers  of  mobile  telephone  service  in  some  markets  and 
 having  the  lions  share  of  subscribers  in  all  markets,  we  concluded  that  economic  competition  alone 
 would  not  ensure  that  the  public  interest  objectives  of  the  cellular  cross-  interest  rule  would  be  met.  37  We 
 also  concluded  that  reliance  on  the  CMRS  spectrum  cap  without  a  cellular  cross-  interest  rule  would  allow 
 cellular  carriers  to  acquire  too  much  of  an  ownership  interest  in  the  other  cellular  licensee  in  urban 
 markets,  and  would  permit  one  entity  to  acquire  complete  control  of  both  cellular  licensees  in  rural 
 markets.  38  However,  because  competition  from  other  services  had  increased  on  the  whole  since  the  rules 
 inception  in  1991,  we  altered  what  had  been  a  near  absolute  bar  against  cross-  ownership  39  by  relaxing 
 application  of  the  rules  attribution  standards  to  the  current  limits  under  section  22.942.  40 


 (Continued  from  previous  page) 
 Docket  No.  96-  113,  Second  Report  and  Order,  FCC  00-  141  (rel.  May  19,  2000)  (Cellular  Disaggregation  Order). 
 To  the  extent  that  either  cellular  carrier  disaggregates  a  portion  of  its  spectrum  on  its  channel  block  to  another 
 entity,  there  could  be  three,  or  more,  cellular  carriers  in  one  geographic  area.  Our  Cellular  Disaggregation  Order 
 does  not  address  the  effect  of  disaggregation  on  the  cross-  interest  rule.  Accordingly,  we  seek  comment  below  on 
 how  disaggregation  may  affect  application  of  the  rule.  See  infra  para.  55. 


 33  47  C.  F.  R.    22.  942(  a). 


 34  Id.    22.  942(  d)(  1),  (2).  Other  rules  for  determining  attributable  interests  are  set  forth  elsewhere  in 
 section  22.  942(  d).  See  id.    22.942(  d)(  3)-(  9). 
 35  Id.    22.  942(  b). 


 36  First  Biennial  Review  Order,  15  FCC  Rcd  at  9232    25,  9251    71. 
 37  Id.  at  9251-  52    70-  72. 
 38  Id.  at  9252    73.  Specifically,  in  the  absence  of  the  cellular  cross-  interest  rule,  cellular  carriers  in 
 MSAs  would  be  permitted  to  acquire  up  to  a  20  percent  non-  controlling  interest  in  the  markets  other  cellular 
 licensee  without  triggering  the  spectrum  caps  attribution  standard;  and,  because  the  spectrum  cap  had  been 
 increased  to  55  MHz  in  rural  areas,  a  single  entity  could  control  both  25  MHz  cellular  licensees  in  an  RSA.  Id. 


 39  As  originally  adopted,  the  Commission  prohibited  an  entity  with  a  controlling  interest  in  the  license  for 
 one  cellular  channel  block  from  having  any  interest  in  the  license  for  the  other  channel  block  in  overlapping 
 CGSAs.  A  single  entity  could,  however,  have  interests  of  5  percent  or  less  in  both  channel  blocks,  so  long  as 
 neither  of  those  interests  was  controlling.  47  C.  F.  R.    22.  942(  a)  (1999). 


 40  See  supra  text  accompanying  notes  33-  35. 
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 Federal  Communications  Commission  FCC  01-  28 
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 III.  DISCUSSION 
 A.  Section  11  Review  of  CMRS  Spectrum  Aggregation  Limits 
 11.  Background.  Section  11  of  the  Communications  Act  imposes  an  affirmative  obligation  to 
 eliminate  or  modify  any  of  our  rules  for  telecommunications  services,  such  as  our  spectrum  aggregation 
 limits  applicable  to  CMRS,  if  any  such  rule  is  determined  to  be  no  longer  necessary  in  the  public  interest. 
 In  passing  the  Telecommunications  Act  of  1996  41  to  significantly  amend  the  Communications  Act, 
 Congress  anticipated  that,  as  competition  developed,  market  forces  would  reduce  the  need  for 
 regulation.  42  Specifically,  in  adopting  section  11,  Congress  required  the  Commission,  every  two  years,  to 
 review  all  regulations  that  apply  to  the  operations  or  activities  of  any  provider  of  telecommunications 
 service  and  to  "determine  whether  any  such  regulation  is  no  longer  necessary  in  the  public  interest  as  the 
 result  of  meaningful  economic  competition  between  providers  of  such  service.  43  If  we  determine  that,  as 
 the  result  of  competition  in  CMRS  markets,  certain  regulations  applicable  to  CMRS  providers  are  no 
 longer  necessary  in  the  public  interest,  then  we  shall  repeal  or  modify  those  regulations  per  Congress 
 mandate.  44 


 12.  Discussion.  To  determine  whether  the  CMRS  spectrum  cap  and  the  cellular  cross-  interest  rule 
 are  no  longer  necessary  in  the  public  interest  as  the  result  of  meaningful  economic  competition,  we  are 
 here  soliciting  detailed  comments  from  wireless  telecommunications  carriers,  consumers  of  their  services, 
 and  other  interested  parties  on  whether  we  should  retain,  repeal  or  modify  these  limits  under  the  standards 
 of  section  11  of  the  Communications  Act.  Under  section  11,  our  fundamental  inquiry  is  whether,  as  a 
 result  of  meaningful  economic  competition  among  providers  of  telecommunications  services,  spectrum 
 aggregation  limits  are  no  longer  necessary  in  the  public  interest,  e.  g.,  to  prevent  harmful  concentration  of 
 spectrum  ownership  or  to  ensure  meaningful  opportunities  for  broadband  CMRS  market  entry.  In  order 
 to  make  this  determination,  we  seek  comment  regarding  what  providers  of  telecommunications  service 
 fall  within  the  purview  of  our  section  11  analysis  of  our  spectrum  aggregation  policies.  What  constitutes 
 meaningful  economic  competition  under  section  11,  and  to  what  degree  have  the  relevant  competitive 
 conditions  changed  since  our  1998  biennial  review  of  these  rules?  45  If  meaningful  competition  between 
 providers  of  telecommunications  services  now  exists,  have  spectrum  aggregation  limits  served  their 
 purpose  and  are  they  no  longer  in  the  public  interest?  46  Or,  are  there  public  interest  reasons  to  retain 
 spectrum  aggregation  limits  notwithstanding  the  development  of  meaningful  economic  competition?  We 


 41  Telecommunications  Act  of  1996,  Pub.  L.  No.  104-  104,  110  Stat.  56  (1996)  (1996  Act). 
 42  See  Joint  Managers  Statement,  S.  Conf.  Rep.  No.  104-  230,  104  th  Cong.,  2d  Sess.  113  (1996)  at  1 
 (stating  that  the  1996  Act  would  establish  a  pro-  competitive,  deregulatory  national  policy  framework). 
 43  47  U.  S.  C.    161(  a)(  1),  (2);  see  also  section  402(  a)  of  the  1996  Act,  110  Stat.  56  (1996). 


 44  47  U.  S.  C.    161(  b). 
 45  In  our  recently  released  Updated  Staff  Report  on  the  biennial  regulatory  review  2000,  we  noted  that  the 
 review  of  regulations  undertaken  in  the  2000  biennial  review  builds  upon  the  work  completed  in  the  1998  biennial 
 review.  In  the  Matter  of  the  2000  Biennial  Regulatory  Review,  CC  Docket  No.  00-  175,  Report,  FCC  00-  456  (rel. 
 Jan.  17,  2001)    11  (2000  Staff  Report). 


 46  Prior  to  release  of  our  2000  Staff  Report,  we  received  comments  from  representatives  of  the  CMRS 
 industry  that  the  section  11  biennial  review  criteria  support  the  elimination  of  the  spectrum  cap.  See  id.  app.  IV  at 
 33  n.  85  (referencing  Comments  of  Alloy  at  p.  5  and  Comments  of  CTIA  at  p.  3).  We  incorporate  by  reference  all 
 comments  on  the  spectrum  cap  that  we  received  in  our  2000  Staff  Report  proceeding. 
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 Federal  Communications  Commission  FCC  01-  28 
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 ask  commenters  to  consider  generally  the  relation  between  public  interest  and  meaningful  economic 
 competition  under  section  11s  terms. 


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


 1.  Development  of  Meaningful  Economic  Competition 
 14.  Background.  Since  we  last  reviewed  spectrum  aggregation  limits  in  September  1999,  CMRS 
 markets  have  continued  to  grow  in  size,  range  of  service  offerings,  and  the  pace  of  technological 
 advances.  In  our  Fifth  Annual  CMRS  Competition  Report,  released  in  August  2000,  we  described 
 considerable  evidence  that  the  mobile  telephony  market  has  experienced  strong  growth  and  competitive 
 development.  47  We  cite  just  a  few  indicia  of  these  trends.  By  the  end  of  1999,  48  we  had  witnessed  the 
 largest  twelve-  month  percentage  increase  in  the  total  number  of  subscribers  in  the  history  of  the  mobile 
 telephone  sector.  Specifically,  total  U.  S.  mobile  telephone  subscribership  had  reached  86  million,  49  and 
 the  Cellular  Telecommunications  and  Internet  Association  (CTIA)  has  reported  that  total  subscribership 
 reached  over  97  million  as  of  June  2000.  50  On  the  competition  front,  we  reported  that,  as  broadband  PCS 
 licensees  continued  to  roll  out  service  and  operational  carriers  expanded  their  nationwide  footprints,  about 
 88  percent  of  U.  S.  residents  lived  in  counties  that  were  served  by  three  or  more  different  broadband 
 CMRS  providers.  51  In  the  largest  counties,  where  69  percent  of  our  population  lives,  we  determined  that 


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


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


 50  CTIA's  most  recent  Semi-  Annual  Wireless  Industry  Survey  tabulating  total  subscribership  as  of  June 
 2000  is  available  at  http://  www.  wow-  com.  com/  statsurv/  survey/  wireless.  cfm. 
 51  Fifth  Annual  CMRS  Competition  Report  at  6.  Because  our  analysis  was  limited  to  publicly  available 
 sources  of  information,  this  coverage  percentage  is  based  on  the  number  of  operators  serving  any  portion  of  a 
 particular  county.  Although  the  three  or  more  identified  operators  may  not  necessarily  all  be  providing  service  to 
 (continued.) 
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 Federal  Communications  Commission  FCC  01-  28 
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 at  least  five  different  mobile  telephone  operators  were  competing  for  subscribers.  52  We  noted  that  carriers 
 were  taking  advantage  of  the  economies  of  scale  and  increased  efficiencies  that  resulted  from  expanding 
 their  footprints  nationwide.  53  As  a  result,  there  are  now  six  nationwide  or  near-  nationwide  carriers 
 offering  service  in  the  United  States,  54  as  well  as  a  large  number  of  regional  and  local  CMRS  providers. 
 In  addition,  because  of  upgrades  by  cellular  carriers  to  convert  to  digital  technology  and  thereby  expand 
 their  network  capacity,  we  reported  that  84  percent  of  the  nations  population  lived  in  areas  with  digital 
 cellular  coverage.  55  Including  broadband  PCS,  digital  cellular,  and  digital  SMR,  digital  subscribers  for 
 the  first  time  composed  a  greater  percentage  of  the  mobile  telephone  market  than  did  analog  subscribers, 
 the  traditional  mainstay  of  the  cellular  industry.  56  Moreover,  because  digital  subscribers  tend  to  use 
 mobile  services  more  intensively  than  analog  subscribers,  the  percentage  of  digital  traffic  in  CMRS 
 networks  substantially  exceeded  50  percent.  57  We  also  reported  that  non-  cellular  carriers  had  for  the  first 
 time  attracted  a  majority  of  the  industrys  total  new  subscribers.  58  As  a  result,  cellular  licensees  market 
 share  of  mobile  telephone  subscribers  nationwide  had  dropped  from  86  percent  at  the  end  of  1998  to 
 approximately  75  percent  at  the  end  of  1999.  59 


 15.  Concurrent  with,  and  we  believe  largely  as  the  result  of,  the  continued  growth  of  competition 
 in  the  mobile  telephony  market,  consumers  have  benefited  from  declining  prices,  rapidly  expanding 
 coverage  areas,  new  service  packages,  and  technological  innovation.  In  our  First  Biennial  Review  Order, 
 we  noted  that  prices  were  falling,  minutes  of  use  (MOUs)  were  increasing,  and  service  options  were 
 growing.  60  According  to  our  analysis,  entry  by  a  fourth  and  fifth  facilities-  based  competitor  into  mobile 
 telephone  markets  was  leading  to  significant  declines  in  bundled  per-  minute  prices  for  consumers.  61 
 Moreover,  in  our  Fifth  Annual  CMRS  Competition  Report,  we  cited  data  that  the  entrance  of  new 
 competitors  into  these  markets  continues  to  reduce  prices  and  benefit  consumers.  62  We  further  concluded 


 (Continued  from  previous  page) 
 the  same  portion  of  the  county,  we  note  that  this  analysis  was  nonetheless  a  more  precise  picture  of  network 
 deployments  than  in  prior  years  reports  where  our  analysis  was  based  on  BTAs.  Id.  at  17-  18. 


 52  Id.  at  6. 


 53  Id.  at  10-  12. 
 54  See,  e.  g.,  id. 
 55  Id.  at  27-  28. 
 56  See,  e.  g.,  id.  at  13. 
 57  See,  e.  g.,  id.  at  14. 
 58  Id.  at  22  (finding  that  non-  cellular  carriers  had  claimed  between  50  and  64  percent  of  the  industrys 
 total  new  subscribers,  and  that  this  figure  was  expected  to  increase  to  75  percent  by  mid-  decade). 
 59  We  provided  data  in  the  Fifth  Annual  CMRS  Competition  Report  that  cellular  licensees  had 
 approximately  75  percent  of  mobile  telephone  subscribers  nationwide  at  the  end  of  1999.  See  id.  at  B-  9  (table 
 comparing  tabulated  figures  for  cellular  subscribership  with  total  cellular,  broadband  PCS,  and  SMR 
 subscribership). 


 60  See  First  Biennial  Review  Order,  15  FCC  Rcd  at  9231    23. 


 61  Id.  at  9240    43,  44. 
 62  See  Fifth  Annual  CMRS  Competition  Report  at  18-  20. 
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 that  the  decreasing  pricing  trends  are  likely  contributing  to  the  increased  MOUs  and  reliance  on  mobile 
 wireless  services.  63  In  addition,  consumers  are  also  experiencing  the  increasing  emergence  of  mobile  data 
 services.  Specifically,  there  have  been  continuing  developments,  both  domestically  and  internationally, 
 regarding  the  provision  of  advanced  mobile  wireless  services,  including  broadband,  multi-  media  services 
 such  as  Internet  access.  64 


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


 17.  In  September  1999,  we  determined  that  improvements  in  the  various  indicia  of  competition 
 would  be  threatened  by  eliminating  the  spectrum  cap,  as  doing  so  could  enable  reconsolidation  to  occur. 
 We  were  especially  concerned  at  that  time  that  allowing  individual  carriers  to  acquire  spectrum  holdings 
 in  excess  of  the  cap  could  lead  to  a  reconsolidation  of  the  broadband  CMRS  marketplace  with  negative 
 impacts  on  competition,  given  the  need  to  obtain  spectrum  licenses  from  the  FCC  to  provide  CMRS.  65  In 
 reassessing  the  need  for  aggregation  limits,  we  seek  comment  on  whether  competitive  developments  since 
 that  time  have  obviated  the  need  for  limits  such  as  the  spectrum  cap  to  prevent  potentially  harmful 
 reconsolidation.  Are  such  limits  still  needed  today,  as  we  concluded  then,  to  prevent  retrogression  and 
 competition-  eroding  concentration  in  CMRS  markets?  Because  incentives  may  exist  for  operational 
 carriers  to  consolidate  within  markets,  how  valuable  a  role  do  spectrum  limits  play  in  preventing 
 potentially  harmful  concentration  versus  allowing  consolidations  that  benefit  the  public  interest?  In  this 
 regard,  we  note  that  spectrum  aggregation  limits  do  not  appear  to  have  prevented  the  consolidation  of 
 carriers  into  nationwide  networks  with  the  resulting  beneficial  service  options  for  consumers.  66 


 18.  We  ask  for  comment  on  the  impact  that  these  market  trends,  as  well  as  the  regulatory 
 considerations  discussed  below,  67  should  have  on  our  assessment  of  the  various  economic  relationships  on 
 which  our  spectrum  cap  policy  is  based.  How  do  these  developments  affect  our  concern  that  limits  were 
 necessary  in  order  to  ensure  a  minimum  number  of  competitors  in  any  given  geographic  area?  Should  the 
 relevant  measures  of  market  capacity  (e.  g.,  assigned  spectrum,  subscriber  shares,  etc.)  be  weighted 
 differently  than  in  the  past?  What  role  should  we  continue  to  afford  HHI  calculations  or  similar  measures 
 of  concentration  of  ownership  or  control,  and  what  inputs  should  we  use  in  calculating  HHI?  Moreover, 
 should  we  redefine  the  relevant  product  market  in  light  of  increasing  product  convergence  between 
 providers  subject  to  the  CMRS  spectrum  cap  and  other  service  providers?  Should  we  continue  to  apply 


 63  Id.  at  22-  23. 
 64  Id.  at  33-  35. 
 65  See  supra  para.  5-  6. 
 66  See  supra  para.  14. 
 67  See  discussion  infra  part  III.  B.  2. 
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 the  cap  to  all  broadband  PCS,  cellular,  and  SMR  spectrum  regulated  as  CMRS,  regardless  of  the  use  to 
 which  the  spectrum  currently  is  dedicated;  or,  should  we  limit  application  of  the  cap  to  CMRS  spectrum 
 used  for  mobile  voice  service?  68  If  we  were  to  limit  the  cap  to  mobile  voice  services  only,  how  would  we 
 further  and  clearly  define  the  included  and  excluded  product  markets?  Also  in  the  increasingly 
 converging  marketplace,  are  these  product  markets  truly  segregable?  Moreover,  how  would  such  a  policy 
 affect  the  spectrum  cap's  goal  to  guard  against  excessive  accumulation  of  CMRS  spectrum?  Also,  how 
 should  we  define  the  relevant  geographic  market,  especially  in  light  of  the  trend  toward  nationwide 
 footprints  and  affiliations?  Commenters  should  specifically  address  whether  todays  CMRS  markets  will 
 enable  new  entrants    both  existing  carriers  seeking  to  expand  their  footprints  and  firms,  including  small 
 businesses,  seeking  to  enter  the  market  ab  initio    to  have  access  to  the  limited  spectrum  that  is  practically 
 available  today  for  mobile  telephone  services. 


 19.  We  also  seek  comment  on  the  implications  for  our  spectrum  aggregation  limits  of  our 
 authority  under  section  310(  d)  of  the  Communications  Act  to  determine  that  a  particular  consolidation  is 
 not  in  the  public  interest.  69  If  we  were  to  eliminate  or  relax  the  spectrum  cap,  could  we,  or  should  we, 
 incorporate  other  methods  into  the  section  310(  d)  review  process  that  would  serve  our  goal  of  preventing 
 consolidations  that  would  eliminate  the  benefits  brought  by  competition,  while  giving  due  consideration 
 to  the  need  for  firms  to  achieve  minimum  efficient  scale?  70  For  example,  could  we  adopt  a  processing 
 standard  that  if  a  proposed  transaction  would  cause  an  applicant  to  exceed  45  MHz  of  covered  spectrum 
 (or  some  other  threshold  amount),  it  must  provide  an  additional  public  interest  showing  meeting  certain 
 criteria  (e.  g.,  HHI  and/  or  other  economic  data  demonstrating  concentration  of  market)?  Alternatively, 
 would  it  be  preferable  to  establish  a  threshold  based  on  the  number  of  competitors  providing  CMRS  (or 
 CMRS  mobile  voice  telephony)  in  a  geographic  market?  71  Commenters  advocating  such  a  threshold 
 should  address  how  we  should  determine  the  number  of  competitors,  as  well  as  how  to  determine  what 
 service  providers  to  include  and  the  scope  of  the  geographic  markets.  We  seek  comment  on  other 
 standards  or  methodologies  that  would  accomplish  what  is  necessary  from  a  competition  perspective. 
 We  also  seek  comment  on  the  benefits  and  detriments  of  providing  bright-  line  criteria  that  do  not 
 substantially  increase  burdens  on  the  public  or  Commission  resources.  72  Commenters  should  consider 
 the  impact  of  any  standards  that  will  increase  time  and  expense  for  small  businesses,  which  often  may  not 
 have  the  requisite  resources  for  case-  by-  case  reviews. 


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


 69  47  U.  S.  C.    310(  d). 


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


 71  Cf.  47  C.  F.  R.    73.  3555  (multiple  ownership  rule  applicable  to  broadcast  stations). 


 72  See  also  infra  para.  30,  38. 
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 20.  More  broadly,  we  seek  comment  on  the  implications  of  other  agencies  enforcement  of 
 antitrust  laws  for  our  spectrum  aggregation  limits  and  our  public  interest  review  required  by  section 
 310(  d).  In  our  First  Biennial  Review  Order,  we  identified  certain  benefits  of  the  spectrum  cap  and 
 cellular  cross-  interest  rule  that  were  not  afforded  by  antitrust  review  and  decided  that  the  antitrust  laws 
 should  [not]  be  the  exclusive  tool  for  addressing  competition  issues  of  the  nature  we  confront  in  CMRS 
 markets.  73  We  note,  however,  that  in  the  past  few  years,  the  Department  of  Justice  (DOJ)  in  some  cases 
 has  entered  into  consent  decrees  with  merging  CMRS  carriers  to  prevent  competitive  harm  in  overlapping 
 markets  after  the  merger.  74  Can  we,  and  should  we,  defer  to  the  DOJ  in  such  matters,  and  if  so,  what  form 
 should  such  deference  take?  For  example,  can  we,  and  should  we,  adopt  an  approach  such  that  all 
 transfers  resulting  in  consolidation  of  spectrum  below  a  spectrum  threshold  should  be  exempt  from 
 section  310(  d)  competitive  analysis?  Can  we,  and  should  we,  eschew  an  independent  review  of  the 
 competitive  implications  of  license  transfers  that  are  part  of  mergers  that  are  subject  to  some  specified 
 level  of  DOJ  review,  and,  if  so,  how  should  we  define  that  level?  What  would  be  the  legal  and  policy 
 implications  of  adopting  these  or  any  alternative  approaches?  Antitrust  laws  may  adequately  focus  on 
 mergers  that  threaten  to  curtail  actual  competition  harming  consolidation.  75  Do  spectrum  aggregation 
 limits  continue  to  promote  other  public  interest  goals  that  stress  policies  such  as  the  beneficial  role  of 
 market  entry? 


 21.  If  we  conclude  that  spectrum  aggregation  limits  remain  necessary  at  this  time,  we  ask 
 commenters  to  address  whether  subsequent  competitive  developments  could  obviate  the  need  for  such 
 limits  and  thereby  enable  us  to  sunset  these  regulations.  In  our  1998  biennial  review,  we  sought  comment 
 on  the  possibility  of  establishing  a  sunset  date  for  CMRS  spectrum  aggregation  limits  in  some  or  all 
 markets,  but  we  ultimately  declined  to  adopt  a  sunset,  concluding  that  it  was  more  appropriate  to  revisit 
 the  rules  in  our  year  2000  biennial  review.  76  We  again  seek  comment  on  whether  it  is  appropriate  to 
 adopt  a  sunset  in  light  of  anticipated  competitive  evolution  of  CMRS  markets.  Alternatively,  we  seek 
 comment  on  whether  there  are  public  interest  reasons  not  to  sunset  the  rules  even  if  such  evolution  occurs 
 or  whether  we  should  reexamine  the  regulations  in  our  year  2002  biennial  review.  If  commenters  believe 
 that  a  sunset  provision  is  appropriate,  we  seek  further  comment  on  whether  it  should  be  tied  to  a  specific 
 date  in  the  future,  and  how  best  to  predict  the  timing  of  the  competitive  developments  on  which  it  would 
 be  based.  Alternatively,  we  seek  comment  on  whether  a  sunset  should  be  based  on  the  development  of 
 specified  competitive  conditions  or  other  criteria,  in  some  or  all  markets,  regardless  of  when  they  occur. 
 We  encourage  commenters  to  provide  specific  economic  evidence  supporting  their  proposals  and  views. 


 22.  We  ask  for  comment  on  the  potential  harms  or  benefits  of  adopting  limits  other  than  the 


 73  First  Biennial  Review  Order,  15  FCC  Rcd  at  9244-  46    56-  57. 
 74  See,  e.  g.,  United  States  v.  SBC  Communications  Inc.  and  Ameritech  Corporation,  No.  1:  99CV00715 
 (D.  D.  C.  filed  Aug.  2,  1999)  (final  judgement);  United  States  v.  SBC  Communications  Inc.  and  BellSouth 
 Corporation,  No.  1:  00CV02073(  PLF)  (D.  D.  C.  filed  Aug.  30,  2000)  (final  judgement).  Indeed,  some  DOJ  consent 
 decrees  require  the  spin-  off  of  overlapping  spectrum  licenses  to  a  level  below  that  required  by  our  spectrum 
 aggregation  limits.  See  United  States  v.  Bell  Atlantic  Corporation,  GTE  Corporation,  and  Vodafone  AirTouch 
 PLC,  No.  1:  99CV01119(  LFO)  (D.  D.  C.  filed  Apr.  18,  2000)  (final  judgement). 


 75  See,  e.  g.,  First  Biennial  Review  Order,  15  FCC  Rcd  at  9245-  46    57. 


 76  See  id.  at  9232    26  n.  75.  We  also  note  that  we  have  utilized  sunsets  in  other  CMRS  rules,  see,  e.  g.,  47 
 C.  F.  R.    20.  20(  f)  (sunset  of  the  separate  affiliate  requirements  for  incumbent  local  exchange  carrier  (ILEC) 
 provision  of  in-  region  broadband  CMRS);    20.  12(  b)  (sunset  of  the  CMRS  resale  rule),  and  LMDS  ownership 
 rules,    101.  1003  (sunset  of  LMDS  eligibility  restrictions  for  ILECs). 
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 current  45/  55  MHz  spectrum  cap  thresholds.  Under  increased  thresholds,  which  combinations  would 
 harm  or  benefit  consumers?  For  example,  a  60  MHz  spectrum  cap  would  permit  an  A  Block  broadband 
 PCS  carrier  to  combine  with  the  B  Block  PCS  carrier,  or  with  a  cellular  carrier,  in  any  given  geographic 
 area.  Under  a  55  MHz  spectrum  cap,  a  25  MHz  cellular  carrier  and  a  30  MHz  broadband  PCS  carrier 
 would  be  able  to  merge  their  operations  in  non-  rural  areas.  77  Assuming  consolidation  between  broadband 
 PCS  and  cellular  operators,  a  55  MHz  cap  would  still  ensure  at  least  four  broadband  competitors  under 
 the  180  MHz  of  covered  spectrum.  However,  under  such  a  limit,  it  is  possible  that  one  competitor  could 
 have  significantly  less  spectrum  than  the  other  three  under  current  allocations.  78  Would  such  an 
 eventuality  allow  harmful  reconsolidation,  or  would  consumers  potentially  benefit?  Do  the  current 
 aggregation  limits  potentially  serve  as  the  best  guarantee  that  new  entrants,  including  small  businesses, 
 can  obtain  the  needed  spectrum  licenses  to  gain  access  to  compete  in  CMRS  markets? 


 23.  In  addition  to  seeking  comment  on  these  issues  with  respect  to  the  spectrum  cap,  we  also  seek 
 comment  on  whether  we  should  repeal  the  cellular  cross-  interest  rule.  The  distinctions  between  cellular 
 and  PCS  services  appear  to  have  decreased  since  our  1998  biennial  review.  79  In  addition,  we  note  that 
 according  to  recent  estimates,  cellular  licensees  market  share  of  mobile  telephone  subscribers  nationwide 
 has  dropped  from  86  percent  at  the  end  of  1998,  as  noted  in  the  First  Biennial  Review  Order,  to 
 approximately  75  percent  by  year-  end  1999,  a  trend  that  industry  analysts  expect  to  continue  in  the 
 coming  years.  80  On  the  other  hand,  most  broadband  PCS  operators  are  still  deploying  their  networks  and 
 do  not  yet  provide  facilities-  based  coverage  comparable  to  the  current  combined  nationwide  cellular 
 footprint.  81  We  therefore  seek  comment  on  whether  the  need  for  a  separate  cellular  cross-  interest  rule  has 
 lessened,  or  whether  the  cellular  sector  may  still  have  the  potential  to  undermine  the  level  of  CMRS 
 competition  we  have  seen  so  far.  In  a  marketplace  where  carriers  are  building  nationwide  networks  that 
 combine  different  CMRS  services,  can  we  continue  to  make  distinctions  and  compare  competitive 
 differences  between  cellular  carriers  and  their  competitors,  e.  g.,  PCS  carriers?  In  inviting  comment 
 on  whether  maintaining  separate  cellular  cross-  ownership  limits  is  still  necessary  in  the  public  interest,  we 
 ask  commenters  to  provide  empirical  evidence  and/  or  studies  on  the  relative  competitive  and  buildout 
 status  of  cellular,  SMR,  and  broadband  PCS  carriers  on  a  market-  by-  market  as  well  as  comprehensive 
 basis. 


 24.  We  also  seek  comment  on  whether  the  cellular  cross-  interest  rule  may  still  be  necessary  to 
 prevent  cellular  carriers  from  merging  in  certain  markets  where  there  is  limited  or  no  competition  from 
 other  CMRS  providers.  There  still  appear  to  be  some  geographic  markets  where  no  broadband  PCS 
 provider  has  yet  initiated  service.  82  Also,  in  rural  areas  where  cellular  carriers  are  the  dominant  providers 


 77  We  note  that  under  a  55  or  60  MHz  spectrum  cap,  the  cellular  cross-  interest  rule  would  still  prevent 
 two  cellular  carriers  from  combining. 
 78  See,  e.  g.,  First  Biennial  Review  Order,  15  FCC  Rcd  at  9256    83. 


 79  See,  e.  g.,  Fifth  Annual  CMRS  Competition  Report  at  15-  16. 
 80  See  supra  text  accompanying  note  59.  We  note  that  the  cellular  licensees  market  share  of  customers 
 does  not  include  additional  customers  that  some  of  these  same  licensees  serve  by  virtue  of  PCS  licenses.  See  Fifth 
 Annual  CMRS  Competition  Report  at  B-  9  (showing  that  several  cellular  licensees  also  serve  mobile  telephone 
 customers  under  PCS  licenses). 


 81  See,  e.  g.,  id.  at  29. 


 82  See,  e.  g.,  id. 
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 and  the  CMRS  spectrum  cap  is  55  MHz,  the  spectrum  cap  alone  would  not  prevent  the  two  cellular 
 carriers  from  merging.  Could  the  purpose  of  the  cross-  interest  rule  still  be  served  by  its  application  in 
 these  circumstances?  Or  would  our  ability  to  review  consolidations  on  a  case-  by-  case  basis  under  section 
 310(  d)  suffice  to  prevent  monopolistic  cellular  consolidation?  83 


 25.  Finally,  one  of  the  primary  goals  of  the  1996  Act  is  to  promote  competition  in  local 
 telecommunications  markets.  84  We  seek  comment  on  whether  and,  if  so,  how  our  spectrum  aggregation 
 limits  affect  CMRS  providers'  ability  to  enter  into  and  compete  in  local  telecommunications  markets. 
 Since  September  1999,  has  the  spectrum  cap  enhanced  or  impeded  the  provision  of  wireless  services  as  a 
 competitive  alternative  to  wireline  services?  How  significant  are  the  opportunity  costs  of  dedicating 
 broadband  CMRS  spectrum  to  mobile  services  when  other  spectrum  bands  are  available  for  fixed  wireless 
 services?  85  To  the  extent  that  incumbent  licensees  build  networks  using  CMRS  spectrum  that  are  targeted 
 mainly  to  particular  services,  are  opportunities  for  entry  and  development  of  competition  in  other  services 
 limited  in  the  short  to  medium  term?  In  addition,  how  should  these  considerations  affect  our 
 identification  and  analysis  of  the  appropriate  CMRS  product  markets  for  our  biennial  review?  86 


 2.  Spectrum  Management  and  Other  Regulatory  Considerations 
 26.  Background.  We  must  also  review  the  CMRS  spectrum  aggregation  rules  in  light  of  our 
 spectrum  management  responsibilities,  pursuant  to  which  we  issue  the  licenses  for  spectrum  necessary  to 
 provide  CMRS,  as  well  as  other  regulatory  considerations.  We  begin  by  acknowledging  that,  relative  to 
 demand,  there  is  a  limited  amount  of  spectrum  available  that,  as  a  practical  matter,  is  suitable  for  the 
 provision  of  broadband  CMRS  within  the  foreseeable  future.  For  example,  the  propagation 
 characteristics  of  spectrum  above  approximately  3  GHz  make  it  generally  unsuitable  for  mobile  use  using 
 current  technology.  In  addition,  many  bands  below  3  GHz  are  allocated  for  multiple  uses  other  than 
 CMRS,  including  broadcast  operations,  private  mobile  and  fixed  services,  and  various  types  of  satellite 
 operations.  Moreover,  significant  amounts  of  spectrum  below  3  GHz  are  allocated  for  important  federal 
 government  uses,  such  as  defense,  national  security,  law  enforcement,  and  air  traffic  control.  Because 
 scarcity  issues  to  some  degree  affect  all  users  of  spectrum  (and,  indeed,  all  users  of  any  finite  natural 
 resource)  and  all  spectrum  bands,  scarcity  in  and  of  itself  is  not  sufficient  to  justify  a  limit  on  the 
 aggregation  of  spectrum.  However,  significant  shortages  of  spectrum  relative  to  demand  raise  concerns, 
 especially  in  service  markets  where  there  are  few  close  non-  spectrum  substitutes.  87  The  Commission  has 
 found  that  the  particular  conditions  that  apply  to  broadband  CMRS  spectrum  support  the  use  of 


 83  See  generally  supra  para.  19-  20. 
 84  See  47  U.  S.  C.    251-  261  (Development  of  Competitive  Markets);  Joint  Managers'  Statement,  S.  Conf. 
 Rep.  No.  104-  230,  104th  Cong.  2d  Sess.  (1996). 
 85  See  First  Biennial  Review  Order,  15  FCC  Rcd  at  9248-  49    64. 


 86  See  supra  para.  18. 
 87  Whereas  fixed  wireless  services  compete  with  wireline  services,  there  are  no  close  substitutes  for 
 mobile  wireless  services    mobility  is  a  unique  attribute  of  spectrum  below  3  GHz.  The  scarcity  of  this  spectrum 
 relative  to  demand  is  evidenced  by  the  increasing  market  value  of  broadband  CMRS  licenses.  For  example,  the 
 on-  going  Auction  No.  35  of  C  and  F  block  PCS  licenses  is  producing  net  high  bids  that  are  substantially  higher 
 than  those  that  have  prevailed  in  any  previous  spectrum  auctions.  See,  e.  g.,  Auction  No.  35  Summary  Measures 
 by  Round,  available  at  http://  www.  fcc.  gov/  wtb/  auctions/  c  f  blk/  35press2.  pdf. 
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 Federal  Communications  Commission  FCC  01-  28 
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 aggregation  limits  in  the  bands  currently  used  for  these  services.  88  In  other  bands,  where  different 
 conditions  prevail,  we  have  taken  a  different  approach.  For  instance,  there  are  several  substantial, 
 technologically  suitable  bands  allocated  for  fixed  wireless  services,  and  we  do  not  impose  any 
 aggregation  limits  on  such  spectrum.  89  Moreover,  wireline  services  are  for  many  customers  close 
 substitutes  for  such  wireless  services  and  so  aggregation  of  such  spectrum  in  a  small  number  of  licensees 
 would  not  necessarily  raise  competitive  concerns. 


 27.  There  have  been  a  number  of  regulatory  actions  since  the  last  biennial  review  that  may  affect 
 our  decisions  here  regarding  CMRS  spectrum  aggregation  limits.  For  example,  we  recently  reconfigured 
 the  licenses  available  in  the  broadband  PCS  C  and  F  block  auction    Auction  No.  35    to  better  enable  all 
 carriers  to  acquire  additional  CMRS  spectrum  in  most  markets  without  triggering  any  CMRS  spectrum 
 cap  concerns.  90  First,  we  removed  the  entrepreneur  auction  eligibility  restrictions  and  established  open 
 bidding  for  a  substantial  portion  of  the  available  spectrum  licenses.  Second,  given  our  determination  that 
 the  vast  majority  of  carriers  have  35  MHz  or  less  of  spectrum  in  most  geographic  areas,  we  divided  each 
 available  30  MHz  C  block  license  into  three  10  MHz  C  Block  licenses,  to  increase  the  ability  of  these 
 carriers  to  obtain  additional  spectrum  at  auction.  By  these  two  decisions,  the  Commission  intended  to 
 help  carriers  obtain  PCS  spectrum  for  economies  of  scale  and  the  introduction  of  3G  services,  while 
 maintaining  the  current  CMRS  spectrum  cap  to  prevent  excessive  CMRS  consolidation.  91 


 28.  In  addition,  we  decided  to  exclude  from  spectrum  aggregation  limits  the  700  MHz  bands  that 
 will  be  auctioned  early  this  year.  This  decision  may  permit  entry  by  new  competitors  as  well  as  increase 
 the  availability  of  significant  spectrum  for  the  introduction  of  3G  services  over  the  medium  to  long  term.  92 
 We  also  eliminated  the  separate  narrowband  PCS  spectrum  aggregation  limit  earlier  this  year.  93  We  did 
 so  based  on  our  findings  that  narrowband  PCS  licensees  increasingly  compete  with  other  sectors  of  the 
 wireless  industry,  including  broadband  PCS  and  SMR,  and  that  the  risk  that  lifting  the  limit  could  lead  to 
 anticompetitive  concentration  or  spectrum  warehousing  was  low  due  to  the  intense  competition  from  all 


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


 89  See,  e.  g.,  Rulemaking  to  Amend  Parts  1,  2,  21,  and  25  of  the  Commission's  Rules  to  Redesignate  the 
 27.5-  29.5  GHz  Frequency  Band,  to  Reallocate  the  29.5-  30.  0  GHz  Frequency  Band,  to  Establish  Rules  and  Policies 
 for  Local  Multipoint  Distribution  Service  and  for  Fixed  Satellite  Services,  CC  Docket  No.  92-  297,  Third  Report  and  Order  and  Memorandum  Opinion  and  Order, 
 15  FCC  Rcd  11857  (2000). 


 90  See  generally  Amendment  of  the  Commissions  Rules  Regarding  Installment  Payment  Financing  for 
 Personal  Communications  Services  (PCS)  Licensees,  WT  Docket  No.  97-  82,  Sixth  Report  and  Order  and  Order 
 on  Reconsideration,  FCC  00-  313  (rel.  Aug.  29,  2000)  (PCS  Sixth  Report  and  Order). 


 91  Id.  at    15,  60. 


 92  See  700  MHz  First  Report  and  Order,  15  FCC  Rcd  at  497-  98    52. 
 93  Amendment  of  the  Commissions  Rules  to  Establish  New  Personal  Communications  Services, 
 Narrowband  PCS,  GEN  Docket  No.  90-  314,  ET  Docket  No.  92-  100,  Second  Report  and  Order  and  Second 
 Further  Notice  of  Proposed  Rulemaking,  15  FCC  Rcd  10456,  10464-  65    16  (2000). 
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 wireless  sectors.  94 
 29.  Another  significant  regulatory  consideration  is  spectrum  efficiency.  Increases  in  the  number 
 of  competitors  and  the  associated  demand  for  CMRS  spectrum  are  leading  to  increases  in  spectrum 
 efficiency.  As  operators  seek  to  increase  mobile  voice  capacity  and  deploy  spectrum-  intensive,  advanced 
 wireless  services  such  as  high-  speed  Internet  access  and  mobile  video  conferencing,  we  see  the 
 marketplace  responding  with  technological  solutions  that  are  increasing  the  technical  capacity  of  wireless 
 networks.  For  example,  in  our  Fifth  Annual  CMRS  Competition  Report,  we  noted  that  U.  S.  carriers  are 
 migrating  to  3G  systems  by  beginning  to  implement  new  technologies  and  infrastructure  upgrades  that 
 will  offer  faster  data  speeds.  95  The  development  of  these  capacity-  enhancing  technologies  demonstrates 
 that  increasing  efficiency  where  spectrum  is  limited  can  be  accomplished  by  engineering  more  capacity 
 from  the  same  bandwidth  per  square  kilometer.  In  addition  to  the  development  of  these  efficiencies 
 through  techniques  such  as  compression  and  modulation  methods,  the  deployment  of  infrastructure 
 upgrades  that  involve  spatial  reuse  designs    e.  g.,  cell  splitting  and  frequency  reuse    will  also  result  in 
 more  efficient  wireless  systems.  Thus,  all  of  these  innovations  in  spectrum  efficiency  promise  to  permit 
 data  communications  sessions  to  multi-  mode  handsets,  increased  numbers  of  telephone  calls  in  densely 
 populated  areas,  and  other  benefits  to  consumers. 


 30.  Finally,  we  found  in  the  First  Biennial  Review  Order  that  bright-  line  rules  like  the  spectrum 
 cap  and  cellular  cross-  interest  rules  hold  many  benefits  over  alternative  regulatory  tools.  In  particular,  we 
 reconfirmed  that  the  spectrum  cap  would  allow  review  of  CMRS  acquisitions  in  an  administratively 
 simple  manner  and  lend  certainty  to  the  marketplace.  96  We  determined  that  bright-  line  rules  reduce 
 burdens  placed  on  both  the  Commission  and  industry,  especially  small  businesses,  as  well  as  give 
 industry  advance  notice  of  which  types  of  cross-  ownership  situations  the  Commission  would  find 
 anticompetitive.  97  We  also  stated  that  use  of  other  regulatory  tools,  such  as  case-  by-  case  review  under 
 section  310(  d),  would  eventually  lead  to  an  understanding  of  which  types  of  cross-  ownership  interests  the 
 Commission  believes  are  anticompetitive.  We  concluded,  however,  that  this  would  require  the 
 Commission  and  industry  to  expend  significant  resources  in  reviewing  individual  cross-  ownership 
 proposals  before  sufficient  precedent  would  be  set  to  establish  the  line.  98  As  the  U.  S.  Court  of  Appeals 
 for  the  D.  C.  Circuit  has  recognized,  [  a]  spectrum  cap,  unlike  many  other  regulations,  might  actually 
 require  a  bright-  line  rule  to  be  effective.  99  In  recognition  that  any  bright-  line  test  may  be  over-  inclusive 
 or  under-  inclusive  in  individual  cases,  we  specifically  provided  that  parties  who  believed  that 
 individualized  analysis  is  appropriate  could  always  request  a  waiver  of  the  spectrum  cap  and/  or  cross-interest 
 rule.  100 


 94  Id.  at  10464-  65    16-  18. 
 95  See  Fifth  Annual  CMRS  Competition  Report  at  36-  44. 
 96  First  Biennial  Review  Order,  15  FCC  Rcd  at  9242-  43    49-  53,  9244    55. 
 97  Id. 
 98  See  id. 
 99  BellSouth  Corp.  v.  FCC,  162  F.  3d  at  1225. 
 100  See  First  Biennial  Review  Order,  15  FCC  Rcd  at  9243    52,  9255-  56    82.  We  concluded  that  bright-line 
 rules  with  a  waiver  process  would  create  more  regulatory  certainty  than  would  unguided  case-  by-  case  review 
 (continued.) 
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 31.  Discussion.  We  seek  comment  on  the  implications  of  the  above  considerations  for  our 
 spectrum  aggregation  limits.  Choices  about  CMRS  spectrum  aggregation  limits  appear  to  involve  market 
 structure  and  fundamental  spectrum  management  issues  regarding  this  limited  amount  of  spectrum.  For 
 example,  in  response  to  the  scarcity  of  spectrum  suitable  for  CMRS,  the  U.  S.  Government  has  undertaken 
 a  number  of  initiatives  to  identify  additional  spectrum  for  these  services.  As  part  of  its  plans  for  the 
 transition  to  digital  television,  Congress  has  directed  the  reallocation  for  commercial  use  of  certain 
 spectrum  suitable  for  mobile  services  that  is  currently  reserved  for  broadcast  services.  101  In  addition,  the 
 Commission  is  exploring  the  possible  use  of  several  frequency  bands  below  3  GHz  to  support  the 
 introduction  of  new  advanced  wireless  services,  including  3G  wireless  systems.  102  At  the  same  time,  we 
 have  found  that  any  new  market  entry  is  unlikely  to  be  sufficiently  timely  or  sufficiently  certain  to 
 discipline  markets  adequately  in  the  near  term.  103  Accordingly,  we  seek  comment  on  our  above  analysis 
 of  CMRS  spectrum  scarcity  issues  and  its  implications  for  our  decisions  on  CMRS  spectrum  aggregation 
 limits.  104 


 32.  We  seek  comment  on  the  potential  efficiency  benefits  or  costs  of  our  spectrum  aggregation 
 limits.  We  described  above  the  significant  technological  developments  and  service  offerings  that  have 
 occurred  since  September  1999.  As  we  explained  in  our  First  Biennial  Review  Order,  there  may  be 
 reduced  incentives  to  implement  more  efficient  technologies  in  a  regulatory  environment  without 
 spectrum  aggregation  limits.  105  Thus,  have  such  limits  provided  incentives  to  the  development  and 
 deployment  of  spectrum-  efficient  technologies  that  will  better  serve  the  public  interest  in  the  middle  and 
 long  term?  Or,  would  such  innovation  have  occurred  independent  of  our  spectrum  aggregation  limits? 
 Can  promoting  the  expansion  of  capacity  through  technological  advances  (as  opposed  to  simply  affording 
 more  spectrum  to  the  market)  serve  as  an  effective  disciplinary  force  on  potential  anticompetitive  conduct 
 in  CMRS  markets  where  market  entry  is  limited?  Or,  do  spectrum  limits  do  more  to  impede  the  efficient 
 development  of  new  3G  technologies  that  may  be  spectrum-  intensive  in  the  short  term? 


 33.  We  ask  commenters  to  address  any  costs  of  constraining  control  of  CMRS  spectrum  by 
 individual  carriers.  In  particular,  we  seek  comment  on  the  extent,  if  any,  to  which  our  regulations  impede 
 beneficial  economies  of  scale  and  the  introduction  of  innovative  new  technologies  and  services.  We  have 
 stated  that  mobile  telephone  service  providers  are  beginning  to  deploy  2.5G  technologies  and  test  3G 
 equipment  that  could  potentially  drive  the  migration  to  the  provision  of  high-  speed,  multimedia  services 
 as  part  of  CMRS.  106  As  early  as  this  year,  some  operators  intend  to  begin  offering  commercial  Internet 


 (Continued  from  previous  page) 
 for  anticompetitive  consolidations  or  post-  auction  issuance  of  licenses.  See  generally  id.  at  9242-  46    49-  58; 
 Biennial  CMRS  Spectrum  Cap  MO&  O  at    12. 


 101  47  U.  S.  C.    337;  see,  e.  g.,  700  MHz  First  Report  and  Order. 


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


 103  First  Biennial  Review  Order,  15  FCC  Rcd  at  9234-  35    31. 


 104  See  supra  para.  26. 
 105  First  Biennial  Review  Order,  15  FCC  Rcd  at  9248    62. 
 106  Fifth  Annual  CMRS  Competition  Report  at  38-  44. 
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 access  service  at  speeds  that  will  increase  current  rates  by  a  factor  of  ten  or  more.  107  We  seek  specific 
 comment  on  how  the  decision  to  limit  carriers  access  to  CMRS  spectrum  affects  the  deployment  of  next-generation 
 services  and  the  migration  of  2G  service  providers  to  those  services.  How  do  aggregation 
 limits  impact  the  emergence  of  mobile  Internet  access  and  other  data  services?  We  seek  comment  on  how 
 to  promote  advanced  wireless  services  while  simultaneously  ensuring  that  meaningful  economic 
 competition  continues  to  develop.  Are  new  data  technologies  developing  as  rapidly  as  they  could  despite 
 current  limits  on  access  to  spectrum?  As  a  general  matter,  how  do  we  best  manage  the  spectrum  resource 
 designated  for  use  of  CMRS  and  factor  in  other  relevant  regulatory  considerations  to  maximize  both  the 
 benefits  to  consumers  that  result  from  multiple  facilities-  based  competitors  and  the  opportunity  for 
 carriers  that  rely  on  this  resource  to  offer  advanced  mobile  wireless  services? 


 34.  We  also  seek  updated  comment  on  how  our  spectrum  aggregation  limits  may  impair  potential 
 efficiencies  for  all  CMRS  markets,  including  those  within  urban  areas.  In  1999,  we  found  that  spectrum 
 aggregation  limits  may  inhibit  economies  of  scope  in  rural  areas  that  would  permit  greater  investment 
 there  by  CMRS  providers.  108  We  also  noted  more  generally  that  up  to  a  point,  horizontal  concentration  in 
 CMRS  markets  may  be  in  the  public  interest  because  it  could  allow  efficiencies  and  economies  that  would 
 otherwise  not  be  achievable.  109  In  todays  CMRS  markets,  would  achieving  such  economies  be  in  the 
 public  interest  despite  any  potential  increased  risk  of  anticompetitive  consolidation?  Commenters  should 
 address  the  extent  to  which  the  current  45  MHz  aggregation  limit  may  be  thwarting  the  realization  of 
 potential  economies  in  non-  rural  areas,  and  commenters  should  submit  evidence  on  the  magnitude  and 
 time  frame  of  any  such  potential  savings  or  efficiencies  in  particular  market  settings. 


 35.  In  discussing  the  availability  of  spectrum  for  advanced  wireless  services,  commenters  should 
 address  the  extent  to  which  companies  ability  to  use  alternative  spectrum    i.  e.,  spectrum  outside  of  the 
 broadband  PCS,  cellular  and  SMR  bands  subject  to  the  cap    should  affect  our  analysis  here.  For 
 example,  in  our  First  Biennial  Review  Order,  we  identified  numerous  alternatives  to  CMRS  spectrum  that 
 can  be  used  for  delivering  services  in  fixed  access  networks.  110  Other  frequency  bands,  such  as  the  700 
 MHz  bands  that  will  soon  be  auctioned,  could  be  used  to  introduce  advanced  wireless  services.  The 
 Commission  also  is  exploring  the  possible  use  of  other  frequency  bands  below  3  GHz  for  advanced 
 wireless  services.  Thus,  we  seek  comment  on  how  the  current  availability  of  additional  spectrum  affects 
 the  need  for  CMRS  spectrum  aggregation  limits.  Similarly,  we  seek  comment  on  what  effect  our 
 allocation  of  additional  spectrum  in  the  future,  suitable  for  mobile  voice  and  data  services,  will  have  on 
 the  appropriate  aggregation  limits  for  the  spectrum  at  issue  here.  To  the  extent  that  future  spectrum  bands 
 like  700  MHz  are  not  subject  to  the  cap,  does  this  lessen  the  need  to  increase  the  spectrum  cap  by  creating 
 opportunities  for  CMRS  incumbents  to  obtain  spectrum  in  these  bands?  Or,  will  new  spectrum  eliminate 
 the  access-  to-  spectrum  barrier  to  entry  faced  by  potential  competitors,  and  thus  lessen  the  need  to 
 maintain  a  spectrum  cap  at  all? 


 36.  Similarly,  we  seek  comment  on  how  to  assess  the  treatment  of  newly  allocated  spectrum  for 


 107  Id.  at  77. 
 108  See  First  Biennial  Review  Order,  15  FCC  Rcd  at  9256-  57    84. 
 109  Id.  at  9233    29  n.  78  (citing  CMRS  Spectrum  Cap  Report  and  Order,  11  FCC  Rcd  at  7869    95  in 
 explaining  that  the  Commission  should  remain  focused  on  the  longer  term  in  pursuing  its  competitive  objectives). 
 110  See  id.  at  9247-  48    61.  Although  carriers  have  the  flexibility  to  use  cellular,  broadband  PCS,  and 
 SMR  spectrum  for  a  variety  of  service  offerings,  CMRS  carriers  are  not  limited  to  this  spectrum  for  purposes  of 
 providing  services  that  can  substitute  for  local  wireline  service.  See  id. 
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 spectrum  cap  purposes.  As  a  general  matter,  we  believe  that  newly  available  CMRS-  suitable  spectrum 
 either  should  be  excluded  from  the  spectrum  cap  or,  if  it  is  included,  that  the  cap  should  be  adjusted 
 accordingly.  We  seek  comment  on  the  factors  to  consider  in  deciding  between  these  two  options.  We 
 invite  comment  as  well  on  any  other  cap-  related  issues  that  we  may  encounter  when  we  make  new 
 CMRS-  suitable  spectrum  available.  We  request  that  commenters  provide  analytical  and  factual  support 
 for  their  conclusions.  While  we  will  not  be  making  specific  decisions  in  this  proceeding  on  what,  if  any, 
 constraints  ought  to  apply  to  concentration  of  ownership  in  newly  available  spectrum  bands,  we  plan  to 
 consider  an  analytical  framework  to  apply  to  such  bands. 


 37.  We  also  seek  comment  on  whether  the  impact  of  the  spectrum  cap  on  development  of 
 advanced  services  could  be  adequately  addressed  by  continuation  of  the  waiver  policy  that  we  adopted  in 
 the  First  Biennial  Review  Order.  In  this  regard,  it  appears  that  most  PCS  carriers  still  have  not  yet 
 deployed  up  to  the  limits  of  their  licensed  capacity;  in  addition,  we  have  not  received  any  waiver  requests 
 as  contemplated  in  our  First  Biennial  Review  Order.  111  Does  our  specific  waiver  process  enable  carriers 
 with  a  demonstrable  need  for  additional  spectrum,  especially  for  advanced  wireless  services,  to  obtain 
 such  spectrum?  We  again  seek  comment  on  the  flexibility  of  this  waiver  standard  for  meeting  carriers 
 needs,  and  whether  we  should  modify  the  waiver  test.  112  In  answering  these  questions,  we  request  parties 
 to  provide  specific  evidence  and  concrete  examples  of  the  extent  to  which  carriers  holdings  in  markets 
 approach  or  are  at  the  45/  55  MHz  cap. 


 38.  Commenters  are  also  asked  to  address  whether  any  developments  in  the  last  year  should  lead 
 us  to  alter  our  determination  that  a  bright-  line  approach  remains  preferable  to  exclusive  reliance  on  case-by- 
 case  review  under  section  310(  d).  Our  conclusion  that  straightforward  application  of  spectrum 
 aggregation  limits  promotes  regulatory  certainty  and  efficiency  was  based  to  a  large  extent  on  an 
 understanding  that  clear  standards  would  best  provide  the  industry  with  incentives  to  make  investments  in 
 advanced  mobile  wireless  services,  as  well  as  speed  the  processing  of  efforts  to  restructure  spectrum 
 holdings  to  create  nationwide  footprints.  The  speed  with  which  the  Commission  processes  transfers  and 
 assignments  remains  an  issue  of  significant  controversy.  113  We  seek  comment  on  the  extent  to  which  our 
 approach  has  facilitated  these  goals  for  licensees,  including  licensees  that  are  small  businesses. 
 Commenters  should  discuss  the  fact  that  in  large  merger  proceedings,  the  transfer  and  assignment  of 
 CMRS  licenses  are  typically  resolved  in  principle  more  quickly  and  with  less  controversy  than  are  other 
 major  issues  not  governed  by  analogous  rules.  As  spectrum  management  tools,  do  these  bright-  line 
 standards  remain  preferable  to  reliance  on  section  310(  d)  review  or  other  alternative  regulatory 
 mechanisms?  Commenters  are  encouraged  to  provide  specific  examples  where  our  aggregation  limits 
 either  did  or  did  not  provide  the  certainty  or  efficiency  that  a  particular  marketplace  transaction  required. 


 39.  Finally,  we  seek  specific  comment  on  whether  we  should  make  any  fundamental  changes  in 


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


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


 113  See,  e.  g.,  Public  Forum  Streamlining  FCC  Review  of  Applications  Relating  to  Mergers,  Public 
 Notice,  DA  00-  334  (rel.  Feb.  18,  2000). 
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 rural  and  high-  cost  markets,  which  appear  not  to  have  seen  the  development  of  competition  in  mobile 
 wireless  services  to  the  degree  that  is  evident  in  urban  areas.  The  available  information  suggests  that 
 many  of  the  nation's  residents  living  in  rural  and  other  high-  cost  areas  do  not  yet  have  meaningful 
 competitive  alternatives  to  the  incumbent  cellular  carriers.  114  In  September  1999,  we  recognized  that  the 
 spectrum  cap  might  affect  the  ability  of  a  CMRS  provider  to  attain  certain  economies  of  scale  and  scope 
 in  these  areas.  115  Spectrum  may  be  made  newly  available  for  commercial  use  through  partitioning  and 
 disaggregation,  but  the  economics  of  offering  service  to  these  lower-  density  populations  may  nevertheless 
 limit  the  extent  of  competitive,  facilities-  based  entry.  In  considering  whether  to  make  further  changes,  we 
 seek  comment  on  whether  increasing  the  existing  spectrum  cap  last  year  in  rural  areas  has  had  any  impact 
 on  the  delivery  of  service  to  rural  customers  in  terms  of  prices,  availability  of  digital  services,  or  other 
 factors.  Wireless  carriers  who  have  aggregated  55  MHz  in  these  areas  should  describe  these  efficiencies 
 and  any  other  public  interest  benefits.  Should  we,  at  a  minimum,  continue  to  retain  the  cellular  cross-interest 
 rule  until  increased  PCS  and  other  service  deployments  become  more  firmly  established? 


 3.  International  Developments 
 40.  Background.  We  also  wish  to  examine  the  significance  for  our  reexamination  of  spectrum 
 aggregation  limits  of  foreign  mobile  licensing  policies,  and  particularly  the  3G  licensing  process  now 
 taking  place  in  Europe  and  Asia.  A  recent  study  issued  by  the  Organization  for  Economic  Cooperation 
 and  Development  (OECD)  has  documented  a  global  trend  in  mobile  licensing  policy  towards  increasing 
 numbers  of  operators  in  a  given  market,  a  trend  that  predates  the  3G  licensing  process.  116  Moreover, 
 many  Western  European  countries  are  using  the  3G  licensing  process  as  an  opportunity  to  promote  the 
 development  of  competitive  market  structures.  All  of  the  Western  European  countries  that  have 
 completed  the  3G  licensing  process  have  licensed  four  or  more  3G  operators,  and  a  number  of  these 
 countries  (United  Kingdom,  Germany,  the  Netherlands,  Italy  and  Austria)  have  licensed  five  or  more  3G 
 operators.  117  In  addition,  the  majority  of  these  countries  (the  United  Kingdom,  Germany,  Italy,  Austria, 
 Spain,  Switzerland,  Norway,  Sweden  and  Portugal)  have  awarded  at  least  one  more  3G  license  than  the 
 number  of  incumbent  mobile  operators,  thereby  ensuring  that  one  or  more  new  operators  enter  the 
 market.  118  These  countries  have  assured  a  minimum  number  of  competitors  either  by  using  spectrum 
 aggregation  limits  analogous  to  our  spectrum  cap,  as  in  Germany  and  Austria,  119  or,  more  commonly,  by 


 114  See,  e.  g.,  Fifth  Annual  CMRS  Competition  Report  at  18,  29. 


 115  See  First  Biennial  Review  Order,  15  FCC  Rcd  at  9256-  57    84. 
 116  See  Sam  Paltridge,  Cellular  Mobile  Pricing  Structures  and  Trends,  OECD,  May  2000,  at  16,  available 
 at  http://  www.  oecd.  org/  dsti/  sti/  it/.  According  to  this  OECD  study,  between  1989  and  1999  the  number  of  mobile 
 operator  equivalents  competing  in  the  markets  of  OECD  Member  Countries  increased  from  35  to  94.  The  last 
 mobile  monopoly  in  the  OECD  area  was  eliminated  in  1998.  The  study  also  predicted  that,  by  the  year  2000,  there 
 would  be  only  three  to  four  OECD  Member  countries  with  mobile  duopolies,  and  that  more  than  half  the  OECD 
 countries  would  have  four  or  more  operators  by  the  end  of  2000. 


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


 118  The  number  of  incumbent  mobile  operators  in  these  countries  prior  to  the  3G  licensing  process  is 
 provided  in  Sam  Paltridge,  Cellular  Mobile  Pricing  Structures  and  Trends,  OECD,  May  2000,  at  76. 
 119  In  particular,  in  both  Germany  and  Austria  small  blocks  of  paired  and  unpaired  spectrum  were  offered 
 for  auction  so  that  the  number  and  size  of  3G  licenses  would  be  determined  through  the  auction  process. 
 However,  to  prevent  excessive  concentration,  the  auction  rules  restricted  individual  bidders  to  winning  a 
 (continued.) 
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 fixing  the  size  and  number  of  licenses  in  advance  and  limiting  each  operator  to  one  national  license.  On 
 the  other  hand,  some  countries  have  used  fixed  national  licenses  to  authorize  a  limited  number  of 
 competitors  with  large  spectrum  blocks  rather  than  to  increase  the  number  of  competitors.  In  Japan,  for 
 example,  the  Ministry  of  Posts  and  Telecommunications  has  licensed  only  three  3G  operators,  and 
 countries  such  as  China  and  Brazil  currently  maintain  a  duopoly  in  mobile  telecommunications 
 services.  120 


 41.  European  countries  are  able  both  to  ensure  a  minimum  number  of  competitors  and  to  permit 
 each  provider  access  to  more  spectrum  because  substantially  more  suitable  spectrum  has  been  allocated 
 for  commercial  mobile  telecommunications  services  in  Europe  than  in  the  United  States.  Prior  to  the  start 
 of  the  3G  licensing  process  in  Europe,  the  total  amount  of  spectrum  available  for  mobile  telephony 
 services  in  most  countries  was  roughly  comparable  to  the  180  MHz  allocation  in  the  United  States.  121 
 However,  with  the  additional  140  to  145  MHz  of  spectrum  that  most  Western  European  countries  have 
 allocated  to  licensed  3G  use,  the  total  amount  of  spectrum  available  for  mobile  telephony  services  in  these 
 countries  now  exceeds  180  MHz,  in  most  cases  by  a  wide  margin.  In  particular,  we  estimate  that  the  total 
 amount  of  spectrum  available  for  first-,  second-  and  third-  generation  mobile  communications  services  in 
 most  Western  European  countries  is  generally  about  250-  300  MHz,  and  ranges  from  a  high  of  almost  365 
 MHz  in  the  United  Kingdom  to  a  low  of  about  187  MHz  in  Norway.  122 


 (Continued  from  previous  page) 
 maximum  of  three  blocks  of  10  MHz  each,  or  30  MHz  total,  of  paired  spectrum.  Rules  for  Conduct  of  the  Auction 
 for  the  Award  of  Licenses  for  UMTS/  IMT-  2000  3G  Mobile  Communications,  Ruling  by  the  Presidents  Chamber, 
 Feb.  18,  2000,  at  3-  9,  available  at  http://  www.  regtp.  de/  en/  reg_  tele/  start/  fs_  05.html;  Telekom  Control  Auction 
 Web  Site,  available  at  http://  www.  tkc.  at/  www/  tkc_  main.  nsf/  pages/  Willkommen-  e.  Given  the  total  amount  of 
 paired  spectrum  offered  for  auction  in  Germany  and  Austria,  this  bidding  limit  ensured  a  minimum  of  four 
 competitors  in  each  market.  Ultimately,  all  the  successful  bidders  in  both  the  German  and  Austrian  auctions  ended 
 up  with  20  MHz  of  paired  spectrum,  the  minimum  required  to  obtain  a  license.  As  a  result,  both  auctions  resulted 
 in  the  award  of  six  licenses. 


 120  On  3G  licensing  in  Japan,  see  The  Principles  on  Radio  Station  Licenses  for  IMT-  2000,  Press  Release, 
 The  Ministry  of  Posts  and  Telecommunications  of  Japan,  Dec.  10,  1999,  available  at 
 http://  www.  mpt.  go.  jp/  pressrelease/  english/  telecomm/  news991210.html.  Brazils  duopoly  policy  in  mobile 
 telecommunications  services  is  detailed  in  Felix  Gilman,  International  Spectrum  Auction  Handbook:  Policies  for 
 Licensing  Radio  Spectrum  in  Nations  around  the  World,  Telecommunications  Reports  International,  Inc.,  2000,  at 
 60-  64.  Brazil  plans  to  end  the  mobile  duopoly  in  2001  with  the  auction  of  three  additional  mobile  licenses  in  each 
 region.  See  Nathalia  Jabur,  Brazil  Seeks  US$  3.  4  Billion  for  Mobile,  Reuters,  November  29,  2000.  In  July  2000, 
 the  Chinese  government  ordered  the  military  to  surrender  control  of  a  third  mobile  operator,  Great  Wall  Telecom, 
 to  China  United  Telecommunications  Corp.  (China  Unicom),  the  second  largest  mobile  operator  in  China.  Matt 
 Pottinger,  Chinese  Military  to  Hand  Mobile  Business  to  Unicom,  Reuters,  July  13,  2000. 


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


 122  This  estimate  includes  Austria,  Belgium,  Denmark,  Finland,  France,  Germany,  Ireland,  Italy,  the 
 Netherlands,  Norway,  Portugal,  Spain,  Sweden,  Switzerland  and  the  United  Kingdom.  The  total  amount  of  mobile 
 telephony  spectrum  in  Norway  is  relatively  low  because  Norway  has  a  duopoly  in  second-  generation  mobile 
 services.  The  total  amount  of  first-  and  second-  generation  mobile  spectrum  available  in  these  countries  is 
 provided  in  ERO  Information  Document  on  GSM  Frequency  Utilisation  within  Europe,  European 
 (continued.) 
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 42.  Prior  to  the  start  of  the  3G  licensing  process,  the  average  amount  of  spectrum  assigned  to 
 individual  mobile  operators  in  most  Western  European  countries  was  generally  within  the  limits  of  the 
 Commissions  CMRS  spectrum  cap.  123  Licenses  awarded  to  both  new  and  incumbent  operators  in  the  3G 
 licensing  process  have  ranged  in  size  from  35  MHz  to  20  MHz.  124  Those  3G  licensees  that  are  not 
 incumbent  mobile  operators  are  limited  to  the  amount  of  spectrum  they  acquired  in  the  3G  licensing 
 process.  In  contrast,  the  additional  spectrum  to  which  incumbent  mobile  operators  have  gained  access  as 
 a  result  of  the  3G  licensing  process  puts  each  of  these  operators  total  spectrum  holdings  (for  1G,  2G,  and 
 3G  services)  in  excess  of  the  Commissions  CMRS  spectrum  cap.  125  Thus,  because  most  European 
 countries  have  allocated  more  total  spectrum  for  mobile  telecommunications  services,  they  are  able  to 
 allow  individual  carriers  to  acquire  larger  total  spectrum  holdings  than  would  be  permitted  under  our 
 spectrum  cap  policy,  while  at  the  same  time  ensuring  that  there  are  at  least  four,  and  often  more, 
 competitors  in  their  markets. 


 43.  We  also  note  that  other  countries  limit  the  amount  of  spectrum  operators  can  acquire  in  the 
 secondary  market.  In  the  vast  majority  of  countries,  including  EU  Member  States,  strict  limits  on  trading 
 of  wireless  licenses  and/  or  spectrum  rights  render  a  spectrum  cap  largely  superfluous.  Apart  from  the 
 United  States,  only  a  relative  few  countries,  including  Canada,  Australia  and  New  Zealand,  allow 
 spectrum  licenses  to  be  traded  both  in  whole  and  in  part.  126  In  Canada,  as  in  the  United  States,  spectrum 
 trading  is  subject  to  a  spectrum  cap,  although  Canada  has  adopted  a  55  MHz  cap  for  its  CMRS  spectrum 
 allocation.  127  Both  Australia  and  New  Zealand  rely  on  general  competition  law,  rather  than  a  spectrum 
 cap  or  other  special  restrictions  on  spectrum  acquisition,  to  control  an  operators  ability  to  acquire  access 
 to  spectrum  in  the  secondary  market.  128  In  Australia,  spectrum  aggregation  limits  have  been  used  to 
 restrict  bidding  in  spectrum  auctions,  but  these  spectrum  caps  generally  expire  once  the  auction  ends  and 
 (Continued  from  previous  page) 
 Radiocommunications  Office,  March  2000.  Information  about  the  amount  of  3G  spectrum  available  in  these 
 countries  comes  from  the  web  sites  of  the  relevant  national  regulatory  authorities. 


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


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


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


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


 128  Id.  at  57,  91. 
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 the  spectrum  is  assigned.  The  Australian  Competition  and  Communications  Commission  (ACCC)  is 
 empowered  to  intervene  to  prevent  trades  of  spectrum  licenses  where  it  believes  the  acquisition  of  a 
 license  will  result  in  a  substantial  lessening  of  competition,  and  it  has  demonstrated  a  willingness  to 
 exercise  this  authority.  129 


 44.  Discussion.  We  generally  seek  comment  on  the  lessons  to  be  learned  from  experience 
 internationally,  as  summarized  above.  In  addressing  these  issues,  commenters  should  consider  the 
 significance  of  the  differences  between  the  United  States  and  foreign  countries.  For  instance,  for  a 
 number  of  reasons,  the  availability  of  spectrum  below  3  GHz,  which  is  generally  considered  the 
 frequency  range  best  suited  for  mobile  services,  appears  to  be  less  constrained  abroad  than  in  the  United 
 States.  This  allows  other  countries  to  allocate  larger  amounts  of  technically  suitable  spectrum  to  CMRS 
 than  in  the  United  States,  which  in  turn  allows  them  to  permit  higher  overall  aggregation  limits  for 
 individual  carriers  without  compromising  the  ability  to  maintain  multiple  facilities-  based  providers.  We 
 further  note  that  countries  in  both  the  European  Union  (EU)  and  Asia  are  generally  less  flexible  than  the 
 United  States  in  their  approach  to  spectrum  management.  In  particular,  unlike  our  flexible  use 
 approach  in  the  United  States,  spectrum  management  policies  abroad  generally  do  not  afford  wireless 
 operators  the  flexibility  to  deploy  3G  technologies  on  spectrum  currently  licensed  for  2G  services. 
 Moreover,  in  contrast  to  our  rules  on  transferability  of  licenses  and  partitioning  and  disaggregation,  laws 
 in  the  EU  and  Asia  typically  do  not  as  yet  permit  licensees  to  trade  rights  to  use  radio  spectrum,  but 
 require  that  any  transfer  of  spectrum  be  back  to  the  licensing  authority.  130 


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


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


 130  The  EU  has  drafted  legislation  that  would  permit  Member  States  to  make  provision  for  licensees  to 
 trade  rights  to  use  radio  spectrum,  but  only  where  such  rights  have  been  assigned  by  national  regulatory  authorities 
 through  an  auction.  Article  8.  4,  Proposal  for  a  Directive  of  the  European  Parliament  and  of  the  Council  on  a 
 common  regulatory  framework  for  electronic  communications  networks  and  services,  Commission  of  the 
 European  Communities,  July  12,  2000,  at  20,  available  at 
 http://  europa.  eu.  int/  ISPO/  infosoc/  telecompolicy/  review99/  Welcome.  html. 
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 C.  Possible  Modifications  to  the  CMRS  Spectrum  Cap  and  Cellular  Cross-  Interest  Rule 
 46.  In  the  event  that  we  do  not  eliminate  our  spectrum  aggregation  limits,  we  also  request 
 comment  on  whether  specific  attributes  of  the  CMRS  spectrum  cap  and  cellular  cross-  interest  rule  should 
 be  modified  to  allow  some  of  the  benefits  that  may  arise  from  additional  cross-  ownership  interests.  131  To 
 the  extent  that  certain  revisions  to  these  rules  would  reduce  any  public  interest  costs  of  our  limits  or 
 promote  objectives  discussed  above,  we  seek  comment  on  how  to  implement  them  without  significantly 
 increasing  barriers  to  entry  for  new  competitors  or  risk  reducing  benefits  to  wireless  consumers. 


 1.  Possible  Modifications  to  the  CMRS  Spectrum  Cap 
 47.  In  addition  to  the  possible  fundamental  modification  of  the  amount  of  spectrum  permitted  to 
 be  held  under  the  cap  discussed  above,  132  we  seek  comment  on  other  aspects  of  the  CMRS  spectrum  cap 
 that  could  be  modified  to  increase  carriers  flexibility  and  promote  our  various  public  policy  objectives. 
 Because  there  are  a  number  of  options  available  for  consideration  when  evaluating  the  aggregation  of 
 CMRS  spectrum  within  geographic  areas,  proponents  of  each  alternative  should  explain  why  it  is 
 necessary  in  the  public  interest  and  should  support  their  assertions  with  specific  data  and  analysis. 


 48.  To  begin,  we  seek  comment  on  the  effect  of  recent  changes  in  CMRS  markets,  particularly 
 the  emergence  of  broadband  PCS  licensees  as  competitors  to  cellular  licensees,  133  on  the  rationale  for  a  10 
 percent  population  overlap  threshold.  What  are  the  public  interest  benefits  of  increasing  the  threshold  and 
 do  those  benefits  outweigh  any  potential  for  reduced  consumer  benefits  from  the  concentration  of 
 ownership  or  control  of  CMRS  licenses?  Would  increasing  the  threshold  facilitate  in  any  way  carriers 
 buildout  of  seamless  nationwide  service  footprints?  If  we  were  to  adopt  a  different  approach  to  overlap 
 analysis,  would  we  need  to  increase  the  current  10  percent  threshold? 


 49.  We  solicit  comment  on  whether  there  is  a  mechanism  for  triggering  the  application  of  a 
 spectrum  cap  in  given  geographic  areas  that  might  be  superior  to  our  current  overlap  standard.  In  a 
 regulatory  environment  where  partitioning  is  permitted  and  geographic  authorizations  are  increasingly 
 issued  for  all  spectrum  subject  to  the  cap,  clarifying  and/  or  modifying  our  rule  to  treat  licensees  in  each 
 service  similarly  may  be  in  the  public  interest.  Under  the  current  rule,  any  overlap  between  attributable 
 PCS  licensed  service  areas  (i.  e.,  between  MTAs  and  BTAs)  is  subject  to  the  cap,  while  a  cellular  CGSA 
 or  station-  defined  SMR  service  area  only  counts  towards  the  cap  if  it  overlaps  10  percent  or  more  of  the 
 PCS  licensed  service  areas  population.  Moreover,  although  SMR  is  no  longer  licensed  only  on  a  site-  by-site 
 basis,  the  current  rules  overlap  analysis  focuses  on  SMR  service  area(  s).  134  Accordingly,  we  ask 
 for  comment  on  the  pros  and  cons  of  adopting  a  simplified  overlap  standard  that  turns  on  a  certain 
 allowable  percentage  of  overlap  between  licensed  service  areas.  For  example,  assuming  a  10  percent 
 threshold,  one  possible  approach  would  be  a  standard  where  a  PCS  BTA-  based  licenses  overlap  with  a 
 partitioned  MTA-  based  license  would  not  come  under  the  cap  if  the  population  covered  by  the  overlap 
 were  less  than  10  percent  of  the  total  population  of  the  PCS  BTA  and  less  than  10  percent  of  the  total 
 population  of  the  partitioned  PCS  MTA.  Similarly,  if  we  were  to  eliminate  the  cellular  cross-  interest  rule 


 131  Similarly,  commenters  should  address  any  possible  interim  modifications  that  would  benefit  the  public 
 interest  in  the  event  that  we  decide  to  sunset  our  spectrum  aggregation  limits  in  the  future. 
 132  See  supra  para.  22,  39. 


 133  See  generally  discussion  supra  para.  14-  15. 
 134  47  C.  F.  R.    20.  6(  c). 
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 under  such  a  standard,  an  A-  Block  cellular  licenses  overlap  in  CGSA  with  the  CGSA  of  a  B-  Block 
 cellular  license  would  not  trigger  the  cap  if  the  population  covered  by  the  overlap  were  less  than  10 
 percent  of  the  total  population  of  the  A-  Block  CGSA  and  less  than  10  percent  of  the  total  population  of 
 the  B-  Block  CGSA.  A  variation  of  this  standard  would  be  to  exempt  overlaps  from  the  cap  if  the 
 population  in  the  overlap  area  were  less  than  10  percent  of  the  total  population  of  the  more  populous 
 licensed  service  area.  In  addition,  the  threshold  could  be  set  at  some  level  other  than  10  percent.  We  seek 
 comment  on  these  and  any  other  possible  approaches. 


 50.  With  respect  to  SMR  spectrum  licensed  on  a  site-  by-  site  basis,  the  current  rules  require  that, 
 in  calculating  the  amount  of  attributable  spectrum,  an  entity  must  count  all  800-  and  900-  MHz  channels 
 located  at  any  SMR  base  station  inside  the  geographic  area  where  there  is  significant  overlap  with  PCS  or 
 cellular  licensees.  135  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).  136  Regardless  of  how  much  800-  MHz 
 and  900-  MHz  SMR  spectrum  an  entity  actually  controls,  no  more  than  10  MHz  of  such  spectrum  is 
 attributed  to  it  for  purposes  of  determining  compliance  with  the  cap.  137 


 51.  We  seek  comment  here  on  whether  recent  developments  in  the  SMR  industry  warrant  any 
 modification  of  the  special  provisions  for  SMR  overlap  analysis  and  calculation  of  attributable  spectrum. 
 The  original  justification  for  the  maximum  attribution  of  10  MHz  was  based  on  the  conclusion  that  SMR 
 spectrum  is  not  equivalent  to  cellular  or  broadband  PCS.  Specifically,  we  noted  that  it  was  encumbered 
 by  existing  licensees,  that  channels  were  historically  assigned  on  a  station-  by-  station  basis,  rather  than  by 
 geographic  area,  and  that  the  spectrum  was  not  available  as  a  contiguous  block.  138  We  seek  comment  on 
 whether  the  rationale  for  this  10  MHz  limit  continues  in  todays  marketplace  for  broadband  CMRS.  For 
 example,  how  have  our  recent  auctions  of  SMR  spectrum  affected  the  rationale  to  limit  the  amount  of 
 SMR  spectrum  attributed  to  a  carrier?  Do  we  need  to  clarify  our  spectrum  cap  analysis  to  account  for 
 application  of  the  cap  when  these  auctioned  geographic-  based  SMR  licenses  overlap  with  PCS  licensed 
 service  areas?  139  In  addition,  should  significant  recent  acquisition  and  merger  activity  lead  us  to  question 
 the  assumption  that  SMR  spectrum  is  difficult  to  reconfigure?  If  we  were  to  revise  our  approach  to 
 station-  defined  SMR  spectrum,  should  we  increase  the  maximum  attributable  amount  from  10  MHz  to  a 
 higher  figure  (e.  g.,  15  or  20  MHz),  or  should  we  simply  attribute  to  each  carrier  the  actual  spectrum  it  has 
 in  each  market?  If  we  were  to  adopt  the  latter  approach,  how  would  we  determine  the  amount  of 
 spectrum  and  define  the  geographic  area  for  our  overlap  analysis? 


 52.  We  also  seek  comment  on  whether  we  should  modify  the  ownership  attribution  standards. 
 The  Commission  chose  a  20  percent  attribution  level  for  broadband  CMRS  to  help  ensure  the  availability 
 of  capital  investment  without  compromising  incentives  for  full  competition,  which  could  arise  with  too 


 135  Id.    20.  6(  b). 
 136  Id. 
 137  Id. 
 138  See  CMRS  Third  Report  and  Order,  9  FCC  Rcd  at  8112-  14    270-  75. 
 139  Section  20.  6(  c)  only  compares  an  SMR  service  area  to  a  PCS  licensed  service  area;  because  SMR 
 is  no  longer  licensed  only  on  a  station-  defined  basis,  the  rule  may  need  to  be  modified  to  apply  to  SMR  licensed 
 service  areas  (which  would  include  station-  defined  and  geographic  based  authorizations). 
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 much  common  ownership  of  competitors.  140  The  Commission  permits  small  businesses,  rural  telephone 
 companies,  and  passive  institutional  investors  to  hold  ownership  interests  up  to  40  percent  in  CMRS 
 providers  without  attribution.  Similarly,  the  Commission  allows  entities  to  hold  non-  controlling  equity 
 interests  up  to  40  percent  in  a  broadband  PCS  licensee  or  applicant  that  is  a  small  business.  Should  the  20 
 percent  general  attribution  standard  be  modified?  If  so,  what  are  the  public  interest  benefits  and/  or  harms 
 of  modifying  the  20  percent  standard?  We  also  seek  comment  on  the  effect  that  a  40  percent  attribution 
 standard  has  had  on  the  ability  of  CMRS  providers  to  obtain  capital.  Have  small  businesses  benefited 
 from  their  general  40  percent  attribution  standard?  Again,  commenters  proposing  a  different  standard 
 should  provide  analytical  support  for  their  proposals. 


 53.  We  also  seek  comment  on  whether  any  of  our  other  ownership  attribution  criteria  should  be 
 modified.  In  the  past  we  have  found  that  even  a  noncontrolling  interest  in  a  competitor  would 
 significantly  reduce  competitive  incentives.  141  Are  there  situations  where  an  entity  can  acquire  effective 
 control  over  another  entity  that  are  not  adequately  contemplated  under  our  attribution  standards? 
 Alternatively,  are  there  situations  proscribed  by  our  attribution  rules  that  do  not  pose  a  threat  to 
 competition?  Should  we  attribute  spectrum  used  pursuant  to  potential  spectrum  leasing  arrangements,  142 
 or  to  management  and  joint  marketing  agreements? 


 2.  Possible  Modifications  to  the  Cellular  Cross-  Interest  Rule 
 54.  We  sought  comment  above  on  the  possible  repeal  of  the  cellular  cross-  interest  rule.  In  the 
 alternative,  can  we  modify  the  rule  so  that  it  does  not  apply  in  certain  circumstances  where  other 
 regulations  will  provide  adequate  safeguards?  One  possibility  we  have  mentioned  would  be  to  have  the 
 rule  apply  only  in  markets  where  there  are  a  limited  number  of  competitors  to  the  existing  cellular 
 providers.  143  Accordingly,  we  seek  comment  on  whether  there  is  a  need  to  maintain  any  cellular-  specific 
 restrictions  in  more  urban  areas,  where  there  is  generally  a  larger  number  of  competitive  choices  for 
 consumers.  Would  the  absence  of  service-  specific  restrictions,  along  with  maintaining  the  general  45 
 MHz  spectrum  cap,  foster  secondary  markets  in  disaggregated  cellular  spectrum  while  providing 
 sufficient  protection  from  potentially  anticompetitive  behavior  by  preventing  the  outright  consolidation  of 
 two  25  MHz  cellular  licensees?  Although  cellular  providers  still  maintain  large  market  shares  in  MSAs, 
 would  cellular/  cellular  combinations  be  more  anticompetitive  than  cellular/  PCS  or  PCS/  PCS 
 combinations  if  the  cellular  cross-  interest  rule  is  repealed  in  MSAs?  Commenters  should  focus  on 
 whether  cellular  combinations  would  be  able  to  sustain  prices  above  the  competitive  level  without 
 reduction  in  market  shares  and  explain  their  conclusions  with  specific  data  such  as  customer  churn 
 percentages  and  whether  these  are  price  driven,  quality/  coverage  driven,  or  both. 


 55.  Another  possibility,  given  that  cellular  licensees  can  now  disaggregate  their  spectrum,  would 
 be  to  replace  the  current  rule  with  a  separate  cellular  spectrum  cap  of  35  MHz  (or  some  other  amount). 
 Under  the  current  cross-  interest  rule,  an  entity  with  an  attributable  interest  in  a  cellular  license  cannot 
 hold  a  5  percent  interest  in  a  disaggregated  license  for  even  1  MHz  of  spectrum  on  the  other  channel 


 140  See  generally  CMRS  Spectrum  Cap  Report  and  Order,  11  FCC  Rcd  at  7879-  87    117-  32. 
 141  Id. 
 142  See  Secondary  Markets  NPRM  at    49. 
 143  See,  e.  g.,  First  Biennial  Review  Order,  15  FCC  Rcd  at  9257    85. 
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 block  in  an  overlapping  CGSA.  Such  a  rule  change  would  allow  increased  opportunities  for  partnering  144 
 while  maintaining  protection  against  the  complete  consolidation  of  two  25  MHz  cellular  carriers.  We 
 seek  comment  on  the  potential  effects  of  such  a  change  of  the  cellular  cross-  interest  rule.  In  addition,  we 
 ask  parties  to  comment  on  any  modifications  necessary  to  permit  parties  to  disaggregate  spectrum  as 
 contemplated  in  our  Cellular  Disaggregation  Order.  145 


 56.  In  addition,  we  seek  comment  on  the  public  interest  benefits  and/  or  harms  of  increasing  the  5 
 percent  ownership  interest  limit  in  a  cellular  licensee  when  one  has  a  controlling  or  otherwise  attributable 
 interest  in  the  other  licensee  in  an  overlapping  CGSA.  In  general,  a  higher  attribution  standard  may 
 permit  increased  investment,  but  it  would  also  potentially  allow  greater  consolidation  of  cellular  interests. 
 Moreover,  although  the  cross-  interest  rule  prohibits  interests  greater  than  5  percent,  our  ownership 
 disclosure  standards  for  wireless  telecommunications  services  only  require  licensees  to  report  interests 
 greater  than  10  percent.  146  We  therefore  seek  comment  on  whether  conformity  between  these  two 
 provisions  would  permit  the  Commission  more  accurately  to  regulate  compliance  with  the  cellular  cross-interest 
 rule. 


 57.  We  also  seek  comment  on  whether  we  should  modify  the  divestiture  provisions  related  to  this 
 rule.  For  example,  should  we  revise  the  rule  to  operate  similar  to  the  spectrum  cap?  Currently,  both 
 regulations  require  divestiture  of  interests  acquired  as  a  result  of  an  assignment  of  authorization  or 
 transfer  of  control  to  occur  prior  to  the  consummation  of  the  transfer  or  assignment.  With  respect  to  the 
 spectrum  cap,  however,  we  consider  parties  to  have  come  into  compliance  with  the  rule  once  they  have 
 submitted  an  application  for  assignment  or  transfer  of  control  of  sufficient  spectrum  to  comply  with  the 
 cap.  147  By  contrast,  under  the  cross-  interest  rule  a  party  would  be  required  to  obtain  a  rule  waiver  if  it 
 could  not  completely  divest  the  prohibited  cross-  ownership  interest  prior  to  consummation.  Commenters 
 are  asked  to  address  the  competitive  and  public  interest  implications  of  harmonizing  these  and  any  other 
 provisions  of  the  two  rules. 


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


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


 145  See  generally  Cellular  Disaggregation  Order. 


 146  See  47  C.  F.  R.    1.919. 
 147  See  id.    20.  6(  e)(  4)(  A). 
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 V.  PROCEDURAL  MATTERS 
 A.  Regulatory  Flexibility  Act 
 59.  As  required  by  the  Regulatory  Flexibility  Act,  148  the  Commission  has  prepared  an  Initial 
 Regulatory  Flexibility  Analysis  (IRFA)  of  the  possible  impact  on  small  entities  of  the  proposals  in  the 
 Notice  of  Proposed  Rulemaking.  The  IRFA  is  set  forth  in  the  Appendix.  Written  public  comments  are 
 requested  on  the  IRFA.  These  comments  must  be  filed  in  accordance  with  the  same  filing  deadlines  for 
 comments  on  the  NPRM,  and  they  must  have  a  separate  and  distinct  heading  designating  them  as 
 responses  to  the  IRFA.  The  Commissions  Consumer  Information  Bureau,  Reference  Information  Center, 
 will  send  a  copy  of  this  NPRM,  including  the  IRFA,  to  the  Chief  Counsel  for  Advocacy  of  the  Small 
 Business  Administration,  in  accordance  with  the  Regulatory  Flexibility  Act.  149 


 B.  Ex  Parte  Rules 
 60.  This  is  a  permit-  but-  disclose  notice  and  comment  rule  making  proceeding.  Ex  parte 
 presentations  are  permitted,  except  during  the  Sunshine  Agenda  period,  provided  they  are  disclosed  as 
 provided  in  Commission  rules.  150 


 C.  Filing  Procedures 
 61.  Pursuant  to  applicable  procedures  set  forth  in  sections  1.415  and  1.419  of  the  Commission's 
 Rules,  151  interested  parties  may  file  comments  on  or  before  [60  days  after  publication  in  the  Federal 
 Register]  and  reply  comments  on  or  before  [30  days  after  comment  date].  Comments  and  reply 
 comments  should  be  filed  in  WT  Docket  No.  01-  14.  All  relevant  and  timely  filings  will  be  considered  by 
 the  Commission  before  final  action  is  taken  in  this  proceeding.  To  file  formally  in  this  proceeding, 
 interested  parties  must  file  an  original  and  four  copies  of  each  filing.  All  filings  must  be  sent  to  the 
 Commissions  Secretary,  Magalie  Roman  Salas,  Office  of  the  Secretary,  Federal  Communications 
 Commission,  445  12th  St.,  S.  W.,  Rm.  TW-  A325,  Washington,  D.  C.  20554,  with  a  copy  to  Michael  J. 
 Rowan,  Commercial  Wireless  Division,  Wireless  Telecommunications  Bureau,  Federal  Communications 
 Commission,  445  12th  St.,  S.  W.,  Rm.  4A-  131,  Washington,  D.  C.  20554.  One  copy  of  all  filings  should 
 also  be  sent  to  the  Commissions  copy  contractor. 


 62.  Comments  may  also  be  filed  using  the  Commissions  Electronic  Comment  Filing  System 
 (ECFS).  152  Comments  filed  through  the  ECFS  can  be  sent  as  an  electronic  file  via  the  Internet  to 
 <http://  www.  fcc.  gov/  e-  file/  ecfs.  html>.  Generally,  only  one  copy  of  an  electronic  submission  must  be 
 filed.  Parties  may  also  submit  an  electronic  comment  by  Internet  E-  Mail.  To  obtain  filing  instructions  for 
 E-  Mail  comments,  commenters  should  send  an  E-  mail  to  ecfs@  fcc.  gov,  and  should  include  the  following 
 words  in  the  body  of  the  message:  get  form  <your  E-  Mail  address>.  A  sample  form  and  directions  will 
 be  sent  in  reply.  Or  you  may  obtain  a  copy  of  the  ASCII  Electronic  Transmittal  Form  (FORM-  ET)  at 


 148  See  5  U.  S.  C.    603. 
 149  See  id.    603(  a). 
 150  See  generally  47  C.  F.  R.    1.  1202,  1.1203,  1.  1206. 
 151  Id.    1.  415,  1.419. 
 152  See  Electronic  Filing  of  Documents  in  Rulemaking  Proceedings,  63  Fed.  Reg.  24,  121  (1998). 
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 <http://  www.  fcc.  gov/  e-  file/  email.  html>. 
 63.  Comments  and  reply  comments  will  be  available  for  public  inspection  during  regular 
 business  hours  at  the  FCC  Reference  Information  Center,  Rm.  CY-  A257,  at  the  Federal  Communications 
 Commission,  445  12th  St.,  S.  W.,  Washington,  D.  C.  20554.  Copies  of  comments  and  reply  comments  are 
 available  through  the  Commission's  duplicating  contractor:  International  Transcription  Service,  Inc.  (ITS, 
 Inc.),  1231  20th  Street,  N.  W.,  Washington,  D.  C.  20037,  (202)  857-  3800. 


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


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


 FEDERAL  COMMUNICATIONS  COMMISSION 


 Magalie  Roman  Salas 
 Secretary 
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 APPENDIX 
 Initial  Regulatory  Flexibility  Analysis 
 1.  As  required  by  the  Regulatory  Flexibility  Act  (RFA),  1  the  Commission  has  prepared  this 
 Initial  Regulatory  Flexibility  Analysis  (IRFA)  of  the  possible  significant  economic  impact  on  small 
 entities  of  the  policies  and  proposals  in  this  Notice  of  Proposed  Rulemaking  (NPRM),  WT  Docket  No. 
 01-  14.  Written  public  comments  are  requested  on  this  IRFA.  These  comments  must  be  filed  in 
 accordance  with  the  same  filing  deadlines  for  comments  on  the  rest  of  this  NPRM,  as  set  forth  in 
 paragraph  61,  supra,  and  they  must  have  a  separate  and  distinct  heading  designating  them  as  responses  to 
 the  IRFA.  The  Commission  will  send  a  copy  of  this  NPRM,  including  this  IRFA,  to  the  Chief  Counsel 
 for  Advocacy  of  the  Small  Business  Administration  (SBA)  in  accordance  with  RFA.  2  In  addition,  the 
 NPRM  and  IRFA  (or  summaries  thereof)  will  be  published  in  the  Federal  Register.  3 


 A.  Need  for,  and  Objectives  of,  the  Proposed  Rules 
 2.  As  part  of  our  biennial  regulatory  review,  pursuant  to  section  11  of  the  Communications  Act,  4 
 we  solicit  comment  on  whether  we  should  retain,  modify,  or  eliminate  the  commercial  mobile  radio 
 services  (CMRS)  spectrum  cap.  5  We  also  seek  comment  on  whether  we  should  retain,  modify,  or  repeal 
 the  cellular  cross-  interest  rule.  6  In  asking  these  questions,  the  NPRM  looks  at  recent  competitive  changes 
 in  CMRS  markets,  reexamines  the  public  interest  objectives  that  the  spectrum  limits  are  designed  to 
 achieve,  and  asks  whether  there  are  alternatives  to  the  existing  rules  that  avoid  any  potential  public 
 interest  costs.  It  seeks  comment  on  how  international  trends  and  developments  in  the  marketplace  since 
 the  completion  of  our  last  biennial  review  in  September  1999  may  affect  our  analysis.  The  NPRM 
 discusses  reliance  on  case-  by-  case  analysis  of  the  potential  competitive  effects  of  a  proposed  spectrum 
 holding  pursuant  to  section  310(  d)  of  the  Communications  Act  as  one  potential  alternative  to  the  current 
 rules,  and  it  discusses  possible  modifications  to  the  spectrum  cap  and  cross-  interest  rules.  These  include, 
 among  other  things:  1)  increasing  the  amount  of  spectrum  that  a  single  entity  may  hold  in  a  given 
 geographic  area  beyond  45/  55  MHz;  2)  modifying  the  spectrum  caps  10  percent  population  overlap 
 threshold  and/  or  attribution  rules;  3)  eliminating  or  modifying  the  rule  that  limits  attributable  Specialized 
 Mobile  Radio  (SMR)  spectrum  to  10  MHz;  4)  altering  the  cellular  cross-  interest  rules  provisions  as  they 
 relate  to  disaggregation  of  spectrum  and/  or  post-  licensing  divestiture;  and  5)  modifying  the  ownership 
 attribution  standards  under  both  rules.  Through  the  process  of  seeking  public  comment  and  collecting 
 data,  we  hope  to  assess  the  impact  of  recent  competitive  trends,  international  developments,  and  spectrum 
 management  and  other  regulatory  considerations. 


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


 2  See  5  U.  S.  C.    603(  a). 


 3  Id. 
 4  47  U.  S.  C.    161. 
 5  Id.    20.  6. 
 6  Id.    22.  942. 
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 B.  Legal  Basis 
 3.  The  potential  actions  on  which  comment  is  sought  in  this  NPRM  would  be  authorized  under 
 sections  1,  4(  i),  11,  303(  g),  and  303(  r)  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    151, 
 154(  i),  161,  303(  g),  and  303(  r). 


 C.  Description  and  Estimate  of  the  Small  Entities  Subject  to  the  Rules 
 4.  The  RFA  requires  that  an  initial  regulatory  flexibility  analysis  be  prepared  for  notice-  and-comment 
 rulemaking  proceedings,  unless  the  Agency  certifies  that  the  rule  will  not,  if  promulgated,  have 
 a  significant  impact  on  a  substantial  number  of  small  entities.  7  The  RFA  generally  defines  the  term 
 small  entity  as  having  the  same  meaning  as  the  terms  small  business,  small  organization,  and 
 small  governmental  jurisdiction.  8  In  addition,  the  term  small  business  has  the  same  meaning  as  the 
 term  small  business  concern  under  the  Small  Business  Act.  9  A  small  business  concern  is  one  which:  (1) 
 is  independently  owned  and  operated;  (2)  is  not  dominant  in  its  field  of  operation;  and  (3)  satisfies  any 
 additional  criteria  established  by  the  SBA.  10  This  IRFA  describes  and  estimates  the  number  of  small-entity 
 licensees  that  may  be  affected  if  the  proposals  in  this  NPRM  are  adopted. 


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


 6.  Cellular  Radiotelephone  Service.  Neither  the  Commission  nor  the  SBA  has  developed  a 
 definition  of  small  entities  applicable  to  cellular  licensees.  Therefore,  the  applicable  definition  of  small 
 entity  is  the  definition  under  the  SBA  rules  applicable  to  radiotelephone  (wireless)  companies.  This 
 provides  that  a  small  entity  is  a  radiotelephone  company  employing  no  more  than  1,500  persons.  11 
 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.  12  Therefore,  even  if  all  twelve  of  these  firms 
 were  cellular  telephone  companies,  nearly  all  cellular  carriers  were  small  businesses  under  the  SBAs 
 definition.  In  addition,  we  note  that  there  are  1,758  cellular  licenses;  however,  a  cellular  licensee  may 
 own  several  licenses.  In  addition,  according  to  the  most  recent  Telecommunications  Industry  Revenue 
 data,  808  carriers  reported  that  they  were  engaged  in  the  provision  of  either  cellular  service  or  PCS,  which 
 are  placed  together  in  the  data.  We  do  not  have  data  specifying  the  number  of  these  carriers  that  are  not 
 independently  owned  and  operated  or  have  more  than  1,500  employees,  and  thus  are  unable  at  this  time  to 
 estimate  with  greater  precision  the  number  of  cellular  service  carriers  that  would  qualify  as  small  business 
 concerns  under  the  SBAs  definition.  Consequently,  we  estimate  that  there  are  fewer  than  808  small 


 7  5  U.  S.  C.    603(  b)(  3). 
 8  Id.    601(  6). 
 9  Id.    601(  3)  (incorporating  by  reference  the  definition  of  small  business  concern  in  15  U.  S.  C.    632). 
 Pursuant  to  the  RFA,  the  statutory  definition  of  a  small  business  applies  unless  an  agency,  after  consultation  with 
 the  Office  of  Advocacy  of  the  Small  Business  Administration  and  after  opportunity  for  public  comment, 
 establishes  one  or  more  definitions  of  such  term  which  are  appropriate  to  the  activities  of  the  agency  and  publishes 
 such  definition(  s)  in  the  Federal  Register.  Id. 


 10  Small  Business  Act,  15  U.  S.  C.    632  (1996). 


 11  13  C.  F.  R.    121.  201,  SIC  code  4812. 
 12  1992  Census,  Series  UC92-  S-  1,  at  Table  5,  SIC  code  4812. 
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 cellular  service  carriers  that  may  be  affected  by  these  proposals,  if  adopted. 
 7.  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.  13  For  Block  F,  an  additional 
 classification  for  "very  small  business"  was  added  and  is  defined  as  an  entity  that,  together  with  its 
 affiliates,  has  average  gross  revenues  of  not  more  than  $15  million  for  the  preceding  three  calendar 
 years.  14  These  regulations  defining  "small  entity''  in  the  context  of  broadband  PCS  auctions  have  been 
 approved  by  the  SBA.  15  No  small  businesses  within  the  SBA-  approved  definition  bid  successfully  for 
 licenses  in  Blocks  A  and  B.  There  were  90  winning  bidders  that  qualified  as  small  entities  in  the  Block  C 
 auctions.  A  total  of  93  small  and  very  small  business  bidders  initially  won  approximately  40  percent  of 
 the  1,479  licenses  for  Blocks  D,  E,  and  F.  16  On  March  23,  1999,  the  Commission  reauctioned  347  C,  D, 
 E,  and  F  Block  licenses;  there  were  48  small  business  winning  bidders.  Based  on  this  information,  we 
 conclude  that  the  number  of  small  broadband  PCS  licensees  will  include  the  90  winning  C  Block  bidders 
 and  the  93  qualifying  bidders  in  the  D,  E,  and  F  blocks  plus  the  48  winning  bidders  in  the  re-  auction,  for  a 
 total  of  approximately  231  small  entity  PCS  providers  as  defined  by  the  SBA  and  the  Commission's 
 auction  rules.  In  addition,  the  Commission  anticipates  that  a  total  of  422  licenses  will  be  auctioned  in  the 
 broadband  PCS  reauction  of  the  C  &  F  Blocks  that  began  December  12,  2000.  Therefore,  we  conclude 
 that  the  number  of  additional  C  &  F  Block  broadband  PCS  licensees  that  may  ultimately  be  affected  by 
 these  proposals  could  be  as  many  as  422. 


 8.  Specialized  Mobile  Radio  (SMR).  Pursuant  to  47  C.  F.  R.    90.  814(  b)(  1),  the  Commission 
 has  defined  small  business  for  purposes  of  auctioning  900  MHz  SMR  licenses,  800  MHz  SMR  licenses 
 for  the  upper  200  channels,  and  800  MHz  SMR  licenses  for  the  lower  230  channels  on  the  800  MHz  band 
 as  a  firm  that  has  had  average  annual  gross  revenues  of  $15  million  or  less  in  the  three  preceding  calendar 
 years.  17  The  SBA  has  approved  this  small  business  size  standard  for  the  800  MHz  and  900  MHz  auctions. 
 The  auction  of  the  1,020  900  MHz  SMR  geographic  area  licenses  for  the  900  MHz  SMR  band  began  on 
 December  5,  1995,  and  was  completed  on  April  15,  1996.  Sixty  (60)  winning  bidders  for  geographic  area 
 licenses  in  the  900  MHz  SMR  band  qualified  as  small  businesses  under  the  $15  million  size  standard. 
 The  auction  of  the  525  800  MHz  SMR  geographic  area  licenses  for  the  upper  200  channels  began  on 
 October  28,  1997,  and  was  completed  on  December  8,  1997.  Ten  (10)  winning  bidders  for  geographic 
 area  licenses  for  the  upper  200  channels  in  the  800  MHz  SMR  band  qualified  as  small  businesses  under 
 the  $15  million  size  standard. 


 9.  The  lower  230  channels  in  the  800  MHz  SMR  band  are  divided  between  General  Category 
 channels  (the  upper  150  channels)  and  the  lower  80  channels.  The  auction  of  the  1,053  800  MHz  SMR 


 13  See  Amendment  of  Parts  20  and  24  of  the  Commissions  Rules  --  Broadband  PCS  Competitive 
 Bidding  and  the  Commercial  Mobile  Radio  Service  Spectrum  Cap;  Amendment  of  the  Commission's  Cellular/  PCS 
 Cross-  Ownership  Rule,  WT  Docket  96-  59,  GN  Docket  90-  314,  Report  and  Order,  11  FCC  Rcd  7824,  7850-  52   
 57-  60  (1996)  (CMRS  Spectrum  Cap  Report  and  Order);  see  also  47  C.  F.  R.    24.  720(  b). 


 14  See  CMRS  Spectrum  Cap  Report  and  Order,  11  FCC  Rcd  at  7852    60. 


 15  See,  e.  g.,  Implementation  of  Section  309(  j)  of  the  Communications  Act  --  Competitive  Bidding, 
 PP  Docket  No.  93-  253,  Fifth  Report  and  Order,  9  FCC  Rcd  5532,  5581-  84  (1994). 
 16  FCC  News,  Broadband  PCS,  D,  E  and  F  Block  Auction  Closes,  No.  71744  (released  Jan.  14,  1997). 


 17  Id.    90.  814(  b)(  1). 
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 34 
 geographic  area  licenses  (1,  050  -  800  MHz  licenses  for  the  General  Category  channels,  and  3  -  800  MHz 
 licenses  for  the  upper  200  channels  from  a  previous  auction)  for  the  General  Category  channels  began  on 
 August  16,  2000,  and  was  completed  on  September  1,  2000.  At  the  close  of  the  auction,  1,030  licenses 
 were  won  by  bidders.  Eleven  (11)  winning  bidders  for  geographic  area  licenses  for  the  General  Category 
 channels  in  the  800  MHz  SMR  band  qualified  as  small  businesses  under  the  $15  million  size  standard. 
 The  auction  of  the  2,800  800  MHz  SMR  geographic  area  licenses  for  the  lower  80  channels  of  the  800 
 MHz  SMR  service  began  on  November  1,  2000,  and  was  completed  on  December  5,  2000.  Nineteen  (19) 
 winning  bidders  for  geographic  area  licenses  for  the  lower  80  channels  in  the  800  MHz  SMR  band 
 qualified  as  small  businesses  under  the  $15  million  size  standard.  In  addition,  there  are  numerous 
 incumbent  site-  by-  site  SMR  licensees  on  the  800  and  900  MHz  bands.  The  Commission  awards  bidding 
 credits  in  auctions  for  geographic  area  800  MHz  and  900  MHz  SMR  licenses  to  firms  that  had  revenues 
 of  no  more  than  $15  million  in  each  of  the  three  previous  calendar  years.  18 


 D.  Description  of  Projected  Reporting,  Recordkeeping  and  Other  Compliance  Requirements 
 10.  This  NPRM  neither  proposes  nor  anticipates  any  additional  reporting,  recordkeeping  or  other 
 compliance  measures. 


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


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


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


 13.  In  our  2000  biennial  regulatory  review  pursuant  to  section  11,  we  here  reexamine  our 
 findings  and  determinations  in  September  1999.  Since  that  time,  there  have  been  international  and 
 economic  developments  that  have  significantly  affected  CMRS  markets.  For  example,  consolidation 
 within  the  CMRS  industry  in  an  effort  to  create  national  service  footprints  has  tended  to  reduce  the 
 number  of  smaller  entities  providing  broadband  CMRS  on  a  purely  local  level.  As  part  of  this  2000 
 biennial  review,  we  seek  to  develop  a  record  regarding  whether  the  CMRS  spectrum  cap  and  cellular 
 cross-  interest  rule  continue  to  make  regulatory  and  economic  sense  in  CMRS  markets  in  the  current-, 
 mid-,  and  long-  term.  In  doing  so,  we  generally  request  comment  on  whether  retention,  modification,  or 
 elimination  of  the  CMRS  spectrum  cap  and/  or  cellular  cross-  interest  rule  is  appropriate  with  respect  to 


 18  47  C.  F.  R.    90.814(  b)(  1). 
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 small  businesses  that  are  licensees  in  the  cellular,  broadband  PCS  and/  or  SMR  services.  We  seek 
 comment  on  whether  there  continues  to  be  a  need  for  these  rules  to  ensure  that  new  entrants,  including 
 small  businesses,  have  access  to  spectrum  licenses  both  at  auction  and  in  the  secondary  market.  We 
 inquire  whether  these  bright-  line  rules  continue  to  create  efficiencies  and  reduce  transaction  costs  for 
 small  business.  We  consider  the  impact  on  small  businesses  if  we  were  to  adopt  alternative  approaches 
 that  rely  more  heavily  on  case-  by-  case  review.  We  also  seek  specific  comment  on  various  aspects  of 
 these  rules  that  particularly  affect  small  business,  such  as  the  whether  our  September  1999  decision  to 
 increase  attribution  standards  to  40  percent  has  benefited  small  businesses. 


 F.  Federal  Rules  that  May  Duplicate,  Overlap  or  Conflict  with  the  Proposed  Rules 
 14.  None. 
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 36 
 CONCURRING  STATEMENT  OF  COMMISSIONER  HAROLD  FURCHTGOTT-  ROTH 
 Re:  2000  Biennial  Regulatory  Review  Spectrum  Aggregation  Limits  for  Commercial  Mobile 
 Radio  Services,  Notice  of  Proposed  Rulemaking,  WT  Docket  No.  01-  14,  (rel.  January  23,  2001). 


 The  use  of  a  spectrum  cap  is  a  drastic  regulatory  remedy  that  continues  to  search  for  a 
 corresponding  competitive  ill.  To  the  extent  the  marketplace  was  ever  genetically  predisposed  to 
 such  a  malady  (a  disputable  proposition  in  itself),  I  believe  such  treatment  has  long  ago  outlived 
 its  effectiveness.  1  In  light  of  this  diagnosis,  I  would  have  crafted  todays  Notice  in  a 
 substantially  different  way.  There  is  nothing  in  the  Communications  Act  that  requires  the  FCC 
 to  promulgate  any  type  of  spectrum  cap.  As  I  have  stated  before,  other  agencies  are  fully 
 capable  of  monitoring  the  competitive  health  of  the  CMRS  marketplace.  Nor  is  there  any  policy 
 rationale  for  the  continued  application  of  the  technology-  and  efficiency-  stifling  caps.  Thus,  I 
 would  have  tentatively  concluded  here  that  the  caps  should  be  eliminated.  Finally,  I  have  grown 
 impatient  with  the  Commissions  repeated  re-  examinations  of  these  issues  without  substantial 
 alterations  in  our  policy  approach.  Nonetheless,  in  light  of  our  current  policy  posture,  I  fully 
 support  fulfilling  our  promise  to  re-  examine  the  caps  as  part  of  this  years  biennial  review.  I 
 look  forward  to  a  full  record  on  these  issues  and  prompt  resolution  by  the  Commission. 


 1  See  Separate  Statement  of  Commissioner  Harold  Furchtgott-  Roth,  1998  Biennial  Review, 
 Spectrum  Aggregation  Limits  for  Wireless  Carriers,  Memorandum  Opinion  and  Order  on 
 Reconsideration,  WT  Docket  No.  98-  205  (rel.  Nov.  8,  2000);  Separate  Statement  of 
 Commissioner  Harold  Furchtgott-  Roth  in  1998  Biennial  Review,  Spectrum  Aggregation  Limits 
 for  Wireless  Telecommunications  Carriers,  15  FCC  Rcd  9219  (1999). 
36